VZCZCXRO9259
PP RUEHAG RUEHBI RUEHCI RUEHDBU RUEHLH RUEHNEH RUEHPW RUEHROV RUEHSL
RUEHSR
DE RUEHAH #0947/01 2101342
ZNY CCCCC ZZH
P 291342Z JUL 09
FM AMEMBASSY ASHGABAT
TO RUEHC/SECSTATE WASHDC PRIORITY 3212
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUCNCIS/CIS COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHAK/AMEMBASSY ANKARA 5482
RUEHBJ/AMEMBASSY BEIJING 3205
RUEHKO/AMEMBASSY TOKYO 3070
RUEHIT/AMCONSUL ISTANBUL 3725
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEHNSC/NSC WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RHMCSUU/CDR USCENTCOM MACDILL AFB FL
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHDC
RUEKJCS/JOINT STAFF WASHDC
RUEKJCS/SECDEF WASHINGTON DC
RUEHVEN/USMISSION USOSCE 3759

C O N F I D E N T I A L SECTION 01 OF 03 ASHGABAT 000947 
 
SIPDIS 
 
SCA/CEN; EEB 
ENERGY FOR EKIMOFF/THOMPSON 
COMMERCE FOR HUEPER 
 
E.O. 12958: DECL: 07/28/2019 
TAGS: PREL PGOV EPET PBTS EINV AZ TX
SUBJECT: TURKMENISTAN'S PERSPECTIVE ON CASPIAN DELIMITATION 
WITH AZERBAIJAN 
 
Classified By: Charge d'Affaires Sylvia Curran, Reasons 1.4 (b) and (d) 
 
¶1. (C) SUMMARY:  During the July 24 Cabinet of Ministers 
session, President Berdimuhamedov made a strong statement 
that Azerbaijan's position on delimitation of the Caspian 
boundary hampers the negotiation process.  He criticized 
Azerbaijan for its unilateral decision to start development 
of the Omar (Azeri) and Osman (Chirag) oil fields and for 
Azerbaijan's claims to the Serdar (Kapaz) oil field. 
Berdimuhamedov pointed out that resolving the delimitation 
soon is a priority for the Turkmen government and instructed 
Foreign Minister Meredov to engage foreign lawyers in 
reviewing this issue and taking this case to an international 
court of arbitration.  The president's statement came a week 
after a Turkmen delegation headed by Deputy Foreign Minister 
Komekov conducted unsuccessful negotiations on the Caspian 
delimitation issue in Baku.  Azeri proposals to resolve the 
dispute over Serdar have been rejected outright by the 
Turkmen, who view the field unquestionably as their own. 
Azeri reluctance to finalize the maritime boundary with 
Turkmenistan may be related to its possible effect on 
maritime claims involving Iran.  If Turkmenistan pursues 
international arbitration, it would face significant hurdles 
and no prospect of a quick solution.  However, the Turkmen 
strategy may be to raise the international profile of the 
dispute in the hope of bringing pressure to bear on 
Azerbaijan to reach a resolution acceptable to both sides. 
END SUMMARY. 
 
SOME BACKGROUND ON THE DISPUTE 
 
¶2. (SBU) The Turkmen-Azeri row over the disputed fields has 
been an issue since 1994 when the Azeri government signed a 
contract with a consortium of international companies to 
develop the Omar, Osman, and Guneshli fields with recoverable 
reserves of 5.4 billion barrels.  Azerbaijan subsequently 
signed an agreement with the Russian Lukoil and Rosneft 
companies to develop the Serdar field (estimated recoverable 
reserves 700 million barrels).  The Turkmen government 
reacted strongly, announcing it would block any attempts at 
development of the Serdar field, and put pressure on the oil 
companies through the Russian government.  Tensions between 
Turkmenistan and Azerbaijan reached a peak in 2002 when 
former President Niyazov stated that "the Caspian Sea smells 
of blood" during the Ashgabat summit of the Caspian littoral 
states.  During the summit, Niyazov also mentioned the 
possibility of resolving the issue in an international court 
of arbitration.  Since Berdimuhamedov's presidency, 
Turkmen-Azeri relations have improved considerably and the 
governments resumed a dialogue on the delimitation issue. 
The Turkmen State Service for Caspian Sea Issues was moved 
from the government's energy portfolio to the Foreign 
Ministry and the Chairman of the Service holds the position 
of Deputy Foreign Minister. 
 
TALKS YIELDED NO PROGRESS 
 
¶3. (C) According to an expatriate energy company 
representative with extensive contacts within the Turkmen 
government hydrocarbon sector, Berdimuhamedov's recent 
announcement that Turkmenistan would pursue international 
arbitration was the result of the lack of progress evident at 
the latest round of negotiations July 15-17.  Until February 
2009, former Deputy Foreign Minister Hoshgeldi Babayev was 
the Turkmen official in charge of negotiations.  He was 
dismissed in February and is currently sitting at home 
without work.  Our contact, personally acquainted with 
Babayev, said the former deputy minister had a typical 
"Soviet mindset" and would not have reported negative results 
to the president following the various rounds of 
negotiations.  Babayev was replaced by Toyly Komekov, a 
 
ASHGABAT 00000947  002 OF 003 
 
 
younger and reportedly more forthcoming official.  The July 
negotiations were the third round that Komekov had attended. 
Following the negotiations, he was reportedly frank to 
Berdimuhamedov about the lack of progress. 
 
¶4. (C) According to the British Embassy, Foreign Minister 
Meredov told Prince Andrew, during his recent visit to 
Ashgabat, that Berdimuhamedov's announcement was sparked by 
Azeri President Aliyev's July 13 speech at Chatham House in 
London.  Meredov asserted that Aliyev had asserted that the 
entire disputed territory was Azeri.  This had angered 
Berdimuhamedov to such an extent that he "ordered" Meredov to 
seek international arbitration.  Meredov also complained to 
Prince Andrew that BP was stealing Turkmen gas in the 
disputed zone.  He later sent a letter to BP headquarters in 
London, via the British Embassy, warning the company that if 
they did not compensate the Turkmen they would also be taken 
to international arbitration. 
 
TURKMEN UNYIELDING ON SERDAR CLAIM 
 
¶5. (C) The Turkmen government has not released information 
about its position regarding the location of the maritime 
boundary and its conditions for resolving the issue. 
According to our energy company contact, the Turkmen position 
about the appropriate boundary line was reinforced in 2007 
when Canadian firm Buried Hill Energy was given a production 
sharing agreement (PSA) for Turkmenistan's offshore Block 
III, which includes the Serdar field.  Foreign energy 
companies, with the exception of Buried Hill, were not 
interested in Block III because of the uncertainty posed by 
the unresolved boundary issue.  In its negotiations for a 
PSA, Buried Hill provided the Turkmen government with a legal 
opinion from an English law firm specializing in maritime law 
that included a map showing the location of the boundary 
line.  In arranging for the analysis, Buried Hill reportedly 
instructed the law firm to conside a line drawn across the 
base of the Apsheron peninsula, on which Baku is located, as 
the Azeri land boundary.  This condition produced a boundary 
that included not only the Serdar field, but also most of 
Azerbaijan's ACG Block, thereby supporting the Turkmen claim 
for the Omar and Osman fields. 
 
¶6. (C) According to our contact, the Azeris have in the past 
acknowledged privately that the Serdar field is in fact 
Turkmen territory.  At the Turkmenistan International Oil and 
Gas Exhibition in November 2008, an Azeri delegation 
reportedly proposed that Turkmenistan could own 100 percent 
of the production in the Serdar field, provided that the oil 
was shipped westward to allow the Azeris to capture transit 
revenue and to show that there had been a compromise.  Our 
contact said the Turkmen side rejected the offer, saying they 
would not accept any restrictions on the delivery of Turkmen 
oil and gas.  At the latest round of talks, the Azeris 
reportedly proposed a 90-10 split of the Serdar field's 
production, with the Turkmen receiving the lion's share and 
no restrictions on where production would be delivered.  The 
Turkmen rejected this proposal as well.  Our contact 
explained that the Azeri reluctance to delimiting the 
boundary with Turkmenistan relates to Azeri boundary claims 
with Iran farther to the south.  There are highly prospective 
fields blocks lying adjacent to the disputed Azeri-Iranian 
boundary and the location of the Turkmen-Azeri boundary could 
have an impact on an eventual Azeri-Iranian delimitation. 
 
ARBITRATION OFFERS NO QUICK RESOLUTION 
 
¶7. (C) No details have been released regarding to which 
international arbitration court Turkmenistan would apply.  An 
independent Turkmen legal expert opined in a meeting with 
Embassy staff that Turkmenistan would most likely take its 
 
ASHGABAT 00000947  003 OF 003 
 
 
case to the International Court of Justice in The Hague 
(ICJ), which can look into territorial disputes between 
states (although its statute requires that both sides agree 
to recognize the court's jurisdiction).  He also mentioned 
that it would take a long time for Turkmenistan to field a 
case, because the country has no experts in maritime and 
international law.  The Turkmen lawyer also suggested that 
either the UN Convention on Maritime Law or Soviet documents 
identifying the borders of the former Soviet republics would 
be applied by the ICJ when considering this case.  He stated 
that it would take years before the case would be resolved in 
court. 
 
¶8. (C) COMMENT:  The Turkmen government's decision to take 
the Caspian issue to arbitration might indicate that the 
Turkmen want to attract the attention of the international 
community to this issue and take it to a higher level than 
the bilateral or littoral format, since the Turkmen 
government seems to have no ability to influence Azerbaijan. 
The Turkmen may well hope for international, and particularly 
Western, involvement to influence the Azeri government's 
decision.  If so, we may soon see further attempts by the 
Turkmen government to improve its relations with Western 
governments.  END COMMENT. 
CURRAN