Modeling and Analysis of the Caspian Sea Negotiations Majid - PowerPoint PPT Presentation

Modeling and Analysis of the Caspian Sea Negotiations Majid Sheikhmohammady اهیزاب هیرظن دربراک و میهافم رویرهش97 یعامتجا نیمات شهوژپ هسسوم

Objective of the Workshop • To predict the most likely outcomes of multilateral negotiations over the legal status of the Caspian Sea. • To suggest some fair solutions for allocation of the oil and natural gas located in the seabed of the Caspian Sea. 2

Outline • Caspian Sea Conflict • Possible Resolutions for the Conflict • Application of Different Approaches • Limitations of the Existing Models and Procedures 3

Different Approaches • Social choice rules democratic elections • Fallback bargaining basic negotiation predictions • Bankruptcy solutions resource allocations 4

What is Negotiation? • Kersten (2002) : A process of social interaction and communication that involves the distribution and redistribution of power, resources, and commitments. 5

Characteristics of the Problem • Decision makers try to attain more preferable agreements. • There is a prespecified list of alternatives. Only one of them can be established. • Only the preference order of each decision maker over the possible alternatives is known. 6

Case Study: The Caspian Sea The Caspian Sea is a salt-water body of area 376,000 km 2 between the Caucasus Mountains and Central Asia. 7

Source of the Conflict • Legal status of the Caspian Sea has been unresolved since the collapse of the Soviet Union in 1991. • The main motivation of the five states is the existence of immense amounts of petroleum in the seabed. 8

Complexity • Number of disputants • Different interests • Effects of external parties (world powers: USA and China, and regional powers like Turkey, and oil industry multinationals) • Unclear ownership (Lake or Sea?) because of the size and oceanographic characteristics 9

Who Owns the Caspian Sea? With the collapse of the Soviet Union, the legal status of the Caspian Sea became unclear. Five alternatives have been identified as possible resolutions: C - Condominium Dm - Division based on International Law of the Seas De - Division: 20% to each country Ds - Division based on Soviet maps DC – Division (m) of seabed, condominium on surface 10

The location of oil and gas fields 11

Division of the Caspian Sea based on Soviet maps • After the Second World War, Moscow decided to divide the Caspian Sea oil exploration projects among five Soviet Republics, Azerbaijan, Turkmenistan, Kazakhstan, Dagestan and Kalmyt. • This system followed exactly the internal borders of the Republics of the Soviet Union. 12

Preferences of the Five Littoral States from most to least preferred • Azerbaijan: Ds > Dm > DC > De > C • Iran: C > De > Dm > DC > Ds • Kazakhstan: Ds > Dm > DC > C > De • Russia: C > DC > Ds > Dm > De • Turkmenistan: De > Ds > Dm > DC > C 13

Social Choice Rules Principles for the aggregation of preference that reflect individual preferences in a group preference as equitably as possible. 14

Condorcet Winner • A Condorcet Winner is an alternative that is at least as preferable as every other alternative for a majority of participants. [Young, 1995] • For example, Dm is preferred to C by Azerbaijan, Kazakhstan, and Turkmenistan, while C is preferred to Dm by Iran and Russia. Therefore, Dm is at least as preferable as C for a majority. 15

Majority preference between all possible pair of alternatives Dm De Ds DC C Alternatives C - Dm C Ds DC • Ds : Condorcet winner Dm Dm - Dm Ds Dm • De : Condorcet loser De C Dm - Ds DC Ds Ds Ds Ds - Ds DC DC Dm DC Ds - 16

Borda Scoring Bargainer K R T Total A I Alternative Score 0 4 1 4 0 9 C 3 2 3 1 2 11 D m 1 3 0 0 4 8 D e 4 0 4 2 3 13 D s 2 1 2 3 1 9 DC Azerbaijan Ds > Dm > DC > De > C Iran C > De > Dm > DC > Ds Kazakhstan Ds > Dm > DC > C > De Russia C > DC > Ds > Dm > De Turkmenistan De > Ds > Dm > DC > C 17

legal status of the Caspian Sea, as determined by five basic Social Choice Rules “Social Optimal” Alternative Social Choice Rule Condorcet Choice Ds Borda Scoring Ds Plurality Rule Ds or C Median Voting Rule Ds Condorcet’s Practical Method Ds 18

Limitations of Social Choice Rules • SCRs are applicable mainly to democratic decision- making by committees or electorates while in real-world multilateral negotiations • DMs may possess different levels of power or legitimacy. • DMs’ first concerns are their own preferences. 19

Fallback Bargaining (Brams and Kilgour, 2001) Fallback bargaining procedures recommend those alternatives that maximize the minimum satisfaction of any bargainer. 20

Unanimity Fallback Bargaining (UFB) Procedure Quality of Support Alternative 1st 2nd 3rd 4th 5th 2 2 2 3 5 C 0 2 4 5 5 D m 1 2 2 3 5 D e 2 3 4 4 5 D s 0 1 3 5 5 DC Azerbaijan Ds > Dm > DC > De > C Iran C > De > Dm > DC > Ds Kazakhstan Ds > Dm > DC > C > De Russia C > DC > Ds > Dm > De Turkmenistan De > Ds > Dm > DC > C 21

Fallback Bargaining Procedures A pplied to the Legal Status of the Caspian Sea Version of FB Compromise Set Unanimity Fallback DC and Dm Bargaining Procedure q Approval Fallback q = 4 Ds and Dm Bargaining q = 3 Ds Fallback Bargaining with Impasse Impasse 22

Limitations of Fallback Bargaining • Fallback bargaining procedures assign equal weights to all decision makers. • The underlying model may not apply. For example, DMs may sometimes insist on their most preferred alternatives, refusing to fall back. 23

Bankruptcy Procedure for Resource Allocation Bankruptcy procedures, which are related to co-operative game theory concepts, apply to fair division problems, in which the total amount of the asset to be shared is not sufficient to cover all creditors’ claims. 24

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The Value of Oil and Natural Gas Claimed by Regional States Regional States Total value (b = billion) The total value of Azerbaijan $ 2580 b proven and possible Iran $ 2702 b oil and gas Kazakhstan $ 5968 b located in the seabed of the Caspian Sea Russia $ 2702 b is $13,512 billion. Turkmenistan $ 3838 b Sum $ 17,791 b 32

Resource Allocation Based on 3 Bankruptcy Methods Regional States P rule CEA rule AP rule Azerbaijan 1,960 2,580 1,895 Iran 2,052 2,702 1,984 Kazakhstan 4,533 2,764 4,831 Russia 2,052 2,702 1,984 Turkmenistan 2,915 2,764 2,818 sum 13,512 13,512 13,512 Azerbaijan: CEA > P > AP Iran: CEA > P > AP P= Proportional Kazakhstan: AP>P>CEA CEA= Constrained Equal Award Russia: CEA > P > AP AP= Adjusted Proportional Turkmenistan: P>AP>CEA 33

Drawback of Bankruptcy Solutions Bankruptcy solutions are applicable only in a Transferable Utility games where players can  freely transfer utility to other players. 34

Findings • Ds is socially optimal resolution but social choice rules may not be applicable to the Caspian Sea conflict. • FB methods suggest Dm as the final resolution. • A new division method (CEA or Constrained Equal Award) can be applied to resolve the conflict. 35

References • Sheikhmohammady, M., Kilgour, D.M., and Hipel , K.W., “Modeling the Caspian Sea Negotiations,” Group Decision and Negotiation, Volume 19, Number 2, 149- 168, March 2010, DOI: 10.1007/s10726-008-9121-2 • Sheikhmohammady, M., Kilgour, D.M., and Hipel , K.W., “How to allocate the value of the Caspian seabed oil and natural gas among the five Caspian states”, Exploration and Production Oil and Gas Review, 7 (2), 34-36. 2009. Available at www.touchoilandgas.com. • Sheikhmohammady, M., Madani , K., “Bargaining over the Caspian Sea: The Largest Lake on the Earth”, Proceedings of the World Environmental & Water Resources Congress, Honolulu, Hawaii, May 12-16, 2008, pp. 1-9. 36