Eight years ago, during his speech in the US Senate, Senator McCain, describing the foreign policy of Russia, spoke very simply: “I have no illusions or worries about the long-term prospects of Russia. Modern Russia is a gas station trying to pass itself off as a country.”. It was in March, when the " It was possible to describe the international position of the Russian Federation in different ways, which in February 2014 firmly chose the path of a future global pariah, but McCain's definition was and remains surprisingly accurate.. No matter what Russian “experts” and “analysts” say, the Russian economy is based on oil and gas. Even their weapons, which until recently were actively bought up by some countries in Asia, Africa and the Middle East, are no longer needed by anyone, because it turned out to be well-disguised scrap metal.

The toughest sanctions in history have been imposed on Russia today. At the same time, the expectations that accompany each new announced wave of sanctions give hope that the Russian economy will finally begin to fade.. And it, of course, fades away, but not at the speed required.. This is due to some still relevant loopholes for circumventing sanctions such as the legalization of “parallel imports”, and fraud with cryptocurrencies and swaps, and a condescending attitude towards the needs of Moscow by some states friendly to Russia that dislike the West and have experience in smuggling. But the most pressing issue, which turned out to be extremely difficult to resolve, is the oil and gas embargo.. And if in the expanses of Europe there is a positive trend in this matter, then in the Indo-Pacific region the situation is much more complicated..

Russian projects in Asia.

The reason is that in South and Southeast Asia there is no " But it is here that the industrial heart of the world beats.. Considering that the most populated countries are also located here, and they are also the largest environmental polluters due to the widest use of coal, it becomes quite understandable that out of 115 oil tankers that left Russian terminals during the first two months of the war and. Growth for India compared to the same period last year was 800%, for China - 33%. One of the reasons is a sharp decrease in the price at which the Russians offered their oil in Asia.. And special discounts to this price - up to $35 per barrel, as in the case of India. Of course, Europe did not stand aside: from March 1 to April 15, 41 tankers went to the Netherlands, 36 to Italy, 9 to Germany. And the same number - 9 tankers - went to Japan. In order to assess the possibility of the final blocking of the oil and gas channel that feeds the Russian economy, it is worthwhile to understand in more detail how the energy non-pipeline upstream projects of Russia focused on Asia are arranged..

There are few such projects - these are Sakhalin-1, Sakhalin-2, a plant for the production of liquefied gas in the Arctic and oil production in the Irkutsk region. In Sakhalin-1, 30% each are in the hands of Exxon Mobil (USA) and the Sodeco consortium (Japan), 20% - ONGC Videsh (India) and another 20% - Russian companies. In the Sakhalin-2 project, 50% - Gazprom, 27.5 - Shell (UK), 12.5 - Mitsui and 10% - Mitsubishi (both Japan). Japan and France invested 10% each in the LNG production plant beyond the Arctic Circle, China and the Russian Federation invested the rest. Finally, the oil project in the Irkutsk region is a joint investment between the Japanese company Japan South Sakha Oil and the independent Russian producer Irkutsk Oil.

Liquefied gas and oil from these projects enter the world markets, however, investors receive them at a price below the market and on the basis of long-term contracts. For example, the main buyers of gas from Sakhalin-2 are Japan (60%), the Republic of Korea and China - 20% each. Japan supplies 4% of its oil and 9% of liquefied gas needs from Russia. Of the G-7 countries, it is the least secured (by only 11%) with its own energy production capacities - this is nuclear and renewable energy. Japan is almost 100% dependent on oil, gas and coal imports. At the same time, the supply structure is quite diversified, for example, LNG is imported from more than 10 countries, and Australia is the largest supplier - almost 36%. Russia is the fifth in terms of supplies after Australia, Malaysia, Qatar and the USA.

China's win, Japan's troubles and India's fears.

After the start of Russia's large-scale aggression against Ukraine, the G7 countries and the EU imposed tough sanctions against the Russian Federation, including those providing for the termination of cooperation in the field of energy projects. Exxon and Shell have announced a decision to withdraw from projects in Sakhalin, although the process itself is neither quick nor easy.. The Japanese press wrote about the negotiations that these companies are holding with potential buyers of their shares, and they, of course, are from China or the Russian Federation.. No one else wants to be subject to US sanctions, direct or indirect..

It is difficult to say how these negotiations are going, but it is already obvious that in the near future China can greatly strengthen its presence in the energy market of Russia and the region.. It is already the largest buyer of oil, gas and coal from the Russian Federation, and now it may well become the most important regional gas trader, especially if the Japanese leave Sakhalin after the Americans and Europeans.

The Japanese JBIC has already announced a radical revision of plans to invest in Russian LNG projects, and Prime Minister Kishida announced his intention to gradually abandon the purchase of Russian energy resources. Gradually, this is when the government will carefully study the issue of resuming electricity production by nuclear power plants and the search for alternatives to Russian oil and gas. The problem is that Japan has already carried out the sale of oil from strategic reserves agreed with other G7 countries and, given the difficult situation with LNG in Europe, has shared part of the volumes of liquefied gas contracted in other countries. Against the backdrop of 20 percent inflation, this caused a discussion in Japanese society (and this is on the eve of the mid-term parliamentary elections) about what is causing the sensitive rise in prices for utilities and goods for the population - measures to support the economy in the past years of the covid epidemic or international solidarity in. Local experts unequivocally link the rise in prices with the “Ukrainian crisis”, while understanding, of course, that Russia is the source of evil. In the context of the Russian war against Ukraine, Japanese support for the policy of the Kishida government reaches 80%, and it is important to maintain this momentum.

The argument of the Japanese side regarding the withdrawal from Russian projects is as follows. Care must be taken, because in the event of the sale of shares owned by Japanese companies (as well as the United States and Britain) in projects on Sakhalin, Chinese companies will have the final say in them.. Thus, it is they who will receive LNG at a price below the market, and this is in addition to the already very special prices for Russian oil.. But on the spot market, they will sell these resources already at market prices, which, in fact, is happening now: the Hong Kong subsidiary of Sinopec is actively reselling Russian liquefied gas to Europe at a good margin. Thus, Russia will still receive the budget revenues it needs, China will receive unlimited access to cheap energy resources, and all other Asian countries, including Japan, will receive high prices on the market..

The situation is further complicated by the fact that European economic giants have now turned towards the Middle East LNG producers, which are the largest suppliers to Asia, primarily Germany, which has abandoned pipeline projects with the Russian Federation.. In Southeast Asia, there are fears that a significant increase in energy prices (add to this a significant increase in food prices) could seriously undermine popular support for governments adhering to sanctions against the Russian Federation.. And this applies not only and not so much to Japan..

Indian experts, for example, actively publish articles in which they try to prove the futility of the sanctions policy in the energy sector against the Russian Federation, since this only leads to an increase in prices on world markets due to a lack of resources, but still does not provide the desired effect of “suffocating” the economy. In their opinion, the most beneficial policy is the United States, which is quickly becoming the main exporter of energy resources, while the Europeans still have a fairly well-developed infrastructure, their own production, and there is room for maneuver, which is almost completely absent in Asia.. It is this point of view of Indian experts that the US is using Russia’s aggression against Ukraine for its own purposes, which is the most dangerous.. Because India is the most important member of QUAD, and at the summit of the countries of this association next week, Delhi's support for Washington's Indo-Pacific vision is decisive.

Recipes for "

With all the difficulties mentioned, the two largest Japanese importers - Eneos Holdings and Idemitsu Kosan - announced the cessation of purchases and processing of Russian oil after the expiration of existing contracts. The suspension of investments in oil and gas projects in the Russian Federation, although not loudly, was reported by Chinese state-owned companies: they are afraid of applying secondary sanctions to them. Obviously, the Russian ship was followed by the Power of Siberia-2 project, an Asian copy of Nord Stream-2, conceived as another Russian trap for the Chinese and Europeans in case one of them dares to be uncompromising in the negotiations. Russia still has its voice in OPEC through some of its Middle Eastern allies, and those voices are scaring the world with deficits.. However, not only Russian voices are heard in OPEC, this structure is well known to other major players. The question, of course, is only time and price..

Thus, as it always happened in the past, energy security today is one of the key factors of overall security and the most important political factor, and not only and not so much economic. An undeniably correct decision on the oil and gas embargo, taken as soon as possible, should seriously undermine the ability of the Kremlin regime to continue the war.. The question is how to achieve the desired result in the conditions of aggression without causing global destabilization of markets, political instability and taking into account such “nuances” as the position of Hungary, China or India. The return to nuclear power in countries that have previously abandoned it, the construction of “smart” power distribution networks that allow renewable generation to be connected to the common grid, and, most importantly, tight control over sanctions and financial flows associated with energy traders are all among.

Well, as for Asia, it is also the strengthening of regional alliances, demonstrating to both Russia and China that now more than ever it is important to be on the right side of history.. This is evidenced by the unusually active Japanese diplomacy, and the first-ever ASEAN-US summit, just held in Washington, and the visit of EU leaders to Tokyo, and the expected QUAD summit. From the very beginning of the Russian aggression, it was clear that what is happening in Ukraine will not remain in Ukraine, and this applies to both Europe and Asia.. The heroism of the Ukrainian army is becoming a world-changing factor, and it is important to take full advantage of it in order to achieve both the immediate goal of securing victory and the long-term goal of achieving strategic transformations in the world that will make it impossible to repeat such aggression, no matter who it comes from.. Neither Europe nor Asia.

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