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Japan to impose ban on Russian coal imports following G-7 pledge: PM

Highlights

Reducing Russian coal imports in phases by finding alternative suppliers

Japan steps into reducing overall Russia energy dependency including oil: PM

Russia accounts for 11% of coal imports as third-largest supplier

  • Author
  • Takeo Kumagai
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  • Debiprasad Nayak
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  • War in Ukraine

Japan will impose a ban on coal imports as part of additional sanctions against Russia following the latest commitment by leaders of the G-7 nations, Prime Minister Fumio Kishida said April 8, marking the country's first commitment to curb any commodity imports from Russia.

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"We will reduce our dependency on Russia in the energy sector by reducing the [coal] imports in phases as well as quickly securing alternative solutions," Kishida told a press conference.

G-7 nations aim to expedite efforts to cut reliance on Russian energy, including phasing out and banning Russian coal imports and cutting Russian oil dependency, the leaders said in a joint statement April 7.

"Japan will not only ban the coal imports but also step into reducing the Russian dependency in overall energy including oil," Kishida said.

Russia was Japan's third-largest coal supplier in 2021 after Australia and Indonesia, importing 19.734 million mt of Russian coal in 2021, or 11% of the country's total imports of 182.629 million mt, according to finance ministry data.

Russia supplied 4% of Japan's total crude oil imports of 2.48 million b/d in 2021, with the Middle East supplying 92% of the inflows, the data showed.

"In order to avoid tightening power supply and the demand balance in the summer and winter, we intend to maximize our use of such power sources as renewables and nuclear power, which are also highly effective for energy security and decarbonization."

Phasing out

The premier's comments come after Minister of Economy, Trade and Industry Koichi Hagiuda said earlier April 8 that Japan intended to phase out Russian coal imports with the ultimate aim of suspending them as part of the G-7 pledge.

"As the situations surrounding energy are different according to each country, we intend to phase out [Russian coal imports] in stages," Hagiuda told a separate press conference.

"Our aim is to suspend the imports ultimately by reducing them as we find alternative [supply] countries," Hagiuda said.

METI is currently surveying large Japanese consumers by company and sector on their outlooks for Russian coal procurement next winter in order to avert any potential impact during the high demand season, Haguida said.

Once Japanese companies cut their coal imports from Russia, the government intends to respond by ensuring alternative sources of supply in order to alleviate the impact on industries, he said.

JERA, Japan's largest power generation company, said that once the Russian coal import ban is in place, it plans to replace its procurement of Russian coal, part of its portfolio supply from its trading arm JERA Global Markets, with supplies from other countries, a company spokesperson said.

Russia accounted for just over 10% of JERA's coal imports of around 20 million mt in fiscal year 2020-21 (April-March).

For its part, Tohoku Electric, which relies on Russia about 10% of the total procurements, expects to be able to secure around two to three months of coal requirements, a company spokesperson said, adding that it will consider alternative supply sources.

Suspending Russian coal

Kyushu Electric, which does not have any long-term coal supply contracts with Russia, has suspended its Russian coal procurement amid increased uncertainty over procurement for stable power supply and has started seeking alternative supplies, a company spokesperson said.

Russia accounted for about 7% of Kyushu Electric's coal procurements of around 6.8 million mt in fiscal year 2020-21.

Kansai Electric, which also does not have any long-term Russian coal supply contracts, has not had any Russian coal procurement deals since Russia's invasion of Ukraine, a company spokesperson said.

Kansai Electric's Russian coal procurement is estimated at less than 10% for its expected total coal procurement of about 3.90 million mt in FY 2021-22, the spokesperson said.

The G-7 leaders -- representing Canada, France, Germany, Italy, Japan, the UK and the US -- said April 7 they would continue working to "ensure stable and sustainable global energy supplies, including by accelerating reduction of our overall reliance on fossil fuels and our transition to clean energy."

Japan's efforts to reduce its Russian energy dependency will also involve diversifying its energy sources by utilizing renewables and nuclear power, Hagiuda said.

While the G-7 leaders also committed banning new investment in key sectors of the Russian economy, including the energy sector, Hagiuda said Japan will not withdraw from the Sakhalin 1 and 2 projects and the Arctic LNG 2 project as these are not new investment projects as well as important for the energy security.

Russia accounted for 9% of Japan's total LNG imports of 74.32 million mt as the fifth-largest supplier in 2021, according to finance ministry data.

More than half of the 9.6 million mt/year LNG production capacity at the Sakhalin 2 project is committed to Japanese offtakers, and Sakhalin 2 LNG accounts for almost all of Japan's LNG imports from Russia.