Numerous ethnic and religious groups reside in the Caspian Sea region, and continuing conflicts pose threats to pipeline infrastructure . Negotiations in in October and February 2006 to resolve the Azerbaijan- Armenia war over the Armenian-populated Nagorno-Karabakh enclave in Azerbaijan have yet to make significant progress . Separatist conflicts in Abkhazia, South Ossetia, and Ajaria in Georgia flared during the 1990s, and Russia 's war in Chechnya has devastated the region around Groznyy in southern Russia . Separatist guerillas from Chechnya have begun using neighboring Ingushetia as a base, and the number of Chechen fighters on Ingush territory is now even larger than in Chechnya itself. Some of these fighters have targeted energy infrastructure to achieve political goals in previous years.

Although there is still no overarching agreement between the five Caspian littoral states on the division of the Sea's resources, in August 2006 the states signed an agreement to collectively begin efforts to reverse the environmental damage that energy development has imposed on the Sea (see the Environmental section for more detail). Russia , Azerbaijan , and Kazakhstan came to a trilateral agreement on sub-surface boundaries and collective administration of the Sea's waters in 2003 that divides the northern 64 percent of the Caspian Sea into three unequal parts using a median line principle, giving Kazakhstan 27 percent, Russia 19 percent, and Azerbaijan 18 percent.

T he main stumbling block on the division of the Caspian Sea is the position of Iran , which claims 20 percent of the water area. Offshore development in Turkmenistan and Iran , both of which refused to sign the 2003 agreement, could fall even further behind. Azerbaijan remains locked in disputes with Turkmenistan and Iran over competing claims to overlapping petroleum fields. In 2001 Azerbaijan and Iran came close to confrontation when an Iranian gunboat challenged a BP-operated research vessel exploring what Azerbaijan calls the Alov oilfield and Tehran calls Alborz. Since then, the field has been unexplored. For more information on the legal status of the Caspian, see Chatham House’s report on Legal Status and Regime Problems .