Pipeline diplomacy

The energy that fuels South Korea's booming economy is not homegrown. The nation relies on imports of natural resources to keep factories turning out Hyundai cars and Samsung semi conductors. But the problem is getting that energy onto the South Korean grid.

Finding a quicker and cheaper solution will be a top agenda item when President Lee Myung Bak meets with Russian President Dmitry Medvedev this week in St. Petersburg. For decades the two nations have envisioned a pipeline that would deliver Siberian liquid natural gas (LNG) to the bottom half of the Korean peninsula. But of course, that means it would have to run through North Korea, which does not have a good track record of cooperating with the south.

Up to August, the project remained thus more or less a pipe dream. Then North Korean ruler Kim Jong-il told Medvedev during their own summit that he wants the pipeline to come to fruition.

Pipeline diplomacy

Not wanting to seem left out of the negotiations, President Lee recently said it is now only a matter of time before the project gets underway. "North Korea and Russia are negotiating and we are also talking with Russia. At some point, the three countries will reach an agreement. The project could proceed faster than expected. It will be a great business if it works out," Lee said during an interview on Korean television in September.

Many analysts agree that the economy would benefit greatly from a pipeline running straight down the peninsula. But it won't come cheap. According to government estimates, the project could cost over three billion US dollars to construct. Yet Kang Hee-chan, an environmental and energy analyst at the Samsung Economic Research Institute in Seoul, believes it would not take long to pay it off.

"Our gas demands continue to grow. Most of the gas arrives via shipping from Europe and West Asia," Kang says. "Those options are very costly. When we can get gas from Russia through North Korea, it will be more cost competitive."

Kang adds that in order for South Korea and Russia to go ahead with the pipeline, a certain amount of trust would have to be installed in North Korea first.

Doubts

Considering the current state of inter-Korean relations, analyst Andrei Lankov at Seoul's Kookmin University casts doubt on the project. "In the long run, this is a very good project, its good both from the economic and political point of view. However, in order to succeed it needs a stable climate of cooperation, exchanges and trust," the Russian native says. "Frankly, I don't see such a climate coming anytime soon."

Lankov believes while all three nations face risks, those South Korea face are especially high. Pyongyang could start siphoning some of the gas for its own uses or could also just turn off the valves if relations with Seoul take an unfavorable turn.

Analyst Park Hee-chan agrees that these risks pose a major challenge for the LNG pipeline. But he notes that South Korea already faces certain risks in obtaining energy. "There are so many supply fluctuations and uncertainties. If there's a pipeline we can get a more certain supply of gas."

The South Korean public is generally ambivalent about where their energy comes from and given the volatility in doing business with the North, they aren't getting their hopes up about this project.

In an attempt to win support from voters and business leaders, some politicians are trying to link the pipeline to improved Korean relations. Hong Joon-pyo, chairman of the ruling Grand National Party says the project "would open a new chapter for inter-Korean relations."

Not a 'reconciliation project'

Andrei Lankov, however, believes any attempts by politicians to label the pipeline as a reconciliation project are fanciful.

"It's a very usual type of official rhetoric in Korea. All kinds of exchange between the two Korean states is always described as something related to unification. It's convenient, it sells very well to the nationalistic Korean public, but let's be frank, it has nothing to do with unification, it's just normal economic exchange and nothing else," Lankov says.

The pipeline's political significance will, however, most likely be used to gain votes in next year's presidential election. The ruling party has seen its popularity drop in part due to President Lee's hawkish stance on North Korea. Last week, in an election seen as a bellwether for the 2012 vote, the conservative nominee from Lee's party was defeated by a progressive candidate who favors closer ties with Pyongyang.

Author: Jason Strother
Editor: Sarah Berning