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Japan mulls aid package for pipeline

Japan is considering extending up to US$9 billion in aid to Russia to help finance a pipeline from Siberian oil fields if Tokyo gets preference over Beijing in the project, a news report said yesterday.

The bulk of the sum being considered -- between ?900 billion and ?1 trillion (US$8 billion to US$9 billion) -- would be in the form of low-interest loans and trade insurance, the Tokyo Shimbun said.

It would be one of Japan's biggest aid packages to the overseas oil sector, the regional daily said.

Japan and China -- which have an increasingly tense relationship and are both in dire need of energy imports to feed their huge economies -- have fought furiously for the right to access Russia's untapped oil reserves.

Russian Industry and Energy Minister Viktor Khristenko said in April that the details of the pipeline were still to be finalized after Japan threatened to cut funding if China was given access to Russian oil first.

A Russian plan in December called for the 4,118km pipeline to reach the Pacific by linking Taishet near Lake Baikal with Perevoznaya near Nakhodka. It would make Japan the nearest overseas market for the Siberian oil.

But Khristenko has suggested that Russia would build a branch to China before completing the main pipeline, prompting Japan to threaten not to fund the pipeline, which is estimated to cost at least US$15 billion.

In the first phase of the project, the pipeline will be laid from Taishet to Skovorodino near the Russian-Chinese border. A China branch could stretch from the border area.

Japan's foreign ministry said nothing definite on aid had been decided.

"Japan and Russia are now discussing what we can do in cooperation beneficial to both sides," a ministry official said.

"We are not saying oil should not go to China but we believe the Pacific line is in the mutual interest of Japan and Russia," he said.

Japan and China have also been at loggerheads over their wartime history and over gas fields in the East China Sea.
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