The need for Washington to focus its attention on energy security and diversification became clear as the war on terrorism began. The U.S. should strongly oppose Iran's threatening military actions to claim a larger portion of the energy-rich Caspian Sea. The Caspian basin, a land-locked body of salt water bordered by Iran, Azerbaijan, Russia, Kazakhstan, and Turkmenistan, harbors billions of barrels of proven oil reserves and over 200 billion barrels of potential reserves. The market value of that oil could exceed $5 trillion, according to some estimates. The sea also may hold up to 325 trillion cubic feet of natural gas. Combined with Russia's resources, by 2010 the region could supply up to one-half of the energy resources now provided by the Middle East.

Iran, a known sponsor of terrorism, began its aggressive campaign to claim a greater portion of the Caspian Sea with actions that were a blatant violation of international law. On July 23, 2001, an Iranian warship and two jets forced a research vessel working for British Petroleum (BP)-Amoco in Azerbaijan's Araz-Alov-Sharg field (60 miles north of Iranian waters) out of the area. BP-Amoco immediately announced that it would cease exploring that field and then withdrew its vessels.

Iran's leaders assert that it has territorial and treaty rights to as much as 20 percent of the Caspian Sea surface area and seabed, much more than its long-recognized sector of about 12 percent to 14 percent. Tehran's use of military forces to threaten the U.S.-British company in Azerbaijan's sector jeopardizes, in addition to energy production and security in the region, Western investments and economic development.

The Caspian Sea basin is expected to produce and export increasing amounts of oil. This would benefit not only Azerbaijan, Kazakhstan, and Turkmenistan, which depend almost exclusively on oil revenues, but also Russia and Iran, which have major oil deposits in their sectors of the seabed. For the West, oil from this region could bypass the politically risky bottleneck of the Persian Gulf, helping to lessen dependence on OPEC nations.

The war against terrorism necessitates the protection of U.S. energy and security interests. The provocative actions by Iran jeopardize those interests. Moreover, as a state supporter of terrorism, Iran is likely to use its energy-related revenues to support its ballistic missile and weapons of mass destruction programs. To assure peace in the Caspian Sea region and protect U.S. interests, the Bush Administration should:

• Call for the demarcation of the Caspian Sea territorial boundaries along the "median line" proposed by the Commonwealth of Independent States. The Administration should make a strong call for peace and security in the Caspian region and advise Tehran that it should refrain from using military force to deter energy exploration projects in the sectors of its neighbors.
• Seek a U.N. Security Council resolution calling for the peaceful settlement of the Caspian Sea disputes. The Administration should seek support from U.S. allies in Europe, particularly Great Britain, who also should demand that Iran refrain from any use of force. Russian President Vladimir Putin has called for the peaceful settlement of claims in the Caspian Sea and should involve Moscow in the drafting of the U.N. resolution.
• Expand Azerbaijan's military capabilities through its ties with NATO and the Partnership for Peace (PFP). Azerbaijan would benefit from the expertise of these other countries by learning how to strengthen its ability to protect its borders. Programs could include developing an integrated military-civilian air traffic control system; developing and training its coast guard and border guards; upgrading its command, control, communications, and intelligence (C3I) systems to NATO standards; and developing military interoperability with NATO.
• Expand political and economic ties with Armenia. The Armenian military is capable of disrupting the flow of oil from the Caspian Sea to ports on the Black Sea and the Mediterranean. Though the Administration is correct in sanctioning Armenian companies for smuggling military and dual-use technology to Iran, Armenia feels isolated and is moving toward closer ties with Iran. The United States should work to expand relations with Armenia in economic and security areas.

Conclusion. Energy development in the oil- and gas-rich Caspian Sea basin would help ensure energy security--a key issue in the war against terrorism. It also would promote the independence and economic development of post-Soviet states in that region. But Iran's aggressive behavior last year could threaten energy development by deterring foreign investment. The United States should call on Iran to stop its aggressive behavior, and it should mobilize its allies to work for a peaceful settlement of the territorial disputes over the maritime borders of the states bordering the Caspian Sea.

--Ariel Cohen, Ph.D., is Research Fellow in Russian and Eurasian Studies in the Kathryn and Shelby Cullom Davis Institute for International Studies at The Heritage Foundation.