Page 59 - bne_Magazine_April_2018

bne April 2018
Opinion 59
government places a high priority on the construction of TGCP and is therefore likely to be open to compromise with Baku. In practice, however, without a convention on the Caspian Sea, the project risks further objections from Iran or Russia.
Whether a convention is signed or not, the commercial logic behind the TCGP will remain highly questionable. Existing and planned Southern Gas Corridor infrastructure cannot accommodate significant volumes of Turkmen gas without further capital-intensive expansion. Moreover, it is unclear whether the demand for gas in Europe warrants significant imports from Turkmenistan.
Iran remains isolated
In contrast to Turkmenistan, Iran is by all accounts less con- cerned about the immediate monetary upsides of delineating borders in the Caspian Sea. This, in part, reflects the relatively low priority afforded to the Caspian by the Iranian upstream sector. Moreover, since Iran is set to lose the most by accept- ing the median line approach – which would give the country at best 13% of the Caspian, significantly less than the 20% it claims – the country has little incentive to make concessions.
At the same time, however, a deal between Azerbaijan and Turkmenistan that excludes Iran would expose the country’s
Territorial disputes in the Caspian are driven by unequal hydrocarbon distribution
isolation and entrench its disputes. This would once and for all remove the possibility of a multilateral solution involving all the Caspian states and highlight any concessions Iran would make in bilateral deals as a sell-out.
In a worst-case scenario, renewed Azerbaijani or Turkmen attempts to explore in disputed waters risk provoking Iran to militarise the dispute. However, under current conditions, Verisk Maplecroft’s Interstate Tensions Model forecasts very low risks of militarised conflict between the Caspian states. Low risk of interstate tensions in Caspian Sea
Despite Lavrov’s talk of a breakthrough on the legal status
of the Caspian in 2018, Verisk Maplecroft considers it very unlikely that full border demarcation is on the cards. More- over, even if progress can be achieved, the TCGP and Serdar/ Kapaz face significant challenges. Any short-term opportuni- ties from a deal between Azerbaijan and Turkmenistan would be countered by a long-term freeze on the remaining blocks under dispute as Iran remains isolated in a high-stakes game.
Camilla Hagelund is principal analyst - Central Asia at global risk consultancy Verisk Maplecroft. This article forms part of Verisk Maplecroft’s Political Risk Outlook – Oil & Gas 2018.
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