BACKGROUND: Since the Soviet Union\'s fall, the inability of the five littoral states (Azerbaijan, Iran, Kazakhstan, Russia, and Turkmenistan) to agree on a legal regime for the Caspian Sea has created uncertainty about the ownership of many Caspian offshore oilfields and prevented their development, while creating a situation ripe for tension and hostility among the littoral states. This reality has created a major obstacle to their acceptance of a legal regime. Until 1999 Iran and Russia opposed dividing the Caspian Sea into national zones, in favor of dividing it based on the condominium principle. Eager to develop its offshore oil and gas fields to address their deep financial problems, the other three states were insisting on its division into unequal national zones. Russia joined them in 1999 when it found large offshore oil reserves close to its Caspian coastline. Lacking support of other Caspian states, Iran has accepted the division of the Caspian seabed into equal national zones, a position backed only by Turkmenistan, although it still favors a condominium arrangement. Russia has lately sought to address the issue through bilateral agreements with its neighbors. It signed agreements with Azerbaijan in September 2002 and Kazakhstan in May 2002, which solved most but not all territorial disputes. Problems remain, though. Beside unresolved territorial disputes between Kazakhstan and its neighboring Turkmenistan, Iran and Turkmenistan are yet to settle major disputes with Azerbaijan, which have pitted them against each other since the mid-1990s. IMPLICATIONS: The Baku session seemed to be different from previous, fruitless ones. This time, the participants discussed a proposed draft convention on the Caspian Sea\'s legal regime. The convention contained certain points acceptable to all littoral countries, while taking into consideration some of the concerns and interests of each littoral state. The document, in spite of its flaws, created a basis for further negotiations to end a decade-long deadlock. This point became evident in the behavior and statements of the respective governments at the end of the session, very much unlike at the 2002 Asghabat session. At the end of that session, all the five attending countries expressed frustration, anger and a lack of common grounds, while Russia revealed its own anger by announcing a major military exercise in the Caspian. But this time, the participants, including the Russian representative, expressed positive views about the Baku session, acknowledging the more constructive environment and the possibility achieving a legal regime. For example, Azerbaijan\'s deputy foreign minister Khalaf Khalafov described the session\'s results as \"positive\". Khalafov\'s expressed satisfaction with his talks with his Iranian counterpart and his announced willingness to hold talks with Turkmenistan created grounds for optimism. Azerbaijan\'s expressed willingness to settle its major conflicts over the Caspian Sea\'s division with Iran and Turkmenistan through negotiations served as an example to reflect a more constructive mood among all the littoral states. In a joint communiqué, they stressed that the session \"contributed tremendously\" to their efforts to agree on a legal regime to be followed in their next session in Kazakhstan\'s capital, Astana. The proposed convention contains certain constructive elements seeking to eliminate or reduce the sources of tension among the Caspian states. They include clauses on the demilitarization of the Caspian Sea, on a system of permission for the peaceful movement of military ships of a littoral state through the sectors of others, on free commercial shipping for the littoral states, on disapproving of shipping rights for non-Caspian states, and on rejecting unlimited shipping rights for any littoral state. It also provides for agreements among the littoral states for fishing and the protection of the Caspian environment. Although such clauses could meet the approval of all the littoral states with some amendments, other clauses on the sensitive issues of dividing the energy-rich Caspian seabed and oil/gas exports will likely part them along the line of their old conflicts. Accordingly, the convention provides for dividing the Caspian Sea into exclusive 15-sea-mile-wide national territories and exclusive fishing zones. Its seabed is divided between neighboring and opposite countries for \"subsurface operations\" and \"other economic activities\" in accordance to \"the principle of a median line\", the agreement of the affected countries and the \"generally accepted norms and international law\". The latter term has been a major source of disagreement between Iran and Russia (until 1999) on the one side and other littoral states. Iran has argued against the applicability of international laws on open seas to the Caspian Sea, the world\'s largest lake, which stipulate the division of open waters into unequal national zones according to their coastlines. The proposed method undermines Iran\'s and Turkmenistan\'s demand for equal shares (20 percent) for all countries as any division based on coastlines will leave them smaller shares. Moreover, the draft convention also provides for the littoral countries\' right to lay underwater pipelines, although they require the approval of the countries through which the pipeline will pass. Beside legitimate environmental concerns, Russia and Iran, which could offer oil and gas export routes via their territories to the other three land-locked Caspian states. They oppose underwater pipelines across the Caspian Sea, which are mainly meant to bypass them for such exports through an alternative export route connecting Kazakhstan and Turkmenistan to Azerbaijan, which is linked by pipeline to the Georgian Black Sea coast and in the future to the Turkish Mediterranean coast. Given these controversial clauses, the Russian and Iranian representatives to the Baku session confined themselves to express satisfaction about the session\'s deliberations in broad diplomatic terms, without committing themselves to the proposed convention. However, as they did not reject it altogether, one could conclude that they might be considering the convention as useful for the Caspian states\' collective efforts to prepare a legal regime acceptable to all of them. CONCLUSIONS: The Baku session did not solve the legal regime issue once and forever, an expected result given the decade-old disagreements among the Caspian states. However, its proposed convention provided at least a means for more serious efforts by the Caspian states to work towards that end. After years of failures to find a common ground as a first step for settling the legal regime issue, the prevailing positive mood at the end of the Baku session, if continued, could potentially help the Caspian states achieve that objective in the near future. AUTHOR BIO: Dr. Hooman Peimani works as an independent consultant with international organizations in Geneva and does research in International Relations.