The Caspian: As Negotiations Fail, Iran Hints at Military Action

The Caspian: As Negotiations Fail, Iran Hints at Military Action
2 July 2002

Summary

Slowly but surely Iran is finding itself squeezed out of any share of the oil and gas revenues from the Caspian Sea. Tehran is responding with hints of military threats, which for now appear to be just rhetoric but may later turn into violence.

Analysis

The Iranian government is becoming increasingly desperate to claim a share of oil deposits in the resource-rich Caspian Sea. Last week Iranian President Mohammad Khatami resorted to veiled threats when he railed against the foreign presence in the Caspian region.

The five nations that border the Caspian Sea have been negotiating for years over how to divide its spoils, and slowly but surely Iran is finding itself edged out. As negotiations fail, Tehran's statements -- combined with its recent actions in the Caspian -- raise the threat of more military intervention in the region. Such rhetoric is most likely aimed at derailing, or at least slowing, the development of a pipeline that would transport Caspian oil and bypass Iran. But a frustrated Tehran may decide eventually to play the spoiler against development in the Caspian.

The Caspian Sea is thought to have the third-largest petroleum resources in the world, but the five Caspian nations have yet to agree on how to divide the gas and oil resources. A summit between all five to reach an agreement on redrawing the sea's boundaries failed April 25. Now it appears that the bordering states are trying to develop their sectors on their own when possible.

The summit collapse was bad news for Iran, which has little oil or gas in its territorial waters and was hoping to benefit from a revenue-sharing deal. Tehran showed during the meeting that it would not budge from its demand for a full one-fifth of the Caspian riches, despite holding only 11 percent of the shoreline. Since then Russia, Kazakhstan and Azerbaijan have been putting the final touches on bilateral deals with each other, leaving Iran out in the cold with only Turkmenistan as a potential (though very questionable) ally.

Adding insult to injury is the quickened pace on the Baku-Tiblisi-Ceyhan pipeline, which would take Caspian oil from Azerbaijan through Georgia and into the Turkish port of Ceyhan. The U.S.-backed proposal was in direct competition with a far simpler plan to pump the oil through Iran. But Washington wanted to see an oil route going through friendly nations, and its post-Sept. 11 cooperation with Russia -- still the main powerbroker in the Caucuses -- has taken the idea from pipedream to near certainty.

Khatami's recent comments about foreigners in the Caspian region are part of a recent pattern of action regarding the sea. Iranian gunboats in July 2001 threatened two ships doing exploration work for British Petroleum in an offshore oilfield claimed by both Iran and Azerbaijan. Iran also is rumored to have started deploying more troops to the Caspian region over the last month. And a rear admiral in the Iranian navy May 15 growled about the ability of his forces to defend Iran's national interests in the Caspian.

It appears that the threats coming from Iran are only words, likely meant to inject a level of uncertainty into some of the negotiations over the BTC pipeline. But a threat still exists nonetheless. Iran has the second-largest military deployment in the Caspian and is slowing losing its grip on the region. This is a dangerous situation for its littoral neighbors.

Russia appears to be taking the threat seriously and is building up its forces accordingly. Its naval group stationed in the Caspian is the only one of Russia's to have grown, not shrunk, over recent years. Several rapid attack craft were transferred recently from Moscow's Baltic and Black Sea fleets, according to the Russia Journal. The Russian military also transferred a marine brigade and a missile base to the area.

Russia will flex its new muscle with military exercises scheduled for August. The exercises reportedly will involve border guards, the Fourth Air Force Group and troops from the North Caucasus military district. Azerbaijan, Kazakhstan and Turkmenistan are similarly building up their military presence in the Caspian, though at a lower level. Azerbaijan has the smallest military of the five regional states, but is backed by neighboring Turkey, which sent F-16 aircraft to Baku after the incident involving British Petroleum last July.

Iran is in a situation it cannot win, but it does not want to back out. Tehran doesn't have the military power to seize and hold any of the oil or gas fields it wants. It does, however, have the power to provoke any number of small clashes throughout the Caspian. Small battles are not enough to take territory, but they will delay or halt oil production. For example, it took British Petroleum five months to resume exploration after its boats were threatened.

Though unlikely in the near future, heightened military action by Iran is a very real option, one that Tehran may be raising now -- and actually pursuing down the road -- in order to wring concessions from the other states.

Thanks for the ping. Here's my take from what I've read from throughout the region:

The overarching strategy of Iran is to deter any export of oil or gas from the region - always has been. Those resources are competitive to Iran, and Saudi's share. The strategy of supporting Al Qaeda and others in the Second Chechen war, Nagorno Karabakh, and other places was to upset areas of production and transportation. Iran is keeping in reserve Qaeda and Uzbek radical useful idiots for possible later disruptions. Hard to do, for now. They may have hated the Taliban, but not Qaida. Probably pissed off Osama upset the game. Hezbollah, Hamas are used too. In great part the jihadis are useful idiots in the "great game."

I've noticed that Iran, Libya, and others are going full speed with development of gas and oil, and transport plans. Interestingly, Venezuela via their friend Chavez is doing little investment, and certainly not helping clear out the rebels from the Colombian regions of potential oil production. It is alleged that Iran and Libya and Saddam have quite a bit of coordination with Chavez. ANother interesting fact - the Mullahs are not only theocrats, but also "board members" of Iranian Oil interests wrapped up in religious trusts. Like if G Bush were the head of Exxon.

Anyway, the obvious market strategy is to capture and keep market share. Wars, failures to negotiate treatys, etc., even if delay production a few years are quite profitable. (On the side, scaring up terror in Israel raises prices too - regardless of actual world supply - the "fear benefit.")

It is in Iran's interest to stall Caspian development at any cost, with any cover story.

Stratfor's analysis is off a little, though interesting. It does show the pipeline confusion and accepts some Iranian agitprop.

Such rhetoric is most likely aimed at derailing, or at least slowing, the development of a pipeline that would transport Caspian oil and bypass Iran. But a frustrated Tehran may decide eventually to play the spoiler against development in the Caspian.

Derailing or slowing? Sounds familiar. Anyway, this has always been the strategy. As for the "pipeline" - as if there only need be one, if the comment were refering to the Caspian Sea Floor lines from K and T -Stan to Georgia to the west, I can sea how lack of a treaty could be troubled. But I think they're talking about the Ceyhan line.

The Caspian Sea is thought to have the third-largest petroleum resources in the world, but the five Caspian nations have yet to agree on how to divide the gas and oil resources. A summit between all five to reach an agreement on redrawing the sea's boundaries failed April 25. Now it appears that the bordering states are trying to develop their sectors on their own when possible. The summit collapse was bad news for Iran, which has little oil or gas in its territorial waters and was hoping to benefit from a revenue-sharing deal. Tehran showed during the meeting that it would not budge from its demand for a full one-fifth of the Caspian riches, despite holding only 11 percent of the shoreline.

They've had several meetings which Iran has bounced. Good point about the apparent geographic fact that if the Sea were divided up by usual law, Iran would have relatively little (Same for Russia compared to its shoreline). Even if their were a lot, Iran would be stalling because they have oversupply, in the OPEC view, of supplies in the south near the Persian Gulf. The "equal split" advocated is a poor argument meant to delay. The statement that the "Summit collapse was bad for Iran" is completely wrong, I haven't seen even a Western Oil co. with Iranian ties say it. In fact, it is contradicted by the rest of the analysis in this article. Weird.

Adding insult to injury is the quickened pace on the Baku-Tiblisi-Ceyhan pipeline, which would take Caspian oil from Azerbaijan through Georgia and into the Turkish port of Ceyhan. The U.S.-backed proposal was in direct competition with a far simpler plan to pump the oil through Iran. But Washington wanted to see an oil route going through friendly nations, and its post-Sept. 11 cooperation with Russia -- still the main powerbroker in the Caucuses -- has taken the idea from pipedream to near certainty.

I've seen this nonsense several times. I've challenged some here and elsewhere to prove it. Generally by lefty conspiracy types privleging Iran with no bad on self-interested motives.. Sure, America "wanted" the oil not to go through Iran. Never asked is what the Azeris and others want. They don't want it to go through Iran because one, Iran is a producer competitor who will control the oil, and influence it's export (BTW, same concern about Russia). Just imagine if OPEC calls for cuts and Azerbaijan says no - Iran controls the valve. Also, Azeris are close to Turks in politics and culture. Also, the whole "cheaper route" though Iran, here called a "simple plan" is false. I have never seen an oil co. say this, but Iran put it out there and it stuck - I guess the "America as meddler" angle is popular. How a pipeline twice as long, and a terminus numerous times farther away from the Western Euro market can be cheaper is beyond me. For example, Iran has been making lots of noise to get its gas to Euro markets how - a la its Azeri plan? Nope. Right through Turkey! Must be an American plot. :) About Russia, true, and they were playing games too in the region, hyping their less efficient pipeline plan. I think 9/11 did a lot to get our govt's ass off its chair - prime motivation. Overall, I think this article is stuck in the "one pipeline mode" as if their only need be one. Iran can build it's own pipeline. Funny, they never did. < /sarcasm>

It appears that the threats coming from Iran are only words, likely meant to inject a level of uncertainty into some of the negotiations over the BTC pipeline.

Could be very astute. I think there's a bigger game plan - for example, the sea bed pipeline. Apparently they are keeping "Qaida" forces near the Afghan border - no doubt to "deter or delay" the T-Stan to Pakistan gas line.

But a threat still exists nonetheless. Iran has the second-largest military deployment in the Caspian and is slowing losing its grip on the region. This is a dangerous situation for its littoral neighbors

Totally wrong. Losing its hegemony, its "grip", is a boon for Iran's neighbors, and they ant this to happen. Again, doesn't jibe with the rest of the article. Weird.

A very interesting story will be why Russia is helping out. Deals made, perhaps because they are a diversified economy, unlike Iran, they see development of Central Asia as good for their economy, or finally realize that after a decade of desovietization, bureacracy and need to "control" Central Asia.

Well, that's all IMHO. Gubamyster in the master in this area, so please guide me where I err. :)

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