After the collapse of the Soviet Union, the three newly independent republics of Azerbaijan, Turkmenistan and Kazakhstan emerged as states along the Caspian coast. Under the new arrangement, Kazakhstan and Russia have been sharing the northern section of the sea, while Iran has been sharing the southern part with Azerbaijan and Turkmenistan.

Foreign Ministry spokesman Bahram Qassemi said, “The issue of demarcation was not even on the agenda of the meeting,” while Deputy Foreign Minister for Asia-Pacific Affairs Ebrahim Rahimpour said, “We still haven’t reached an agreement over the division, especially with the two neighboring countries” of Turkmenistan and Azerbaijan.

Neither Iranian Foreign Minister Mohammad Javad Zarif nor his Azerbaijani, Kazakh and Turkmen counterparts have confirmed Lavrov’s statement. However, two senior Iranian diplomats rejected the notion that the demarcation of the Caspian Sea was discussed at the summit in Moscow.

Speaking after the recent summit of the Caspian Sea littoral states' foreign ministers in Moscow, Russian Foreign Minister Sergey Lavrov said, “We have found solutions to all the remaining major issues related to the preparation of this document [draft Convention on the Legal Status of the Caspian Sea]. The text of the meeting is actually ready,” although he provided no further details.

Nearly three decades after the collapse of the Soviet Union and following 26 years of tough negotiations, a solution to the legal status of the Caspian Sea appears to be on the horizon.

Use of the term “sea” in reference to the Caspian can cause confusion as it implies that it is no different from the Black or Baltic seas. The Caspian is landlocked and thus the world’s largest lake. From a legal point of view, the determination of whether the Caspian is a sea or a lake can have a significant impact on the regulations concerning it.

For instance, while the coastal states agreed in the Alma-Ata Declaration of 1991 to recognize the Caspian as a lake, Kazakhstan four years later stated that from a legal point of view, it considers it a sea. The implication of the latter would be that the UN Convention on the Law of the Sea would apply to it. However, there has been no agreement to date among the coastal states on whether the UN convention governs the Caspian, which could impact the reaching of a final agreement.

Given these challenges, in terms of international law, the matter of the delimitation of the Caspian is a "sui generis" case and thus needs an exclusive legal regime, i.e., a framework of rules governing its legal status. The stakes are high: After Iran’s border disagreements with Iraq in the 1970s, it is the biggest challenge for Iranian sovereignty over the past four decades.

According to the UN convention, a sea or lake surrounded by two or more countries is considered a “closed sea” if no waterway gives it access to open waters and thus falls under the following legalities:

Freedom of sailing activities and the principle of innocent passage do not apply to closed seas.

Governing legalities over such bodies of water and designation of borderlines come from an agreement between all surrounding countries.

Coastal countries have exclusive rights over fishing and resources.

Coastal countries have exclusive rights to govern those waters, including the right to legislation.

Among the five Caspian states, Kazakhstan and Azerbaijan support the enforcement of the UN convention. But Russia and Iran — two countries with a long and historical right in the Caspian — strongly disagree with the idea of the presence of third-party countries' presence, including military presence, in the region.

Russia is of the view that the 1921 and 1940 agreements between Iran and the Soviet Union could be extended to leverage new potential agreements. It also emphasizes that the Caspian is an indivisible body of water and ecosystem, and that its resources belong to all five coastal states. As such, any exploitation of its resources should only be allowed by multilateral agreement between all parties.

No legislative regime over lakes has ever been developed by the International Court of Justice, which makes the case of the Caspian unique from this aspect as well.

Some governments and international lawyers have made efforts to establish regulations for inland waters. For instance, international common practice posits that lakes surrounded by more than one country should be governed by agreements between the countries. In this vein, there are three major common practice systems: full division, equal division and condominium. Iran has added a legal solution to these methods: acting based on the principle of fairness.

Soon after the dissolution of the Soviet Union, Iran was pursuing an equally shared system of use for the Caspian Sea. In this pursuit, Tehran’s main objective was to reinforce previous agreements with Moscow, insisting that a condominium regime should apply and disputing exploitation of resources by any individual party. Following changes in the posture of the Iranian government and also changes of position among coastal countries, Iran eventually accepted the idea of dividing exploitation rights between the five countries.

The presidents of the coastal states agreed in their summit in Astrakhan in September 2014 on the scope of territorial waters (15 nautical miles) and exclusive fishing zones (10 nautical miles). But other important issues, such as the seabed status and shares of underwater resources, remain unclear.

Indeed, Iran’s position is not limited to pursuit of a “fair mechanism” to share the seabed, but also the rich subterranean resources — for all five countries. This will give about a 20% share of seabed to Iran instead of up to 13%, which was suggested in the Russian proposal. None of the coastal states have so far endorsed the Iranian position. A major stumbling block thus remains, and it remains unclear whether there has been acquiescence to Tehran’s proposal or whether something new that is mutually acceptable has been put on the table.

For now, the expectation is that a draft of an agreement on a new legal regime for the Caspian Sea will be finalized at the next summit of the leaders of the coastal states, which will reportedly be held in Kazakhstan in early 2018.

If the text is finalized, it will need to be approved by the Iranian parliament and endorsed by the Guardian Council before Iran can enter a new Caspian Sea legal regime. Implementing the potential agreement would resolve the biggest legal challenge over the largest landlocked sea in the world after nearly three decades.