SEOUL – US-led efforts to suppress and contain Russia’s energy-centric economy suffered their latest blows yesterday – blows dealt by its two leading East Asian allies.
In the latest sign of the unwillingness of US-allied capitals to sever energy ties with Russia, South Korea and Japan are, respectively, entering and maintaining energy deals with Russian players.
South Korea yesterday (August 25) announced that the state-owned Korea Hydro & Nuclear Power Co (KHNP) would supply US$2.25 billion worth of components and engineering for a Russia-built nuclear power plant to be raised in Egypt.
Separately, two major Japanese trading firms yesterday confirmed that they will retain their stakes in Russia’s Sakhalin II natural gas project. Those developments followed related news on the opposite side of the balance earlier in the week.
Staunch US ally the UK, a major supplier of both arms and political support to Ukraine, is on target to terminate all Russian energy imports by year’s end. Official data found that London had ended Russian oil imports in June, though some natural gas imports lingered.
But the UK is fortunate to have access to local energy supplies. Amid the Ukraine crisis, the UK’s now ex-leader Boris Johnson has said that London will give its North Sea fields, “a new lease of life.”
Elsewhere in the Global North – the prosperous democracies which have, to greater or lesser degrees, condemned and sanctioned Moscow for its storm upon Kiev – the outlook for continued pressure on the Russian economy is cloudy.
Across the inflation-racked EU, perhaps the biggest economic questions facing governments are whether, how, and to what extent member countries can realistically slash their politically embarrassing dependencies on Russian energy.
These questions are going to be asked with increasing volume and frequency as summer fades and the cold season sets in.
And far to the east, neither South Korea nor Japan – two US allies that are both net energy importers boasting heavily industrialized economies – are positioned to cut back on power use. Nor does either appear willing to cut energy links with Moscow, which owns vast energy reserves in the nearby Russian Far East.
Moreover, Seoul’s nascent Yoon Suk-yeol administration is keen to resume exports in the nuclear sector. Meanwhile in Tokyo, Prime Minister Fumio Kishida is taking the political baby steps required to dust the mothballs off Japan’s nuclear sector, which was effectively frozen in the wake of the 2011 Fukushima disaster.
The developments showcase – yet again – the corresponding interests that link Seoul and Tokyo, regardless of the endless historical disputes that divide the two governments.
Russia-Korea in a nuclear embrace
In a surprise announcement, Seoul revealed late yesterday that KHNP will supply equipment and buildings for Egypt’s first nuclear power plant project, northwest of Cairo, which will encompass four reactors.
KHNP will be the junior partner under Russia’s Atomstroyexport. Last month, Egyptian media reported that Atomstroyexport, as the leader of the consortium building the plant, was responsible for selecting all sub-contractors.
KHNP’s win was hailed by none other than President Yoon – who has professed his closeness to US political stances both in this spring’s election campaign and since entering office in May – in a Facebook post.
Certainly, it is a substantial revival of for South Korea’s nuclear-energy related ambitions, expertize and exports. One area where Yoon has most strongly reversed the policies of his predecessor Moon Jae-in is on the nuclear power front.
Moon, a conviction anti-atomic politician, had reduced nuclear’s share in the national energy mix. Yoon has vowed a restart.
Yoon’s Senior Secretary for Economic Affairs Choi Sang-mok called the win the biggest export order for domestic nuclear players since 2009, when a South Korea-led consortium won a tender to build the UAE’s Bakrah atomic power plant.
Choi admitted that there had been “unforeseen difficulties” surrounding the deal – the Ukraine War and related sanctions upon Russia. And it was clear that Seoul would be explaining matters to Washington.
According to Yonhap News Agency, related agencies have been instructed by the president to offer the United States a briefing on the deal, Choi revealed.
Japan retains stake in Sakhalin II
Japanese firms Mitsui & Co and Mitsubishi Corp, meanwhile, plan to retain their interests in the Sakhalin 2 oil and gas project and will notify Russia of this intention by the end of the month, Kyodo News Agency reported yesterday.
The Japanese companies have both decided to invest in the new operator established by Moscow to take control of the project in the Russian Far East. That managerial change followed a February announcement by UK’s Shell – which previously held a 27.5% stake – that it was exiting the project and all other investments in Russia.
The Japanese players’ decision had been signaled earlier this month when the two firms wrote down the value of their combined 20.5% investment in Sakhalin II, but did not divest it.
The decision to retain was made in light of Tokyo’s aim to secure a stable supply of LNG amid the seismic disruptions that have followed in the wake of Russia’s invasion of Ukraine, Kyodo reported.
Japanese strategicians had previously made clear that their country was over-reliant on Middle Eastern suppliers – a situation that offered Russia the opportunity to fulfill Japan’s diversification ambitions.
Like Korea’s Yoon, Kishida has also signaled a reset for nuclear.
Speaking at an energy policy meeting in Tokyo yesterday, he said that Japan should consider building next-generation nuclear reactors, in addition to both restarting existing plants that are currently offline and extending their lifespans.
Yesterday’s statements follow similar pledges made in July. Then, Kishida and his energy minister had said that they wanted nine nuclear reactors on-grid and generating by the end of the year. That would be an advance on the five reactors currently in operation Japan-wide. The nine plants would generate some 10% of national energy needs.
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