Russia-South Korea pipeline talks revived

Russia and South Korea revived talks on Wednesday on a long-mooted gas pipeline crossing North Korea, in a sign of continuing efforts to bring Pyongyang into the international economic fold despite diplomatic tensions this year. “We have agreed that for both our countries the project is going to be a key one,” Russian energy minister Alexander Novak told the Financial Times in a media briefing at the World Energy Congress in Daegu.

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Russia’s state-controlled gas company, Gazprom, and its South Korean counterpart Kogas have been “instructed to continue negotiating to decide on the volumes [and] price of the possible supplies, the route of the pipelines,” he added. Little progress has been made on the pipeline plan since Seoul and Pyongyang signed a preliminary agreement with Gazprom in 2011, prompting speculation that it had been quietly abandoned. Analysts say inter-Korean tensions all but rule out its construction in the near future.

Yet the economic logic is compelling for all three countries involved. South Korea is the world’s second-largest importer of natural gas, and it would be considerably cheaper to import through a pipeline rather than shipping the liquefied natural gas on which it currently relies. The pipeline would boost Russian efforts to increase energy exports to Asia in the face of flagging European demand, while North Korea would receive lucrative transit revenues.

Wednesday’s talks on the project were the first since a spike in tensions on the peninsula this spring, when North Korea executed its third nuclear test and engaged in a sustained period of bellicose rhetoric. Park Geun-hye, the South Korean president, has promised to expand economic co-operation with Pyongyang as part of her “trust-building” strategy. The only surviving inter-Korean economic project, the Kaesong Industrial Complex in North Korea, reopened last month after a five-month suspension. Ms Park highlighted the political importance of regional energy integration in a speech to the WEC on Wednesday, urging energy co-operation in northeast Asia to follow “the example of Europe’s introduction of Russian gas [imports] in the 1980s”.

Yet inter-Korean relations remain fraught: North Korean statements have warned of “disastrous consequences” stemming from a US-South Korean naval exercise last week, and described Ms Park as an “imbecile” for her efforts to persuade Pyongyang to abandon its nuclear programme. A key concern around the proposed pipeline for Seoul would be the potential for North Korea to disrupt the South Korean economy by cutting off gas supplies – a risk that could be reduced by attracting Chinese investment in the project, suggested Han Jong-man, head of the Siberian-Korean Center at Pai Chai University. Mr Novak said that such political risks were “calculated and would make part of the conditions of the possible agreement”. But he confirmed plans to look into an alternative undersea pipeline between Russia and South Korea, with preliminary assessments due to be carried out within the next two months. Such a pipeline would be “far more expensive” to build than an overland one, said Andrei Lankov at Kookmin University. But he added that Gazprom’s construction of a pipeline through North Korea would leave it a potential “hostage to political games over which neither Moscow nor the company has any control”. “Technically the project is possible but it would require a very different situation on the Korean peninsula,” he added. “[Seoul and Pyongyang] should be on friendly terms for five to 10 years, undertake a number of joint projects, and then Russia would take the risk.”

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