A pipeline for prosperity: commentary

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Last updated at: (Beijing Time) Friday, September 26, 2003

A pipeline for prosperity: commentary

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Russian Prime Minister Mikhail Kasyanov's renewed commitment to the Russia-China oil-pipeline project clearly underscored the importance his government attached to the strategic partnership of co-operation between China and Russia.

Yet, his stopping short of giving a hoped-for nod to the proposed route indicates that bilateral economic ties might still have to stand tests before bearing generous fruits.

In the run-up to Kasyanov's two-day state visit to China, which ended yesterday, the increasingly louder media talk that the planned route may be blocked and replaced by a rival pipeline, bypassing China to Russia's Far East port of Nakhodka has caught wide public attention.

The planned 2,400 kilometre-long Russia-China oil pipeline is to extend from Russia's Angarsk to Daqing in Northeast China's Heilongjiang Province.

After years of study and assessment, this project has been proved realistic and practical.

China National Petroleum Corp and Russia's private oil producer YUKOS even signed an agreement on the US$2.5 billion project during President Hu Jintao's state visit to Russia in May.

However, early this month, the Russian Ministry of Natural Resources disclosed its attempt to veto the Angarsk-Daqing pipeline due to so called "environmental problems."

Such a turnaround has darkened the prospects for the project and has sparked wild guesswork from Chinese public.

Under such circumstances, Kasyanov's reiteration of the Russian side's commitments to meeting China's needs for petroleum and natural gas for its economic development at a joint press conference with Chinese Prime Minister Wen Jiabao on Wednesday is surely welcome.

The pledge not only helps breathe new energy into the Russian-China pipeline project, but also adds to the momentum both countries are fostering to expand bilateral trade and economic co-operation.

Bilateral economic and trade relations have progressed rapidly in recent years, but not as fast as both countries have hoped.

The trade volume between China and Russia hit a record high of US$12 billion last year, and is expected to reach US$14 billion this year.

But the figure should be far more impressive given the 4,000-odd-kilometre-long border between the two countries and the huge size and growth potential of both economies.

Now, a common goal for the two countries is to boost their annual bilateral trade volume to US$20 billion as early as possible.

As the most important part of Sino-Russian economic ties, co-operation in energy should be further strengthened.

The Russia-China pipeline that is expected to pipe 700 million tons of Russian crude in eastern Siberia to Northeast China over 25 years is the would-be largest bilateral trade deal between the two countries.

Undoubtedly, smooth implementation of such a giant project will contribute significantly to the further expansion of trade ties between the two countries.

Nevertheless, a conspicuous lack of an explicit go-ahead for the Angarsk-Daqing pipeline from the Russian side bears testimony to the problems yet to be ironed out in the way of broader bilateral economic ties.

One ostensible cause of the current stalemate centring on the Russia-China pipeline project is Japan's hard lobbying for a pipeline stretching to Nakhodka.

The lure of the latter option includes not only Japan's ample funding, but also a diversified demand side composed of rich nations.

But the underlying reason behind the abrupt change of attitude toward the Russia-China pipeline project may lie with scepticism on the part of certain Russian factions toward China's future growth and behaviour.

Not to mention apparent technical problems like inadequate oil supplies to support the other route which also faces environmental problems, opponents of the Russia-China pipeline have unfortunately failed to come to grips with the trend of regional economic development.

Those concerns over the pricing issue of a one-buyer project are reasonable as business considerations, but not pertinent to the reality of bilateral ties between China and Russia.

China, one of the world's largest oil consumers, has a huge stake in reducing its dependence on the turbulent Middle Eastern oil supply. Russia, one of the world's largest oil producers, can help satisfy China's growing energy needs.

It is estimated that, according to China's ambition to quadruple its gross domestic production in two decades, its oil consumption will exceed 400 million tons by 2020, with import oil accounting for half of that.

In addition to its huge need for oil imports, the robust growth of the Chinese economy and earnest fulfilment of its commitments to the World Trade Organization (WTO) all guarantee that China will be an accountable buyer for Russian oil.

With Russia standing on the threshold of the WTO, both countries should make the most of their bilateral ties to serve each other's interests.

The current scheme means more than a symbol of the two countries' "strategic partnership of co-operation." It will also play a substantial role in fuelling China's latest campaign to revive its Northeastern industrial base as well Russia's development of its Far East region. (China Daily)

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