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Russia – Japan: current status of economic relations

and future developmentsTimonina Irina

Professor of EconomicsRussian Presidential Academy

of National Economy and Public Administration (RANEPA)

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Working hypothesis. Japan and Russia are not core

economic partners for each other

0

1

2

3

4

5

0.8 1.11.5

2.1

0.600000000000001

1.1 1.4 1.6 1.5 1.31.2 1.2

1.71.8

1.6

2.3 2.22.4 2.8 3.1

The share of Russia in foreign trade of Japan (%)

ImportExport

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2004 2005 2006 2007 2008 2009 2010 2011 2012 20130

1

2

3

4

5

6

7

8

9

10

1.91.5 1.5

2.2 2.2 2.4

3.22.8 3

3.7

5.25.9 5.7

6.4

7

4.34.5 4.9

5 4.3

The share of Japan in foreign trade of Russia (%)

ImportExport

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Between Japan and

Russia 0, 83

Between Russia

and Japan0,84

The trade intensity index 2013

1

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“Archaic” model of mutual

complementarily

Level of mutual complementarily

within inter-company

relations

Structure of Russian-Japanese

trade

From Russia to Japan

mineral fuel and metals

(90%). From Japan to Russia vehicles,

general engineering electronics

(83%)

What influences the trade turnover?

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Investments: Current situation

20052006200720082009201020112012201320140

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

0.21

0.320000000000001

0.13

0.23

0.52

0.610000000000001

0.310000000000001

0.620000000000001

0.330000000000001

0.240.04

0.06

0.07

0.1

0.13

0.15

0.18

0.26

0.22

0.14

The share of Russia in Japan's Total Outward FDI

(end of FY, %)

Stock (International Investment position)FDI flow (Based on Balance of Payments, net)

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Agriculture, hunting and

forestry (7,5)

Production of vehicles and equipment

(16,1)

Mining and quarrying of

energy minerals (13,4)

Japan's Share (%)

Mining (10,2)

The priority areas of the Japanese investments in the Russian economy (2013)

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What are the prospects?Let’s listen to the voice of the Japanese companies themselves…

Survey of JETRO 2015

In 2014 53,2% of companies

reported an operating profit

and forecast that they would

improve upon theirperformance in 2015

Reasons for forecasting an“Increase” in 2015 operating

profits at Russian market(multiple answers)

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And challenges…

Survey of JETRO 2015

Those Japanese companies,

which decided to locateproduction facilities inRussia see the

followingchallenges for theiroperations

Challenges in terms ofproduction (manufacturingindustries only) (Multiple answers)

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Current risks and challenges

Survey of JETRO 2015

The most dramatic change in estimates in :

78% vs. 48% (in prior year) of respondents cited currency volatility as a high risk for their business

Political instability was mentioned by 79% vs. 48% (in prior year)

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In 2014 Rosneft has invited Japanese partners to participate in 3 projects: “Far East LNG" Eastern petrochemical company (petrochemical complex at

Primorye territory). Creation of a shipbuilding cluster in the far East to support

offshore oil production.

Yamal LNG project: Japanese companies received major subcontracts. Major investors of the projects are independent Russian gas company Novatek (60%), Total, France (20%) and CNPC, China (20%)

Where is Japan/Russia active in Asia-Pacific

energy/trade/investment arenas?

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… the dialogue in the energy area can radically change the level of partnership between Russia and Japan…

“in our case, when we mention the word energy bridge we are speaking not only about the primary energy resources supplies. We take into account oil, oil products, LNG and other resources supplies, counter deliveries of machinery and also assets swap. This is the kind of energy bridge I see many perspectives in, this kind of dialogue can offer possibilities for the development of our corporate cooperation. Such a bridge assumes a fundamental interdependence of energy systems and economies of both countries, de-facto it will form the basis for a strategic partnership between the countries” © Timonina

Igor Sechin: key speech at the conference “Energy bridge Russia – Japan”

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Cooperation between Russia and Japan is developing on “case by case” basis in following spheres:

Infrastructural systems. Localization of production in certain spheresR&DAgriculture.

Is energy/trade/investment an area that is ripe for greater bilateral or broader multilateral cooperation? Why or why not?

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The importance of economic relations between Russia and Japan should not be measured only by statistical data …

Generally, figures, which reflect trade and investment relations between Russia and Japan, are

constantly insignificant

There is no clear connection

between sanctions and the scale of cooperation.

For both Russia and Japan the issue of diversification of external economic relations is becoming one of the priorities especially in energy sector

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