WASHINGTON, Feb. 29 (UPI) -- While it has been a cornerstone of U.S. foreign policy since the 1979 Iranian Islamic revolution to contain and isolate Iran, Washington's increasingly factious relations with Moscow and record-high oil prices are beginning to ripple through the relations of the five Caspian nations, producing several developments that all point to the increasing failure of Washington's containment policy against Tehran. The Bush administration's rising hostility against former "Evil Empire" Russia and charter "Axis of Evil" member Iran has infuriated both nations and driven them closer together.

In perhaps the most striking recent development, on Feb. 20 Gazprom Chairman Alexei Miller held talks in Tehran with Iranian Oil Minister Gholam-Hossein Nozari. While little was released about the meeting, the pair agreed on increased Russian involvement in developing Iran's massive South Pars and North Kish offshore gas fields in the Persian Gulf as well as laying oil and natural gas pipelines. Further agreement was apparently reached on mutual cooperation in the oil and gas sectors in the Caspian Sea. Gazprom also agreed to build a gas reservoir in Iran as well as constructing a refinery in Armenia. Moving swiftly ahead, the two sides agreed to hold expert-level meetings and sign agreements within the next two months.

Since 1997 Russia's state-owned Gazprom has been participating in a joint venture, working on the development of South Pars field's second and third (out of 18) blocks with France's TotalElf and Malaysia's Petronas. Gazprom and Petronas hold 30 percent shares in the project and Petronas the remaining 40 percent. When development is complete, the complex will produce and process 20 billion cubic meters of natural gas annually. Four years ago the complex was sold to National Iranian Oil Co. for $2 billion.

Gazprom is now poised to begin development of two to three additional blocks of South Pars, the world's largest gas condensate deposit, estimated to hold 450 tcf in reserves. The massive South Pars project consists of 24 phases of development and by 2014 is projected to produce 751 million cubic meters per day. Gazprom's agreement with Iran reportedly includes exploration, development, transportation, processing and marketing.

The natural gas deposit on the island of Kish is equally impressive, as it has estimated reserves of 10 trillion cubic meters. Part of the allure of the project for Gazprom is that production costs in the Persian Gulf are a fraction of the expenses incurred in developing gas fields in West Siberia or on Russia's Arctic coastal shelf.