LONDON—Russia, the world's top oil producer, is set to make deep inroads into Asian energy markets at the expense of Mideast rivals thanks to a new pipeline that pumps crude from the oilfields of Siberia to a new terminal on the Pacific Ocean.

The pipeline, a pet project of prime minister Vladimir Putin, is key to Russia's efforts to diversify its export routes away from Europe and tap growing energy demand in Asia. It is also important to countries such as China that want to reduce their dependence on Middle East oil.

Mr. Putin inaugurated the first stage of the $12 billion East Siberia-Pacific Ocean pipeline, or ESPO, last month. The crude it carries, also referred to as ESPO, is already proving a hit with Asian customers. ESPO "will likely displace some similar quality Middle East crudes," the International Energy Agency said in its monthly oil market report Friday.

Officials sign a branch of the new oil pipeline in Russia's Far East. ITAR-TASS

ESPO heralds an "important step change in world crude markets," JP Morgan oil analyst Lawrence Eagles wrote in a research note Friday. "It provides Russia with the infrastructure necessary to act as a swing producer between Western and Eastern markets."

In recent years, as relations between Russia and Europe deteriorated, Russia has repeatedly threatened to divert its energy exports to Asia. But with nearly all its oil and gas pipelines flowing east to west, the threat has rung hollow. That is now changing.

"Europe will now have to compete with Asia for Russian crude," said Dianne Munro, a senior oil-market analyst with the IEA.

ESPO crude's advantage over competing blends is its proximity to the oil refineries of northeastern Asia. The new $2 billion terminal, at the Pacific coast port of Kozmino, is five days' sailing time from markets in China, South Korea and Japan. Producers in the Middle East, Africa and Latin America face journeys of at least two weeks.

The launch of ESPO, which will be fed by a new generation of oilfields being developed in the wilderness of Eastern Siberia, comes amid surging oil demand from China. China's imports of crude topped 5 million barrels a day last month, a record high. In contrast, demand in Europe has fallen by 1 million barrels a day over the last three years.

Analysts say ESPO could significantly change the dynamics of Russian oil exports. The IEA said Russian loading schedules show crude exports are already being rerouted from ports on the Baltic and Black Seas towards the east. Tighter Russian supplies to European markets could push up the price of Urals, Russia's main export blend, which traditionally trades at a discount to other benchmarks like Brent. That could mean tough times ahead for European refiners.

The Russian government has sought to facilitate the shift eastward by subsidizing exports via the ESPO. It has suspended the export tax on crude moving through the new pipeline from fields in Eastern Siberia, and has set a preferential transport tariff for ESPO crude that is well below the actual cost of transportation. The state-owned pipeline monopoly, Transneft, will cover the subsidy by charging oil companies more to ship their crude to western destinations.

With a capacity of 600,000 barrels a day, ESPO runs from Taishet in Siberia to Skovorodino near Russia's border with northern China. From there, crude is shipped by rail to Kozmino, where it is loaded onto tankers. A 300,000 barrel-a-day spur from Skovorodino to Daqing in China will be completed next year. By 2014, the ESPO is expected to be extended all the way to Kozmino, at an additional cost of $10 billion.

Write to Guy Chazan at guy.chazan@wsj.com