1 2 Geopolitics of the Russo-Korean Gas Pipeline Project and Energy Cooperation in Northeast Asia Printed 0D\ Published 0D\ Published by.RUHD,QVWLWXWHIRU1DWLRQDO8QLILFDWLRQ .,18 Publisher3UHVLGHQW.RUHD,QVWLWXWHIRU1DWLRQDO8QLILFDWLRQ Editor([WHUQDO&RRSHUDWLRQ7HDP'LYLVLRQRI3ODQQLQJDQG&RRUGLQDWLRQ Registration number1R $SULO AddressUR 6X\XGRQJ *DQJEXNJX6HRXO.RUHD Telephone Fax HomepageKWWSZZZNLQXRUNU Design/Print+\XQGDL$UWFRP ISBN &RS\ULJKW.RUHD,QVWLWXWHIRU1DWLRQDO8QLILFDWLRQ $OO.,18SXEOLFDWLRQVDUHDYDLODEOHIRUSXUFKDVHDWDOOPDMRUERRNVWRUHVLQ.RUHD $OVRDYDLODEOHDWWKH*RYHUQPHQW3ULQWLQJ2IILFH6DOHV&HQWHU 6WRUH 2IILFH The Geopolitics of Russo-Korean Gas Pipeline Project Geopolitics of the Russo- Korean Gas Pipeline Project and Energy Cooperation in Northeast Asia 7KHDQDO\VHVFRPPHQWVDQGRWKHURSLQLRQVFRQWDLQHGLQWKLVPRQRJUDSKDUHWKRVH RIWKHDXWKRUV DQGGRQRWQHFHVVDULO\UHSUHVHQWWKHYLHZVRIWKH.RUHD,QVWLWXWHIRU 1DWLRQDO8QLILFDWLRQ Geopolitics of the Russo- Korean Gas Pipeline Project and Energy Cooperation in Northeast Asia 1. Introduction ···················································································· 8 2. The Geopolitics of Competition and Conflict since the halt of the Russo-Korean Pipeline ························································· 16 A. Chinese proposal for Russo-Sino-Korean gas pipeline cooperation ·· 18 B. Likelihood of changes in Russia’s position ······························ 26 C. Expansion of the Japanese factor ············································ 32 D. Internal conflicts in South Korea and the U.S. negative viewpoint ······················································································ 38 3. The Meaning and Role of the Russo-Korean Pipeline: Possibilities for New Cooperation ············································ 46 A. Catalyst for Northeast Asian energy cooperation ·················· 46 B. Beyond energy cooperation: Catalyst for Northeast Asian Peace and Cooperation Initiative and the Trust-building Process on the Korean Peninsula ·································································· 52 1 INTRODUCTION 1. Introduction The Russo-Korean Gas Pipeline has raised much expectation but has not shown much progress to date. The initiative for a cooperative project connecting a gas pipeline with Russia has regularly attracted attention since the 1990s, while the signing of a memorandum of understanding (MOU) between South Korea and Russia in 2008 strengthened expectations of advances in the Russo- Korean gas pipeline project. However, North Korean risks stemming from the regime’s instability and military adventurism have left pipeline project-related discussions at a standstill up to this day. The Russo-Korean gas pipeline project has prompted not only the Korean government in pursuit of stable energy sources but also all related countries to anticipate tremendous economic profits and political ripple effects. Therefore, conventional research on the Russo-Korean gas pipeline has focused on the expected economic and political effects of the pipeline’s completion.1) Numerous 1) Refer to the following for relevant research. Yun-sik Lee, Effects, Controversies, and Assignments for the Russo-Korean Gas Pipeline (Seoul: Korea Institute for National Unification). (in Korean); Sung-hak Yoon, “Research of the Economic Effects of the Russo-Korean gas Pipeline: 9 Case of South Korea,” Russian Research, Vol.22, No. 2 (Seoul National University Institute for Russian, East European and Eurasian Studies), pp. 259-280. (in Korean); Jong-man Han et al., The Beginning of Inter-Korean Cooperation Projects: Gas Pipeline Project (Seoul: Pureungil, 2012). (in Korean) research reports optimistically suggested that the pipeline will, in the long term, solve South Korea’s energy shortages as well as North Korea’s political problem, and serve as infrastructure for Korean unification. However, the exacerbation of North Korea- related risks, the largest factor of concern, has stalled the project. Internal circumstances in North Korea rapidly shifted with Kim Jong-Il’s death and Kim Jong-Un’s emergence while the ensuing missiles and nuclear test provocations worsened relations between the two Koreas. Discussions of the pipeline project, perceived as a new attempt at reconciling the two Koreas, lost steam before it even began. Some may perceive that this project ought to be viewed as a long term project due to the complications of the North Korean situation, while Russia’s natural gas is here to stay for the foreseeable future. In other words, this opinion suggests that discussions on the pipeline can perhaps take place after inter- Korean relations improve. Nonetheless, this view may turn out to be a complacent one if warning signs indicate that “time is not on South Korea’s side.” This is because other Northeast Asian states have put forth related alternative proposals as the Russo-Korean pipeline project reached a standstill. Most salient of those is China’s Russo-Sino- Korean pipeline project which completely bypasses North Korea. 10 This proposal rests on the argument that connecting Russian gas to South Korea through China and the Yellow Sea may be more cost effective since the North Korean problem renders the Russo- Korean pipeline as unrealistic. Regardless of China’s strategic intentions behind this proposal, the Chinese proposal was certainly very attractive for South Korea, faced with urgent demands for a stable energy source. Furthermore, certain players in Russia have recently begun to express skepticism towards the Russo-Korean pipeline. Criticism towards the Korean government’s lukewarm attitude and their stance that Russia cannot rely on the Russo- Korean pipeline alone were expressed through affiliates of the Russian energy industry and experts.2) More than anything, it is important to focus on the intensifying competition among neighboring countries for Russia’s natural gas. Energy negotiations made headway during Russo-Chinese and Russo-Japanese summit talks which took place in March and April 2013, respectively. Previously, opinions towards heightened cooperation between Russia and China were met with pessimism due to difficulties over price negotiations. However, increasing political cooperation between the two governments and rise of China in the energy procurement field has made rapid progress of negotiations a possibility. Japan has also been showing initiative towards energy cooperation with Russia since the accident at the Fukushima Nuclear 2) Russian President Vladimir Putin revealed at the APEC conference in October 2013 that an 11 undersea pipeline through the East Sea could be considered instead of the Russo-Korean pipeline through North Korea. “Putin, pipeline for Korean natural gas exports can be built under East Sea,” Yonhap News, October 7, 2013. (in Korean) Power Plant (NPP) to prepare for skyrocketing demand for natural gas. No specific agreements have been made, but Japanese and Chinese interests can overlap with those of the Russo-Korean pipeline as both countries are interested in the Russian Far East and Sakhalin. The characteristics of energy resources make energy cooperation difficult. Energy is a strategic commodity which not only en- compasses economic interests but also those of diplomacy and security. Diplomatic and security interests strongly apply to resources such as petroleum and natural gas despite their status as economic resources traded for economic needs. This is because their status as a limited public good indispensable to a nation’s stable development makes it a target for inter-state competition. This characteristic often gives rise to frictions between concerned nations which strive to secure such resources under favorable terms. Northeast Asia is a major arena for large energy consumers. In 2010, primary energy consumed by South Korea, Japan and China amounted to 27 per cent of the world total (the United States, the European Union and Russia respectively accounted for 19 per cent, 14 per cent and 6 per cent), and this share has steadily grown. Although economic dynamism has weakened in Korea and Japan since the 2000s, China has grown rapidly while the U.S. has carried 12 out a strategy to expand its role in the region as the world’s sole superpower. North Korea is threatening regional security by concentrating its provocative actions in nuclear and energy issues which act to destabilize the region. As a result, Northeast Asian nations perceive energy supply as a key factor which may threaten their national security. In other words, energy is of more importance to Northeast Asia than to any other region, and Northeast Asia assigns much importance to energy security. In such circumstances, friction and competition will prevail over cooperation. Additionally, the absence of cooperative institutions in the region makes coordinative actions difficult during times of instability and friction surrounding energy supply and demand. Competition for natural gas may especially intensify in Northeast Asia. The share of natural gas in the world’s energy mix will increase to 25 per cent by 2035, and it is expected to overtake that of coal by 2030. Demand for natural gas has been increasing in China, the ‘energy guzzler,’ while Japanese demand for natural gas as a substitute for nuclear power has also exploded as a result of the Great East Japan Earthquake and the Fukushima NPP accident.3) On the other hand, Russia as a natural gas supplier may well promote competition among energy importers in order to obtain economic and political