Japan violates the US and EU “Price Ceiling” and buys oil at $70
The United States has persuaded its European allies to cap purchases of Russian crude at $60 a barrel, but one of Washington's closest allies in Asia is buying oil at prices above the cap, at least according to reports from the Wall Street Journal.
The Japanese government has apologized to Washington stating that its dependence on external energy sources makes it necessary to purchase Russian oil and gas, even at prices higher than those agreed with the allies.
At the same time, as many European countries have reduced their dependence on Russian energy supplies, Japan has increased its purchases of Russian natural gas over the past year. Japan is the only Group of Seven nation not to supply Ukraine with lethal weapons, and Prime Minister Fumio Kishida was the last G-7 leader to visit Ukraine following Russia's invasion. As an ally of the US, Tokyo is very careful not to irritate Moscow too much.
Kishida said the G-7 summit he will host in May in his hometown of Hiroshima would show solidarity with Ukraine. Tokyo said it was committed to supporting Kiev and could not send arms due to the government's long-imposed export restrictions.
"We will absolutely not allow Russia's outrageous act and are imposing severe sanctions on Russia to stop the Russian invasion as soon as possible," government spokesman Hirokazu Matsuno said.
The premium-priced oil is linked to the extraction of hydrocarbons from the large Sakhalin-2 field, which mainly produces natural gas. The oil purchases, while minimal and sanctioned by the United States, represent a break in the unity of US-led efforts to impose a global cap of $60 a barrel on crude purchases.
The limit works because oil-buying countries, even if they are not aligned with the United States, generally need to use insurance and other services from companies based in the United States or one of its allies. The G-7, the European Union and Australia have agreed on rules banning these companies from providing services if a buyer of Russian oil pays more than $60 a barrel.
However, the collaboration between Tokyo and Moscow does not stop at the purchase of oil: an official of the Japanese Ministry of Economy, Trade and Industry has declared that Tokyo wants to have guaranteed access to the large natural gas field of Sakhalin- 2, a product which is then liquefied and shipped to nearby Japan. “We did this with the aim of having a stable energy supply for Japan,” the official said.
The official added that a small amount of crude oil is being extracted alongside natural gas on Sakhalin-2 and needs to be sold to ensure production of liquefied natural gas, or LNG, continues. “The price is decided by the negotiations between the two parties,” he said.
Many US analysts would like Japan to give up Sakhalin-2 and its oil and gas to objectively support Ukraine. It is not clear how getting Sakhalin-2 gas sold to China, for example, could help the Ukrainian resistance: the result would only hurt the Japanese economy. After all, since 1945, after the World War, Japan has always increased energy ties first with the USSR and then with Russia. Now it's too late for a 180-degree flip.
Thanks to our Telegram channel you can stay updated on the publication of new articles from Economic Scenarios.
The article Japan violates the US and EU "Price ceiling" and buys oil at 70 dollars comes from Scenarios Economics .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/il-giappone-viola-il-tetto-del-prezzo-usa-e-ue-e-compra-petrolio-a-70-dollari/ on Mon, 03 Apr 2023 07:00:18 +0000.