WSJ.com - Russia Confirms China-Pipeline Plan
WSJ.com - Russia Confirms China-Pipeline Plan
By GUY CHAZAN
Staff Reporter of THE WALL STREET JOURNAL
September 7, 2005; Page A14
MOSCOW -- President Vladimir Putin said Russia will continue to increase oil output despite a recent growth slowdown. He also confirmed a multibillion-dollar oil pipeline to be built across Siberia will first go to China and only later to the Pacific coast.
Japan and China have been vying over the route of the pipeline, which will eventually pump as many as one million barrels of Siberian oil a day to East Asia. The issue has dominated Russia's relations with the two countries for years.
So far, Russia has refused to commit on which customer would get deliveries when.
But in a meeting with Western analysts and journalists in the Kremlin late Monday, Mr. Putin said shipments initially will go to China's oil center in Daqing. "The Daqing pipeline will be built first," Mr. Putin told the group, according to one of the participants. "But we will also build to Nakhodka," he said, referring to Russia's port on the Pacific coast that would enable shipments to Japan. A Kremlin spokesman confirmed the comments, adding that Mr. Putin said the economics of the China route were more attractive to Russia.
The decision is a setback to Japanese interests. Mr. Putin said Russia's relations with China had dramatically improved and Chinese military orders were keeping Russia's arms industry alive. He said the two had resolved all their border issues for the first time in 40 years.
In contrast, he had harsh words for Japan, accusing it of intransigence over the Kurile Islands territorial dispute that has held up the signing of a peace treaty between the two countries since World War II.
Mr. Putin said that by sending oil to Daqing, Russia would be able to diversify export routes and avoid becoming dependent on a single customer for its oil. "We want to sell to the whole Asia-Pacific region," he said.
Construction of the pipeline is to begin late this year, with the first stage of the line carrying 30 million metric tons of crude annually from Taishet in Siberia to Skovorodino near the Chinese border. From there, a pipeline is expected to take two-thirds of the oil south to Daqing, while the remaining 10 million metric tons would be shipped by rail to a new port to be built on the Pacific coast near Nakhodka. The project is expected to be completed around 2008. Mr. Putin also has pledged to expand the line to 50 million metric tons a year, or roughly 1.2 million barrels a day, and to extend the pipe all the way to the Pacific coast at some time in the future.
An official for Japan's Foreign Ministry said he hadn't heard of Mr. Putin's latest remarks about the Siberian pipeline, so he couldn't comment. But he said Japan was continuing talks with Russia on the project. Mr. Putin is scheduled to visit Japan in November, and the pipeline issue likely will be mentioned during meetings between him and Japanese Prime Minister Junichiro Koizumi, the official said.
In his comments Monday, Mr. Putin reiterated that Russia will continue to expand oil production amid global worries about petroleum supplies. He played down the slowdown in output growth over the past year, noting that, despite problems at embattled giant OAO Yukos, Russian production has been rising. The Kremlin slapped Yukos, once Russia's most dynamic oil company, with $28 billion (€22.35 billion) in back-tax claims and nationalized its main production unit late last year.
"Even without Yukos, oil production has increased and will continue to increase," Mr. Putin said, according to a participant. After months of stagnation, Russian output hit a new post-Soviet high of 9.49 million barrels a day in August. So far this year, however, production is up only 3%, a much slower rate than the 9% seen in 2004.
Mr. Putin also strongly criticized the tycoons who once ran Yukos, whose founder, Mikhail Khodorkovsky, was sentenced to nine years in prison last May on fraud and tax-evasion charges he says are politically motivated. "You can't become billionaires in a matter of five or six years without breaking the law," Mr. Putin said.
The president also stated in the strongest terms yet that he wouldn't stand for a third term in elections in 2008. Mr. Putin is constitutionally barred from seeking a third term, although commentators believe he might change the constitution to allow himself to stand again. But Mr. Putin said that would destabilize Russia. "Stability is critical," he said.
By GUY CHAZAN
Staff Reporter of THE WALL STREET JOURNAL
September 7, 2005; Page A14
MOSCOW -- President Vladimir Putin said Russia will continue to increase oil output despite a recent growth slowdown. He also confirmed a multibillion-dollar oil pipeline to be built across Siberia will first go to China and only later to the Pacific coast.
Japan and China have been vying over the route of the pipeline, which will eventually pump as many as one million barrels of Siberian oil a day to East Asia. The issue has dominated Russia's relations with the two countries for years.
So far, Russia has refused to commit on which customer would get deliveries when.
But in a meeting with Western analysts and journalists in the Kremlin late Monday, Mr. Putin said shipments initially will go to China's oil center in Daqing. "The Daqing pipeline will be built first," Mr. Putin told the group, according to one of the participants. "But we will also build to Nakhodka," he said, referring to Russia's port on the Pacific coast that would enable shipments to Japan. A Kremlin spokesman confirmed the comments, adding that Mr. Putin said the economics of the China route were more attractive to Russia.
The decision is a setback to Japanese interests. Mr. Putin said Russia's relations with China had dramatically improved and Chinese military orders were keeping Russia's arms industry alive. He said the two had resolved all their border issues for the first time in 40 years.
In contrast, he had harsh words for Japan, accusing it of intransigence over the Kurile Islands territorial dispute that has held up the signing of a peace treaty between the two countries since World War II.
Mr. Putin said that by sending oil to Daqing, Russia would be able to diversify export routes and avoid becoming dependent on a single customer for its oil. "We want to sell to the whole Asia-Pacific region," he said.
Construction of the pipeline is to begin late this year, with the first stage of the line carrying 30 million metric tons of crude annually from Taishet in Siberia to Skovorodino near the Chinese border. From there, a pipeline is expected to take two-thirds of the oil south to Daqing, while the remaining 10 million metric tons would be shipped by rail to a new port to be built on the Pacific coast near Nakhodka. The project is expected to be completed around 2008. Mr. Putin also has pledged to expand the line to 50 million metric tons a year, or roughly 1.2 million barrels a day, and to extend the pipe all the way to the Pacific coast at some time in the future.
An official for Japan's Foreign Ministry said he hadn't heard of Mr. Putin's latest remarks about the Siberian pipeline, so he couldn't comment. But he said Japan was continuing talks with Russia on the project. Mr. Putin is scheduled to visit Japan in November, and the pipeline issue likely will be mentioned during meetings between him and Japanese Prime Minister Junichiro Koizumi, the official said.
In his comments Monday, Mr. Putin reiterated that Russia will continue to expand oil production amid global worries about petroleum supplies. He played down the slowdown in output growth over the past year, noting that, despite problems at embattled giant OAO Yukos, Russian production has been rising. The Kremlin slapped Yukos, once Russia's most dynamic oil company, with $28 billion (€22.35 billion) in back-tax claims and nationalized its main production unit late last year.
"Even without Yukos, oil production has increased and will continue to increase," Mr. Putin said, according to a participant. After months of stagnation, Russian output hit a new post-Soviet high of 9.49 million barrels a day in August. So far this year, however, production is up only 3%, a much slower rate than the 9% seen in 2004.
Mr. Putin also strongly criticized the tycoons who once ran Yukos, whose founder, Mikhail Khodorkovsky, was sentenced to nine years in prison last May on fraud and tax-evasion charges he says are politically motivated. "You can't become billionaires in a matter of five or six years without breaking the law," Mr. Putin said.
The president also stated in the strongest terms yet that he wouldn't stand for a third term in elections in 2008. Mr. Putin is constitutionally barred from seeking a third term, although commentators believe he might change the constitution to allow himself to stand again. But Mr. Putin said that would destabilize Russia. "Stability is critical," he said.
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