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South Korean President Lee Myung-bak and Russian President Dmitry Medvedev met at the Kremlin September 29 and agreed to jointly pursue a project that would bring Russian natural gas to Korea beginning in 2015. The two sides agreed to elevate bilateral relations to the level of a strategic cooperative partnership and issued a ten-point statement.

The countries’ two state gas companies, Korea Gas Corporation and Gazprom, signed a memorandum of understanding on Russia supplying Korea with natural gas in the presence of the two leaders. The document states that South Korea will import 7.5 tons of natural gas yearly for thirty years, and that prior to that, Korea Gas and Gazprom will undertake joint research of the construction of a gas pipeline that goes through North Korea. South Korea and Russia will seek the cooperation of North Korea in the future. The two countries will sign a final contract by 2010, and, starting around 2015, South Korea will be able to use natural gas supplied via the Korea-Russia gas pipeline.

The deal comes as the interests of the two nations converge at the point where South Korea needs stable natural gas and Russia wants to stimulate its Far Eastern economy by developing Eastern Siberian gas fields.

If the deal goes as planned, it would mean Korea imports 7.5 tons of natural gas a year from Russia, which by 2015 will be 20 percent of Korea’s total natural gas consumption.

Another expected effect of having gas arrive in Korea by pipeline would be that the price of gas would drop, as pumping it by pipeline over a distance under 3,000 kilometers is cheaper than transporting liquefied natural gas, or LNG, from overseas. The distance from Vladivostok to Busan is a mere 700 kilometers.

Critical to the whole project is the construction of a pipeline in North Korea and having gas actually pass through it. South Korean officials say Russia is going to actively work with North Korea on formulating an agreement and, since the North would enjoy more than US$100 million in transit charges a year, expect Pyongyang to agree to a deal. South Korea and Russia do have an alternative plan in place, one that would involve shipping it as LNG from Vladivostok, if they are unable to build the pipeline through North Korea as desired.

The two leaders also discussed connecting the Trans-Korean Railway and the Trans-Siberian Railway and the joint development of a port in the Russian Far East close to the area where China, North Korea and Russia share borders.

Please direct questions or comments to [englishhani@hani.co.kr]