The LNG plant for the Sakhalin-2 oil and gas development project began operation in Prigorodnoye, at the southern tip of Sakhalin (Karafuto), in February 2009.
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The United States Donald Trump administration is increasing pressure on Russia over its continued aggression in Ukraine. To do so, America has targeted two major Russian oil companies for economic sanctions in an attempt to cut energy revenues that contribute to Moscow’s war spending. This includes liquefied natural gas (LNG). It has also called on its allies to follow suit.
Even as the G7 countries are stepping up sanctions against Russia, Japan finds itself in the position where it is now procuring just under 10% of its LNG from Russia.
However, there is a chance that Japan will not be treated as an exception. US Secretary of the Treasury Scott Bessent has said that he is "expecting" Japan to cease energy imports from Russia.
Japan's public and private sectors need to prepare to ensure that LNG availability is not disrupted.
Cutting Off Russia's War Funds
The Russian LNG imported by Japan comes from the Sakhalin II oil and gas development project in the Russian Far East. Both Mitsui & Company and Mitsubishi Corporation are involved.
The United States has exempted transactions related to Sakhalin-II from financial sanctions against Russia. However, this exemption expires in the early hours of December 19.
It takes a mere three days to transport LNG from Sakhalin II to Japan. Therefore, if procurement from Sakhalin is halted, it would inevitably result in increased costs. With growing global demand for LNG, it may not be easy to find alternative sources for the stable procurement at a reasonable price over the long term. Nevertheless, the public and private sectors should work together to make this happen.
In the medium- to long-term, the US should offer a strong alternative option. Any negotiations should also seek favorable conditions from the US for procuring American LNG.
Nuclear Power for Energy Security
The procurement contract for Sakhalin II LNG is due for renewal in stages starting in 2029. It is widely believed that if Japan does not renew its contract, China will benefit. China is also expanding its own procurement of LNG. Nevertheless, dependence on Russia for LNG still poses energy security problems.
Prospects for peace in Ukraine are uncertain. However, we urge the public and private sectors to thoroughly consider options for responding according to various situations. That includes considering whether the contract should be renewed at all.
The European Union has agreed to stop importing Russian LNG by the end of 2026. As a G7 member, it is only natural that Japan should also step up pressure on Russia.
However, for resource-poor Japan, LNG remains essential for daily life and industry. To mitigate the impact, consideration of alternative energy sources and having them ready to make up the difference is necessary. That includes promoting the restart of nuclear power plants.
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Author: Editorial Board, The Sankei Shimbun
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