Page 6 - AsianOil Week 35 2022

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Asian energy giants snub US

sanction efforts

POLICY THE governments of Japan and South Korea, joining sanctions and abandoning Sakhalin 2,
two of the US' most important regional allies in was centred on the need for a reliable supply of
Both want to avoid East Asia, have together thumbed their noses at affordable LNG as winter approaches.
losing out on Russian US-led sanctions on Russia. Yet with LNG prices in Asia hitting record
energy. In doing so, statements from both capitals highs in August as spot prices reached between
indicate they have either agreed energy con- $42 and $43, Japan and South Korea starting
tracts worth billions or confirmed large-scale their annual stockpile efforts ahead of winter was
tech exports to Moscow, despite the February seen as only exacerbating the wider problem.
24 invasion of Ukraine, and US-led widespread
international condemnation. The past few years had seen Japan become
Announcing the deals reached with Mos- increasingly reliant on Middle Eastern nations
cow was seen as the latest highly publicised for their LNG supply, something seen as poten-
body-blow to efforts by the White House to tially hazardous by Tokyo should conflict, polit-
cut off Russia’s energy links with the rest of the ical or otherwise, arise in the region.
world. The subsequent irony of conflict in Ukraine
Most prominent was the on-again, off-again involving their northern neighbour thus prov-
predicament facing Japanese energy giants in ing the impetus behind diversification of LNG
relation to securing long-term LNG supplies sources for Japan was not lost on analysts in
from the Sakhalin 2 natural gas fields in Russia’s Tokyo.
Far East. On the western side of the Sea of Japan,
Initial calls from the US for Japan to abandon meanwhile, authorities in Seoul announced on
any deals involving exports from Sakhalin were August 25 that Korea Hydro & Nuclear Power
largely ignored in Tokyo, albeit with the Japa- Co (KHNP) had reached a $2.25bn deal to sup-
nese government keeping one eye on any reac- ply components and engineering know-how
tion from Washington. This was not an attitude towards a planned Russian nuclear power plant
adopted across wider Japanese society, and on (NPP) in Egypt.
occasion the thought of losing billions already Governments in both Seoul under new
invested in Sakhalin was openly scoffed at by President Yoon Suk-yeol, and in Tokyo under
Japanese media pundits. Prime Minister Fumio Kishida, have made clear
Threats of being cut off altogether from access their intent in recent weeks to boost reliance on
to Sakhalin LNG exports by Russian President nuclear power and related domestic industries.
Vladimir Putin, however, saw the government South Korea’s Senior Secretary for Economic
in Japan eventually opt to maintain their current Affairs, Choi Sang-mok, said the KNHP deal
stakes in the project. with Moscow was the largest such export deal in
Household names Mitsui & Co. and Mitsubi- over a decade despite “unforeseen difficulties”;
shi Corp. are Japan’s main players in the Sakhalin an indication that US pressure not to agree the
2 project with a combined 20.5% ownership. deal had been an issue.
Differences of opinion with the Moscow-in- Hinting at energy problems in Asia caused by
stalled management at the site in recent months US policy on Russia is one thing in Korea. Facing
initially led to something of a standoff, but have the US head on is another altogether.
now been settled, with Moscow being informed As a result, President Yoon, soon after sign-
of Tokyo’s decision to hold on to the stake in ing off on the deal, reportedly ordered a team
Sakhalin earlier in the week. to be formed to explain to the US the reason-
Sources in Japan indicate that the decision to ing behind his government's decision to supply
work with Russia, rather than appease the US by nuclear tech to Moscow. ™

P6 www. NEWSBASE .com Week 35 05•September•2022