Japan eyes Central Asia for
strategic resources By Roman
Muzalevsky
Japan announced on November 10
it would provide US$700 million to the
resource-rich Central Asian countries for
exploitation of oil, gas and rare-earth minerals
(REM). The announcement was made at the fourth
meeting of foreign ministers representing
member-states of the "Central-Asia plus Japan"
Dialogue initiative, which was launched in 2004 to
promote trade and security in the Eurasian region.
Participants of the gathering focused the
discussion on ways to promote intra-regional
cooperation on trade, investment and security in
broader Central Asia.
The level of
financial commitment is significant and indicates
Japan's keen interest in boosting its longer-term
strategic presence and advancing security in the
resource-rich Central Asian region amid its
simmering tensions with a rising China and
ahead of the pull-out by
coalition forces from war-torn Afghanistan.
Central Asia is emerging as focus of Japan's
efforts to address issues of access to strategic
resources, regional security, and China's
restrictions on REM exports.
Japan views
its declared financial contribution as
facilitating its existing and future economic
plans in Central Asia. In Kazakhstan, Japanese
companies have already invested in the Kashagan
oil deposit and energy projects in the Caspian
Sea. They have also pursued nuclear energy
cooperation with Kazakhstan, which in 2009 became
the world's largest uranium producer.
Japanese companies Sumitomo Shoji and
Kepko, along with Kazakhstan's Kazatomprom, are
developing the Zapadny Munkuduk uranium deposit,
the production of which, in 2010, was planned to
meet 10% of Japan's annual uranium needs. Japanese
firms have also participated in the construction
and remodelling of oil-processing plants in
Uzbekistan.
The issue of access to
resources is a pressing one for Tokyo. Japan is
known to depend heavily on strategic resources
from other countries, including from China -
widely perceived as a nationalistic power pursuing
an ambitious resource-acquisition strategy
worldwide. This particularly concerns imports of
REMs, strategic resources that are critical to
Japan's high-tech industry and to its ability to
compete in global high-tech markets. Any severe
disruptions in inflows of REMs could undermine
Japan's high-tech industry given the country's
prominence in the production and export of
advanced products.
REMs are used for
civilian and military purposes in the manufacture
products such as computers, hybrid cars, smart
phones, tanks, precision bombs, radars, and
rockets, among other items.
Probably not
coincidentally, Tokyo's announced pledge amount to
Central Asia is nearly equal to the value of
Japan's lost REM imports from China, with which it
spars over the disputed Senkaku/Diaoyu Islands.
China's REM exports to Japan fell by 11.5% this
year - a drop of $702 million from last year. The
decrease in exports is attributed to China's
cautious approach to exploitation of its strategic
resources, Beijing's restrictions on exports over
concerns about excessive production and impact on
the environment, as well as its strained relations
with Japan over the disputed islands.
A
third of the world's proven REM reserves is
concentrated in China, which exports up to 95% of
the world's REM supply. China is also using
four-fifths of its production for its own needs
and is reportedly racing to become a net importer
of REMs by 2014. Prior to its dispute with
Beijing, Tokyo relied on China for up to 90% of
its REM supply.
In 2010, Beijing reduced
export quotas for its REM resources by a whopping
40%, citing irresponsible exploitation of its
reserves. The measure, which occurred amid a
territorial dispute between Tokyo and Beijing, led
to a decrease in China's exports to Japan and
prompted Tokyo to look to Central Asia for REM
supplies.
Japan has since announced plans
to draw 50% of its REM supplies from countries
other than China by 2013. Japan views Central
Asia, rich in rare earths and energy resources, as
a critical source of strategic resources.
This December, a joint
Japanese-Kazakhstani Summit Atom Rare Earth
Company (SARECO) plans to extract REM in
Stepnagorsk, Kazakhstan. The enterprise aims to
recover 1,500 tonnes of REMs annually, which is
equivalent to 7.5% of Japan's annual demand, and
then expand the production to up to 6,000 tonnes
per year by 2017.
"This is an iconic
cooperative project between Japan and Kazakhstan,"
Japanese Deputy Minister of Economy, Trade and
Industry Yosuke Kondo stated.
Japan also
hopes that it will be able to import up to 20
tonnes of dysprosium annually, which would satisfy
3% of Japan's demand for this rare element.
Central Asian countries contain vast deposits of
uranium, whose tailings are rich in such rare
earths as dysprosium and neodymium.
Several complications await Japanese firms
as they expand into Central Asian markets,
particularly in the area of REM extraction. These
include technological barriers and lack of
regulations required for efficient and
environmentally friendly extraction. Japan is also
likely to face stiff competition over the region's
energy and uranium resources.
It is only a
matter of time before countries in the region open
their REM deposits to extraction by Chinese firms,
especially since China is expected to become a net
importer of REM. China is already believed to be
importing REM supplies from Vietnam and may yet
come to the Central Asian market as it enjoys an
expanding economic presence in the region,
particularly in its vast energy sector.
By
expanding its access to energy and other
high-value resources in Central Asia, Japan will
be able to reduce dependence on China for
strategic commodities critical to its high-tech
manufacturing sector and contribute to Central
Asian security and stabilization of Afghanistan.
It will also become a more "weighty" actor
in the Central Asian region, where it will
inevitably compete and cooperate with other
players, such as Russia, China, India, the United
States, the European Union, Turkey, Iran and
Pakistan, all of which are pursuing long-term
economic interests in broader Eurasia.
Roman Muzalevsky works for iJet
Intelligent Risk Systems, Inc and is a
Contributing Analyst at Wikistrat. He received his
MA in International Affairs with concentration in
Security and Strategy Studies from Yale
University.
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