Japan’s Energy Policy towards the SCO Member States: Current Situation and the Perspectives

The Shanghai Cooperation Organization is undoubtedly an important economic and geopolitical player in the Central, East and South Asia regions, bringing together countries of different size and potential. This is primarily about the economy and energy sectors, but the military-strategic partnership within the framework of the association shouldn’t be ignored too. Japan does not have a coherent policy towards the SCO as a single structure, at least it is not reflected in official documents, but individual member States are of significant interest. These are mainly Russia and China, and Russia is considered as one of the chief energy resources suppliers, which contributes to the implementation of the Japanese concept of energy security, aimed at maximum diversification of supply geography. China is regarded as one of the largest buyers of Japanese high-tech industrial products and an exporter of coal. The countries of the Central Asian region, which are rich in energy resources and do not have sufficient financial and technological capabilities to explore them, are also attracting more and more attention from Japan, but there is great competition with Chinese companies. India and Pakistan, that joined the SCO in 2017, are important for Japan as a counterweight to China’s expansion in South Asia and also markets for Japanese nuclear power plant construction technologies and various types of renewable energy generators. All in all, Japanese energy policy towards the SCO member States is balanced and flexible, but the presence of certain geopolitical contradictions with the founders of the organization still hinders the building of a meaningful multilateral dialogue, although options for involving Japan in the Shanghai Cooperation Organization periodic work, for instance, in the observer status, have been repeatedly voiced.


Japan's energy policy towards China
China like Japan belongs to the states with a deficit of its own primary energy resources, that are necessary to provide the growing economic and energy needs. Therefore, the main directions of energy cooperation between the countries are aimed at both supplying equipment and materials (for instance, generators for power plants based on renewable energy sources) and exchanging technologies in various energy sectors, including mining operation, electric power and mechanical engineering, etc.
Since the mid-2000s Japan-China relations have been temporarily alienated due to the strengthening of China's geopolitical positions and increased competition for sales markets from Chinese companies that have largely kept on the Japanese track. That is, at first, they actively borrowed technologies from abroad as well as placed stacks on their own manufacture and export of products at attractive prices.
Nevertheless, in the 1980s and 1990s Japan's role in modernizing the Chinese economy and energy sector as an integral part of it was enormous enough. During this time, more than 200,000 Chinese students have been trained at Japanese Universities. Japanese companies have also created more than 10 million jobs in China and invested approximately 130 billion USD in industry, agriculture and non-manufacturing business.
However, Japan quickly lost the status of China's key economic partner, yielding the palm to the US and the EU. In the near future, South Korea, whose trade turnover with China is only increasing, will probably drop Japan to the third place. As a long-term trend for the past decade and a half Japan has been trying to maintain the certain segments of the Chinese market for export of its own energy technologies. That is why the most promising is renewable and hydrogen energy [1].
According to the Japanese state forecasts, by 2030 the share of Japan's coal generation should be reduced to 26 % from the current approximately 40 % that implies a decrease in coal exports. Nowadays China takes sixth place on the list of Japan's coal suppliers. In 2019 Japan purchased about 10 million tons of Chinese coal for 306 million USD. The main import is from Australia (worth about 14 billion USD in 2019). By all accounts there are plans to further increase the share of Australia in Japanese coal imports. If China-Japan cooperation faces a turn of instability and reciprocal reproaches, this is to be expected the coal supplies' reduction, especially as its significance for Japan's market is not so vital [2].
Since the early 2000s, China has been actively importing technologies for the renewable energy development, and Japan has consistently participated in this process. The matter concerns the sale of patents on production of individual units as well as wind power and solar power plants' ones, technological samples for the construction of low-power nuclear plants and the production of biofuel electric power, the operation of hydrogen fuel cell transport.
Until 2017 Japan has invested more than 200 million USD in China's renewable energy, with most of this amount was made up of loans for the purchase of appropriate materials from Japanese companies. Furthermore, among the major investors were Germany, Denmark, the USA, and Canada. According to some Chinese think tanks that deal with renewable energy issues, thanks to these technologies China was able to increase its capacity input growth by 30 % from 2007 up to 2016 and became the world's top power producer both in terms of the number and generation of electricity based on renewable energy sources [3].
Stress the point that among the significant areas of bilateral energy cooperation is China-Japan Comprehensive Forum on Energy Saving and Environmental Protection, first held in 2006 at the ministerial level. The recent Forum was held in Tokyo in December 2019. This platform is of great importance for the development of the energy dialogue between the two largest economies in Asia as well as the meeting point for politicians, economists, business and research representatives.
Despite its high status, the Forum is in fact still a discussion platform because the conclusion of any significant energy contracts that need fund-raising and production solutions is rare. For example, about 20 different treaties and agreements are annually signed in the field of energy saving, hydrogen energy, renewable energy sources' innovations, and so on, but most of these documents are optional [4].
Japan's energy policy towards China is in focus of the overall economic and geopolitical system of the bilateral relations. China is actively promoting the "One Belt One Road" initiative, that includes a wide range of economic and energy development proposals for Central, East, South and South-East Asian countries. In fact, today's China's role is more typical for the USA insomuch as China is trying to embrace the entire economic space surrounding it and strengthen its position as a global power that can provide its foreign partners with profitable projects.
On the other hand, Japan focuses on the project's development of the Trans-Pacific Partnership (TPP) even without the US participation. In 2018 11 countries signed a new trade agreement called Comprehensive and Progressive Agreement for Trans-Pacific Partnership that foresees the reduction or complete elimination of duties on industrial and agricultural goods. Tokyo officially is seeking to attract India, the largest Asian democracy, to participate in this Association, but so far these efforts have not succeeded, because New Delhi is not aimed at unambiguously joining any bloc, but it wants to maximize the benefits of cooperation with all states [5].
Actually, at the level of rhetoric, China and Japan offer each other to participate in their large-scale initiatives, but in fact the geopolitical gap between them is only growing, that is clearly based on ideological, not economic factors. An illustrative example is that during 2013-2018 Japanese companies' investment in China's economy fell by 60 % compared to previous five years. Among the 10 most developed countries in the world, this is the highest index, for example, for the US, the same indicator is 15 %, for Germany is 18 %. South Korea, which has currently complicated relations with Japan, only increases the presence of its capital in China by several percent a year.
Evidently, that the Chinese and Japanese perspectives on both regional and global systems of multilateral international trade and economic cooperation are fundamentally different. Tokyo stands for the so-called "new Atlanticism", which has covered the Pacific Ocean, and aims to build long-term partnerships with countries that are wary of Chinese expansion (Australia, Canada, India, and some Latin American states). Beijing is vice versa consistently pursuing a course of "New Eurasianism" or "Middle Way" with an emphasis on drawing neighbors into its economic and civilizational orbit, for geographical or strategic reasons, these states are far from the Atlantic camp. Naturally, Russian is one of the first countries in this emerging system [6].

Japan's energy policy towards Central Asian States
After the collapse of the Soviet Union in the 1990s, Japan provided a substantial financial and humanitarian assistance to Central Asian states. At that time, there wasn't any underplot; it was regarded as part of a program of assistance to newly formed transitional economies of the post-Soviet area. The situation changed by the mid-2000s, when China started actively promoting its interests in the region. China was looking for opportunities to create a safe and reliable corridor for the primary energy resources' supply in the future.
Japan also started building relationships with Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan and Turkmenistan (the first four countries are now members of the SCO), trying to ensure a favorable attitude of the elites of these former Soviet republics at the intergovernmental level. Japan's key topic was power energy, namely, its participation in new oil and gas-field development. However, despite the efforts of officials, Japanese business responds cautiously to invest in the extractive sectors of these countries. Moreover, excessive Japan's activity in the post-Soviet area could cause disapproval from China, because at that time Japan-China economic relations were stable.
The 2010s were considered as the period of a new turn of official Tokyo's interest in the Central Asian republics, which was caused by a growing competition between Japanese, Chinese and Korean companies for the mining fields' access. The political dialogue "Central Asia plus Japan", launched in 2004, went into overdrive, according to which quite enormous investments were expected in various sectors of economy and energy of the Central Asian states.
Thus, Japan supposed to invest 8 billion USD for a few years in the post-Soviet area. Uzbekistan's economy has been modernized in such areas as geological exploration and mining operations (mainly natural gas), chemical and automobile industries. In Kazakhstan it was announced a nuclear power plant construction using Japanese technologies. Kyrgyzstan could receive a financial assistance for the modernization of the Manas airport in Bishkek as well as Tajikistan could count on several long-term loans in the amount of 7 million USD [7].
In some degree Japan tried to offer an alternative to China's "One Belt One Road" Initiative but the scale and nature of Japanese politics in Central Asia couldn't get rid of the perception of such a foreign policy as of minor importance. This is largely due to the Central Asian states' poverty, a small capacity of their domestic markets for Japan's industrial and digital products, and historically strong economic ties with Russia.
Nevertheless, Japan still takes a line on strengthening interaction with Kazakhstan and Uzbekistan, the largest economies in Central Asia. This especially concerns Kazakhstan, whose mutual trade turnover reached 1.5 billion USD in 2019. The matter concerns not only Kazakhstan's wealthy natural resources, but also Japan's "soft power" policy in the state. Japan allocates significant funds for the training of Kazakh experts, various humanitarian and cultural programs. Therefore, the perception of Japan among the Kazakh people is generally positive, which can't be said, for example, about China. Mention may be made of repeated mass demonstrations in 2018 and 2019 against China's purchase of land for plants' construction and making appropriate amendments to the Code of land laws in Kazakhstan.
Moreover, an important part of Japanese policy in Central Asia is the so -called "resource diplomacy" or the structure of trade, when Japan sells higher-valueadded products (for instance, cars), and buys with these countries primary energy resources, ferrous, non-ferrous and rare-earth metals, and other mineral raw materials.
The "resource diplomacy" basis is to stimulate the export-oriented Japanese economy due to the development of new markets, but the Central Asian region does not fully comply with this concept because of weak trade and economic institutions and limited legislative efforts by governments to protect foreign investment. But it is of great importance that this region is really a strategically influencial bridgehead for Russia and China, so Japanese capital is not particularly welcome over there [8].
When it comes to Russian-Chinese dominance in Central Asia, it should not count out the national interests of Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan. Despite their membership in the SCO, these states are trying to pursue an independent foreign policy, and here Japan can find its niche as a supplier of technologies for building new and upgrading old energy infrastructure. The Japanese experience in creating an efficient and sustainable electric power industry that is resistant to long-term natural and climatic impacts is one of the most advanced in the world, which is important for countries with outdated generating supplies and electric power transmission lines.
If there are prospects for mutually beneficial cooperation and appropriate institutional mechanisms, participation of Central Asian countries in projects under the SCO auspices won't be an obstacle for Japanese companies in the future. It is highly likely that Japan is about to continue its policy of strengthening its presence in Central Asia.

Japan's energy policy towards India
India-Japan energy cooperation as a reflection of the general state of the bilateral relations was formal and declarative until the mid-2000s, having the nature of memoranda of intent and framework agreements. However, in the 2010s India became one of the leading countries in terms of economic growth, which did not fall below 5 % a year. By 2030 India is likely to become the world's third economy and be beforehand with China on annual GDP growth, that will help to create more than 100 million jobs in India, especially in such promising industries as digital technology, information systems and robotics [9].
China is trying to expand methods and ways in promoting its national interests and presence in South Asia. The inclusion of South Asia in the strategically important regions for Beijing could not help but evoke response in Tokyo. By the way, it is a well-known fact that India as one of the key players in South Asia is in favor of non-alignment with military blocs. This means that Japan stands a good chance to establish successful rapport with its Indian partners and do the groundwork for investment cooperation in many sectors of the economy and power industry.
Two documents became the bedrock for the bilateral cooperation such as "Joint Statement towards India-Japan Strategic and Global Partnership" (signed in 2006) and "Japan and India Vision 2025 Special Strategic and Global Partnership" (signed in 2015). These agreements, that were signed almost 10 years apart, still formed the institutional basis for partnership not only at the foreign policy level, but also at the level of specific business projects in various spheres [10].
Japanese companies are investors and projectors of the Delhi-Mumbai industrial corridor, aimed at the comprehensive development of transport links, industrial and agricultural clusters, housing construction and various non-manufacturing business. The total project cost is about 100 billion USD, and about 26 billion USD falls to the Japanese investment. This corridor is a good opportunity for exporting Japanese technologies. More than one and a half thousand joint Indian-Japanese enterprises have already been launched.
As for the power industry, within the framework of the Delhi -Mumbai corridor it is expected to build power plants and power grid infrastructure, with a possible focus on renewable energy, because India as a resource-deficient country has to import primary energy resources. Wind and solar power plants' construction technologies from Japan are the most advanced in the world as well as they can be successfully applied in Indian realities thanks to climate, especially sunshine duration and strong seasonal winds in coastal zones [11].
Another integral part of Japan's energy policy in India can confidently be called the atomic power energetics. In 2016 it was signed "The India-Japan Agreement for Cooperation in the Peaceful Uses of Nuclear Energy", aimed at applying Japanese technologies in the field of peaceful atom for the construction of nuclear power plants in India. So, India is the first country on the list among those states that have not signed Treaty on the non-proliferation of nuclear weapons (but actually India possesses it). However, the Japanese government signed such an agreement with India insomuch as Tokyo is concerned in these potential projects [12].
The key current mechanism for India-Japan integrated energy cooperation is undoubtedly the bilateral Energy dialogue, which has been held annually at the ministerial level since 2009. In 2019 New Delhi hosted regular meetings within this format under the aegis of "3E+S", where it was debated such topics as energy security, energy conservation, economic efficiency and environmental issues. The Dialogue has a working group on electric power engineering, aimed at setting up and promoting a roadmap for the Japanese companies' activities in the construction and operation of new power plants and electric power transmission lines in India, as well as the modernization of existing capacities.
In the field of energy conservation, it was set up a joint energy conservation plan for India's energyintensive industrial plants. It is assumed that pilot enterprises for experimental implementation of practical plan's provisions will be selected. Thus, in a few years it will be able to decide how effective the proposed methods were. However, if it takes into account Japan's wealth of experience in the field, the outcomes are expected to be positive. As for oil and gas sectors, the matter concerns the joint development of deposits in such countries as Russia, The United Arab Emirates, Canada, Mozambique and Sri Lank in cooperation with local companies.
In addition, one of the Plan's items refers to the development of hydrogen energetics in India based on the Japanese experience (transport and electrical generation). A worth-while project is the construction of pumped-storage station in West Bengal (the commissioning term is 2027), as well as other renewable energy plans aimed at gradually reducing CO2 air emissions [13].
Thus, India does not play a vital role in Japan's foreign energy strategy, but the situation is gradually changing in a positive direction and closer relations between two states. India is concerned in attracting Japan's energy technologies and investment. Japan is seeking to conduct an alternative trade and economic policy to China in South Asia, relying on states with a great development potential and high capacity of domestic markets.

Japan's energy policy towards Russia
The evolution of Japan-Russia energy cooperation is a complex and multifaceted topic. The collapse of the Soviet Union and the sequel market reforms of Russia's economy along with the liberalization of foreign policy, contributed to a certain rapprochement with Japan. In the mid and late 1990s, it was discussed and scientifically established various options for linking the electric energy systems of the two countries. The Sakhalin -Hokkaido power bridge project was the most significant one.
Leading Russian and Japanese think tanks such as Melentiev Energy Systems Institute of Siberian Branch of the Russian Academy of Sciences, the Institute of Energy Economics, Japan (IEEJ) as well as major electric power holding companies RAO "UES of Russia" and Sumimoto have been working on this project. The potential exports' volume of Russian electric power was well-grounded, options for building an underwater cable were proposed as well as the project cost was calculated from 3 to 6 billion USD, depending on the conditions and technical characteristics. However, this initiative has not been carried out rather for political reasons, and it was replaced by new plans which are also periodically reviewed [14].
In terms of location the Russian Far East with its wealthy natural resources is close to Japan, aimed at diversifying energy supply. All these factors led to the serious debates since the mid-2000s on projects to export Russian oil and gas to Japan through terminals on Sakhalin. So, it was established the Sakhalin-1 and Sakhalin-2 Projects that were subsequently implemented. The basis of Sakhalin-1 Project was a consortium of such companies as American Exxon (30 %), Japanese Sodeco (30 %), Indian ONGC (20 %) and Rosneft (20 %). In 2018 on shelf deposits in the northeastern Sakhalin about 9.2 million tons of oil was produced, the main share of it (7 million tons) was sent by tankers to Japan.
Among the Sakhalin-2 shareholders are Gazprom (50 %), Shell (27.5 %), Mitsui and Mitsubishi (12.5 % and 10 % respectively). The Project produces annually approximately 10 million tons of liquefied natural gas, the lion's share of which is sent to Japan (providing 9 % of the natural gas demand) and South of Korea (4 % respectively) [15]. The researchers pay much attention to the history and future prospects of these Projects, so there is no sense to study it in detail, especially for the reason that the international cooperation on them is developing successfully. Evidently, if the parties are sufficiently interested in cooperation (with corresponding benefits at hand), political contradictions are safely "forgotten" and pale into insignificance exactly to the moment until they are needed again to cope with any immediate problems.
The Japanese-Russian trade turnover shows expository figures. At the end of 2019, it was 20 billion USD, and 8.5 billion USD accounted for the sale of power resources (total exports from Russia estimate 11 billion USD plus ferrous metals, aluminum, wood, precious and semiprecious stones) [16]. Japan supplied to Russia various goods on the sum of 9 billion USD, including vehicles, energy equipment, finished products made of ferrous and non-ferrous metals, digital equipment, and so on [17]. This pattern hasn't essentially altered for more than 15 years and it is likely to remain unchangeable in the future. First of all, this is a task for Russia's economy, which needs modernization and gradual but steady movement towards the development of globally competitive high-tech industries.
Nevertheless, an investment in the extractive sector is still a fundamental element of Japan's energy policy towards Russia. In addition to the system of agreements on the development of gas and oil fields on Sakhalin, Japan and Russia have signed a number of treaties, including some in the energy sector cooperation. In May 2009 Tokyo hosted the Russian-Japanese Economic Forum the main purpose of which was finding the ways to overcome the crisis, including the energy dialogue intensification.
In November 2010 it was a meeting of the Russian-Japanese Advisory Council on modernization of Russian economy and power industry. Despite Japan's formal access to anti-Russian sanctions, in November 2014 another APEC summit was held as well. A similar meeting was held at the II Eastern Economic Forum in September 2016 and the III Eastern Economic Forum in September 2017. In 2019 the Japanese delegation visited St. Petersburg International Economic Forum, at the end of which it was signed an agreement on the purchase by a consortium of Japanese companies of 10 % of the Arctic LNG 2 Project that is worth about 3 billion USD (the field development is headed by Novatek).
At the events listed above, both major energy projects were discussed, and issues of cooperation in the development of electric grid infrastructure in Russia together with Japanese companies, especially in remote Northern regions, the construction of low-power nuclear power plants and power plants based on renewable energy sources. All these proposals are still in the nature of intent, but the situation itself, when Japanese businesses are concerned in investing in Russian energy on a broader list of projects, seems to be optimistic. Japan and Russia understand that the geopolitical conditions may change, that is why they keep a restrained interest in each other, despite the circumstances [18].
However, Japan is not trying to make Russia a leading supplier of energy resources, despite its geographical proximity and, therefore, lower logistics costs. This is due to Japan's constant position on the primary energy imports, which stems from energy security issues. Excessive dependence on any one exporter puts Japan in a vulnerable position that is unacceptable. Therefore, Japan is about to purchase annually no more than 2 million tons of liquefied natural gas from the gas-fields of the Arctic LNG 2 Project. The plant is expected to be launched in 2022 -2023. In the future it is possible to increase purchases of Russian liquefied natural gas, but it will also much depend on the situation on world markets [19].
Nowadays there are debates how to attract Japanese investment to construct an annual 6.2 million-ton liquefied natural gas plant (in addition to an export oil terminal) within the framework of the Sakhalin-1 Project. The building cost of the plant is worth 9 billion USD, and the first gas will be shipped to Japan not sooner than 2027. It is also planned to build a 200 km length gas pipeline from Sakhalin to Russia's mainland. According to preliminary forecasts, liquefied natural gas supplied from the new terminal is about to provide up to 10 % of Japan's needs, which together with the existing capacity of the Sakhalin-2 Project, will help Russia's gas to possess up to 15-17 % of the Japanese market. The Japanese presence in Russian gas projects is also likely to be consolidated through the participation in the building of the Murmansk LNG terminal (with a capacity of 21 million tons per year) and the Kamchatka terminal with a capacity of 21 million tons per year by 2023 [20].
If the matter concerns Japan's energy policy towards Russia, it should be taken into account two factors. The first one is the solution of the "Northern Territories" issue in Japan's favor, and the second one is the decline in the importance of China as the most promising energy Russia's partner. As for the "Northern Territories" issue premier-minister Shinzo Abe said it time and again that he is seeking to a successful solution of this issue for Japan until the end of his term (autumn 2021). However, an essential progress has not been achieved yet. Japanese society is not fully satisfied with "Joint development" program because it is very limited and, in fact, do not bring the moment of islands' transfer to Japan.
Therefore, many economic and energy Japanese projects and initiatives in Russia should be viewed precisely through the prism of the territorial belonging of the Kuril ridge. If Tokyo understands that the solution of the Kuril Islands issue is high, it will be a temporary intensification of Russia-Japan cooperation as well as Japanese investment boom. However, there are other strictly economic restrictions (the peripheral position of the Far East in Russia's economic development model, the region's sparse population) that determine both low business activity and low level of consumption of goods and services. It should be also mentioned the geopolitical aspects (countries' aspiration for different global centers of power and visions of the world order).
As for the "competition" with China on energy projects in Russia, this rather follows from the multivector nature of Japanese foreign policy and is an echo of the general Japan-China tension due to China's active trade, economic, military and strategic expansion in the Asia-Pacific region as well as Beijing's cautious but consistent promotion of the idea of China's global leadership. Somehow or another, Tokyo officially takes up a moderate position on the "resource dialogue" issues with Russia, emphasis is placed on its national interests and understanding that there are no suitable conditions for enhancing today's cooperation.

Conclusions
The SCO member-states are perceived variously by Japan in the context of its regional energy policy that is due to significant differences between these states. While Russia and Central Asian countries are playing the role of suppliers of primary energy resources to Japan, a more complex and multi-vector interactions are being built with India and China because Japanese companies are interested in the presence of the energy technologies and services on the Indian and Chinese markets, that have a large capacity and development potential.
Japan's foreign energy policy is pragmatic and primarily pursues the goal of providing the country with the most efficient and uninterrupted energy supply. In general, Japan follows "soft power" means and tactics, when, in addition to obtaining financial and economic benefits, the bet is also placed on promoting the country's positive image abroad. This is the partner's position that is ready to help with technology and qualified personnel in the major energy projects' implementation, without setting strict conditions and requiring in return the inclusion in a certain orbit of "civilizational influence", which latently implies a number of Chinese initiatives.
Japan has its own position on many regional economic and political issues in spite of that fact that it is still a key US ally in the Asia-Pacific region. Against the background of rising China, the Asia-Pacific region is becoming the arena of the future geo-economic clash, and the SCO influence in this game will be only soaring.