A leading Japanese economist has informed EIR that the Obama sanctions imposed on Russia in 2014 following the Obama-run coup against the elected government of Ukraine, had the additional impact of undermining the dramatic development plans which were being worked out between Japan and Russia. Daisuke Kotegawa, a former leading official in the Ministry of Finance and Japan’s former Executive Director at the IMF, explained the circumstances.
Prime Minister Shinzo Abe and President Vladimir Putin were in close collaboration during the years leading up to 2014, to find a resolution to the sticky problem of sovereignty over the Kuril Islands/Northern Territories, with the view that once this was resolved, major Japanese investments could be undertaken in the Russian Far East and Sakhalin Island, as well as the Kurils. Kotegawa listed eight areas for major joint development: medical and disease control; urban environment and waste management; SME cooperation; energy, including exploration off the Sakhalin coast; industrial diversification and productivity improvement with Japanese JBIC
Loans for Japanese machine tool manufacturers in Russia; greenhouse vegetable development and other agricultural investments; IT cooperation; and people-to-people exchanges, universities and tourism.
Kotegawa then explained what happened following the Maidan coup in February and the imposition of U.S. sanctions on Russia: President Obama visited Tokyo on April 23-25, 2014. On April 23, he had a dinner meeting at the most famous Sushi restaurant “Jiro” with Prime Minister Abe Shinzo. After the dinner, Abe was asked by Japanese journalists if he enjoyed the sushi. Unlike other occasions, Abe said, in a bad temper, that he could not enjoy the dinner because he was completely occupied with business talks. What unraveled later was as follows:
(1) Both sides were represented by three people each; in addition to Obama and Abe, ambassadors of each country (Caroline Kennedy for the U.S.), and national security advisors, for the U.S. Susan Rice and for Japan Shotaro Yachi.
(2) President Obama did not eat sushi nor speak. It was Susan Rice that kept pressuring PM Abe to introduce economic sanctions on Russia, despite the fact that Japan had already contemplated its own sanctions on anonymous Russian individuals and companies that seemed to have been directly involved in the so-called annexation of Crimea.
(3) As a result, Japan announced an additional economic sanction on Russia which included certain numbers of Russian financial companies.
(4) By including a kind of financial sanctions as described above, three Japanese “mega” banks which have extensive operations in New York and London in order to be involved in U.S. dollar trading, came under huge pressure to stay very careful about any transactions which involved Russian companies. They are afraid that U.S. authorities will unilaterally condemn a specific operation related to Russian companies as a violation of sanctions and penalize them. Under such a case, it would be very difficult for them to challenge legally. So, they have become very cautious in even opening up a bank account which would be used by Japanese companies in their business with Russian companies, though not related to any business in Crimea.
Accordingly, regardless of many identified promising projects in the eight areas, actual development of projects has been very slow. It is true that companies involved can avoid problems if they agree not to use the U.S. dollar as the currency for settlement. However, companies in Japan and Russia still maintain their preference for the use of U.S. dollars. How long will such an attitude be sustained? That, Mr. Kotegawa does not know.
