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Foreigners Fight Putin's Asia Oil Pipe, Operator Says

Pipeline and Power LinesJan. 19 (Bloomberg) -- Foreign states tried to derail Russian Prime Minister Vladimir Putin's project to build an oil links to supply Asian markets with Siberian crude, national pipeline operator OAO Transneft said.

Representatives of foreign governments met with and funded Russian environmental and public interest groups in the Far East region that sued to stop or delay construction of the pipelines, Transneft Chief Executive Officer Nikolai Tokarev said in comments broadcast on state television today.

"Russia now has a powerful corridor to Asia-Pacific markets and, naturally, many states don't like Russia having this capacity," Tokarev said, without naming any countries. "Of course a company which builds these advantages for Russia needs to be stopped, through different means."

Putin has brought the country's energy industry under state control and sought to expand sales beyond Europe since becoming president in 2000. Russia has boosted output more than 50 percent in the period, surpassing Saudi Arabia as the world's largest oil producer.

Transneft finished building the first phase of its East Siberian Pacific Ocean pipeline in 2009, a year behind schedule. The Moscow-based company made its first direct deliveries to China on Jan. 1 via a spur of that link.

Fraud Claims

The ESPO link will cost 770 billion rubles ($26 billion) and span 4,700 kilometers (2,900 miles), longer than the distance from London to Tehran, when completed. It will carry oil from Taishet, beyond the west Siberian basin where most of Russia's oil is produced, to the Pacific port of Kozmino near North Korea and China when completed as early as next year.

Tokarev said allegations of a $4 billion fraud during the construction of the pipeline, published by laywer Alexey Navalny in November, were part of a campaign to discredit Transneft.

"When a company faces an information war, this always damages its image," he said. "I'm sure it's got nothing to do with Transneft itself."

Navalny, who returned to Moscow in December after six months as a world fellow at Yale University, said Transneft was avoiding a response by engaging in "Cold War rhetoric."

"They totally refuse to explain the facts of corruption, which investors deserve to know about," Navalny, a minority shareholder in Transneft, said in a phone interview today.

The lawyer published on his website in November what he said was a report by the state budget watchdog, showing that officials at Transneft embezzled $4 billion while building the pipeline. The allegations, which the company and the Audit Chamber denied, prompted Putin to call for an investigation on Dec. 30.


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