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Russia and Japan are deepening economic cooperation

Russian-Japanese ties in business are moving ahead at a healthy pace

(New Eastern Outlook) – As is well known, both the geographical position of Japan and its need for the import of hydrocarbon fuels have facilitated the development of relations of that country with Russia. Only the long-standing Kuril Islands dispute stopped Japan from becoming one of the main Russian economic partners even several decades ago.

Not having their own hydrocarbon resources, the ‘Land of the Rising Sun’, nevertheless, established one of the most powerful industries in the world, by importing fuel from various countries. Whereby Russia, traditionally rich in oil and gas, although a neighbor of Japan, is not included into the list of its main suppliers, all due to somewhat clouded relationship that formed between the two countries after the Second World War.

Now, the main supplier of hydrocarbons to Japan is the Middle East region. The maritime delivery of the large shipments of energy carriers along the whole of the southern coast of Eurasia has always been difficult and costly. In the recent years, several factors emerged that make it even less convenient. One can refer to the instability and the terrorist threat in the Middle East, as well as the Chinese One Belt One Road Initiative (OBOR). Japan, discomforted by the strengthening of China’s positions across the whole of Asia, is not particularly enthusiastic about OBOR and its subproject ‘The 21st-century Maritime Silk Road’, which is aiming at uniting all the maritime routes along the coast of Eurasia into a single system, including the routes by which Japan is getting the hydrocarbons from the Middle East. China brings under control the key ports on this route, and Japan has started to be concerned over its energy security. All this is happening against the background of weakening the positions of the USA in the Indo-Pacific region, who is considered the traditional Japanese ally and partner. Obviously, all these processes in their integrity make Japan take a fresh look at its relations with Russia. Now, the cooperation between Russia and the ‘Land of the Rising Sun’ is actively being promoted, in the spheres of energy, finances and transportation.

The end of 2017 was remarkable by much news on the Russian-Japanese co-operation. This is related to the regular meeting of the head of the Ministry of Foreign Affairs of the Russian Federation, Sergey Lavrov and TarōKōno from the Ministry of Foreign Affairs of Japan, that took place on 24th November in Moscow. The two ministers discussed in detail the array of issues on the bilateral interaction, including the prospects of the joint economic activity on the Kuril Islands.

On the same day, the 13th meeting of the Russian-Japanese Intergovernmental Commission on Trade and Economic Issues took place, where the First Deputy Prime Minister of Russia, Igor Shuvalov and Minister for Foreign Affairs of Japan, Tarō Kōno were present. The issues of Russian-Japanese co-operation in the sphere of transport, energy and high technologies were discussed. The following topics were touched upon: participation of Japan in the development of Arctic gas fields and in the development of the Russian Far East, joint investment projects and many other issues. Upon conclusion of the meeting, Tarō Kōno announced that the Russian-Japanese relations have a huge potential, and that it is necessary to do everything possible for its implementation.

Soon after the meeting by both the heads of the Russian Ministry of Foreign Affairs, Ministry of Foreign Affairs of Japan and the meeting of the Intergovernmental Commission, one news after another started to emerge in the mass media, regarding the co-operation of the major Russian and Japanese companies.

In early December 2017, in Moscow, the Chairman of the Management Committee of Gazprom, Alexey Miller met Nobuhide Hayashi, Chairman at Mizuho Bank Ltd. Mizuho Bank Ltd. is one of the largest financial organizations in Japan, with which Gazprom has been successfully co-operating since 1999. The topic for negotiations was the possibility for capital participation of Mizuho Bank in the strategic projects of Gazprom, whereby the Russian corporation is going to start working on these projects in 2018. Mizuho Bank can invest its facilities into such projects as gas pipeline ‘Power of Siberia-1’, TurkStream, Nord Stream 2, Amur Gaz Processing Plant and others.

At the same time, the mass media informed us of the commencement of liquefied natural gas (LNG) production on the first processing train of the new Russian plant built on the Yamal Peninsula within the framework of the project ‘Yamal LNG’. This plant is being built with the participation of Russian and foreign companies, using the South Tambey Field as a resource base in the Yamalo-Nenets Autonomous District of the Russian Federation. As soon as on 8th December 2017, the first loading of LNG was launched onto the tanker in Sabetta – the Russian Arctic port in the center of the Northern Sea Route. The launch of the second and third parts of the projects, known as processing trains, is scheduled for 2018-19, however the operational capacity is already sufficient to produce 5.5 million tons of LNG per year. The joint-venture parties – the Japanese construction companies JGC Corporation and Chiyoda Corporation, who have completed numerous projects in the gas industry, participated in the development of the Yamal LNG Project.

As is well known, Japan is included into the list of the major global importers of LNG, whereby it is much closer to the Northern Sea Route than China and South Korea. Possibly, it will be the ‘Land of the Rising Sun’ that will become the main consumer of Yamal LNG.

The Yamal project (ОАО ‘Yamal LNG’) is majority owned by the private Russian gas company Novatek, which is the second largest gas producer in the Russian Federation. It actively participated in the development of gas fields of the Far North of Russia and in the development of the Northern Sea Route. Novatek pursues strategic co-operation with the Japanese partners: in late November 2017, it had signed a memorandum of understanding with Japan’s Marubeni Corporation and Mitsui O.S.K. Lines, Ltd. The three companies are intending to explore options for a liquefied natural gas complex in Russia’s Kamchatka Region, envisaging both transshipping and marketing. According to the plan, LNG brought by ice-breaking tankers along the Northern Sea Route, will be reloaded onto the conventional tankers to reduce the carrier cost. From this point, LNG will be delivered to all the interested countries of Asia-Pacific Region, first to Japan, territorially close to Kamchatka Region. It is expected that the Japanese companies will make major investments into the project. Also, it is reported that the project received support of the Kamchatka Region government, as part of the gas will be used for the needs of this region of the Russian Federation.

Transport is one more important sphere of the Russian-Japanese co-operation. As it was mentioned above, China and its ‘The 21st-century Maritime Silk Road’ play an increasingly significant role in the maritime cargo traffic along the southern coast of Eurasia, in which Japan does not wish to participate as the junior partner. It is not impossible that the ‘Land of the Rising Sun’ will need alternative routes of communication with the countries of the Eurasian continent, free from the Chinese influence. Regarding this, Japan shows interest for the Russian Trans-Siberian Railway, as well as for the Northern Sea Route going along the northern coast of Eurasia. In early December 2017, the Holding ‘Russian Railways’ announced the creation of ‘one stop shop’ for Japanese companies intending to deliver cargos to Russia and Europe via the ports of the Russian Far East along the Trans-Siberian Railway. Representatives of Japanese companies can receive any necessary information on transport management via the territory of the Russian Federation, within a short time.

In mid-December 2017, it became known that the major Japanese trading companies SBI Holdings and Hokkaido Corporation decided to unite their efforts to provide assistance to small Japanese companies wishing to do business in Russia. The firms wishing to open their facilities and conduct business on the territory of the Russian Federation, will be given financial and informational support.

Thus, one can draw a conclusion that Russian-Japanese relations are likely to experience a prosperity phase. It is to be hoped that the parties will be able to consolidate the achieved success, and the co-operation of Russian and Japan will be developing steadily towards the mutual benefit and for the good of the whole Asia-Pacific Region.

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