Energy Situation in Japan, Sanctions, and Sakhalin Projects: Cross-Cutting Issues

Abstract

In the first half of 2022, Japan joined the G7 countries with tough anti-Russian sanctions. Japan, at the same time, took a unique position concerning the Sakhalin-1 and Sakhalin-2 oil and gas projects, even though the international companies ExxonMobil and Shell decided to withdraw. After Russia’s retaliatory steps, the Japanese side accepted new conditions considering the balance between the logic of the confrontation and the requirements of economic security. This article discusses some of the economic and energy aspects of Japan’s challenge, such as the diversification of energy supplies, importance of liquefied natural gas (LNG), specifics of Sakhalin projects, and competition of Northeast Asian countries in the global energy markets. Despite particular successes in the diversification of energy imports, the overall situation in the Japanese energy and LNG sector remains unstable. Sakhalin supplies account for 7-8 % of Japan’s LNG; however, the proximity of the location and other terms give them much greater importance. The simulation results for replacing Sakhalin LNG with American gas suggest a deterioration in diversification indicators for Japan. Moreover, the redirection of Sakhalin LNG to China will strengthen its competitive position. Consequently, internal and external factors support Japan’s continued involvement in the Sakhalin shelf. Unfortunately, outside the two Sakhalin and one Arctic LNG projects, there are currently no realistic prospects for further energy cooperation between Japan and Russia.