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Albert Kalashnikov: The Eastern Siberia – Pacific Ocean Oil Pipeline

[We’re pleased to welcome back our guest blogger and expert Russian ecologist, Albert Kalashnikov, who has written for us in the past.] Construction of the VSTO as a secret operation of the special services [VSTO – Eastern Siberia – Pacific Ocean oil pipeline] By Albert Kalashnikov, ecologist

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The author is secretary of the Coordination Committee of Protest Actions of the city of Blagoveshchensk of Amur Oblast. From 1985 to 1999, not a single kilometre of trunk pipeline was built in Russia. The state did not consider this a priority problem, inasmuch as a decline in oil production was being observed in the country and existing transport capacity was quite sufficient. In 1999, OAO «AK «Transneft» (the state trunk oil pipeline transport monopolist) begins realization of the first large pipeline project – «BPS» (the Baltic Pipeline System) from the fields of Western Siberia and Timano-Pechora to the port of Primorsk – export to the countries of the European Union (60 million metric tons of crude per year). Concurrently with this, the private company «YUKOS» resolves to throw down the gauntlet to «Transneft» and announces its intention to build the first private trunk oil pipeline in Russia. «YUKOS» head Mikhail Khodorkovsky had decided that it was necessary to orient oneself not towards Europe, but towards China, which is increasing purchases of oil for its economy year in and year out. As a result, an inter-governmental agreement is signed between Russia and the PRC for the development of a design for the oil pipeline. From 1999, «YUKOS» begins to actively lobby at all levels the project for the construction of the pipeline from Angarsk (Irkutsk Oblast) to Daqing (Heilongjiang Province). The overall span of the «Angarsk-Daqing» Russo-Chinese oil pipeline (RCP) route was supposed to comprise 2214 km, of which 1453 km along the territory of Russia (30 million metric tons of crude per year). The announced cost of construction was $2 billion. In response to the «YUKOS» initiative, «Transneft» in alliance with «Rosneft» in that same year, 1999, propose an alternative variant for the construction of an oil pipeline to the East. Their «Oil pipeline for deliveries of Russian oil to the countries of the APR» [Asia-Pacific Region] (Angarsk-Primoriye) project was not only more expensive (with an announced initial cost of more than 5 billion dollars), but also more complex and long 3765 km. In order to pay for the project, it was calculated with a capacity of 70 million metric tons of crude per year. And here there arose a problem – where to get so much crude? Probably the only advantage of the given variant was its soundness from the point of view of opportunities for diversification, and, correspondingly, it gave the state levers for managing export directions (not only the PRC, but also S.Korea, Japan, the USA, and other countries of the APR). In execution of instruction No. Pr-1315 of the President of the Russian Federation of 17 July 2001, «AK «Transneft» in August of 2001 set about drawing up Declaration of Intent and Justifications of Investments into the construction of its project. The project got approval in the Ministry of Economic Development and Trade of the Russian Federation, where in January of 2002, there took place the presentation of the Declaration of Intent of the project with the participation of the Ministry of Energy and oil companies. In April 2002, «Transneft» coordinated the Declaration of Intent in the administrations of the regions on the territories of which it was planned to build the oil pipeline facilities.

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Photos: Albert Kalashnikov, the pipeline under construction.

At the same time, the «YUKOS» routing was moving along in parallel at the government level. On 8 September 2001, the signing of a general agreement for the development of a feasibility study for the Angarsk-Daqing oil pipeline took place in St. Petersburg. The document was signed based on the results of negotiations between the head of the government of the RF, Mikhail Kasyanov, and the premier of the State Council of the PRC, Zhu Rongji. Construction of this oil pipeline was slated to begin in 2003 and finish in 2005. In the meantime, the parties could not come to a consensus on the main question: on pump-through tariffs and purchase guarantees, which in the end put the brakes on the realization of the given project. And the reason for this was the demand of the Chinese that they be allowed to participate in the development of a series of oil-and-gas fields on the territory of Eastern Siberia, including Irkutsk Oblast and Yakutia, among others the Yurubcheno-Takhomskaya oil-and-gas, Verkhnechonsky oil-and-gas-condensate, and Talakanskaya oil fields. That they took such a tough stance was explained by the emergence of the PRC in the Aktöbe field in Kazakhstan and the construction of an alternative oil pipeline along the route Tengiz-Kenkiyak-Atasau with access to Urumqi (Xinjiang-Uyghur Autonomous Region). To the holding back by Russian officials the «YUKOS» head reacted thus: “While we were first from the point of view of the construction of a pipeline, we could attain somewhat better positions from the Chinese partners. If we become second after the Kazakh colleagues, then we will have to orient ourselves to those conditions which will develop by that time. And from this point of view, our bureaucratic delays will lead to certain losses.” It is interesting that Khodorkovsky’s prediction came true in 2004 – China signed agreements on the construction of oil pipelines with Kazakhstan and Uzbekistan. And on 23 August 2005, the Management Board of the partners in the company «Kazakhstanneft» accepted an offer from CNPC on the acquisition of its company for 4.18 billion US dollars (CNPC thereby secured production and deliveries to China of approximately 7 million metric tons of crude annually). The only geopolitical plus for Russia here became the fact that as a result, China “diverted” a part of Central Asian crude from the «Baku-Ceyhan» oil pipeline. And in the long term, the trans-national company «BP» is going to have real problems with being able to fill it (the Azerbaijani fields are on the decline). In the meantime, the outcome of the battle of the routings still had not been decided at the initial stage; opinions in the government were split. Prime Minister Mikhail Kasyanov was pushing for Japan, defending the interests of «Rosneft»., while Minister of Energy Igor Yusufov lobbied «YUKOS» defending the Angarsk-Daqing route leading to China. The Ministry of Nature reacted “negatively” to both variants, because they envisioned laying the pipeline in immediate proximity to Baikal, found under UNESCO protection. Now let us recall the whole legal chaos of the Russian bureaucratic apparat relative to the environmental component of both projects. Here we have everything from anti-constitutional prohibitions on holding referendums, to direct pressuring of ecologists-volunteer community workers, to gross violations of the procedures for holding public hearings on environmental impact studies, and much more about which many materials have already been written. And so, against this background, don’t the periodically repeated bursts of nature-protecting activeness on the part of official ecologists look strange? There can be one explanation for this: already then, the decision had been adopted in the Kremlin to stretch out the question of the start of construction of the eastern oil pipeline a maximally long time. Two objectives take shape here: 1. To use the oil factor for as long as possible to strengthen the foreign policy positions of Russia in the Orient, playing on the economic confrontation between the PRC and Japan. This line persists to this very day thanks to the dividing of the project into two stages of construction and the continuing uncertainty with the routing of the second stage. Thus it is still not clear where exactly the terminus of the oil pipeline will be – in Khabarovsk or Primorsky Kray, or if everything will simply be confined to just the first stage (with a cost of 185 billion rubles) and will end in Amur Oblast; 2. To have the time to prepare for and carry out the “nationalization” of the «YUKOS» fields, which under any scenario were the principal source of crude for filling the eastern pipeline. After all, it was clear right from the very start that there could not be two routes; there were only enough reserves for one pipeline, since «Transneft» does not have its own fields and does not engage in oil production, while its “ally”, the production company «Rosneft», does not have a sufficient effective reserve. The subsequent sad outcome for «YUKOS» is known to all… The low-efficiency «Rosneft» gobbled up its more successful competitor and as a result became practically the monopolist of the oil industry in Russia, having the opportunity to personally manage the trunk oil pipelines through the agency of «Transneft». Hence, what appeared to be a many-years-long confusion with the eastern oil pipeline, the growth of environmental alarmism, the multitude of discrepancies, the intensifying protest attitudes – all of this in the end now looks like a top secret operation by the special services. A behind-the-scenes game, in which the moves were predetermined in advance. We should give its author and moderators their due and admit that the game succeeded. It is especially interesting to recall the so-called public hearings, which are conducted en masse in all the regions of the territory through which the route passes. Here it is necessary to clarify the fact that such undertakings are of course required by law, but they are often simply ignored, both by the customers and the supervisory organs, and by the public. But here, everything is by the book: a public reception office remains open its legally mandated two months during the course of the hearings, and personal invitations are sent out to all the local environmentalists-seditionists. And the predictable result is right there in front of us: a broad burst of protest locally, appeals to courts, and all of this with stable informational support from the news media. Then the supervisory nature-protection organs are brought in and as a result «Transneft» is forced to put the brakes on once again. Time passes and everything is repeated yet again, then again and again. It should be said, to the credit of the employees of the company «Transneft», that they carry this burden of the judges that has been laid upon them without complaint. The hearings continue…

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Photos: Albert Kalashnikov, the pipeline under construction.

The environmental component of the VSTO [Eastern Siberia – Pacific Ocean oil pipeline]. I will not weary you with discussions about how low Russia fell to the role of a raw-materials appendage of technologically developing countries, whether the VSTO is needed or not, and if it is needed, then by whom concretely, and so forth. What we are talking about here is that the VSTO has always been a “cat in a bag”, and today the situation has changed little. It seemed to the public that their protest actions do have an effect on the choice of the direction of the route: recall the campaigns in defense of Tunkinsky Park, Lake Baikal, the Cedar Valley Preserve, the Barsovy and Imangra Wildlife Sanctuaries, Perevoznaya Bight… The route “ping-ponged” from the borders of Mongolia to the Yakutian tundra. In the end, all the parties came together on the northernmost variant, which is the one now being realized. But was it not clear from the very beginning that this route is the most effective one in the sense of ensuring that the oil pipeline would be filled? Its proximity in passing by the new fields being developed is exactly what provided such an opportunity. There is no doubt that the VSTO is a project that is highly potentially dangerous for the environment. And there is no doubt that the builders of the pipeline will deviate from the confirmed technical documentation that is being discussed at the public hearings.