Free Web NovelWhen it came to the construction of the oil and gas pipelines, all of us were in agreement.
But once the usage fees came up, our opinions diverged.
“Our Republic wants the same conditions as Ukraine.”
Jang Songthaek wanted the contract for usage fees on the gas and oil pipelines passing through North Korea to mirror exactly the terms Ukraine received.
Medvedev’s expression hardened at that demand.
“That’s nonsense. Do you have any idea how much natural gas passes through Ukraine into Western Europe? And how long that route is? Applying the same conditions makes no sense.”
As Medvedev said, Ukraine’s gas pipeline played a crucial role for Russia.
Major Western European countries like Hungary, Austria, the Czech Republic, and Bulgaria imported roughly 80% of their Russian gas through the Ukrainian pipeline.
Russia supplied about 300 million cubic meters of natural gas to Europe each day, and most of it flowed through Ukraine’s gas pipelines.
It was only natural that European countries had fallen into chaos when I previously asked the owner of the Kremlin to shut off Russia’s gas pipelines.
For them, Russian natural gas was no different from a lifeline.
At the time, the justification for shutting off the gas had been Ukraine’s excessive usage fees.
“The pipelines installed in Ukraine alone stretch over ten thousand kilometers. But even if you connect everything as densely as possible, the pipelines linking North Korea and South Korea won’t reach five thousand kilometers. Contracting under the same conditions is something Russia simply cannot accept.”
Russia paid Ukraine more than seven hundred million dollars a year in usage fees.
Back in the Soviet era, Russia had used those long pipelines for free.
But after the Soviet Union collapsed and Ukraine gained independence, Russia had to start paying transportation fees it had never paid before—so of course it felt wasteful from Russia’s perspective.
“We cannot pay pipeline usage fees. Instead, we’ll supply gas to North Korea at half the market price.”
North Korea wanted usage fees; Russia refused to pay them.
The discussion went back and forth several more times, but it was nothing more than a repeating loop of the same arguments.
I stepped into their exchange.
“Chairman. Will North Korea be bearing the cost of constructing the pipelines that pass through its territory?”
At my question, Jang Songthaek pressed his lips tightly together.
“All construction costs will be borne by Russia and South Korea. And yet you’re asking for excessive usage fees. Frankly, I can only see that as greed. The reason I’m pushing for pipelines to pass through North Korea is simple—it benefits North Korea as well. Even supplying natural gas at half the market price instead of collecting usage fees would still be an enormous gain.”
“But the land the pipelines pass through is practically rendered unusable, isn’t it? And the pipelines require constant maintenance. We must receive usage fees.”
Jang Songthaek’s argument also had merit. Looking back and forth between the two of them, I spoke.
“Then let’s do it this way. Russia will cover the cost of pipelines built within Russia, North Korea will cover the pipelines passing through North Korea, and South Korea will cover those built within South Korea. In return, we’ll pay maintenance costs under the name of usage fees.”
“······Our Republic doesn’t have the capacity to shoulder such massive construction costs right now.”
Greedy, aren’t you. It seemed Jang Songthaek had been hoping to get the pipelines built for free.
“Chairman. It’s better for North Korea in the long run to bear the installation costs. The initial investment will be large, but over time, its value will be immeasurable. The same goes for North Korea—countries like South Korea and Japan import natural gas at about 1.5 times the price paid by countries supplied via pipelines.”
Natural gas can be broadly categorized into three types based on storage and transport.
Pipeline Natural Gas (PNG), supplied in gaseous form through pipelines; Liquefied Natural Gas (LNG), rapidly cooled into liquid form and transported by ship; and Compressed Natural Gas (CNG), supplied by compressing gaseous natural gas.
A representative example of PNG was Russia’s method of supplying natural gas to Europe.
East Asian countries like South Korea and Japan imported natural gas primarily as LNG.
Supplying gas directly through pipelines versus shipping liquefied gas after an additional processing step naturally resulted in significant cost differences.
“If pipelines are built, costs can be reduced dramatically. North Korea would receive gas at half the market price simply because the pipeline passes through its territory. Don’t focus only on immediate gains—look at the long term. For the future of North Korea, this pipeline construction is absolutely necessary. If you continue insisting on excessive usage fees, we’ll have no choice but to route the pipeline offshore instead of through North Korean land.”
The plan to run pipelines through North Korea wasn’t just about reducing construction costs.
I would need large amounts of oil and natural gas for the businesses I planned to run in North Korea going forward.
If North Korea demanded usage fees on the same terms as Ukraine, it would actually be a loss in the long run.
In that case, even if construction costs doubled, it would be better to build the pipelines offshore.
While Jang Songthaek pondered, I turned to Medvedev.
“And Medvedev, you shouldn’t just keep saying no either. You know as well as I do that even after construction, maintenance costs will be ongoing. You are the Chairman of Gazprom’s board, after all.”
Medvedev nodded and replied.
“I’m aware. There will be maintenance costs. But we still can’t contract under the same conditions as Ukraine. Russia and South Korea will be paying all the construction costs. In the end, wouldn’t North Korea just be sitting back, watching the show, and enjoying the cake?”
Well, he wasn’t wrong. I nodded in agreement.
“Medvedev, how much do you pay Ukraine annually in transit fees?”
“In cash alone, roughly seven to eight hundred million dollars.”
I couldn’t help letting out a gasp. Eight hundred million dollars just for right-of-way fees.
“That’s more than I expected.”
“That’s not all. Under the pretext of gas transit fees, we also supply about seventeen billion cubic meters of gas annually. But since Ukraine receives that gas at roughly one-quarter of the market price, the total benefit Ukraine gains amounts to tens of billions of dollars each year.”
The money Ukraine received from Russia came in two forms: transportation fees and gas transit fees.
“It’s like swimming while holding onto dry land. And all the pipelines laid across Ukraine were built during the Soviet era, weren’t they?”
“There are some newly built sections, but most of them were installed during the Soviet period. After the Soviet Union collapsed and Ukraine became independent, we had to start paying money we never needed to pay before—it drives us mad.”
If I were losing tens of billions of dollars every year, I’d be furious too.
“Ukraine’s largest company is the state-owned gas company Naftogaz Ukraine. Its primary revenue comes from the gas transit fees it charges us.”
Medvedev continued, his tone heated.
“We would rather not lay pipelines at all than pay gas transit fees to another country. That’s Russia’s position. Instead, we’ll supply gas at a lower price.”
“So the same price as Ukraine is out of the question?”
Medvedev shook his head firmly.
“No. We’re planning to renegotiate with Ukraine soon as well. We’ll adjust the gas supply price to about half the market price. One-quarter was excessive. Back in the Soviet days we were friends, but now we’re different countries.”
It was regrettable, but even supplying gas at half the market price was still quite cheap.
As North Korea’s economy grew, energy would become indispensable.
Consumption of oil and energy would continue to rise, and being able to import natural gas at half price would ultimately be a major benefit to the North Korean government.
“Even so, if you insist on gas transit and transportation fees, we’ll have no choice but to supply gas at the original price.”
With that, Medvedev fell silent.
Both sides had stated their positions. The two of them looked only at me, waiting for a compromise proposal.
After stroking my chin for a long moment as if deep in thought, I spoke.
“Then let’s do it this way. I’ll personally cover all construction costs, which amount to tens of billions of dollars. In return, Russia will allow us to sell the natural gas we import to other countries, and North Korea will forgo gas transit and transportation fees. Instead, we’ll handle all maintenance as well.”
The owner of the Kremlin had already promised to grant me exclusive rights to the pipeline running through the Korean Peninsula.
Medvedev had no choice but to accept that decision.
“Russia agrees with President Kim’s proposal.” frёewebnoѵel.ƈo๓
Compared to Europe, the East Asian market was small to begin with.
China—the largest market in East Asia—was already building pipelines directly between Russia and China, so it wasn’t a major concern.
“And what about you, Chairman Jang Songthaek?”
“So aside from receiving natural gas at half price, our Republic gains no other benefits?”
Of course not. The larger North Korea’s market became, the more I would benefit as well—so it was time to offer a carrot.
“Let’s jointly develop industrial complexes along the east coast under government leadership. Petrochemicals or steel would be ideal. Dream High will handle the investment.”
“You’re suggesting building a heavy chemical industrial complex?”
“Yes. At one time, North Korea’s petrochemical technology was renowned worldwide. It has declined now, but that underlying capability hasn’t disappeared. We’ll handle technology transfers through Jungyu Heavy Industries and Jungwoo Chemical. There’s no need to support steel technology separately, is there? North Korea’s capabilities in steel are already among the best. I understand you’re even developing new technologies as we speak.”
“······How did you know that?”
Jang Songthaek’s eyes widened. Only a handful of people knew this, so his reaction was understandable.
Even Jang Songthaek himself probably only learned about it after consolidating power.
In my previous life, it had been a major issue covered repeatedly in Korean media, so it was only natural that I remembered it.
“There was a lot of talk about self-reliant economics and the like. Steel production couldn’t rely solely on imported raw materials. But we can discuss that later. For now, how about sharing the benefits of the gas and oil pipelines indirectly in this way?”
The petrochemical industry required enormous amounts of energy.
The downfall of North Korea’s once-thriving heavy industry had ultimately been due to chronic energy shortages.
“When you say you’ll invest······?”
“How about forming a joint venture between North Korea’s state-owned enterprises and the Jungwoo Group? The state-owned enterprises would hold 50.1%, and the Jungwoo Group 49.9%.”
After a brief moment of consideration, Jang Songthaek nodded.
“Natural gas supplied at half the market price, and investment by the Jungwoo Group in a petrochemical complex along the east coast······. Very well. Under those conditions, we agree.”
With Jang Songthaek’s consent secured, I smiled and summarized the agreement.
“Dream High °• N 𝑜 v 𝑒 l i g h t •° will cover all construction costs for the gas and oil pipelines. Until the usage rights are transferred to the Russian government and Gazprom, Dream High will also bear all maintenance costs.”
Talking nonstop had left my throat dry. I picked up the water in front of me, took a sip, and continued.
“Russia will allow the resale of crude oil and gas that enter South Korea through those pipelines after processing. North Korea will receive natural gas at half the market price through the pipeline, limited to domestic use. Is that correct?”
Both men nodded at the same time.
“North Korea will construct a petrochemical industrial complex along the coastline where the pipeline passes, and the Jungwoo Group will invest in that complex and transfer the necessary technologies.”
By now, it seemed like a satisfactory deal not only for Russia, but for North Korea as well.
Sure enough, both of their faces looked bright.
With the major issue resolved, everything else fell into place swiftly.
“Looks like we’ve got things more or less settled.”
After about two more hours of discussion, we finally completed a draft of the agreement.
“This won’t be what gets announced to the media, of course.”
Once each government stepped in to revise the detailed clauses based on this draft, construction of the pipelines could finally begin.
“I’ll return to South Korea tomorrow, rest for a day, and then head straight to Japan. Medvedev, do you have any other plans?”
“Not particularly. I plan to return to Moscow tomorrow as well.”
Turning to Jang Songthaek, I asked,
“And you, Chairman? Any other plans today?”
“No. I cleared my entire schedule today for this agreement.”
“Then let’s have a drink to celebrate closing the deal.”
“Sounds good. I’ve already had things prepared.”
Prepared in advance, even though he didn’t know when it would end. It was clear how much Jang Songthaek had been hoping for this.
I chuckled softly as I stood up, then jokingly threatened the two of them.
“Tonight, let’s drink until we drop. Don’t even think about running away until you both pass out.”
