VLADIMIR PUTIN
ARCHIVE OF THE OFFICIAL SITE
OF THE 2008-2012 PRIME MINISTER
OF THE RUSSIAN FEDERATION
VLADIMIR PUTIN
ARCHIVE OF THE OFFICIAL SITE
OF THE 2008-2012 PRIME MINISTER
OF THE RUSSIAN FEDERATION
VLADIMIR PUTIN
Bilateral trade and economic relations are regulated by the December 6, 1957 commercial treaty stipulating mutual most favoured nation status. The treaty is extended automatically.
After slumping in the late 1990s, the bilateral trade turnover has been expanding steadily in the past seven years. A $30 billion trade turnover was posted in 2008. In 2007, Russia accounted for 1.6% of the Japanese trade turnover, ranking as Tokyo's 16th major trade partner.
Russian exports are dominated by raw materials. Fuel and raw materials account for 49.3% of the export volume's value. Crude oil and coal make up for 6.6% and 6.4% of Japanese oil and coal imports.
Fuel and raw materials are followed by non-ferrous metals, namely, aluminum, nickel, palladium, platinum and titanium (39%) meeting 18.6% of Japanese non-ferrous metals demand.
Fish and seafood come third with 10%.
Timber accounts for about 9% of Russian exports.
Nuclear fuel cycle materials, which meet 12% of Japanese market demand, are posting good dynamics.
Japan, which has been posting a trade surplus in its relations with Moscow since 2006, primarily exports machinery and equipment to Russia. New and used cars, road construction equipment, electric appliances and telecommunications account for 90% of Japanese exports to Russia in this category.
The fuel and energy sector is a strategic sphere of Russian-Japanese economic cooperation. Both countries develop oil and gas deposits in Sakhalin Island under the Sakhalin-1 and Sakhalin-2 production-sharing agreements, which have received investment worth $14.4 billion and $14.6 billion, respectively. In March 2009, Japan started receiving liquefied natural gas under the Sakhalin-2 project.
The sides are assessing possible Japanese investment in the development of oil and gas and coal deposits in the Republic of Sakha-Yakutia, north-eastern Russia, energy-saving programmes in the Russian fuel and energy sector and in the nuclear power industry. On December 15, 2008, Russia's United Industrial Corporation and Mitsui of Japan signed an agreement on joint prospecting operations at Elegestskoye deposit containing about 900 million tonnes of coking coal in Tuva. Under the document, both sides will compile the relevant feasibility study.
Japanese business could help establish joint ventures for manufacturing pipes, heavy-duty machinery, and oil and gas equipment. This is a highly promising venue of bilateral cooperation.
In 2007, construction of an ammonia-processing plant was launched in Mendeleyevsk, Tatarstan. The project involving Japan's Sojitsu has received $700 million worth of investment to date.
Marubeni has started overhauling refineries in Samara, Tuapse and Nizhnekamsk. The sides are negotiating various forms of the Japanese business community's involvement in building the East Siberia - Pacific Ocean Coast oil pipeline and implementing the federal targeted programme for the development of Russia's Far East and Trans-Baikal area.
In 2008, Russia's state-owned oil company Rosneft resumed contacts with the Agency for Natural Resources and Energy at the Japanese Ministry of Economy, Trade and Industry (METI) in order to jointly implement oil and gas and oil refining projects.
In 2005, Japan started modifying its investment policy in Russia and moved to build car assembly plants near St Petersburg. Toyota and Nissan invested $150 million and $200 million in both projects, respectively. In December 2007, the Toyota plant started operating in Shushary near St Petersburg. The company also announced plans for building another car assembly plant.
In February 2007, Japanese automaker Isuzu and Russia's Severstal-Avto signed a package of documents on establishing a joint lorry manufacture venture. In June 2007, Suzuki and Russia's Ministry of Economic Development signed an agreement on investing $115 million in a car assembly plant near St Petersburg. The new enterprise will annually manufacture 26,000 vehicles.
In December 2007, Mitsubishi Motors announced plans to build a car assembly plant in Kaluga. On July 21, 2008, Komatsu laid the cornerstone of a plant that will make road construction equipment and lifters in Yaroslavl. The project will receive $80 million worth of investment. Hitachi is studying the possibility of opening a road construction equipment plant in Kostroma.
Japanese car component manufacturers, namely, Bridgestone (car tyres), Toyota Boshoku (seats and upholstery), Denso (electrical equipment), Kirado (radiators), Daido (ball bearings), Sakura Kogyo (brakes and fuel systems), etc., also entered Russian markets after new car assembly plants were commissioned.
Along with Japan's car makers, local high-tech manufacturers have shown interest in the Russian market as well. Among those are Matsushita Denki, Japan's major manufacturer of electric appliances and consumer electronics products, including liquid crystal display TVs, electric machines and instruments producer Yasukawa and electromechanical manufacturer FANUC. In 2008, machine tool builders Yamazaki Mazak Corporation and Mori Seiki announced plans on selling and servicing their engineering tools in Russia.
Japan's largest trade and investment company Mitsui & Co and transport monopoly Russian Railways plan to centralise cargo traffic from Japan to Russia via the Trans-Siberian Railway and to enhance the latter's competitiveness and capacity.
The two sides are also expanding cooperation in the IT and telecommunications sphere. Russia's Transtelekom and NTT of Japan have jointly laid an optical fibre cable from Sakhalin to Hokkaido for quickly transmitting digital data from Japan to Europe. Rostelekom and KDDI are implementing an alternative project.
The Japanese banking sector and insurance companies followed suit after major national businesses entered the Russian market.The Bank of Tokyo-Mitsubishi UFJ, Ltd. and Mizuho, the largest banking holding companies, have opened subsidiaries in Russia and have launched operations on the local market. The financial corporation Nomura Shoken and leading insurance companies have also started operating in Moscow.
The Russian-Japanese Inter-Governmental Commission on Trade and Economic Issues, which was established in 1994, plays an important role in coordinating bilateral economic cooperation. The Commission is co-chaired by Russia's Minister of Industry and Trade Viktor Khristenko and Japan's Foreign Minister Hirofumi Nakasone.
National business communities have also streamlined their cooperation. Russian-Japanese and Japanese-Russian Committees on Economic Cooperation meet on a regular basis. On September 5, 2008, St Petersburg hosted their ninth meeting.
The Russia-Japan Trade and Investment Promotion Organisation, which launched its full-scale work in April 2005, has been holding annual Russian-Japanese investment forums since 2006. The third such forum was held on September 4-6, 2008.
However, the global financial and economic crisis can seriously impair the Russian-Japanese trade turnover and investment cooperation. The Japanese economy already faces a recession, with Russian consumer demand also beginning to plunge.
Japanese car and car component manufacturers are likely to channel less investment into the Russian market. The lack of spare cash could also negatively influence bilateral cooperation in the financial sphere.
