Turkmenistan agrees to Caspian border demarcation with Kazakhstan

In a move that adds further murkiness to an already confused situation, Kazakhstan and Turkmenistan have agreed to a demarcation of their maritime border in the Caspian Sea, despite the fact that previous conferences of the five Caspian littoral states (Kazakhstan, Turkmenistan, Azerbaijan, Iran, and Russia) established that borders had to be delineated and agreed upon jointly in order to be “legal.” Turkmenistan’s Parliament agreed on the border arrangement that was submitted by Kazakhstan to them in November 2014. The agreement recognizes the sovereign rights of each country in the Caspian, and includes the right to develop and use the resources found in their national maritime “zones.”

The Caspian littoral states are still in a state of debate about whether the Caspian Sea can be considered a sea or an inland lake. If it is a lake, national sectors of each country would extend only about 16 kilometers from the shoreline of each country, with exclusive rights to develop natural resources within that zone, and the remainder would be considered common property of the five states and only developed in the event of mutual consent (a highly unlikely event). Iran has been lobbying hard for the lake designation, due to the fact that its zone of influence contains the least number of proved reserves of oil and gas.

The Kazakh-Turkmen agreement, if it is not overturned, will strengthen the hand of the bloc that wishes to develop its resources and engage in bilateral projects (like the Trans-Caspian pipeline) without the consent or approval of the other states. Russia has raised its own objections about the TCP project, but so far have not commented on the current agreement.

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News Briefs:

  • A Korean engineering & construction firm, GS, has won a bid to construct a petrochemical plant in Uzbekistan for about $4.5 billion based on a memorandum of understanding. The Uzbek plant is set to be run by Uzbekneftegaz, the state-run oil and gas company. The plant itself will produce olefins and polyolefins which are used to make plastic materials and chemicals in further processing, such as ethylene and polyethylene. As of yet, it is unclear where the raw material feedstock for this plant will be coming from, or whether it is oil and gas from Kazakhstan being shipped through Uzbekistan to China.
  • Mongolia has announced that it will issue a $1 billion debt offering in order to extend a wave of goodwill after the announcement of a deal with Rio Tinto group on its Oyu Tolgoi copper mining project. Injections of cash into the Mongolian government are a requirement for its solvency, as foreign direct investment declined some 84% in 2014, caused by weak commodity prices. Half of the offering, created by the Development Bank of Mongolia, will mature in 2017 and the other half in 2018, using these capital injections (assuming a fully subscribed offering when the securities go up for sale), to relieve the pressures of debt.
  • The Russian Army has bolstered its troop numbers on Ukrainian border, including increasing the number of heavy weapons only 50 kilometers from the Luhansk region. The Russian Defense Ministry issued no commentary on these troop movements, but Kremlin spokesmen dismissed comments about a potential invasion being prepared as “inappropriate.”
  • Ukrainian President Petro Poroshenko signed into law a bill on the government’s controversial debt repayment policy – specifically the language of the bill that stipulates that the government can exercise discretion in making its payment schedule. The bill has proved controversial among Western companies acting as credit providers and with Russia, whose government holds some $3 billion in Ukrainian sovereign debt. Ukraine is hoping to restructure its $23 billion in outstanding foreign-currency denominated debt, and likely the IMF’s bailout program in June will determine what course of action Kiev will take.
  • German oilfield services manager Bentec has won three bids for rig and equipment contracts in the Caspian Sea, confirming its expansion into the offshore market. The first goes to Nobel Drilling, which is operating in the offshore sector closest to the coast of Azerbaijan, the second is for several Cluster Slider rigs for a Russian company as well, in an interesting shift away from Russian oilfield services companies like Eurasia Drilling. The contracts indicate an interest on the part of all Caspian littoral states in expanding their offshore rig count.

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