China yesterday sent a high-ranking delegation to Moscow to lobby the Russian Government for its endorsement of a US$2.5 billion oil pipeline from eastern Siberia to Northeast China.

There has been concern that Russia might thwart the deal.

Ma Kai, director of the National Development and Reform Commission, headed the delegation. Also on the trip is Ma Fucai, chairman of PetroChina, the project's Chinese backer.

The delegation's visit is China's latest effort to rescue the deal after the Russian Ministry of Natural Resources indicated earlier this month that it may block the planned route for the Angarsk-Daqing pipeline on environmental grounds.

The ministry said the route may threaten the environment of the Tunkinsky National Park and Lake Baikal, through which the planned pipeline would run. Although no official decision was announced, analysts said they would not rule out the possibility of the project being abandoned.

An industry source said the Chinese delegation would seek to iron out differences between the two sides before Russian Prime Minister Mikhail Kasyanov visits Beijing next week to discuss the project.

The two countries signed a framework agreement on the project in March during the first visit to Moscow of the then newly elected President Hu Jintao.

The deal is worth US$150 billion and would be the largest ever bilateral trade venture between the two countries. It would allow China to ship 700 million tons of Russian crude through the pipeline to China over the next 25 years.

Many analysts, however, said there is more to Russia's vacillation than the environmental issue. They said the twists and turns are partly a result of hard lobbying by Japan for a rival pipeline that would bypass China and stretch to Russia's Far East port of Nakhodka.

Some Russian officials and the pipeline monopoly Transneft support Japan's proposal, believing the route could let Russian oil flow to larger markets, including Japan, South Korea and even the United States.

Analysts said the issue was complicated further by deep rifts between the Kremlin and private oil companies such as Yukos, the project's Russia oil supplier.

Yukos has recently come under public fire when the Russian police have arrested its major shareholders on charges of embezzlement and tax evasion.

Chinese experts said they hope the project can proceed against the odds because it is in the interests of both sides.

Moscow hopes to attract investment to develop the vast, untapped hydrocarbon resources in the Far East to revitalize its economy, while China needs the energy resources to sustain its economic boom.

Liu Huaqin, an expert with the Chinese Academy of International Trade and Economic Co-operation, said: "Should the project break down, it will cast a shadow on the bilateral ties between the two countries."

(China Daily September 12, 2003)