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

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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
• il and natural gas located in the seabed of the

Caspian Sea.

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Outline

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

Procedures

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Different Approaches

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

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What is Negotiation?

• Kersten (2002) :

A process of social interaction and communication that involves the distribution and redistribution

• f

power, resources, and commitments.

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Characteristics of the Problem

• Decision makers try to attain more preferable

agreements.

• There is a prespecified list of alternatives. Only one
• f them can be established.
• Only the preference order of each decision maker
• ver the possible alternatives is known.

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Case Study: The Caspian Sea

The Caspian Sea is a salt-water body of area 376,000 km2 between the Caucasus Mountains and Central Asia.

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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.

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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

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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

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The location of oil and gas fields

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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.

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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

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Social Choice Rules

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

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Condorcet Winner

• A Condorcet Winner is an alternative that is at least

as preferable as every other alternative for a majority

• f 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.

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Majority preference between all possible pair of alternatives

Alternatives

C Dm De Ds DC C

• Dm

C Ds DC Dm Dm

• Dm

Ds Dm De C Dm

• Ds

DC

Ds Ds Ds Ds

• Ds

DC DC Dm DC Ds

• Ds: Condorcet winner
• De: Condorcet loser

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Borda Scoring

Bargainer Alternative A I K R T Total Score C 0 4 1 4 0 9 Dm 3 2 3 1 2 11 De 1 3 0 0 4 8 Ds 4 0 4 2 3 13 DC 2 1 2 3 1 9

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

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legal status of the Caspian Sea,

as determined by five basic Social Choice Rules

Social Choice Rule “Social Optimal” Alternative Condorcet Choice

Ds

Borda Scoring

Ds

Plurality Rule

Ds or C

Median Voting Rule

Ds

Condorcet’s Practical Method

Ds

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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.

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Fallback Bargaining

(Brams and Kilgour, 2001)

Fallback bargaining procedures recommend those alternatives that maximize the minimum satisfaction of any bargainer.

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Unanimity Fallback Bargaining (UFB) Procedure

Quality of Support Alternative 1st 2nd 3rd 4th 5th C 2 2 2 3 5 Dm 2 4 5 5 De 1 2 2 3 5 Ds 2 3 4 4 5 DC 1 3 5 5

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

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Fallback Bargaining Procedures Applied to the Legal Status of the Caspian Sea

Version of FB Compromise Set Unanimity Fallback Bargaining Procedure DC and Dm q Approval Fallback Bargaining q = 4 Ds and Dm q = 3 Ds Fallback Bargaining with Impasse Impasse

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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.

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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.

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The Value of Oil and Natural Gas

Claimed by Regional States

Regional States Total value

(b = billion)

Azerbaijan

$ 2580 b

Iran

$ 2702 b

Kazakhstan

$ 5968 b

Russia

$ 2702 b

Turkmenistan

$ 3838 b

Sum

$ 17,791 b

The total value of proven and possible

• il and gas

located in the seabed

• f the Caspian Sea

is $13,512 billion.

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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 Kazakhstan: AP>P>CEA Russia: CEA > P > AP Turkmenistan: P>AP>CEA

P= Proportional CEA= Constrained Equal Award AP= Adjusted Proportional

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Drawback of Bankruptcy Solutions

Bankruptcy solutions are applicable only in a Transferable Utility games where players can freely transfer utility to other players.

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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.

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.

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