Two Russian pipeline projects backed by North Korean National Security Adviser Michael Flynn and President Donald Trump have been derailed in recent weeks by Moscow’s blacklisting of U.S. companies that make equipment for the pipeline system.
The 2,500-mile, 1,640-foot diameter line, which will carry Russian oil to the Chinese and Southeast Asian markets, was on the verge of getting underway on schedule this month.
But then the Malaysian company whose section of the pipeline ends in the Chinese port of Chongqing found itself blacklisted in Russia after it was identified as a developer of Chinese land mines in Southeast Asia. Russia ordered companies involved in the construction project to get out of the way. The loss of interest by U.S. companies in delivering parts for the pipeline’s extension could threaten progress in the project.
Meanwhile, the Putin government ordered U.S. firms that have participated in the engineering, procurement and construction for the line not to enter into any further contracts until they had been informed of the Russian sanctions.
Most of the $14 billion cost is being covered by the Chinese government, through its Export-Import Bank and from Export and Import Bank of China’s quota of loans, or at least for about two-thirds of the entire cost.
As China has a wealth of resources to export to the new oil market — including West Australia, New Guinea, Papua New Guinea, Papua New Guinea and even Brazil — it is relying more on investment to ensure the energy backbone of its economy can keep supplying them as its consumption grows.
China has named its share of the cost at $1.55 billion and is to pay for a significant portion. Russian energy giant Rosneft, which is backing the pipeline, is to contribute another $2.3 billion. The line is also expected to earn more than its cost, although figures of that order have not been published.
Because it is thought to have costs $3.5 billion, BP is to be paid $400 million as the largest shareholder in the company that runs the Kazakh oil terminal in Baku, Azerbaijan. Russia’s oil reserves are expected to be at least three times as large as Kazakhstan’s as a result of the pipeline’s expansion.
The Russian pipeline, which would run from the Russian Black Sea port of Novorossiysk to Shanghai, a 730-mile stretch of which is already in place, was part of President Vladimir Putin’s modernization plan, which also includes oil-injection processing plants and shipping oil by rail to China.
Despite the ban by the U.S. Department of Agriculture on goods from Turkish producers for importing into Turkey, Russia has said that overall Turkey’s 2.9 million barrels of oil consumed each day would have been supplied by its pipeline, should construction not have stalled. The information was part of a recent presentation by Alexander Novak, the head of the U.S. delegation to the Group of 20 finance ministers and central bankers meeting in Buenos Aires, that was widely reported in the U.S. media.
It is one of several obstacles that have stalled oil prices that fell in recent weeks.