New dynamics in Japan–Russia energy relations 2011

Abstract

Since the triple disaster in Japan in 2011, the energy dimension of Japan–Russia relations in the Russian Far East (RFE) has developed at a more rapid pace. The integration of the energy markets of the world's top liquefied natural gas (LNG) importer, Japan, and major energy exporter, Russia, has paralleled a warmer bilateral political climate and been accelerated by Russia's turn to the East. In the aftermath of the Ukraine crisis, the globe's energy landscape has been significantly altered and both Russia and Japan have faced constraints economically and in terms of bilateral cooperation. Questions remain about how bilateral energy relations will develop in the face of competition from Japan's traditional energy suppliers and ongoing Japanese government efforts to diversify energy sources. Is energy prompting a stronger bilateral political bond or just fostering a limited partnership in this area? In considering the consequences of the Fukushima and Ukraine crises on Japan–Russia energy relations and the energy dimension of Russia's pivot to Asia, the topic is placed in a wider context of new dynamics in Japan–Russia relations.

Keywords

Energy Japan Russian Far East (RFE)Fukushima Sanctions Diplomacy

1 Introduction

Japan–Russia relations have undergone notable developments over the past few years, despite the two nations never signing a formal peace treaty ending World War II and an ongoing territorial dispute over the Hoppō Ryōdo (Northern Territories, Spor o prinadlezhnosti Kuril'skikh ostrovov in Russian), which has been a major obstacle to improved bilateral relations. Russia's aspirations to establish itself as a Euro-Pacific power have met Japanese ambitions to secure its energy market to make for a promising dialogue on various security issues of mutual interest. Changing domestic and regional contexts have also accommodated for an upgraded Russia–Japan trade partnership, particularly on energy issues. Total trade between the countries reached $37 billion in 2013, six times the amount recorded a decade earlier (Bloomberg, 2014) and Russian energy exports to Japan have grown substantially since 2011 and Japan's Fukushima Daiichi nuclear disaster, which underscored the growing question of Japan's energy vulnerability (Brown, 2013; Klein, 2014). In 2013, President Vladimir Putin announced his country's intention to pivot toward the Asia-Pacific region by turning to eastern markets and by developing the Siberian and the Far Eastern districts, recognizing East Asia as a hub of global economic growth.¹ Although underdeveloped, the Far Eastern and Siberian districts are rich sources of energy resources and raw materials, thus how the development of these districts will affect the region's governance and security is a timely topic of regional and international interest.

1
For in-depth accounts of the domestic planning around and regional reception of Russia's pivot to Asia, refer to the volume Helge Blakkisrud and Elana Wilson Rowe (Eds.), Russia's Turn to the East, Palgrave Macmillan: Cham, 2018.

In the wake of the Crimean conflict and ongoing fighting in the Donbas region of eastern Ukraine since 2014, two crises which were blamed on Moscow by the international community, Russia's approach to its “Go East” policy has been facing new constraints. Moscow no longer has the option of accommodating both the United States (and its Western European Allies) and China while maintaining non-alignment and is now more limited when it comes to managing its competing interests with China, for instance in Central Asia. At the same time, scholars have argued that the pivot has been given a push by the strain in Russia–Europe ties and that the Ukraine crisis has been a major catalyst for certain relationships, namely enhanced Sino–Russian strategic and bilateral cooperation (Brown, 2015, 2016b; Itoh, Ken, Michito, & Yahuda, 2017; Lo, 2015; Mankoff, 2015; Rozman, 2014a). While the details of Russia's turn to the East have been relatively well-studied, the international community still has limited knowledge about how the Ukraine crisis has influenced this multifaceted endeavor.

Specifically, a clear picture of how this development has affected Japan–Russia energy relations has not appeared, since both sides have not been revealing about how the Ukraine crisis has affected the bilateral relationship. Thus, how has bilateral energy cooperation developed in light of two notable crisis points since 2011? Has Japan's participation in the sanctions regime (including the U.S. and many European states) affected the energy dimension of Russia's “Go East” strategy in Japan? How have recent bilateral political developments, such as Putin's visit to Japan in 2016, influenced the energy relationship? One wonders if energy is prompting a stronger bilateral political bond or just fostering a limited partnership in this area.

By tracing key developments in the energy sphere after the Fukushima nuclear crisis and prior to and after Russia's annexation of Crimea, we develop a better understanding of how two notable crisis points have affected Japan–Russia energy relations and the energy piece of Russia's pivot to Asia. It is argued that energy relations are not just a case of a “marriage of convenience” (as is often the framing of the China–Russia energy relationship) but rather provide impetus for frequent high-level political dialogue on issues that have long plagued the bilateral relationship, namely the unsigned peace treaty and dispute over the Northern Territories.

This article proceeds as follows. First, in Section 2, a brief overview of Russia and Japan's respective energy situations and approaches is given. This section provides context for a more in-depth analysis of bilateral energy relations in Section 3 on post-Fukushima (2011) and pre-Ukraine and in Section 4 on post-Ukraine (2014 on). In Section 5, developments in Japan–Russia political relations, largely propelled by energy relations, are discussed. The article concludes in Section 6 with a reflection on the broader implications of bilateral political and energy relations.

This article's methodological approach involved a review of primary sources, (public documents, speeches and press releases), as well as academic journals, books, policy papers and newspaper articles. This review was complemented with ten in-person, semi-structured expert interviews with diplomats, ministry officials, policy experts and academics working on Japan–Russia relations and Japanese energy policy, (see Appendix 1 for overview of interview subjects). Interviewees provided insight into how Japan's energy relationship with Russia developed between 2011 and 2015 and into changes in Japan's domestic energy strategy formulation and outlook since the Fukushima crisis (2011). These conversations also allowed for a more detailed contextualization of Japan–Russia energy relations and how they have propelled broader bilateral political dialogue and cooperation on contentious issues.

2 Russia's energetic pivot to the East

The Putin administration has acknowledged the global power shift toward the Asia-Pacific region and has made developing the RFE a top policy priority. A core piece of Russia's pivot to Asia involves the development of its energy market and the securement of the role of raw energy supplier for energy-hungry East Asian markets (Rozman, 2014b; Tabata, 2013). The RFE plays a large role in this endeavor given its comparative advantage in energy production and proximity to East Asia. Russia's energy strategy for 2030 forecasts produced an estimate that the Asia-Pacific market will consume 22%–25% of Russian oil exports and 19%–20% of Russian gas exports (Ministry of Energy of the Russian Federation, 2010). Accordingly, Russia has worked to broaden its energy outreach to various Asian partners, including Vietnam, Laos, South Korea, China and Japan (Shadrina & Bradshaw, 2013; Weitz, 2015).

The need for Moscow to develop energy cooperation has become critical in the post-crisis environment. Accounting for half of the state's revenues, Russia's energy sector is a crucial market for the national economy as well as for establishing political clout. Russia knows that it is a competitive energy provider in East Asia and has taken advantage of various opportunities to step in and step up energy cooperation with states of the region. China was notably absent as a Russian gas customer until 2013 when the countries signed significant oil and gas deals. In May 2014, the two countries finalized a landmark, $400 billion, 33-year gas agreement, following years of negotiations over prices (Koch-Weser & Murray, 2014). The timing and stipulations of the long-anticipated deal naturally led to questions about the influence of Western sanctions on Russia's energy market. Analysts suggest Beijing was able to leverage the economic difficulties brought about by the sanctions by offering Russia new markets for its energy supply at prices lower than what Russia would have been able to get from the European market. However, Russian sources suggest that China offered a very generous price.² The initial up-front payment on part of the megadeal is allegedly welcome security for Russia's dwindling cash supply, which has been hit hard by the sanctions regime and the global drop in energy prices after 2015. Russia reportedly has a 60%–70% reliance on energy in its economy and only a cash supply for 30 days (Interview 2). Further, Russia's invitation of Chinese involvement in the upstream projects in the Arctic, Siberia and the Far East signals a potentially more open and inclusive approach to developing its energy market and bodes well with China's view of Russia as “a strategic rear area” (Klimenko, 2014; Lukin, 2015). Russia's growing role in the Chinese energy market, as a supplier of electricity and gas, has paralleled ongoing dialogues with other Asian states, such as Japan, about energy cooperation.

2
Personal communication with an informed Russian expert, December 2014.

2.1 Japan's energy situation and outlook

Despite being a leader when it comes to energy efficiency and technology, the geographic position and makeup of Japan makes meeting the country's large energy demands an unattainable goal, especially when it comes to fossil fuels. Over 80% of the resource-poor island nation's energy use is imported and Japan ranks as the world's biggest consumer of liquefied natural gas (LNG), second-largest coal importer and third-largest oil purchaser (EIA, 2014). Formerly, the main form of domestic energy production took place at the nation's 54 nuclear power plants, which accounted for roughly 30% of peak electricity (World Nuclear Association, 2015).

Japan's energy needs have undergone substantial changes since the triple disaster involving a magnitude 9.0 earthquake, tsunami and nuclear disaster in March 2011. The Fukushima Daiichi nuclear plant crisis led to the temporary shutdown of all domestic nuclear power plants and a major reassessment of Japan's energy security and policy (Hiranuma, 2014). While there is no silver bullet answer to Japan's energy predicament in light of the Fukushima accident, experts suggest that a “Best Energy Mix” would involve the optimal use of diverse sources including renewables, fossil fuels, and possibly nuclear power as well as energy saving and efficiency improvement (Koyama, 2013b). Japanese ministries developed plans to restructure Japan's energy mix to meet its energy needs in a sustainable and nuclear-free fashion. The initial plan to work toward being nuclear-free by 2040 was revised to include fossil fuels and renewable energy to make up for a good part of the nation's nuclear handicap (METI, 2014). As the world's sixth-largest producer of solar power, Japan has explored the possibility of increasing the efficiency of this renewable energy (Nesheiwat & Cross, 2013). Eliminating Japan's nuclear crutch also meant seeking out new partnerships and solutions to meet the rising energy need. The Middle East supplies 90% of Japan's energy imports, but Japan has relied less on this source and more on Russia and alternative sources over the past decade, as it tries to diversify the geographic location of its supply for security and cost reasons.

Japan's use of nuclear power in its energy mix continues to be heavily debated domestically (Hobson, 2014; Midford, 2014; Umbach, 2014). Although the Japanese populace is overwhelmingly against reintroducing nuclear power, Japan's ruling Liberal Democratic Party (LDP) takes a pro-nuclear stance and has included nuclear energy in the base-load electricity source package it proposed to Japan's Central Government in April 2015. The package, which suggests a mix of nuclear energy, and coal-fired thermal, hydroelectric and geothermal plants, would account for about 60 percent of Japan's energy needs in 2030 (Asahi Shimbun, 2015). It is estimated that nuclear power would account for about 20% of Japan's energy mix in the proposed plan. Significant hurdles remain for the approval of such a high share of nuclear energy in Japan's mix as the LDP's coalition partner, Kōmeitō, favors phasing out nuclear power.³ Moreover, in light of upgraded Nuclear Regulation Authority (NRA) safety standards, it is estimated that 17 of Japan's remaining 48 reactors⁴ will never be switched back on and that the status of another 17 is unknown (Saito, Sheldrick, & Hamada, 2014). The 14 reactors that will likely restart at some point would eventually make up less than 10% of Japan's power supply. Thus, the LDP's suggested 20% nuclear power share would require building new reactors which is not only largely unpopular among Japanese citizens but also a costly and risky endeavor. Further, the interconnections between energy and local politics are especially strong in the case of nuclear power in Japan. Reactors that pass the safety standards are in most cases subject to local approval, giving mayors or prefectural leaders a significant say in the fate of nuclear power in Japan (Interview 6). One Japanese energy expert reminded, “The most important thing is elections. Energy is a political matter, not a policy matter. This is very important to understand” (Interview 4).

3
For more on the security dynamics between the LDP and coalition partner Kōmeitō, see Petter Y. Lindgren (2016) “Kōmeitō's security ideals and collective self-defense: betwixt pacifism and compromises,” East Asia, 33: 233–254.

The six reactors at the Fukushima plant are shut down permanently. Prior to the Fukushima crisis, Japan had 54 reactors. The lifespan of a reactor is in principle 40 years but Japan has pushed for revision of this standard to allow for 60 years of operation (Interview 6).

As of August 2015, 23 plants had applied to the Government of Japan, who makes final decisions once local referendums have been passed, for permission to restart their reactors (BBC, 2015). In April 2015, a local court in Japan directly challenged the NRA safety standards by blocking the start of two nuclear reactors in Fukui prefecture⁵ which had been approved for resumption of operations. The act was perceived as a notable event in Japan's ongoing heated national debate about abolishing nuclear power (Soble, 2015; Interview 1). However, in August 2015, nearly four and a half years after the Fukushima Daiichi nuclear crisis, Japan restarted its nuclear power when the 30-year old Sendai No. 1 reactor in Kagoshima prefecture in Kyushu went back online while anti-nuclear protests took place in various parts of the country (Digges, 2015). In January 2016, the Takahama 3 and 4 plants in western Japan were restarted only to be shut down upon the order of a district court in March 2016 due to safety concerns among the public (Soble, 2016). On the five-year anniversary of the triple disaster, only the two reactors at the Sendai nuclear plant in Kagoshima prefecture were online. By June 2017, five of Japan's 42 operable reactors were online (Kansai Electric's Takahama 3 and 4, Kyushu Electric's Sendai 1 and 2, and Shikoku Electric's Ikata 3) and two more reactors (Kyushu Electric's Genkai 3 and 4) were approved to come online within the year. Despite the obvious risks associated with nuclear power and strong public opposition, sources suggest that nuclear power will likely remain a part of Japan's energy mix for energy security, sustainability and economic reasons (Tanaka, 2013; Interview 2, Interview 4, Interview 6).

Fukui, a prefecture on Japan's west coast, is home to 13 nuclear reactors that are placed on the coastline and colloquially referred to as Genpatsu Ginza or “Nuclear Alley” (Soble, 2015).

3 Japan–Russia energy relations post-Fukushima, pre-Ukraine

For Russia–Japan energy relations, the triple disaster was a major catalyst. It paved the way for a longer-term deepening of bilateral energy relations and also provided a quick fix to Japan's precarious energy position in the wake of the disaster. Russia swiftly promised supplies of LNG, oil, coal and electricity and worked to accommodate Japan's high LNG demand. Further, joint working groups on issues such as oil and gas were created (Brown, 2013, p. 214).

At present, Japan is involved in two major projects taking place on Sakhalin Island, the only location in the RFE where gas is extracted. The Sakhalin-1 pipeline – a collaborative effort between a Government of Japan (GOJ)-led consortium (the group of public and private Japanese oil companies operate under the umbrella Sakhalin Oil and Gas Development Company (SODECO) and own 30%) India, the U.S. and Russia – has been providing Japan with crude oil since 2009 (Bradshaw, 2013; Motomura, 2014).⁶ The Sakhalin-2 resource extraction project is under development by Japanese trading companies, Mitsui and Mitsubishi (which together own 22.5%), in collaboration with Gazprom (which has a 50%-plus-one share stake) and Shell (UK-Netherlands). The Sakhalin plant provides Japan with about 10% of its LNG needs – making it Japan's fourth-largest supplier of LNG – and has increased its exports to Japan exponentially over the past five years. Among states in the Asian vector, Japan receives the largest amount of the plant's exports (82% in 2013). The GOJ and private corporations are evaluating importing more gas from Sakhalin to meet 17%–18% of Japan's gas needs. In addition to the Sakhalin projects, in 2012, Japan revealed plans to build a $13 billion LNG plant in Vladivostok (MOFA Japan, 2012). However, the construction of plant, which was being developed by Gazprom in collaboration with a group of Japanese companies known as the Japan Far East Gas Company⁷ and was expected to account for around 13% of Japan's gas imports, was indefinitely postponed in 2015.

6
For figures and overviews of the projects, see: Masumi Motomura, “Japan's Need for Russian Oil and Gas: A shift in energy flows to the Far East,” Energy Policy 74 (2014): 68–79 and Michael Bradshaw, “Russian LNG Exports to Asia: Current Status and Future Prospects,” NBR Special Report #44, November 2013.

Itochu, a major trading company in Japan, is heading the group. Mitsui and Mitsubishi are also part of the project.

Although Japan relies on the Middle East for over 80% of its crude oil supply, Russia also provides Japan with crude oil. In addition to supplies coming from Sakhalin-2, since 2009, Russia's Eastern Siberia–Pacific Ocean (ESPO) pipeline – which runs from Taishet, Siberia, to the Kozmino Bay Oil Terminal near Russia's border with China – has been delivering crude oil to Japan (EIA, 2014). In 2014, Russia accounted for 4% of Japanese oil imports and there are plans to increase the supply, which will help meet Moscow's target of sending a third of its crude oil exports to Asia by 2020.

Since nuclear power no longer plays a significant role in its energy mix, Japan's current revitalization strategy involves a diversification of Japan's LNG sourcing in the foreseeable future and a greater dependency on renewables in the long term (Government of Japan, 2014, p. 146–148; Interview 4, Interview 6). Australia is a notable energy supplier, accounting for roughly 20% of LNG imports (Japan buys 70% of Australia's supply) and aspiring to supply up to 40% of Japan's LNG needs by 2020 (Global LNG, 2014). Japan's plans for diversification of its energy sources, including a greater dependence on imports from North America and Australia and the growing interest in highly price-competitive shale gas imports from the U.S., will not only be a direct challenge to Japan's current suppliers in the Middle East but also to Russia (Interview 6). Russia–Japan energy relations and U.S.–Japan relations are not mutually exclusive, as one informant stated, “When we think about business with Russia, we need to think about the U.S.” (Interview 4). As such, Japan's close ties with the United States, epitomized by the U.S.–Japan alliance, could likely deter Russia from securing Japan's energy imports. Another Japanese energy analyst further pointed to Russia's supply limits and the relatively warmer business climate in the United States as reasons for Japan's business approach:

Regardless of Russia's strong ambition to export to Northeast Asia, Russia's supply is limited. The Japanese private sector is attracted to U.S. business – they share grant ties and are connected to the EU. No one believes that Russia is more important than the U.S. Profit for doing business with Russia is negligible (Interview 2).

In addition to the several larger ongoing projects noted above, there is bilateral cooperation in the fields of energy saving and renewable energy (Arai, 2016, p. 108). For instance, Russia and Japan have begun collaborating on renewable energy initiatives, namely the initiative that was launched in early 2014 to develop wind power plant technology that allows for operation at low temperatures in regions of the Far East (Vorotnikov, 2014). Japan recognizes that energy resources from the RFE are not only rich but also potentially more secure since they involve largely overland routes and less time-consuming than importing from the Middle East. Since transportation routes are considerably shorter – delivery time is reduced by approximately two weeks – Japan is in a better position to adjust to short-term fluctuations in demand and the routes do not require passage through hostile waters or choke points (Interview 2). In short, delivery through the Sea of Japan (East Sea) is safe, efficient and timely, yet Russia still only accounts for a relatively small portion of Japan's overall energy imports (10% of LNG imports, 4% of oil imports) (EIA, 2014). Nevertheless, the growing nature of Moscow's involvement and the promise of the resource-rich Far East in the medium- to long-term should not be disregarded (Koyama, 2013a).

Rivalry among states in the “Asian vector” will likely impact the Asia-Pacific region's energy diplomacy in the years to come. Energy integration with Russia presents Japan with an opportunity to semi-counter burgeoning Russia–China relations as well as Beijing's growing regional impact. Russia still seeks to secure Japanese investment in the RFE and Japanese labor contributions are also welcomed and viewed more positively than Foreign Direct Investment (FDI) and labor from Chinese sources. As such, Japan can potentially counter Chinese influence in the region through increased FDI, high-technology cooperation and labor exchange.

4 Japan–Russia energy relations post-Ukraine crisis

While the Ukraine crisis and subsequent sanctions imposed on Russia by Japan have not led to any stoppages in Russian energy supplies to Japan, the situation has led to delays in dialogue about further developing bilateral energy relations and has put a few prospective projects on hold (Ratner & Rosenberg, 2014). An informant from Japan's Ministry of Economy, Trade and Industry (METI) attributed the slower pace in bilateral communications on energy issues as due to the “Ukraine effect” (Interview 6). For instance, propositions to construct an undersea non-liquefied gas transport pipeline from Sakhalin to the northern Japanese island of Hokkaido, which has been discussed in various forms for over 15 years, stalled in the wake of Russia's annexation of Crimea. Japanese media sources alleged that a senior official at Japan's MOFA reported that the construction of the pipeline depended on the outcome of the Ukraine issue and ongoing negotiations about the territorial dispute over the Northern Territories (Tanaka, 2014a). However, bilateral dialogue regarding the pipeline, which would be the first of its kind for Japan, was eventually reopened in September 2016 at the Eastern Economics Forum in Vladivostok and continues to be discussed and investigated. A more likely contender, which was also discussed at length and was revisited in Vladivostok, is the proposal for a “power bridge” between Sakhalin and Hokkaido that would involve laying a 43-kilometer long underwater power cable between the two islands.

Moscow now views the increased pipeline supplies to China as a potential alternative to the shelved Vladivostok LNG plant project, which would have had a notable effect on Japan's anticipated LNG supply (Persily, 2015; Richards, 2014). Prior to the shelving of the project, one JOGMEC economist elaborated on the nature of pipeline geopolitics and the element of risk associated with pipelines:

Energy flow from the region is limited to pipeline or tanker. But, once a pipeline is built, the supplier is weakened if the receiver decides to stop its energy intake. It is very risky…Russia is using Japan as leverage against China. If China doesn't buy, Russia will need to pursue the Vladivostok LNG plant (Interview 7).

Furthermore, the sudden drop in oil prices in December 2014, ongoing western sanctions, and the generally fragile state of the Russian economy are notable additional and continuing challenges to Russia's energy market.

4.1 Japan in the “sanctions circle” and implications for bilateral energy relations

In the months following Russia's annexation of the Crimea, Japan imposed sanctions against Russia in three phases. The first set of sanctions, in late March 2014, were in response to Russia's military intervention in Ukraine and involved restrictions relating to diplomacy and cooperation. For instance, there was a “freezing of the commencement of negotiations on agreements relating to investment, space cooperation, and the prevention of dangerous military activities” (Kitade, 2016, p. 3). A second phase of sanctions involving a travel ban and asset freeze was announced nearly four weeks later. From late April 2014, Japan banned 23 individuals from receiving visas and froze the assets of 66 individuals and 16 organizations. This second phase was upgraded in December 2014, when Japan added a list of 26 individuals and 14 organizations linked to separatist Ukrainian regions (MOFA Japan, 2014). Despite this upgrade, compared to the rollout of U.S. and EU versions of this phase of sanctions, the Japanese sanctions were delayed and targeted a much smaller number of individuals and organizations. Japan's third phase of sanctions, which targeted trade and finance sectors, was announced in late September 2014, two months after the U.S. and EU had implemented similar sanctions. These sectoral sanctions involved an arms embargo and “curbs on the issuing of securities by five top Russian banks” as well as “restrictions on the provision of services relating to the issuing of securities” (Kitade, 2016, p. 3). Japan's sanctions were overall viewed by Russia as comparatively modest to those of the U.S. and EU.

Domestic political support in Japan for joining the sanctions regime was mild considering both the political and business risks involved; however, officials concurred that Japan had to follow the request of its closest ally and security partner, the United States. In light of the fact that Japan's longstanding alliance with the U.S. affects the country's energy and foreign policy choices, it was not surprising that Japan joined the sanctions regime post-Ukraine. The alliance is the centerpiece of Japan's security policy and often steers Japan's major foreign policy decisions, including those concerning Russia (Izumikawa, 2016, p. 62–63). The Abe government has explicitly made securing U.S. commitments to the region and Japanese security interests a top priority, thus making Japanese deviation from American foreign policy strategy potentially costly and highly unlikely (Lindgren, 2018).

This naturally made it more difficult for Japan to maintain relations with Russia at the level they were progressing at prior to the Ukraine crisis. Under U.S. pressure, Japan joined the G-7 sanctions regime but was careful to add a caveat that the Abe government was still interested in continuing dialogue with Moscow despite the suspension of talks regarding military matters, space issues and investment opportunities (Fackler, 2014). Walking a diplomatic tightrope, Prime Minister Abe's messages alternated between strong rhetoric against Russia's unilateral actions in Crimea and a conciliatory behavior toward President Putin.

Japan's close security alliance with the United States was, however, not the only motivation for Japan implementing sanctions against Russia. Japan made the decision as a member of the international community and in light of China's behavior in the South China Sea (Izumikawa, 2016, p. 67). As one MOFA bureaucrat clarified, Japan's joining of the “sanctions circle” was not only an action toward Russia but also a warning to China:

Japan joined as part of the G-7, so we cannot accept such unilateral actions. We have a neighbor (China) doing the same things…so in this sense Ukraine is a global issue. We are sending a message to China about what is not acceptable. The G-7 needs to take a united position and ministries in Japan have to be on the same page (Interview 5).

Similarly, Japanese international relations scholar Yasuhiro Izumikawa likens the Ukraine dispute for Japan to the South China Sea for Europe, explaining that Tokyo risks Europe ignoring Chinese provocations in the South China Sea dispute if it chooses to ignore Russia's unilateral actions in Ukraine (Izumikawa, 2016, p. 67). Despite Russia's contempt for Japan's following of American foreign policy choices on Ukraine, dialogue, business and the amicable relationship between the two countries’ top leaders have been maintained to the extent possible (Interview 5). Bilateral energy cooperation has been an important issue area for segueing into otherwise challenging and ongoing bilateral political topics, such as the sanctions regime and the Northern Territories Dispute.

Informed Japanese sources suggested that the sanctions did not have direct ramifications for Japan–Russia energy ties. Interviewees in Tokyo described the sanctions as “quasi sanctions and weak” (Interview 3), “careful of the interests of Japanese companies” (Interview 5), “having no content” (Interview 7), “cost-free and not having an impact” (Interview 8), “symbolic and sending a message of non-accommodation” (Interview 9) and “moderate and do not affect business with Russia” (Interview 10). Ultimately, the impact of the sanctions is understood to be “more psychological than material” (Arai, 2016, p. 109). Although it is acknowledged that some Japanese businesspeople may be wary of the sanctions, it remains unlikely that they will impede business collaboration (Arai, 2016, p. 109).

Russian analysts also suggest that the sanctions imposed by Japan have had little effect on bilateral business and that, rather the contrary, business relations have expanded and diversified in the aftermath of the “sanctions fever.”⁸ As for energy, Russia's crude oil exports to Japan jumped 12% in 2014 (Reuters, 2015) and 20% in 2015 (Tass, 2015). In 2016, the U.S. lifted its 40-year ban on crude oil exports and thus opened another market to Japan at a time when diversification of suppliers was a government priority. In addition to initiating crude oil exports from the U.S., Japan continued to export from Russia and Venezuela (another Western pariah government) and was also exploring markets in Canada and Ecuador (Nikkei, 2016).

8
Personal communication with an informed Russian expert, December 2014. For an assessment of the potential economic costs of the sanctions, see Yanagisawa (2014).

Although Gazprombank, which invests and lends to major sectors in the Russian economy including the oil industry, was one of the lenders that was blacklisted by Japan during the second phase of sanctions, the indirect effects of this on bilateral energy relations are regarded as minimal. The falling oil price has also generated added business between the neighbors as Japanese oil refiners prefer the short distance and quick purchases RFE sources offer while refining remains high in demand. Representatives of Japanese energy companies acknowledge Russia's resource endowments in the Far East and the country's comparative advantage in delivery time compared to Japan's traditional crude oil sources in the Middle East. For all of these reasons, despite Japan's ongoing involvement in the sanctions regime, the forecast for Japan–Russia energy relations is viewed overall as promising (Interview 7).

5 ‘Vladimir–Shinzo’ diplomacy since 2012

The mutual interest in energy cooperation has facilitated frequent dialogue on broader political issues, such as the dispute over the Northern Territories and the countries’ unsigned peace treaty. It has been suggested that the two leaders want to seize the opportunity for enhanced bilateral collaboration while it lasts – Japan for energy purposes, possible dispute resolution and in response to Sino–Russian developments and Russia for the opportunity to challenge the U.S. and to have Japan as a partner on technical and financial matters, especially in face of the EU anti-trust regulation against Gazprom.⁹ As one University-sector energy expert said of Russia's strategy toward Japan on energy, “Russia is interested in utilizing the unique chance to play Japan (against the Unites States). Russia would prefer to side with cooperation with Japan but it is interesting to play both cards – one with Japan and one with a rising China” (Interview 1). On the Japanese side, there are three strategic factors that carry weight in Japan's foreign policy vis-à-vis Russia: the rise of China,¹⁰ its security alliance with the United States and the Ukraine crisis (Izumikawa, 2016, p. 62). While it can be argued that each of these factors (and especially the first two) shapes the Abe administration's general foreign policy outlook, when it comes to Japan–Russia relations this is especially the case due to contention in bilateral relations between the U.S. and Russia (especially under Obama administration), Japan and China and Russia and Ukraine.

9
During Abe's first prime ministership (2006–2007) the leaders also signed “Initiative for the Strengthening of Japan-Russia cooperation in the Far East Russia and Eastern Siberia,” an agreement to boost cooperation between the private commercial actors in Japan and the Far East regions. See MOFA Japan (2007).

For more on the dominant, contemporary Japanese understanding of China, see Wrenn Yennie Lindgren and Petter Y. Lindgren, “Identity Politics and the East China Sea: China as Japan's ‘Other’,” Asian Politics & Policy 9(3) (2017), 378–401.

Since re-assuming Prime Ministerial duties in December 2012, Prime Minister Abe has met with President Putin bilaterally over twenty times (as of June 2018), with their discussions focusing on a range of security and economic issues and always including discussion about energy relations. Numerous sources pointed to Abe's 2013 visit to Russia as a notable catalyst for the strengthening of bilateral relations (Interview 3, Interview 5, Interview 8). In addition to a shared strategic outlook, Prime Minister Abe and President Putin have also developed a seemingly close personal relationship (Brown, 2014). PM Abe showed his support for the Putin government in person at the 2014 Winter Olympics opening ceremony in Sochi, with the leaders addressing each other on a first-name basis and during a peripheral discussion at the 2014 Asia-Pacific Economic Cooperation (APEC) meeting in Beijing, Abe likened Putin's talent in the Japanese martial art judo to the strengthening relationship between Russia and Japan (Reynolds & Arkhipov, 2014). It is suggested that the amicable ‘Vladimir–Shinzo’ first-name-basis relationship is in part the reason why communication lines managed to remain open despite Japan joining the sanctions regime post-Ukraine (Hirose, 2015, p. 59).

In the years following Russia's annexation of Crimea, bilateral meetings at the highest level were carried out, albeit with some delay, often on the sidelines of larger multilateral arrangements such as the Asia–Europe Meeting (ASEM) and the APEC forum; however, longstanding political issues remained major barriers to cooperation. Although Putin's state visit to Japan in fall 2014 was cancelled after Tokyo imposed sanctions, it was eventually carried out in December 2016 and came to be known as the Yamaguchi/Tokyo Summit. 2016 was a notable year for Abe–Putin diplomacy as the leaders made the occasion to meet four times in-person. All of their meetings involved discussion about Japan's role in developing the Far East and Siberia and bilateral energy relations, in addition to the thorniest issue in bilateral relations: the Northern Territories dispute. After respective Foreign Ministers convened in Tokyo in mid-April 2016, Abe and Putin met in Sochi in May 2016 despite President Obama's telephone advice to PM Abe to not meet with President Putin (The Japan Times, 2016a). At the meeting, Prime Minister Abe introduced an eight-point plan which outlined how the two governments could collaborate in the revitalization of the Russian Far East and energy cooperation among other issue areas of mutual interest (MOFA Japan, 2017a). The leaders then met at the Eastern Economic Forum in Vladivostok, where a public–private discussion about investment opportunities in the Russian Far East and the Asia-Pacific took place, and agreed to hold a summit in Abe's hometown of Nagato in December. Prior to the Yamaguchi/Tokyo summit, they met again on the sidelines of the APEC leaders’ summit in Lima and began preliminary talks about the Northern Territories dispute, which is understood by Japan to be the most important bilateral issue with Russia (Interview 5).

5.1 Three outcomes of the 2016 Yamaguchi/Tokyo summit

The 2016 Yamaguchi/Tokyo summit was an especially important meeting of strong symbolic importance for both countries. It was years in the making and was carefully planned by the Japanese hosts. Eleven years had passed since President Putin's last visit to Japan and the summit also marked his first official visit to a G-7 country since Russia annexed Crimea. The two-day summit commenced in Abe's hometown of Nagato where the leaders discussed the Northern Territories issue before moving to Tokyo where the focus shifted to broader economic initiatives. Expectations were very high and there was a particular media buzz about the possibility of Japan and Russia signing a peace treaty which would formally end the war between the two countries and normalize relations. This was, however, not an outcome of the summit, and international media largely reported on the hopes for the summit that were not met. What does the ‘Vladimir–Shinzo’ diplomacy of the past five years bring to the development of the Far East and Siberia? And where does the Japan summit lead relations into the future?

In retrospect there are three outcomes of the 2016 summit that are of particular policy importance and that are themes that should draw further focus in the future. The first is the notable number of business deals which were signed during the summit. This comes after a year of trade decline in the bilateral relationship where we witnessed a drop of nearly 25% in total trade turnover during 2016 (Tass, 2017). At the same time Russia's trade with other major Asian partners, China and Vietnam, slightly increased. Within bilateral business relations, energy remains a very strategic area of cooperation for Japan–Russia relations. More than 60 deals were signed during the December summit and at least 23 of them concerned energy. There was also a mutual fund established for projects in the agricultural, infrastructure and other sectors. Among the agreements signed, METI Japan and Russia's energy ministry signed an MOU on the development of the Elga Coal Complex in the Siberian Republic of Sakha (Yakutia). Furthermore, a number of agreements were signed on cooperation in hydrocarbons development including ones on joint exploration off of Sakhalin and technological and financial collaboration in oil, gas and LNG.

The signing of such deals in and of itself is a statement of commitment to the bilateral relationship and Japan's role in further developing the Russian Far East and Siberia. Many of these agreements are based on the eight-point cooperation plan that Prime Minister Abe proposed during his meeting with Putin in Sochi in May 2016. This plan serves as a blueprint or framework for future deals. In the plan, contributions from the private sector and SMEs are targeted, as well as the industrial development to the RFE. Provisions on high-technology industries and people-to-people exchange are also included. At the meeting, Japan agreed to relax visa requirements for Russian businesspeople and this relaxation can possible extend to general Russian visitors to Japan in the future.

A second notable development concerns the Northern Territories. At the meeting in Sochi the leaders reportedly agreed to a “new approach” to handling the territorial dispute over the four islands which comprise the Northern Territories. This new approach was described by PM Abe as “free of any past ideas,” and at this meeting PM Abe and Putin declared that they would be forwarding a “future-oriented relationship” (The Japan Times, 2016b). Although many in the Japanese community were hoping for more progress on this issue and a possible return of at least two of the islands to Japanese jurisdiction there was some advancement. Most notably, the leaders discussed possible joint economic projects on the disputed islands and agreed to hold further negotiations.

An ongoing, unresolved issue is that Japan wants the islands to operate under a special legal status that does not raise sovereignty issues while Russia, which governs the islands, wants them to be run under its laws. Just as Japanese public attitudes against Russia are some of the most critical in the world, Russian popular support is vehemently opposed to an agreement involving any territorial concessions. However, it was also made apparent at the summit that business can go on despite not reaching an agreement on sovereignty over the islands. Although Prime Minister Abe and President Putin view the absence of a peace treaty after 70 years as “abnormal” they have managed to work around it thus far and will likely continue to do so. Experts on these issues believe that long-term energy agreements and major Japanese investment in the RFE are as perceived important bargaining capital for Japan but also caveat that, although Japanese investment is desired and welcomed in Russia's Far East, Abe's strategy to promise energy agreements and FDI in exchange for a territorial concession largely miscalculates the extent of Japanese leverage in the dispute (Brown, 2016a, p. 15–16; The Japan Times, 2016b). While the Abe government is eager to see the “carrot” of oil and gas production cooperation propel movement on the territorial dispute, which if solved could put to rest a slew of security concerns that could hinder cooperation in the years to come, it remains highly unlikely that Russia will make any concessions.

Another important development from the summit is that two leaders agreed to resume “2 + 2” talks among the countries’ foreign and defense ministers. The first and last “2 + 2” meeting was held three years ago in Tokyo and this is a meeting format that Japan only has with select partners such as Australia, India, Britain, France and the U.S. At the 2013 meeting, Ministers discussed national security and defense policy based on the security situation in the Asia-Pacific region, cooperation in multilateral frameworks in the region, and the deployment of the missile defense system in the region. It was agreed to move forward with the cooperation counterterrorism and anti-piracy measures, defense exchange including navy-to-navy talks, and regular discussions on PKO during military-to-military talks as well as the establishment of a Japan–Russia cyber security meeting. The 2 + 2 mechanism is thus an established meeting space for furthering issues related to bilateral defense initiatives and a crucial venue for furthering the thaw in defense relations. These issues came out as Russia deployed two anti-ship missile systems, Bal and Bastion-P, to the disputed Kuril Islands in November 2016, signifying its resolve to protect the sovereignty of the region.

These three outcomes of the Yamaguchi/Tokyo summit, namely business deals, collaborative economic projects on the Kuril Islands and a reconvening of the 2 + 2 talks continue to propel the new dynamics of the Japan–Russia relationship and how it will contribute to developing the RFE. Since the summit, Abe and Putin have continued to discuss these three outcomes at the 17th Japan–Russia summit meeting in Moscow in April 2017, on the sidelines of the G-20 meeting in Hamburg in July 2017, at the Vladivostok Eastern Economic Forum in September 2017 and on the sidelines of the APEC economic leaders’ meeting in Vietnam in November 2017. The Moscow Summit in May 2018 marked the 21st tête à tête between the two leaders.

As one of Japan's most informed Russia experts noted, the continued meetings do not indicate drastic change in the bilateral relationship but follow a “step-by-step” approach and demonstrate steady progress on the issues discussed during the Yamaguchi/Tokyo summit (Shimotomai, 2017). The pace of reconciliation on challenging and longstanding historical issues is inevitably slow and complex. As one MOFA bureaucrat noted, “Difficult things are difficult for them too” (Interview 5). Both Putin and Abe have expressed a commitment to resolving the peace treaty issue during their tenures and both leaders bought more time to do so when they respectively secured additional terms during Japan's 2017 snap election and Russia's 2018 presidential election. 2018 marks a year of mutual recognition with the “Japan Year in Russia” and “Russia Year in Japan” diplomatic initiatives, which are expected to boost cross-cultural links and set the tone for a year of strengthening bilateral relations in a broad range of areas (MOFA Japan, 2017b).

In sum, personal relations between Prime Minister Abe and President Putin have been seemingly progressive since 2012. Frequent meetings have ensured for opportunities to advance dialogue on enduring bilateral hurdles that create significant challenges to broader cooperation on other issues, energy collaboration included. Despite their countries’ differences and notable matters left unsettled, the two leaders recognize that Japan and Russia are important partners for each other, especially economically, and have chosen to focus on areas of mutual benefit instead of letting the Ukraine crisis and subsequent sanctions completely destruct their energy cooperation and political ties. Moreover, they also find more support from Washington with the Trump administration being seemingly more positive about Japan–Russia collaboration than the Obama administration (Rozman, 2017, p. 75).

6 Conclusions

Japan–Russia energy relations have come a long way in a short period of time. Despite the significant convergence in Russia–Japan energy relations that the Fukushima crisis accommodated for, the longevity and extent of the Japan–Russia energy embrace is challenged by countries in the Middle East, notably Qatar and Saudi Arabia, which still hold significant shares of Japan's energy market. Although a growing share of Japan's energy imports originates in the RFE, Russia is still not a major supplier to Japan when considering the amount of resources coming from Japan's other energy partners (i.e. Australia, U.S., countries in the Middle East). Future LNG supplies from Sakhalin and the Russian Far East will likely increase Russia's role in Japan's market in the mid- to long term. Russia can provide Japan with a safe and short transport route as well as an abundant supply that will allow Japan to meet fluctuations in demand. However, it will also have to offer a competitive price and quality in order to compete with Japan's Middle East suppliers, Australia, Canada and relatively cheap American shale gas exports. Japan's restart of its Sendai nuclear reactor in August 2015 is not an indicator of a complete return to nuclear dependency. The restart will neither account for the major demand that the nation has for alternative resources nor will it work toward the government's plan to diversify energy sources in the interest of both economy and energy security. With nuclear energy still largely off the grid, Japan will continue to look to diversify its energy supply and will further research developing renewables on its home turf and elsewhere.

Japan and Russia have made notable efforts to maximize their energy relations in the post-Fukushima period, and to minimize the potential negative consequences of the Ukraine crisis and Japan's sanctions on bilateral relations. In the face of ongoing sanctions, Russia wants to reduce dependence on European markets and is eager to engage the increasingly competitive Asian energy market. In addition to Russia, Qatar and Australia want to expand their LNG supplying roles to Japan. While the RFE's close proximity and relatively secure routes are very attractive to Japan, questions remain about pricing and Japan's willingness to move away from traditional suppliers. Russia should highlight what it can contribute to the Japanese market – fast, safe routes – and should offer competitive pricing. Flat-lined global oil prices and the instability of Russia's economy threaten its energy diplomacy. If Russia's economy crashes, the oil prices continue to stay low and Tokyo will likely turn to other sources, namely the Middle East, for energy. Whether oil prices stay down is an open question; however, Russia should take precautionary measures to address such a scenario when marketing its energy to Japan.

Japanese security and foreign policy is strategically tied to the U.S.–Japan alliance, and thus Japan's joining of the sanctions regime and reaction to Ukraine was influenced by Washington to some degree. Russia has openly criticized this arrangement but also recognizes that Japan has tried to avoid activating full sanctions and to maintain dialogue with Russia. A strong personal relationship between the Russian and Japanese heads of state has facilitated ongoing communication in the post-Ukraine environment. Overall, Prime Minister Abe and President Putin have managed to safeguard and develop bilateral relations in the wake of the crisis. Although the Japan–Russia relationship has endured the Ukraine crisis, there are longstanding bilateral issues – namely, the territorial dispute over the Northern Territories and the unsigned peace treaty – that will likely hinder cooperation in the future if left unaddressed. Rather than understanding bilateral energy developments as creating a ‘marriage of convenience,’ they should be viewed as catalytic to a stronger political bond that allows for breaching these difficult and historical issues. Consistent Shinzo–Vladimir diplomacy involving initiatives to address issues that have long plagued bilateral relations has demonstrated the importance of themes of cooperation (energy) in addressing themes of contention. Conducting dialogue and confidence building measures that could lead to the signing of a peace deal would alleviate security concerns and could potentially foster further cooperation and Japanese investment in developing the RFE.

Conflict of interest

The author declares no conflict of interest.

Acknowledgments

The author would like to express her gratitude to Matteo Dian, Katsuhiro Musashi, Marc Lanteigne, Ulf Sverdrup, Elana Wilson Rowe, Petter Y. Lindgren and two anonymous peer reviewers for their comments, questions and suggestions. Earlier versions of this article were presented at the Nordic Association for the Study of Contemporary Japanese Studies’ (NAJS) Annual Conference in Trondheim in 2015, at a conference at the Far Eastern Branch of the Russian Academy of Sciences in Vladivostok in 2015 and at the 11th Lodz East Asia Meeting in Poland in 2015. The article also benefitted from discussions at a policy dialogue at Keio University in Tokyo in 2017. The funding for this article was provided by the Norwegian Research Council under the project ‘Evaluating Power Political Repertoires (EPOS),’ project no. 250419.

Footnotes

Appendix 1

Interviews

Interview 1	Energy expert, University sector	Tokyo, April 2015
Interview 2	Energy expert, The Institute of Energy Economics, Japan (IEEJ)	Tokyo, April 2015
Interview 3	Bilateral relations expert, University sector	Tokyo, April 2015
Interview 4	Energy expert, The Tokyo Foundation	Tokyo, April 2015
Interview 5	Deputy Director, Ministry of Foreign Affairs (MOFA)	Tokyo, April 2015
Interview 6	Director, Ministry of Economy Trade & Industry (METI)	Tokyo, April 2015
Interview 7	Energy expert, Japan Oil, Gas and Metals National Corporation (JOGMEC)	Tokyo, April 2015
Interview 8	Researcher, National Institute of Defense Studies (NIDS)	Tokyo, April 2015
Interview 9	Researcher, National Institute of Defense Studies (NIDS)	Tokyo, May 2015
Interview 10	Researcher, National Institute of Defense Studies (NIDS)	Tokyo, May 2015

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New dynamics in Japan–Russia energy relations 2011–2017 *

Abstract

Keywords

1 Introduction

1 For in-depth accounts of the domestic planning around and regional reception of Russia's pivot to Asia, refer to the volume Helge Blakkisrud and Elana Wilson Rowe (Eds.), Russia's Turn to the East, Palgrave Macmillan: Cham, 2018.

2 Personal communication with an informed Russian expert, December 2014.

3 For more on the security dynamics between the LDP and coalition partner Kōmeitō, see Petter Y. Lindgren (2016) “Kōmeitō's security ideals and collective self-defense: betwixt pacifism and compromises,” East Asia, 33: 233–254.

4.1 Japan in the “sanctions circle” and implications for bilateral energy relations

8 Personal communication with an informed Russian expert, December 2014. For an assessment of the potential economic costs of the sanctions, see Yanagisawa (2014).

6 Conclusions

Conflict of interest

Acknowledgments

Footnotes

Appendix 1

References

1
For in-depth accounts of the domestic planning around and regional reception of Russia's pivot to Asia, refer to the volume Helge Blakkisrud and Elana Wilson Rowe (Eds.), Russia's Turn to the East, Palgrave Macmillan: Cham, 2018.

2
Personal communication with an informed Russian expert, December 2014.

3
For more on the security dynamics between the LDP and coalition partner Kōmeitō, see Petter Y. Lindgren (2016) “Kōmeitō's security ideals and collective self-defense: betwixt pacifism and compromises,” East Asia, 33: 233–254.

8
Personal communication with an informed Russian expert, December 2014. For an assessment of the potential economic costs of the sanctions, see Yanagisawa (2014).