Press Conference by Minister Hagiuda (Excerpt)

*Note: This is a provisional translation for reference purposes only.

8:41-8:56 a.m.
Tuesday, May 10, 2022
Press Conference Room, METI

Question-and-Answer Session

The Situation in Ukraine 

Q: Prime Minister Kishida stated at the G7 leaders’ meeting that Japan would impose a general embargo on Russian oil. What are your thoughts on how such an embargo will be implemented?
The Prime Minister has also said that Japan will maintain its interests in Sakhalin. Is it possible to stop importing Russian oil completely while maintaining such interests?

A: Although this was a very tough decision as Japan relies almost entirely on imported oil, solidarity with the G7 is now of the utmost importance. Therefore, based on the recent G7 Leaders’ Statement, we have decided to enact a general embargo on Russian oil.
However, we cannot immediately embargo Russian oil. Instead, we are committed to gradually reducing dependency on Russia for energy in a timely and orderly manner while securing alternate supply sources. Moving forward, we will establish a concrete method and timeframe for reducing and ultimately stopping these oil imports considering actual conditions.
With regard to oil imports from the projects in which Japan has interests, as they are contributing to our low-cost, long-term stable energy supply, we will take time to consider how we can phase out these imports with minimal impact on citizen's lives and business operations.

Energy Security

Q: My question relates to economic security. In addition to the issue of how to prevent leaks of cutting-edge technology, attention is also being focused on securing a stable supply of energy as you have just mentioned. What measures can Japan take to address this issue as it has little domestic energy resources?
We have recently seen other countries start to consider restarting nuclear power stations, and Prime Minister Kishida has said that the policies on restarting will not change. However, it seems that he repeated relatively positive statements about restarting nuclear power stations. Do you think that speeding up that process is one of the practical ways forward in this situation?

A: Energy is the foundation of all socio-economic activity. Moving forward, ensuring energy security will be our basic principle while responding to Russia's invasion of Ukraine. At the same time, we also need to work toward decarbonization.
Thus, we want to keep diversifying our suppliers through resource diplomacy and accelerate thorough energy conservation, maximal introduction of renewable energy, and the restarting of nuclear power plants with safety as the top priority in order to increase our energy self-sufficiency rate.
Because nuclear power you mentioned is a decarbonized, base load power source in practical use, we need to utilize it as an important power source. Japan will continue working to secure energy security based on its policy of pursuing all options.
As stipulated in the Strategic Energy Plan, we will move forward with restarting plants that have been approved as meeting the stringent safety standards by the independent regulation authority, with the understanding of the local stakeholders. This policy is not changing.

The Situation in Ukraine 

Q: I have a question about the oil embargo.
I understand that Japan will maintain its interest in Sakhalin-1, and even if Japan halts these imports in the future, SODECO (Sakhalin Oil and Gas Development Co.)—in which METI and Japanese companies have interests—will have to continue selling crude oil produced from the project.
How does METI intend to sell the crude oil that comes from Sakhalin-1 moving forward?

A: We have had to make a tough decision this time, but solidarity with the G7 is important. Considering the G7 Leaders’ Statement, we have decided on the Russian oil embargo.
As I said earlier, we cannot do it immediately. Instead, our goal is to gradually phase out our dependence on Russia for energy in a timely and orderly manner while securing alternate supply sources.
I assume that the oil will be sold to neighboring countries—such as South Korea—in addition to Japan. I will refrain from giving any more details at this point in time because any speculation might cause adverse effects on related companies’ ordinary profits.

Q: How do you think this embargo will affect Japan's industry? Profits of oil companies and trading houses are expected to hit an all-time high. Please tell us how this will impact the industry.

A: It will obviously have a large impact on the business community.
I believe that most citizens understand our overall policy of looking to enact the embargo, but there may be various negative impacts, which we have not clearly understood yet.
As I mentioned in an on-the-move interview yesterday, if countries decide to embargo Russian oil, they will have to compete for the alternatives to those imports. We are asking oil-producing countries to increase production, but as I have said before, those countries are questioning whether we will continually buy the increased amounts they produce.
Japan, at least, has said that it will continue using the increased amounts. We intend to keep using a certain amount of oil while working toward carbon neutrality by utilizing technology to reduce CO₂ emissions. However, if European countries or others suddenly strengthen their embargo as the situation changes, they may ask oil-producing countries to increase their production and only buy that increased amount for a certain period of time. This would be a problem for those oil-producing countries. Given this situation, I think it is undeniable that the oil embargo will likely have a significant impact on the economy and the market.
Right now, I am telling citizens that the overall direction for Japan is to enact this embargo. I think the general public may have the understanding that this was an unavoidable decision when considering our future relationship with Russia. However, I think we also need to explain to them at some point that energy prices will spike as a result of this. Otherwise, they won't be able to accept our country's policies. There are many people who say brave things, but we need to protect the daily lives of citizens and Japan's economy. The embargo is a commitment we have made to the international community, and we are having difficult discussions about how best we can protect the lives of our citizens and our economy with the Agency for Natural Resources and Energy. If we could not actually put pressure on Russia, there is no point in doing it. If we withdraw from the Sakhalin project quickly, our interest may be transferred to a third country. Another problem is that if we embargo Russian crude oil, it could be coming into the market via other countries by way of oil laundering. In that case, it would be very difficult to determine whether the oil is of Russian origin.
Therefore, while I am not denying the G7 commitment to take this direction, each country needs to stay alert and run various simulations to figure out what practical problems need to be taken care of. Otherwise, what we are doing now might become a big advantage for Russia, and these sanctions will have been for nothing. Thus, we must keep up our calm response. At the same time, we will do our best to minimize the impact this may have on companies.

Q: My question is about coordinating with the G7. As we cooperate with the G7 countries coordinating to reduce dependence on Russia for their energy and oil supplies, can you tell us your expectations about the role the US plays as an oil and gas producer and about a potential increase in crude oil and LNG production by the US?

A: The G7 committed to phase out dependence on Russia for energy and giving each country time it needs to secure a sustainable, alternative supply based on its circumstances. Thus, I believe each country will continue to explore ways to reduce its dependence.
The US is both a major consumer and producer of energy, and a country that can play an essential role in ensuring a stable energy supply for the world. Regarding LNG in particular, there are plans to expand existing US-based projects that could increase LNG production in a relatively short time. Japanese companies are also showing interest in such projects. I hope Japan will provide public financing to support the launch of these projects in the US and move forward on cooperation with the US toward establishing a stable LNG supply worldwide. I recently visited the United States and spoke with Secretary Granholm about this matter. If everyone suddenly decides to stop buying oil from Russia, stop using coal, and start thinking about LNG all at once without finding an alternative, it would cause chaos in the global economy and energy markets. I think the role that the US is playing is very important as an oil and gas producer. I believe the US should firmly establish their own production increase system, just as it led G7 discussions. I told them that the Japanese government will provide cooperation including upstream investment. I would like to pay particular attention to the US response.

IPEF

Q: My question is about Japan's trade relationship with the US. Last night, Ambassador Tomita spoke online with US Ambassador to Japan, Rahm Emanuel. Mr. Tomita remarked that the IPEF (Indo-Pacific Economic Framework) will be officially launched. As this signals that TPP negotiations are moving forward between the US and Japan, what are your thoughts on where the IPEF stands now?

A: The IPEF came about as a proposal when the US started saying last year that it wanted to get involved in the Indo-Pacific region. I welcomed that, but the issue at hand was that the TPP already existed and had moved from 12 to 11 members when the US left. I have also been publicly saying that the US should return to the TPP now that Mr. Biden—who was vice president of the Obama administration—has become president.
Rather than replacing the TPP, the IPEF is trying to develop various rules for the Asia- and Indo-Pacific that would be favorable for them. If this was a simple economic framework, it would be unclear how it differs from the TPP and how it would benefit countries related to it. I do welcome the US to get involved in this region, but I would like them to try to deepen their understanding of the content of the rules being created and the type of discussion platform this should be. As Mr. Tomita may have said, I think the IPEF should be started with as many Asian countries as possible participating. Creating a community with a small group will not do anything, so that is not our goal in launching the IPEF. Rather, I hope as many ASEAN countries as possible will act together, clarify what kind of discussions we can have in this platform we are building and how we can put it to use, and then start operating after that. I do not know exactly when it will start, but I discussed this matter thoroughly when I visited the US. Again, I would like to welcome the IPEF's establishment in itself, but I would also like it to start with many countries participating.

The Situation in Ukraine

Q: Do you think this crude oil embargo could possibly lead to an LNG or natural gas embargo in the future?

A: I am not sure, but I think a gas embargo might be hard for the EU. The volume of gas differs a lot from that of oil, for example, where alternative suppliers such as those in the Middle East could temporarily make up for a reduced volume of Russian oil by increasing their oil production. That would not be possible for LNG, so I do not think such an embargo will happen.
When we started to impose these sanctions, we considered energy security to be separate from them. However, countries have started to see stricter measures as necessary as this conflict has dragged on, and those are being enacted gradually. While I cannot say that LNG will never be considered as part of these sanctions in the future, I think such sanctions would be difficult to plan out.
For instance, if you canceled your existing hotel reservation before making an alternative reservation at another hotel, you might end up sleeping in the open air for the night. I think we need to carefully consider whether the world is capable of taking an alternative energy sources in place.