Russo-Japanese cooperation in
the Arctic region
Dmitry Streltsov,
MGIMO University

Japan’s lack of interest to the Arctic
region in the past
* The legacy of the Tokugawa period's isolationist policies, when
Japan deliberately turned its back on the north and the outside
world in general* The northern direction of expansion in the short period of theexistence of the Japanese Empire that proved to be the mostdisastrous for the country* In the post-war period, Japan built its policy based on the
direct military threat from the north, which aﬀected thementality of several postwar generations* Even polar scientiﬁc research after the war was launched inJapan not in relation to the Arctic, but in connection with
Antarctica

Factors of Japan’s Interest to the
Arctic region after the cold war (1)* Pragmatic considerations: political ambitions as
global power* Energy security: the Arctic contains 30% of theworld's unconﬁrmed natural gas reserves and 13% of
the world's oil reserves.
* Short transportation route to Europe

Ecological security* Natural gas is the most environmentally friendly andpromising energy resource after Fukushima* Participation in Arctic gas development projects isevaluated in Japan both as part of the energy security
strategy, and as Japan's contribution to green
development and the ﬁght against greenhouse emissions* Japan as the leader of the movement against global
warming. Ice melting in the Arctic where holds the key tomany global environmental problems* Japan as the global leader of environmental studies

Arctic as a new transportation route* In the future, the Arctic may become a navigable region as
the ice melts. It is already possible to deliver cargo acrossthe Arctic from Asia to Europe* The Northern Sea Route promises great beneﬁts forJapan. Its length is about 20 thousand km, if it passes the
traditional way-through the Paciﬁc Ocean through theSuez Strait. Through the NSR, the route from Yokohama
to Rotterdam on the southern route is 20742 km, on thenorthern-12038 km . Thus, it is 13 thousand (40% shorter)and 10 days less

Maps of NSR

Transportation from the Russian Arctic through the Northern Sea Route contributes to reducing
greenhouse gas emissions as the required navigation distance is 65% shorter than that via the Suez Canal.
Additionally, energy transportation through the Northern Sea Route enables Asian countries, including
Japan who relies on natural energy imports, to develop a new energy supply route.
https://www.mol.co.jp/en/pr/2020/20038.html

Merits of the NSR for Japan (1)* Reducing greenhouse gas emissions* The NSR enables LNG produced in the Russian Arctic
to be delivered to Asian purchasers in 15 days via the
Bering Strait. It cuts the transport time in half fromthe traditional Suez Canal and decreases
transportation costs.
The new LNG carriers are tailored to allow
sailing east via the Northern Sea Route
year-round. Christophe de Margerie began her
voyage on 5 January 2021 at the port ofSabetta. On 7 February, upon reaching theeastern end of the Northern Sea Route, Cape
Dezhnev, met the icebreaker 50 Let Pobedy,
which then escorted her back to Sabetta. The
LNG carrier safely completed her passage
eastward along the Northern Sea Route in 11days, while navigating the entire length of the
NSR without icebreaker assistance.

The ﬁrst time call of an Ice-Breaking
LNG Carrier from Yamal to Japan* The Ice-Breaking LNG Carrier "Vladimir Rusanov", which is
jointly owned and operated by MOL and China COSCO
Shipping Corporation Limited for the Yamal LNG project,made its ﬁrst call at the LNG Terminal in Ohgishima, locatedinside Tokyo Bay in Japan, on 23rd July 2020. This ishistorically the ﬁrst time an Ice-Breaking LNG Carrier has
called at Japan.

Merits of the NSR for Japan (2)* The NSR is safer than the southern route. Vessels do not needto pass through waters subject to the threats of piracy andterrorism, including the Strait of Malacca or the East coast ofSomalia* Japan acknowledges that Russia has suﬃcient technology toensure navigation almost all year round. Russia has enoughicebreakers, search and rescue, repair and other support
vessels.
* Suﬃcient risk-avoiding infrastructure (including fuel leakage
etc.)* Japan also highly appreciates the pilotage services for the NSR
available in Russia compared to other Northern countries

NSR: doubts (1)* Most decisions on the development of the Arctic have been
only in 2018-2019. Russian Government approved in December
21, 2019, the plan of the NSR infrastructure development up to2035. As part of the development of the Northern Sea Route,
Rosatom State Corporation has become its single infrastructure
operator.
* Russia is yet to fully implement improvements to theinfrastructure of the Northern Sea Route, the construction of
icebreaking, rescue and auxiliary ﬂeets, the creation of groundvehicles and aircraft to work in the climatic conditions of the
Arctic.
* In 2018, only 100 vessels passed through the NSR per year, and1,800 passed through the Suez Strait.

NSR: doubts (2)* Russian monopoly in setting shipping conditions for the NSR: fear of highescort tariﬀs, restrictions for national ﬂag of tankers transporting LNG fromthe Yamal ﬁelds etc. Only at the beginning of December 2020 the Russianside stated that ‘if appropriate appeals are sent from transport companies,
this restriction will be lifted’* Relatively shallow Bering Strait (the lowest depth of the fairway is 36 m),
which signiﬁcantly limits the navigation capabilities of large-capacity vessels* Due to the large volume of emissions and the risk of serious accidents,
large-sized vessels may cause irreparable damage to the fragile ecology of
the Arctic* Diﬃcult assessment of investment and insurance risks and insurance
payments. As a result, insurance companies refuse to sign insurance
contracts with investors, which deters the latter even from economicallyattractive projects in the Arctic.

Energy security* Rich natural resources (hydrocarbons) About 20% of the world's gas reserves areconcentrated in the Yamal region (Yamal and Gydan deposits)
Leonid Mikhelson, President of Novatek: “ I think that altogether with Gazprom's reserves
and undistributed license areas in the region, Russia is able to produce 130–140 million
tons of LNG per annum. This is as much as one and a half of Qatar”.
https://www.novatek.ru/common/upload/press/Kommersant_LVM.pdf* For Japan this region is part of the diversiﬁcation strategy within the framework of
the Energy Security Policy. Energy raw materials account for about 70 percent ofJapan's total imports from Russia. Japan pursues a strategy of balanced distributionof sources of LNG supplies from various regions of the world – the United States,
Russia, Southeast Asia and the Middle East
* Currently, LNG volumes from Australia, Malaysia and Qatar account for about 60
percent of Japanese imports. Thus, participation in the Arctic projects will contributeto the diversiﬁcation of Japan's energy sector away from traditional sources* Russian LNG is at present around 7.5% of Japan’s LNG market and can be expandedCompetitive LandscapeJapan’s LNG Import (2019)(tons)(thousand yen)

Australia

30,116,008

1,756,177,031

Malaysia

9,330,527

492,022,088

Qatar

8,734,971

510,420,743

Russia6,398,638

337,528,306

Brunei

4,320,630

248,174,455

Indonesia

4,153,037

243,067,415

Papua New Guinea

3,741,745

216,672,924

U.S.A.

3,695,647

196,835,711

Oman

2,894,035

144,333,845

United Arab Emirates

2,168,486

123,767,579

Nigeria

833,291

32,436,813

Peru

677,128

36,467,369

China

70,5602,250,297

Equatorial Guinea

68,8193,623,685

Egypt

62,1193,495,559

Algeria

61,4382,505,334

77,327,079

4,349,779,154

Evolution of Japan’s involvement to
the Arctic LNG projects* In December 2016, Marubeni signed a memorandum on participation in the second
major project in Yamal – Arctic 2.
* In November 2017 Marubeni and Mitsui signed a memorandum with the Russian sideon participation in the construction of an LNG transshipment hub in Kamchatka.
* In 2018 Japan National Oil, Gas and Metals Corporation (JOGMEC) has signed amemorandum of understanding and cooperation opportunities for the projects on the
Yamal Peninsula, including the Arctic – 2 projects on the Gydan Peninsula. The
memorandum also provided for the exchange of information and knowledge on thetransportation and marketing of LNG for Japan and the Asia-Paciﬁc market along theArctic Sea Route.
* Shortly thereafter, Seibu Gas (Fukuoka Prefecture), a Japanese gas distribution
company that supplies urban gas to the northern Kyushu region, signed amemorandum of understanding with Novatek to enter the end-user market andoptimize LNG supplies to the Asia-Paciﬁc region using LNG, including the constructionof the Hibiki terminal in Kitakyushu

The Arctic LNG 2 project outline* As of 31 December 2018, the Utrenneye ﬁeld’s 2P reserves under PRMS
totaled 1,138 billion cubic meters of natural gas and 57 million tons of liquids.
Under the Russian classiﬁcation reserves totaled 1,978 billion cubic meters ofnatural gas and 105 million tons of liquids. Arctic LNG 2 owns an LNG export
license.
* Arctic LNG 2 envisages constructing three LNG trains at 6.6 million tons perannum each, using gravity-based structure (GBS) platforms. The Project isbased on the hydrocarbon resources of the Utrenneye ﬁeld. The total
capacity of the Arctic-2 three trains will be 19.8 million tons of LNG per year.
* The launch of the ﬁrst line is planned for 2023, with a phased commissioningof the facility in 2023-2025. In contrast to the previously established LNG
trading model focused on long-term contracts, the company expects to sell
LNG on the basis of spot transactions. The key to this is the smooth
operation of the Arctic Sea Route. If all goes well, Arctic Ocean LNG could
lead the new LNG spot market.

Arctic LNG 2

Sales and Purchase Agreement to purchase a
10% in the Arctic LNG 2
*

*

*

*

During the G20 summit in Osaka in June 2019, Mitsui &Co and the Japan National Oil, Gas and Metals
Corporation (JOGMEC) have signed the Sales andPurchase Agreement to purchase a 10% participationinterest in the Arctic LNG 2 project. The participation in
the Project also provides for the long-term LNG oﬀtakeof approximately two million tons per annum by theJapanese partners.
“We welcome the consortium of Mitsui and JOGMEC as
partners in our Arctic LNG 2 project,” noted Leonid
Mikhelson, NOVATEK’s Chairman of the Management
Board. “Japan has 50 years of experience with importingLNG and is one of the largest LNG consuming countries.
Moreover, Japanese companies have extensive
experience in implementing LNG projects as well as
marketing LNG around the world.
President Vladimir Putin told a news conference on
Saturday after a G20 summit in Osaka that the Japanese
investments in the project would reach almost $3
billion.
Japanese Prime Minister Shinzo Abe praised the signingof the agreement, stressing that the deal "facilitates
Russia's eﬀorts to develop the Arctic and provides astable energy supply to our country."Japanese investors’ doubts* Reluctance to invest in the project which can beunder Washington's sanctions. Most large Japanesecompanies traditionally invest in the U.S. and do notwant to lose the U.S. market* Unpredictable situation with Russia as projects in theenergy sector take decades* Unattractive investment climate in Russia: problems
with customs clearance, legal regulations andadministrative authorities

Why only Mitsui survived?
* Mitsui agreed only after the Japanese state-controlled JOGMEC
oﬀered to ﬁnance 75% of the deal, thus violating its self-imposed 50%
limit* Mitsubishi Corp. refused to participate as doubts were raised about
its proﬁtability, the lack of guarantees that in the future it would not
be on the US sanctions list etc. In addition, Mitsubishi remembered
what happened to the Sakhalin-2 project in 2006, when along with
Shell and Mitsui it had to reduce its stake in the project by 50% when
Gazprom needed a controlling stake.
* Since the Soviet period Mitsui has special relations with Russianauthorities and fulﬁls certain political instructions from the Japanese
government not necessarily linked to the economic expedience

JOGMEC motivation* By entering into the deal, the Japanese companies won in competition
with several international national oil companies (NOC), including Saudi
Aramco and KOGAS.
* Notably, the government-aﬃliated JOGMEC is deeply committed to thistask. The project is positioned as important for the national interests ofJapan. Following the revision of the JOGMEC Law of 2016, it may movetowards acquiring Novatek's capital in the same way as Total in the
future. It is France that shows a presence in Europe at the same level as
China. French major Total owns a 16% stake in Novatek, as well as a 20%
stake in the Yamal LNG project and a 10% stake in the Arctic-2 project.
China National Petroleum Corporation (CNPC) and China National
Oﬀshore Petroleum Corporation (CNOOC) have each acquired a 10
percent stake in Arctic-2.

Merits for Japan* Diversiﬁcation of Japan's energy sector away fromtraditional sources* Operating costs of LNG production in the polar
regions are lower than in the Middle East. In
particular, this is due to the fact that it is cheaper tocool gas to a temperature below zero in polar
latitudes than at 30 Celsius degrees, as in the Middle
East.

Political motivation (Kantei)* Hopes that joint projects in the Arctic will advancenegotiations on the peace treaty (Abe’s strategy ofsettling the border dispute with Russia)* China factor: not to cede Arctic to China and not to let
Russia move too closely to China* To become, in cooperation with China, the main "link"connecting the Arctic Sea Route and the Indo-Paciﬁcregion, in particular Southeast Asia and India, where thedemand for natural gas will increase in the future (Japan’svision of Free and Open Indo-Paciﬁc)China factor* In January 2018, China announced that it would build an “Ice Silk Road" in the Arctic aspart of the "One Belt, One Road" initiative.
* Japan's accession to Arctic LNG-2 will lead to an unprecedented level of cooperation
between Japanese and Chinese energy companies* It is consistent with Abe's willingness to move from competition to cooperation and«lift Japan-China relations to a new era“, where Tokyo and Beijing are "neighbors andpartners“* In Japan's perspective, in cooperation with China, it can play the role of the "link"connecting the Arctic Sea Route and the Indo-Paciﬁc region, in particular Southeast
Asia and India, where the demand for natural gas will increase in the future.

* Japan's participation in the Arctic 2 is also important for Russia interms of balancing against China, and of the prospect of expanding
sales channels to Southeast Asia and India through Japan.

Other possible spheres ofcooperation in the Arctic* Improving people's quality of life: advanced technologies ofwooden house construction in the extreme climate conditions* Construction of new transport infrastructure facilities , inparticular, seaports along the NSR.
* The construction of diagnostics and rehabilitation centers(Vladivostok experience)* Construction of wind power plants, development of conditions
for power generation in extreme climatic conditions in Sakha(Yakutia).
* Construction of greenhouses for growing vegetable products.

Wind power plant in Sakha (Yakutia)* The project initially kicked-oﬀ in September 2017 at the Eastern Economic Forum in
Vladivostok. In February 2018, RusHydro, the government of Sakha (Yakutia) Republic
and NEDO signed an agreement to build a wind-diesel complex in Tiski after which thefeasibility studies and preparation of construction site began.
* On December 22, 2020, RusHydro announced inauguration of 3,900 kW uniquewind-diesel power plant* The wind-diesel complex consists of 900 kW wind power plant, 3,000 kW diesel power
plant and 1,000 kW electricity storage system. All components jointly function via
automated system controlling and distributing electricity.
* Three unique wind turbines are engineered to operate in temperatures up to -50 ºC
and can withstand 70 m/s winds. Each wind turbine is 41.5 meters high with blade span
diameter of 33 meters. Three diesel units are engineered to use crude oil, which isconsiderably cheaper than diesel fuel* With annual output of 12 GWh, the facility will ensure reliable electricity supply to the
5,000 inhabitants of Tiksi.

Wind turbines in Tiksi

Military security* An arms race is beginning in the Arctic, and many
powers are seeking to establish their militarypresence there. This is the region where Russia, theUnited States, and Europe share borders, and in thissense it becomes a testing ground where theinterests of the main global centers of power collide.
For Japan the Arctic region is treated as the arena of
China's containment policy.

The blog of Kobayashi Takayuki,
the LDP MP in the Lower House* China's activity in Arctic " raises
concerns that the inﬂuence of theChinese navy will increase in the
Arctic Ocean, the Bering Sea andthe Sea of Okhotsk in the North
Paciﬁc.
* "If Chinese nuclear submarines sailin these areas, the US deterrence
against China will fall sharply, andthe balance of power in East Asia
will be seriously disturbed.“* From this perspective, looking at
the future of the Arctic Sea Routewill further enhance the strategic
value of the Soya and Tsugaru
Straits, as well as the Kuril Islands.

Global dimension of Russo-Japanesecooperation in the Arctic* . The development of Arctic projects with the participation of Japan, primarilygas projects, and the introduction of the Northern Sea Route into the global
transport and communication turnover, make it possible to create a newlogistics link that will connect Russia and Japan with other countries of the
Indo-Paciﬁc region.
* This maritime trade and transport route will connect Russian gas, Japaneseﬁnance and technology, labor resources and industrial capacities of theASEAN and South Asian countries into a single whole.
* The sea lanes encircle Eurasia from the north, east and south that canbecome the logistics basis for economic growth in the 21st century. In thissense, Russian-Japanese cooperation in the Arctic is gaining not only aregional, but also a global dimension .
* These projects can also be integrated into the Japanese concept of a free andopen Indo-Paciﬁc region.

Thank you for attention