Risks of trans-Korean gas pipeline

There have been more leaks to the mass media and the expert community from the foreign ministry and Gazprom about details of a project on laying a gas pipeline from Russia to South Korea via North Korea. According to the latest speculations, Gazprom intends to sign a contract with South Korea’s Kogas in spring 2012. According to the document under discussion, the Russian side will build a 700km transit section of the gas pipeline in North Korea for approximately $2.5bn. Natural gas is likely to be sold at the South Korean border, not at the entry to North Korea.

The problem is whether we can believe the assurances of diplomatic and commercial negotiators of both Seoul and Pyongyang having provided guarantees of normal work of the gas pipeline. Project enthusiasts say that North Korea is so much interested in a trans-Korean gas pipeline (it will get transit revenues) that it will not shut it down over political reasons.

However, the history of North Korea and its political regime has shown that ideological motives often prevail over economic ideas in the decision-making pattern of Pyongyang leaders. To be exact, political or military and political threats against Seoul are a means of earning additional money. The scheme is simple – by blackmailing and threatening even to use the military force it is possible to get concessions from the neighbor (from financial aid to additional supplies of food and fuel). Thus, there is no guarantee that if the constantly smoldering conflict between the Koreas intensifies, Pyongyang will not cut off the gas transit. A more rational move for Gazprom could be reconsidering the idea of building new LNG facilities in Sakhalin to deliver natural gas to South Korea by tankers. 

By Stanislav Mitrakhovich, NESF leading expert