Russia’s Energy Resources and East Asian Security
March 15, 2010
Russia is rich in energy resources, especially in natural gas, and it is increasingly leveraging such assets into diplomatic clout. This has been more pronounced in Europe than in Asia, but with new LNG development projects, Russia’s importance in meeting Asia’s energy needs will rise, especially as cooperation in nuclear energy advances.
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A dialogue on Russian affairs among Japanese and US experts was held during the overview meeting of the Eurasia Information Network on November 11 and 12, 2009. US participants included Russia specialists Andrew Kuchins of the Center for Strategic and International Studies, Mark Medish of the Carnegie Endowment for International Peace, and Paul Saunders of the Nixon Center.
On the first day of the dialogue, a closed session was held between these three and Japanese experts on Russian, US, and Chinese affairs, as well as on energy issues. The sessions on the second day were open to the public and featured short presentations and questions from the floor, mostly journalists.
As a specialist in Russian affairs, this author has been involved since the very beginning in planning and organizing the dialogue, which was proposed by Paul Saunders of the Nixon Center and which received financial assistance from the Japan Foundation. I helped coordinate the agenda with the US panelists and served as a liaison for the Japanese participants.
A full report of the four panel discussions by Tokyo Foundation Senior Fellow Tsuneo Watanabe has already been uploaded, so this review will focus on the third panel on “Russia and Energy Security.”
Russia is widely known to have abundant energy resources. With regard to natural gas, in particular, it holds 26% of the world’s total reserves and accounts for 21% of global production. But as demonstrated by the “gas wars” that erupted with Ukraine in January 2006, many countries, primarily those in Europe, believe that an overreliance on Russia for supplies of energy can be dangerous.
The share of the domestic energy supply claimed by natural gas is around 20% to 30% in most European countries—with the notable exception of France—owing to the resistance these countries have toward nuclear power. There are 10 countries that import some 60% of all their natural gas from Russia, and six Central and East European countries rely 100% on Russian for their supply of natural gas. Around 80% of the gas exported to Europe passes through pipelines in Ukraine, moreover, making Europe vulnerable to Russia in the area of energy security.
Does Russia enjoy the same kind of influence over the energy needs of Asian countries? And is such clout likely to grow in the coming years? And for Japan, what is the significance of its energy relationship with Russia? These were some of the questions that the panel addressed.
Russia’s energy resources do not have the same clout in Asia as they do in Europe, and most panelists—citing economic, political, and diplomatic factors—felt that Russia’s influence in the region will remain limited in the future.
Economically, Russia has not been investing aggressively to develop new energy deposits and build infrastructure in Eastern Siberia and the Russian Far East, and while many have pointed to China as a potentially highly lucrative market for Russia’s natural gas exports, the scale of the market is still much smaller than in Europe.
There are also political reasons for the lack of investment in Eastern Siberia and the Russian Far East, such as the monopolistic control of energy resources in the region and the somewhat unstable political situation there.
As for diplomatic factors, panelists noted that considerable mutual distrust still exists between Russia and China. Unlike in Europe, moreover, competition for Russian’s energy resources is not very intense, and the energy portfolios of both Japan and China are more diversified than most European countries. This has made it more difficult for Russia to leverage its energy assets into diplomatic clout.
Be that as it may, panelists believed Russia is eyeing the Asian market with greater interest than ever before, as energy demand in Europe plummeted following the September 2008 Lehman shock. In hopes of generating greater energy demand in Asia, last year President Dmitry Medvedev visited Sakhalin, and Prime Minister Vladimir Putin invited the managers of such energy giants as Shell, Mitsubishi, and Mitsui to the Yamal Peninsula in northwest Siberia.
A panelist also agreed that greater energy imports from Russia could contribute to diversifying the sources of Japan’s supply, which is now excessively reliant on the Middle East. In 2004-06, 89% to 90% of Japan’s petroleum came from the Middle East. But it declined to 86.4% in 2009 and is expected to fall to 83% this year, as East Siberian oil will start flowing to the Pacific region as well.
Imports of liquefied natural gas from Sakhalin began last year, moreover, and supplies of natural gas from Russia should increasingly replace imports from Indonesia, where production has been declining over the years.
The Sakhalin II LNG development project that was ordered stopped in 2006, much to the world’s surprise, has been revived following the transfer of majority rights to domestic energy giant Gazprom from Royal Dutch Shell, Mitsubishi Corp. and Mitsui & Co. Panelists pointed out that the Japanese Ministry of Economy, Trade, and Industry and many energy industry officials have generally welcomed Gazprom’s participation as lending stability to the project.
Such a levelheaded response in Japan to rising imports of oil and natural gas from Russia may, in a sense, be a reflection of the limited impact Russia’s resources have—compared to Europe—on meeting Japan’s energy needs.
The above considered the impact of Russia’s fossil fuel resources on Asia, but comments were also made about the possibility that Russia’s importance may grow in the area of nuclear power.
Japan and Russia signed a nuclear energy cooperation agreement during Prime Minister Putin’s visit in May 2009. Japan henceforth intends to import approximately 30% of its natural uranium fuel to be used in its nuclear power plants from Kazakhstan, after enrichment in Russia, which has the world’s biggest reserve enrichment capacity.
When Japan’s nuclear plant makers export plants to emerging economies, they will be required to provide a guarantee of fuel supply. Since the Japanese nuclear power industry does not have the ability to offer such guarantees, they will need to enter into a strategic partnership with Russia. Russia is also the only country that has agreed to take back spent fuel, provided the uranium was originally exported by Russia.
Of Japan’s three major nuclear plant manufacturers, Toshiba has tie-ups with US manufacturer Westinghouse, while Hitachi is affiliated with General Electric. Thus a strategic Japanese-Russian partnership in the area of nuclear energy has the potential, one panelist noted, of expanding into a trilateral partnership among Japan, the United States, and Russia.( Translated from a report in Japanese published on February 9, 2010 )