Abstract
The oil and gas endowment of the Caspian whatever its contribution to tension in the first place lends itself to the deployment of the instruments of law. It requires agreements between states on demarcation distribution and legitimization of property rights. The method of joint petroleum development - postponing the definitive border delimitation by a joint system for collaborative licensing of disputed areas and distribution of the revenues - is particularly suitable for developing technical and legal collaboration. An oil and gas development contract also forces the country to understand the logic of technology finance and markets and to import the standards of the oil industry including on safety and environmental protection. Similarly the oil and gas agreements between investors and a host state require the need to respect contractual commitments and be seen as respecting them. In short while oil and gas reserves can incite regional tensions the logic of their development also has a powerful effect in teaching the virtues of law and contract. Similarly the imperatives of oil and gas development can have a civilizing effect on neighborly relationship. The impact of disputed borders and unresolved transit of closed markets and transportation routes of military threats and externally fomented internal subversion usually leads to a lose-lose situation. Resolving such disputes means that the oil and gas industry can pay a peace premium. So international good governance and economic development through the petroleum industry usually go hand in hand.
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References
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There are no binding treaties determining in general the status of international lakes — such as the UN Convention on the Law of the Sea for the seas. There are many precedent treaties concluded between the coastal states, but they are not conclusive evidence for lakes where such treaties do not exist. And, while some treaties set up condominium-like structures for international lakes, others do not and divide the lakes into areas under national jurisdiction of the coastal states.
There has been a strategy to involve Russian companies, in particular Lukoil and Gazprom, in such projects, to reduce the risk of Russian opposition. In fact, it seems that these companies have helped to soften Russian opposition. The Russian Ministry of Energy/Fuel, as the governmental voice of the Russian oil and gas industry, is noticeably less opposed than the Russian Foreign Ministry. On the other hand, it is difficult to predict if the involvement of Russian companies in the Caspian consortia will continue and work — in particular if they are able to contribute their share of the substantial capital required for full-scale development. If they do, Russian interests would become hostage to Caspian politics — similar to Western oil companies, and this should be a disciplining factor on Russian foreign policy.
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From a dispute settlement perspective, it will often be fortunate that the standards of international law are far from absolutely clear. If they were, disadvantaged parties would rarely submit to international adjudication, while the ambiguity facilitates in fact both submission and the involvement of disputing parties in the procedure.
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Using a term from Kautiliya’s Arthasastra - the near King is the powerful, most involved one - most dangerous for its enemies.
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We are not privy to the feasibility studies of this pipeline, but the amount of political pressure visibly displayed indicates that the Baku-Ceyhan project would not be feasible on commercial merit only.
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The volatility of this signal is illustrated by the fact that from the first presentation of this paper — February 1999 in London — to the writing of the manuscript — April 1999, oil prices have moved from their lowest point in decades at $10 per barrel to over $15. At the time of writing, arguments can be made, as usually, for a further downwards or upwards evolution.
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Many terms are used: exploration and development agreement; government contract; state contract; concession/license — the most popular form today, the production-sharing agreement (mainly for developing countries, and also Russia), and the concession (used in modernising developing countries and the developed world, e.g. UK and Norway.
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Waelde, T. (2000). International Good Governance and Civilized Conduct among the Caspian States: Oil and Gas as Lever for Prosperity or Conflict. In: Ascher, W., Mirovitskaya, N. (eds) The Caspian Sea: A Quest for Environmental Security. NATO Science Series, vol 67. Springer, Dordrecht. https://doi.org/10.1007/978-94-011-4032-4_3
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