As tensions cool, a new future for the Trans-Korea natural gas pipeline?
Seoul is optimistic, but major hurdles - from sanctions to logistics - loom large
It wasn’t long after the Kim-Trump summit that the topic of the fabled natural gas pipeline which would connect South Korea to Russia via its northern neighbor was back on the cards.
Three days after the meeting, Russia’s state-owned Sputnik news service was already covering Gazprom’s interest, while adding that discussions on the project were being pushed by the South Korean side.
No doubt President Moon Jae-in of South Korea raised the topic, too, during his recent visit to the Russian capital, where he met his counterpart Vladimir Putin to discuss infrastructure projects and a free trade agreement.
In fact, the pipeline has likely been on Moon’s mind since well before the most-recent North Korean detente, with the South Korean President last year including it in his new “economic map for the Korean Peninsula.”
“The severed inter-Korean railway will be connected again. A train departing from Busan and Mokpo will run through Pyongyang and Beijing, and head towards Russia and Europe,” Moon said in July last year in Berlin.
“Cooperation projects in Northeast Asia, such as the gas pipeline project connecting the two Koreas and Russia, may also be implemented.”
Moon made the remarks even as North Korea was in the midst of an aggressive weapons testing schedule and just three days after the DPRK successfully tested its first intercontinental ballistic missile.
Yet even the most recent round of optimism seems at odds with the results of the summit, which many North Korea watchers and experts felt did little to move the world closer to a nuclear-free North Korea.
Regardless of Moon’s aspirations, a large-scale energy security project like a joint gas pipeline would require the clearance of several hurdles, with denuclearization and the need for a prolonged period of cooperative behavior from Pyongyang not least among them.
“The main obstacle is the settlement of the denuclearisation issue between the DPRK and U.S.” Paik Keun-wook, Associate Fellow, Energy, Environment, and Resources at Chatham House, told NK Pro.
“It is not conceivable any meaningful progress (could be made without it), except the repeat of feasibility studies on the project Gazprom and Korea Gas Corp (Kogas).”
The idea of a gas pipeline connecting South Korea and Russia via the DPRK has been discussed since the early 2000s, blurring or moving into focus depending on how the well all the interested parties were getting along at any given moment.
Since then, South Korea’s demand for energy has only gone up: devoid of natural resources, it imports around 98 percent of its needs, according to the Energy Information Administration.
South Korea’s natural gas sector is in a similar position, with no domestic production the country ships in all the gas it burns for heating during its freezing winters.
Without a single pipeline connecting another country, South Korea’s gas first needs to be liquefied, loaded into specially designed ships and the regasified upon arrival, a resource-intensive and expensive process requiring infrastructure costing billions of dollars.
Yet with Russia – the world’s largest gas producer – practically on their doorstep, a pipeline connecting the two countries and operated by Russia’s state-owned Gazprom and South Korea’s Kogas seems like a natural fit for both sides.
The proposed pipeline would run from Russia’s north, though the far-eastern cities of Khabarovsk and Vladivostok, along the coast and through North Korea, terminating south of the DMZ.
Despite the possible benefits, the project’s now near-mythical status is not unearned. Large-scale infrastructure projects often take years to even get through the planning stages, and would require a level of trust between the three parties that seems difficult to envisage even in this post-summit world.
In this context, the proposed natural gas pipeline could be seen a barometer for the state of inter-Korean relations and progress towards denuclearization.
Agreements covering national energy security are not the same as deciding to build a rail line to Pyongyang, and would likely be among the last of the proposals to be greenlit, and among the first to be canceled should relations take a turn for the worse.
“Pipelines through North Korea to the South are an obvious win-win, but they are very large expensive projects and as a result generate substantial holdup risk,” Stephan Haggard, director of the Korea-Pacific Program at IR/PS, told NK Pro.
Nor do the risks end with the completion of the project, as both Moscow knows all too well after having wielded its gas supplies as a political weapon during numerous disputes with Ukraine and Europe.
For his part, Kogas CEO Seung-II Cheong told Sputnik in June that the pipeline’s viability depended on North Korean denuclearization and a reduced sanctions environment, though also indicated his company was ready to move on it should the opportunity arise.
“The denuclearization of the Korean peninsula and also lifting of international sanctions are the prerequisites to promote that project — pipeline to South Korea via North Korea,” told the Russian news outlet.
“But Kogas has been consulting with their Russian counterparts about this project for a long time. So we think if the conditions are met we can easily resume the consultations with Russian counterparts about this project,” he added.
Those consultations will likely need to be extensive, multilateral affairs in which one party holds little experience or technical know-how.
“The parties will need to agree on a price (or price-setting mechanism) for gas, and on what ‘rents’, in the form of money and/or gas withdrawals, the DPRK will extract for hosting the pipeline in its region,” David Von Hippel, a senior research associate at the Nautilus Institute for Security and Sustainability studies, told NK Pro.
“The parties will have to agree on how and where the pipeline will be built, who will build it, and how the flows will be controlled.”
Both the UN and the U.S. would also have to alter their sanctions posture before the project could move beyond the planning stages, as UN restrictions prohibit the export of machinery and industrial equipment to North Korea, in addition to numerous raw materials and processed forms of metal.
The U.S. Treasury Department’s Office of Foreign Assets Control and presidential Executive Orders also make it very difficult for U.S. persons or entities to go anywhere near most North Korean industries, including the energy sector.
Given the U.S.’s large technological and commercial footprint in the oil and gas sector, the Treasury Department’s measures could also make things complicated for U.S. shareholders in companies like Kogas, or for peripheral companies working in the sector with U.S. interests.
Yet for now, it seems the Moon government does not view the obstacles in the path’s pipeline as insurmountable.
While the likelihood of it becoming reality is nested in a much larger set of conditions and probabilities, the South Korean President’s determination to settle the larger issue is no doubt genuine, even if might not prove to be enough.
“The pipeline has been mentioned by President Moon several times but the fundamental assumption for the pipeline development has to be satisfied,” Chatham House’s Paik told NK Pro.
“The clearance of nuclear weapons from DPRK is the pre-requisite. It remains to be seen how this matter will be handled.”
Edited by Oliver Hotham
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