Russian Tunnel To Alaska?
Picture a tunnel across the Bering Strait with oil and natural gas pipelines and a train.
A planned 3,700-mile transportation corridor from Siberia into the United States will feed into the tunnel, which at 64 miles will be more than twice as long as the underwater section of the Channel Tunnel between Britain and France, according to the plan. The tunnel would run in three sections to link the two islands in the Bering Strait between Russia and the United States.
The Bering Strait tunnel will cost an estimated $10 billion to $12 billion. The rest of the investment will be spent on the entire transportation corridor, according to the plan.
This may sound far-fetched. But the channel tunnel (chunnel) linking the UK and France is 31 miles long. Britain and France have more commerce flowing between them than Russia and the US would. Except the US has a huge appetite for oil and natural gas.
As for the $10-$12 billion cost for the tunnel and total of $65 billion for the larger project: At $50 per barrel and about 21 million barrels per day the United States spends the tunnel's cost on oil in less than 2 weeks. The US spends the whole project's cost on oil in about 2 months. That's chump change for energy projects. But does the project make economic sense? I suspect the Russian leaders want to avoid getting too dependent on oil and natural gas sales to China. Best to build up a few routes of export to different customers.
What I wonder: How could such a structure handle an 8+ Richter scale earthquake?
Since the Richter scale is logarithmic, the engineers would need to account for seismic activity at least an order of magnitude greater than 8.
The Good Friday Earthquake (also called the Great Alaska Earthquake) of Friday, March 27, 1964, 5:36 P.M. AST (03:36 3/28 UTC) caused 131 deaths, was the most powerful recorded earthquake in U.S. and North American history (magnitude 9.2), and the third most powerful ever measured by seismograph. The epicenter was about 10km east of the mouth of College Fjord (61.04N, 147.73W), approximately 90 km west of Valdez and 120 km east of Anchorage. The duration of rupture was located approximately 25km under the epicenter and lasted approximately 4 minutes. The earthquake also caused some parts of Alaska to be liquefied, causing much damage to property and leading to landslides. Link.
Further the chunnel was drilled though chalk and other loosely consolidated material.
History provides us with several examples of "monster projects" such as the proposed Bering Straits Tunnel. See the Suez and Panama Canal, and more recently the Channel Tunnel between France and Great Britain, all of which are still going strong and prove extremely useful.
Yet each of these projects proved a major disaster for the inital investors, because when they thought were buying a right to cash in on commercial traffic via a particular canal or tunnel, it turned out they had in fact paid for the right to be liable for unknown or misrepresented building costs which invariably rocketed way over and above what they were gullible enough to believe in the prospectus.
This age-old principle has proved itself time and time again.
We must be particularly wary when Russia is involved.
Viktor RAZBEGIN of the Russian Economy Ministry tells us not to worry because "the governments will act as guarantors for private money".
A century ago more than a million French households massively invested in Russian government, infrastructure, utilities, and railway bonds.
They all came with a Russian government guarantee.
Not a single one has ever been paid back.
Today the Russian Federation still refuses all form of contact with 400000 present day bondholders. The total amount outstanding is in excess of US$80 billion.
How could anyone trust Mr. RAZBEGIN and his chiefs?
Mr. RAZBEGIN, before issuing new worthless Russian government guarantees you must first deliver on the outstanding ones.
To avoid losing ALL your investment please read the following INVESTOR ALERT below. This is not rhetoric. This is present-day economics.
RUSSIAN IPO INVESTOR ALERT
French holders of Russian government bonds remind investors that the Russian Federation is still in default today (April 2007) on their estimate of some US$ 90 billion owed to them since the Bolshevik, then the Soviet, and now the Russian Federation governments have all unilaterally repudiated Tsarist debt and refused any form of contact or dialogue with their legitimate bona fide creditors.
They also remind investors that in its Sep. 15th 2006 report entitled "Governance matters: a decade of measuring the quality of governance", the WORLD BANK has rated Russia's governance comparable to that of Swaziland, Zambia and Kazakhstan. Russia came 151st out of 208 countries in terms of (...) accountability, quality of regulatory bodies, and rule of law, (...). In particular, rule of law (i.e. the courts and the quality of contract enforcement) was judged as effective in Russia as it is in Ecuador, Indonesia, and Bangladesh. Nicaragua, East Timor, and China's ability to control corruption was judged similar to Russia's.
On February 26th 2007 the St. Petersburg Times, quoting a report from Vedomosti, wrote that "Surgutneftegaz managers covertly hold 72 % of the secretive oil firm" and that Deutsche UFG had had to "raise its estimate number of outstanding shares from less than 26 billion to (...) 43 billion" which "implies a 40% dilution in the value of the stock".
In Paris on April 3rd 2007 to launch the merged NYSE-EURONEXT entity Mr. John Thain, the New York Stock Exchange CEO, warned that he was "very concerned about the quality of corporate governance, the transparency of company financials and the protection of minority shareholders. A number of Russian companies raise serious questions around these issues."
Despite these findings, and the main rating agencies' knowledge that Russia is in default on US$ 90 billion of Tsarist debt, Russia is rated "INVESTMENT GRADE" whereas it should clearly be in "SELECTIVE DEFAULT".
French bondholders intend to pursue their claim until full settlement at present value, by any legal means and in any jurisdiction they deem appropriate.
EVERY POTENTIAL INVESTOR IN RUSSIA MUST BE MADE AWARE OF THESE RISKS.
FRENCH CREDITORS OF THE RUSSIAN FEDERATION STRONGLY ADVISE AGAINST ANY FORM OF INVESTMENT IN A COUNTRY WHOSE SOLVENT GOVERNMENT HAS IN THEIR VIEW SYTEMATICALLY REFUSED TO FULFIL ITS NATIONAL AND INTERNATIONAL CONTRACTUAL OBLIGATIONS, REFUSES ALL CONTACT AND DIALOGUE WITH ITS LEGITIMATE BONA FIDE CREDITORS, AND REFUSES TO DISCLOSE LIABILITIES WORTH US$ 90 BILLION.