Russia supports China and Japan in Iranian confrontation with the USA
China and Japan announced their refusal to support the USA’s embargo for oil deliveries from Iran. Anyhow, these countries will surely receive oil through ESPO pipeline.
China and Japan challenges the USA in the questions of Iran and dollar
In Beijing it was announced about official visits of Wen Jiabao, the Prime-Minister of the State Council of PRC, to Saudi Arabia, UAE and Katar in the period since January 14th to January 19th. The main purpose of the trip is the discussion with oil exporting countries the situation of the planned by EU embargo in respect to Iran, and the threats of Tehran to block the Strait of Ormuz.
Nowadays, Saudi Arabia is the main partner of PRC at the Middle East, and, as it is expected, China would leave the USA behind soon, and would become the major consumer of Saudian oil. Signing a contract between Sinoptec (the Chinese State oil corporation) and Saudi Aramco on building a large-scale oil processing plant in Saudi Arabia, witnesses the strengthening of relations between these countries.
Just before the Middle East trip of the Chinese Prime Minister, the head of the Ministry of Finance of the USA, Timothi Geithner came to Beijing to clarify the position of Washington regarding the sanctions against Iran. On the next day, there appeared an article in Chinese mass media (just in the spirit of Eastern diplomacy) prepared in the Chinese Academy of modern international relations, which declared that China will not support the sanctions of the USA against the oil sector of Iran.
Japan also does not intend to support the international embargo in relation to oil deliveries from Iran, as the Government of Japan is highly anxious about very high prices for energy resources on the world markets. Cessation of oil deliveries from Iran will result a new increase of prices, and it will negatively affect the efforts on restoration of the regions of the country that were devastated by earthquakes and tsunami last year, said in Tokyo. Japan depends on oil deliveries from the Middle East by 75 per cent. Although, the Japanese also depend too much on the USA, and so they tactfully pledged to permanently lower the part of Iran in their import of oil.
Such an agreeable position of the two major economics of Asian-Pacific region could be expected after the meeting of Yoshihiko Noda, the Prime-Minister of Japan, and Wen Jiabao, the Prime-Minister of the State Council of PRC, which took place in Beijing on December 25, where they came to an agreement on “using national currencies instead of American dollar in deals between Japanese and Chinese companies”. “China and Japan decided to save themselves together”, say financial analytics, but they surely forget to add Russia there, which also argues the embargo for export of Iranian oil. “The sanctions do not have anything common with the main aim – to strengthen the regime of non-proliferation of mass destruction weapons”, said Sergey Ryabkov, the Deputy Minister of Foreign Affairs of the Russian federation. In spite of all the contradictions, a very important thing unites such countries as Russia, China, and Japan, and that is the ESPO oil.
Small, but valuable
The possible prospectives of oil deliveries through ESPO pipeline (which may significantly increase after building the second part of the oil pipeline) help China and Japan to hold such a strict position regarding the world largest nation.
The second step of ESPO project presupposes building a cross-country pipeline on Skovorodino – Koz’mino SMNP section, that would result an increase of volumes up to 50 million tons per year in Primorsk Region at the functioning ESPO-1 section (Taishet-Skovorodino). In September 2011 there was welded the final junction of the linear part of the second turn of ESPO oil pipeline system in Primorsk Region. The completion date of ESPO-2 building project is the year 2014, though there are declarations on possible launching in the end of 2012, and this turned to be very vital. After launching the second part of the project, there would be dispatched 35 million tons of oil to the market of Asian-Pacific Region through Koz’mino port, and besides, the oil pipeline branch to China will have the capacity of 15 million tons. The total capacity of ESPO system may be increased up to 80 million tons of oil per year in future.
The import of oil by the three major economics of Asian-Pacific Region (these are China, Japan, and the South Korea) is valued of 750-800 million tons of oil per year. Against this background, the possibilities of ESPO seem insignificant, but these deliveries are stable and do not depend on any outer factors, straits shutdowns and other forms of war in the sea. If any force-majeure circumstances take place, the oil of ESPO and the oil of Chinese own production (about 200 million tons per year) would be enough for secure oil provision of the army and the fleet of the APR States, and also for strategic objects of life sustenance, and this is very highly appreciated.
The oil pipeline around the Strait of Ormuz is too expensive and needless
About 17 million barrels of oil pass through the Strait of Ormuz which joins the Persian Gulf and the Arabian sea daily. This is 35 per cent of the world sea oil trade (more than 40 per cent with oil products), and 93 per cent of the total export of the States of Persian Gulf. Moreover, 3.5 billion cubic meters of liquefied natural gas is being transported to Europe and North America through this gateway to Asia daily.
The building of a pipeline that duplicates the way of tankers via the strait from UAE to the coast of the Gulf of Oman was started in the year 2008. The pass-through capacity of the oil pipeline will amount 1.5 million barrels per day, and may be increased up to 1.8 million barrels, that is about 10 times as less than tanker transportation through the strait. The pipeline will allow UAE to export up to 60 per cent of oil produced in the country, but in case of shutting down of the Strait of Ormuz, it won’t allow to continue importing vital and life-saving goods. The delay of building may be explained by the matter, that the oil pipeline is needless in fact, and this is just a political project, which was imposed by Washington. It had been planned to finish the building of the pipeline in 2010, but its putting into operation is postponed until June, 2012. The pipeline turned to be too much expensive. The cost of building 1 km of the pipeline is valued as 6.9 million USD. For comparison, the cost of building ESPO-2 is about 4.6 million USD per kilometer, providing the fact that the pipe has been laid in harsh climatic conditions. In sands of Arabian peninsula, there is no need to blow up the earth and rocks, to work in conditions of everfrost and sub-zero temperatures, to speed up the laying by means of the method of inclined drilling of some river as Amur for example. Herewith, ESPO had been built in summer and in winter in uninhabited and harsh terrain, where it was necessary to lay a road and power supply lines before, and so to overcome more than 2 000 kilometers in 2 years long.
It is evident, that blocking of navigation in the Strait of Ormuz and the further escalation of the conflict will result such disastrous consequences for life sustenance of all the countries of Persian Gulf, including Iran, that against such a background the work of the pipeline from UAE to Al Fujairah port will have no sense for the states of this region. And the country which would be the first to initiate dynamic activities in the region of the Gulf, would become an enemy of all the states of the region, irrespectively of the reasons and justifications.
The times have changed, and the absolute hegemony of the USA comes to a close. If the USA choose aggression against Iran, it would more likely result in unfortunate consequences for the States themselves. A military cooperation of Beijing and Tehran is in progress, and it could significantly change the power balance in the Persian Gulf. In the last year, Iran, with the financial and technical assistance of China, started up production of anti-ship missiles NASR-1, which are an improved version of a Chinese missile C-704. Just in a short time ago, Iran run tests of long-range missiles that are capable to attack American military bases at the Middle East and Israel, and with no doubt the oil terminals in Al Fujairah port. The major observers believe that if such events take place, then both China and Japan, feeling the lack of oil and oil products, could interfere into the conflict, and this would result in a new full-sized war. Unless the Russian oil deliveries to the East would become such an insurance which may hold off the Asian-Pacific Region from a global military confrontation.
16.01 10:45
Text by: Dmitry Parfenov // independent expert in fuel and energy market