Newsletter No. 15
June 16, 2005

 

ARABIAN OIL COMPANY SIGNS CONTRACT WITH IRAQI OIL MINISTRY

The Nihon Keizai Shinbun has broken a story on Japan’s first major business deal with postwar Iraq. Japan’s Arabian Oil Company, yesterday morning signed a contract with Iraq’s Oil Ministry to conduct oil field surveys and to upgrade oil and shipping facilities in southern Iraq. The exact plan is still to be worked out between the two parties, but it will include such matters as repairing equipment, building oil tanks, repairing pipelines, and expanding port facilities. Additionally, Iraqi engineers will be brought to Japan for training. Work will begin in earnest during the course of 2006.

As many of you know, the Arabian Oil Company (AOC) lost its concession over the Khafji oil field in 2000, and has therefore not been on the spot in West Asia since that time. Apparently AOC has judged that Iraq offers them their best hope to become a serious player in the region once again. Readers of Shingetsu Newsletter No. 9 will also realize that, just a week ago, the Japanese NGO-related concern Systems International Group (SIG) was granted an oil concession by the Sudanese government. This certainly indicates that June 2005 will stand as a key month for Japan’s reentry into the Arab oil market.

Reflecting on the significance of these two deals, several thoughts occur to me. First of all, both deals were built upon the back of Japan’s aid activities in the region. The SIG deal arose from the Sudanese government’s gratitude for the humanitarian work done by the Japanese NGO Reliance. Similarly, the AOC deal is clearly a product of the SDF mission to Samawa and, one might even suggest, a legacy of Okamoto diplomacy (that is, Yukio Okamoto). Clearly, Japan’s policies of delivering aid to needy countries also may contain the seeds of future business deals.

On the other hand, certain risks can be perceived as well. If more Japanese engineers are on the ground in remote places like eastern Sudan and southern Iraq, there is potential for more hostage incidents and other such crises. Also, Japan faces a potential problem if the perception begins to arise that it is cashing in on the misery of less-fortunate countries.

In the case of Iraq the possible scenarios for trouble are many. For example, if the American public should demand a pullout of US forces from Iraq in the near future (as they are increasingly telling pollsters that they want), and if the leaders of the current Sunni insurgency should therefore ride back into substantial power in future years, then the AOC and even MOFA may find themselves in a rather tight situation of their own making. The point I’m making here is that Japan is probably making a more risky gamble here than they probably even realize. In fact, I would bet that the very idea that the US might possibly lose the political fight in Iraq hasn’t even occurred to them.

In other Iraq-related news, the Nikkei is also reporting that Japan will announce in Brussels on the 22nd a policy of allowing Iraq to take out new loans from Japan for the first time since 1985. These loans will probably be used for construction of water purification plants and electric power plants.

The Mainichi reports that from the 17th to the 22nd there will be seminar held somewhere in Tokyo where Japanese and Iraqis will meet and discuss constitutionalism and democracy-building. Among the topics to be discussed are Japan’s postwar constitutional experience and Iraq’s ideas about a constitution based on Islamic law.

Finally, on the 12th, MOFA announced information about a ceremony regarding the Japanese donation of medical equipment to a hospital in Samawa.

 

Sources:

Maeda, Eiji, “17-nichi kara Shien Seminaa (A Support Seminar from the 17th),” Mainichi Shinbun, June 15, 2005.

Nihon Keizai Shinbun, “Arabia Sekiyu—Iraku to Gijutsu Kyoryoku—Yudan Chosa ya Yushutsu Setsubi de Sekiyu Kaihatsu Sannyu ni Fuseki (The Arabian Oil Company: Engineering Cooperation with Iraq: The Opening Moves Toward Participation in Oil Development Based on Oil Surveys and Export Equipment),” Nihon Keizai Shinbun, June 15, 2005.

Nihon Keizai Shinbun, “Iraku Enshakkan—‘Rainendo ni mo Saikai’ Hyomei e—Machimura Gaisho Shien Kaigi de 4000 okuen, Fukko no Juten (Iraq Yen Loans for Next Year Too Will Be Announced: Foreign Minister Machimura Will Announce 400 Billion Yen for Reconstruction),” Nihon Keizai Shinbun, June 15, 2005.