MOSCOW
- Russia's expected decision to build a Siberian oil
pipeline to the Pacific port of Nakhodka - instead of an
alternative route to China - will surely please Tokyo,
but threatens to strain Moscow's relations with Beijing.
This month Russian President Vladimir Putin
called for expanding Russia's ties with the Asia-Pacific
region for the development of Siberia as well as far
eastern parts of the country. However, he refrained from
a clear commitment on the future of Siberian
oil-pipeline projects.
Russia's state
oil-pipeline monopoly, Transneft, last week held public
hearings on the Taishet-Nakhodka project in Russia's far
eastern Primorie region. Transneft officials revealed
that the pipeline would go through Taishet,
Kazachinskoye, Tynda, Skovorodino and Khabarovsk to
Nakhodka, crossing Russia's Irkutsk, Chita, Amur, Buryat
and Primorie regions. Crude would be funneled to Japan,
China, Korea, Indonesia and Australia, Transneft said.
In March, Russia skipped a previous version of
the Japan-backed project, Angarsk-Nakhodka, in favor of
the Taishet-Nakhodka oil pipeline. In May, Transneft
president Semyon Vainshtok stated that the estimated
cost of an oil pipeline from Eastern Siberia to Nakhodka
was about US$12 billion. The Taishet-Nakhodka oil
pipeline would be some 4,200 kilometers long, about
250km longer than the Angarsk-Nakhodka project.
Tokyo has been lobbying hard for an oil-pipeline
route to the Pacific and has promised it would invest in
developing untapped oilfields. To back up its lobbying,
Japan reportedly promised up to $14 billion to fund the
pipeline, as well as $8 billion in investments in the
Sakhalin-1 and Sakhalin-2 oil and gas projects,
according to Russian media reports. Japan has also said
it will give Russia 8.4 billion yen ($77.6 million) to
fund a feasibility study of the Nakhodka route.
(Transneft is to complete a final study by next March.)
But the proposal to build the pipeline from
oilfields in Eastern Siberia to the Far East port of
Nakhodka is competing with a rival pipeline scheme to
China. Beijing favors this alternative pipeline that
would bring oil to Daqing in northwestern China. In June
2002, Russian officials pledged to invest $2 billion to
fund the construction of the Russia-China oil pipeline,
designed to supply 20 million to 30 million tons of oil
to China every year. It was to be funded by Transneft
and oil major Yukos, as well as the China National
United Oil Corp (Chinaoil).
Preliminary plans
for the oil pipeline involved two possible routes
starting from the Angarsk refinery near Irkutsk, Eastern
Siberia, going to either Beijing or Daqing, Manchuria.
The other possible route is through Mongolia. Russia had
favored the route through Mongolia because it is 170km
shorter, while Chinese officials presumably prefer the
second route because of lower political
risks.
The construction of the Angarsk pipeline
was scheduled to begin in 2003 and commissioned by 2005.
The pipeline's total length was to be 2,247km, including
1,452km in Russia. Russia's blueprint implied that
through 2005-09 the pipeline was due to supply 20
million tons of crude a year from oilfields in the
Sakha-Yakutia region, in Eastern and Western Siberia. By
2010 supply was to be raised to 30 million tons per
annum. However, Transneft, and then the Russian
government, skipped the Angarsk-Daqing project.
Russia had been toying with both options, but
this March indicated that it could favor the
Japanese-backed project. Japan argues that the Nakhodka
route would also be a strategic asset for Russia,
allowing it to export to other Asian countries and
perhaps the US west coast.
Moscow has been
leaning toward Tokyo for some time. Russian Foreign
Minister Sergei Lavrov pledged to step up ties with
Japan ahead of a visit to Tokyo early next year by
Putin, but held out few hopes of substantial progress.
On June 25, he told his Japanese counterpart Yoriko
Kawaguchi that Moscow "intends to launch intense joint
work with Tokyo ahead of President Putin's visit to
Tokyo in 2005".
The Russian Nezavisimaya Gazeta
daily commented last Wednesday that Russia's acceptance
of Japanese money signified a final decision in favor of
the Nakhodka pipeline project. The daily warned that the
development could complicate relations between Moscow
and Beijing, because China had invested in an
Angarsk-Daqing pipeline feasibility study. Beijing could
view the demise of Angarsk-Daqing as a breach of trust
with serious repercussions for bilateral relations, the
daily wrote.
For now, Beijing seems to remain
diplomatic. Chinese Ambassador to Russia Liu Guchang has
said he was pleased with the outcome of his talks with
Russian Energy Minister Viktor Khristenko in Moscow on
June 30.
"Russia is the country with the largest
hydrocarbon [market], while China is the largest and
most reliable oil, gas, and oil product market," Liu
said. "Khristenko told me that the construction of an
oil pipeline to China had been included in the strategy
for developing the Russian energy sector until 2020.
China appreciates the reasons why Russia has abandoned
the southern and northern routes of the pipeline
construction from Angarsk eastward around Lake Baikal
due to ecological considerations and agrees that the
Taishet-Nakhodka route is the most reasonable one," said
Liu, adding: "The Russian government could make a final
decision this fall and start planning pipeline extension
into China."
Before the Russian and Chinese
leaders meet in September, a bilateral committee on
energy cooperation will hold a meeting to discuss this
issue in detail. "The meeting with Minister Khristenko
has given me hope that Chinese-Russian energy
cooperation will have a reliable and bright future," Liu
said.
On the other hand, problems with the
China-bound pipeline could be partially explained by
Russia's besieged Yukos. While Russia's pipeline
monopoly Transneft has backed the plan to build a
pipeline to Japan via Nakhodka, Yukos had been long
focusing on China. Now Yukos' former head Mikhail
Khodorkovsky is ready to surrender his shares to pay off
Yukos' huge tax debts, and the fate of Yukos projects
remains far from certain. Khodorkovsky's proposal could
help stave off asset seizures over a $3.4 billion
back-tax bill for 2000.
In April, state-owned
Russian Railways Co (RZD) agreed to more than double
rail crude-oil exports to 130,200 barrels per day (bpd)
(6.46 million tons) this year, up from 60,000 bpd (3
million tons) in 2003. Russia's oil exports to China by
rail are expected to increase further to 302,200 bpd by
2006. Putin earlier stated his support for plans of the
RZD to boost oil exports to China by rail. The RZD has
said it is technically feasible to boost rail shipments
to China to 600,000 bpd. However, the RZD had planned to
rely on crude supplies from Yukos to export oil to
China: and now Yukos has other issues to worry about.
On the other hand, Russia, which sits on a
quarter of the world's natural-gas reserves, could try
to compensate the possible demise of the Angarsk-Daqing
project by a multibillion-dollar pipeline project to
export Siberian natural gas to China.
The $4
billion project, expected to carry 20 billion cubic
meters of gas annually, envisages the installation of a
3,700km pipeline between the Kovykta natural-gas field,
which is 400km north of Irkutsk near Lake Baikal, and
China's Pacific coast port of Lianyunggang, via Ulan
Bator in Mongolia.
In November 1997, Moscow and
Beijing reached an agreement on the gas-pipeline
project. In the joint statement signed in Beijing by
former presidents Boris Yeltsin and Jiang Zemin, both
sides prioritized bilateral cooperation in natural gas
and energy. In February 1999, the two nations signed a
deal on a feasibility study of a giant gas pipeline
linking the Kovykta deposits in the Irkutsk region of
Siberia with northeastern China. However, it remains to
be seen whether the long-delayed Kovykta-Lianyunggang
gas-pipeline project could serve as adequate
compensation for the loss of Angarsk-Daqing.
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