Skip to 0 minutes and 0 secondsWhile East Asia has sought to broaden its oil supply, Central Asia has emerged as a potential player in the world energy market. Central Asia’s energy potential may be great, but it is not another Middle East. Its ability to satisfy Asia’s growing energy demand is limited. The costs of proposed pipelines to move oil or gas to Asia are very high, and there are many barriers to transporting oil or gas to coastal locations where it could be loaded onto Asian-bound tankers. Therefore, Asia’s energy needs are inexorably drawing Russia back into Asia as a key strategic and commercial player. At the same time, power relations in the region are markedly changing in the post-Cold War era.
Skip to 0 minutes and 43 secondsIn this respect, we see the rise of China, the slow growth of Japan, the rise of India, and the weakening of Indonesia. All of these trends come into play, as well as Russia’s more active role in the region, which leads to changing power relations. Russia’s ability to supply these resources and desire to exert influence over its trading partners must be tempered with the fears of becoming solely a raw materials exporter, and with a strong desire to avoid being locked into a single export market.
Skip to 1 minute and 23 secondsJapan could be the source of investment that Russia’s energy infrastructure needs in the Far East, but becoming too close to Tokyo could have serious repercussions on Russia’s ties to China, and could result in Japan increasing pressure for settlement of the northern territories issue. Presently in Asia it is building the East Siberia Pacific Ocean oil pipeline (ESPO) to China and negotiating with China over gas pipelines from Russia to China. It signed numerous deals with South Korea in 2008 and cooperates with Japan to pump liquefied natural gas (LNG) from Sakhalin-2.
Skip to 2 minutes and 8 secondsMoreover, major firms like Gazprom are contemplating not just a major reorientation of exports to Asia, but also huge projects like building a hub in Asia that will liquefy and compress natural gas so that Russia may take advantage of the Asian demand for liquefied natural gas (LNG), an area where it has been slow to act. Thus at present it clearly is seeking more foreign markets, has huge plans on the drawing board to build the infrastructure needed to become a major energy actor in the Far East, and, also seeks large-scale foreign investment to help it develop the Russian Far East (RFE) and its energy industry.
Russian exports to Asia
Russia produces 10 million barrels of crude oil and about 600 BCM of natural gas.
It exports about 200 BCM of the gas. The resources of Asiatic Russia and the needs of China, Japan, and the two Koreas create enormous potential for economic partnerships.
Within its ‘turn to the East’ Russia has prioritized its relations with China. Like the United States, Russia sees the rise of China as one of the most significant developments of the twenty-first century.
Russia made a lot effort to advance into the energy markets of Korea, China and Japan who were heavily dependent on import from Middle East since the mid-1990s.
The year 2009
The Eastern Gas Program brought about the first tangible result in the year 2009. The 4,188km-long ESPO (Eastern Siberia Pacific Ocean) oil pipeline exports crude oil from Russia to the Asian Pacific markets of Japan, China and Korea. The first phase of the pipeline was completed in 2009 and the second phase was completed in December 2012. It made possible for Russia to export 600,000 barrels of oil to Asian countries.
In 2009 Russian LNG began to be exported to Asia for the first time through LNG export facilities in the southern part of Sakhalin.
The Period 2013-2014
Russia’s oil and gas export to Asia entered into the expansion phase in 2013 and 2014. On December 24 in 2012, the 2nd section of ESPO was completed. China’s president Xi Jinping chose Russia as the first place to visit since his inauguration.
The most notable part in the agreement between Xi Jinping and Putin is that China will import 1 million barrels of oil per day from Russia by 2018 and will become the largest importer of Russian oil surpassing Germany.
Russia and China signed contracts on supplying 28 BCM and 30 BCM of gas through pipelines in May and November respectively in 2014. Therefore it is expected that totally 82 BCM of gas including 14 BCM of LNG will be supplied by 2020.
In September 2014, Russia reportedly proposed constructing an undersea LNG transport pipeline from Sakhalin to the northern Japanese island of Hokkaido. The pipeline would be the first of its kind for Japan, which does not have LNG pipelines connecting it to any other countries.
Russia-South Korea relations
President Park Geun-Hye of South Korea announced in October 2013 her plan to expand economic cooperation with Eurasian countries for more trade opportunities. Called the Eurasian Initiative, the policy is centered on the idea that exchanges between South Korea and Eurasian nations, especially Russia, will help induce an opening up in the reclusive North, which lies in between, thus allaying the long-running military and diplomatic tensions on the Korean Peninsula.
© Younkyoo Kim, Hanyang University