16 Jul 2024
Saturday 18 August 2018 - 09:40
Story Code : 316180

Caspian Convention can help Iran oil, gas exports face US sanctions - Analysts

Sputnik| Anastasia Dmitrieva: The Convention on the Legal Status of the Caspian Sea will facilitate Tehrans energy cooperation with Ashgabat and Astana and help export Iranian oil and gas products after the reinstatement of US sanctions, experts told Sputnik.

The status ofthe oil-and-gas-rich Caspian Sea was regulated byagreements reached betweenIran and the Soviet Union untilthe dissolution ofthe latter, followed bythe emergence ofnewly independent states surrounding the body ofwater, namely Azerbaijan, Kazakhstan, Russia and Turkmenistan, who had managed toreach the agreement afterover 20 years ofdiplomatic efforts.

The recently signed convention closed the door tothis uncertainty bydividing the seabed and subsoil betweenthe five littoral states onthe basis ofinternational law, while the major surface ofthe sea will be shared. The document regulates such issues asfishing and pipeline construction, establishes rules formaritime navigation inthe sea, and bans any activities threatening the sea's biological resources.

Caspian Deal Opens Opportunities forNew Energy Projects

The signing ofthe Convention onthe Legal Status ofthe Caspian Sea opens upgreat prospects forcooperation inthe fuel and energy sector, according tothe experts.
"The Convention onthe Caspian Sea signed on12 August 2018, inAktau, Kazakhstan [] opens major economic possibilities. Most important, an estimated 68 billion barrels ofoil and 535 trillion cubic feet ofnatural gas inproved and probable reserves may be available forextraction bythe five countries. In addition toeasing domestic energy costs forthose nations, commercial exploitation presents the possibility ofthe region becoming a pivotal player inglobal supply if the signatories act cooperatively formutual benefit," Dr. Jamsheed K. Choksy, the chair ofDepartment ofCentral Eurasian Studies atIndiana University, told Sputnik.

In particular, the Caspian Convention may give a new impetus forbuilding the Trans-Caspian pipeline, which will help transport the regions gas throughAzerbaijan tonew markets inEurope, bypassing Iran and Russia.
"The agreement may lead tomore cooperation betweenIran and Turkmenistan, and Iran and Kazakhstan. They are both land-locked countries and wish toexport their oil and gas. There has been much talk aboutTrans-Caspian pipeline," Muhammad Sahimi, the NIOC Chair inpetroleum engineering atthe University ofSouthern California, told Sputnik.

In November, the signatories are set togather inAzerbaijan tohold the first meeting ofa working group onimplementation ofthe convention, which inthe long run will integrate the whole region, according toanother expert.
"The Convention will help toimprove the relations betweenall ofthe states and help tointegrate the region. Its something that benefits all fromall sides ofthe Caspian. I hope that cooperation will help toimprove the environment aswell, while also enhancing energy cooperation," Mohammad Marandi, a professor atthe University ofTehran, told Sputnik.

The convention onthe Caspian Sea was hard toagree due tothe fact that its legal status aseither a sea or a lake was tobe determined; the two bodies ofwater are regulated bydifferent provisions ofinternational law.

Irans Exports Fall inthe Face ofUS Sanctions

The signing ofthe Caspian convention comes ata time when Iranian oil exports are aboutto be seriously undermined due toUS sanctions, the first set ofwhich was implemented onAugust 6. As the result, Irans oil production fell by56,300 barrels per day to3.73 million barrels per day inJuly. The US sanctions are expected toextend tothe Iranian energy sector and cover the purchase ofpetroleum and petrochemical products fromIran.
"Some ofthe importing countries cut back their imports fromIran, and it takes time toreplace them. By swapping oil and natural gas withits neighbors tothe north that are signatories tothe Caspian Sea agreement, Iran will effectively be exporting its oil even inthe face ofUS sanctions," Sahimi said.

One ofthe solutions forTehran torestore its exports would be toconnect tothe proposed Trans-Caspian pipeline, which will be "political benefit forIran bymaking it part ofa pipeline that Europe needs," the NIOC chair inpetroleum engineering added.
"This is a purely political line because the more economic route is throughIran. The main obstacle toa route throughIran has been the United States," Sahimi argued.

However, it remains unclear how Azerbaijan, Kazakhstan, and Turkmenistan plan toswap oil and gas withIran underthreat tobe sanctioned bythe United States. US President Donald Trump previously warned that the United States would cut trade ties with "anyone doing business withIran."
"[The three states] definitely cannot afford tocircumvent the American demand-and covert trade betweenIranian companies and organizations inthose three Caspian states and fromthere tothe west or the east will not make a fundamental difference toany economic sectors," Choksy warned.

The professor explained that inorder forthe Caspian regional grouping tohelp partially offset the impact ofUS sanctions and set uptrading routes toEurope and Asia, Tehran would still need tonegotiate withWashington, a step they repeatedly refused.
"[Iranian President Hassan] Rouhani administration inTehran will have only a short timeline todemonstrate the Convention is a positive step forthe Islamic Republic, and the US administration is likely toact toblock any gains toIran fromthe Convention. For the Convention onthe Caspian Sea toachieve its full potential and benefit the five signatory nations and the world, Iran needs tosettle its disputes withthe US," Choksy concluded.

The United States is set tointroduce secondary sanctions againstcountries that will continue toimport oil fromIran afterWashington reintroduces sanctions onTehran onNovember 4, according tothe US Department ofState.

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