Research Proposal: “Energy Security in Northeast Asia”Ilmin International Relations Institute (IIRI), Korea University (Seoul, Korea)

1.Significance of the Project

1.1. Energy security as Non-Traditional Security (NTS) theme in the region

Since the collapse of the Soviet Union and the end of the Cold War, the security paradigm has undergone a significant change in Northeast Asia. Non- traditional security concern such as human security, environmental security, and economic security has received more attention in the region. Most of all, energy issues are becoming an important security agenda in the region. In other words, in Northeast Asia, new security concerns are emerging with regard to energy use, energy security, energy competition, energy war and the sustainability of economic growth. For years, energy security was defined as the availability of adequate supplies at affordable prices. For producing countries, energy security now also means the long- term availability of consumers willing to pay market prices so as to justify the necessary investments to bring adequate capacity on stream. Today, energy security is as much security of supply for the consuming countries as security of demand for the producers. In some cases, energy security can then become a confrontational stance rather than a unifying factor, and then could lead to an energy war.1

At present, China, Japan, Taiwan, Mongolia and the two Koreas are all desperately searching for economically rational, diversified, and reliable supplies to support their energy needs. In this end, Russian oil and natural gas in the Far East region represents a potential new source of supply to the Northeast Asian states, providing them with the opportunity to diversify their energy supplies both geographically and in terms of energy mix, thereby promoting competition and protecting the environment.2

Nevertheless, there has been neither substantially institutionalized framework nor any sign of multilateral cooperative efforts between the governments in the region, to solve energy shortage problem or to promote regional energy integration. Both Kyoto protocol and Shanghai cooperation has not played a significant role in this sense yet. And thus regional energy cooperation has remained rather in primitive stage. Therefore, Ilmin International Relations Institute seeks to bring us opportunities to explore the necessity and possibility of broad regional energy cooperation in Northeast Asia, while attempting to bridge the energy issue and the concept of security at the same time.

1 “Energy Security in a Fragile World,” Cambridge Energy Research Associates Research Highlights, on http://www.cera.com/aspx/cda/public1/news/researchHighlights/researchHighlights.aspx, accessed on 20 December, 2006.2 Vladimir I. Ivanov and Mitsuru Hamada, Energy Security and Sustainable Development in Northeast Asia: Prospects for U.S.-Japan Coordination, Article for Economic Research Institute for Northeast Asia, Niigata, Japan, p. 6, on http://gsti.miis.edu/CEAS-PUB/200013Ivanov-Hamada.pdf, accessed on 4 December, 2004.

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1.2. Background of the Research: Current Trends of Energy Security in Northeast Asia

Northeast Asia has been one of the fastest growing energy markets over the past 30 years. The end of the Cold War has brought positive political changes in Northeast Asia, and the opening of the Chinese and Russian economies has also enhanced multilateral economic cooperation. In particular, the importance of energy security, primarily the energy demand issue in the region has risen rapidly in recent years, as a result of population and income growth, and this trend will persist in the foreseeable future at a higher rate than in other parts of the world. Accordingly, the energy sectors continue to change rapidly in response to issues such as increasing demand, resource availability, environmental concerns, changing technology and the need for regulatory reform, and sector restructuring that will attract investment capital to fund supply infrastructure.3

Currently, the majority of Northeast Asian oil imports come from the Middle East. This Asian dependence on imports from the Middle East is expected to increase in the future. Long term projections for China’s economic growth, the possible unification of Korea, and energy consumption all lead Northeast Asian countries to consider that diversification of their energy supplies is inevitable. In this regard, development of energy projects in Central Asia and the Russian Far East provide Northeast Asian states with good options for securing their energy.

Moreover, the potential for extensive environmental deterioration caused by coal burning in China promotes the incentive to look at nearer and more competitive sources of natural gas in the Russian Far East. Regional demand for this efficient, plentiful, and clean-burning fuel is substantially increasing the momentum to produce, trade, and utilize natural gas. The demand for cross-border sale and purchase by both pipeline and Liquefied Natural Gas (LNG) ship is spreading in the region.4 For example, demand for natural gas has been rising at 9.3% per year since 1970 in this region.5 Northeast Asia is a net importer of gas, and imports could potentially increase sharply in the 2010-20 period.6 For example, three countries in the Pacific Basin – Japan, South Korea, and Taiwan – accounted for 68 percent of global LNG imports in 2002.7 Many experts also predict that the growth of the demand for gas will be particularly strong in China and Korea. In Korea, for example,

3 APEC ENERGY DEMAND AND SUPPLY OUTLOOK 2002, Asia Pacific Energy Research Center, Tokyo, Japan 2002, p. 1.4 Peter Ross, “Gas Pricing,” Workshop by Director, Wimbledon Energy for 11th Annual Seminar on Gas Pricing at Kuala Lumpur, 8-10, December 2003.5 Peter Cleary, “Development of East Siberian Gas for Export to China and Korea Markets,” Presentation by President, BP Gas Power & Renewables Korea for Sakhalin & North Asia Oil, Gas & Pipelines 2003, Seoul, Korea, 12-13 November, 2003.6 APEC ENERGY DEMAND AND SUPPLY OUTLOOK 2002, Asia Pacific Energy Research Center, Tokyo Japan 2002, p. 5. 7 “Global Liquefied Natural Gas Markets: Status and Outlook/ LNG Importers,” Energy Information Administration (EIA),on http://www.eia.doe.gov/oiaf/analysispaper/global/importers.html, accessed on 9 September, 2005.

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demand for natural gas will double, increasing from 25bm³/in 2003 to almost 50bm³/by 2020, whereas demand in China is forecast to increase five fold from 30bm³/ in 2003 to more than 160bm³/by 2020.8

In this regard, Russia, as the world’s No. 1 natural gas and No. 2 oil exporting country, becomes an energy solution for Northeast Asian countries. In particular, Russia’s natural gas could provide an alternative to coal and oil for power generation. As a fuel, it is cleaner than oil and coal, since it produces no sulphuric discharges and much less carbon dioxide.9 Thus the oil and natural gas pipeline projects on which Russia is currently engaged in Northeast Asia have great strategic importance for enhancing not only Russia’s economic and energy security, but also that of Northeast Asia as a whole. Regional energy cooperation would facilitate a reconfiguration of political and economic ties, with Russia moving into a position of advantage.

Specifically, Russia’s export of energy could facilitate the investment of Japanese, Chinese and South Korean capital and technology in Russia’s oil and gas sector too. For example, the Kovykta gas project, one of Russia’s biggest and most far-reaching, is fast approaching implementation stage. The project’s goals—developing a new East Siberian gas- bearing region while tapping new markets in East Asia—are highly ambitious. On the energy demand side, access to Kovykta, East Siberian- Pacific Ocean pipeline and Sakhalin oil and natural gas are crucial for enhancing each of the Northeast Asian states’ energy security, given that the demand for oil is increasing steeply, as is the dependence on overseas sources. Japan and South Korea are the world’s second and the fourth largest oil importing country respectably.10 Japan, South Korea, and China have a vested interest in diversifying their energy supply sources, and its proximity to the Russian Far East would lead to a drop in the cost of transporting energy sources.

2. Purpose and Contribution of the Research

■ Despite the importance of energy security in the region, once again no other significant effort has been implemented among the Northeast Asian community at the government, private sector, or even academic level. Therefore, Ilmin International Relations Institute seeks to promote analysis and policy discussion of the geopolitical, economic security implications of Northeast Asia’s rapidly growing energy challenges.

Through a program of research; hosting international conferences inviting energy experts from China, Mongolia, Taiwan, Japan, the US, and the two Koreas; publications; policy studies; and seminars, the program seeks to promote an informed public policy dialogue in

8 Cleary.9 Cleary.10 See The CIA World fact book, Global oil consumption and production, www.MarkTaw.com, on http://www.marktaw.com/culture_and_media/politics/GlobalOil.html, accessed on 20 April, 2005.

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the US and Asia to assist in meeting the region’s energy needs and to enhance prospects for regional energy and economic cooperation.

Ilmin’s Energy Security program seeks to promote more effective energy policies in the region, further the public policy dialogue, and enhance prospects for cooperation and market solutions to the region’s energy challenges.

■ Specifically this project will help us

1) Conceptualize non- traditional dimension of security and definition of the energy security in the region.2) Link politics (International Relations and International Political Economy) and energy issues. 3) Understand trends in Russian, Caspian and Chinese oil and gas production.4) Identify the dynamics in Northeast Asian oil and gas business.5) Anticipate the influence of politics and regulatory issues on Russian and Caspian energy production and export.6) Understand the priorities and concerns of local energy partners.7) Develop key strategies for mitigating risk in a quickly changing business environment.8) Identify opportunities for investment in the Eurasian oil, gas, and power sectors.9) Identify the obstacles obstructing energy cooperation in the region.10) Contribute regional energy (economic) integration in the region.

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