The Russian Pipeline Decision

by
Michael C. Ruppert

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January 3, 2005 18:50:55 PM EST (FTW) A recent announcement that the Russian pipeline will serve Japan is, in my opinion, quite possibly a chimera:

Russia approves Pacific oil pipeline
MOSCOW (Aljazeera) -- The Russian government has given its final approval for a major oil pipeline to the Pacific, dropping the idea of a route to China.

The government said state oil pipeline monopoly Transneft will build an 80-million-tons-a-year (1.6 million barrels per day) pipeline from Taishet in East Siberia to the Perevoznaya Bay in the Pacific Primorsk region. The deal will enable Russian oil exports to Japan and the U.S.

China getting a piece of Yukos (Yugansknefetgaz) does not equate to getting the oil to China. So what good does it do China to own oil in Siberia that it can't transport to or burn in Shanghai? Rail transportation has already been underway for sometime now and China is getting no prize there. The rail system is running so fast now that the already marginal infrastructure is breaking down. At most Russia can increase the rail transport a few hundred thousand barrels per day. Big deal. There's only one real line and this is being touted as a blessing for China when, in fact, most of this oil is already in China's current consumption.

So who would pay for an additional rail line? Why the Chinese of course. That could be used for troops later on if necessary.

Remember that Russia has already admitted its second peak and inevitable decline is not far off.

I have been following these pipeline negotiations closely for more than two years. Khodorkovsky was China's biggest friend on this issue. So was George Soros. But Putin is an inevitable enemy of the US, especially with Ukraine all heated up. That too is far from over.

China can sell its Russian oil on the markets or withhold it from certain customers. China and Japan now both have an equity stake in Russia's survival. Good for Russia. Putin's stringing this out until the last possible second. My gut says he'll turn and side with China on his terms, factoring Soros, Kissinger et al (i.e. dollars) out of the picture. China is the 800 pound gorilla and Japan is an anemic elephant hopelessly wedded (welded) to the dollar. The one benefit Russia gains with the Japanese decision is its ability to sell all over the Pacific rim to multiple customers instead of one. But if all these economies collapse (which is inevitable anyway) what's the point? Then you would have China and its long memory on your eastern frontier.

No. There's something else moving under the carpet here. That was hinted at by Japan's reluctance to celebrate until Putin hit them with his investment demands.

This is far from over and China is far from out of the game. I would not put it past Putin to use it to buy time with the US (Japan is our buddy) while laying the seeds for a collapse of talks and construction down the road; say when the pipeline is built to the geographic point where it must either turn south or continue east. That's maybe 2-3 years away and in the meantime Putin's options remain open. Wouldn't it be nice to have Japan pay for that segment of the pipeline? China would love that.

This is the end game of games. There are no rules.