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Russia: Moscow Promises Energy Exports To China

The Russia-China summit has produced a long list of pipeline announcements that promise a big boost in energy trade. Experts say that some of the plans may be realized with huge investments of money and time. Our correspondent Michael Lelyveld reports.

Boston, 19 July 2001 (RFE/RL) -- Russia has announced an ambitious series of pipeline plans for energy exports to China as part of the Moscow summit between presidents Vladimir Putin and Jiang Zemin.

But the long list of projects would require investments totaling tens of billions of dollars, raising questions about the financing needed to join Asia's biggest energy producer with its biggest consumer to the south.

On 17 July, Russia and China announced only one framework agreement for an oil pipeline that would stretch across Mongolia from the Siberian city of Angarsk, near Irkutsk. The line, to be built by Russia's pipeline monopoly Transneft and the Yukos company, would carry 20 million tons of oil by 2005. The 2,400-kilometer project would cost $1.7 billion, AP said.

But the Russian gas monopoly Gazprom publicized far more sweeping plans for an entire "Unified System of Gas Pipelines of Asia" for exports to China from Siberia.

Sergei Zhvachkin, president of Gazprom's eastern division Vostokgazprom, said the company would build at least three lines. The magazine "Russkiy fokus" reported that the first would run from the Tomsk region, the second from Irkutsk, and the third from Yakutia along the route of the China Eastern Railway to Shanghai.

Gazprom has also been promoting a $15 billion pipeline project from its Arctic gas fields in the Yamalo-Nenetsk region. In addition, the company has been competing to build a 4,100-kilometer gas pipeline within China from its western Xinjiang province to Shanghai.

On one level, the announcements may offer nothing new. All the pipelines from Siberia were previously included in a draft cooperation agreement with China in August of last year.

Western oil industry officials with interests in the region also voiced skepticism this week about how soon Russia will turn any of its plans into reality.

One official who spoke on condition of anonymity said: "I've seen a lot of summit meetings. There has always been something about the pipelines, and then it's back to business as usual."

In the case of Gazprom, it seems unlikely that the company will be able to finance its plans on its own. Gazprom has been planning a pipeline from the Yamal peninsula to Europe for over six years.

There are also questions about how much gas China can use in the near term, despite its population of 1.3 billion. So far, gas accounts for less than 3 percent of China's energy needs, which are met largely by coal.

Beijing is increasingly worried about its reliance on imported oil from the Middle East. But that concern is unlikely to ease if it becomes dependent on Russian imports instead.

The country's imperative is to curb its use of coal and to build its west-to-east gas pipeline from Xinjiang, giving it a chance to decrease dependence on high-polluting fuels and imports at the same time.

While experts see great potential for exports from Russia's giant Kovykta gas field near Irkutsk, the oil industry official said that only the west-to-east project is part of China's current five-year plan. A Kovykta pipeline is not. The line from Kovykta is estimated to cost up to $6.5 billion, while field development could cost $6 billion more, the Reuters news agency reported last month. But analysts believe that major energy links to China are inevitable at some point.

Fiona Hill, a fellow in foreign policy studies at the Brookings Institution in Washington, said: "Caution is absolutely right. These are ambitious ideas." But Hill also sees a good chance that some of the projects will take place in time.

One reason is that the Russian government has made energy exports to China a political goal, Hill said. Another reason is that some of the Siberian gas fields are so far from Western markets that they may have no other economic outlet.

Hill said: "They have these resources. They have to do something with them."

For now, Russia's plans may be a list of everything that could be done rather than what it can do. But there seems to be no doubt that China will look to the north unless it can find more energy at home.