Caspian Sea
Political issues

Many of the islands along the Azerbaijani coast retain great geopolitical and economic importance for demarcation-line oil fields relying on their national status. Bulla Island, Pirallahı Island, and Nargin, which is still used as a former Soviet base and is the largest island in the Baku bay, hold oil reserves.

The collapse of the Soviet Union allowed the market opening of the region. This led to intense investment and development by international oil companies. In 1998, Dick Cheney commented that "I can't think of a time when we've had a region emerge as suddenly to become as strategically significant as the Caspian."

A key problem to further local development is arriving at precise, agreed demarcation lines among the five littoral states. The current disputes along Azerbaijan's maritime borders with Turkmenistan and Iran could impinge future development.

Much controversy currently exists over the proposed Trans-Caspian oil and gas pipelines. These projects would allow Western markets easier access to Kazakh oil and, potentially, Uzbek and Turkmen gas as well. Russia officially opposes the project on environmental grounds. However, analysts note that the pipelines would bypass Russia completely, thereby denying the country valuable transit fees, as well as destroying its current monopoly on westward-bound hydrocarbon exports from the region. Recently, both Kazakhstan and Turkmenistan have expressed their support for the Trans-Caspian Pipeline.

Leaked U.S. diplomatic cables revealed that BP covered up a gas leak and blowout incident in September 2008 at an operating gas field in the Azeri-Chirag-Guneshi area of the Azerbaijan Caspian Sea.
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