Japan Buys Oil From Russia In Break With Western Allies

Japan will continue to purchase Russian crude oil above the $60 per barrel price cap imposed by G7 nations last year.

The break from the sanction created by Western nations in reaction to the Russian invasion of Ukraine was approved by the United States but marks a faltering in the G7 alliance, which includes the two nations as well as Canada, France, Germany, Italy, and the United Kingdom. Japan, an island nation with lackluster energy reserves, will continue to purchase crude oil from the Sakhalin-2 project in the far eastern portion of Russia such that Japan continues to have access to the natural gas present at the site.

“We have done this with an eye toward having a stable supply of energy for Japan,” an official from the Japanese economy ministry said in a statement to The Wall Street Journal. He noted that a small quantity of crude oil is extracted alongside the natural gas at Sakhalin-2, which Japan must continue to purchase to ensure access to the latter energy product.

The price cap policy only allows maritime services industries in the G7 nations, the European Union, and Australia, which include sectors such as insurance and trade finance, to offer their services for Russian oil sold below the benchmark. Brent crude oil, the price benchmark for fuel drilled in the Atlantic Ocean, was $81 per barrel as of Monday morning.

Mitsui and Mitsubishi, two prominent Japanese companies, own nearly one-quarter of the Sakhalin-2 initiative and successfully fought to maintain their shares of the project last year.

Japan has been more hesitant than other G7 nations to express full-throated support for Ukraine, given their dependence on Russian energy resources. Russia provides roughly one-tenth of Japanese natural gas imports; Germany, which depended on Russia for more than half of natural gas imports before the invasion began early last year, rushed to secure other power sources as the cost of electricity soared more than tenfold last fall.

Hirokazu Matsuno, the chief spokesman for the Japanese government, nevertheless insisted that his nation supports Ukraine. Japanese Prime Minister Fumio Kishida plans to express solidarity with the Ukrainian war effort next month at the G7 conference in Hiroshima.

“We absolutely will not allow Russia’s outrageous act, and we are imposing strict sanctions on Russia in order to stop Russia’s invasion as soon as possible,” Matsuno said.

The United States Treasury Department asserted last year that the price cap is “high enough to maintain a clear economic incentive for Russia to continue selling oil on global markets,” as Russia has “historically accepted” the rate. To shirk the price cap, Russia must depend upon maritime service providers outside of the G7, which are more expensive and less reliable.

“This price cap will benefit directly emerging and developing economies, and it will be adjustable over time so that we can react to market developments,” European Commission President Ursula von der Leyen said in a speech regarding the policy.

The United States has sent more than $75 billion in combined humanitarian, military, and financial aid to Ukraine as of January, according to an analysis from the Council on Foreign Relations. Institutions of the European Union, on the other hand, have sent nearly $32 billion, while the United Kingdom and Germany have sent a combined $15 billion.

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