Japan Maintains Sanctions but Boosts its LNG Imports From Russia

Tuesday, September 20, 2022

Ahmed Adel, Cairo-based geopolitics and political economy researcher

Despite being one of the very few non-Western countries to join the US-led sanctions against Moscow, Japan has suddenly tripled the amount of liquefied natural gas (LNG) imported from Russia to solve its energy problem. Although the Japanese government plans to reduce its dependence on Russian gas supplies, it appears that Tokyo cannot immediately give up gas and fuel from the Eurasian country.

According to the Japanese Ministry of Finance, Japan in August increased the amount of LNG imported from Russia by 211.2% compared to last year. It is noted though that crude oil imports in the same period year-on-year decreased by 20.3%. According to the data, coal imports from Russia in August decreased by 32.6% compared to the same period last year.

In the opposite direction, iron ore imports increased by 44.9%. In addition, Japan increased the number of vegetables and fruits imported from Russia by 154%, but reduced the amount of grain and soybean imports by 94-95%. While the total volume of goods exported from Japan to Russia in August decreased by 24.3% compared to the same period last year, reaching $384 million, the amount of Japanese goods imported from Russia recorded an increase of up to 67.4%, with a value of up to $1.15 billion.

The Japanese want to gradually reduce imports of Russian coal and oil, but Tokyo does not want to cut the amount LNG because this is a gas supply that plays an extremely important role in maintaining the country’s economy.

At the end of June 2022, the G7, the group of leading industrialised countries in the world, which includes Japan in its ranks, announced a plan to reduce dependence on the supply of gas, oil, and fuel from Russia. However, the sharp increase in LNG imports from Russia to Japan seems to indicate a different truth. Not only Tokyo, but also many Western countries, will find it difficult to end their dependence on Russian gas in the short and medium term.

It is recalled that Japan’s energy self-sufficiency rate is only 11%, much lower than the US’s 106%, Canada’s 179%, and the UK’s 75%. Therefore, if Russia stops selling oil and gas to Japan, Tokyo will face a great risk of energy insecurity.

This month, G7 countries also announced their intention to impose a price cap on Russian oil. However, the EU itself cannot find a common voice on this issue, especially as Moscow has warned that “unfriendly” countries will not have the opportunity to import oil, gas and fuel from Russia if they impose a cap. This is a scenario that Japan wants to avoid.

According to the Ministry of Economy, Trade and Industry (METI), Japan’s total energy consumption in 2019 is equivalent to 247 million tons of oil, of which natural gas accounts for nearly 8.7%. Renewable energy (other than electricity) accounts for only a very small part, about 0.1% and even tends to decrease slightly over time. In recent years, Japan has not discovered any more natural gas fields of major commercial value. Japan, for its part, only produces about 2 million tons per year.

To meet domestic demand, Japan imported 82.9 million tons in 2018 – from Australia 34.6%, the Middle East 21.7%, and Malaysia 13.6%, but also from host of other countries. In fact, Japan uses LNG mainly for power generation through 37 LNG terminals, with the highest proportion belonging to JERA (42%) and Tokyo Gas (17%).

After the Fukushima nuclear power plant meltdown, Japan changed its energy development strategy, focusing on the issue of safety and energy security. Along with that, Japan also strives to further enhance energy efficiency.

In the context of Japan’s limited potential to exploit renewable energy, the use of nuclear power is opposed by many domestic organisations. For this reason, LNG imports became a key strategy for Japan. By 2030, the share of LNG in Japan’s power generation capacity is forecast to reach 27%.

It is noted though that August marked the thirteenth month in a row that Japan has been importing products more than it has been exporting, with about half of the deficit coming from energy imports from the Middle East.

“The weaker yen is boosting (the cost of) imports at a time of surging energy prices. Energy and grain prices have shown signs of stabilizing recently, but the impact of the sharp drop in the yen will continue for a while with a lag,” one analyst told Japanese daily Mainichi.

In this way, Japan’s anti-Moscow sanctions are also affecting its economy, just as it is all across Europe. There is little evidence either that Tokyo is planning to reverse its sanctions, suggesting that its economic woes will continue to be compounded by the self-sabotaging sanctions imposed against Russia.

Source: InfoBrics