Gas pipeline construction from Russia to South Korea: dream not to come true?
The idea of the construction of the gas pipeline for the gas supply from the Russian deposits near the Sakhalin Island via North Korea to South Korea aimed at the long-term gas supply to this country has been discussed for a few years already as a good variant for all 3 countries. The mutual economic benefit and advantages of the advantages of the energy mutual dependence provides the continuous consultations between the parties. It happens despite of the falls and rises in the relations between South and North Koreas,the intermediate periods in the policy of both Koreas and failure of efforts of the international diplomacy searching for the decision to the safety problems. V. Babson, chairman of the economic forum of Korea at the American-Korean institute of the international research school of J. Hopkins University writes.
Better perspectives in this issue arise now as the pipeline might become quite a serious issue of negotiations and the attention of parties. The progress became possible as North Korea had quite turn of the Government to the new regime which is more focused on the economy and aims for the future. Moreover, the coming Presidental elections in the South Korea are to lead to the acceptance of the policy of more active cooperation with the North, whoever wins. The additional stimulus is given by the recent decision of Russia to forgive North Korea 90% of its debt and to start economic cooperation.
In the framework of this process last year and earlier a series of 2-party consultations between Russia and the 2 Koreas were held. Russia tried to protect its interests and be the intermediary protecting the interests of both Koreas. The consultations didn’t lead to the development of the plan of actions. North Korea demanded higher price for the gas transit than is done in international practice.
The world gas market is also changing due to the appearance of new technologies of production which lead to the offer rise and price fall. The USA might enter the world market not as an importer but gas supplier. South Korea worries that Pyonguang can make shut downs with the gas supply with political aims, in this connection there were suggestions on the gas supply via the north in such a way that in the case of such shutdowns North Korea lost not only cash but the possibility to use gas for its needs. All these circumstances don’t contribute to the successful negotiations and signing the deal in the framework of the current negotiations. So the perspectives of signing from the commercial and political point of view contract are illusions.
The negotiations may result in the case if the negotiations are not limited by Russia and 2 Koreas. In North Korea significant economic reforms are to be realized, including the strategy of rational energy use and the improvement of the applicable practice of development and execution of economic contracts.
Being the guarantors of safety of Koreas, the USA and China are to become the participants of the negotiations so that the agreement was attractive for private sector. One can’t imagine the USA and China agree on the agreement between Russia and 2 Koreas which will act against their interests of regional safety even if the parties come close to the mutually beneficial agreement. The 6-party agreement might be dead but it is to be replaced by the process of founding the consensus and increasing the support for an important start. It will help in achieving the political goal which is in the switch of mechanisms of safety.
Bernhard Seliger from Hanns Seidel Foundation actively cooperating with North Korea in the framework of the hydroelectric energy projects, says the project of the gas pipeline construction is risky. North Korea needs to have the experience of meeting the international norms of transparency and reports, and participation in such legal regime. It requires large investment. Pyonguang should also learn to aim for the economic rationality rather than trying to gain more profit.
The first steps in the project’s realization might strengthen the opportunities for its success. One of the examples is that North Korea has raised the issues of signing the long-term international contracts covering the sphere of commercial and state interests and reasons by which the rest are to be sure in the reliability of such actions as the loss might be tremendous. Another opportunity is given by the inclusion of the pipeline planning into the large-scale dialog between North Korea and foreign partners of Pyonguang.
Such a strategy is to pay attention to the logical plan of investment for the development of the energy sector of North Korea aiming for the realization of this strategy and understanding of the potential dependence on gas which is to be collected from the pipeline.
The pipeline construction agreement needs to be considered from the point of view of the events in the world gas market to protect the safety of financial interests of Russia and South Korea if such an agreement is applicable for them. It will require the participation of not only those countries interested in the economy and safety spheres, but of corporations whose commercial interests are very important for the success. North Korea might not be ready for such a dialog but it has to find a way for the business cooperation with the rest to keep on working in this direction.
2013 might be the period of tests for 2 Koreas. It will show if these countries can set relations in such a way so that the perspective of signing the gas deal became more real. It is not likely to be possible without the open and transparent process of agreeing the interests of all the parties that have relation to this project as their support id very important for the success of the deal.
http://www.oilru.com/news/344582/
Translated by Galiya Musabekova
