Japan Notices the Absence of Sakhalin Gas
// Threatens Russia with a Reconsideration of Relations
Yesterday Japan reacted severely to the decision of the Russian Ministry of Natural Resources to repeal the positive conclusion of a governmental ecological inspection of the "Sakhalin-2" project. The Japanese media ranked the decision alongside such infamous incidents as the "liquidation of Yukos and the temporary suspension of gas deliveries to Ukraine." Shinzo Abe, the future Japanese Prime Minister, threatened Moscow with a full review of the bilateral relations between the two countries. Other countries restrained themselves to unofficial remarks about possible negative consequences for Russia resulting from the government's unacceptable interference in the economy.
"A significant hold-up in this project, which is a symbol of Japanese-Russian cooperation, will have avoidable negative repercussions on the whole of our relations with Russia," said Mr. Abe yesterday at a press conference in Tokyo.
A meeting on Monday between the Japanese ambassador to Russia and the Russian natural resources minister went nowhere after the Russian minister, Yury Trutnev, declared that participants in the project had not fulfilled half of the relevant ecological recommendations over the last three years.
Uncertainty surrounding final estimates also dogs the project. A source close to the company Sakhalin Energy told Kommersant that the company is planning to increase its estimate for the work from $12 billion to far more than $20 billion. According to the source, the entire estimate for the duration of the project (until 2045) is $21.95 billion, while expenditures of $20 billion are planned for the period up to 2014 (the second stage of the project). These figures do not include operational costs, which the company plans to hike from $15 billion to $29 billion for the entire running time of the project.
The Japanese companies Mitsui and Mitsubishi, which own 25% and 20% stakes respectively, in Sakhalin Energy, have refused to comment. The two companies have so far invested $4.7 billion in the "Sakhalin-2" project and are afraid of making any sudden moves, especially after their shares fell yesterday by 3.1% and 1.8%, respectively, in the wake of the Russian ministry's decision.
The "Sakhalin-2" project is very important for Tokyo, which hopes to convert a large amount of its national industry to liquid natural gas, which is ecologically cleaner than fuel oil. Several large Japanese energy firms have already signed long-term agreements to buy around 4.7 million tons of liquid natural gas per year from Sakhalin Energy after 2008, a figure that represents approximately 10% of the country's energy needs. The project is also seen as part of an attempt to wean Japan off its dangerous dependence on oil from the unstable Near East.
Reactions from the West were definite but muted. The only substantial comment from an official came from EU Energy Commissioner Andris Piebalgs, who noted that Russia must now give a "clear explication" of its complaints. Mr. Piebalgs plans to meet soon with Russian Industry and Energy Minister Viktor Khristenko to discuss the issue. The Western media and experts in the field were unanimous, however, in condemning Russia's actions, with some calling it "a new attempt by Moscow to regain control over private shares in the oil and gas sector" that is aimed at "ensuring Gazprom's share in the project." It goes without saying that no one in the West believes Moscow's pretense of ecological concern.
Moscow, however, dismissed such opinions as false and claimed that no one in the West was so quick to react to the issues of Yukos and gas supplies to Ukraine as they unfolded. In an article in the Wall Street Journal yesterday, the Natural Resources Ministry attempted to draw attention to the problems that delays in the "Sakhalin-2" project could pose for Russia. The article claimed that, in the wake of the "Sakhalin-2" events, possible plans to put shares in Russian state companies on the world market may be scrapped. The purported public offerings could net "$20-30 billion" in investment for the Russian government.
Vasily Golovnin (Tokyo) and Oleg Zorin
All the Article in Russian as of Sep. 20, 2006
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