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. Last Updated: 07/27/2016

Environmentalists Challenge Pacific Pipeline

PEREVOZNAYA, Far East -- Stretching from Lake Baikal to the Sea of Japan, the first trans-Siberian oil pipeline is to run 4,100 kilometers -- more than three times longer than the trans-Alaska pipeline. With a price tag of $15.5 billion, it looms as modern Russia's biggest infrastructure investment, President Vladimir Putin's answer to the Trans-Siberian Railway of the tsars.

Because China and Japan both rely on the Middle East for about 85 percent of their oil imports, both economic giants competed fiercely over what could be the world's longest and most expensive oil pipeline.

Trumping China with a more generous financing offer, Japan, the world's second-largest oil importer, hopes that the 1.2-meter-diameter pipe will bind it to Russia, the world's second-largest oil exporter.

It may be a decade before the pipeline is completed. But the line would represent about a one-third increase in Russia's export oil pipeline capacity and would mark a major Russian shift toward the Pacific, where oil could be sold to any country, including the United States.

But the project still faces major hurdles. There are no guarantees there will be enough oil to fill the pipe, although Russia has as much as 67 billion barrels of untapped oil reserves along the pipeline route. When the oil reaches the Sea of Japan, there are no public commitments binding Russia to sell it to Japan, whose ports are only a day's sail away. And Russia's last-minute switch of the Pacific terminal site from an existing oil port to this pristine bay is already putting Japanese banks in the crosshairs of a growing global environmental protest movement.

Contrary to the traditionally opaque nature of many major Russian investments, the pipeline is expected to come under rigorous international scrutiny. The Kremlin has vowed not to contribute state funds for the pipeline construction.

Instead, Transneft, the state pipeline monopoly, has been told to go find its own financing, preferably on international markets.

Foreign banks, especially the Japan Bank for International Cooperation, will increasingly face questions over the pipeline's future profitability and over Moscow's little-publicized decision in December to switch the pipeline terminus from Vostochny, Russia's main industrial port in the Pacific, to Perevoznaya, a tranquil bay known for its beaches and wild nature.

In the summer, this bay's sandy beaches and warm waters are frequented by ferry loads of beachgoers from Vladivostok, 16 kilometers to the east. In the winter, this frozen semi-wilderness is home to some of the last 30 to 40 Amur leopards in the world. On the brink of extinction, this black-spotted cat is one of 50 endangered species found only in this corner of Pacific Russia.

To get to the terminal and planned oil refinery, dozens of tankers would steam daily past Russia's only maritime nature reserve, a collection of 11 islands prized for 3,000 species -- a rare wealth of biodiversity that comes from a meeting of boreal and subtropical water currents. Navigating an eight-kilometer-wide channel littered with more small islands, the tankers would then enter a maritime cul-de-sac with such shallow waters and fragile ecology that environmentalists have started calling Perevoznaya Bay "Siberia's Prince William Sound," evoking memories of the 1989 oil spill in Alaska by the oil tanker Exxon Valdez.

"We are already seeing the start of an environmental campaign on this issue, which is really going to grow in coming months," said David Gordon, executive director of Pacific Watch, a California-based environmental group.

"The pipeline will be a test case of whether or not Russia can meet the top-level environmental standards that the public expects from oil and gas projects around the world."

This winter, U.S. and European environmentalists are organizing an international campaign to persuade Moscow to go back to its original plan to build the oil pipeline to Vostochny, a modern industrial port and railhead built 30 years ago next to Nakhodka.

Adding urgency, May 1 is the new deadline for Transneft to draw up a pipeline construction timetable and for the Transportation and Defense ministries to draw up oil tanker shipping routes to Perevoznaya Bay.

Last fall, Russian environmentalists began collecting signatures on protest petitions and writing letters to Putin and Transneft. Particularly alarming to protectors of endangered species, Transneft plans to get the oil here by building the pipeline through one nature reserve and along the southern border of a second preserve.

"If the pipeline is to be built in this area, a tremendous part of the tiny leopard and tiger habitat will be cut off," Dmitry Pikunov, a Russian biologist, said one recent afternoon as he drove through Barsovy Wildlife Refuge, the land reserve that would be bisected. Noting that the Siberian tiger has other strongholds in Primorye region, he added: "If a port is built near this reserve, no animals will stay. And this area represents the leopard's last stand."

Anatoly Lebedev, a Vladivostok environmentalist leading the opposition campaign, said: "It is obviously a crazy idea to kill all the recreational industry in the district, which offers generally cheap and accessible recreation on the sea coast for millions of Far Easterners and Siberians."

Anton Semyonov, another environmentalist in Vladivostok, said he was worried that the bay's "strong currents would carry oil from any spills far and wide."

The oil terminal project also presents a test between Japan's energy anxieties and its environmental concerns. Representatives of Japan's development bank have participated closely in negotiating potential Japanese financing for the project.

Conceivably, this Japanese bank could finance up to 80 percent of the project, which would make it the largest loan in the bank's history. From an original price tag of $6 billion, costs have ballooned over the last two years, inflated by rising steel prices and the technical challenge of building across soils affected by differing conditions of permafrost.

Although Japanese studies say there will be enough oil found near the pipeline route to fill the pipeline, skeptics say the line could be a 21st century Trans-Siberian Railway -- a wonderful exercise in nation-building that has never made a profit.

Initially, the pipeline was to be far shorter, going to Skovorodino, a Siberian town 60 kilometers north of the Chinese border, and then angling south into northern China. A later version had the pipeline forking at Skovorodino, with one-third of the oil going to China and two-thirds going to Vostochny, and the open market.

But Japan overpowered China in the bidding war, although, to appease China, Russia has promised to increase its annual shipments of oil to China by rail to 300,000 barrels per day next year.

Moving aggressively, Japan offered $7 billion in soft loans for construction of the line and billions more to help Japanese oil companies search for and develop oil in eastern Siberia.

Tokyo lobbied heavily to get the entire pipeline to the Sea of Japan -- 1.6 million barrels per day. Although oil supply guarantees have not been worked out, Japan, with its sea ports only 440 kilometers to the southeast of Vladivostok, is expected to be the primary buyer.

But much of the oil is expected to go on the open market, available for shipping to South Korea, China or even the United States.

With Transneft keeping quiet about its decision to make Perevoznaya the terminus, many outsiders believe the planned route is still to follow the Trans-Siberian Railway to Nakhodka-Vostochny.

But Japanese and American environmentalists are preparing to campaign to pressure the Japan Bank for International Cooperation to condition its loans on the Nakhodka terminus.

With a major environmental battle looming, the Japanese development bank is stepping cautiously.

"If JBIC considers the possibility of financing this project, we have to review, not only in terms of the financial aspect, but of the environmental point of view," Yoshimi Tamura, spokeswoman for the Japanese development bank, said in Tokyo.