November 4, 2014, by editor
Russia and South Korea: the economic and geopolitical rationale for a natural gas pipeline
Written by Alex Calvo.
There was a time when South Korea thought that joint projects (including Kaesong industrial park and Mount Kumgang tourist area) and, more widely, economic cooperation could bring about two key policy objectives: narrowing the gap in standards of living between the North and the South (much larger than that between the two Germanies) and building confidence and lessening tensions between Seoul and Pyongyang. Although later developments have put a question mark over such moves, their ultimate rationale remains in place.
Russia’s regional interests, and South Korea’s energy needs and desire for reunification, represent further dimensions. Moscow is interested in diversifying away from the European energy markets, both for economic reasons (uncertain future growth prospects) and political motivations (in particular given the escalation in tensions over the last few months). While the two natural gas agreements with Beijing (dealing with a projected pipeline and liquefied natural gas exports) earlier this year attracted front page news, Russia does not wish to become too dependent on the Chinese market. Again, both because of economic and political reasons. From an economic perspective, while China is the greatest success story of the last three decades, significant questions remain over its future performance. Politically, the Kremlin is not keen on becoming excessively reliant on the Asian giant, with which significant territorial and historical issues remain outstanding. The perennially nice words that accompany bilateral summits should not make us forget the mutual distrust and conflicting interests between the two countries. We should not forget that while we often tend to see Russia as a continental power, its presence in maritime Asia is growing, as is clear, for example, in Pakistan and Indonesia.
The ideal end state for Russia would be to sell more natural gas to Asia, thus diversifying away from Europe, while also diversifying within the former, selling to China but not just to China. It is here that South Korea looms large, as a major industrial economy and net energy importer. Although Japan’s nuclear woes have not extended to her neighbour, Seoul is and is expected to remain a significant energy importer. Importing natural gas from Russia may make sense again on two counts. Economically, new suppliers contribute to diversification and can bring down prices. From a security perspective, the gathering storm in the East and South China Seas means South Korea may wish to avoid excessive reliance on SLOCs (Sea Lanes of Communication) running through those bodies of water.
Of course, the main obstacle to a natural gas pipeline from Russia to South Korea is that it would have to run through North Korea, and right now this does not seem to be a very attractive or realistic proposition. It would be another matter entirely if Seoul’s policy of economic engagement with the North had yielded fruit. Setting aside the current state of bilateral relations, however, the fact remains that the incentives are clearly there. Furthermore, some voices even point out that although it may be feared that Pyongyang could use the threat of cutting supplies as a weapon, this would hurt itself as much as Seoul. In other words, a pipeline may contribute to stability in the Peninsula, while bringing tangible economic benefits to both sides. While waiting to see whether things change, enabling the construction of a pipeline, natural gas can be transported by ship in the form of LNG (liquefied natural gas). This is one of the reasons for Seoul’s growing attention to the Arctic, South Korea being one of the countries to have gained observer status in the Arctic Council in 2013. That year was also witness to the first LNG carrier travel from Norway to Japan along the Northern Sea Route.
Going beyond energy, there are other reasons why both Moscow and Seoul may wish to deepen bilateral relations. From a Russian perspective, the development of the Russian Far East remains a vexed question, periodically showing on the government’s agenda but not making as much progress. South Korea (like Japan) is a potential source of capital and technology in this regard. Another Russian interest is preventing North Korea from becoming a mere Chinese protectorate, and regaining some of the influence lost after the fall of the Soviet Union would be welcome. Seen from a South Korean perspective, this is a complex issue. While Russia may not necessarily favour a reunification of the Peninsula, it may be more difficult to achieve that goal if a single power, whichever it is, holds a stranglehold over the North. Thus, a greater dose of Russian influence in the Region, while not without its risks, may be in the long-term interest of South Korea, making it easier to achieve reunification once the necessary evolution has taken place in the North. In the context of the current Russia-NATO tensions, this may feed some discrepancies between South Korean and American policies towards Moscow. Tokyo is in a similar position concerning this, and we can expect both Japan and South Korea to try do to follow some careful balancing act. Beijing of course is not likely to just passively watch such developments. The “loss” of Burma (Myanmar) following the US-Indo-Japanese decision to be pragmatic (Nixon’s principles can also be used against China) is a lesson of how nothing can be taken for granted in the complex game going on in the Indian-Pacific Ocean Region. Clearly, nothing lasts for ever.
To conclude, as major energy exporter and importer respectively, Russia and South Korea share an interest in greater bilateral trade, including natural gas. This would fit with the two sides’ need for diversification, prompted by both economic and political factors. Russia needs to become less dependent on the European Union, while avoiding excessive reliance on the Chinese market. The gathering storm in the East and South China Seas make SLOCs running through them look unreliable in South Korean eyes. Going beyond the energy arena, both countries have an interest in preventing North Korea from becoming a mere Chinese protectorate, in the case of Seoul since that may push further away the dream of reunification. Despite all this, the fact remains that the current tensions in the Korean Peninsula and failure of Seoul’s policy of engagement with the North make proposals for a cross-border pipeline difficult to implement in the short term, while retaining their longer-term appeal. Meanwhile, LNG may provide a way for greater energy trade between South Korea and Russia.
Alex Calvo, a guest professor at Nagoya University (Japan), focuses on security and defence policy, international law, and military history, in the Indian-Pacific Ocean Region. He tweets at Alex__Calvo and his work can be found at https://nagoya-u.academia.edu/AlexCalvo