Russia, Japan and the East Siberia pipeline
MosNews reported yesterday that Russia and Japan had come to an agreement over the building of the East Siberia-Pacific oil pipeline. Japan will help fund the construction.
There's quite a bit of history to this announcement, which I talked about in this post.
In January, Putin announced that construction on the pipeline would begin this summer. Early on, the pipeline was seen as benefiting Japan, which made China nervous. China is oil-hungry too, and seeing all that oil sail by to its rival, Japan, irked China.
After much discussion (see my aforementioned previous post) Putin announced at the G8 summit last year that a rail branch would go from Skovorodino to China, and that it would be the first priority.
(A map of the proposed route can be seen here. Skovorodino is just above the shaded red area, the name, in Russian, looks like it starts with "CKOBOp".)
Obviously, that didn't sit well with Japan, who thought they were the first priority. Japan began to worry if the pipeline would ever reach the Pacific, and if the pipeline would instead end in China, or if China would get most of the oil.
In November, Putin tried to reassure Japan when he said the pipeline would indeed go to the Pacific.
Shortly thereafter, in an apparent quid pro quo, Japan said it would support Russia's entry into the WTO.
Russia hoped to receive support for entry into the WTO at the recently concluded G8 summit, but the US blocked it. Those talks are still ongoing, but note it wasn't Japan blocking the deal.
In March, Russia and China held a summit, and it was apparent Russia was still hesitant about fully supplying China's oil needs. Russia wants the business, but is still wary about providing the engine for a dominant China. At that summit, Putin did not clearly commit to building a pipeline to China itself.
Earlier this month, Transneft, the Russian pipeline company, said that China still had a strong interest in a branch off the East Siberia pipeline.
Part of the discussion surrounding the branch was if it would remain a rail branch, or if a pipeline would be built. Rail is a more expensive way to transport oil, so China would prefer a pipeline, if possible. The Chinese ambassador quoted above certainly mentioned a pipeline, not a rail branch.
And that is what is missing in this news about the Russia-Japan deal. What about this branch into China? Will a rail branch, or branch pipeline, still be built first? If Japan is kicking in a lot of money, has Japan now "bought" first priority? You'll notice the announcement only mentioned Skovorodino, which was where the rail branch was going to start from in the first place. Something to keep an eye on.
Russia and Japan agreed on the project to build the East Siberia-Pacific Ocean oil pipeline, the Japanese Prime Minister Junichiro Koizumi said at a final press-conference at the end of G8 summit in St. Petersburg.
“Russia and Japan agreed to cooperate on the pipeline from East Siberia to the Pacific,” Junichiro Koizumi said, quoted by RIA Novosti. “It will be a mutually advantageous project.”
The pipeline is slated to pump up to 80 million metric tons of crude a year (1.6 million barrels per day) from Siberia to Russia’s Far East. The oil will then be exported to the Asia-Pacific region with a branch going to energy-hungry China.
....
Japanese Prime Minister’s words were supported by the Russian Industry and Energy Minister Viktor Khristenko who said Japan has offered to invest in oil production in Siberia in exchange for the speeding up of the construction of the Siberia-Pacific pipeline. “The decision has been taken to build the first part of the pipeline and the terminal,” Khristenko said, quoted by AFX. The Russian minister added, however, that the decision on the second part of the pipeline will be taken “when we have more information on the (oil) resources available in East Siberia”.
There's quite a bit of history to this announcement, which I talked about in this post.
In January, Putin announced that construction on the pipeline would begin this summer. Early on, the pipeline was seen as benefiting Japan, which made China nervous. China is oil-hungry too, and seeing all that oil sail by to its rival, Japan, irked China.
After much discussion (see my aforementioned previous post) Putin announced at the G8 summit last year that a rail branch would go from Skovorodino to China, and that it would be the first priority.
(A map of the proposed route can be seen here. Skovorodino is just above the shaded red area, the name, in Russian, looks like it starts with "CKOBOp".)
Obviously, that didn't sit well with Japan, who thought they were the first priority. Japan began to worry if the pipeline would ever reach the Pacific, and if the pipeline would instead end in China, or if China would get most of the oil.
In November, Putin tried to reassure Japan when he said the pipeline would indeed go to the Pacific.
Shortly thereafter, in an apparent quid pro quo, Japan said it would support Russia's entry into the WTO.
Russia hoped to receive support for entry into the WTO at the recently concluded G8 summit, but the US blocked it. Those talks are still ongoing, but note it wasn't Japan blocking the deal.
In March, Russia and China held a summit, and it was apparent Russia was still hesitant about fully supplying China's oil needs. Russia wants the business, but is still wary about providing the engine for a dominant China. At that summit, Putin did not clearly commit to building a pipeline to China itself.
Earlier this month, Transneft, the Russian pipeline company, said that China still had a strong interest in a branch off the East Siberia pipeline.
China's Ambassador to Russia Liu Guchang confirmed his country's strong interest in seeing a branch of Eastern Siberia - Pacific Ocean (ESPO) oil pipeline built to reach China.
"Cooperation between Russia and China in building an ESPO oil pipeline branch to China is of strategic importance. We are committed to this project and intend to cooperate fully with Russia in this matter," Liu Guchang said last Friday to the Interfax-China agency.
"The companies of the two countries are undertaking in-depth research and a TEO feasibility study to build an ESPO oil pipeline branch from Skovorodino to the Russian-Chinese border. Once the findings of the research are in, we will look into every possible option to partner up with Russia on that project," Liu Guchang said.
Part of the discussion surrounding the branch was if it would remain a rail branch, or if a pipeline would be built. Rail is a more expensive way to transport oil, so China would prefer a pipeline, if possible. The Chinese ambassador quoted above certainly mentioned a pipeline, not a rail branch.
And that is what is missing in this news about the Russia-Japan deal. What about this branch into China? Will a rail branch, or branch pipeline, still be built first? If Japan is kicking in a lot of money, has Japan now "bought" first priority? You'll notice the announcement only mentioned Skovorodino, which was where the rail branch was going to start from in the first place. Something to keep an eye on.
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