Beijing left in dark over Moscow's intentions
A crackdown by the Russian authorities on the country's biggest oil companymay have an impact on China's ability to meet its rapidly growing energyneeds in years to come, RFA reports.
China�struggling to keep up with soaring oil demand�had hoped tomake Siberian oil reserves one of its major energy sources for the next 25years, and was in the process of negotiating a US$2.5 billion pipeline with the Russians.
But the arrest of the head of Russia's largest oil company, MikhailKhodorkovsky, on Oct. 25 on seven charges including tax evasion and fraud,may have scuppered negotiations, which were already delayed by Tokyo'sproposals for an alternative pipeline to serve Japanese energy needs. Thereare not sufficient reserves in Siberia for more than one pipeline.
"This may prove to be the final straw on a catalogue of events of theRussian government, [which] for this reason or that reason, is justprocrastinating," Philip Andrews-Speed, China energy expert at Scotland'sUniversity of Dundee, told RFA.
"I think the Chinese are likely to say, this may come through one day butnot at the moment, let's look in other directions for the short term."
Experts said it was still unclear whether Khodordovsky's fall from gracewould have a direct impact on a US$150 billion import deal that thestate-owned China National Petroleum Corp. (CNPC) signed with Yukos duringChinese President Hu Jintao's visit to Moscow in May.
But they said Beijing was growing angry and frustrated at the lack oftransparency in dealings with Russian officials and oil executives.
"I think they will feel betrayed. I think it's all been done in very badfaith from certainly the Chinese perspective," Fiona Hill, a senior fellow at the Brookings Institution in Washington, told RFA's special correspondent Michael Lelyveld. "The [pipeline] deal has dragged on much longer than theywere anticipating."
Yukos was the main champion of the proposed Siberian pipeline to thenortheastern oil city of Daqing. China had intended to rely more heavily onRussian oil, which currently accounts for just five percent of its oilimports, which have soared in recent months on the back of a sharp rise inprivate auto sales.
"They thought [Yukos would be] a little more transparent in theirmotivations, a commercial venture," Hill said. "Now, it clearly seemsthat... the principal players involved are to a large extent at the mercy ofthe whims of people in the Kremlin, and perhaps the whims of narrow personalinterests rather than the strategic interests of relations between the twostates."
The Yukos scandal is the latest in a long line of difficulties for China'sattempts to secure energy supplies from Russia. Initially, Russia delayedthe pipeline contract, citing strategic concerns that it would be controlledby a private company. Later, it paused to consider Tokyo's proposals, whenChinese negotiators regarded the deal as settled. And in September, RussianPrime Minister Mikhail Kasyanov said on a visit to Beijing that Russia wouldneed a few more months to resolve environmental concerns.
Even pledges of increased rail imports to China have been thrown intoquestion because of the seizure of Yukos' shares and the review of itsoperating licenses. Russian equity analysts say it is currently impossibleto predict whether the shares would be reappropriated by the state, and ifthe company would continue to exist in its present form.
Experts say Khodorkovsky's run-in with the law may stem from shadyprivatization deals in the mid-1990s, which gave birth to Russia's existing oil companies. But they argue that the government seemed content tooverlook past practices until Khodorkovsky posed a political challenge toPresident Vladimir Putin.
The Russian press has attributed the crackdown on Yukos to a powerful groupof former intelligence agents that Putin brought into government from hisdays in the KGB.