Publication: Eurasia Daily Monitor Volume: 3 Issue: 79

The Kremlin appears keen to deliver on its repeated pledge to connect Russia’s oil fields with the Asia-Pacific region by a pipeline running from eastern Siberia to the Pacific Ocean, despite protests by environmentalists.

Semyon Vainshtok, head of the Transneft pipeline monopoly, recently dismissed objections to this project as groundless and said the planned safety features would stop any potential oil spill. He also claimed that an alternative route to bypass environmentally sensitive Lake Baikal would raise the project cost by nearly $1 billion, meaning that it could “never” become profitable.

“Even if all the defense measures are breached then, by our assessment, no more than 171 kilograms (375 pounds) of oil will reach Baikal,” he told Ekho Moskvy radio. “Every year, 500 tons of oil enters the lake down the Angara River alone” (Ekho Moskvy, April 20).

With construction set to begin within one month, the Eastern Siberia-Pacific Ocean pipeline is expected to funnel up to 80 million metric tons a year (1.6 millions barrels per day) from Taishet in Irkutsk region to Perevoznaya Bay in Primor region. Estimated to cost $11.5 billion, the pipeline is expected to recoup the investment in 17-18 years. The first stage of the pipeline’s construction is expected to be completed by the end of 2008.

In February 2006, Transneft sounded more flexible, indicating a readiness to at least discuss the pipeline route, including an alternative site for an oil-export terminal. Vainshtok reportedly said Kozmino Bay, close to Nakhodka, was under consideration as a terminal site on the shore of the Sea of Japan.

But last month Russia’s environmental watchdog approved the pipeline, as did the Russian Emergency Situations Ministry, and now Transneft seems less inclined to compromise over the route.

In an apparent bid to remove any remaining legal hurdles, on April 12 the Russian State Duma passed a law to enact Russia’s Water Code in the second and third, final readings. Thus now Baikal’s protection zone will cover just 500 meters, effectively allowing the pipeline to run less than a kilometer from the lake. But opponents of the Water Code, which becomes effective on January 1, 2007, argue that it will let Transneft build a pipeline too close to the lake.

Last week 73 State Duma deputies sent a letter to Russian President Vladimir Putin stating their opposition to the pipeline, which is set to run along part of Lake Baikal’s northern shore. They also called the Water Code unconstitutional. Critics say the bill was adopted with major violations, effectively depriving Lake Baikal of a water-protection zone. Members of the Communist Party, Rodina, and a number of independent legislators signed the letter (Ekho Moskvy radio, April 20).

The pipeline is due to run along the shoreline of Baikal for about 100 kilometers (62 miles), according to Transneft’s current plans. Experts have warned that, in the event of an accident, about 3,000 tons of oil would reach the lake within 20 minutes. The MP’s also noted that the area is seismically unstable, which will increase the risk of accidents.

There have also been public protests against the pipeline. On March 19 some 5,000 people rallied in the Siberian city of Irkutsk to protest the route encroaching on Baikal. The crowd included environmentalists, scientists, and members of the regional parliament and administration (Itar-Tass, March 19). On April 1 Moscow police detained 16 people during a protest outside Transneft’s headquarters. There was a series of pickets against the pipeline held in Moscow and other Russian cities over the weekend, April 22-23.

Some regional governors also oppose the pipeline route. Irkutsk governor Alexander Tishanin has said that the pipeline project must be moved away from Lake Baikal. He questioned Transneft’s claim that changing the pipeline’s route would add $900 million to the project’s cost (RIA-Novosti, April 8).

Transneft reportedly is working to bring the governors around to its way of thinking. Vainshtok is due to travel to the Far East to discuss the pipeline’s route, according to Kamil Iskhakov, Russian President Vladimir Putin’s envoy in the Far East (Interfax, April 21). In January Iskhakov had suggested changing the destination of the Pacific pipeline from Perevoznaya Bay to the Nakhodka area.

Moscow has also taken an interest in the Russia-Pacific pipeline project. Last February, Industry and Energy Minister Viktor Khristenko announced plans to deliver up to one-third of the country’s total oil exports to the Asia-Pacific region by the year 2020, a huge leap from the current 3% now. He also made clear that environmental protests would not delay — let alone stop — the project.

During his trip to China last month, Putin said the pipeline project would help boost oil supplies to China. “If the project is implemented, which I have no doubts about, it will ensure a dramatic increase in crude supplies from Russia to China,” Putin told a Russian-Chinese economic forum in Beijing (RIA-Novosti, March 22).

Russian officials also moved to dismiss fears that there might not be enough oil to fill the pipeline. The head of the state-owned Rosneft oil company said on April 18 the company could pump 27 million tons of oil per year through the Siberia-Pacific oil pipeline by August 30, 2008. CEO Sergei Bogdanchikov also told President Putin that an oil refinery would be built on the Pacific coast terminal of the pipeline. “A feasibility study is under way and a formal decision should be made soon,” he added (RIA-Novosti, April 18).

Other officials sounded less optimistic about the volume of crude to be pumped via the pipeline. Anatoly Ledovskikh, head of the Federal Agency for the Management of Mineral Resources, estimated the East Siberia-Pacific oil pipeline could pump only 12 million tons in 2008. “East Siberia has sufficient oil deposits for the pipeline’s capacity to be raised to 35-40 million tons by 2020 from 12 million in 2008” (RIA-Novosti, April 18).

Last month Rosneft head Bogdanchikov revealed plans to pump crude oil to China via the Pacific pipeline. “We expect to contribute to filling the pipeline with crude from the Vankor and Talakanskoye deposits by the end of 2008” (RIA-Novosti, March 22).

The first phase of construction will cost $7.22 billion. Khristenko said the Transneft board was working to secure the necessary loans and added that investments could come from Russian as well as foreign sources (RIA-Novosti, April 17). He also said some funds could come from Transneft, which is set to operate the pipeline.

State-owned Sberbank, the country’s largest bank, was among the first to indicate an interest in the project. “We will contribute,” Sberbank CEO Andrei Kazmin said. However, he said it was “premature” to discuss concrete figures (RIA-Novosti, April 7).