Unreasonable demands from Russia could be on the horizon

To ensure that Japan’s energy supply is not hampered, Mitsui & Co. and Mitsubishi Corp. must do their best in cooperation with the central government.

Regarding the Sakhalin-2 oil and natural gas development project in the Russian Far East, the two trading houses have decided to notify the Russian government of their request to participate in a new operating company established by the Kremlin.

Russian President Vladimir Putin signed a decree at the end of June to transfer the operation of Sakhalin-2 to this new company.

The two companies had invested in the original operating company and were requested by the Russian side to express their intention within one month of the establishment of the new company if they wished to continue the business.

About 9% of Japan’s liquefied natural gas (LNG) imports come from Russia, mostly from Sakhalin-2. The Japanese government had urged the two companies to maintain their stakes in the project. The latest decisions can be said to be reasonable.

The Russian government has said it will negotiate specific contract terms after receiving the notification from the two companies.

Moscow, however, has been using the export of resources as a means of intimidation and retaliation against countries that impose economic sanctions against Russia, taking such steps as tightening the supply of natural gas to Germany through pipelines. Sakhalin-2 negotiations are also unpredictable.

At this point, Russia is said to have not indicated any adverse changes in conditions, but the possibility cannot be denied that it will make some demands in the future.

The Japanese government should make efforts to gather information and if there are any unreasonable demands, Tokyo should strongly protest and demand that they be corrected.

In the first place, Japan and Western nations continue to impose economic sanctions entirely because of Russia’s barbaric invasion of Ukraine. Any act of retaliation that infringes on the legitimate rights and interests of another country is totally unacceptable.

British oil company Shell PLC has announced its withdrawal from Sakhalin-2. It is important to gain the understanding of the international community so that there will be no misunderstanding that Japan’s maintenance of its interests in Sakhalin-2 will disrupt Japan’s unity with the United States and Europe.

Even if Japan decides not to participate in the new operating company, the rights would simply be transferred to a third-party such as China, and Russia could benefit greatly. It is necessary to explain in detail about this possibility to Western nations.

Apart from negotiations on Sakhalin-2, Japan’s own efforts to secure stable energy supplies are also important.

Japan must take all possible measures, such as exploring alternative sources of LNG procurement, restarting nuclear reactors, building new nuclear power plants, adding new reactors to existing power plants and expanding sources of renewable energy. In the long term, it is also desirable to put more efforts on the development of resources in the seas around Japan.

(From The Yomiuri Shimbun, Aug. 31, 2022)