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China beats Japan in Russian pipeline
race
By John
Helmer
MOSCOW - Despite pressure from the
government and oil importers in Tokyo for priority
in Russian crude deliveries to Japan, Russia's new
eastern oil pipeline will first deliver crude oil
to China, and later to Japan, a senior executive
of Transneft, the state pipeline agency, told Asia
Times Online. But the oil to China will be
transported by rail, not by a special China spur
pipeline.
For two years, Russian
government officials have been tugged in different
directions by Japan and China over the route the
pipeline should take. At stake are deliveries of
up to 1.6 million barrels of crude per day. The
biggest soap opera in the history of oil
transportation began with an ambitious scheme by
Mikhail Khodorkovsky's Yukos oil company to build
its own pipeline from Angarsk, in eastern Siberia,
where Yukos operated a refinery, to Daqing, a
terminal town in northern China. The China
National Petroleum Co agreed to build the
section of the pipeline from the border to Daqing,
and began work.
Then Transneft, the
state-controlled pipeline agency, moved to block
Yukos from taking ownership of the pipeline.
Russian government officials agreed that
commercially owned pipelines threatened their
control over oil export capacity, and allowed
unrestricted pumping of the oilfields. Transneft
took over equity in the project; Yukos was to
supply the oil for China.
Then war broke out between Khodorkovsky
and President Vladimir Putin over Khodorkovsky's attempt to
sell up to 40% of Yukos to a US
oil company. Khodorkovsky went to jail, where 18
months later he remains - he is to face court
judgment in Moscow this week - and Yukos was
dismantled. Its principal assets have been transferred
to state-controlled companies in payment of
massive tax-fraud claims.
But Japanese lobbying in
the meantime failed to shake Transneft's
preference for piping the first oil in the project
to China, thereby setting high Russian officials
at one another's throats or, to be more precise,
their pockets. While cabinet ministers appeared to
favor the Japanese, Transneft worked on persuading
the Kremlin to back the Chinese.
Japanese
officials have reacted to the Transneft plan by
threatening to withdraw their promised financing.
"In such a situation, Japan will not provide
financial cooperation," announced Japanese Minister
of Economy, Trade and Industry Shoichi Nakagawa.
This threat plays directly into Transneft's hands,
as Transneft spokesman Sergei Grigoriev has more
than once warned against accepting the Japanese
financing formula, which ties construction loans
for the pipeline to repayment with guaranteed
volumes of oil, with favorable pricing.
Claims by the Japanese media in January
that the Kremlin preferred the Tokyo-financed oil
pipeline route to deliver crude oil to a new
tanker terminal at Perevoznaya Bay near Nakhodka
port turned out to be wishful thinking. Transneft
announced at a January meeting between chief
executive officer Semyon Vainshtok and Putin that
a substantial increase in pipeline oil shipments
to China overland remained the strategic priority,
and would not be eliminated in favor of the
Japanese bid to corner Russian exports eastward
through Nakhodka. Vainshtok and Putin appeared to
agree that his agency would build a branch line to
China as part of the longer project.
Still, Transneft officials were so
uncertain of the outcome in January, they have
been reluctant to confirm what exactly is on their
drawing boards. In the past, Transneft has told
Asia Times Online it wants to lay the southeastern
branch line to China to carry an estimated 30
million tonnes per annum (584,000 barrels per
day); while the eastern branch line to the Sea of
Japan coast would carry 50 million tonnes per
annum (972,000 bd). In December, however, an order
by Prime Minister Mikhail Fradkov proposed
eventual capacity of the Nakhodka line to be 80
million tonnes per annum (1.6 million bd).
Transneft has never been enthusiastic
about the Nakhodka option, not least of all
because there are no operating oilfields yet in
eastern Siberia to fill the pipeline. However, for
the past four months, Putin has been unable to
resolve fierce lobbying by both Tokyo and Beijing
among his advisers and ministers. Last month, Yury
Trutnev, appointed a year ago as minister of
natural resources, emerged as the leader of the
cabinet clique against Transneft. In a speech on
March 30, he said Transneft should lose control of
major new oil pipeline and port projects,
especially the eastern pipeline. Trutnev said
Transneft should not be responsible for pipeline
transport, and therefore should be reorganized
under the control of a new federal agency.
"Nonsense," charged Grigoriev. "Absolutely
incompetent", he said of Trutnev, indicating how
personal the politics has become. Sources from the
Natural Resources Ministry have told Asia Times
Online that Trutnev, who himself has an oil background
and was a regional politician before taking his
Moscow post, is under the influence of LUKoil and
other powerful oil and mining companies. Last
year, LUKoil clashed with Transneft, and attempted
to lobby for the same reorganization plan Trutnev
advocated in March. Trutnev is so wary of the
charges against him, he has ordered his spokesman
not to answer press questions.
The
internecine lobbying continued unabated until
Industry Minister Victor Khristenko led a Russian
delegation to Tokyo recently for a session of the
Russia-Japan inter-government commission. Again,
the Japanese tried to force the Russians' hand by
a flurry of press statements. To this, Grigoriev
told Asia Times Online: "We are not building a
pipeline to China or Japan. We are building a
pipeline on the territory of Russia. The first
part of the project will stretch to Skovorodino
[terminal]. Then for the project to start
operations, we will send oil from Skovorodino by
railroad."
Skovorodino is considerably
further to the north and east of the initial
Angarsk-Daqing route proposed by Yukos. The new
planned pipeline skirts northward of the
ecologically sensitive region around Lake Baikal,
and will run from Taishet, near the Bratsk
aluminum center, to Skorovodino. This terminal is
600 kilometers east of the main border rail
junction at Zabakailsk and Manzhouli, where
current Russian oil deliveries by rail cross into
China. It is still unclear what rail capacity
China has, or will build, to carry the oil from
Skorovodino. Current maps show Russian and Chinese
rail lines moving east-west in parallel on either
side of the border. They are not yet connected.
From
Skorovodino, Grigoriev told Asia Times Online, politics,
not geography, will decide the oil's course. "It
is political lobbying that will decide where it will go -
to China or Japan. After that, we plan to
build a pipeline from Skovorodino to
Nakhodka." Grigoriev noted that since China is seeking 30
million tonnes of crude per year, with an additional
50 million tonnes for tanker pick-up from Nakhodka, "We
are building an 80-million-tonne-capacity pipeline
to Skovorodino, and a 50-million-tonne-capacity pipeline from
Skovorodino to Nakhodka."
John
Helmer is the doyen of the foreign press corps
in Russia. He first set up his Moscow bureau in
1989, and specializes in the coverage of Russian
business. US reviews of Western reporting from
Russia have rated him at the top of the
profession.
(Copyright 2005 Asia Times
Online Ltd. All rights reserved. Please contact us
for information on sales, syndication and republishing.) |
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