A Turkmen official explained Tuesday the president’s decision because of the clash of the meeting with the celebration of Turkmenistan’s independence from the former Soviet Union on 27 October, but due to start from 20 October.

He did not say if Mr. Niyazov has set any new date for the meeting, to which the five Caspian Sea littoral states had pinned their hopes to reach an agreement on how to share the lake’s oil-rich waters.

Mr. Niyazov’s typically decision, unexpected and unannounced to the participants, surprised other parties, as Ashgabat had confirmed recently that the Iranian President Mohammad Khatami would attend, as would his Russian, Azeri and Kazakh counterparts.

Tehran had dispatched a gunboat and a jet fighter to deter a British Petroleum oil research vessel operating on behalf of the Azeri State Oil Company in a zone that both Tehran and Baku say is situated in their territorial waters.

While Russia, Kazakhstan and Azerbaijan have already traced and fixed their borders in the Caspian Sea on the basis of each state’s length of sea shore, Iran alone insist on an equal sharing of the Sea’s resources between all five bordering nations, thus assuring it 20 per cent of the waters instead of a mere 13 per cent, also meaning that several prospective oil and gas fields now in Azeri territory and being developed by western companies would come under Iranian control.

The status of the Caspian Sea has been disputed since the collapse of the Soviet Union. Under the 1921 and 1940 treaties between Soviet Russia and Iran, the land borders were delineated and demarcated, but not the sea boundaries. These treaties defined rules for shipping and fishing, but left open the question of oil and gas development. In addition, the existing treaties prohibit Iran from deploying naval assets in the Caspian.

Aliyev slammed the actions of the Iranian navy in the Caspian as "wrong" and called on Tehran to pull its military out of the Sea.

He added: "Iran should not exercise force against neighbouring states, especially Azerbaijan. The use of force in the Caspian incident was wrong."

"It is in our interests that the question of the status of the Caspian should be resolved on the basis of negotiations, mutual understanding and the norms of international law, Aliyev added, while confirming that e would go to Iran on the invitation of his Iranian counterpart.

Ahani said Tehran had warned Baku three years ago that it would not stand for any oil exploration in disputed areas of the Caspian.

"We did not expect that an Azeri ship would go into disputed territory and that mistaken step left us with no choice but to use force," he said.

"Row over prospecting in the Caspian is by no means indicative of (the existence of) a hostility between the two nations and all disputes can be settled through talks", Ahani told Aliyev in the meeting, according to IRNA.

"Iran and Azerbaijan have agreed to seriously follow up the Caspian issues through political consultation and technical negotiations" he added.

"Tehran-Baku shared views can be of help to a consensus among the five littoral states and definition of a legal status for the sea", he added.

Ahani also said that Iran is opposed to the militarisation of the Caspian Sea and calls for cooperation among the five littoral states for keeping the sea as an area for friendship."

Iran is particularly piqued that companies from the United States, which it regards as its ideological enemy, and other major western nations are prospecting for oil in Azeri territory which it believes rightfully belongs to it.

Informed sources termed his mission in Iran as "impossible", as any agreement based on international principles would drastically trash the part of Iran in the Caspian from a claimed 20 per cent to less than 13.

Meeting with foreign Minister Kamal Kharrazi, Kalyuzhny said that Iran is the strategic ally of the Russian Federation and called for continued consultations between the two countries.

And in order to please the Iranians, he slammed Turkey and the United States, which he accused of looking for "pretext" to interfere with the affairs of the Caspian Sea, adding that Russia is against presence of any external forces in the region, according to the official IRNA.

Until recently, the Russians had kept an ambivalent position, siding on the surface with the Iranian proposals while defining secretly the borders with neighbouring Azerbaijan and Kazakhstan.