How Separatists in Donetsk Threaten Japan’s Energy Security

Europe is not the only country in the world to feel torn between enforcing sanctions against Russia’s aggressive actions in Eastern Ukraine and preserving its own energy security. Japan, too, has had a difficult time reconciling its strategic interests in the West and maintaining a lucrative relationship with Moscow. Unfortunately, repeated calls for sanctions from its G7 counterparts have complicated Tokyo’s options, pushing the Asian country between a rock and hard place.

Otherwise, how would one explain the outcome of the recent Japan-EU free trade talks that took place in Brussels, where leaders seemed more intent on pressuring Japan to support more sanctions against Russia than in actually discussing the details of what could be one of the world’s largest free trade agreement? Without referring to the already over-used metaphor of ‘geopolitical chess game’, the ramifications of the Ukrainian crisis are baffling, evidenced by how the ripples of such an event can be felt halfway across the world, negatively impacting Japan’s economy.

Untangling the complicated web on international relations can be a daunting challenge even for the most seasoned observer. In Japan’s case, the explanation is fairly straightforward and can be traced back to the Fukushima disaster. In 2011, the global energy market experienced a demand shock after the Asian country decided to phase out its nuclear program altogether and replace it with fossil fuels. To this end, Tokyo became the world’s biggest consumer of liquefied natural gas, the second largest coal importer and the third largest oil purchaser. And whom could it turn to for resources? None other than Russia and its energy empire.

Shinzo Abe, Japan’s reformist-minded prime minister, has made revamping his country’s sagging economic growth his first priority. He has made overtures to Russian President Vladimir Putin, seeking to come to a solution over the status of the Kurils, a group of islands in the country’s north that have been long-disputed. Since some horse-trading is needed to gain the Kremlin’s favors, Japan’s oil imports from Russia have increased by half last year, flowing through Moscow’s Eastern Siberia-Pacific Ocean pipeline, which connects the Siberian city of Taishet to Kozmino Bay Oil Terminal.  Diplomatically, signs of good faith continued to come from Tokyo, as Shinzo Abe was one of the handful of leaders to take part in the Sochi Olympics. A Russian official state visit to Tokyo is also expected this fall, which would be Putin’s second trip to Japan.

Despite the warm hand extended to Putin at the beginning of the year, Shinzo Abe offered him the cold shoulder in the spring after caving to Western pressures to apply visa sanctions to several Russian officials in the wake of the worsening crisis in Ukraine’s east. The Kremlinvowed to retaliate. Given the complex relations between the two countries, Russia has enough leverage against Tokyo to make the situation painful for Abe. Putin is set to meet his Chinese counterpart on May 20 where he is expected to clinch a long-sought, 30-year gas purchase agreement that will send 38 billion cubic meters of gas a year to China starting in 2018. Tokyo would be loath to see a strengthening Sino-Russian partnership, given its long-standing historical problems with the Middle Kingdom. At the same time, Japan cannot afford to alienate its Western allies.

The only way for Tokyo to escape this zero-sum-game logic is for the Ukrainian crisis to reach a conclusion. Once settled, Tokyo would no longer have to take sides and act as an Asian proxy for the West against Russia.

Fortunately, with Ukrainian presidential elections coming up on May 25, Ukraine has the opportunity to find a way out of its rut and indirectly alleviate Japan’s woes. The highly anticipated vote should deliver a new leader, legitimate enough to steer Ukraine out of the muddy waters in which the Crimean crisis and its subsequent aftershocks have plunged it in.

Despite the standard narrative peddled by some pundits, Kiev’s best hope resides not in chocolate king Petro Poroshenko and his shady oligarch connections, but in Yulia Tymoshenko and her ambitious plan to fight corruption. Indeed, if stability is what one seeks from a leader, Poroshenko’s flip-flopping political career and extensive business interests with Russia do not bode well.

The unrest in Eastern Ukraine was allowed to exist in great part by some of the country’s oligarchs and their refusal to side with Kiev, afraid to put at risk their business interests with Russia. The events in Mariupol of May 15, when thousands of steelworkers from one of the companies owned by Rinat Akhmetov, the country’s richest man, stormed the city and cleared the streets of separatists show very well what power oligarchs have at their disposal. This clear example shows the extent to which these businessmen can impact the political process in Ukraine. On the other hand, Tymoshenko, with her promises to enforce anti-monopoly laws and force the oligarchs to retreat from politics, seems like Ukraine’s best choice. Safeguarding the rule of law requires for unchecked power to be reigned in and not allowed to proceed unfettered.

Such is the interdependent nature of international relations nowadays, akin to the butterfly effect and its pell-mell of unintended and unforeseen consequences. Tokyo is sure to keep a close eye on developments in Ukraine, knowing that peace there will allow Japan to pursue its own agenda: Russia, one where Europe plays little part. This will be a lesson for the history books. When the conflict finally simmers down in Ukraine and the world reverts to business-as-usual, we will look back at this moment as the failure of the West to stand united in the face of authoritarianism and Cold War tactics.

This piece is cross-posted from OilPrice.com with permission.