The Iranian foreign ministry said the deal signed on Monday was incompatible with the existing legal status of the Caspian and will not be recognised by Tehran.

The BBC's Paul Anderson, reporting from Moscow, says disagreements have hampered exploration of the area

It said the legal status of the Caspian Sea can be resolved "only through the unanimous agreement" of the five countries surrounding the Caspian - Russia, Kazakhstan, Turkmenistan, Iran and Azerbaijan.

Tehran radio said the division of the sea's resources among the five states should be based "on the principles of fairness and on the basis of guaranteeing the interest of all countries."

Legal status unresolved

The exploitation of the Caspian's oil reserves - some of the world's largest - has been held up for years by disagreements over the Sea's legal status.

Until recently, Russia favoured joint control of the sea, but its agreement with Kazakhstan divides the northern part into national sectors.

With Azerbaijan and Turkmenistan having made claims to oil-rich areas close to their coasts, Iran is alone among the states insisting the Caspian be shared.

Russian-Kazakh deal

President Nazarbayev...in Russia to sign deal

The deal the Russian President, Boris Yeltsin and President Nursultan Nazarbayev of Kazakhstan signed in Moscow divides the sea bed of the northern Caspian along a median line equidistant from each country's shores.

This will effectively open the way for both to develop the energy reserves on their share of the seabed.

Russia still insists the water itself is common property and says fishing and environmental issues can only be managed by the five countries bordering the Caspian working together.

Co-operation on delivery

The deal is believed to include another important provision - that Russia and Kazakhstan will co-operate on oil and gas pipelines, which are crucial to getting the Caspian's huge reserves out of this landlocked part of the world.

A Soviet-era pipeline network currently runs north, through Russia, but several US companies are pressing hard for a southern route to Turkey to prevent Moscow holding them to ransom.