VLADIMIR PUTIN, the President of Russia, has confirmed that the multibillion-pound oil pipeline to be built across Siberia will go first to China and only later be extended to the Pacific coast.
The announcement, in a Kremlin interview with Western journalists and academics, ends months of speculation and diplomatic lobbying. It will be greeted with satisfaction in China, whose appetite for Russian oil is boundless, and with dismay in Japan.
The President said that shipments will go initially to Daqing, an oil terminal in northern China. “The Daqing pipeline will be built first, but we will also build to Nakhodka,” Mr Putin said, referring to the Pacific port from which oil can be shipped to Japan. He said the economics of that route were more attractive to Russia.
Mr Putin’s remarks come after a marked warming in economic and political relations with China. Russia recently held military exercises with the Chinese, and the Russian arms industry now largely depends on booming Chinese orders. The exercises were seen in Japan as an ominous sign that both Moscow and Beijing are ready to “play the China card” in their quarrel with Japan.
The Japanese Government of Junichiro Koizumi, before its re-election last week, saw a sharp worsening in its relations with China, which accuses Tokyo of glossing over Japan’s Second World War atrocities. At the same time, Russian interest in engaging Japan in the exploration for energy in Siberia appears to be waning. Analysts in Japan say that Moscow now shows little interest in any political concessions to attract investment.
Mr Putin, who is due to visit Tokyo in November, was sharply critical in his Kremlin meeting of Japanese diplomacy. He accused it of intransigence in holding up agreement on a territorial dispute over the Kurile islands, which has been delaying the signing of a formal peace agreement since the end of the Second World War.
Mr Putin said that by sending oil to Daqing, Russia could diversify its export routes and avoid becoming too dependent on a single customer for its oil. “We want to sell to the whole Asia-Pacific region,” he said.
Construction of the pipeline of 4,100 kilometres (2,500 miles) is to begin in December, on the first leg from Taishet to Skovorodino, near the Chinese border and about halfway to the Pacific. The vast steel tube will become one of the vital carriers of the world’s energy supplies, eventually able to transport 50 million tonnes of oil a year to Asian markets.
Japan had offered to make available $9 billion (£5 billion) in low-interest loans and export credits to help to fund construction, but Mr Putin’s announcement now throws that commitment into doubt.
Russia’s vast energy supplies have become a crucial factor in the strategic calculations of the main countries in Asia, which diplomats liken to a new version of the “Great Game” — the 19th century tussle between the Russian and British empires for control of Afghanistan and the Central Asian borderlands.
China’s new interest in cultivating Moscow, after years of relative indifference, has a clear economic accent. The Chinese leadership expressed public concern over the arrest of Mikhail Khodorkovsky, the former head of the Yukos oil group, and at the subsequent dismantling of the company, because Yukos was one of the main suppliers of Russian oil to China.
Mr Putin assured Beijing that supplies would not be disrupted, and Transneft, Russia’s state pipeline group, has taken over from Yukos responsibility for building the pipeline. Mr Putin recently also assured the Chinese that Russia would supply them with 385,000 barrels a day by rail from the Skovorodino terminal.
Now the President has decided to send some two thirds of the pipeline’s capacity south to China by pipeline the whole way. The remaining one third will be sent to the Pacific coast by rail, using the Baikal-Amur Mainline, a massive 2,000-kilometre Brezhnev-era project that has so far largely proved to be a white elephant.
Japan has so far made no official response to Mr Putin’s remarks. However, the issue is bound to be a central theme of the talks in Tokyo in November, with Mr Koizumi wrongfooted by the announcement.
Russia’s success in this northern “Great Game” is in contrast to its diplomatic failure to win its way in a similar pipeline contest ten years ago. At stake then was the route of a new pipeline to carry energy from Kazakhstan and Central Asia to Western markets. Russia wanted a pipeline from below the Caspian to link to its existing network, which would take oil to the port of Novorossiysk, on the Black Sea. However, American oil companies, backed by the US Government, wanted a route south through Georgia and Turkey to the Mediterranean port of Ceyhan.
Moscow put huge pressure on the Government of Azerbaijan to send the oil north through Russia. But there were two fatal weaknesses in its strategy. First, the existing pipeline passes through Chechnya, and secondly Turkey made clear that the Bosphorous was dangerously overcrowded and that it would not allow any more oil tankers to pass through from the Black Sea. In the end, the pipeline was opened from Baku to Ceyhan, with only a minor branch going north into Russia.
Another diplomatic game over pipelines is under way on Russia’s western flank. This concerns the route of the new carrier of Russian gas to Western Europe. It is now planned to take the pipeline along the Baltic seabed to Germany, bypassing Poland and Ukraine, much to the anger of their governments.
That decision is clearly political. Moscow has poor relations with both Poland and Ukraine and is determined not to give them a hold over its vital oil exports. Mr Putin also told his Western guests that it would be much cheaper for Russia not to have to pay transit costs.
The gas pipeline, about 880 kilometres long, to be built by Gazprom, the state energy group, and German companies, will run from near St Petersburg under the sea to the northeast coast of Germany.
Mr Putin hinted that he would have been ready to negotiate a pipeline deal with Ukraine, but that the Yushchenko Government that came to power after the Orange Revolution took such a hard anti-Russian line that agreement became impossible.
Clearly, in the West as in the East, pipelines are the new conduits of power projection. The Great Game is in full swing.
FUELLING CONTROVERSY
Diplomatic storms have blown up over all three major pipelines now being built to carry huge energy exports abroad from the former Soviet Union.
Taishet-Nakhodka: the new pipeline from Siberian oilfields to the Russian Pacific coast will branch south to Daqing in China before being extended to the Pacific.
