4 Jul 2022

Japan’s foreign policy toward Gulf countries: Challenges for the Kishida government

Dr. Shun Watanabe

Introduction

The recent increase in global oil market volatility has reaffirmed the importance of energy security in Japan. The Middle East, especially the Gulf region, is one of the pillars of the country’s energy security. Japan has relied heavily on the Gulf region for crude oil supplies, accounting for about 90% of its total crude oil imports (see Table 1). To ensure its energy security, Japan has strengthened its relations with the Gulf countries in various sectors beyond oil and gas. In 2001, the then foreign minister Yohei Kono declared Japan’s will to build “multi-layered relations with the Gulf countries” in his speech in Doha. [1] Subsequent foreign ministers and governments have persistently reiterated this.

Table 1: Japan’s Crude Oil Imports by Country in FY 2019

How then does the newly established Kishida government address the issue of building multi-layered relations with the Gulf countries? Is the Kishida government in line with previous Japanese foreign policy in the Gulf, or are there changes on the horizon? And how does the changing global energy supply affect Japanese foreign policy toward the Gulf region?

Japanese foreign policy in the Middle East

Since the end of World War II, maintaining an alliance with the US has been the cornerstone of Japanese foreign policy. Consequently, Japan has developed as an economic power under the security protection of the US. Simultaneously, the East Asian country has functioned as a base for US security in East Asia, mainly against the challenges posed by China and North Korea. This function has been gaining greater importance due to the recent surge in US-Sino competition. Consequently, Japan has also been searching for measures to confront the security threats posed by China, which has increasingly reinforced military capabilities, and has rapidly expanded and intensified maritime and airspace activities in Japan’s surrounding waters and airspace, as well as in East China Sea and even in the Pacific Ocean. [2]

Japan’s alliance with the US also lays the foundation for its foreign policy in the Middle East. Simultaneously, though, due to resource scarcity, Japan’s foreign policy in the region has pursued another goal: securing access to energy resources, namely oil and gas. This poses a dilemma for Japan in the case of the US’ confrontations with oil-producing countries, including Iran as a prime example. [3] However, Japan has secured good relations with the Middle Eastern countries through its massive and long-term import of fossil fuels from the Gulf. Developing oil fields in the area with the local governments has particularly contributed to consolidating relations with the Middle Eastern oil-exporting countries and securing stable oil and gas provisions for Japan.

Toward multi-layered relations with Gulf countries

Nevertheless, after the Arab Oil Company (AOC) lost its concession rights to the Khafji oil field, Japan was urged to reconsider its approach toward the Middle East. The AOC had been developing the oil field since 1958. However, the company and the Japanese government could not renew the concession agreement with the Saudi government; the agreements with Saudi Arabia expired in 2000, and with Kuwait in 2003. The Saudi side demanded ambitious terms, including Japanese investment in the Saudi rail project estimated to cost $2 billion, but the Japan side lacked the political will to offer extensive compromises to renew the contract in an era of oil glut since the mid-1980s. The Japanese government at that time considered oil as a market commodity and found it unreasonable to pledge a huge investment in exchange for the AOC’s equity. [4] Japanese Foreign Minister Yohei Kono’s aforementioned speech on “multi-layered relations with the Gulf countries” emerged in this context of the “AOC shock” and the subsequent need to reconfigure Japanese foreign policy in the Gulf region.

In his speech, Kono emphasized Japan’s desire to broaden its relations with the Gulf countries in a multi-layered manner, beyond oil and trade relations. He mentioned three possible areas of cooperation: promotion of dialogue with the Islamic world; water resources development; and wide-ranging policy dialogue. All three were subsequently put into effect. Successive governments have adopted a similar stance; for example, during his 2007 visits to Saudi Arabia, the UAE, Kuwait and Qatar, as well as his 2013 visits to Saudi Arabia, the UAE, and Turkey, Prime Minister Shinzo Abe highlighted the importance of building comprehensive, multi-layered relations with Middle Eastern countries beyond resources and energy. One result of these initiatives was the creation of the Japan-Arab Economic Forum. This international joint public-private economic forum has been held five times since 2010 (the latest forum was held in Cairo in 2019), with the aim of promoting Japan-Arab economic cooperation in a wide range of fields including trade and investment, energy, technology, and human resources development. [5]

Economic rise of Asian rivals

Besides reconfiguring its stance on the Middle East, Japan also had to cope with the changing international context: the economic rise of Asian rivals. Due to economic growth and a large market, energy demands from Asian countries, such as India and China, grew in the 2000s. Furthermore, an increasing number of Asian countries started seeking business opportunities in the Gulf. Such a trend placed Japan in severe competition with its Asian rivals, both in securing energy supplies and expanding economic and non-economic cooperation.

The mounting competition with its Asian rivals resulted in yet another “shock” for Japan. In 2009, a consortium led by US-based General Electric and Japan’s Hitachi lost a bid for a nuclear power plant in Abu Dhabi. The winner of the $40 billion deal was a consortium led by a South Korean state-owned power company, Korea Electric Power Corp. [6] This “Abu Dhabi shock” illustrated the severity of the competition over business opportunities in the Gulf countries and, ultimately, urged the Japanese government to strengthen cooperation between the government and the private sector in promoting such opportunities.

Therefore, since the beginning of the 21st century, Japanese policymakers have had to address multiple issues in foreign policy in the Gulf: securing a stable energy supply, [7] building multi-layered relations with the Gulf countries and strengthening cooperation between the government and the private sector in promoting business opportunities. But how does the Kishida government cope with these multiple issues?

Kishida government’s foreign policy and the Middle East

Since taking office as Prime Minister in October 2021, Kishida has pursued what he calls “realism diplomacy for a new era.” [8] Amid the US-China rivalry, the Kishida government has managed to balance the need to strengthen the US-Japan alliance and seek a stable China-Japan relationship.

Regarding foreign policy in the Gulf region, the Kishida government seems to follow its predecessors’ path by fostering relationships on multiple fronts. Foreign Minister Yoshimasa Hayashi visited Turkey and the UAE in March 2022 and met with his counterparts to discuss bilateral relations. In the UAE, he also met with the Minister of Industry and Advanced Technology and the Abu Dhabi National Oil Company CEO, Dr. Sultan Al Jaber. [9] This meeting illustrates that the Kishida government, as an energy importer, hopes to maintain a good relationship with the Gulf exporter. In the cultural sphere, the Ministry of Foreign Affairs (MOFA) of Japan held an online meeting in March 2022 with the supervisor of the Center for Voice of Wisdom of the Organization of Islamic Cooperation, whose headquarters are located in Jeddah, Saudi Arabia. Furthermore, in Saudi Arabia, an international event featuring Japanese pop culture called “Anime Village” was launched in May 2022, as part of the “Jeddah Season 2022”. [10]

Despite these developments, the Kishida government faced another “shock” in November 2021. JERA Co., Japan’s biggest power generator, decided not to renew its long-term LNG contract with Qatar, which amounts to 5.5 million mt/year. Reportedly, the decision was based on JERA’s wish to diversify LNG suppliers and the mismatch in the contract terms between them. [11]

In response to a question during a press conference, Japanese Minister of Economy, Trade and Industry, Koichi Hagiuda, indicated his preference not to comment on the decision since it was a negotiation between private companies. Instead, he expressed his appreciation for the friendship with Qatar and his willingness to secure mutual trust. [12] However, by contrast, executives in the MOFA and the Ministry of Economy, Trade and Industry (METI) reportedly recognized JERA’s decision as a blow to Japan-Qatar relations and complained about the decision. [13] Such reactions, like Hagiuda’s, imply that the cooperation between the government and private sector still needs improvement.

In terms of political commitment, some concerns remain in developing relationships with the Gulf countries. Upon the demise (passing) of Sheikh Khalifa bin Zayed al-Nahyan, Emir of Abu Dhabi and President of the UAE, in May 2022, Japan sent Mr. Akira Amari, an influential senior member of the ruling Liberal Democratic Party as a Special Envoy of the Prime Minister to offer condolences to the family of the late Emir. Compared to other major countries, the Japanese envoy appeared lower-ranked. Arab and Western countries sent high-ranking royal family members or their heads of state, like Qatari Amir Sheikh Tamim bin Hamad Al-Thani, British Prime Minister Boris Johnson, and French President Emmanuel Macron. [14] Thus, the selection of a lower-ranked envoy may have cast doubt on Japan’s will to build closer relations with the Gulf countries.

Additionally, compared to its predecessors, the Kishida government seemingly pays lesser attention to the Gulf and Middle East. In May 2022, Kishida invited the leaders of the US, Australia, and India to a meeting. The so-called Quad meeting, first held in 2007, aims at countering China’s growing influence in the Indo-Pacific region. The Quad meeting’s objective is reflected in an initiative called “Free and Open Indo-Pacific”. Proposed by Japanese Prime Minister Abe in 2016, this initiative aimed to accelerate development in Asia and Africa, and improve connectivity between the Indian and Pacific Oceans to promote stability and prosperity throughout the Indo-Pacific region. [15] The Quad members endorse the initiative; however, interestingly, only Japan includes the Middle East in the initiative’s scope. [16] In the Diplomatic Bluebook of Japan, the Indo-Pacific region is illustrated as a region that “stretches from the Asia-Pacific across the Indian Ocean to the Middle East and Africa.” [17] However, policies for the Middle East were seemingly not on the agenda of the May 2022 Quad meeting. The joint leaders’ statement in the meeting did not refer to the Middle East or Gulf region and only condemned terrorism and violent extremism while referring to the recent developments in Afghanistan. [18] Instead, the focus was on East and Southeast Asia, which implies that the meeting’s primary concern was to discuss ways to counter China’s growing influence.

The prolonged Russian war in Ukraine mounts global concern about energy supplies. Since Japan has oil and gas stakes in Sakhalin, an island located at the far eastern end of Russia, the war poses a threat to Japan’s energy security by evoking discussion over anti-Russian economic sanctions. Japan is facing a dilemma between holding the stakes to secure its energy access and abandoning the stakes to follow the G7’s stance of phasing out their dependency on Russian energy, which includes the phasing out or banning of Russian oil imports. [19] The importance of the stakes for Japan lies in the fact that it mitigates Japan’s over-reliance on the Middle East for energy provision, while Sakhalin’s geographical proximity to Japan helps secure stable energy supply. [20]

The international context not only reminds us of the insecurity of energy supply chains but also the severity of competition over energy provision. European countries have already shifted their attention to the Gulf region to secure energy supplies. Qatar agreed on an LNG deal with Germany in March 2022, [21] which was followed by the signing of the energy partnership agreement on May 20, 2022. [22] This move is rooted in Germany’s intention to diversify its LNG sources beyond Russia in response to the Russian aggression in Ukraine. At this moment, whether the deal would lead to long-term LNG deals is unclear. [23] However, for as long as the Russian-Ukrainian war continues, European countries’ concerns over the supply of hydrocarbon energy resources should persist. Such concerns would lead European countries to focus on the Middle East, thereby severely affecting the competition for energy supplies.

Such international circumstances demand further commitment of Japanese policymakers to energy security. Securing access to the Gulf’s oil and gas seems to be gaining greater importance. However, the above discussion illustrates that Japan’s political commitment to Gulf relations is insufficient. Following the Russian war in Ukraine, Kishida, in March 2022, made a phone call to Saudi Crown Prince Muhammad bin Salman to discuss a potential increase in oil production. However, Kishida did not receive a positive reply from the Saudi Crown Prince over the issue. According to the Saudi Press Agency, the Saudi Crown Prince “reiterated the Kingdom of Saudi Arabia’s keenness to maintain the oil market’s balance and stability, noting the role of the OPEC+ agreement in this regard and the importance of maintaining it,” but he made no reference to any possible increase in crude oil output. [24] When Kishida held a press conference about the telephone talk, all he could say was that they “had an intense discussion on countermeasures against oil price increases.” [25] Evidently, Japan is facing more severe competition over access to the energy resources in the Gulf. How the Kishida government responds to the challenge and pursues foreign policy in the Gulf remains to be seen.

References

[1] Ministry of Foreign Affairs of Japan, “Policy Address by Minister for Foreign Affairs, H.E. KONO Yohei (Subtitle: Toward Multi-layered relations with the Gulf Countries),” January 9, 2001, https://www.mofa.go.jp/region/europe/russia/fmv0101/fmspeech.html.

[2] Ministry of Defense of Japan, “Defense of Japan 2021 (Annual White Paper),” https://www.mod.go.jp/en/publ/w_paper/index.html.

[3] Yukiko Miyagi, Japans Middle East Security Policy: Theory and Cases (London: Routledge, 2008).

[4] Ken Koyama and Jim Krane, “Energy Security through FDI: The Legacy of Early Japanese Investment in the Oil Sectors of the Persian Gulf,” Resources Policy 74 (December, 2021), https://doi.org/10.1016/j.resourpol.2021.102165.

[5] Ministry of Foreign Affairs of Japan, “The Establishment of the Japan-Arab Economic Forum,” January 20, 2009, https://www.mofa.go.jp/announce/announce/2009/1/1186706_1126.html.

[6] Amena Bakr and Cho Mee-young, “South Korea Wins Landmark Gulf Nuclear Power Deal,” Reuters, December 27, 2009, https://www.reuters.com/article/us-emirates-korea-nuclear-idUSLDE5BQ05O20091227.

[7] The importance of securing energy supply from the Gulf countries was highlighted in Japan after 2011, when a massive earthquake hit the eastern part of Japan and led to the suspension of nuclear power plants. In 2010, nuclear power accounted for approximately 11% of Japan’s primary energy sources; however, after the Great East Japan Earthquake, the proportion of nuclear power in the primary energy sources dropped drastically to less than 1%. The figure is still low, and even in 2020, it is only at 2%. See, Agency for Natural Resources and Energy of Japan, “Comprehensive Energy Statistics,” https://www.enecho.meti.go.jp/statistics/total_energy/index.html.

[8] Yuichi Hosoya, “What Kishida’s ‘Realism Diplomacy for a New Era’ Actually Means for Japan,” API Geoeconomic Briefing, February 22, 2022, https://apinitiative.org/en/2022/02/22/33242/.

[9] Ministry of Foreign Affairs of Japan, “Foreign Minister Hayashi Visits Turkey and the United Arab Emirates (March 18-21, 2022),” March 20, 2022, https://www.mofa.go.jp/me_a/me1/page3e_001181.html.

[10] “Jeddah Season 2022 Announces the Launch of ‘Anime Village’,” Arab News Japan, May 20, 2022, https://www.arabnews.jp/en/arts-culture/article_72421/.

[11] “Honeymoon with Qatar is over: Natural Gas Crisis Has Changed Japan’s Mind,” Nikkei [Japanese], February 5, 2022, https://www.nikkei.com/article/DGXZQODK051IT0V00C22A2000000/.

[12] Ministry of Economy, Trade and Industry of Japan, “Press Conference by Minister Hagiuda (Excerpt),” November 30, 2021, https://www.meti.go.jp/english/speeches/press_conferences/2021/1130001.html.

[13] “Honeymoon with Qatar is over: Natural Gas Crisis Has Changed Japan’s Mind,” Nikkei [Japanese], February 5, 2022, https://www.nikkei.com/article/DGXZQODK051IT0V00C22A2000000/.

[14] “Video: World Leaders Descend on UAE to Pay Respects to Sheikh Khalifa,” Gulf Today, May 16, 2022, https://www.gulftoday.ae/news/2022/05/15/world-leaders-descend-on-uae-to-pay-respects-to-sheikh-khalifa.

[15] Amane Kobayashi, “Challenges for Japan in Integrating the Middle East and Africa into the Free and Open Indo-Pacific Strategy/Vision,” in The Changing Security Environment in the Middle East and the Role of the U.S. – Japan Cooperation, JIME Center, The Institute of Energy Economics, Japan, April 2020, https://jime.ieej.or.jp/htm/extra/report/cgp2019.pdf.

[16] Ibid.

[17] Ministry of Foreign Affairs of Japan, Diplomatic Bluebook 2021, https://www.mofa.go.jp/policy/other/bluebook/2021/pdf/pdfs/2021_all.pdf.

[18] Ministry of Foreign Affairs of Japan, “Quad Joint Leaders’ Statement,” May 24, 2022, https://www.mofa.go.jp/fp/nsp/page1e_000401.html.

[19] Juntaro Arai and Hiroyuki Akiyama, “Japan Faces Dilemma in Sakhalin as G-7 Vows to Quit Russian Crude,” Nikkei Asia, May 10, 2022, https://asia.nikkei.com/Business/Energy/Japan-faces-dilemma-in-Sakhalin-as-G-7-vows-to-quit-Russian-crude.

[20] Agency for Natural Resources and Energy of Japan, Energy White Paper 2022, June 7, 2022, https://www.enecho.meti.go.jp/about/whitepaper/2022/pdf/.

[21] Patrick Wintour, “Germany Agrees Gas Deal with Qatar to Help End Dependency on Russia,” The Guardian, March 20, 2022, https://www.theguardian.com/world/2022/mar/20/germany-gas-deal-qatar-end-energy-dependency-on-russia.

[22] “Germany, Qatar Sign Energy Partnership Agreement,” Reuters, May 20, 2022,  https://www.reuters.com/business/energy/germany-qatar-sign-energy-partnership-agreement-2022-05-20/.

[23] Ibid.

[24] “HRH Crown Prince Receives Phone Call from Japanese Prime Minister,” Saudi Press Agency, March 17, 2022, https://www.spa.gov.sa/2338389?lang=en&newsid=2338389.

[25] Ministry of Foreign Affairs of Japan, “Telephone Talk between Prime Minister Kishida and Crown Prince of Saudi Arabia,”, March 17, 2022, https://www.mofa.go.jp/me_a/me2/sa/page3e_001179.html.

Table 1: Yearbook of Mineral Resources and Petroleum Products Statistics (Petroleum), Ministry of Economy, Trade and Industry of Japan, https://www.meti.go.jp/statistics/tyo/sekiyuka/index.html.

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