Japan Pursues Technology-for-Energy Diplomacy in Central Asia

Commentary | October 28, 2015

In his recent article for Sputnik, EWI Senior Fellow Najam Abbas talks about Japan's economic interests in Central Asia and how the region can benefit from increased investment prospects. 

In the past years, although Japan has been interested in possible energy supplies from Central Asia, it has not been active enough in the region.

However, recent circumstances have brought forth an appropriate time to explore further the rising opportunities that the two sides have to offer each other. Without putting up any tough competition to China, Japan will like to secure a firm foothold in the region and also to enter joint ventures in a few infrastructure projects for which it has advanced technological edge, better know how and more technical expertise to offer.

According to US Energy Department estimates, in 2020, the Chinese demand for oil will reach 13 million barrels per day, while that for natural gas will rise to 100 billion cubic meters per year. In order for Central Asian states to develop the infrastructure to meet such rising demands, it will need exploration and transportation support structure with much advance technology which is available with Japan. As the Kashagan oil reserves in Kazakhstan and the Galkynysh reserves in Turkmenistan are developed for production in the coming years, Japan is interested to benefit from joint ventures with these two major oil supplier states. This comes at a time when the Iranian energy reserves are about to open up for foreign ventures. Especially so, when an agreement on Caspian Sea is expected in 2016 among the five littoral states namely Azerbaijan, Iran, Kazakhstan, Turkmenistan and Russia.

Additionally, there are chances for progress on Turkmenistan, Afghanistan, Pakistan, India (TAPI) pipeline. Therefore in the medium term, short windows of opportunity will be taken up by others if Japan delays any further in making its move. In future, the central Asian energy companies will need much advanced technologies which are not always available with their Russian or Chinese partners. To overcome this limitation, Turkmenistan and Kazakhstan will be exploring how to take advantage of Japanese involvement in such project.

Factors which contribute to hitherto dormant relations included long distances, higher costs and the business environment in the Central Asian states that, to many Japanese investors, appeared both un-prepared and unfavourable in the past years. In the past years, Japan’s reluctance as an ‘island nation’ to considerably invest in land-locked Central Asia provided China an open field which took maximum advantage of such opportunity. The Chinese influence in every Central Asian state is an established reality as Beijing did not miss many opportunities for making investments and entering joint ventures in many spheres where as Japan’s progress in this sphere has been comparatively slow. Akio Kawato, a former Japanese ambassador to Uzbekistan and Tajikistan, has pointed out to Japan's NHK news channel that the Central Asian states will not like to become completely dependent on China and hence seek to deflect such dependence and to drive maximum leverage by making various investing nations compete with each other in the region.

The Central Asian states will benefit from greater interest, closer attention and increased prospects for short and medium term investments. According to a Japanese diplomat in Tashkent, representative of Japanese enterprises aim to conclude partnership contracts in Central Asia worth 17 billion dollars particularly in projects involving the conversion of fuel resources to value added products such as plastics and chemicals. According to Japan’s Daily Nikkei, major Japanese companies are involved in a number of key projects in Central Asia: Japan’s Sumitomo Investment Corporation has received orders to build a $300 million thermal power plant in Turkmenistan. Toyo engineering has won a contract for building an $800 million petro-chemical complex in Turkmenistan which is scheduled to complete in 2018. Kawasaki Heavy Industries has received an order from TurkmenChemya for building a gas to gasoline conversion plant by 2018. According to Tokyo’s Diplomat Magazine, five Japanese companies plan to complete an agreement to build a purification plant at the Galkynysh gas field worth $8.3 billion (1 trillion yen), which will be funded in part by Japanese banks.

Mitsubishi Heavy Industries has signed agreements to build a natural gas to fertilizer plant in Uzbekistan while Toshiba Corporation aims to export its nuclear plant technology to Kazakhstan.

At a time when falling oil prices have compelled the Central Asian states to attract investment in diverse ventures they have become comparatively eager to benefit from the Japanese co-operation.

Japan neither has the clout nor the capacity or desire to compete with the Chinese and Russian influence in the region. However, it would welcome to be seen as an additional partner which can bring in much needed technical expertise to the region. However, Japan has still many chances for offering its plant technology to the central Asian states.

With the Chinese investment expected to rise in the coming years, Japan may like to carve out its own niche in the Central Asia engineering plants and industries especially when those states aim to diversify the destinations for exporting their oil and gas. Japan will like to pursue its technology for energy diplomacy in those states.

In Central Asia, Japan is seen as an attractive investment partner. On its part, Japan seeks to participate in infrastructure projects that can improve communication, commerce, power- transmission and energy transport from Central Asian to South Asian states. Japan describes such an approach as ‘Corridors of Peace and Stability’ in the context of encouraging what it promotes as ‘open regional co-operation’.

Click here to read the article in Uzbek. 

Click here to read the article in Kyrgyz.