Moscow recently proposed the construction of a natural gas pipeline that would connect eastern fields with Japan, according to a report from a Japanese newspaper. Reuters reports:
The plan to build a pipeline between Sakhalin and the northern Japanese island of Hokkaido was presented to Japan last month by Russia, the Nikkei reported, citing diplomatic sources it did not identify. […]Moscow, which is heavily dependent on taxes from oil and gas sales to western Europe, has been trying to shift focus to Asian countries including Japan and China as potential customers for its vast reserves in eastern Siberia.It has been offering lower priced gas to Japan, which buys about a third of world shipments of liquefied natural gas (LNG), a supercooled form of the fuel, the Nikkei said.
Russia and Japan never formally signed a peace treaty after World War II, and a territorial dispute over the Kuril Islands could complicate any potential gas deal. But Moscow showed earlier this year that it is willing to set aside concerns to secure gas deals in Asia, after it signed a $400 billion contract with China after more than a decade of pricing disputes.Much is made about Europe’s heavy dependence on Russian gas, and rightfully so: relying on one source, especially one like Russia, for one third of your natural gas can lead to some very shaky energy security. But the flip side of that coin is Russia’s dependence on securing a reliable buyer for its prodigious hydrocarbon reserves. The Kremlin’s budget relies heavily on the sales of oil and gas, and disruptions to sales to Europe hurts both sides.In light of this fact, it shouldn’t surprise us that we’re seeing another sign of Putin looking east to hedge his bets.