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Crisis prompts Japan to cut heavy reliance on Middle East oil
By Shingo Ito
AFP
SAINT PETERSBURG
Petroleumworld.com 07 17 06
The latest Middle East crisis has re-awakened Japan to the need to reduce its heavy reliance on oil from the volatile region and should spur it to step up efforts to secure alternative energy suppliers.
Energy security is high on the agenda at this year's of Group of Eight summit, being held here amid mounting anxiety over record high oil prices and fears that Israeli military offensives in Lebanon and the Gaza Strip will trigger a wider conflict.
Leaders of the world's most powerful nations pledged Sunday to promote "open, transparent" energy markets, while vowing to pursue development of alternative energy sources, including nuclear power.
"The Middle East crisis has again called Japan to reconsider its heavy reliance on crude oil from the region," said John Kirton, director of the G8 Research Group.
Tokyo relies totally on oil imports, 90 percent of them from the Middle East.
"In the long run, Japan will be able to overcome the impact of the latest crisis, with its experience of the previous oil crisis and its advanced technology," Kirton said.
"But the crisis is still a concern about the prospects for the Japanese economy, which is just getting out of deflation."
The Japanese central bank raised its key short-term interest rate target to 0.25 percent from almost zero percent at the end of a two-day meeting on Friday in the clearest signal yet that deflation is all but history.
Japan is also facing another potential blow to its oil import security as Iran has warned that a two-billion-dollar deal with Tokyo to develop the Azadegan oil field could be cancelled in response to US pressure for a halt to investment in Iran.
The United States and other major powers are weighing possible sanctions on Tehran aid concerns that its nuclear program is for military purposes, a suspicion Iran insists is unfounded.
Japan defied the United States, its closest ally, in 2004 by signing an agreement to develop Iran's Azadegan oil field, one of the world's largest untapped oil reserves.
But Tokyo has delayed going ahead with construction, joining US calls for a suspension of Iran's uranium enrichment program.
"Japan should seriously take action to secure alternative energy sources," said Hiroyuki Aoyama, an expert on the Middle East at the Institute of Developing Economies in Tokyo.
"A Russian pipeline project could be one of the keys to Tokyo's energy security."
A planned Russian pipeline, which will cost an estimated 15-16 billion dollars and have a capacity of 80 million tonnes a year, is an important development for Japan and China, two of the world's top oil importers.
When complete, it will run for 4,200 kilometers (2,600 miles) from Taishet in central Siberia to Perevoznaya Bay on the Pacific coast close to Russia's southeastern border with China.
Koizumi and Russian President Vladimir Putin agreed on Saturday to "accelerate" talks on construction of the pipeline.
Moscow has promised to provide oil through the line for Tokyo and Beijing but has still to decide which of the two Asian economies will get priority.
Brushing aside mounting concerns about Japan's energy security, Koizumi has expressed confidence that Japan can overcome the impact of the Middle East crisis on the Japanese economy.
"As oil prices hit 75 dollars, some people say it's a crisis," Koizumi told his G8 partners.
"But the pinch can turn to be a chance," he said, referring to Japan's success in its energy-saving drive in the 1970s following a previous oil crisis, which eventually helped enhance Tokyo's environment technology.
AFP 17 0159 GMT 07 06
Copyright ©2006 AFP. All Rights Reserved.
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