SPEAKING
FREELY Don't dismiss China's Daqing oil
pipeline By Mark N Katz
Speaking Freely is an Asia Times Online
feature that allows guest writers to have their say.
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It appears that Japan has
beaten China in the competition over which Siberian oil
export pipeline Russia will build. Instead of the
shorter route to Daqing in China favored by Beijing,
Moscow seems poised to announce its approval for the
longer route to Nakhodka on Russia's Pacific coast
favored by Tokyo. Several recent conversations I had
with knowledgeable Russian and Western sources in
Moscow, though, suggest that the Daqing route may yet be
the pipeline that gets built.
It was the now
beleaguered Russian oil company, Yukos, that had
originally proposed to sell its Siberian oil to China
via a pipeline to Daqing in China's north. Although
Japan had offered financial incentives for the Nakhodka
route, Russia's then prime minister, Mikhail Kasyanov,
indicated in April 2003 that the Daqing pipeline would
be built. The following month, Yukos signed an agreement
to sell oil to China via this pipeline that it expected
to complete in 2005. But as the political feud between
Russian President Vladimir Putin and Yukos chief Mikhail
Khodorkhovsky escalated, the Daqing pipeline looked less
and less likely.
On a visit to Beijing in
September 2003, Kasyanov informed the Chinese that
construction of the Daqing pipeline would be
"postponed". Shortly thereafter, Japan offered a
beefed-up package for building the Nakhodka route,
including US$5 billion for pipeline construction and $2
billion for Siberian oil field development. Since then,
press coverage of this issue has indicated that it is
the Nakhodka pipeline route that will be built, though
Moscow has not yet announced its decision.
The
Nakhodka route has the advantage of allowing Russia to
sell Siberian oil to a variety of customers, while oil
shipped via the Daqing route could only be sold to
China, leaving Russia dependent on Beijing alone. And
while it is estimated that the Nakhodka pipeline will
cost two to four times as much as the Daqing line,
Japanese financial support will ease this burden
considerably. Finally, the Nakhodka pipeline has the
advantage of not being the one proposed by Yukos. Moscow
could try to please both China and Japan by building
both pipelines, or a spur from the Nakhodka route to
Daqing, but proven Siberian oil reserves do not yet
appear sufficient to supply both markets.
Nevertheless, there is reason to believe that
Moscow may switch back to favoring the Daqing pipeline
once again. During a conversation in Moscow in
September, a Yukos official argued that the cancelation
by the administration of President Vladimir Putin of the
Daqing pipeline was done strictly to punish Yokos chief
Khodorkhovsky and Yukos. But once the ownership of
Yukos' Siberian assets have been transferred to entities
the Kremlin approves of, this motive will disappear. And
since the Daqing pipeline is much cheaper than the
Nakhodka one, it would be more sensible commercially to
build the former.
In addition, several Russian
and Western sources in Moscow expect that when Moscow
and Tokyo are concluding the deal for Japan to fund the
construction of the Nakhodka pipeline, Tokyo will not
give final approval for the project unless Moscow
promises to return the four Kuril Islands that it seized
from Japan at the very end of World War II. This is a
highly emotional issue for the Japanese; the dispute
between Moscow and Tokyo over this issue has prevented
the two countries from signing a peace treaty formally
ending the state of war between them that has existed
since 1945.
From the Japanese viewpoint, a
Russian promise to return the Kurils (even if it won't
be fulfilled any time soon) might appear a small price
for Moscow to pay in return for the generous funding
Tokyo would provide that would allow Russia to escape
dependence on China as the sole customer for Siberian
oil. Observers in Moscow, though, were unanimous in
emphatically asserting that Putin would never agree to
this. Russian public reaction to Moscow even promising
to return the Kurils is likely to be so negative that
even a president as powerful as Putin could lose his job
by relinquishing them.
If indeed Tokyo attempts
to tie Japanese funding of the Nakhodka route to a
Russian promise to return the Kurils, then Moscow is
highly likely to approve the export of Siberian oil by
the new, Kremlin-approved owners of Yukos' fields there
via the less-expensive pipeline to Daqing, China. And
with any luck, the construction of the Daqing route will
lead to more oil discoveries in Siberia sufficient to
fill a pipeline to Nakhodka, as well as to greater oil
revenues that will allow Moscow to build it without
assistance from Tokyo.
Mark N Katz is
a professor of government and politics at George Mason
University in Fairfax, Virginia.
Speaking Freely is an Asia Times Online
feature that allows guest writers to have their say.
Please click here if you are interested in
contributing.
