Iran Japan

Japan prime minister to visit Tehran, with energy security the main concern

As Japan looks to ensure security in the region, it could play a vital role in negotiating between Iran and the US.

Japan is the third-largest economy in the world, needing a regular supply of energy from reliable sources and routes. 

The diversification of energy resources is, therefore, a key pillar of Japan’s energy policy, in particular as it imports most of its oil from the Middle East. Saudi Arabia is Japan’s main oil supplier and besides Saudi Arabia, the UAE, Russia, Kuwait, Qatar and Iran supply additional oil.  Stability and peace in the region directly affect Japan’s energy security and economy.

Any tension or conflict in the region from which Japan imports energy or on a route it travels may increase the oil price, resulting in a significant negative impact on Japan’s economy as well as other major oil importers. Japan is therefore attempting to play an active diplomatic role in the Middle East to decrease the impact of tensions in the region. As the fourth largest consumer and importer of oil in the world, the largest importer of liquid gas (LNG) and the second largest importer of coal after China, it has no choice but to mediate regional Middle Eastern risks.

Japan’s major oil suppliers

In 2018, Saudi Arabia and the United Arab Emirates were the largest suppliers of oil to Japan with Iran coming in sixth. According to Japan’s Ministry of Finance, its crude imports from Iran dropped 42 percent in April compared to March, reaching 169,000 barrels a day on average. In March, the country imported an average of 292,000 barrels of oil a day from Iran. In February, Japan’s oil imports from Iran reached 76,000 bpd. At the time of Iran’s sanctions waivers the government of Japan extended insurance of state-owned oil imports from Iran for one year. This was the Japanese government’s move to encourage its refineries to continue importing oil from Iran.

Zarif’s Visit to Japan

During the last few months, Iran has begun to actively lobby diplomatically to increase its relations with major Iranian oil buyers; Iran does not want to lose its share in regional and world oil markets. Last month Iran’s Foreign Minister, Mohamad Javad Zarif, visited Tokyo and met with Japanese Prime Minster Shinzo Abe and Foreign Minister Taro Kono.

Taro Kono in his press conference after meeting with Zarid said: “We are very worried about the Middle East and will not hesitate to try to reduce tensions and resolve confrontations.” He emphasised that Iran needs to continue to uphold its commitments under the Iran Nuclear Deal, urging Iran to maintain its implementation. Zarif, at a meeting with his Japanese counterpart, said that Iran continues to honour its commitments under the Iran Nuclear Deal, despite US withdrawal from it. During his trip to Japan, the Iranian foreign minister told reporters that there is no way to negotiate with the United States. Zarif had set the goal of his trip to Japan to confront the “tension” of the United States.

Trump’s Visit to Japan

Japan is one of America’s closest allies. President Donald Trump visited Japan recently meeting with Japanese Emperor Naruhito and Shinzo Abe. Trump, in his joint press conference with the prime minister, asked Japanese businessmen to make more investments in the US. North Korea and Iran were also major topics which Trump focused on in his meeting with Shinzo Abe. Trump in his visit to Japan, said of Shinzo Abe’s visit to Iran: “I know that both Japan and its prime minister have good relations with Iran. We will see what will happen.”

Japan’s private and state-led companies with high technology and enough financial capabilities hold the potential to invest in Iranian infrastructure and oil and gas fields. Iran needs billions to recover its oil and gas production capacity; due to sanctions after the 1979 revolution Iranian oil and gas production capacity dramatically decreased, and without foreign technology and financial capability it will not be easy for Iran to increase oil and gas production capacity. Iran’s petrochemical and refinery sectors also need foreign investment due to ageing infrastructure the majority of petrochemical and refineries need to be repaired.

Shinzo Abe to visit Tehran

The relationship between Tehran and Tokyo has always been peaceful and based on mutual respect. One of the focuses of economic cooperation between Iran and Japan after the expansion of relations between the two countries in recent decades has been the issue of energy and contracts for oil and gas.

Shinzo Abe’s trip to Iran will be the first visit by a Japanese prime minister in over 40 years and has become particularly important regarding intensive diplomacy between Iran and the United States and tensions in the region. The continuation of energy imports from Iran is not the main concern for the Japanese government. The country can easily find an alternative to Iran’s oil and gas condensate, countries such as Saudi Arabia, Kuwait and the Emirates can easily meet the needs of the Japanese energy market. LNG imports from Qatar and the United States could also replace Iran’s gas condensate in the Japanese energy market.

Japan’s energy security will not be affected by US sanctions against Iran’s oil exports. However, any possible agreement between Iran and the United States will be in the interest of Japan. With the abolition of sanctions, Japanese companies can invest in oil and gas fields, refineries, and renewable energy in Iran. The country’s products will also have a greater chance of selling in the Iranian consumer market.

Is it possible for Japan to be mediator between Iran and US?

Japan’s major concern is decreasing the likelihood of conflict and tension in the region. The tensions and conflicts in the energy supply countries of Japan, as well as the routes that bring oil and gas resources to the Japanese market, have a direct impact on the security of energy and economic growth in the country. The major import of Japanese oil from Saudi Arabia, the UAE and Kuwait, and any military engagement in the region, especially in the Strait of Hormuz, directly threatens not only the energy security, but also the economy of the country. Any possible conflict in the region would mean an increase in oil prices, which would not be pleasant for the economy of major energy consumers, including Japan.

Given that the 12 pre-conditions by US Secretary of State Mike Pompeo have not yet been eliminated, if the talks are negotiated with Japan’s possible mediation, it would be difficult to reach an understanding between Iran and the United States in the current situation. If Iran and US officially choose Japan as mediator, it could play an important role.

It should be noted that negotiation without a precondition is different from the new agreement without a precondition. It is hoped that with Shinzo Abe’s trip, the tension in the region will be somewhat reduced.

Any conflict in the region and insecurity for oil tankers would be detrimental to all energy producers and consumers in the region. Shinzo Abe’s visit to Tehran will increase Japan’s role and political presence in the region and will enable Japan to play a role in stabilising security in the region. 


https://www.trtworld.com/

Read More

US, Russia Compete for EU Natural Gas Market

The global markets for natural gas and liquefied natural gas (LNG) are currently seeing an increase in the number of new producers. Natural gas’ geopolitical importance is also on the rise and it will increase its share of the energy basket of countries by 2040 as countries with natural gas resources seek to increase their share of the LNG market. The share of natural gas and volatile energy in the global energy market rises every day. In 2016, LNG’s contribution to the global gas market was 42 percent, and according to the International Energy Agency (IEA), will reach 53 percent in 2040.

Of countries that export LNG, Qatar has the largest export share. In 2017, of 264 million tons produced in the world, 77 million tons came from Qatar. Currently, countries such as Australia, Russia, the U.S. and Mozambique have made huge investments in to increase their market share. In the shadow of the shale gas revolution and technology and innovation, the U.S. has quickly become one of the largest manufacturers of LNG, which will soon play an important role in the security of energy in the European Union and East Asian countries.

Trump’s decision to withdraw from the Joint Comprehensive Plan of Action (JCPOA) has not taken place without considering the opportunity to export more energy resources. The United States uses energy exports, especially LNG, to expand its relations with its neighbors and allies everywhere. The energy security of the European Union and its strong dependence on Russian gas have led the United States to take a special look at the European Union energy market, and with the increase in LNG exports and the accelerated construction of the Southern Corridor, gas will require the EU to depend on Russia. Looking at the state of import of Iranian oil and gas condensate from Iran, the U.S. LNG role could be furthered in a boycott of Iran.

The geopolitical dimensions

Energy geopolitics is changing. The shale gas revolution and innovative high technology has enabled the U.S. to become a giant energy exporter. Energy exports play an import role in U.S. foreign policy, and the U.S. is using energy exports to expand relationships with allies. This important step was due to improving its infrastructure, including the development of gas pipelines and LNG facilities for export.

Russia is not interested in losing the EU market and is trying to keep its share in the EU market by diversifying transit pipelines and LNG projects such as Turk Stream and North Stream II. Gazprom also has several pipelines currently in operation or under construction with European energy companies. Gazprom is also preparing a Turk Stream pipeline to transfer Russian gas through the Black Sea to Turkey and southeastern Europe. The U.S. has many times officially declared that it is against North Stream II; this project has been heavily criticized in Europe and the United States, and the German “Trump,” Russia’s largest captive foreign gas buyer, has been “captured” by Russia.

According to Dan Brouillette, the deputy secretary of the U.S. Department of Energy, North Stream II will increase the dependence of Germany and Europe on Russian gas, but recently Germany has decided to help finance the final installations for importing liquefied natural gas that will reduce this dependence.

In October 2018, the largest volume of gas went to Europe, about 24 percent of total [U.S.] LNG: 0.6 billion cubic meters. By 2017, only 10 percent of LNG gas was exported to the European Union. The European Union Energy Commission expects U.S. exports and facilities for LNG terminals to double throughout Europe by 2022. “The fact is that American LNGs can play a more competitive role in supplying gas, increasing the diversity and security of energy in the future,” said the European Union on LNG trade between the United States and Europe in late November.

 

Qatar’s Plan

Early in January, Qatar’s energy minister told Reuters last year, Qatar’s petroleum company plans to invest at least $20 billion in the United States over the next few years and is expected to make its final decision on the LNG terminal concerning the Golden Pass of Texas soon. Qatar is also planning to invest in Germany and export LNG to Germany. According to Qatari officials, it will invest €10 billion in the German economy, which could be the continuation of successful Qatari investments in Germany.

Washington has been encouraging European countries to diversify Russian-dominated energy supplies, with Qatar and the U.S. as possible alternative suppliers. It is in the U.S.’ interest to allow Qatar to export to specific markets. Doha’s supplies play a key role in Washington’s strategy of providing balance in the market.

At present, Qatari gas is a lot more competitive in Europe than U.S. gas. U.S. officials are aware that U.S. LNG is not competitive with Qatar LNG in EU market but what is important for the U.S. is to decrease the dependency of the EU on Russian natural gas and Gazprom’s monopoly in the EU market.

Increasing LNG supplies is the best way to reduce Europe’s dependency on Russian natural gas. Qatar is a major LNG provider and is trying to increase its share in the market. Russia is trying to keep its monopoly in Europe – in energy – and has used different pricing strategies to do this. Russia has sold a stake of its shares in Rosneft to Qatar, as Doha battles a blockade from a Saudi-led coalition. Russia is using a different pricing system in the EU market and has multiplied pipelines and LNG projects to increase and keep its share in EU natural gas market. It is expected that the EU natural gas market will bring a new competition era for the U.S. and Russia. In the short term and midterm, Russia will keep its share in the EU natural gas market, but if in the long term U.S. LNG can compete with Russia gas and Qatar LNG, it would be in favor of the EU as a consumer, and major LNG producers are trying to propose suitable prices to keep or maybe increase their share in the EU market.
www.dailysabah.com
Read More