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Working with the New Russia: Progress and Setbacks

Tags: Russia , Energy , Natural Gas , Earthquake-Tsunami

Abiru, Taisuke

November 10, 2011

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In previous articles I explored two major developments affecting Russia's foreign policy and security strategy in 2010. The first was the "resetting" of US-Russia relations, an initiative launched by the administration of US President Barack Obama in 2008 with a view to enlisting Russia's cooperation in defusing the threat of Iran's nuclear program.[1]

The second was the dawn of a new phase in Asia-Pacific diplomacy, as embodied by the November 2010 decision of the East Asia Summit (composed of the 10 ASEAN countries plus China, Japan, South Korea, Australia, New Zealand, and India), to admit Russia and the United States as full members beginning in 2011.[2]

In the following, I would like to follow up on both topics, with a focus on subsequent developments.

The Reset and Its Limitations

The event most emblematic of the resetting of US-Russia relations was the coming into force of the New Strategic Arms Reduction Treaty (New START) in February 2011. A month earlier, a bilateral nuclear energy accord called the US-Russia 123 Agreement—submitted by President Obama on May 10, 2010, and passed by Congress on December 9 last year—took effect with the exchange of diplomatic notes between US Ambassador to Russia John Beyrle and Russian Deputy Foreign Minister Sergey Ryabkov.

The latter agreement gave the green light for a 10-year contract, announced on March 23, under which American nuclear fuel company USEC will purchase low-enriched uranium from Tekhsnabexport (TENEX), Russia's state-run exporter of nuclear fuel and fuel-processing services. One particularly noteworthy detail of this contract is its inclusion of an agreement to launch a feasibility study on construction of a new uranium enrichment plant in the United States using Russian centrifuge technology.

On another key item of the "post-resetting" agenda, however, progress has been elusive. Although attempts were made to take the relationship to a higher level through US-Russian cooperation in a missile defense system for Europe, Moscow insisted on being included in a single, integrated European shield, while Washington held firm to the position that there should be two independent and mutually complementary systems. The impasse suggests a point of fundamental divergence between US and Russian strategic interests.

Energy Diplomacy in the Asia-Pacific Region

The March 2011 nuclear accident in Fukushima has greatly altered the outlook for energy development and cooperation over the coming years. In the accident's aftermath, the expansion of Russia's presence in the Asia-Pacific region via nuclear energy, a development I have tracked for several years now, has come to a standstill.

On the other hand, Russia has already begun supplying Japan and South Korea with liquefied natural gas through the Sakhalin-2 project, and the strategic importance of natural gas as an alternative to nuclear energy has risen significantly.

On August 20, 2011, North Korean leader Kim Jong-il crossed over the Tumen River for a rare official visit to Russia. During talks between Kim and Russian President Dmitri Medvedev on August 24, the two governments agreed to set up a special joint committee to discuss conditions for cooperation between Russia, North Korea, and South Korea on a proposed gas pipeline running from Vladivostok through North Korea to South Korea.

On September 15, Russia's Gazprom and South Korea's Korea Gas signed a "roadmap" agreement, and Gazprom signed a memorandum of understanding with North Korea's oil ministry regarding the pipeline project.

The objective of these negotiations is the construction of a 1,100-kilometer gas pipeline, 700 km of which would run through North Korean territory. The pipeline would supply about 10 billion cubic meters of natural gas per year and provide North Korea with approximately $100 million in annual transit fees. At the earliest, it would be completed in 2017.

Just a week before the abovementioned agreements, Prime Minister Vladimir Putin attended the September 8 opening ceremony for the Sakhalin–Khabarovsk–Vladivostok gas pipeline. The 1,822 km pipeline, built to transport Sakhalin's gas to the most populated regions of the Russian Far East and for export, has an initial capacity of 6 billion m3 per year, but it is expected transport as much as 30 billion m3 by 2020. The opening ceremony was held off Vladivostok on Russky Island, where preparations are now underway for its hosting of the Asia-Pacific Economic Cooperation (APEC) summit in autumn 2012.

Following the Fukushima accident Russia was quick to stress its commitment to supplying natural gas to Japan. Deputy Prime Minister Igor Sechin conveyed that message to then Ambassador Masaharu Kono at the Japanese embassy in Moscow on March 22, 2011. An agreement was also reached during that meeting to establish a bilateral working group on energy cooperation.

On April 25, Japan Far East Gas Co., a joint venture among Itochu, Marubeni, Japan Petroleum Exploration (JAPEX), INPEX, and Itochu Oil Exploration, signed an agreement with Gazprom to carry out a joint study on a number of proposed natural-gas projects in the Vladivostok area. The projects are expected to lead to the construction of Russia’s second LNG plant in the Asia-Pacific region—following the Sakhalin-2 plant—in Vladivostok.

The newly established Japan-Russia Working Group for Cooperation in the Petroleum and Natural Gas Sectors held its first meeting in Moscow on July 26. The main topic, incidentally, was the Vladivostok natural gas project.

All of this provides strong evidence that Russia is working aggressively in advance of APEC 2012 to become a major strategic player in the Asia-Pacific region by leveraging its energy resources. The prime mover behind this policy is none other than Prime Minister Putin, who now seems certain to take back the presidency in 2012.

Uncertain Fate for Nuclear Cooperation

Cooperation between Japan and Russia on nuclear energy, meanwhile, has fallen victim to changing priorities since the Fukushima accident. A major casualty of the Japanese government's decision to limit funding for nuclear power to current allocations in the reconstruction budget is the “Russian Far East route,” a nascent scheme under which uranium ore extracted by Japanese businesses in Kazakhstan would be enriched in Russian facilities and then shipped to Japan and other parts of the Asia-Pacific via ports in the Russian Far East.[3] Trial shipments of nuclear fuel, which had been scheduled to begin before the year's end, have been placed on hold indefinitely.

Japan's Ministry of Economy, Trade, and Industry had worked hard to make the Russian Far East route a centerpiece of the APEC Russia 2012 agenda. The plan was seen as a possible steppingstone to cooperation with Russia in the supply of nuclear fuel for Vietnam's nuclear energy project, which has tapped Russian and Japanese companies for the first and second phases of construction, respectively.

Speaking on September 22 at a high-level UN meeting on nuclear safety and security, Prime Minister Yoshihiko Noda stressed that, while determined to learn from the Fukushima disaster, "Japan stands ready to respond to the interest of countries seeking to use nuclear power generation." This clear signal of Japan's intent to continue nuclear exports tells us that Japanese industry will remain involved in Vietnam's nuclear energy program. It also leaves the door open for a resurrection of the Russian Far East route initiative. This writer will be following further developments with keen interest.



[1] See "Japan and the Resetting of US-Russia Relations," October 15, 2010, http://www.tokyofoundation.org/en/t/5bu7, and my February 2011 update, http://www.tokyofoundation.org/en/t/an8e5.

[2] For more on Russia in the Asia-Pacific, see "Reframing the Japan-Russia Relationship: A Report from the Valdai Club," December 3, 2010, http://www.tokyofoundation.org/en/t/olhlu.

[3] Ibid.

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