Russian oil and gas: Sakhalin, a Japanese dependency

A liquefied natural gas LNG carrier at Sodegaura, east of Tokyo, Japan on April 6, 2020 (STR/JIJI PRESS/AFP/Archives)

Japan, which presides over the G7 this year, is involved in international sanctions against Moscow but is involved in Russian oil and gas projects: an energy security requirement for Tokyo, but poses “vulnerability” and credibility issues for some experts.

On the one hand, after the invasion of Ukraine, Japan promised last year to give up Russian coal and eventually reduce its energy dependence on Moscow.

Last year, this commitment was only partially fulfilled: its imports of Russian coal fell by 41.3% in volume and oil imports by 56.4%. Liquefied natural gas (LNG) rose 4.6%, according to preliminary foreign trade figures released on Thursday.

Tokyo is also involved in the December cap on Russian oil prices imposed by the G7, the European Union and Australia.

However, Japan has exempted oil imported from Sakhalin-2, an oil and gas project off the Russian island in the Far East, from this mechanism.

Anglo-Saxon oil companies ExxonMobil and Shell gave up their stakes in Sakhalin-1 and 2 last year, and these projects came under the strict control of the Russian state.

A liquefied natural gas plant near Korsakov on Sakhalin Island, February 17, 2009, Russia
A liquefied natural gas plant near Korsakov on Sakhalin Island, Russia on February 17, 2009 (NATALYA KOLESNIKOVA/AFP/Archives)

However, Tokyo obtained retention of its existing shares (30% of Sakhalin-1 through a public-private consortium and 22.5% of Sakhalin-2 through private companies Mitsubishi Corp and Mitsui & Co).

AFP Hiroshi Hashimoto of the Institute of Energy Economics Japan (IEEJ) reminds AFP that these projects have the advantage of being “very close” to Japan, unlike other sources of supply.

Fragile energy security

With the lowest level of energy self-sufficiency (13.4%) in the G7, Japan has long relied on Sakhalin to diversify its supply, knowing that more than 90% of its oil imports come from the Middle East.

A liquefied natural gas tanker near Korsakov, near Sakhalin Island, Russia on February 16, 2009
A liquefied natural gas tanker near Korsakov, Sakhalin Island, Russia on February 16, 2009 (Natalia KOLESNIKOVA/AFP/Archive)

James D. Brown, a professor at the Japanese campus, explains that its crude oil supply could be threatened “if there is a crisis in the Middle East or in the South China Sea, where most of the energy goes to Japan.” American Temple University.

This dangerous energy security has been “ingrained in the minds of the Japanese government” since the 1970s and the first oil shock, Mr. Brown recalls.

Sakhalin-2 is even more strategically important for Japan, as this project supplies almost all of Russia’s LNG imports (9.5% of the country’s total LNG imports in 2022).

LNG prices have exploded due to the war in Ukraine and Europe’s rush to the segment. According to Yuri Humber, founder of the Japanese analysis platform NRG, Japan could not easily and cheaply change its long-term contracts on Sakhalin-2.

According to him, it would not make sense to sanction oil and not natural gas of this project, because the production of these two resources is carried out simultaneously.

Japan also stressed the risk of seeing China replace it on the Sakhalin if it gives up its stake.

Ethics and pragmatism

Some experts doubt that Tokyo made the right choice.

Brown said Sakhalin is a “source of weakness” for Japan because it is exposed to potential energy retaliation by Moscow.

A liquefied natural gas plant near Korsakov on Sakhalin Island in Russia on February 16, 2009.
A liquefied natural gas plant near Korsakov on Sakhalin Island, Russia on February 16, 2009 (Natalia KOLESNIKOVA / AFP/Archive)

“Of course, it’s important not to become too dependent on Sakhalin,” admits Mr. Hashimoto. “Japan should prepare for unfriendly events by further diversifying its supplies.”

Japanese firms recently signed new long-term LNG contracts with the US and Oman. However, in such contracts, it is generally necessary to wait several years before delivery.

Staying in Sakhalin “undermines the moral and value-based diplomacy that (Japan) has pledged to strengthen during its presidency of the G7,” said Wrenn Yennie Lindgren, an expert at the Norwegian and Swedish Institutes of International Relations.

However, according to Mr Humber, “we can only act morally if we have a pragmatic solution”. What Japan lacks in the near future.

His Western allies will not be able to teach him a lesson, with the exception of oil sanctions against Russia, which are also intended for some countries in the south-east of the European Union.

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