Japanese trading companies aiming for business expansion in Russian Far East

Published: 28 November 2016
Major Japanese trading houses are aiming to expand their operations in Russia, at a time when the governments of the two countries are proceeding with talks on cooperation in eight fields including natural resources and energy development, and urban development in the run-up to a bilateral summit in Japan in December.

The ongoing bilateral economic cooperation talks are the biggest tailwind, said an official of Marubeni Corp.

The bilateral summit between Prime Minister Shinzo Abe and Russian President Vladimir Putin is scheduled to be held on Dec. 15 in the city of Nagato, Yamaguchi Prefecture, which includes the Japanese leader's constituency.

Mitsui & Co. has been involved in the Sakhalin-2 project for crude oil and natural gas development since 1986. The company has a 12.5-percent stake in the operator of the project, which is the nucleus of its operations in Russia.

Mitsui and its project partners, including Gazprom, Russia's state-run natural gas monopoly and the top shareholder of the project operator, are planning to build a third liquefied natural gas plant in Sakhalin in the Russian Far East region.

In addition, Mitsui is conducting a test on wind power generation in the Kamchatka Peninsula, and considering investing in Russia's state-owned power company RusHydro.

"In areas such as industry diversification, Russia' expectations for Japanese companies seem larger than ever before," a Mitsui official said.

In September, Mitsubishi Corp., which is also a member of the Sakhalin-2 project, signed a memorandum of understanding with the Sakhalin government on a feasibility study for a project to construct a plant making methanol from natural gas produced in Sakhalin.

Methanol, used as a material of chemical products, is also drawing attention as a clean energy source.

Marubeni is constructing a coal shipping facility at Vostochny Port in Nakhodka in the Far East, with completion slated as early as next year.

Sojitz Corp. is teaming up with such firms as Japan Airport Terminal Co. in bidding for a project to expand the terminal building of Khabarovsk airport in the city of Khabarovsk and for the right to operate the airport. Japan Airport Terminal is partly owned by Japan Airlines and ANA Holdings Inc., the parent of All Nippon Airways.

By investing in the airport, a gateway in the Far East region, Sojitz is apparently aiming to boost its presence in Russia for further business expansion in the country in the future.

Tetsuya Umetsu, a senior official for overseas strategy at the Japan External Trade Organization, noted, "Since the 1991 dissolution of the Soviet Union, exchanges between Japan and Russia, and Japanese investment in Russia have boomed about three times."

"This time, the Japanese government appears to be enthusiastic (about expanding cooperation with Russia), and Japanese companies are aware of its eagerness," he said, adding that there are expectations for new developments.

Source: The Japan Times