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China to get first crack at Russian
oil: Putin
By John Helmer
MOSCOW - In his most detailed statement to
date, President Vladimir Putin has spelled out
Russia's priorities for transporting crude oil to
Asian markets in the next decade. In diplomatic
but unambiguous language, Putin rejected Japanese
proposals, in favor of China.
In a press conference at
Gleneagles last week as the new chairman of the
G8, Putin identified rail deliveries to China from
the new border terminal at Skovorodino as his
first priority, with 20 
million tons (385,000 barrels per day) the target
for delivery, once Transneft, the state pipeline
agency, builds the planned new pipeline to
Skovorodino.
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.
An
additional 10 million tons (192,000 bpd), Putin
said, will be sent on by rail to the new tanker
terminal planned near Nakhodka. Construction will
take "around three years", the president noted.
The president's remarks rejected wishful thinking
from Tokyo that a Japanese government offer to
finance a pipeline all the way to Perevoznaya Bay,
near Nakhodka port, would tempt the Kremlin over
Chinese insistence that deliveries to Beijing take
priority. "As the oil in this [first-stage]
pipeline increases through the development of new
sources and fields in eastern Siberia," Putin
said, "we will build a second section of the
pipeline that will run right to the Pacific coast.
This system will then be pumping 50 million tons
[972,000 bpd]..."
This number is a
discreet way of rebuffing the Japanese government,
whose multi-billion dollar financing proposal for
the Nakhodka-first pipeline has assumed a capacity
of 80 million tons annually (1.5 million bpd). The
pay-back terms may also have required such a large
volume, despite the fact that, as Russian industry
sources have repeatedly pointed out, the eastern
Siberian oilfields are far too underdeveloped to
fill the pipeline to that level within the next
decade or longer. Niether the Russian government,
nor the commercial Russian oil companies, have any
intention of diverting crude from western Siberia
in order to make up the difference for Japan's
benefit.
Thus Putin's remarks ought to be
read in Tokyo as marking a colossal failure on the
part of Japanese interests who have promoted and
lobbied for the Nakhodka plan for years. Like the
Indians, whose failure to link billion-dollar
investment promises to commitments of Russian
crude oil supply have resulted in a comparably
spectacular failure, the Japanese ought to be
auditing how the money allocated to this task was
spent; and blaming themselves for the dead end
their tactics have now brought them.
In
almost the same breath, Putin had
less-than-reassuring words for the other goal in
Japan's two-pronged strategy for Russia - a peace
treaty resolving the status of the Kurile Islands.
"Regarding the territorial issue," Putin said, "I
would call it the problem of signing a peace
treaty - I think you will agree with me that in
order to someday settle this question, we need to
work on it together, and in order to work on it,
we need to meet, to understand each other and
trust each other. In order to trust each other, we
need to build up our cooperation. These are the
issues we intend [to discuss] during my visit to
Japan." In short, no Russian oil and no Russian
and will go to Japan for the foreseeable future.
Putin's latest statement on the Russian
geopolitics of oil was significant, too, for what
he didn't offer Russia's most prominent strategic
ally, India. This is despite the fact that the
current Indian government, and its parastate oil
and petroleum refining companies, ONGC and IOC,
have made repeated, highly publicized attempts to
secure new oilfield concessions in Russia from the
Kremlin, as well as shareholding stakes in
Russia's state-controlled energy companies.
None of these efforts has made the headway
which China's President Hu Jintao and his oil men
achieved on their visit to Moscow early this
month. Referring to the two reported undertakings
by Rosneft to the Chinese for exploration of a
Sakhalin oil deposit, and for supply of gas to
China, an Indian source observed: "Indian
investment of $2.5 billion [in Sakhalin by ONGC]
will bring energy security and prosperity to
China. We don't shoot people in India, as the
Chinese would have done if a Chinese investment
had secured one of [the] world's largest oil and
gas reserves for Indians. It would have been
considered treachery."
In the Indian case,
the source claims, still secret mandates have been
granted by the Indians to US investment banks, and
at least one French bank, to serve as
intermediaries in arranging Russian oil resource
acquisitions. The potential for corruption which
these arrangements might inspire would be more
noteworthy if there had been any reason to suspect
that American investment banks can influence the
Kremlin's oil and gas decisions. Indian officials
express continuing optimism that they will secure
oilfield concessions in time. They admit they have
so far failed to reach any agreement on
transporting to India any oil from the Sakhalin-1
oilfield, in which ONGC is a major investor.
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.
(Copyright 2005 Asia Times Online Ltd. All
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