October 04, 2012 11:43
Plans to build a gas pipeline linking South Korea and Russia via North Korea has hit a snag due to North Korea's outrageous demands.
A South Korean government source said talks have dragged on because the North is demanding a transit fee that is two to three times more than international rates.
Based on a method of calculation used by Ukraine -- about $2 per 1,000 cubic meters of natural gas for 1 km of pipeline -- a reasonable fee would be about US$150 million a year given the estimated amount of gas South Korea would import from Russia and the 700-800 km of the gas pipeline running through the North. But the North reportedly demanded $300-500 million a year.
"It's likely that the North asked for such a high price in the first place to gain the upper hand in future talks," the source added. "There have been no full-fledged talks yet. At the moment, Pyongyang, Seoul and Moscow are just trying to read each other's minds."
North and South Korea have separately been discussing terms with Moscow since September last year. Prices of natural gas vary greatly, depending on time of supply, contract period, amount of gas, pipeline fees and the possibility of resale to a third country.
A Foreign Ministry official said, "Nothing has been decided. There are still lots of things to discuss."
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