The first gas from Azerbaijan reached Italy through the Trans Adriatic Pipeline (TAP) section of the corridor less than a year ago (S&P Global Platts 31-Dec-2020).
Completion of the proposed Trans-Caspian Pipeline (TCP) between Azerbaijan and Turkmenistan would make the Southern Gas Corridor even better. The Government of Turkmenistan certainly seems favourable (Turkmenistan: Golden Age 27-Jun-2021). The Aktau Treaty means that Azerbaijan and Turkmenistan can proceed without permission from the other 5 - they cannot veto it, only raise environmental concerns.
What are they waiting for? Maybe China.
India
India is under some pressure from China. The Belt and Road Initiative (BRI) is squeezing it out of exactly the same countries it should be competing for business from with China.
The US hasn’t made things easy either.
Connecting to Turkmenistan, through Afghanistan, with the TAPI gas pipeline is no longer an option.
The International North-South Transport Corridor (INSTC) is theoretically promising. It would link Mumbai to St Petersburg and cut the transport journey from approximately 16,000km to 7,000km, and would be 40% faster and 30% cheaper.
Unfortunately for the INSTC’s prospects, Iran is under sanctions and it will struggle to build proper railways across its mountainous terrain. Economic cooperation is too difficult and risky. Making Iran and Russia more amenable to India, which the west enjoys much better relations with, could be very worthwhile. Perhaps the US calculation is that it’s better for Russia and Iran to be weaker, though this looks like it’s only pushing these two very important countries closer to China.
Regardless, the INSTC is not viable and India refocused on a new project: its Arab-Mediterranean Corridor (ARC).
Aktau Treaty
The rules which govern the Caspian Sea were agreed in the Convention on the Legal Status of the Caspian Sea (BBC 12-Aug-2018), alternatively called the Aktau Treaty after the Kazhakh city where it was signed.
It’s an unusual treaty. If the Caspian was declared officially a “sea” then the 5 would have to follow the UN Convention on the Law of the Sea (UNCLOS). There would be space for international waters in the middle of the Caspian Sea, opening the possibility to external influence. On the other hand, if the Caspian was declared a lake it would mean that none of the 5 could take unilateral action to do whatever they pleased i.e. drilling for natural gas.
Aktau is a bespoke 3rd arrangement.
It covers nautical zones, resources, has some environmental provisions, and limits ships from only the 5 to sail.
It benefits each of the 5 countries approximately equally. What do they get out of it? And what are each country’s goals around the Caspian Sea?
Russia
Russia was the main driver of the Aktau Treaty.
It remains the big fish in the little pond. The treaty limits the presence and influence of external/western powers and maximises Russia’s own. There are no particularly pro-western countries around the Caspian Sea. Azerbaijan, perhaps, but it won’t be making any big moves soon. External influence would likely only bring instability, and this is bad for all 5 countries.
Russia has the biggest military by far in the Caspian Sea. Its fleet is larger than the other 4 nations’ fleets combined. It’s likely to stay that way without external interjection. Aktau affords Russia the freedom to act much more freely e.g. it will move its Caspian fleet’s base from Astrakhan on the River Volga to Kaspiysk. Kaspiysk doesn’t freeze in winter.
The military is perhaps the secondary consideration for Russia. It has naval bases in the Black Sea and Mediterranean, which are not landlocked like the Caspian.
Russia’s oil and technology successes in the Caspian Sea are also very important. Lukoil is interested in drilling in the deeper parts of the Caspian Sea and plans to have a total of 25 stations by 2030 (Reuters 24-Dec-2018) and is working on some hydrogen plans (Reuters 27-Apr-2021).
Iran
In the negotiations for Aktau there were 2 views about how the Caspian Sea should be divided.
One side was Russia and the ex-Soviet countries. They wanted it to be divided proportionately. On the other side was Iran which wanted an equal fifth. UNCLOS standards would have given Iran approximately 15%.
Iran’s interests in the Caspian are mostly about natural resources. Unfortunately for Iran, the south end of the Caspian sea is much deeper than the north. The resources are harder to access and Iran doesn’t have the technology for exploration or drilling.
While sanctions last, Iran’s best hope is for Russia to build and float drilling platforms by permission of the provisions in the Aktau Treaty.
Otherwise, Iran’s interests in the Caspian Sea can only be about saving a little face and protecting at least a little prestige. As far back as the Persian Empire, the Caspian Sea was never a major focus for Iran. None of the power centres of the Persian Empire were particularly close or linked to the Caspian Sea. Tehran is closer to it than Persepolis or Babylon were but Tehran still doesn’t depend on the Caspian Sea. The rivers around Tehran flow south. Iran is looking to the Persian Gulf for desalination projects with the Hope Line (BBC 09-Nov-2020) and not the Caspian Sea.
Iran’s main excuses for fighting over it is to eke out some more resources and to be seen standing up for itself.
Kazakhstan
Kazakhstan has energy interests in the Caspian Sea but its most important interest is in diversifying its trade routes away from Russia.
The solution is the Middle Corridor/Trans-Caspian International Transport Route (TITR) for commodities transport and the Trans-Caspian Gas Pipeline. The latter is perhaps more important for Turkmenistan and Azerbaijan. In any case, neither project is very advanced.
Azerbaijan
Russia and Azerbaijan are strategic partners. It’s notable that Russia isn’t intervening on the side of Armenia regarding the conflict over Nagorno-Karabakh, despite having a formal alliance.
Azerbaijan buys a lot of military equipment from Russia (Bloomberg 13-Aug-2013); it is Azerbaijan’s second largest supplier.
Azerbaijan is also very good at balancing its relationships with other countries. It has fair relationships with Russia, Iran, Turkey, and the West.
It’s going to continue exporting gas from the Caspian Sea to its great financial benefit. If it can connect with Turkmenistan it stands to do even better.
Turkmenistan
Turkmenistan is the most interesting country on the Caspian Sea. Herodotus wrote about the Scythians. The 1980s gave us the Kurgan.
It’s estimated to have somewhere between the 4th and 6th largest natural gas reserves in the world (BP 11-Jun-2019). Gas makes approximately 70% of its GDP, most of which goes to China, where Turkmen gas is about 30% of China’s total supply.
Turkmenistan is looking to diversify. The TAPI pipeline to Pakistan and India won’t happen soon now that the US is gone from Afghanistan (Frontier Mogul 24-Aug-2021), and even then it was vulnerable to attack.
Turkmenistan is definitely not in the bag for anyone. One of Ashgabat’s most famous landmarks is the Arch of Neutrality, topped with a golden statue of the former dictator, Niyazov. Turkmenistan is not a full member of Russia’s Commonwealth of Independent States or a member of China’s Shanghai Cooperation Organisation. It doesn’t like the other central asian countries, has a functional relationship at best with Iran, Turkey isn’t strong enough, and for now the west might as well be on a different planet. Turkmenistan’s only notable external cooperation is with the China National Petroleum Corporation (CNPC).
The door is open to the west.
Europe’s gas pipelines extend all the way from the UK to Baku. Just another 300km further and Turkmenistan could be enormously wealthy.
Turkmenistan is beginning to build the infrastructure on it’s Caspian Sea coast.
In the mid-00s China began scoping out Turkmenistan for its gas pipelines (RadioFreeEurope 10-Apr-2006). It was finished before the end of the 00s (Reuters 12-Dec-2009).
The west needs to hurry up if it doesn’t want to lose out.
On the outside looking in - countries with an interest in the Caspian Sea
Every country interested in power on the Eurasian landmass (the best place to have it - the Americas are a relatively small portion of the world) needs to have a Caspian Sea strategy.
Some countries are more advanced than the others in their Caspian Sea strategy.
The US, Europe, and Turkey
It’s easier to think about these as a group.
Their economic and defensive interests are somewhat aligned. Turkey still hopes to join the EU and is a NATO ally.
The US indirectly benefits from a strong European and Turkish strategy, one particularly focused on natural gas. On the one hand, Europe is vulnerable to its reliance on Russian gas supply. Alternatives are good. On the other hand, the Nord Stream 2 pipeline could help deliver more and cheaper gas to Europe. On balance, it probably creates an even greater dependence on Russia, though this is only true if Europe doesn’t work on a simultaneous alternative to balance it out.
That alternative is the Southern Gas Corridor.
Caspian Sea: N/S, E/W division, & European gas supply 26-Sep-2021
The Caspian Sea is the true centre of the Eurasian landmass and it’s full of natural gas.
Every country needs a Caspian Sea strategy. Massive surges in European gas prices (CNBC 20-Sep-2021) and Europe’s desperate reliance on Russia (IEA 21-Sep-2021) make this even more urgent.
Just as the Mediterranean divides Europe to the north and Africa to the south, the Caspian lies between the European steppe and the Middle Eastern desert. Like the Urals it divides east and west - the furthest reach of Europe in the Caucasus and the ex-soviet states of Central Asia.
If you want to get between Europe and Asia over land, you must go around the Caspian Sea on one side or the other. That means going through either Russia or Iran. It’s impossible to avoid travelling through one of these two countries. Russian territory extends from the Caspian Sea to the Arctic Circle. Iranian territory extends from the Caspian Sea to the Arabian Sea.
This is a much better prospect for India. The INSTC could only open up opportunities through to Iran and Russia. The ARC opens opportunities for India through the UAE, Saudi Arabia, Israel, and Europe.
There’s still some work to do - approximately 300km of railway construction in Saudi Arabia and Jordan.
This only really became fully possible recently with the normalisation of Israel’s relationships with its Arab neighbours toward the end of the Trump presidency.
The ARC doesn’t come close to the Caspian Sea. India may not revive its interest in the region for many years.
China
China has committed a lot of investment in Central Asia as a key part of the BRI.
China has been present in the Caspian Sea region since at least the 90s, taking investments in Kazakhstan companies, and taking losses for years with a more long term outlook.
In the soviet era, the USSR used to refer to “Kazakhstan and Central Asia”, setting Kazakhstan apart. It used to and perhaps still does have a more special status with Russia, but Russia is on the back foot versus China.
The same is true for Turkmenistan but for different reasons. Gazprom stopped its gas imports from Turkmenistan completely for 3 years after a “commercial pause” and only recently resumed (PR 03-Jul-2019). In that time the vast majority of Turkmenistan’s gas went to China and it has given the two space to sign an enormous new deal (Reuters 24-Aug-2021).
China also has a great relationship with Iran, which is signed up to the BRI, strengthening ties with a 25-year cooperation agreement (Reuters 27-Mar-2021).
China is well placed with most of the countries surrounding the Caspian Sea.
What’s next?
The US, Europe, Turkey, and India have a lot to gain from the Caspian Sea, in energy, trade, and defence.
The powers in these places should seriously review their options and think about boosting its existing plans and/or starting some new ones.
The simplest place to start should be the Trans-Caspian Pipeline.
China holds a lot of sway over Turkmenistan. A wider customer base is good for it. Europe and Turkey should make a deal and start construction quickly. A long time between agreement and completion would leave Turkmenistan vulnerable to China for longer.
The Southern Gas Corridor hasn’t been expensive so far - only approximately $40bn (S&P Global Platts 21-Nov-2018).
Someone, take leadership, find the money, and get it done.
The west is not friendly with either of these countries. It should reconsider its position.
It’s not obvious how the west could build a positive relationship with Russia and/or Iran very quickly. The west spent the last few decades surrounding Iran (see August’s Frontier Focus), possibly thinking about invasion. While the west was hostile to Russia, China improved its relationship, looking forward to buying resources and shipping goods through the North-Eastern Passage (NEP) in the Arctic Circle (see March’s Frontier Focus).
The only other route left through the region is across the Caspian Sea itself, between Turkmenistan on the eastern coast, to Azerbaijan on the west, and then either 1) through Georgia (which is vulnerable to Russia) and the Black Sea, or 2) through Armenia (which is in conflict with Azerbaijan) and on to Turkey. There is also the web of territorial and diplomatic issues to consider between the 5 countries which share the Caspian Sea. This kind of trans-Caspian route is not easy.
Both choices, building good relationships with Russia and Iran, or building infrastructure across the Caspian Sea and the smaller Caucasus countries, are likely to be multi-decade projects.
Mare nostrum - the five countries around the mini-Mediterranean
In the Soviet era, the Caspian Sea was contested by the USSR and Iran. Now the Caspian Sea is contested by Russia, Iran, Kazakhstan, Azerbaijan, and Turkmenistan.
There’s some regional trade between these 5 but it’s limited. They’re all energy economies. They don’t have much to trade with each other. There isn’t the infrastructure for it anyway and it’d be hard to justify.
It’d also be hard to justify because, though the Caspian Sea is almost as big as the Black Sea, it’s remote, landlocked, and sparsely populated. The steppe and desert aren’t hospitable. While the Black Sea has many large cities, Baku is the only really notable city on the Caspian Sea.
It’s unlikely to become a big economic or population centre. That’s not why it’s interesting. The Caspian Sea has an interesting strategic position and a lot of natural gas.
Any external country interested in these things (they should be) must also understand the interests and relationships of the 5 countries which share it. They’ll have to find a way to work with some or all of them.