Japan must strongly protest Russia’s threats to ‘seize’ joint project

Russia’s unilateral actions to threaten Japan’s energy security can never be tolerated.

Russian President Vladimir Putin has signed a presidential decree to transfer the rights to the Russian Far East’s Sakhalin-2 oil and natural gas project, which Japanese trading houses have also invested in, to a new operating company to be established by Moscow.

The possibility has arisen that Japanese firms will be excluded from the project due to the de facto “seizure” by the Russian government.

Japanese trading houses Mitsui & Co. and Mitsubishi Corp. have invested in Sakhalin-2 to supply liquefied natural gas to Japanese electricity and gas companies. It has been reported that Russian-produced LNG accounts for about 9% of Japan’s LNG imports, with most of the imports from Russia coming from Sakhalin-2.

In the wake of Russia’s invasion of Ukraine, Russia has designated countries that impose sanctions on it as “unfriendly nations” and has used its exports of natural resources as a means of intimidation and retaliation toward those countries. Russia has cut off gas supplies to the Netherlands and Denmark and sharply reduced supplies to Germany.

It is obvious that Putin aims to rattle Japan with the latest presidential decree.

Reacting against comments by Prime Minister Fumio Kishida on a proposal under consideration by the Group of Seven leading industrialized nations to impose sanctions on Russian oil, former Russian President Dmitry Medvedev said on social media that Japan “would have neither oil nor gas from Russia.”

The reason, however, why Japan as well as many other nations continue to impose sanctions on Russia is Moscow’s barbaric act of violating international law by invading Ukraine. All fault lies with Russia. Attempting to retaliate by undermining the legitimate interests of other countries is completely unreasonable.

According to the presidential decree, if a Japanese firm wishes to continue operations in Sakhalin-2, it will have to indicate its intention within one month after the establishment of the new Russian company to accept the conditions presented by the Russian government for acquiring stakes in the new company.

However, it is totally unclear what conditions Russia will impose.

Japanese power and gas companies have concluded contracts to purchase Sakhalin-2 LNG over an extended period of 15 to 20 years. If the contracts are unilaterally canceled, that is an outrage that ignores the principles of commercial transactions.

It is quite natural that some people in Japanese business circles are saying very few private companies will invest in Russia in the future.

Once again, the risk of relying on Russian resources has been highlighted.

The Japanese government should strongly protest Russia’s action. At the same time, in preparation for the suspension of imports, Japan should work swiftly on finding alternative suppliers of LNG. It is also essential to promote the restart of nuclear power plants.

Japan must strengthen cooperation with the international community, especially the G7, to find ways to secure stable energy supplies.

(From The Yomiuri Shimbun, July 7, 2022)