A tale of two Koreas and Russian gas

North Korean leader Kim Jong-II wants Moscow to build a pipeline across his country so much that he may soon ride his private train to Russia to discuss the project. The eccentric Communist dictator may soon be visiting Russia to discuss issues of mutual concern for both countries, according to South Korean news reports on 19 August.

On 15 August, Russian President Dmitry Medvedev urged North Korea to cooperate in a project to build a gas pipeline linking Russia and South Korea via the North. Moscow has been discussing with Seoul and Pyongyang the construction of a gas pipeline to export its natural gas. Russian Foreign Minister Sergei Lavrov was quoted as saying recently that North Korean officials had responded favourably during initial discussions about the pipeline project. And why shouldn't they have? For North Korea, the deal presents an opportunity to acquire vital hard currency by charging transit fees. And Kim Jong-II would have the chance to turn off the tap, disrupting gas supplies to Seoul during a future dispute, or just because he felst like it.

National Energy Security Fund General Director Konstantin Simonov in Moscow told New Europe Gazprom recently visited North Korea and discussed the issue. “The situation will be like in Ukraine. Today the relations can be bad, tomorrow, they can be good. But you have to make a serious investment decision. And let’s imagine that today we have a normalisation of relations between Russia and North Korea and North Korea and South Korea. But then the mind of Kim Jong-Il may change and we will see an absolutely different story. Because with the help of this pipeline, Kim Jong-Il can blackmail South Korea. Of course, he will speak about the openness of North Korea, that he supports this pipeline, but it will be an instrument of blackmail,” Simonov said.

South Korea, like Japan, is a serious consumer of natural gas, but it is buying mostly liquefied natural gas (LNG.) Russia could become a major supplier to South Korea, which officially said that it was possible to buy 10 billion cubic metres of Russian gas and that amount could increase in the future. Building a pipeline through North Korea would substantially reduce delivery costs. Gazprom will finish a pipeline from Sakhalin to Vladivostok with a planned capacity of more than 30 billion cubic metres per year. Part of this gas could be exported to South Korea.“For Gazprom, it is an excellent idea because Gazprom would have this gas in Vladivostok and Gazprom doesn’t know what to do with it,” Simonov said, adding that domestic consumption in Vladivostok is low.“That is why it is very logical to speak about the possible sale of this gas to South Korea...maybe finally Gazprom will make a decision to build an LNG terminal at the end of this pipeline and it will be possible to sell LNG from Vladivostok to Korea.”

By Kostis Geropoulos

New Europe, August 20, 2011