IEEJ：December 2016○ｃ IEEJ 2016

Special Bulletin
A Japanese Perspective on the International Energy Landscape (302)

December 19, 2016

Japan-Russia Relation after the Summit Meeting in JapanKen Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanOn December 15 and 16, Japanese Prime Minister Shinzo Abe and Russian President
Vladimir Putin held a bilateral summit. In Abe’s home town in Yamaguchi Prefecture on December
15 and in Tokyo on December 16, they held talks, including a meeting where the two leaders had
deep discussions on bilateral problems only with interpreters being present. On December 16, Abeand Putin held a joint press conference, announcing the achievements of their talks.
Through the summit, Tokyo-Moscow talks and business-sector negotiations, Japan andRussia agreed on (1) the launch of detailed talks on joint economic activities on the four northern
islands under a “special regime,” (2) bilateral economic cooperation projects worth 300 billion yen
for an eight-point economic cooperation plan and (3) the resumption of talks between Japanese andRussian foreign and defense ministers. The summit thus led to various important agreements thathave potential to break through the long stalemate in bilateral relations.
Before the summit, however, Abe and Putin were seemingly expected to make some
important progress on the Northern Territories and peace treaty problems, even though falling shortof resolving them. The actual agreements this time failed to meet the expectations. They arepositioned by some people as the first step for efforts to resolve the territorial and peace treaty
problems. At the same time, however, the summit provided an opportunity for Japan to recognize
anew how difficult the resolution of these problems is.
It has traditionally been difficult for the two countries to coordinate and conclude theirrespective domestic discussions on the problems linked directly to their sovereignty. Even thecurrent Japanese and Russian leaders boasting their high domestic popularity ratings have difficulties
in making any easy compromise or finding an agreement. They are required to appropriately respondto great changes in the two countries’ domestic conditions and the international situation.
The Japan-Russia summit led me to feel anew that relations with the United States areimportant for each of Japan and Russia. Current U.S. President Barack Obama has taken theinitiative in imposing sanctions on Russia over the Ukraine problem and maintained a hardline
policy against Russia. However, he will soon be replaced by Donald Trump who is expected by1

IEEJ：December 2016○ｃ IEEJ 2016

some people to revise the U.S. policy on Russia. The coming change might have some influences on
how Japan and Russia would position their relations and proceed with talks.
Regarding the Northern Territories problem, the framework and presence of the Japan-U.S.
security alliance might pose a matter of concern to Russia from the viewpoint of Russian security
policy. Japan and Russia will have to proceed with bilateral talks under the changing internationalsituation including the emergence of the new U.S. administration. In the future, Japan will berequired to take deliberate, strategic initiatives to resolve the difficult problems.
As well as the abovementioned point, how to implement the latest agreements will become
important in the future. The following focuses on economic cooperation related to the eight-point
plan among the latest agreements.
Through Japan-Russia talks toward the latest summit, agreements were signed for a totalof 82 economic cooperation projects (including 68 private sector projects) worth 300 billion yen for
the eight-point economic cooperation plan. They include health care improvement, small andmedium-sized enterprise exchange, Russian industrial diversification, Far Eastern industry
promotion, personnel exchange and other projects in which Japanese companies will participate. It issignificant that these project agreements indicate the path and potential for widening Japan-Russia
economic cooperation.
However, the talks through the summit highlighted the importance of energy inJapan-Russia economic cooperation. Large energy cooperation projects include joint resources
exploration using Japan’s “Shigen (resources)” research vessel in waters around Russia, resources
development off Sakhalin between such Japanese firms as Marubeni Corp. and INPEX Corp., andRussian oil giant Rosneft, loans from the Japan Bank for International Cooperation and others for
Arctic liquefied natural gas development, loans from Mizuho Bank, Sumitomo Mitsui Banking Corp.
and others to Gazprom, LNG production capacity expansion for the Sakhalin 2 project, and Arctic
LNG development between Mitsubishi Corp., Mitsui & Co. and Marubeni from Japan and Novatekfrom Russia.
What was agreed on through the talks is economic cooperation instead of economic
assistance. Particularly, private sector projects are required to have economic rationality andadvantages for Japanese participants. As a matter of course, the successful implementation of private
sector projects is expected to further advance Japan-Russia relations to help pave the way forenhancing the bilateral relationship and building confidence to resolve the abovementioned politicalproblems. Energy projects are significant for Japan to enhance energy security and for Russia todiversify export destinations now concentrating in Europe and strengthen demand security.
However, private sector projects must be of economic significance for participating
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companies under the fast-changing Japanese and foreign economic situations and energy landscape.
Another significant matter for consideration is that the Japanese energy market will grow morecompetitive through the deregulation of electricity and gas markets. It is also important that theinternational oil and gas market is expected to remain a buyer’s market with oversupply for theimmediate future due to progress in the shale revolution and the launch of energy supply projects
subjected to investment decisions made amid higher energy prices. Given these conditions, Japaneseand Russian stakeholders are expected to promote talks and consideration to implement their
win-win economic cooperation projects.
I would like to pay attention to government and private sector efforts in Japan and Russia
to make the latest summit and its achievements a full-fledged first step for advancing Japan-Russia
relations in the future.

Contact: report@tky.ieej.or.jp
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