The competing political and economic interests of the five littoral countries of the Caspian Sea after the collapse of the Soviet Union resulted in a prolonged dispute over the definition of the legal status and fair division of the basin according to national segments. Different legal interpretations have led to political and even military clashes between countries. The former Soviet republics of Azerbaijan and Turkmenistan have recently exchanged barbs over a disputed oilfield in the Caspian Sea.

Turkmenistan’s Foreign Ministry has accused Azerbaijan’s Border Service of taking “illegal action” against a Turkmen civilian vessel carrying out seismic exploration in a Caspian section that “had nothing to do with Azerbaijan.” In a statement released by the Turkmen embassy in Baku on June 16, the ministry said Turkmenistan would take “adequate measures” if Azerbaijan continued the “provocations.” In response, Azerbaijan’s Foreign Ministry invited Turkmenistan’s Ambassador Toyly Komekov two days later, accusing Turkmenistan of violating an agreement reached between the presidents of Azerbaijan and Turkmenistan in 2008 on suspending all exploration at the Kapaz field, also known as Serdar, before the dispute is resolved. Azerbaijan threatened to take “appropriate measures to defend Azerbaijan’s sovereign rights in the Caspian.”

The field, located on the border between the Azerbaijani and Turkmen sections of the Caspian Sea, has been claimed by both countries after the collapse of the Soviet Union in 1991. The final legal status of the Caspian Sea needs to be determined by unanimous agreement among all the littoral states. The five littoral states; Russia, Azerbaijan, Kazakhstan, Turkmenistan and Iran, have failed to agree on the maritime boundaries of the sea despite extensive talks in the past 20 years.

The uncertainty and no-consensus situation is considered an obstacle to the implementation of projects such as the Trans-Caspian gas pipeline that would enable the transportation of gas from Turkmenistan to Azerbaijan at the bottom of the Caspian Sea and on to the European market. While the EU and Washington do not see any political or environmental obstacles to construct the Trans- Caspian gas pipeline through the Caspian Sea, Russia and Iran strongly oppose it.

“The EU completely supports the ongoing work and is already working with the two states which have decided to build a gas pipeline in their territorial waters,” the head of the EU office in Kazakhstan and Turkmenistan Aurelia Bouchez said on June 21. The Trans-Caspian gas pipeline will have a length of about 300 kilometers and begin on the Turkmen coast of the Caspian Sea. The pipeline will be connected to Azerbaijan where it will link to the Southern Gas Corridor. Russia opposes the project due to the unresolved status of the Caspian Sea and environmental risks.

Bouchez added that the EU has no specific position on the legal status of the Caspian Sea, because “this matter should be settled between the five littoral states.” At the same time, the unresolved status of the Caspian Sea poses no obstacles to the construction and operation of oil and gas pipelines, she said. “In our opinion there is no need to delimit borders for the construction of a pipeline through the Caspian Sea. Pipelines can be built through borders, which of course exist though their status has not been agreed yet. Such problems happen quite often in the EU. In particular, we had some similar problems in the North Sea,” Bouchez said. Moreover, the Trans-Caspian gas pipeline poses no environmental risks according to Bouche: “The EU-funded research revealed no environmental problem, which can hamper the Trans-Caspian gas pipeline construction.”

Meanwhile, the EU is ready to finance the work in this area to solve all possible environmental problems. According to British Petroleum’s World Energy 2012 report, Turkmenistan ranks fourth in terms of the natural gas reserves after Russia, Iran and Qatar. Turkmenistan’s proven gas reserves at the end of 2011 are estimated at 24.3 trillion cubic meters. Turkmenistan’s share of global gas reserves was 11.7 percent last year, while the country’s share of total gas production is 1.8 percent. Gas consumption in the country last year totaled 25.0 billion cubic meters which is 10 per cent more than the previous year.

At the latest Caspian Sea summit in Baku, Turkmenistan’s President said that building pipelines under the Caspian Sea is an issue of principle for Ashgabad. Hoping to cooperate with the EU in the energy field, Ashgabad has already made certain some commitments, promising to produce up to 40 billion cubic meters, which may in future be delivered to the EU.

At meeting with European Commission president Jose Manuel Barroso in Ashgabad early last year, Berdimuhamedov said he considers the European direction to be the most promising and expressed his willingness to sign specific agreements on the Nabucco project after detailed negotiations.

Analysts believe that ensuring resources for Nabucco in Turkmenistan is of interest not only to potential customers in Europe, but also for Turkey as a recipient and transit facilitator, and for Azerbaijan which is the principal supplier for the consortium. Baku will be able to receive long term significant profit for the transit. Turkmen oil has already been successfully transported via Azerbaijani ports.

Speaking on the transportation of Turkmen gas to Europe, Daniel Stein, senior adviser to the U.S. State Department’s special envoy for Eurasian energy has noted that “If Turkmenistan and Azerbaijan reach an agreement on the pipeline and decide to implement this project in their territorial waters, then other countries will not have the right to veto.”