BOFIT Weekly Review 2015/37
Putin issues decree to speed up construction of Power of Siberia pipeline
It was hoped that president Putin’s state visit to Beijing last week would give a boost to China-Russia economic relations, but the meeting produced little of substance. There was no progress in talks on construction of the Altai pipeline to bring gas into Western China and the new initiative on building a one more pipeline from the Far East received little attention.
Construction of the Power of Siberia natural gas pipeline has proceeded slowly since it began a year ago. Gas transmission is scheduled to begin in 2019, which requires that construction of the massive transmission pipeline grid be completed and two new gas fields brought on stream. Gazprom expects the Chayandinskoye field (Yakutia) to be producing in 2017 and the Kovykta field (Irkutsk) in 2022.
The Power of Siberia project is a key part of Russia’s efforts to diversify gas export routes. The country’s leaders have repeatedly described the project as a good example of intensified cooperation with China. At the end of August, Putin signed a decree to speed up implementation of the project and the cabinet moved ahead with enabling rules. The machinery and equipment needed for the construction of the Power of Siberia pipeline and new production areas will be exempt from import tariffs (if comparable domestic products are unavailable) and value-added tax. Moreover, numerous government agencies and state firms have been encouraged to support the project in many ways. For example, the state railways and other transport businesses have been encouraged to give priority to project shipments, while power grid operator Rosset has been asked to give priority to projects related to the Power of Siberia pipeline.
Construction of a 2.2-kilometre rail bridge across the Amur River commenced last year has not proceeded as anticipated either. The Chinese partner says it should complete its 1.9-kilometre stretch of the bridge by the end of October. The Russian partner has yet to start construction work.