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Russia tests China's patience over
pipeline
By Michael Lelyveld
BOSTON - China is waiting with waning patience
for Russia to end its debate over who will control its
oil exports and where they will go.
In an
unusually blunt article this week, the official Chinese
Communist Party newspaper, People's Daily, is drawing
attention to the unresolved question of whether Russia
will build an oil pipeline to China, in accordance with
bilateral pacts.
The question has gained urgency
for Beijing with concerns about cuts in Middle East oil
during a possible war in Iraq. China gets more than 46
percent of its imported oil from the Persian Gulf,
primarily from Saudi Arabia, Iran and Oman, according to
the Reuters news agency.
Pushed by the same
concerns, Japan has tried to convince Moscow that its
eastern Siberian oil should flow through a longer
pipeline to the Far East port of Nakhodka instead. China
has grown increasingly upset by what it calls Moscow's
"vacillating" between the two suitors for Siberian oil.
This week People's Daily notes that Russia
signed an accord for an oil pipeline from Angarsk in the
Irkutsk region to China's Daqing oil center in July
2001. The paper said pointedly, "Thus, there should have
been no more suspense regarding who will be the
purchaser of oil in [the] Far East."
The report
glossed over the fact that the framework agreement for
the US$1.7 billion project came during President Jiang
Zemin's summit with President Vladimir Putin in Moscow,
where the two countries signed their first friendship
treaty in 50 years. But friendship counted for little
after Japan offered to buy one-fourth of its oil imports
from Russia during Prime Minister Junichiro Koizumi's
visit to Moscow last month.
Japan's tempting bid
coincided with an internal battle between Russia's Yukos
oil company, which planned the pipeline to China, and
the state pipeline monopoly Transneft, which backed the
Nakhodka route. The 3,800-kilometer alternative would
cost a staggering $5 billion, which Japan has shown some
willingness to finance.
Transneft pegged the
plan for a privately run Yukos pipeline to China as a
ploy to break its monopoly and argued that Russia's oil
should reach multiple markets from the Pacific port.
Transneft has persisted, even though analysts argued
that eastern Siberia does not have the 1 million barrels
per day needed to fill such a long and large line.
After months of conflict, the dispute seemed
resolved in mid-February when the Russian Energy
Ministry urged the government to split the difference
between the two plans by building the 2,400km line to
China first to carry 600,000 barrels of oil per day.
Russia would then add a link later from the Siberian
city of Chita to Nakhodka with a 1-million-barrel
capacity.
Last week, Japan's Kyodo news agency
reported on an interview with Transneft spokesman
Vyacheslav Tarbeev, saying the company now considers the
Nakhodka plan "unprofitable", adding that priority will
go to the China line instead. If that is Transneft's new
and final position, it has yet to be confirmed.
China's comments in People's Daily are a sign
that it does not see the matter as settled, and, in
fact, it is not. The Russian government is scheduled to
decide the issue at a March 13 cabinet meeting, giving
it time to weigh China's stand. In the meantime, China
has agreed to increase its more costly oil imports from
Russia by rail.
Beijing kept largely silent
after another affront in December, when the Russian
government sold a controlling stake in the Slavneft oil
company and invited the China National Petroleum Corp to
bid. But the company was forced to withdraw after the
State Duma passed a resolution saying that foreign
attentions were unwelcome. China now seems to be
seething over the suggestion that Russia might jilt it
again.
Beijing's patience also seems to be
wearing thin with Japan, where China continues to export
small amounts of oil despite its own import needs.
People's Daily pointed to Japan's even higher import
dependence on the Persian Gulf, which it estimated at 82
percent.
It also cited unnamed analysts as
explaining that the real reason behind Japan's
"enthusiasm" for the Nakhodka pipeline is to gain
leverage in its dispute with Russia over the "northern
territories", or what Russia calls the Kuril Islands.
The remark may be a measure of how much China resents
the entire pipeline affair.
Despite the reasons
to end the frictions, there may be just as many that
will make it go on.
Under another preliminary
settlement proposal, private oil companies such as Yukos
would agree to give up their quest for privately run
pipelines in Russia and submit to continued Transneft
control in exchange for preferred access and tariffs, if
they invest in the lines. But it is hard to see how the
plan will work, as long as Transneft has the last word.
This week, the pipeline monopoly abruptly turned
away 400,000 barrels per day in Russian oil exports from
the Yukos, LUKoil, TNK, and Rosneft oil companies, the
Moscow investment bank Troika Dialog reported. The move
is believed to be tied to backups at Russian ports, but
with the exception of state-owned Rosneft, all the
companies have been trying to break free of Transneft.
The curb, which will cut Russia's oil exports
outside the Commonwealth of Independent States by 13
percent, is hardly likely to end the infighting with the
companies or enhance the spirit of compromise. While
China seeks more energy trade with Russia, it may need
more patience than it has.
(©2003 RFE/RL Inc.
Reprinted with the permission of Radio Free Europe/Radio
Liberty, 1201 Connecticut Ave NW, Washington, DC
20036.)
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