RUSSIA IN ASI A — ASIA IN RUSSIA: ENERGY Russia in Asia—Asia in Russia: Energy, Economics, and Regional Relations , ECONOMICS, AND REGIONAL RELA Conference Proceedings Edited by F. Joseph Dresen TIONS OCCASIONAL P APER #292 Woodrow Wilson International Center for Scholars OCCASIONAL PAPER #292 KENNAN One Woodrow Wilson Plaza 1300 Pennsylvania Avenue, NW INSTITUTE Washington, DC 20004-3027 Tel. (202) 691-4100 Fax (202) 691-4247 www.wilsoncenter.org/kennan The Kennan Institute is a division of the Woodrow Wilson International Center for Scholars. Through its programs of residential scholarships, meetings, and publications, the Institute encourages scholarship on the successor states to the Soviet Union, embracing a broad range of fields in the social sci- ences and humanities. The Kennan Institute is suppored by contributions from foundations, corporations, individuals, and the United States Government. 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The views expressed in Kennan Institute Occasional Papers are those of the authors. ©2005 Woodrow Wilson International Center for Scholars, Washington, D.C. www.wilsoncenter.org Russia in Asia—Asia in Russia: Energy, Economics, and Regional Relations Conference Proceedings Edited by: F. Joseph Dresen OCCASIONAL PAPER #292 Contents Russia in Asia—Asia in Russia: Energy, Economics, and Regional Relations Cosponsored by the Kennan Institute and Asia Program Woodrow Wilson International Center for Scholars July 22–23, 2004 Washington, D.C. DAY 1: THE RUSSIAN FAR EAST IN ASIA 1 Introductory Speaker: Eugene Lawson, President, U.S.-Russia Business Council PANEL 1: CONDITIONS AND PROSPECTS IN THE RUSSIAN FAR EAST 5 Chair: Blair A. Ruble, Director, Kennan Institute, Woodrow Wilson Center “Economic Trends in the Russian Far East and Russia’s Economic Policy towards the Pacific Region,” Alexander Fedorovsky, Head of Section, Pacific Studies, Institute of World Economy and International Relations, Moscow; “Regional Politics and the Competition for Influence,” Robert Orttung, Associate Research Professor, Transnational Crime and Corruption Center, American University; Visiting Scholar, Center for Security Studies, Swiss Federal Institute of Technology; and former Title VIII-supported Short-term Scholar, Kennan Institute; “Environmental Issues in the Russian Far East,” Josh Newell, author, The Russian Far East: A Reference Guide for Conservation and Development PANEL 2: RFE-ASIA ENERGY TRADE AS AN ENGINE OF INTEGRATION: NOT A DONE DEAL 23 Chair: Paul Rodzianko, Senior Vice President, Access Industries, Inc. “East Siberia-Regional Resource Potential,” Shawn McCormick, Vice President, International Affairs, TNK-BP; “Sakhalin’s Oil and Gas Projects: Current Status and Future Prospects,” Michael Bradshaw, Professor and Head, Department of Geography, University of Leicester; “Russian Oil and Gas: The Battle Within and Without for Control and Access,” Marshall Goldman, Kathryn W. Davis Professor of Soviet Economics, Wellesley College, and Associate Director, Davis Center for Russian and Eurasian Studies Harvard University; “Demographics in the Russian Far East,” Nicholas Eberstadt, Henry Wendt Chair in Political Economy, American Enterprise Institute Concluding speaker: Jeffrey L. Miller, Senior Vice President and Head of Export Finance, Export-Import Bank of the United States v DAY 2: ASIA AND ITS RUSSIAN NEIGHBOR 51 Introductory Speaker: Robert Sutter, Visiting Professor, Department of Government, Georgetown University, and former National Intelligence Officer for East Asia and the Pacific, U.S. National Intelligence Council PANEL 3: CUSTOMERS, COMPETITORS, AND PARTNERS: ENERGY RELATIONS IN NORTHEAST ASIA AND RUSSIA 55 Chair: Robert Manning, Senior Counselor, Energy, Technology and Science Policy, Office of Policy Planning, U.S. Department of State “Emerging Russia-China Energy Relations: Will Needs Be Met by Supplies?” James Dorian, international energy economist, Washington, D.C.; “The Politics of Japanese-Russian Energy Relations,” Joseph Ferguson, Director of Northeast Asia Studies, National Bureau of Asian Research; “Korea’s Access to Russian Energy,” John Fetter, President, FSI Energy PANEL 4: INTEGRATION VS. ISOLATION— NORTHEAST ASIA’S APPROACH TO RUSSIA 77 Chair: Robert Hathaway, Director, Asia Program, Woodrow Wilson Center “Maneuvering over the Russian Far East’s Place in Northeast Asia,” Gilbert Rozman, Musgrave Professor of Sociology, Princeton University; “The Russian Far East and Transnational Security Challenges in Northeast Asia,” Elizabeth Wishnick, Research Associate, Weatherhead East Asian Institute, Columbia University; “Nuclear Security Issues in Northeast Asia,” Daniel B. Poneman, Principal, Scowcroft Group PANELIST BIOGRAPHIES 95 vi RUSSIA IN ASIA—ASIA IN RUSSIA: ENERGY, ECONOMICS, AND REGIONAL RELATIONS Preface he Woodrow Wilson Center’s Kennan Institute and Asia Program convened a conference in July 2004 to examine the evolving relationships among the countries of Northeast T Asia—Russia, China, Japan, and North and South Korea—with an eye toward under- standing the growing importance of energy in the region. For much of the past century, Russia did not have a particularly close relationship with its Asian neighbors. Its focus was on Europe and the United States, and its territories in the Russian Far East were long regarded by Moscow as a source for natural resources and a military outpost. Following the fall of the Soviet Union, the region experienced steep economic and population declines. At the same time, the transformation of Russia to a market economy and the reworking of its federal system produced a host of new actors and relationships that have been reshaping Russia’s presence in Asia. The greatest factor in recent years behind Russia’s growing importance to the region is the energy reserves situated in the Russian Far East and Siberia, and the demand for those reserves from Russia’s Northeast Asian neighbors. As Eugene Lawson points out in his introductory remarks, the Russian Far East is adjacent to two of the world’s top three energy markets and “is ideally suited to serve as a major energy supply link between Russia’s oil and gas fields and China and Japan, as well as Korea, India, the countries of South East Asia, and the U.S.” Russia’s neighbors have had to adapt to Russia’s energy wealth—China, Japan and South Korea have all pursued new economic relationships with Russia. Yet Russia cannot maximize these new economic relationships on its own. To realize the potential of its energy projects in the region, Russia must rely on investment and technology from foreign multinationals. Whether it will suc- cessfully do so is in some doubt, according to several panelists. The climate and terrain where the resources are situated are harsh and unforgiving. The cost of developing the various proposed gas and oil pipelines runs into the billions and is constantly increasing. More daunting than the phys- ical climate is the investment climate, especially in recent years. Nevertheless, Russia is enhancing its status as a major player in Northeast Asia. Russia has a seat at the table in the multilateral talks on the nuclear issue in North Korea, and has the poten- tial to play a vital role in finding a resolution. China and Japan are vying with each other for access to Russian energy reserves, allowing Russia to push for deals that serve its geopolitical, as well as economic, interests. Russia must also work to balance economic development with preserving one of the world’s most diverse and important ecological areas. Yet, as became clear in several of the presentations during the conference, a number of chal- lenges remain. “Soft” security issues such as corruption, cross-border criminal activity, and pop- ulation movements hinder legal trade in non-energy sectors and Russia’s closer integration in the regional economy. The geopolitical landscape of Northeast Asia is changing, and this conference was an attempt to assess the current situation to inform Russia-watchers in Washington of the complex dynam- ics underway in Asiatic Russia, the implications for Russia’s geostrategic role in the region, and the economic and political ramifications for China, Japan, and North and South Korea. The conference was conceived and planned with the assistance of Mike Bradshaw of the University of Leicester, and I am pleased to take this opportunity to thank him for his efforts. My colleagues in the Asia Program provided much needed assistance and support in organizing and running the conference. I also would like to acknowledge the Woodrow Wilson Center for pro- viding the federal conference funds that made the event possible. —F.Joseph Dresen vii The Russian Far East