The Convention is silent on the important question of how subsoil resources within the Caspian Sea are to be divided. Article 8(1) instead provides that “delimitation of the Caspian Sea seabed and subsoil into sectors shall be effected by agreement between States with adjacent and opposite coasts, with due regard to the generally recognized principles and norms of international law”.
This means that long-standing disputes in the south of the Caspian Sea will remain an unsettled reality going forward. For example, Iran and Azerbaijan have historically disagreed on the ownership of the Araz-Alov-Sharg exploration block.
Separately, the resolution of the long-running dispute between Azerbaijan and Turkmenistan over the Serdar/Kapaz field may play a role in discussions on the development of the TCP.
Whilst the Convention does not resolve this issue directly, it does pave the way for a deal to be made by the parties, which should help them realise their key strategic objectives. Azerbaijan has long viewed the Serdar/Kapaz field, and its estimated reserves of 620 million barrels of oil, as a strategic asset. Similarly, Turkmenistan understands that the TCP provides it with an invaluable alternative export route, which would reduce its vulnerability and reliance on its only other existing export route.2 It may be that Azerbaijan and Turkmenistan are able to find a compromise on the ownership of the field as part of their discussions on the TCP.
The Convention is also ambiguously drafted as to how disputes between parties are to be resolved. Whilst Article 21(1) makes a reference to disagreements being settled through “consultations and negotiations”, the Convention fails to outline a clear dispute resolution forum should the parties find themselves in a stalemate. Instead Article 21(2) states, that to the extent that disputes can’t be resolved in accordance with Article 21(1), they are to be referred “for settlement through other peaceful means provided for by international law”, at the discretion of the parties. Given this broad wording it remains to be seen how parties actually go about resolving any disagreements which may arise.
To conclude, while the Convention helps pave the way for the development of key pipelines and infrastructure, it does not provide answers to all legal questions pertaining to the exploitation of natural resources, and the delineation of the seabed remains unresolved. It remains to be seen whether the Convention will actually lead to greater levels of pipeline investment within the Caspian Sea area. More immediately, with the Convention currently awaiting ratification, a telling indicator of each party’s commitment will be the time taken by the parties to deposit their instruments of ratification with the Republic of Kazakhstan (as the Depositary under Article 22).