Why an island home to two massive fossil-fuel projects symbolises an uneasy Russo-Japanese peace
Save time by listening to our audio articles as you multitaskThe two projects, Sakhalin-I and Sakhalin-II, lured energy firms from America, Britain and India, as well as Japan and Russia. Shortly after Vladimir Putin’s tanks rolled into Ukraine, however, ExxonMobil, an American giant, pledged to divest its 30% stake in Sakhalin-I and Shell, a British rival, said it would offload its 27.5% stake in Sakhalin-II.
Not the Japanese. Sakhalin Oil and Gas Development Company, a public-private partnership, will hold on to 30% of the oil-producing Sakhalin-I; two big trading houses, Mitsui and Mitsubishi, will keep their 12.5% and 10%, respectively, of Sakhalin-II, which pumps out liquefied natural gas . The government in Tokyo has no problem with that. In May the economy minister, Hagiuda Koichi, declared that the Japanese shareholders wouldn’t leave even if asked to by the Russian government.
Japan’s approach seems out of character. In other instances the country’s position with respect to Russia has mirrored those of America and Europe. In June the Japan Bank for International Co-operation, a state-owned lender, extended its freeze, introduced in March, on project financing of Russian natural-gas projects in the Arctic. Private-sector financial firms have cut links with their Russian counterparties.
Japan’s government dislikes the prospect of disposing of the Japanese assets in such a fire sale. It is particularly loth to hand one of the world’s largest and most advanced gas projects over to a Chinese competitor for a song. And unlike ExxonMobil’s and Shell’s investments, which followed a purely commercial logic that Western sanctions and the reputational risk of remaining in Russia have severely undercut, it worries about energy security.
Archipelagic Japan has no pipelines or electricity grids linking it to other countries. It is the world’s second-biggest importer of. Around 9% of its supply comes from Russia, and the bulk of that is produced in Sakhalin. This year between 50% and 69% of Sakhalin-II’s monthly gas output has headed for Japan, according to Kpler, a data firm.
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