ARE MOSCOW AND TOKYO DOUBTING WISDOM OF NAKHODKA PROJECT?

Dmitry Medvedev’s recent interview in the Russian journal Ekspert (April 4) raised eyebrows for a variety of reasons. The fact that he even consented to give an interview is news in itself. The Kremlin Chief of Staff has been largely invisible to the public eye since his appointment last year. Medvedev warned that without a unified leadership Russia could “disappear” as a political entity. He also stated that the leadership is unhappy with dissent, giving ominous signals that the Kremlin could be ready for an even stronger power grab to rein in political opposition, both in the regions and in the center.

But another segment of his interview drew much less attention, namely his statement concerning the Russian Far East, and in particular the Siberian oil pipeline. The pipeline, or rather its final destination, has been the focus of an intense lobbying campaign between China and Japan. It appears that this issue is still a long way from being decided.

Medvedev named Siberia and the Russian Far East as two of Russia’s most troubled areas in terms of the potential for fragmentation; he did not even mention Chechnya. He stated that the construction of an oil pipeline through the region could boost the local economy. But at the same time, Medvedev pointed out that Russia’s weakness there is not merely economic, but also demographic. Medvedev warned that Russia needs to address the panoply of problems in those regions, otherwise, “cold and emptiness will reign there.” While supporting the construction of the pipeline, he said that Russia should not rush to build it merely for the sake of building it. He gave the example of the Baikal-Amur Magistral railroad as a wasted project with no real viability. Medvedev seemed to indicate that Russia could not afford to chase grandiose projects, as had often been the case in the Soviet Union.

At the same time, leaders in Japan have gone quiet on the Siberian pipeline. Following the December 31 announcement by the Russian government that the pipeline would be constructed to the Far Eastern port of Perevoznaya (across from Nakhodka), there was little reaction from the Japanese side. This initially might have been due to Japan’s concern about China’s reaction, lest Tokyo show too much euphoria. But after several weeks passed, Japanese Foreign Minister Nobutaka Machimura visited Moscow and very little was said publicly about the pipeline (see EDM, March 11). Russians who had lobbied on behalf of the Japanese also received little in the way of thanks from those in Japan they had supported. One Russian official, who claims to have personally lobbied President Vladimir Putin on behalf of the Pacific route, says he was stonewalled when he subsequently visited Tokyo in January. “We are still studying the feasibility [of the pipeline project],” he was tersely told by one Japanese official. Furthermore, there are now rumors that plans for the construction of a Toyota auto assembly plant in St. Petersburg have also been put on hold.

Putin is reportedly displeased with the cool attitude of the Japanese, and many of Tokyo’s allies in Moscow (what few there are) have also expressed similar irritation. Meanwhile, the decision by the United States and Japan (at Tokyo’s behest, no doubt) to include a statement about the resolution of the Northern Territories dispute as a “common strategic objective” in the February 2+2 meetings (the secretaries of state and defense with Japanese counterparts) has no doubt further angered Moscow (Asahi Shimbun, February 20). Pointedly, in his interview Medvedev said that the Russian government had until May 1 to make a final decision on the go-ahead with the pipeline, mentioning the need to study watershed issues and the need to pay attention to “other steps” (Prime Tass, April 4). This leaves the question: Why May 1, when Transneft had said it would be ready to make its final decision on groundbreaking by June 1? It appears that infighting between Gazprom and Transneft over Yukos assets is still an ongoing battle, and that Medvedev put in his own reminder that, in the end, the Kremlin will decide how and when.

Medvedev’s interview raises new doubts about the status of the Pacific pipeline, whose economic feasibility has been doubted for years by both Russian and Western experts. Russia has in the meantime been increasing shipments (by rail) of oil to China and has given indications that it is prepared to allow Chinese participation in equity holdings of Russian energy firms (although this is still open for debate). If Japan sits out, China is prepared to step in, as are Korean, and even Indian, firms. Russia will find the capital it needs if it can make the case that the Pacific route is economically feasible. It appears that once again the “Northern Territories” and the intense emotions surrounding this issue are hindering the normal development of Japanese-Russian relations.