18-02-09 Russia, which has already profited handsomely exporting natural gas to Europe via pipelines, opened its first liquefied natural gas plant to supply fuel to Asia in tanker ships.
Built on an island off the eastern coast of Siberia, the plant -- part of the $ 22 bn Sakhalin-II development -- will greatly expand the already broad horizons of Russia's natural gas exporting empire. Futures contracts have already been signed to ship Russian gas as far away as the West Coast of the United States.

The plant's opening also marks the realization, after many years of planning and false starts, of a trade in eastern Asia long seen as ripe with promise: the marriage of Russian natural resources with Asian financing and manufacturing prowess.
The Sakhalin-II project, on Sakhalin-Island, just north of Japan, is the largest Russian energy project supplying Asia to come online to date. Though partially nationalized by the state energy company Gazprom in 2007, the project remains operated by its original developer, the English-Dutch oil giant Shell. Two Japanese trading houses, Mitsui and Mitsubishi, are also partners. The development links three offshore platforms, hundreds of miles of pipelines and the LNG plant along an isolated stretch of Pacific coastline. When the plant reaches full capacity in 2010, it will chill and ship about 5 % of the world's LNG supply.

President Dmitri Medvedev of Russia and Prime Minister Taro Aso of Japan attended the opening, where company executives pressed a large, ceremonial blue button to begin operations.
"I will not conceal that we are happy about this," Medvedev said, noting the plant would promote "Russia's position as a global supplier of natural resources."
Aso said the plant showed Russia was "building a window to Asia."

Apparently addressing worries that have arisen in Europe over Russia's use of energy as a political weapon, Medvedev struck a conciliatory tone in his comments, acknowledging that "mistakes" were made in Russian energy policy in the past.
"At times we do not fully calculate political risks and practical consequences," Medvedev said.

Still, Russia's energy ambitions in the Asia-Pacific region are gathering momentum. Earlier, the Russian national oil company, Rosneft, and the national pipeline operator, Transneft, finalized a deal for $ 25 bn in loans from the China Development Bank. In exchange, the Russian companies agreed to provide about 300,000 additional barrels of oil per day to China over 20 years through a trans-Siberian pipeline scheduled to reach China in 2010.
And State Grid, the largest electricity distributor in China, agreed to buy power from Russia.

After years of piling up trade surpluses with the United States, China is awash in cash, with the largest currency reserves in the world. The Russians are hoping that Chinese investment can compensate for the vast sums Western investors have pulled out of in recent months. China, meanwhile, sees an opportunity to invest cheaply in natural resources it will need when its economy recovers.
Such deals with China are a potential saviour from the economic vise of plunging petroleum prices and vanishing foreign investment that is tightening on Russia. So dire have Russia's fundamentals become that even typically upbeat financial analysts have been taking a funereal tone recently.

Chris Weafer, chief analyst for Uralsib bank in Moscow, published a research note describing the Russian equity markets as "a highway along which asset valuations and investor sentiments are being driven by the infernal troika of oil, ruble and economy. All three of which have reached the banks of the river Styx and are scrambling to find the appropriate number of kopeks to pay the ferryman."
Russian corporations, for example, must repay $ 117 bn in debt to Western banks this year in a stark reversal from the inflow of foreign investor money that buoyed Russia's economy in recent years. Thus, just the $ 25 bn oil deal with would offset nearly a quarter of this so-called capital accountdeficit in 2009. The deficit is one of the factors pushing down the value of the ruble and depressing the Moscow stock exchanges.

If the global recession deepens, the Kremlin may be willing to put more on sale, economists say.
"If the situation remains tense in Russia and world economy, we will see more concession to China," possibly in metals or mining as well as energy, said Vladimir Tikhomirov, the chief economist at Uralsib.

Japan, while also holding large reserves and seen as eager to invest in Siberian natural resources, is not likely to plough ahead as quickly, he said. A dispute over the status of four small islands north of Japan, occupied by Russia since World War II, is unlikely to be resolved soon, and is an obstacle in the countries' relations.
The Sakhalin-II site, in the works since the early 1990s, had a turbulent history. In 2006, A Russian environmental regulator threatened to halt work on a pipeline. After a tense few months, Shell and the Japanese trading houses agreed to sell 50 % plus one share -- a controlling stake -- to Gazprom for $ 7.45 bn. After the sale, the environmental objections were lifted.