Japan and Korea challenge the United States with big Russian energy contracts
SEOUL — US-led efforts to suppress and contain Russia’s energy-centric economy suffered their final blows yesterday — blows from its two main East Asian allies.
In the latest sign of US-allied capitals’ reluctance to sever energy ties with Russia, South Korea and Japan are respectively entering into and maintaining energy deals with Russian players.
South Korea announced yesterday (August 25) that state-owned Korea Hydro & Nuclear Power Co (KHNP) would provide $2.25 billion worth of components and engineering for a Russian-built nuclear power plant to be built in Egypt.
Separately, two major Japanese trading companies confirmed yesterday that they would retain their stakes in Russia’s Sakhalin II natural gas project. These developments followed related news from the opposite side of the scale earlier in the week.
The United Kingdom, a staunch US ally, a major supplier of arms and political support to Ukraine, is set to end all Russian energy imports by the end of the year. ‘year. Official data revealed that London ended imports of Russian oil in June, although some imports of natural gas persisted.
But the UK is fortunate to have access to local energy supplies. Amid the Ukraine crisis, former British leader Boris Johnson said London would hand over its North Sea fields, “a new life”.
Elsewhere in the Global North – the thriving democracies that have, to varying degrees, condemned and sanctioned Moscow for its storm over kyiv – the outlook for continued pressure on the Russian economy is murky.
In the inflation-ridden EU, perhaps the biggest economic questions facing governments are whether, how and to what extent member countries can realistically reduce their politically embarrassing dependencies on Russian energy.
These questions are going to be asked with increasing volume and frequency as summer fades and the cold season sets in.
And far to the east, neither South Korea nor Japan – two allies of the United States that are both net energy importers and highly industrialized economies – are in a position to reduce their energy consumption. Neither seems willing to cut energy ties with Moscow, which has vast energy reserves in the neighboring Russian Far East.
Moreover, the fledgling administration of Yoon Suk-yeol in Seoul is keen to resume exports in the nuclear sector. Meanwhile in Tokyo, Prime Minister Fumio Kishida is taking the small political steps needed to dust off Japan’s nuclear sector, which was effectively frozen in the wake of the 2011 Fukushima disaster.
The developments highlight – again – the corresponding interests that bind Seoul and Tokyo, regardless of the endless historical disputes that divide the two governments.
Russia-Korea in a nuclear embrace
In a surprise announcement, Seoul unveiled late yesterday that KHNP will provide equipment and buildings for Egypt’s first nuclear power plant project, northwest of Cairo, which will include four reactors.
KHNP will be the junior partner of the Russian Atomstroyexport. Last month, the Egyptian media said Atomstroyexport, as leader of the consortium that built the plant, was responsible for selecting all subcontractors.
The KHNP victory was hailed by none other than President Yoon – who has professed his closeness to US political positions both during the election campaign this spring and since taking office in May – in a Facebook post.
Certainly, this is a substantial revival for South Korea’s nuclear energy ambitions, expertise and exports. One of the areas where Yoon has most reversed the policies of his predecessor Moon Jae-in is nuclear.
Moon, a convinced anti-atomic politician, had reduced the share of nuclear power in the national energy mix. Yoon promised a reboot.
Yoon’s principal secretary for economic affairs, Choi Sang-mok, called the win the biggest export order for domestic nuclear players since 2009, when a South Korean-led consortium won a tender. for the construction of the Bakrah atomic power plant in the UAE.
Choi admitted there had been “unforeseen difficulties” around the deal – the war in Ukraine and related sanctions against Russia. And it was clear that Seoul would explain things to Washington.
According Yonhap News Agencyrelevant agencies have been instructed by the president to offer the United States a briefing on the deal, Choi revealed.
Japan retains its stake in Sakhalin II
Japanese firms Mitsui & Co and Mitsubishi Corp, meanwhile, plan to retain their interests in the Sakhalin 2 oil and gas project and will inform Russia of this intention by the end of the month, Kyodo News Agency reported yesterday.
The Japanese companies have both decided to invest in the new operator set up by Moscow to take control of the project in the Russian Far East. The management change followed Britain’s Shell – which previously held a 27.5% stake – announcing in February that it was exiting the project and all other investments in Russia.
The Japanese players’ decision was signaled earlier this month when the two companies wrote down the value of their combined investment by 20.5% in Sakhalin II, but did not sell it.
The decision to retain was made in light of Tokyo’s goal of ensuring a stable supply of LNG amid seismic disruptions following Russia’s invasion of Ukraine, Kyodo reported.
japanese strategists had previously specified that their country was too dependent on suppliers from the Middle East – a situation which presented Russia with the possibility of realizing Japan’s diversification ambitions.
Like Korean Yoon, Kishida also signaled a nuclear reset.
Speaking during a energy policy meeting in Tokyo yesterdayhe said Japan should consider building next-generation nuclear reactors, in addition to restarting existing plants that are currently offline and extending their lifespan.
Yesterday’s statements follow similar promises made in July. Then Kishida and his energy minister said they wanted nine nuclear reactors to be on the grid and producing by the end of the year. That would be an advance over the five reactors currently in operation across Japan. The nine plants would generate around 10% of national energy needs.
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