Posted on 01/30/2005 4:38:02 PM PST by Tailgunner Joe
MOSCOW : Russia's pipeline monopoly said it had started to plan the construction of a vital pipeline from Siberian oil fields to the Sea of Japan with another branch leading to China.
The announcement sets in motion a monumental project that in the coming decades could see Russia's oil spread over a large swath of Asia and potentially reach customers in the United States.
Transneft head Simon Vainshtock told Russian President Vladimir Putin the pipeline's first branch would run from Taishet in Siberia's Irkutsk region to the town of Skovorodino some 1,600 kilometers (960 miles) to the east near China's border.
"We already have drafts" for the project, Vainshtock told Russia's president.
Japan and China -- both starving for future energy supplies -- have fought furiously for the right to access Russia's untapped oil reserves.
Tokyo won the upper hand after a protracted diplomatic battle when the Russian government late last year sided with the more expensive but potentially more profitable Pacific coast option.
But the Chinese are now also a part of Russia's plans in the longer term and under terms set in Moscow.
"The Chinese will get what they had wanted, 30 million tonnes a year, but on Russian terms" because China will have to compete with Japan and other future customers in the price paid for the oil, said Adam Landes, oil and gas analyst at Renaissance Capital.
The oil will first run to Skovorodino -- a town that sits just 70 kilometers (40 miles) north of the Chinese oil. It will then be shipped by a rail to a port on the Sea of Japan to Perevoznaya while a permanent pipeline to a bustling port in nearby Nakhodka is being built.
The Chinese branch was backed by the out-of-favor Yukos oil company, which Russia is dismantling to pay off back taxes. It was turned down as a first option by Moscow because a sea route presented more potential buyers.
Moscow officials have hinted that Beijing would have to come up with the financing if it wanted the oil.
Deputy Prime Minister Viktor Khristenko pointed out in a recent interview with the Vedomosti daily that Skovorodino, the intermediate point, lies only 70 kilometers north of the Chinese border.
"An option for a Chinese branch still remains," said Khristenko, who holds Russia's energy brief.
Financing for the Japanese branch also remains unclear, the Russian government announcing last week it would not guarantee any loans for the project.
The statement was issued three days after January 14 talks on the massive pipeline between visiting Japanese Foreign Minister Nobutaka Machimura and Khristenko.
Khristenko said Russia expected "cheap loans from both within and abroad" to build the pipeline.
The project is estimated to cost 12 billion dollars (nine billion euros) although some analysts have forecast a price of 16 billion dollars and possibly more.
Tokyo has offered to provide seven billion dollars in soft loans for the pipeline and make further investments in Far Eastern Russia, which has been shunned by Japanese companies because the two nations have yet to sign a peace treaty ending World War II due to a lingering border dispute.
The Kommersant business daily has reported that Russia may give Japanese companies the right to develop new oil fields in Siberia but that a final decision still had to be made by the government.
Russia has admitted that existing oil fields will not be able to feed the pipe to its full supply of 80 million tonnes a year and ITAR-TASS reported that Moscow may offer countries like Japan, China and South Korea to launch joint ventures to prospect eastern Siberia for new oil.
No Russian company or bank has yet volunteered to help construct the pipeline, which would be operated by Transneft.
This would go a long way to revitalizing Russia, for better or worse. Hopefully, they wouldn't wind up like the Arab states though. Single-product economies aren't very stable. Might also do wonders for Russia's east, including the Vladivostok port city and the trans-siberia railroad.
The Russians have certainly squeezed every yen and every yuan out of this deal that they could.
This will be one of the way Russia gains leverage over Japan and starts disrupting our close relationship with her.
Russia's working hard on India with that, too, BTW.
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