Siberian marriage turns sour for the Japanese

Press, 9 March 1982, Page 20

Siberian marriage turns sour for the Japanese

By

MARK FRANKLAND

in London

While the American' Administration continues what looks more and more to be a losing battle against the West Siberia-to-Europe gas pipeline, ambitious schemes to use Japanese money and technoloy to exploit the riches of Eastern Siberia have run into difficulties.

Ten years ago, the marriage of Japan and the Soviet Far East seemed , to.. have been made in an economist’s heaven. Japan’s industry depends on imported raw materials. .Eastern Siberia has. huge deposits of oil, gas, coal and other minerals. (Siberia already produces half of the Soviet Union’s oil and a third of .its natural gas.) And the distance between them is only a day’s boat ride. Futurologists played with the vision of Japan drawing the Soviet Far East'into the prosperity of. the Pacific Basin, bringing Honda motorbikes and Sony radios to the inhabitants of Khabarovsk and Vladivostok to the envy of less fortunate Russians to the West. But international politics and the difficulty of getting at Siberia’s riches, as remote as they are seductive, proved a greater obstacle than Soviet planners and Japanese businessmen supposed. The story of how these difficulties arose suggests that breath-tak-ing schemes for Soviet-Western economic co-operation will, for the calculable future, probably end up trimmed to modest proportions. Japan struck its great Siberia deal in the early 19705. There had been earlier projects for exploiting timber and developing the Soviet Far Eastern port of Wrangel but they were small by comparison. The 1970 s deal had four parts: a big extension of the timber project; , the mining of coking coal in South Yakutia; the development of natural gas fields, also in Yakutia; and oil and natural gas prospecting off

the Soviet island of Sakhalin. Japanese banks agreed to lend some three billion dollars for Japanese technology and experts. The Soviet Union would pay back by deliveries of raw' materials.

After a meeting between President Brezhnev and the then Japanese Premier, Mr Kakuei Tanaka, even more ambitious Far Eastern plans were floated for copper and asbestos mining and the construction of a steel complex, but they, are still .up in. the air while much of what had been agreed on has proved difficult to realise. Coking coal deliveries ’were supposed to start in 1979. The Soviet Premier, Mr Nikolai Tikhonov, told Japanese journalists last month that they would start some time before 1986. The Japanese say the Russians have yet to confirm the Yakut natural gas reserves, and suspect Moscow may have shelved the project. The prospecting off Sakhalin is progressing, but with more promise of gas than of oil. The difficulty on the Soviet side seems to be fierce competition for increasingly limited supplies of both labour and capital compounded by the extreme cost imposed by Siberian conditions where moving a drilling rig 100 kilometres can cost as much as its construction. There is evidence of a battle of bureaucrats in Moscow, with Gosplan, the supreme planning authority, and some ministries doubting whether Siberian development is always worth while. According to a Soviet commentary “there are those that think that the mastery of Siberia’s wealth involves greater expense per unit of output. In other words it is said that the rate of return on inputs in Siberia is not high and very long-term.” These arguments are challenged by a Siberian lobby, led by the Siberian

branch of the Soviet Academy of Science, which still seems to have the support of the party leadership. International politics have compounded the purely Siberian difficulties. The shakiness of; East-West relations has played a part but the chief difficulty lies in the two'countries’ ambivalent attitudes to each other. They are old imperial rivals in East Asia and Japan’s persistent claim to four miniscule islands occupied by Soviet troops in 1945 infuriates the Soviet Government. A Soviet concession on -the islands would do wonders for the relationship but Soviet diplomacy won’t budge, apparently in the belief that one territorial concession would touch off a chain of demands elsewhere. This diplomatic battle can be stormy: when the Japanese proposed salvaging, treasure from the Russian cruiser Admiral Nakhimov/ sunk by the Japanese Navy in the war of 1905, the Russians at once, claimed it as theirs.

Japan is also constrained by China which insists that the development of Siberia threatens its security. The Chinese press calculated last year that the Soviet Union already produces a third of its tanks, a quarter of its warships and nearly half of its airplanes in the eastern half of the country. Chinese disapproval stopped the Japanese from considering a pipeline project g that would have taken West Siberian oil to the Soviet Pacific coast.

The upshot is that the single biggest Soviet deal Japan is now working on is for three million dollars of pipes and pipe-laying, equipment for the controversial line that will take the gas of Western Siberia not to the East but westwards, to Europe—Copyright, London Observer Service.