Japan does not see sanctions on Russia causing major energy supply disruption

Japan does not expect the Ukraine crisis to cause any immediate major disruption to the stable supply of energy in the country as it imposes sanctions on Russia.

"We understand that sanctions taken by Japan, the US and Europe are not having an impact on the current energy flow," a source from the Ministry of Economy, Trade and Industry told S&P Global Platts on Feb. 24.

Russia accounted for 9% of Japan's total LNG imports of 74.32 million mt in 2021 and 4% of total crude imports of 2.48 million b/d, according to the latest Ministry of Finance data.

Japan is also stepping up talks with oil and gas producing countries as well as with the International Energy Agency to better prepare for any supply disruption, the source said, adding the talks cover the state of oil and gas markets and the potential evolving risk.

Discussions with the IEA included considering the use of the agency's scheme for coordinated action in the event of disruption, the source said, declining to elaborate.

As part of Japan's efforts, a senior Japanese diplomat discussed global energy prices with International Energy Forum Secretary General Joseph McMonigle on Feb. 24.

"We urge producer and consumer countries to have a sensitive focus on energy market stability and prevent any disruption to supplies that could lead to further increased prices and heightened volatility," McMonigle said in a statement.

Energy importers

Japanese importers of Russian LNG, coal and oil said Feb. 24 they are carefully watching developments in the Russia-Ukraine conflict and looming sanctions on Russia.

JERA, Japan's largest power generation company, is closely monitoring the situation and its impact on LNG and coal prices as well as governments' moves on sanctions, a company spokesperson said.

Russian LNG supply imports account for less than 10% of JERA's annual LNG imports of over 30 million mt and its coal imports from Russia account for more than 10% of its annual imports of about 20 million mt, the spokesperson said.

Tokyo Gas, which procures more than 10% of its LNG requirements from Russia, will consider its measures as the situation develops, while ensuring its immediate stable supply, a company spokesperson said.

Osaka Gas, which imports less than 10% of its LNG requirements from Russia, does not plan to change its Russian LNG procurement strategy for now, a company spokesperson said.

Following requests by the EU and US, Japan announced Feb. 9 its decision to divert surplus LNG cargoes to Europe amid gas shortages in the continent.

Japan currently holds 240 days' worth of oil reserves, with two to three weeks' worth of commercial LNG stocks held by power and gas utilities.

Imposing Sanctions

Japan decided to impose sanctions on Russia following the latter's recognition of Ukraine's breakaway regions of Donbas and Luhansk and its subsequent order for Russian troops to conduct "peacekeeping operations" there.

Japan will suspend the issuance of entry visas into the country to individuals of the two breakaway regions and freeze assets held by these individuals in Japan, and prohibit trade with the regions and the issuance and transaction of new Russian sovereign debt in the primary and secondary market, Minister for Foreign Affairs Yoshimasa Hayashi said Feb. 23.

Japan will also expand the coverage of maturity regarding existing prohibitions of bond issuance by designated Russian banks, Hayashi said in a statement, adding the country will swiftly proceed with the procedures to do so.

Should the situation deteriorate, Japan will move swiftly to implement further measures, together with the G7, he added.

US President Joe Biden said Feb. 23 he would meet his G7 counterparts in the morning of Feb. 24 and announce further measures following Russia's "unprovoked and unjustified attack" on Ukraine.