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Japan’s dilemma with Russian energy

Cooperation with Russia plays an important role in Japan’s energy security, but Tokyo is facing great pressure to give up this source of oil and gas.

Sakhalin-2, an oil and gas project in Russia’s Far East, was once seen as a model for Russia’s future of global cooperation. Sakhalin-2, which was launched at the beginning of this century, was the largest foreign investment project in Russia at that time, attracting the participation of many international and Japanese oil and gas corporations.

Technology from around the world converges on the project, which tackles one of the world’s most challenging oil and gas exploration environments on a volcanic island 40 kilometers off the northern coast of Japan. The project combines both offshore oil production infrastructure and the first liquefied natural gas (LNG) plant in Russian history.

However, Sakhalin-2 is in danger of becoming a symbol of the end of that promising era of cooperation. Russia’s special military operation in Ukraine resulted in a series of international sanctions targeting the country’s energy sector. The Western process of abandoning Russian energy threatens to be irreversible anytime soon.

Although more than 8,000 kilometers from the war zone in Ukraine, Japan is clearly feeling the heat from the crisis, according to Rurika Imahashi, commentator on political security and energy at Nikkei. Tokyo’s energy security concerns are increasingly evident through each move to tighten sanctions on Moscow by the West.

The European Union (EU) is accelerating its exit from Russian energy dependence, starting with its decision to ban coal imports in April and continuing with an oil ban under consideration. The roadmap to stop buying Russian gas is also being actively discussed by European countries.

Sakhalin-2 project in 2019, about 40 km from the Japanese island of Hokkaido.  Photo: Sakhalin Energy.

Sakhalin-2 project in 2019, about 40 km from the Japanese island of Hokkaido. Image: Sakhalin Energy.

Tokyo has sought to coordinate with the West in its efforts to pressure Moscow. Japan supports removing some Russian banks from the SWIFT global payment system and freezing the assets of the central bank and Russian officials and tycoons. Japan also banned the import of Russian vodka and stopped exporting cars and luxury goods to its northwestern neighbour.

Since the outbreak of the Ukraine crisis, Japan-Russia relations have turned into a “deeply frozen” state, said David Boling, Asia and Japan trade director at policy think tank Eurasia Group. . “Prime Minister Fumio Kishida has put an end to the friendly motto of Russia under Shinzo Abe, quickly implementing some strong economic sanctions against Russia,” Boling commented.

But energy cooperation between Japan and Russia is a completely different aspect. Russia is Japan’s fifth-largest LNG supplier, accounting for about 4% of oil, 9% of gas and 11% of coal imported into the country.

As a country that has to import about 90% of the fuel consumption needs of the entire economy – society, Japan will face many troubles if it loses its energy supply from Russia.

Commentator Imahashi said that Japan is facing an increasingly obvious dilemma with Russian energy. Many Japanese parliamentarians admit that the longer Japan maintains an energy cooperation project with Russia, the greater the negative impact on the international image, especially in the eyes of its US allies and Western partners.

Under pressure from Western sanctions, the British Shell Corporation and the US Exxon Mobil announced plans to withdraw from the multinational energy projects Sakhalin-1 and Sakhalin-2 with Russia, including Japanese companies hold shares.

But Prime Minister Kishida announced at the end of March that the country did not intend to divest from energy cooperation projects with Russia. He said Sakhalin-2 is “extremely important to Japan from an energy security perspective” because the project helps the country secure a cheap long-term supply of LNG.

Mr. Kishida stressed that energy security “is one of the issues of national interest that needs to be ensured to the highest degree”, warning that finding alternative sources of Russian energy is an increasingly difficult challenge. An unnamed Japanese official revealed that the global LNG market has almost sold out of its long-term supply contracts and that if it wants to sign a new contract, Tokyo must accept to wait to receive the first gas shipments from this year. 2026.

A Japanese LNG carrier anchored near Sakhalin Island in February 2009.  Photo: Reuters.

A Japanese LNG carrier anchored near Sakhalin Island in February 2009. Image: Reuters.

Before the Ukraine crisis, Japan and Russia had built a fairly close energy cooperation relationship. At least 4 Russian energy projects with the participation of the Japanese government or enterprises. In which, Sakhalin-2 project provides about 60% of oil and gas output for Japan and ensures about 10% of imported LNG demand.

Japan also invested in the Arctic LNG 2 project in Russia, which is scheduled to start production in 2023, with a capacity of 19.8 million tons of LNG per year.

The two countries have identified this as a mutually beneficial relationship. At the Eastern Economic Forum in Vladivostok in 2019, then Japanese Prime Minister Shinzo Abe told Russian President Vladimir Putin that the two countries were “moving towards a common future”.

Russia needs to develop relations with Japan to “pivot to the East” and promote economic growth in the Far East – Siberia. Meanwhile, Tokyo needs Moscow for energy security and stable fuel supplies, according to Ken Koyama, senior executive director at the Institute of Energy Economics of Japan (IEEJ).

Japan’s goal when investing directly in Russian energy projects is to ensure long-term supply and not be affected by prices. Oil tankers from Sakhalin to Japan take just a few days, while shipments from the Middle East take about two weeks to arrive in this country, and from the US, 4 weeks.

According to commentator Imahashi, Japanese leaders are also concerned about the prospect that if they withdraw from the Sakhalin project, other countries may jump in to take their place and benefit from the infrastructure developed by Japan. Observers warn that a third party taking over Japan’s position in projects that can sell gas to the market at a high price, both benefits Russia, and creates more difficulties for Japan in its efforts to secure gas. new supply.

Akio Mimura, president of the Japan Chamber of Commerce and Industry, thinks that China is a good candidate to replace Japan in energy projects with Russia. Telegraph At the end of April, it was reported that Shell Corporation is working with a number of Chinese companies to resell shares in the Sakhalin project.

According to Kaho Yu, an expert at policy risk consulting firm Verisk Maplecroft, Japan does not seem to have forgotten the lesson of 2010, when it dived from Iran’s Azadegan oil field because of US sanctions and the same method. West. At that time, Japan sold all 75% of shares to National Iranian Oil Corporation, then China National Petroleum Corporation jumped in to buy the right to exploit the oil field.

But continuing energy cooperation with Russia is also a difficult choice for Japan. A recent Nikkei survey showed that 78% of Japanese public opinion supports reducing dependence on Russian energy, even if they have to buy gasoline or gas at a higher price than before. Only 14% of those surveyed said that Japan should not stop importing fuel from Russia.

Japanese Prime Minister Fumio Kishida leaves Prime Minister Boris Johnson's office in London on May 5, during a visit to Britain this week.  Photo: AFP.

Japanese Prime Minister Fumio Kishida leaves the office of British Prime Minister Boris Johnson in London on May 5. Image: AFP.

As the West, especially European countries, accepts to sacrifice cheap fuel supplies to increase punitive pressure on Moscow, it will become increasingly difficult for Tokyo to stay out.

According to energy security expert Nobumasa Akiyama at Hitotsubashi University in Tokyo, international pressure on Japan will increase if the West completely separates from Russia’s energy supply. Prime Minister Kishida then found it difficult to maintain the current “priority of energy security” stance.

“We cannot continue to do business as before, there is no other way. Japan cannot continue to behave as if everything is normal, under the pretext of ensuring national energy security.” , Tadashi Maeda, head of the Japan Bank for International Cooperation (JBIC), warned on March 3.

Prime minister Kishida On May 5, Japan announced that Japan will make use of nuclear reactors to reduce its dependence on Russian energy, provided that these facilities meet safety criteria.

“Japan will overcome limitations in energy self-sufficiency by expanding supply, promoting the development of renewable energy, and using nuclear energy to diversify sources of electricity generation,” Prime Minister Shinzo Abe said. more.

However, experts say the option of increasing nuclear power has some risks, especially when Japan has experienced the nuclear disaster at the Fukushima plant. A Nikkei survey in March found that nuclear power remained a very controversial issue in Japanese society, with nearly 50% of respondents saying that Tokyo should not accelerate the process of restarting reactors. .

Koichi Nakano, professor of political science at Japan’s Sofia University, worries that the goal of increasing the share of nuclear power and renewable energy in the national energy structure is unrealistic. While many people wonder about the safety of nuclear power, wind or solar power projects are highly dependent on the weather and need a long time to develop before they can become a major source of energy for Japan. Copy.

Japan’s dilemma with Russian energy was evident when Japan’s Economy, Trade and Industry Minister Koichi Hagiuda traveled to Washington on May 5 to meet senior officials in President Joe’s administration. Biden.

Mr. Biden has vowed to discuss increasing pressure on Russia sanctions with G7 leaders, which could significantly increase pressure on Japan, especially in the context that the EU is proposing the harshest package of sanctions aimed at targeting Japan. Moscow, including a ban on importing oil from this country.

Minister Hagiuda has stated that the country “will face a lot of difficulties if it immediately responds to the above move by the EU”, as Japan is “very limited in resources”.

However, Koichiro Tanaka, an expert at Keio University in Tokyo, said that Japan will sooner or later have to come up with a more definitive answer as pressure from Western allies mounts. “Controversy over oil and gas cooperation with Russia, together with the challenge of ensuring energy security for the country, will be a serious challenge for Japanese leaders now and in the future,” Tanaka said.

Name (According to Nikkei Asia, Bloomberg, Nippon)

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