Energizing Russian and Korean
ties By Sergei Blagov
MOSCOW
- After summit talks in the Kremlin, Russian President
Vladimir Putin and his South Korean counterpart
President Roh Moo-hyun pledged to forge a "comprehensive
partnership of mutual trust".
The move appears
to come as a leap forward in bilateral relations. A
decade ago, in 1994, then South Korean president Kim
Young-sam visited Moscow and agreed on forming a
"constructive partnership" with Russia.
However,
a comprehensive partnership between Russia, the world's
top gas exporter and second-largest oil seller, and
South Korea, the world's fourth-largest oil buyer, seems
to be dominated by energy considerations, notably as
Korea is looking to diversify its oil supplies amid
Middle Eastern volatility.
Russia and South
Korea pledged to boost "large-scale bilateral and
international projects in developing Russia's Far
Eastern and Siberian oil and gas fields", said a joint
Russian-South Korean declaration. The two leaders also
pledged to support long-term delivery of Russian natural
gas to South Korea.
Seoul and Moscow signed a
series of deals during the Korean president's four-day
visit this week. Russia's Tatneft oil company and South
Korea's LG International signed an agreement in Moscow
to build a joint US$3 billion petrochemical complex in
Nizhnekamsk, Tatarstan. The Export-Import Bank of Korea
has also signed a memorandum with the government of
Tatarstan to open a $1.3 billion credit line for the
project.
Russia's state-owned Rosneft and Korea
National Oil Corp (KNOC) signed a $250 million agreement
to explore Kamchatka and Sakhalin Island oil reserves in
the Far East. KNOC said in a statement that exploration
is to begin in 2005 and that South Korea expects to
secure 1.7 billion barrels of oil reserves from the
deal. Korea's Samsung also signed a $500 million,
10-year deal with Russia's private Alliance Group to
modernize a refinery in the Far East city of Khabarovsk.
Furthermore, according to Russian media reports,
Seoul expressed an interest to join BP's eastern
Siberian Kovykta gas project to build a pipeline to
China and South Korea, which is currently stalled. The
state-owned Korean Gas Corp also reportedly indicated an
interest in purchasing up to 2.5 million tons of
liquefied natural gas (LNG) per year over 20 years from
the Shell-led Sakhalin-2 project.
Besides energy
deals, also on the agenda were talks of possible
investment in Korea's automobile industry and Russia's
bid to join the World Trade Organization. Trade between
Russia and South Korea reached $4.2 billion last year.
Russia also agreed to train South Korea's first
astronaut by 2007, and to assist the country in the
creation of its own space program aimed at launching
satellites.
Moreover, Seoul's quest for
hydrocarbon riches is not limited to Russia. Prior to
his Moscow visit, President Roh traveled this week to
Kazakhstan. There, South Korea signed a major energy
deal between state-run KNOC and Kazakhstan's state oil
firm KazMunaiGas, which pledged to develop between 600
million and 800 million barrels of oil.
No big
wonder that South Korea is seeking energy supplies as
the gap between projected Korean LNG demand and viable
supply is growing. The shortfall of 5 million to 6
million tons in 2008 may reportedly reach 22 million
tons by 2015.
On the other hand, Moscow seeks to
expand its markets in East Asia and build an
infrastructure to deliver its products. Moscow has been
keen to export oil, gas and electricity to East Asia,
including the Korean Peninsula. Russia has also backed a
rail project that would link the Trans-Siberian and
Trans-Korean railways, creating a transportation network
to help revive the North Korean economy. According to
Russian experts, the plan would be one-tenth the cost of
the currently frozen nuclear reactor project envisaged
by the US-DPRK (Democratic People's Republic of Korea)
Agreed Framework.
However, North Korea's hardline
stance and the controversy over its nuclear ambitions
seem to undermine Moscow's plans to integrate Russia's
Far East with booming Asian-Pacific economies.
Therefore, Russia has a lot to gain from the stable and
peaceful Korean Peninsula and eventual Korean
reunification.
Moscow is eager to capitalize on
its long-standing ties with North Korea to increase its
role in East Asia. Since Russia is keen to have its
special role on the Korean Peninsula, the Russian
government needs to back it up with some economic
substance. And since direct trade between Russia and
North Korea is still low, around $100 million a year,
high-profile projects such as railroad links are needed
to back up Russia's "special role" on the Korean
Peninsula.
On Tuesday, Putin and Roh agreed to
speed up efforts to link the Trans-Siberian Railway with
South Korea's rail network, via North Korea. Such a link
would create a fast, cheap route for South Korean
exports to Russia and the rest of Europe, and would earn
Russia lucrative transit fees for goods crossing its
vast territory.
It is a plan Moscow has been
backing for some time. The rail link would open up the
9,000-kilometer Trans-Siberian railway to East Asian
trade. In the meantime, railway experts from Seoul,
Pyongyang and Moscow are likely to meet once more within
the year to discuss a project to link the Korean railway
system and the Trans-Siberian Railway.
Putin and
Roh had agreed to study the project when they met at the
Asia-Pacific Economic Cooperation summit in Bangkok last
year. This April, railway experts from the three
involved countries held their first-ever trilateral
meeting, during which they discussed routes. The three
parties agreed on the need to create an international
consortium to finance the estimated $3 billion for the
plan.
The Russian Railway Ministry was
previously pessimistic about the Korean railway project,
yet it eventually changed its stance and argued that the
link with the Koreas would bring in some $30 billion a
year, on the assumption that South Korea would divert at
least 10% of the cargo it currently delivers to Europe
by sea.
However, the rail project remains rather
a political than an economic enterprise because the
Trans-Siberian route itself has not been economically
viable in recent years. The cost of moving cargo from
South Korea to Europe by rail is estimated to be about
30% higher than by sea. And it remains to be seen
whether the connection with the Trans-Korean would do
any good for the Trans-Siberian.
Hence
speculation looms over whether Pyongyang (and
Washington) could agree with this joint Russian-South
Korean effort to create a supply and transportation
network.
South Korea and Kazakhstan this week
signed agreements to develop uranium mines jointly in
the Central Asian nation. The deal could bring Seoul up
to 1,000 tons of uranium ore a year, enough uranium to
meet up to a quarter of its 19 nuclear power plants'
needs. But the recent exposure of Seoul's nuclear
ambitions would seem to complicate multilateral efforts
to compel North Korea to end its nuclear program, a
situation already unstable enough.
Sergei
Blagov covers Russia and post-Soviet states, with
special attention to Asia-related issues. He has
contributed to Asia Times Online since 1996. Between
1983 and 1997, he was based in Southeast Asia. In 2001
and 2002, Nova Science Publishers, New York, published
two of his books on Vietnamese history.
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