[Viewpoint] No pipeline through the North

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[Viewpoint] No pipeline through the North

North Korea’s support for a proposed pipeline crossing its territory to deliver natural gas from Russia to South Korea should not come as a surprise. While the deal is not yet done, Kim Sung-Hwan, South Korea’s foreign minister, has voiced support for the project, and Russia is now negotiating with each Korea separately to try to hammer out the details. However, North Korea’s support for the pipeline is likely a calculation to add to its increasing portfolio of potential hostage issues for times when inter-Korean relations chill. Such a pipeline would give the regime a direct line of influence on South Korea’s economy.

Natural gas is an increasingly important energy source for all sectors of South Korea. From 1987, the year that natural gas was first introduced to South Korea, to 2002, when supply networks were completed for all major cities, demand increased 17 percent per year on average. After this sustained boom, growth slowed to 6 percent per year as residential demand reached a saturation point. However, the demand from industry and for power generation remains strong. Industrial demand is forecast to increase more than 10 percent in 2011 on a year-on-year basis. The Ministry of Knowledge Economy predicts industrial demand will increase 2.3 percent per annum through 2024, but that could easily change according to economic conditions and oil prices.

To satisfy this growing demand, President Lee Myung-bak signed a memorandum of understanding (MOU) with Russia in September 2008. This MOU declared that South Korea would import 7.5 million tons every year for 30 years, starting in 2015. If that amount were imported today, it would represent roughly 19 percent of South Korea’s natural gas imports, making Russia the country’s third largest supplier after Qatar and Malaysia.

With the memorandum signed and the delivery date growing closer, discussions on how to best deliver that supply are now underway. Traditionally, natural gas has been delivered by ship, but increasing oil prices also drive up the cost of delivery. Building a pipeline, which the three nations are discussing, would drastically cut delivery costs. Of course, as anyone familiar with the geography of the region knows, there is only one way to reach South Korea overland from Russia: through North Korea.

Is there any question as to why North Korea is reacting positively to this project? Not only is North Korea likely to gain significant financial and energy concessions to allow the project to move forward, it will also gain a prominent bargaining chip in the process. Using conservative estimates of 300 kilometers of pipeline with valves stationed every 30 kilometers, at least 10 valves will be inside North Korean territory. These are generally used for maintenance on the pipeline itself or to shut off the flow of gas in case of emergency. However, North Korea could easily use these valves to halt the flow of natural gas to South Korea. Such a move would be particularly devastating in the winter, when demand for gas to residential and industrial users spikes in South Korea.

Any agreement could be profitable for all involved parties. One key to a successful deal would be to ensure that North Korea sustains significant losses should it interfere with the gas flow to South Korea. However, economic concerns have always been secondary for the regime. For this reason, the ability of Russia to exert control over North Korea after the pipeline is in place is doubtful.

Despite the promises that North Korea would inevitably make regarding the use of the pipeline, there should be no doubt that the regime will try to manipulate the valves for its own purposes. North Korea’s record of keeping its promises with the outside world leaves much to be desired. It previously cheated on the 1994 Agreed Framework by pursuing uranium enrichment. The United States had been monitoring North Korea’s imports of equipment consistent with uranium enrichment since the late 1990s, but North Korea refused to give a full accounting of how that equipment was being put to use. In March 2009 it announced that it intended to construct its own light water reactor (LWR), a move that requires a uranium enrichment facility to fabricate fuel. Then in June 2009, it announced it had started testing uranium enrichment, and by November 2010, it unveiled a nearly complete uranium enrichment facility. The news stunned the world. Needless to say, these actions violated the 2005 Joint Statement, as well as the Second-Phase Actions Agreement signed in October 2007.

North Korea has also shown that it is willing to illegally appropriate facilities that are within its borders. In 2005, North Korea kicked the Korean Peninsula Energy Development Organization (KEDO) out of the country. It did not allow KEDO to repatriate the machinery and resources that were being used to build two LWRs as the Agreed Framework stipulated. Despite pledges to allow the subcontractors - many of whom were South Korean - to sell the machinery to recoup losses, North Korea almost immediately began to use the equipment for its own purposes. This is just one example. There are others from the Kaesong Industrial Complex.

With this recent history, South Korea should not move forward with any deal that places a pipeline in North Korea.

The proposals to build pipelines under the sea, either crossing from China or from Russia itself, are certainly more expensive and difficult and not risk free. But placing a strategic energy supply within the immediate reach of North Korea would be a mistake.

Until North Korea proves it can honor its international commitments, has abandoned provocations and is ready to rejoin the international community, any agreement should be buried.

*The writer is a research associate at the Asan Institute for Policy Studies in Seoul. The views expressed here are the author’s and do not necessarily reflect those of the Asan Institute. The author can be contacted at klf@asaninst.org.

By Karl Friedhoff
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