Iran, latest, multipolar world, Russia
Comments 20

Caspian Sea Agreement Symptomatic of Wider Geopolitical Changes

James O’Neill

On 12 August 2018 the five littoral states to the Caspian Sea (Azerbaijan, Iran, Kazakhstan, Russia and Turkmenistan) signed an historic agreement governing the use of the Caspian Sea. The negotiations had been ongoing for more than 20 years.

One of the issues was with the Caspian should be regarded as a sea (it is salty but completely enclosed) or a lake. If the former, then it would be governed by the international law of the sea. If defined as a lake, then the resources would be divided equally between the five States. In the event, the five nations agreed to accord it ‘a special status,’ neither lake nor sea. Whether this unique formulation will be recognised by non-littoral States is an open question.

There are several significant elements to the Caspian Sea Convention (CSC) that are worthy of note. The first aspect is the size of the resources at stake. The Caspian Sea basin is known to hold 50 billion barrels of oil in proven reserves, and nearly 9 trillion cubic metres of natural gas. To put that in perspective, the gas reserves are greater then the entire known United States reserves.

The agreement signed on 12 August gave each of the five states a 15 nautical mile exclusive territorial zone, plus a further 10 nautical mile exclusive fishing zone. The balance of the sea area was for common use. Its economic development would therefore be a joint exercise with the benefits equally shared. A Caspian Economic Forum was also established to determine, inter alia, the practical means and effects of such cooperation.

The second aspect of the agreement relates to security arrangements. All non-littoral States are forbidden to have foreign military bases. This is specifically directed at NATO, which continues its encroachment and attempted encroachment in all nations with proximity to Russia.

Russia is the underwriter of security in the Caspian, a factor that increases its geopolitical strength viz a viz other nations, and in particular Iran that is looking increasingly to secure arrangements unaffected by the unilateral sanctions imposed by the United States.

Both Russia and China are developing closer economic and political ties with Iran. Both countries have made significant investments in Iranian infrastructure and resource development. Iran is also a pivotal State in China’s Belt and Road Initiative. Neither Russia nor China are likely to tolerate overt aggression against Iran of the type advocated by some of the more extreme neocon elements of the US administration.

That does not preclude those same elements increasing the intensity of the hybrid warfare waged against Iran for many years, including overt support for the terrorist MEK group. Hybrid warfare is also the main means by which the US will seek to undermine China’s Belt and Road Initiative, as overt warfare is now, as the Rand Corporation acknowledged recently, “unthinkable.”

The leaders of Iran and Kazakhstan also held separate meetings, an object of which in part was to establish economic links bypassing the United States dollar. This also reflects a developing trend of a move away from the US dollar, the ramifications of which are potentially enormous.

The third major consequence is in the links between some members of the CSA and related Eurasian organisations. Iran had earlier this year signed a free trade agreement with the Eurasian Economic Union, (EAEU) two of whose members, Kazakhstan and Russia are also parties to the CSC. Iran is an observer State (and likely full member soon) of the Shanghai Corporation Organisation. That organization’s full members include CSC States Russia and Kazakhstan, as well as neighbouring Pakistan and fellow SCO observer State Afghanistan. A resolution of the long running Afghanistan war will require the co-operation of Afghanistan’s Central Asian neighbours, all of whom are members of the SCO.

The CSC therefore represents a further step in the significant shift of geopolitical power to the Eurasian heartland. Although China was not a party to the CSC it is nonetheless the dominant economic power in the region, with close ties to the CSC signatories, particularly through the SCO, but also with non-member States such as Turkmenistan from whom it is a major importer of natural gas.

Although there are important differences between the Caspian Sea and the South China Sea, there are also lessons that can be drawn. Following the recent ASEAN meeting in Singapore, the ASEAN nations and China announced that they had agreed upon a new draft code of conduct for the littoral States of the South China Sea. Those negotiations had also been very lengthy.

The draft code of conduct underscores the importance of those nations most affected by the issues in dispute being the ones best able to formulate a resolution when they are able to do so. Those negotiations arguably have a better chance of success, absent the involvement of outside countries such as the United States and Australia. The actions and statements of those two nations demonstrate an inability to promote a peaceful resolution of the South China Sea issues, preferring instead a provocative and confrontational methodology.

The Caspian Sea Convention and the South China Sea code of conduct provide evidence that an alternative model is available.

James O’Neill is a barrister at law and geopolitical analyst. He may be contacted at joneill@qldbar.asn.au

20 Comments

  1. Hope says

    Adding my thanks to those above; I really appreciate such clear and informative writing. It’s extraordinary that there’s been so little about this agreement in the general press.

  2. Fair dinkum says

    ‘Fifty billion barrels of oil, nine trillion cubic meters of gas’? Really?
    Climate change will lay those figures in an early grave.
    How about an agreement on SANITY!!!

    • writerroddis says

      Nice thought, Fair dinkum. Meanwhile, here on planet earth, I welcome moves that check its most rapacious capitalism …

    • writerroddis says

      Indeed, Antonyl, and the author acknowledges this with his reference to “important differences between the Caspian Sea and the South China Sea”. I offer two such differences. One is that the immediate stakes in the South China Sea are higher for the USA, which will seek to maintain, among other things, control of the sea lanes given its scores if not hundreds of military bases, all armed to the teeth and making nonsense of its talk of ‘Russian aggression’ in the region. The other, related, is the greater ease with which USA can exploit regional tensions of the kind exemplified by maritime disputes between China and Vietnam, and by exasperation on the part of Cambodia, Laos and Vietnam over China’s disruptive damming of the upper Mekong.

      That said, James O’Neill is right to make the comparison. Ultimately, the issues are the same: the slow steady shift of economic power from North America and Western Europe to Eurasia, and the billion dollar question: how far will the world’s most rapacious power go in its attempts to block that shift?

  3. Savorywill says

    Yes, this was good to read. Not much mentioned about this on CNN, which seems to backing off its hysterical Trump-bashing day in and day out. Probably, they must be realizing that people are getting a bit sick of all the negativity.

    I think the best thing is that countries form their own alliances and agreements and use whatever currency they want to. Isn’t this what freedom is supposed to be, something America always considers itself the champion of?

    • Robbobbobin says

      Any transaction can be conducted in whatever currency the participants agree on: one or more of their national currencies, the currency of a nation external to any of them, or a global “reserve” currency. There is currently no actual global reserve currency but there are a few national currencies which are in contention for that function, the most ubiqitous of which is the US Dollar. For international trade by anyone, anywhere, public or private, the use of a reserve currency is often very advantageous, for individuals and businesses in managing the local effects of foreign exchange regulations, etc., for governments in the international financing of initiatives and for both the holding of internationally fungible assets (the why and hows don’t matter at this level). For the issuer of a reserve currency, any trading in that currency is almost always advantageous and trades, by anyone, anywhere, in certain universally sought after commodities, e.g. oil, are extremey advatageous (again, you can research the hows and whys for yourself if you want to).

      You may have seen Trump telling NATO that Germany wants the USA to protect it but it is buying energy from Russia, so why should the US oblige? In fact, “energy” is just another commodity, but for the USA that is very much not the case. The German-Russian energy trade is denominated in Euros, not dollars. Trump has a very limited understanding of anything beyond simple, rapacious business dealing, but his separation of energy trading – internationally, principally in fossil fuels – from any other sort of trading will have been drummed into him by the US departments of state responsible for maintaining and extending US hegemony through one of its main tools, the US dollar as the world’s predominant reserve currency (i.e. the US as the world’s banker, i.e. financial controller).

      Issuance of a dominant global currency is the sort of thing that triggers major international conflicts; not just trade wars, but full-scale military agressions.

      Near the end of World War II the self-proclaimed “good guys” set up an international trading order, with a couple of political side shows for the easily bored, the generally unstated purpose of which was to keep everyone else in quiescent obedience, to the benefit of the winners, through loudly stated public relations messages proclaiming an era of “freedom”, “justice”, “equality”, “political harmony”, “human rights”, “joint prosperity” and so on. There were two main sides in the discussions, the USA, which had most of the unbombed wealth and wished to advance the international influence of the U dollar, and the UK, which was flat broke and wished to hang on to the international influence of the pound sterling.

      The British sugar-coated their proposals by suggesting a universal replacement for the reserve currency system based on an international accounting system using a new intergovernmental accounting unit – not a “currency” – called the “Bancor”. Superficially, this would have the advantage of removing the great advantage that issuing a reserve currency gives to the issuer of that currency and would spread the trading wealth of nations more equally (and hence the individual traders within, as well as the governments, of those nations). The Americans, on the other hand, went staight for commercial jugular. The Americans won, and we ended up with the gold-backed US dollar instead: the”gold standard”.

      As it was, ultimately, a finite commodity and despite peristent US gaming of the system it had successfully had adopted, gold eventually became too inflexible to meet the demands of the sort of shenanigan economy that Americans and their more rapacious European counterparts were cooking up, so Richard Nixon grabbed the ball and left the field. The first world was without its “gold standard”. That could have been the start of a far rockier road for US hegemony but for the sheer brilliance of the US government’s and Federal Reserve’s go-to money guys, who took themselves off to Saudi Arabia and engineered a shonky semi-secret agreement with that corrupt little monarchy, under which the US would supply the Saudis with all the war power they might need, as win-win arms and related deals, in return for the Saudis denominating all of their oil transactions in US dollars (known in that context as “petrodollars”). The net effect, given other, contributing commercial, realpolitik and geopolitical factors, has been to extend the benefits of the previous gold-linked US dollar scams by decades, continuing to outsource much of America’s subsequent internal prosperity as a successul depletion of the assets power of other governents and their citizenries.

      Now the whole shabby scheme is finally hitting the fan of over eighty years of gross abuse and we have the war in Yemen, much of the motive behind the villification of Russia, the physical, political and social destruction of Iraq and Libya, the trashing of Turkey’s economy at the moment it needs intelligent assistance (Turkey being but the first of likely many), tne attack on China’s state-aided push to develop AI and robotics (as though D/ARPA had never existed) and so on. And Trump’s recent ill-informed attempt of a snow job on the US’s NATO partners. The remains of Donald Rumsfeld and the cadaver of John Bolton are getting rattled. Those foundations of US hegemony that lie in the issuance of the world’s de facto reserve currency are finally being challenged. A couple of years ago the Governor of the Chinese reserve bank even floated the possibility of revisiting the at least superficially more equitable concept of the Bancor.

      In a degenerate, capitalist society where everything has its price ticket, the advice of Deep Throat to Bob Woodward to “follow the money”” is relevant to the understanding of just about every commercial, social and political problem you care to lo mention.

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      • Big B says

        Robbobbobin:

        “Those foundations of US hegemony that lie in the issuance of the world’s de facto reserve currency are finally being challenged”

        Are they though? And if so, by whom or what?

        Like it or not, the dollar as the premium instrument of financial imperialism is going from strength to strength (though it cooled off recently). The general synopsis is that Powell’s (the Fed’s) rate rises have pulled dollarised debt from the periphery and semi-periphery, back into the imperial core (NY, London, Zurich, and to a lesser extent Tokyo). The capital flight from the former Emerging Market Economies (EMEs) – now to be known as the submerging market economies – led to currency vultures shorting their currencies …most notably the Argentine Peso and Turkish Lira: and contagion is spreading out (to the Italian and Spanish banks for instance) …but the dollar (and to a lesser degree the Pound Sterling) is doing fine.

        In modern markets, it is a big mistake to conflate the currency with the country. Dollars (Eurodollars) can be created anywhere (because of the dynamics you explain, there is a surfeit of printed dollars to back them up – in a fractional sense) …and anyone can deal in them. Capitalists of all stripes deal in dollars – for reasons you have explained – seeking the highest return irrespective of any national loyalty. Most of the transactions are unregulated and occur ‘offshore’ through secrecy jurisdictions. The owners, benefactors, and ultimate destinations of the capital outflows are deliberately masked (through creative accounting and shell companies, etc). The designated countries – i.e. America and the UK – are Third World hollowed out basket case economies: but the transnational asset owning superclass who deal in their currencies are doing fine.

        [Witness that Mark Carnage (with the recent BoE rate rise) deliberately slowed any UK ‘recovery’ to preserve the wealth of the asset owners at the expense of community and society].

        The idea that there is any alternative paradigm emerging has submerged with the current EMEs freefall. The real dynamics of imperialism and sub-imperialism have been revealed as unchanged. The ‘Emerging’ markets emerged only because the Imperial core exported (as $$$$ FDI) their ‘free’ QE capital after GFC 1: in seek of the highest return. Now they are taking it back (as capital flight from the EMEs). Any de-dollarisation is localised and sub-imperial: amplifying the effects of corporate credit imperialism. For instance, if Turkey starts trading in local currencies: it still will have to find dollars to pay a large tranche of dollarised debt due next year. If not, it will be rolled over as dollarised debt. Argentina has succumbed to the parasites of the IMF (accepted $50bn in dollarised debt): and will extract wealth from their citizens to preserve the wealth of their capitalist credit compradores. Any talk of a long term change in the reserve status would be the death knell for humanity (centralised economic global governance administered through the invisible government of the WTO). Let us hope we never get that far.

        The alternative to neoliberal globalism is neoliberal globalism. Russia-China are content to integrate as sub-imperial dollar vassals (see PCR’s blogpost I posted in comment yesterday) …because of the mistaken neoliberal idealism that they need dollar capital to grow. They do not (they could create yuan or ruble capital and not expose themselves to the risks of credit imperialism – but they do not). Their response to the dollar imperialists is subdued therefore to the point of self-imposed impotence (as PCR points out).

        The full details of the broken EME model have recently been made available (as selections from a complementary book chapter) by Dr Jack Rasmus. I encourage you to read it if you (or anyone else) thinks that the EMEs hold the keys to future harmony. They do not (those keys are within our universal humanity) …a humanity that neoliberal globalism a priori negates.

        http://www.kyklosproductions.com/posts/index.php?p=360

        [His other articles contain the detail of the dynamics I have pointed out above.]

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        • Robbobbobin says

          “…if you (or anyone else) thinks that the EMEs hold the keys to future harmony. They do not…”

          Firstly, though perhaps with too many words and commas enclosed in virtual parentheses to make it totally explicit, I think it’s still pretty clear:

          ‘an international trading order, with a couple of political side shows for the easily bored […] through loudly stated public relations messages proclaiming an era of “freedom”, “justice”, “equality”, “political harmony”, “human rights”, “joint prosperity” and so on.’

          that I, for one, do not so think (if a pre-existent EME is considered to be a sufficient or even necessary a base for change).

          Secondly, … well, after such an unpropitious firstly, I think there’s not much point proceeding to a secondly…

          As an aside, though, it’s unusual (though not without precedent) to encounter someone who appears to be self advertising as a dialectical materialist but who seems to have left his dialectic at home. Did you forget to bring it or did it refuse to leave the house except via a discrete proxy link to PCR’s place?

          • Big B says

            Robbobbobin: I have no idea what you are talking about …there’s a bunch of words, but … we seem to be agreeing, I for one wholeheartedly agreed with your earlier comment: except that I draw a different conclusion from the same set of propositions …

            “In a degenerate, capitalist society where everything has its price ticket, the advice of Deep Throat to Bob Woodward to “follow the money”” is relevant to the understanding of just about every commercial, social and political problem you care to [lo] mention.”

            From your earlier post: the money trails lead to NY, London and Zurich, and then offshore. So where is the challenge and alternative to the neoliberal global world system? There is none. Dialectic materialism pre-supposes two states that are co-modifying each other; you know – dialectically. One state will eventually emerge as a phase change from the other. But the negation of the negation of neoliberal globalism is neoliberal globalism: it is not a paradigm shift, but a re-ordering within the global system from uni-polar to a multi-polar order. This is not without merit as it will entail a certain meta-democratic balance. But a meta-democratic balance in an anti-humanitarian, alienating, and violently super-exploitative system does not forecast the emergence of a post-capitalist, post-exploitative universal humanity – globalism forecloses the possibility.

            A true phase change is away from the inherent ultra-violence and super-exploitation of capital accumulation: a shift from the quantitative stochastic reduction in the value of human life to that which is valorisable only through Gross Domestic Psycopathy …I am not a statistic; I am not a function in a Cobb-Douglass equation; I am not an abstract value that can be valorised as a mythical share of GDP. Therefore, I assume, neither is anyone else. And a view of monetising debt to grow a pseudo-scientific number that totally externalises our common humanity; a priori externalises around 85% of world population; and externalises the common support network of nature is the work of psychopathy.

            There is nothing of value outside of recognising our common humanity. The Neo-Classical Econometrics of violence that govern neoliberalism a priori negate a universal humanitarian paradigm shift.

            I will leave you with a quote from a different PCR post:

            “The external costs associated with economic growth as measured by GDP can be more costly than the value of the output.”

            “Herman Daly notes that last year the British medical journal, Lancet, estimated the annual cost of pollution was about 6 % of the global economy whereas the annual global economic growth rate was about 2 percent, with the difference being about a 4% annual decline in wellbeing, not a 2 percent rise. In other words, we could already be in the situation where economic growth is uneconomical.”

            https://www.paulcraigroberts.org/2018/08/17/is-capitalism-killing-us/

      • John Giles says

        I think you underestimate the goodwill of Keynes and his Bancor.

        • Big B says

          John: I think you underestimate the anti-life dehumanisation of unfettered neoliberal capital accumulation: witness, the desolation of the entire planet. The profits go to the few: the benefits to the vast majority are marginal (and could be amplified exponentially locally in terms of quality of life) …and the externalities (85% of humanity; all of the biodiversity and all of the ecosphere) are laid to waste. What part of neoliberal globalism is there not to resist?

          As for the Bancor: that was rejected in favour of economic imperialism in 1945. Apart from as a theoretical concept – or modernised as a ‘Green Bancor’ – it has gained no traction with the corporate credit imperialists …why would it? I do not underestimate it, it always was the superior idea, but the corporatist Harry Dexter White killed it. The IMF and World Bank (and later the WTO) were set up to internationalise corporate credit imperialism instead. Every BRICS Declaration reads as explicit subordination to the established post-Bretton Woods ‘global governance’ architecture. It would save an awful lot of confusion if people actually read them?

          http://www.xinhuanet.com/english/2018-07/27/c_129921358.htm

          It’s the longest suicide note in history.

  4. Baron says

    A clear slicing of the geopolitical importance of the deal, thank you, Mr. O’Neill.

    The one indirect aspect of it is the absence of the US playing the usual role of the ‘honest broker’, something that must worry the Deep State.

    There’s nothing in the agreement of a possible linking of the Caspian Sea with the Black Sea, a massive undertaking of some 700km in length that would require locks, but doable. This would allow ships from the signatory countries to reach the oceans.

  5. vexarb says

    Good to see someone from Australia writing about Eurasia. That is, thinking outside the Anglo box.

    • grandstand says

      There are several Australians writing online in whom, as an Australian, I take some pride. James O’Neill is one. Others that come to mind are the veteran, John Pilger, and Caitlin Johnstone: https://medium.com/@caityjohnstone – currently being attacked for saying that the world would be a better place when John McCain dies. Unfortunately, you will not see any of these writers in the Australian corporate or even government media. Instead we are being consistently fed a neocon/neolib view of the world – China/Russia bashing in particular – with a sprinkling of identity politics. The ABC, in particular, has become a parody of a real news site. Yesterday morning at one point the three top stories on its website were about Aretha Franklin – ok a great singer and I’m sad to see her passing but three stories at the same time as NSW is burning (in the middle of winter!) and Saudi Arabia is bombing Yemen?

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  6. Many thanks to James O’Neill for this straightforward assembly of known facts and insights. Unfortunately we all now know who the next targets of US mischief will be, but good luck to them. Whilst this is move is certainly not based on any socialist ideology, it is a significant step away from the murderous US foreign bullying and aggressive policies and should be yet another step in the right direction.

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  7. writerroddis says

    Thank you. Lucid, informative and sober in tone while giving ground for cautious optimism.

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