Salman’s Japan visit will have deep impact
With the Japanese economy so reliant on Middle Eastern oil and gas, promoting stability in the kingdom and its neighbourhood will only help serve Tokyo’s interests better
s the first Saudi monarch to visit Japan since 1971, King Salman Bin Abdul Aziz’s trip to Tokyo this month signalled the kingdom’s deepening interest in Japan as a strategic partner. During the fourth leg of King Salman’s ongoing Asia tour, he met the Emperor of Japan — who awarded him the Daisy High Medal at a reception held in the Imperial Palace in Tokyo — and Prime Minister Shinzo Abe. The monarch’s visit was built on the trip that Deputy Crown Prince Mohammad Bin Salman made to Tokyo last September in pursuit of stronger Saudi-Japanese relations. During King Salman’s recent visit, officials of both governments discussed growing strategic cooperation and deepening economic links across a range of sectors, from energy to finance and health to infrastructure, as well as trans-regional security crises. Abe pursued the king’s support for placing Saudi Aramco on the Tokyo Stock Exchange. Both governments committed to launching a joint study on establishing economic zones in the kingdom to lure more Japanese investment by loosening regulations.
Indeed, Saudi Arabia and Japan have a special relationship dating back several decades. Japan’s prosperity has long depended on the Middle East. As its top oil seller, Saudi Arabia, and its prospects for long-term stability, are important to Japan, which imports the majority of its oil from the Gulf Cooperation Council (GCC). As the kingdom’s second top export partner, Japan has come to play a pivotal role in Saudi Arabia’s ‘Look East’ economic pivot, which the late King Abdullah had initiated in the mid-2000s.
Japan represents opportunities for Saudi Arabia’s non-oil exports, which have increased in recent years with the support of joint ventures between Saudi Basic Industries Corporation, Japan’s Mitsubishi Group and other big-name firms. Riyadh is also eyeing Japan for foreign investment and, unquestionably, Vision 2030’s success depends on it. To secure investment from abroad, the Saudis seek to make all the wealthy countries across the world stakeholders in the kingdom’s economic transformation. Although Saudi Arabia is busy pursuing cooperation from financial and high-tech giants in America, Riyadh is also looking to Japan and other industrialised Asian countries. On King Salman’s third day in Japan, the monarch attended the Saudi-Japanese Vision 2030 business forum, which is designed to deepen relations between the two countries.
Japanese support for the development of Saudi Arabia’s non-oil sectors came as early as 2007 with the establishment of the Japan-Saudi Arabia Industrial Cooperation Task Force, aimed at diversifying industrial development, along with memorandums of understanding (MoUs) signed by both governments to deepen cooperation and increase investment in small and mediumsized enterprises. Bilateral relations had a historic opening in 2014 when King Salman (as the then-Crown Prince) visited Tokyo, where he and the Japanese leaders signed three agreements and an MoU between the Saudi Arabian General Investment Authority and Japan’s Cooperation Centre for the Middle East. Since then, both countries have discussed potential plans for civil nuclear cooperation.
Important partner
Since March 2015, the Japan Bank for International Cooperation has signed loan agreements collectively worth more than $1.5 billion (Dh5.51 billion) with Saudi Methacrylates Company and Eastern Petrochemical Company. The Japan External Trade Organisation and the Ministry of Economy, Trade and Industry are also playing key roles in Tokyo’s approach to assessing opportunities in the kingdom. In October, the Saudis and Japanese announced a “SoftBank Vision Fund” technology investment pool to be funded by the Public Investment Fund (Saudi Arabia’s largest sovereign wealth fund) and initially bankrolled by Japan’s SoftBank, underscoring Tokyo’s view of the kingdom as an important partner.
Despite Japan’s role in the Middle East being quite passive, Tokyo has become a major stakeholder in the region’s future largely due to its need to secure a steady flow of oil and natural gas. In recent years, due to the Fukushima disaster of 2011 and the imposition of sanctions on Iran, Japan has become increasingly reliant on Saudi Arabia and other Arab Gulf states for its consumption of hydrocarbon resources.
Saudi Arabia, meanwhile, has maintained an image of a regional anchor of stability since the uprisings of 2011 destabilised other Middle Eastern nations. Yet, the terrorism of Daesh (the self-proclaimed Islamic State of Iraq and the Levant), missile attacks from Yemen, sectarian unrest, youth unemployment, housing and demographic challenges, displays of political opposition and dire economic ills stemming from cheap oil have complicated prospects for long-term stability in the kingdom. Saudi rulers are deeply interested in the diversification of the kingdom’s economy and securing Japanese investment for Vision 2030.
The Saudis and Japanese have much to gain from deeper ties. Ultimately, with Japan’s economy so reliant on Middle Eastern oil and gas, promoting stability in the kingdom and its neighbours will serve Japan’s national interests. King Salman’s historic visit to Japan will further solidify Riyadh and Tokyo’s maturing partnership.
Giorgio Cafiero is the CEO of Gulf State Analytics (@GulfStateAnalyt), a Washington, DC-based geopolitical risk consultancy.