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Risks Behind Russia’s Gas Supplies to China via Western Route

© RIA Novosti . Alexei Nikolsky / Go to the mediabankPower of Siberia pipeline construction
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Russia has to choose between environmental and technological risks in planning the western route for gas supplies to China, analysts told RIA Novosti.

MOSCOW, September 4 (RIA Novosti) – Russia has to choose between environmental and technological risks in planning the western route for gas supplies to China, analysts told RIA Novosti.

"Russia's border with China in this area is very small [a few tens of kilometers]. The conditions for laying a pipeline aren’t the best there due to the specifics of the terrain. For this reason, Mongolia and Kazakhstan may be considered a more fitting option for this route... Altai [pipeline]has not been agreed yet, so the route may change," Energy Development Fund director Sergey Pikin said.

Routing through Kazakhstan or Mongolia can help solve a number of technological problems and eliminate the environmental risks of supply, but will nevertheless introduce a third party, which has the potential to carry hidden economic risks, judging from the current situation with Ukraine.

"A mediator in transit creates additional problems. If we look at the situation in the West, Russia is actively trying toget rid of the transit countries, like Gazprom with his South Stream. I think Russia will take a more cautiousapproach here … In any case, I would warn against additional mediators," Alfa-Bank senior analyst Alexander Kornilov said.

If the environmental and technological risks are too great for Russia to construct a pipeline through the Ukok Plateau, then Mongolia and Kazakhstan’s readiness for cooperation can create decent opportunities for partnership.

In late August, Kazakh Deputy Energy and Fuel Resources Minister Uzakbai Karabalin said that the neighboring countries are considering the possibility of building a gas pipeline to China through Kazakhstan.

"It’s possible to get more favorable conditions from a transit country, which will see that in case of irrational behavior the choice will fall on its rival. That is, the presence of another transit partner disciplines counterparties," National Energy Security Fund deputy director for gas projects Alexei Grivach said.

Grivach also believes that Kazakhstan has some advantages over Mongolia since the Moscow and Astana are Customs Union partners. Furthermore, Kazakhstan already has gas transfer points at the border, and hence it would be easier to develop infrastructure there.

The discussion about Russian gas supplies to China via the western route has intensified after Gazprom and China National Petroleum Corporation signed in May a $400 billion contract for the annual supply of 38 billion cubic meters of gas to China via the eastern route for the next 30 years. The deliveries will be made through a branch of the Power of Siberia gas pipeline; its resource base will be the fields in eastern Siberia.

On September 1, Gazprom CEO Alexei Miller assured that the company is ready to sign the contract with CNPC for gas supplies to China via the western route already in November, during a meeting of Russian and Chinese leaders.

For these purposes, Gazprom considered construction of the Altai gas pipeline, which would go through the Altai Mountains and connect west Siberian gas fields with China. However, the complex topography and protests of environmentalists against laying pipelines through the conservation areas have significantly slowed down the implementation of the project.

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