[Special Feature: Thinking About Energy Security] Roundtable: The Future of International Politics as Seen Through Energy

Today, I have arranged this opportunity to discuss "energy security" with all of you. With the recent crisis in Ukraine and the issues surrounding Gaza in the Middle East that arose in October 2023, there is certainly growing concern regarding the stable supply of energy within Japan.

My specialty is security theory, and the concept of security is interpreted very broadly in the "National Security Strategy" of December 2022. To quote: "This strategy provides strategic guidance for policies in areas related to Japan's security, such as diplomacy, defense, economic security, technology, cyber, maritime, space, information, Official Development Assistance (ODA), and energy," so energy is included.

As for the definition of "energy security," the International Energy Agency (IEA) definition is perhaps the most famous: "the uninterrupted availability of energy sources at an affordable price." However, at the same time, it has been pointed out that energy security is a concept that encompasses a very diverse range of meanings.

First, I would like to ask how you each perceive energy security within the context of your own work.

My specialty is the history of Japanese diplomacy, but since I began researching Japanese diplomacy during the first oil crisis for my master's degree, I have continued to think about energy security as well.

I entered graduate school in 2006. At the time, my seniors and peers told me, "That's quite a minor theme." They thought that in the history of Japanese diplomacy, things like the Japan-U.S. security alliance, Okinawa, or Japan-China relations were more important, and wondered why I was working on resources. I believe the fact that energy issues are currently attracting attention in the media reflects our current state of crisis.

That said, if I were to define how I perceive the concept of energy security—though it may lack some strictness—it would be the "inexpensive and stable supply of energy."

However, setting aside "inexpensive" for a moment, if we look closely at the "stable" part of stable supply, there are actually many different elements. "Stable" means that supply can continue even when a crisis occurs, so it leads to the discussion that diversification is necessary, including not just the supply sources but also the supply routes. Furthermore, if you depend on a specific country, it creates the problem of not only high sensitivity but also high vulnerability.

Moreover, because Japan has an extremely low energy self-sufficiency rate, when we think about energy security issues, we must discuss international issues almost as an equivalent. I would like to mention at the outset that this introduces a slightly different context than the energy security considered by the vast majority of other countries.

I have been in the research department of the "Japan Organization for Metals and Energy Security" (JOGMEC) for over 20 years. My specialty is China's energy situation, but recently I have been interested in and researching the ideal energy mix and energy security policies of Asian consuming countries. I am attempting to compare Japan's energy security with that of China, Taiwan, and South Korea side-by-side.

I went to Taiwan this November, and it is said that energy policy there may change significantly with the presidential election in January 2024. Energy carries such policy change risks, and this is prominent in East Asia as well.

I consider energy security to be the ability to independently obtain necessary energy at a reasonably affordable price, without losing national autonomy or becoming dependent on or subservient to other countries. That is an important mission of the organization I belong to, JOGMEC.

However, I also feel that it is not a good era when energy security is discussed so seriously. I used to believe in the idea that peace and stability are guaranteed through interdependence and mutual benefit, so I am shocked. Europe, which had deepened its dependence on Russian oil and gas, was greatly tossed about by the Ukraine crisis—especially regarding gas procurement—and I believe the world has rediscovered the importance of energy security.

I started in regional studies, and because that region was the Middle East, I am inextricably linked to energy. I ended up immersing myself in this field out of professional necessity.

How I perceive energy security does not differ much from the definitions provided by Mr. Shiratori and Mr. Takehara, but when you study the Middle East, you develop the habit of having to look at the world of energy from their perspective as well.

We desire stability of supply, but they have an aspect of desiring stability of demand. There is no stability unless the intentions of both sides align. I think that without understanding this principle, energy security is prone to falling into the one-sided assumptions of a consuming country like Japan.

One point is that since oil prices dropped significantly in the mid-1980s, there has been a debate over whether oil is a strategic material or a commodity. Oil prices have continued to fluctuate since then, but essentially, the logic that you can secure it if you pay enough money probably became dominant. If there isn't enough, just import it. I think that is the most familiar sense of energy procurement for Japan.

However, an event occurred later that significantly changed that daily reality. That was Japan's 3/11. Following the accident at the Fukushima Daiichi Nuclear Power Plant during the Great East Japan Earthquake and the subsequent shutdown of nuclear plants in other regions, Japan's dependence on fossil fuels increased further. There were cases in 2011 and 2012 where the energy supply-demand situation became quite tight because energy alternatives could not keep up with replacing nuclear power. Even in recent years, there are concerns about tight power supply and demand in the East Japan jurisdiction. This becomes a problem for energy as a whole, specifically electrical energy.

Therefore, energy security was never that far away from us. It's just that it was expressed as power shortages or soaring electricity bills, and the media expressions changed for each situation, but in reality, these were all energy security issues.

Returning to the Middle East, we have had a long relationship with them, but for many people, that relationship is only recognized in terms of oil or gas. However, that situation does not seem like it will be stable forever. Furthermore, while the depletion of resources used to be the concern, the current situation involves the challenge of reducing greenhouse gas emissions and ultimately the grand goal of carbon neutrality, so the meaning of energy security from the perspective of Middle Eastern countries has changed from the past. I believe we are reaching a point where our expectations and way of engaging with them will also change.

While there may be differences in the approaches you have each researched, I feel that there isn't much difference in your thoughts regarding the concept of energy security.

So, I would like to have you speak about energy security from your respective positions, including historical perspectives. First, Mr. Shiratori, who specializes in Japan, please go ahead.

Energy is fundamental to both national management and our daily lives; if it is stable, there is no problem, but the moment it collapses, everything about national management changes. However, energy security generally only becomes a topic of conversation during a crisis. Consequently, I have the impression that there are far too many discussions in Japan that lack energy literacy.

I feel that since the time of the first oil crisis, both the media and the general public have gotten off on the wrong foot, and that has dragged on to the present. In Japan, when people talk about the oil crisis, for some reason, footage of people lining up to buy toilet paper on TV always comes up, and this is also a source of great misunderstanding. What covered Japanese society at that time was likely a fundamental sense of fear that oil might stop coming in.

However, if you ask whether that was the real problem, what had a greater impact afterward was price rather than quantity; the fact that crude oil prices rose all at once caused various problems. Despite this, many citizens and the media focus on the toilet paper shortage. From this stage, we have come all this way without energy literacy being understood.

As for why that happened, one reason is that Japan was a relatively wealthy country in the world, so it could afford to buy even if crude oil prices rose. Moreover, at that time, there was still room for energy conservation, and because the price mechanism worked, the demand for oil decreased. There was another peak in the 1990s, but even so, the peak for crude oil import volume was 1973.

The Japanese government had been aware since the late 1960s that the issue of energy resources and oil would become important as a diplomatic issue in the future.

The trigger for this was the Third Arab-Israeli War in 1967, when oil-producing countries used oil as a weapon. In other words, they tried to impose embargoes on countries that took Middle East policies close to Israel, but this ended in failure. At that time, the United States had surplus oil production capacity, so it supplied the oil.

However, from the late 1960s to the early 70s, America's surplus production capacity was rapidly lost. As a result, the power balance between oil-producing and consuming countries changed, and while it was thought a crisis would come someday, the first oil crisis arrived sooner than expected.

How was the Japanese government responding at that time?

It is often said that Japan "shifted" toward the Arab nations at that time. In reality, following the Security Council resolution after the Third Arab-Israeli War in 1967, Japan basically took a neutral policy favoring the Arab nations. However, at that time, it was a form that left some ambiguity out of consideration for Israel. In '73, Japan expressed a policy favoring Arab nations that was "clarified" without leaving ambiguity. However, reporting proceeded without much understanding of this background.

The issue of quantity is not solved just by cozying up to oil-producing countries. The crude oil price crisis was largely a matter of redistribution by the "Majors" who controlled the midstream distribution sector between upstream and downstream, but there was a significant gap between the reporting and general image in Japan and the actual state of the crisis. In fact, the oil crisis also occurred in Western European countries that were selling weapons to Arab nations.

After December '73, efforts for cooperation among consuming countries resumed, and Japan participated as a member of the major powers, joining the International Energy Agency (IEA) as a founding member. This was a strange arrangement where the IEA was placed under the umbrella of the OECD, but Japan played a considerable role in its establishment. However, even when the IEA was established, newspapers only carried a small article in a corner of the economy page.

At that time, Japan ranked first in the world in oil import volume and second only to the United States in consumption, and it was a period when Japan played various roles partly because its bargaining position was strong. However, I think the problem is that from the beginning, there has been a gap between what the Japanese government is doing and what attracts attention within Japan, and this situation continues to this day.

So there was a gap from the beginning.

Later, during the second oil crisis, I think what attracted political attention was the agreement on reducing crude oil consumption at the 5th G7 Tokyo Summit (1979). They agreed on a direction to reduce medium-term crude oil consumption in coordination with the G7.

There were many voices of concern domestically, but the price mechanism worked, and at the same time, energy conservation progressed. By the summer of that year, it became clear that oil consumption had decreased considerably, and even the lower limit of 6.3 million barrels per day agreed upon at the summit would not be a problem. As a result, Japan's oil consumption continued to decrease until 1985, the year of the agreement.

The next major event was the sharp drop in crude oil prices between 1985 and 1986, also known as the reverse oil shock. This resulted in further distancing interest from issues surrounding energy security. This is because it became taken for granted again that oil would be supplied inexpensively and stably.

This situation basically continued until the beginning of the 21st century. Then, from the early 2000s, when the full-scale rise of emerging countries including China was seen, an era of high energy prices began—that is how I see the flow.

My impression is that, as a result, Japan was able to maintain a somewhat consistent strategy until around 2010, but I have doubts about whether it did so intentionally.

One point is regarding nuclear power. Targets were always set, but in a situation where they were not reached, the numbers were manipulated to fit. Also, for natural gas, the volume ended up increasing in a disorganized way after 3/11. Furthermore, as the movement toward an energy shift strengthens now, quite unrealistic target values are being produced by fitting the numbers to that. I am strongly concerned about whether Japan's energy security can survive with this.

You spoke about the gap between public perception and reality in Japan's energy security field. I am very interested to see if this will improve after the invasion of Ukraine or when considering Japan's future energy security. Mr. Takehara, how about from China's perspective?

I will speak from the perspective of energy security as seen from China and China's energy strategy. China's energy strategy is often evaluated from Japan as being consistent or strategic, but I believe it is the result of repeated adjustments rather than being so consistent.

First, China has a lot of coal domestically, and its energy self-sufficiency rate used to be 90%, and it still maintains 80% today.

On the other hand, it imports large amounts of energy from overseas, but its partner countries are very diversified. For example, Japan's dependence on the Middle East for crude oil is currently over 90%, but China's dependence on the Middle East for crude oil is around 50-60%, with diversification progressing into Africa, Russia, and Latin America.

Japan's energy self-sufficiency rate, following the Energy White Paper and including nuclear power, was about 20% until 2011, but in addition to Middle East dependence, its procurement sources are also quite heavily biased. I sometimes find myself envying China in this regard.

However, China has also always had a high sense of crisis regarding energy security since its founding and has been revising its energy strategy. It adopted the reform and opening-up policy in the 80s and joined the WTO in 2001, and it has continued economic growth for the past 30 years or so. To support that growth, it first urged oil and natural gas production companies to increase production at any cost and sell at low prices.

As a result, oil fields became exhausted due to disordered development. This led to a deficit-prone structure and a lack of economic rationality. Even so, demand continued to grow rapidly, so China became a net importer of oil in 1995 and a net importer of natural gas in 2006. Now, its crude oil imports surpassed the U.S. in 2017 to become number one in the world, it is also number one in natural gas, and it competes with India for the top spot in coal imports.

So, the Chinese government turned away from the production-increase-at-all-costs approach in the late 90s, and since 2006, it has tried to break away from so-called "voracious consumption" by making energy conservation and environmental protection national policies.

While three state-owned oil companies control over 70% of oil and natural gas, for coal, there are many coal mines operated by township enterprises involving local governments in addition to state-owned coal companies. Such small-scale mines have many accidents and a high environmental burden, so policies to close them and suppress coal have been in place since the 2000s. However, whenever energy becomes scarce due to economic growth, they immediately return to coal, and the suppression policies fall apart. Coal mine accidents increased, and air pollution became serious.

China's energy consumption tripled from 1 billion tons to 3 billion tons in oil equivalent over the 20 years from 2000 to 2020. However, GDP must have grown tenfold during that time, and like Japan, China was gradually advancing its energy transition through energy conservation, electrification, and the transfer from coal to oil and natural gas, including the use of nuclear power.

2013 was a turning point for China, as PM2.5 became a social issue and air pollution eradication policies were issued one after another. Then, the shift to natural gas and renewable energy gained great momentum. In 2020, Xi Jinping declared that China would also achieve carbon neutrality by 2060.

It made a major turn toward decarbonization with policy goals such as the expansion of nuclear and renewable energy and emission reductions. However, after the Ukraine crisis, China's energy policy transition has returned to coal again. Ultimately, energy security relies on coal.

Japan has a very high dependence on the Middle East for oil and natural gas. Mr. Tanaka, please give us the Middle Eastern perspective.

There are several points of contention regarding energy related to the Middle East. One is that whether it is Iran, Iraq, or even Libya, so-called unstable regions, unstable nations, and unstable regimes are lined up on the supplier side. So-called geopolitical risks are not uncommon in the Middle East, with the Iran-Iraq War, the Gulf War, then the Afghan War, the Iraq War, and the Arab Spring.

I don't see the current Gaza issue as having a direct impact, but eyes are once again turning to the Israel-Palestine issue with the same framework as the 1973 conflict. We have continued to import crude oil from the Middle East while observing that it is always accompanied by such geopolitical instability and risk.

In cases other than the Middle East, Russia could have been a partner, especially for crude oil, but the invasion of Ukraine brought everything back to square one, and we have been forced into a situation where we have a record-high dependence on the Middle East of 95-96%.

The problem with the Middle East is not just that regimes are unstable or there are conflicts, but also whether they are predictable—in other words, there are concerns about regimes or governments suddenly changing policies.

After all, once a country becomes a rentier state (a country dependent on natural resources), it must always be nervous that the regime itself will face a crisis due to the depletion of resources or a drop or crash in prices, causing instability in the production system.

Therefore, Japan's traditional pattern has been to rely on long-term contracts to somehow soften that shock. Regarding crude oil, I think these long-term contracts have contributed to price and supply stability to some extent, but for LNG (liquefied natural gas), these long-term contracts can sometimes increase price rigidity. As a result, for example, the long-term LNG contract with Qatar could not be renewed as of December 2021. The mechanism for determining prices and the closed nature of the contracts were deemed very rigid and disadvantageous from the recipient's perspective.

We finalize contract details by looking at various changes on the Middle East side and the policies they consider best for their own national interests, but the contracts also affect prices and the volume to be taken, and a discrepancy arose with the partner there.

However, I believe the Middle East can no longer use oil as a weapon. With the talk of carbon neutrality and the impact of the shale revolution, which has made the United States the world's largest oil producer, the situation is completely different from the 1970s. I think that is the one thing that will not return to how it was then, but I believe our relationship with the Middle East is one that fluctuates while always being concerned about a certain kind of uncertainty and instability that the Middle East possesses.

The point Mr. Tanaka made at the end is very important. Something that everyone in the energy industry knows but is not understood by the general public is the situation surrounding oil.

Around the 70s, oil was overwhelmingly dominant. LNG finally started in '69 and expanded throughout the 70s, and nuclear power also increased in earnest in the 70s, but from there, the importance of oil gradually declined, and global markets, including futures trading, were established.

It has been a long time since we entered an era where the market determines prices. This means that it's not just about getting along with oil-producing countries; how we think about the market is important. This is common sense in the energy industry, but it is not well understood.

Currently, there is no situation where the supply of oil itself immediately becomes an issue in international politics or a major challenge for Japanese diplomacy. Of course, there is an impact if prices rise, but oil has progressed toward commoditization to some extent, and it is actually natural gas that has a larger impact.

Despite the growing problem of natural gas, I feel a sense of incongruity as to why the reporting always goes "oil, oil."

Exactly. Whenever there is talk of a crisis in the media, it always becomes a question of "Is there enough oil?" But Japan now has about 250 days' worth of crude oil stockpiles between the public and private sectors, and since 3/11, product stockpiling has also progressed, so there is nothing that will cause immediate trouble. Furthermore, oil products for power generation have almost nothing to do with the mainland, setting aside remote islands. In other words, the uses for the crude oil we consume are primarily transportation fuel and plastic products.

That kind of literacy is simply lacking in the general public. That's why they immediately set up questions like "Is there enough oil?" because it sounds familiar to many people. In particular, the sense of how much the procurement price of LNG is affecting power generation is extremely thin.

Including politicians, there may be many people who still have the 1970s sense that energy equals oil. I think the "getting off on the wrong foot" during the first oil crisis is exactly that, but perhaps it's because those who were pushed around by the toilet paper panic as a formative experience are now in top positions that this happens.

I also go around denying it from time to time, but the current situation is that it is still repeated.

Next, I would like to ask you to point out any important trends in energy security up until the mid-2010s, before the invasion of Ukraine occurred.

I think if we consider energy, the issue of the energy shift has a larger medium- to long-term impact than the invasion of Ukraine.

Around when should we consider the energy shift to have started?

You could say it started around the signing of the Kyoto Protocol (1997), or you could say from the adoption of the Paris Agreement (2015), but issues surrounding climate change became an important theme in international politics, and they began to have a fairly direct impact on the actual energy policies of each country shortly before Russia's invasion of Ukraine.

The 2015 Paris Agreement is indeed very significant, and it has moved further with the United States returning to the protocol under the Biden administration. Then, in October 2020, Japan declared that it aims to be carbon neutral by 2050.

I think the energy shift went through several stages. First, from the oil shocks in the 70s, a shift toward things like nuclear power occurred. But energy security at that time was still looking at the Middle East.

Afterward, China emerged as a consuming country and attracted attention from the perspective of energy security. In the 2010s, the shale revolution occurred in the U.S., and the U.S. became an exporter of oil and gas. And after the Paris Agreement, from around the time of the pandemic, although there are regional differences, the transition to clean energy has become a major global trend.

I agree. Each element is slightly different, but I feel the structure changed at those timings.

In Japan, the highest demand for oil in recent years was around 1995. The volume then was 4.7 million barrels per day, but now it has dropped to about 2.7 million barrels per day. With the appearance of hybrid cars like the Prius, fuel efficiency has improved dramatically, and Japan's energy consumption—at least the oil consumption structure—has changed significantly.

Also, if we look at the fluctuation range of global primary energy demand, until before World War II, the fluctuations were intense, rising or falling by more than 10% compared to the previous year, but after the war, it stayed within a range of about 10%. Moreover, it almost never swung into the negative and basically moved mostly in the positive territory.

However, in 2020, it recorded a drop of over 4%. We haven't fully processed the COVID shock yet, but I have the impression that a new era was marked there in the world of energy as well.

Also, in Japan's case, regardless of how much it was intended, after 3/11, it was significant that renewable energy was advanced all at once through the Feed-in Tariff system, centered on solar power. As a result, Japan is now a world leader in terms of installed solar power capacity per unit of land area.

Even so, it only contributes about 5% of total energy demand, and it's reaching a point where there's no more room, but in that sense, Japan has a side of having made advanced investments unintentionally.

Around what year did China's major growth in energy demand begin?

From around 2000 to 2010, there was a period when a mood was created that China's demand would grow forever. For the supply side like the Middle East, it was very happy, and it was an era where the needs of the demand and supply sides matched, and supply and demand were heading toward stability.

However, China's demand changed after the start of the Xi Jinping administration around 2013. Meanwhile, India's demand growth is seen as not being as powerful as expected. It feels like we are entering a new era as the shift to clean energy progresses.

So, the 2000s was a rosy era where so-called emerging economies appeared and energy demand increased, but things began to change as we entered the 2010s?

In addition, the Middle East could no longer remain peaceful because the rapid growth of U.S. shale oil and gas supplies caused OPEC's status to begin to decline. One could argue that one reason for the current instability in the Middle East is the emergence of a mood where the U.S. felt it could manage on its own without paying much attention to the Middle East.

I pointed out at the beginning that geopolitical risks in the Middle East are high, but for all that, over the last 20 years or so, the Middle East has not been a factor in causing crude oil markets to skyrocket significantly. Even if prices rise momentarily, there is no sustainability, and the cycle of returning to original levels or, at worst, falling even further has been repeated.

That is why OPEC is now desperately trying to support prices by coordinating production cuts with Russia under the "OPEC Plus" framework. As Mr. Takehara mentioned, what is clearly involved here is demand from China.

The factor of Chinese demand has become a kind of reverse geopolitical risk, and energy prices move depending on how this changes. Until now, attention was focused on geopolitical risks on the supplier side, but looking at the last 20 years or so, reverse geopolitical risks on the side of emerging countries, led by China, have been driving the market.

How much of an impact did the U.S. shale revolution have on the Middle East?

The important thing is that the U.S. became a net energy exporter.

By returning to that status in 2019, an atmosphere emerged where people wondered if the U.S. no longer needed the Middle East, or if U.S. voters would no longer support policies where the U.S. looks after the Middle East. This is just an atmosphere, but everyone at home and abroad believes it. Neither the people on the side of the oil-producing countries nor American society takes it seriously, no matter how much the U.S. administration messages that it "remains committed to the Middle East." The Middle East side can no longer accept the U.S. presence as a given as they once did.

Therefore, they are moving in the direction of forming partnerships with China and Russia, or creating frameworks to prevent disputes between regional countries. We simply don't know where the exit is. At the very least, the desire to work with the U.S. as in the past has weakened in the current situation.

Regarding energy, there is a sense that U.S. hegemony has been restored by the shale revolution. The U.S. was once an overwhelming oil power, but for about 50 years, it was resigned to being a net importer. I think the fact that it has returned to that status is significant.

The degree to which the U.S. needs the Middle East has decreased, and in fact, there are aspects of it trying to pull out of the Middle East, as seen in the withdrawal from Afghanistan. In this context, Middle Eastern countries are looking toward Russia and China. While it is true that the U.S. has become self-sufficient in the energy sector, I feel that the U.S. position in the Middle East has become considerably weaker compared to the past.

In terms of medium- to long-term trends, the influence of not only the U.S. but also the G7 countries has gradually weakened since the beginning of this century, while the influence of emerging countries, led by China, has steadily increased. This is exactly the same for energy, and one cannot help but think that the formation of OPEC Plus in 2016 has had various impacts since then.

For example, when Russia invaded Ukraine, I cannot believe that having a certain amount of influence over prices through OPEC Plus did not play a role. I think it is fair to say that the existence of OPEC Plus is helping Russia directly, rather than indirectly.

I am curious to hear how everyone observes OPEC Plus.

It is very much a give-and-take relationship. Within OPEC Plus, Saudi Arabia is very close to Russia and is increasing its purchases of heavy oil from Russia. The G7 imposed sanctions on imports of Russian crude oil and petroleum products, but behind the scenes, Saudi Arabia—which is essentially a U.S. ally—is buying a lot of heavy oil from Russia, especially during the summer. It was said that Saudi Arabia could not cut production no matter how much prices fell in the summer, but now they are able to cut their own oil production.

Since Russia is having trouble finding buyers for its petroleum products, including heavy oil, the fact that Saudi Arabia is taking them off their hands is truly a give-and-take. It is not just about adjusting production to support prices; it has become a structure that creates a win-win situation by mutually providing what each other wants, which is something we haven't seen before.

So the beginning of OPEC Plus reflects changes in international politics in the energy sector.

As emerging countries rise and it becomes clear that the G7 alone cannot manage, the G20 Summit began, but it does not function sufficiently, at least.

In this context, international politics considers how to get rising emerging countries to behave responsibly, but emerging countries create various frameworks to secure their own interests. OPEC Plus is one of them, and I have the impression that it has also revitalized OPEC itself.

I feel it is one of the multipolar frameworks that happened to work well. There are other frameworks like BRICS or the Shanghai Cooperation Organization where it's not quite clear what they are doing. Among them, I think OPEC Plus is certainly producing interesting effects.

Amidst trends like the rise of emerging countries, the energy shift, and the shale revolution in the 2000s and 2010s, Russia's invasion of Ukraine occurred. How will this affect energy security? I would like you to point out recent trends, including not only the Ukraine war but also the subsequent Israel-Gaza war.

I think the developments since the invasion of Ukraine have been a godsend for the Middle East. Amid the trend toward decarbonization, Middle Eastern hydrocarbon resources had the potential to become stranded assets. However, with the West introducing sanctions against Russia, eyes have suddenly turned back to the resource volumes and production capacity of the Middle East, and they have been revitalized.

This is not just about becoming more energetic; it is also a kind of reconstruction of confidence. In the current conflict between Hamas and Israel, the fact that Qatar is actively acting as a mediator for the release of hostages is also a sign that they have regained momentum on the diplomatic international stage.

Whether it is Qatar or Oman attempting mediation between the U.S. and Iran, or countries like Turkey—which is not an oil producer—being able to deal with Russia, there is no doubt that the Middle East has become more energetic.

Of course, their biggest concern is not wanting to be dragged into the conflict, so no country is joining the sanctions against Russia. That is why Saudi Arabia can continue to import heavy oil.

For the Middle East, there is another field where dependence on Russia was strengthening: nuclear energy. In terms of the introduction of nuclear power plants, three countries—Turkey, Egypt, and Iran—are either building Russian-made ones or have already introduced them. The possibility of Saudi Arabia introducing them in the future is not zero.

In many ways, Russia's presence and involvement in the energy sector is expected to grow even larger in the Middle East in the future. Under these circumstances, they will likely consider how Middle Eastern countries should respond to the Ukraine conflict and make political decisions.

On the other hand, Middle Eastern countries themselves remain rentier states, so they still harbor the vulnerability of how to handle internal problems.

In this way, we must fully recognize that the Middle East stands in a different position from us regarding sanctions against Russia.

What kind of impact does the Gaza issue have?

The Gaza issue has not had much to do with energy so far. One of the gas fields in the Eastern Mediterranean that Israel is already operating, the Tamar gas field, had stopped operations immediately after the October 7 attack, but it resumed just the other day. As a result, surplus gas goes from Israel to Egypt and is exported mainly to the Mediterranean using Egypt's LNG terminals, which had become idle facilities.

As you say, the impact of the Gaza issue on energy is limited; in particular, it was proven that supply sources for oil can be adjusted following the invasion of Ukraine. Since crude oil is basically a single-price commodity, if Europe does not use Russian crude, it flows to India and China. Although there was some disruption in shipping, the market proved to be balanced as crude oil was supplied where needed, including the arrangement of tankers.

However, gas was a different story. Simply put, Europe scrambled to collect gas from around the world at great expense because it could not procure it from Russia. As a result, natural gas prices skyrocketed from $8 to $100 per BTU (Million British Thermal Units). A gas price of $100 is equivalent to $600 for crude oil. Since the all-time high for crude oil prices is around $150, that is a staggering price.

Electricity rates in Japan rose by about 30% due in part to the weak yen, but Japan, which had secured procurement through long-term contracts, got away with just that much. However, Europe has advanced marketization and liberalization, so when gas imports from Russia decreased, they had to procure large amounts of gas on the market. EU electricity rates rose by 50%, and in Italy, they reportedly tripled.

Gas prices were reflected in European electricity rates in that way, but countries like India and Pakistan fell into situations where they couldn't buy the necessary gas and had no choice but to use coal or face power outages. Under these circumstances, some in the energy industry believe that Europe has reversed the trend of decarbonization.

Japan has consistently been a resource-poor country since the energy revolution from coal to oil. Unfortunately, there is no prospect of that changing for the time being.

Regarding renewable energy, suitable sites for solar power using conventional technology are limited, and for offshore wind, shallow coastal areas are also limited. Therefore, considering economic efficiency, impacts on various environments, and stable supply, the reality is that it is difficult to dramatically increase the amount introduced. Similarly, for next-generation energy sources such as hydrogen and ammonia, the situation remains that we have no choice but to bring them from abroad in the end.

This was clear even before the invasion of Ukraine. Despite being a resource-poor country, Japan also declared its commitment to carbon neutrality in 2020 as part of its efforts toward an energy shift. My view is that we need to understand that the Russian invasion of Ukraine occurred on top of the extremely difficult situation of this double burden: "resource-poor country + energy shift."

However, I think the impact of the Russian invasion of Ukraine on energy-related matters is largely indirect. Because of the sanctions imposed by the G7, conventional policies had to be revised, and oil imports and the like were stopped.

Providing fuel subsidies while aiming for an energy shift is a contradictory policy. The rise in oil and gas prices had begun a little before the invasion of Ukraine. When subsidies were introduced, the Russian invasion of Ukraine happened immediately, and the reality is that the timing to stop them was missed. I think the impact of continuing a policy that was not originally intended to be long-term due to the invasion of Ukraine will be quite significant in the medium to long term.

As for direct energy talk, I think the emergence of a new policy issue regarding how to view dependence on Russia is significant. Currently, oil imports have stopped, and natural gas imports account for just under 10%. There were people who argued from the beginning that we should not depend on Russia, but people in the energy industry saw Russia as a reliable supplier. In a situation where dependence on the Middle East was extremely high, the logic was that depending on Russia would enhance Japan's energy security from the perspective of diversifying and dispersing supply sources. However, that has completely reversed.

Even now, in the short term, stopping natural gas from Russia would have a huge impact, but at the very least, while this war continues and the Putin administration remains, a policy that deepens dependence on Russia further should be impossible to take.

If that is the case, then the question of how to ensure Japan's energy security is being asked once again.

Adding a word from the perspective of energy security rather than the energy industry, rather than saying Russian energy is reliable, its convenience—arriving in two or three days—is highly valued.

As was the case with 3/11, when something happens, energy that takes 20 days to arrive is completely different from energy that arrives in 3 days, so I still believe that Russian energy was effective for security.

Regarding the rise in oil prices, in recent years, the oil price itself has not swung upward that extremely. Nominally, it rises to about $90, and when it's low, it moves in the $60 range. Therefore, the soaring gasoline prices that consumers feel in Japan today are more due to the impact of the weak yen than the impact of oil prices.

Regarding ammonia and hydrogen as next-generation energy mentioned by Mr. Shiratori, I understand the policy of expanding these under GX (Green Transformation). However, what appalled me when reading the three security documents was that, whether it is blue ammonia or blue hydrogen, the focus is ultimately on importing next-generation energy carriers from abroad. This means there is a high probability of continuing to import from the Middle East. From a security perspective, this is a very concerning part.

Of course, we are trying to advance partnerships with the Middle East in various technical ways, but even if we stop using oil, Japan will ultimately continue its dependence on the Middle East as usual. Thus, we will enter a new era of energy without ever fulfilling the slogan of "moving away from the Middle East" that has been discussed for a long time. I wondered if this point could have been considered in parallel with GX.

At the same time, this means that long sea lanes will remain as they are, so for preparation, we will naturally end up relying on the U.S., and the energy self-sufficiency rate will never rise. I sometimes worry about where Japan's energy policy is headed.

I also hoped that Japan could provide its own green hydrogen derived from renewable energy, like China and India, but it seems the cost of renewable energy power generation in Japan is too high. For example, gasoline prices are currently around 160 yen per liter with subsidies, but I hear that if synthetic fuel were made from domestic hydrogen or ammonia and sold at gas stations, it would be around 600 or 700 yen. This is not a price acceptable to consumers, and there are limits to government subsidies.

On the other hand, since raw material costs are low in the Middle East and the U.S., the reality is that even if transported by ship, the manufacturing cost is unfortunately lower than that of Japan's domestic hydrogen or ammonia.

There is talk among energy industry insiders that if preferential measures were taken, such as reviewing gasoline and diesel taxes or fully exempting the renewable energy surcharge (Renewable Energy Power Generation Promotion Surcharge) for using hydrogen or ammonia, a path would remain for Japan's green hydrogen. However, with renewable energy used while the current surcharge is still attached, only hydrogen and ammonia at unrealistic prices will enter the market. Therefore, I understand that energy policy has no choice but to take the somewhat sad but realistic policy of having to import from overseas.

Listening to what you've said, Japan will continue to be an energy-poor country. And it will continue to depend on overseas sources.

A very tough reality is before us, but finally, given the various constraints, what directions are there for Japan's future energy security policy?

I think we should clearly present the figures on how much the public is burdened by energy-related costs, including subsidies, and have a discussion.

Fuel subsidies for gasoline and other fuels serve as a policy message saying, "Please use more fossil fuels." In other words, it's a message that says you don't have to make the energy shift. Despite this, on the other hand, we say we will make the energy shift and impose renewable energy surcharges on the public. This is like stepping on the accelerator and the brake at the same time. Therefore, the public is bearing a huge burden without really understanding it, but this is not understood, and there is no policy consistency.

The fact that various costs are being paid, yet decisions are being made without a national debate, is a very big problem. Energy literacy as a premise is also insufficient. In a situation where politics immediately shells out money when gasoline prices soar, I wonder if we can really transition to an energy policy that does things like hydrogen with renewable energy.

The second point is how to maintain continuous interest. Regarding oil, it should be possible to do things like further increasing stockpiles when crude oil prices fall. We must not repeat the cycle where money stops being allocated once the energy crisis passes and prices fall.

And finally, Japan will continue to be a resource-poor country, and its energy self-sufficiency rate is exceptionally low even among the world's major countries. This means that energy issues must be considered as international issues.

Since this structure will not change anytime soon, we need to be aware that a situation where the world is as stable as possible and international markets are maintained is directly linked to Japan's prosperity, and Japan needs to be involved in the maintenance and management of the international order. I want to convey the message that Japan's position regarding energy lies at the root of a broader foreign policy.

As the energy shift progresses, I think a new way of interacting with resource-rich countries like those in the Middle East is becoming necessary. Even if energy resources are no longer just oil and gas, Japan will ultimately have to depend on overseas sources.

The supply side also has concerns, such as how to make energy clean and low-emission, rather than just saying it's fine as long as they are paid as in the past. Meanwhile, there is the reality that Japan's bargaining power is declining.

However, I think we can become a consuming country as a top runner in new energy by utilizing our existing knowledge, so I think it is important to build new energy diplomacy and partnerships with the resource-rich side.

Also, I believe we should make effective use of our existing energy resources and facilities, including nuclear power. While cherishing what we have now, I hope a flow can be created to make a realistic transition to new resources.

I have two points. One is a fundamental point: balance is important for energy, and since various masses and amounts of heat are conserved physically and chemically, in the end, there is no energy that has only merits. Emissions and radioactive waste are always generated, so if you pursue one thing excessively, the entire structure will collapse. Based on the fact that it is built on such a balance, my view is that it is better not to chase the dream of "dream energy" too much.

Following that, the second point is that currently, the Ministry of Economy, Trade and Industry uses the term "S plus 3E" (Safety, Energy Security, Economic Efficiency, Environment) in its macro policy. Originally there were only 3Es, but S was added after the Fukushima Daiichi nuclear power plant accident.

I have no objection to it starting from 3E, but it has been used for a very long time. During that time, the introduction of renewable energy has begun, and we have to consider and adjust for more diverse aspects. I want to ask if "S plus 3E" alone is sufficient.

So, I am proposing something called "4SA2E." These are Safety, Security, Stability, Sustainability, Affordability, Efficiency, and Environment. I think macro energy policy today cannot be properly managed unless these are included. This hasn't been taken seriously domestically yet, though (laughs).

It might be a bit long (laughs). But I think they are all necessary elements, adding the concepts of the IEA and Japan.

I learned a lot from hearing your valuable stories today. I believe that by having many readers read this roundtable discussion article and learn about the importance of energy security and new trends, and then having them think about the direction Japan should aim for, the level of Japan's energy security will rise.

Also, I felt that I would like those of you who came today to continue to share your views and become the driving force for improving the quality of Japan's energy security policy. Thank you very much for your time today.