Tokyo versus Beijing for Siberian pipeline

In the Asia thirsty for oil, war has been declared between China and Japan to bring home Siberian oil. Meanwhile development in the Far East is in the hands of Putin and America. An economics and oil expert offers his analysis.

China and Japan are battling over eastern Siberian oil fields. And Putin, in consideration of internal policies, seems oriented in favor of the Japanese: this is what emerges from AsiaNews sources in Moscow and an article written the Jan. 9 issue of the Moscow Times. 

The current increase in crude oil barrel prices (English Brent crude today sells at 31.37 US dollars a barrel against quotes of around 28 dollars only a few days ago; the American West Texas Intermediate is at 34.29 US dollars a barrel) is evidence for the structural weakness of the amazing Chinese economic expansion, where there is a scarcity of internal energy resources and raw materials.

This problem has been shared by all Far East countries for awhile. Sixty years ago Japan was forced to launch its attack on Pearl Harbor precisely because of the embargo declared by President Roosevelt on oil and raw materials a few months prior. Today, Japan, South Korea and Taiwan's insatiable need for raw materials is added to that of China, which is in a rapid and tumultuous phase of industrialization with the intent of becoming the "world's factory". It is estimated that by 2005 China will replace Japan as the second largest oil consumer in the world after the United States.       

Given the Middle East's political instability, all far eastern Asian countries will want to reduce their own dependence on middle eastern crude oil. The most attractive alternative is far eastern Russia, whose vast energy resources are still hardly tapped into. In order to develop Siberian oil fields it is necessary to spend billions of dollars and organize transport for the crude oil to consumer markets –to China and its industrial centers or to a Russian port on the Sea of Japan? Hence, the birth of political and economic battle.  

China has made the first move. Yoichi Funabashi, influential columnist for the Japanese Asahi Shimbun  financial daily, recently wrote: "We are entering an era in which Japan and China will come to blows. China acts and Japan reacts. For now we (Japanese) are losing the oil battle." In effect, China has made moves on all Asian fronts to assure itself not only of crude oil but of every raw material available in the region. The country has: 

- agreed on the building of a 5000 km-long natural gas pipeline from eastern Siberia to Shanghai, at a cost estimated at around 17 billion US dollars.

- financed another pipeline in Kazakistan;

- negotiated the development of huge natural gas fields in Turkmenistan;

-  purchased in Australia and Indonesia natural gas fields and agreed with such countries to receive long term supplies of liquefied natural gas;

- financed coal and copper mines in Mongolia and acquired steel from South Korea via long term deals.

Likewise to assure itself of crude oil from eastern Siberian fields, China made a big, decisive move and in long anticipation, having for decades discussed with Russia the details of the relative pipeline. In reference to the future flow of supplies, president Hu Jintao thought he finally brought the story to a close during his visit to Moscow last May, upon signing a statement together with Putin in which the pipeline's direction toward China was supported. During the same official visit, the Chinese state oil company had moreover signed a twenty-year, 150 million US dollar agreement with Yukos for crude oil supplies. However, since last Oct. 25 Yukos's patron, Mikhail Khodorkovsky, who was arrested for tax evasion and fraud (especially after he revealed that he ceded to Rothschild the largest Russian oil company via a pre-dated sales option –considered illegal or at least suspicious), an important  Russian backer of the China-directed Siberian pipeline was lost.    

Japan's Advantages 

Political winds in Moscow have, therefore, begun blowing in the direction of Japan –the latter is again a player and making up for lost time. Regional governors in eastern Siberia  have immediately begun pushing for the pipeline's course in the direction of Krylova Cape, in the municipality of Nakhodka, where the Trans-Siberian railway ends and where a deep water port for 300 ton super-tankers is under construction. The port, which could become operational shortly, is structured to receive railcar tanks, but its role might be seen as exaggerated considering the consistent relative additional profit of transit and port rights, if Moscow decides to direct the new Siberian pipeline's course toward Japan.       

From an economic perspective, the course proposed by the Chinese and Yukos offers clear advantages: it is shorter, faster and less expensive. It is in fact 2250 kms long, costs 2.8 billion US dollars, and predicted to take 7 years to build. The Krylova Cape-directed course bringing the crude oil to Japan, would be 3700 kms long, cost 5.8 billion US dollars and be completed in 10 years.

The pipeline proposed by the Japanese would have a larger capacity –a million barrels a day versus 600,000. Yet many Russians, starting with Putin, are asking themselves if the Siberian oil fields are ever able to take advantage of such a capacity. According to the Moscow Times, all those in Moscow for a China-directed pipeline point out any interdependence linking China and Russia would have positive results for regional stability on the basis of what occurs in terms of Canadian and US oil supplies. The Moscow Times states that any decision on the matter is, at any rate, in the hands of Putin. 

According to some western oil industry experts contacted in Moscow by Asianews, Putin could, however, delude the Chinese and favor the Japanese not so much because the latter seem to have offered to pay more for the crude oil, but precisely to crowd out Yukos. To such an end, it is worth mentioning that in Moscow a hot battle is underway in which Putin and his entourage are set against lobbying groups of oligarchies from the times of Yeltsin who hoard the majority of Russia's natural resources with the support of the largest financial organizations in New York.  Rather than prevailing over such a lobbying group, commonly known in Russia as the "Jewish lobby" (Gusinski, Abramovich, Goldowski and Khodorkovsky, to name of a few of the major exponents), Putin might be ready to make many unhappy abroad, adding to the consensus within Russia.   

Russian resentment toward such a Jewish lobbying body is quite widespread, on account of a series of frauds committed during the period following the fall of the communist regime. Many Russians see Putin as the champion they are looking for to free Russia from Mafia bosses strictly linked to foreign interests. And it certainly does not help that the fact that many of these oligarchies have taken Israeli passports. As old ghosts, therefore, pop up again and behind the misleading appearances of openness to the West, Russians are rediscovering the nationalism of those who for years felt surrounded by powerful enemies wanting to prey upon the immense wealth of the their land and who blame the West for the misfortunes of the communist dictatorship.  

Even if unexpressed, there is deep and well rooted anti-Jewish and anti-Western resentment in Russian.

Hu Jintao, jumping on the Yukos-Khodorkovsky bandwagon –victorious until yesterday, has unknowingly opened an old, and not totally healed, Russian wound. If Putin chooses the Japan-directed pipeline it will not be because he isn't informed of Japan's decline and the rising pre-eminence of China in Asia; but for the simple reason that otherwise he would end up favoring a further strengthening of Yukos, the largest Russian oil company controlled by Rothschild, therefore evoking unpleasant spectres within Russian public opinion. At any rate, any decision made by Putin will be significant for the long term development of the Asian Far East.   

• china
• japan
• russia
• oil
• siberia
• middle
• east