BACKGROUND: Arriving to the Kremlin in early 2000, Putin immediately ordered a diplomatic campaign aimed at dividing the Caspian Sea into national sectors. The noisy shuttle-diplomacy activities provided perfect cover for a steady build-up of Russian military muscles, and first of all the Caspian Flotilla. Despite the obvious fact of sharp disagreements between the littoral states about borders across the oil-rich waters, Moscow was sending signals that the agreement was within reach. It was only the failure of the long-trumpeted Caspian summit in Ashgabat in April this year that showed the real depth of the conflict. Citing 'irrational claims' of the Caspian neighbours, Putin announced the day after the summit a major military exercise to be held within  three months. Looking now at the scale of these exercises, which took place from August 1 to 15 and involved 10,500 troops and 60 combat and auxiliary ships, it is possible to assume that the planning had started at least a year prior. Besides such 'politically correct' aims as search-and-rescue, fire drill and hot pursuit of caviar poachers, the exercises (their name was not revealed) also included the landing of a marine battalion for exterminating a terrorist band blocked in a coastal area by Army units. While the Caspian Flotilla does not include any major surface combatants or submarines, it has plenty of firepower (including anti-ship missiles); these capabilities are expected to provide solid support for operations of Border Troops and Interior Forces that were also involved in the exercises. External observers were impressed with the smooth performance of Russian forces, way above their average level in Chechnya.

IMPLICATIONS: This demonstration of military supremacy allows Putin to redefine significantly the rules of the Great Oil Game in the Caspian area. It is symbolic in this respect that Russian Defense Minister Ivanov observed the exercises from an oil platform that belongs to LUKOil, one of the key players in this game. This certainly does not mean that Moscow is going to lay claims on any of the contested oil riches; in fact, its own maritime borders with its immediate neighbours, Azerbaijan and Kazakhstan, are perfectly delimitated. Considerable hydrocarbon resources have recently been found in the Russian 'sector', but the oil 'barons' are in no rush to start drilling, preferring to keep those as strategic reserves for the time when the Siberian fields are exhausted. Russian companies will certainly feel encouraged by the presence of a few 'friendly gunboats' to pursue more persistently their 'fair share' in joint ventures with Kazakhstan and Azerbaijan but will calculate carefully how to maximize profits with getting the Caspian oil upstream. At the same time, it is not the oil as such that is the target for the military might. What Russia aspires to is the role of security guarantor/provider for the inherently unstable region; for that matter, we should not expect that the border issue will be settled at the next Caspian summits scheduled for next spring in Tehran. And the desperate pleas for demilitarization of the Caspian waters from Ashgabat, Baku and Tashkent would be easily dismissed under the pretext of countering the terrorist threat. Building further its naval capabilities here, while its Northern and Pacific Fleets are rusting at their piers, Moscow wants to show to international oil companies that in the future it would be able to secure their assets against such incidents as the harassment of an Azerbaijani-flagged British Petroleum exploration ship by Iranian navy and air force in August 2001. While selling tons of conventional weapons (including submarines) to Iran, Moscow seeks to make sure that those would be deployed towards the Persian Gulf. Russia certainly has no intention to engage in an arms race with Iran or to provoke any sort of confrontation with this important customer, but it probably expects that the Iranian 'risks' would make it easier to 'sell' its military build-up to the United States.

CONCLUSIONS: In the US 'grand strategy' for the Caspian area, a peculiar discrepancy has emerged between the anti-terrorist campaign (centred on Afghanistan, but involving also Kirgizstan, Tajikistan and Uzbekistan) and oil diplomacy (focussed on Azerbaijan and Kazakhstan). Russia is determined to avoid such an inconsistency and deploys its military assets exactly where its oil interests are. That does not mean that the US has choice but to adjust to Russia's military dominance in the Caspian and expect that it would at least check Iranian encroachments. New American military facilities in Central Asia, even if expanded, could not provide a convincing counter-balance. A much better option could be to downplay the geopolitical power games and shift the emphasis to the 'soft power' of Caspian geo-economics. In the end, it is much more useful for the Russian oil companies to cultivate links with US partners than to finance military exercises.

AUTHOR'S BIO: Dr. Pavel K. Baev is Senior Researcher and Head of the Foreign and Security Policy Program at the International Peace Research Institute, Oslo (PRIO), Norway.

Copyright 2001 The Central Asia-Caucasus Analyst. All rights reserved.