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. Last Updated: 07/27/2016

Illarionov Urges Private Investment in Pipelines

Russia's oil and gas pipeline network should be built and operated by both public and private companies and not kept as a preserve of the state, President Vladimir Putin's top economic adviser Andrei Illarionov argued Friday.

Russia, the world's second biggest oil exporter, faces export bottlenecks as state pipelines struggle to cope with fast rising production, currently 8 million barrels per day and set to rise by at least 20 percent in the next few years.

"I cannot see a single economic reason why things should not work here as they have everywhere else over the last century," Illarionov told reporters after a meeting with Saudi Oil Minister Ali al-Naimi.

Illarionov said there should not be a monopoly in the pipeline business any more than in the electricity business.

He was referring to Russia's ongoing break-up of its huge state power monopoly, Unified Energy Systems, or UES, into smaller generators.

"A monopoly corrupts and an absolute monopoly corrupts absolutely," he said.

Russia on Thursday delayed making a decision on a pipeline project to carry its crude to the east until May.

Russia's second largest oil firm, Yukos, hopes to build a 600,000 bpd oil pipeline from Western and Eastern Siberia to Daqing in northeast China by 2005 at a cost of around $2.5 billion.

Russia's pipeline monopoly, Transneft, has put forward a rival offer and aims to construct a pipeline to the Pacific port of Nakhodka by 2007.

Twice as long and considerably more expensive, the pipeline would ship 1 million bpd of crude oil to Japan, China and the United States.

Transneft in early March proposed combining the two plans.

Prime Minister Mikhail Kasyanov said Friday that a project aiming to please both Japan and China most likely be the outcome.