IEEJ：November 2017○ｃIEEJ 2017
Special Bulletin
A Japanese Perspective on the International Energy Landscape (350)

November 15, 2017

10th Japan-Russia Energy and Environment Dialogue in Niigata
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanOn November 14, the 10th Japan-Russia Energy and Environment Dialogue took place atToki Messe, an international conference facility in Niigata. Organized by Niigata Prefecture, Niigata
City and the Economic Research Institute for Northeast Asia (ERINA), the annual dialogue has
provided opportunities for Japanese and Russian policymakers, energy industry people and experts
to discuss bilateral energy and environment cooperation since the first meeting in 2008. The 10th
one became the fourth in which I participated, following the second, fifth and ninth.
Representing the organizers at the 10th dialogue were Niigata Prefecture Lieutenant
Governor Morio Takai, Niigata City Mayor Akira Shinoda and ERINA Representative Director
Masahiro Kawai. Russian representatives included Sergey Yasenev, consul-general in Niigata, andAlexey Karaivanov from the Trade Representation of the Russian Federation in Japan. Delivering
keynote addresses or reports in the opening session were Nobuo Tanaka, chairman, Sasakawa Peace
Foundation; Keiichi Shima, director, Japan-Russia Economic Affairs Division, European Affairs
Bureau, Ministry of Foreign Affairs; Kazushige Tanaka, director, International Affairs Division,
Agency for Natural Resources and Energy; and Karaivanov. In Sessions A and B to deal with energy
resource problems and energy conservation/environment/electricity problems, a total of 12 reports
were presented by Russian experts and representatives from the energy industry and some research
institutes in Japan.
The meeting discussed Japan-Russia energy and environment cooperation as bilateralrelations were viewed as relatively stable and steady as indicated by four bilateral summit meetings
between the top leaders of the two countries a year, despite North Korean and other problems that
could affect the two countries and Northeast Asia. The ninth dialogue came in November 2016 when
Japan-Russia cooperation became a great matter of concern just before Russian President Vladimir
Putin’s visit to Japan in the next month. Based on later developments and realities, the latest meetingfeatured calmer, steadier discussions than at the previous one. While Prime Minister Shinzo Abe andhis administration have enhanced their support base through a recent parliamentary election, Russia
is set to see a presidential election in March 2018. It is important for the two countries to carefully
discuss their cooperation in consideration of the coming Russian presidential election and otherevents from next year. The meeting might have provided an opportunity for such discussions.
The first impressive point at the meeting was how the two countries should think aboutbilateral cooperation in the international energy market now in a buyer’s market stage. While crude
oil prices have risen back above $60 per barrel recently, the market environment at present is far1

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different from that during the period between 2011 and the first half of 2014 when crude prices
remained above $100/bbl. The natural gas/LNG market, on which Russia places great hopes, hasretained oversupply particularly in Asia including Japan. While the market is expected to go in thedirection of rebalancing with oversupply being eliminated, a mainstream view is that the naturalgas/LNG market will take five to six years to be rebalanced. Russian energy supply, particularly oiland gas/LNG supply, has various advantages for Japan and the whole of Asia, including thereduction of dependence on the Middle East, the diversification of energy supply sources and shortertransportation periods and distances arising from geographical proximity. At a time when Japaneseenergy demand is growing more uncertain amid the gradual restart of nuclear power plants, theexpansion of renewable energy, and power and gas market deregulation amid an oversupply market,
however, Russia has no choice but to face severe competition from other energy suppliers. In suchsituation, Japan and Russia must agonize over how to realize complementarity and reciprocity thatcan be found instinctively or potentially in bilateral energy relations.
As a matter of course, we cannot predict that oversupply or a buyer’s market will remain
forever. The history of the international energy market represents the repetition of market cycles. No
one can correctly predict what will happen next. While keeping such uncertainties in mind, Japanand Russia are required to explore, plan and implement cooperation that can produce desirable
results for both sides.
From the viewpoint of market competition, the moves of the United States are importantand significant for Japan and Russia. It may be needless to say that the largest factor behind thepresent oversupply in the international energy market is the U.S. shale revolution. In a sense, theshale revolution is still ongoing and will continue to exert great influences on the international oil
and gas/LNG market. In considering a strategy for the hopeful Asian market, or an eastward vector,
Russia cannot ignore the presence of U.S. LNG regarding the gas/LNG problem. In Europe as a
traditional mainstay market for Russia, potential U.S. LNG supply may be a key issue to which
Russia has no choice but to be alert. For Japan as a gas consuming country, however, U.S. LNG
supply expansion can be expected to provide a significantly positive effect. How to utilize U.S. LNG
supply is a key challenge for the energy market and a key topic for the whole of Japan-U.S. relations.
Japan and Russia must sufficiently and strategically consider theses points before building
reciprocally cooperative relations in the field of energy.
Regarding international relations, China’s moves are also very important. While being
isolated internationally through Western economic sanctions over the Ukraine crisis, Russia has
strategically enhanced its approach to China. In the energy field, Russia has completed and expanded
the Eastern Siberia-Pacific Ocean oil pipeline and increased crude oil supply to China. As for gas,
Russia has concluded a historic gas pipeline agreement with China. As Russia depends on China or
the Chinese market more and more, however, its relations with China may entail more sensitivedifficulties. In going ahead with the eastward vector, Russia must consider appropriate
decentralization and diversification. How to position Japan in this regard is strategically significant
for Russia.
As for Chinese moves, the problem is the energy demand expansion pace. China’s2

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economic growth has decelerated under the “New Normal” economy, affecting energy demandgrowth. For example, natural gas demand growth in 2015 slipped below 5%, contributing tooversupply sentiment. Since last year, however, Chinese gas demand has recovered an upward trend.
Particularly, China has substantially expanded LNG imports. Chinese moves are important foranalyzing the supply and demand environment for the international energy market and have various
implications for Japan and Russia. Amid various uncertainties existing in the international
environment surrounding Japan and Russia, the two countries are required to realize energy
cooperation based on strategic thinking and various angles and concentrate their wisdom to that end.

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