Shingetsu Newsletter #3

JAPAN KEEN TO EXPORT BEEF TO THE GULF

In Shingetsu Newsletter No. 1215, we reported that Saga Prefecture was denied halal meat certification from the UAE due to insufficient space between the areas for slaughtering pigs and cows. Pigs are considered haram, forbidden to Muslims. (These designations can be considered parallel to the concept of kosher meat in Judaism.)

On February 27th, the first commercial exports of Japanese beef were delivered to Dubai. Japanese farmers have been suffering from a slump in prices and low demand in the Japanese market, which makes the Arab consumer market seem like a beacon of hope for them. JES Corporation, a Tokyo-based trading house that is keen to increase trade, sent the first beef to Dubai. The main barrier has been ensuring that the cows are slaughtered in accordance to Islamic law. Aquil Siddiqui, chairman of Japan Islamic Trust, welcomed the idea of importing meat from Japan: “As long as it’s halal, I’m keen to eat Japanese beef.” He then added, “I’m sure that Japanese beef will be well received by Muslims.”

Japan is really keen to ensure that all proper procedures are in place to ensure success of this new venture. In fact, Saga prefectural officials were so overzealous that they did not go through the inspection procedures outlined by the Ministry of Agriculture, Forestry, and Fisheries when they carried fifteen kilograms of beef for an export promotion event in Dubai. The Saga officials apparently thought that no inspection was required, as the beef in question was not for export per se. However, Agriculture Minister Shigeru Ishiba ordered Saga Prefecture to file a report and urged them to take stern action against any beef exported without the proper inspections. It was noted that failure to comply with the inspection laws can result in up to three years in prison or a fine up to US$10,000. Saga Governor Yasushi Furukawa personally flew to Tokyo to apologize for the incident.

MIXED RESULTS FOR ENERGY INDUSTRY TIES

French Energy Giant GDF Suez is the sole developer of the Shuweihat II Project, which is comprised of a natural gas-fired power station and a water desalination plant. The Abu Dhabi Water and Electricity Authority owns 60% of the project and GDF Suez owns the remaining 40%. The Japan Bank for International Cooperation (JBIC) will participate by giving US$2 billion in financing for the project. As part of the package, the JBIC is requiring a Japanese partner to be involved in the project. As a result, the Marubeni Corporation is in talks to take at least 20% of GDF Suez’s stake.

In a related story, the Abu Dhabi National Energy Company announced that it is finalizing talks to take over half of Marubeni’s energy portfolio in the Caribbean region. The Marubeni Caribbean portfolio consists of equity stakes in power generation and transmission facilities in Jamaica, the Bahamas, Trinidad and Tobago, and Curacao. These deals are another indicator of the deepening of Japanese-UAE energy relations, as noted in Shingetsu Newsletter Nos. 1259 and No. 1271.

However, Cosmo Oil (the fourth biggest refiner in Japan), which owns Abu Dhabi Oil, has suffered its worst loss ever in the year ending March 2009. The company suffered from a net loss of US$920 million, the largest in its 22-year history. Oil prices have been declining, eroding the value of crude oil inventories and profits from exploration. Nippon Oil Corporation, the country’s largest refiner, and Nippon Mining Holdings are also expecting losses. The Abu Dhabi government’s investment arm, International Petroleum Investment Company (IPIC), acquired 20% of Cosmo Oil in September 2007, as reported in Shingetsu Newsletter No. 744.

NEWS BRIEFS

UAE Foreign Minister Shaikh Abdallah bin Zayd al-Nahyan met Prime Minister Taro Aso on April 17th. He also met with Foreign Minister Hirofumi Nakasone. The two parties discussed mutual relations and ways to enhance cooperation in various fields. Shaikh Abdallah also reviewed the outcome of the Pakistan Donors’ Conference and thanked Japan for hosting it.

Yasuo Fukuda, former prime minister and Chairman of the Japanese-UAE Parliamentary Friendship Association, met in Tokyo with Chairman of the Executive Affairs Authority Khaldun Khalifa Mubarak on March 6th. Mubarak thanked Fukuda for his role in sealing the air transport agreement, which allows the UAE national carriers to commence their flights to Tokyo’s Narita Airport. During his visit to Japan, Mubarak also met METI Minister Toshihiro Nikai and other officials.

Tatsuo Watanabe was named as the new Japanese ambassador to the UAE on February 13th. Watanabe joined the Finance Ministry in 1972 and became director of the Development Finance Division. He later became vice chairman of the Japan Securities Dealers Association, and in July 2008 was named as special adviser to the association. Appointing a financial expert as ambassador indicates Tokyo’s interest in stronger economic and financial relations with the UAE.

Dubai Chamber of Commerce delegates attended the Investment Promotion Forum organized by the Japan Cooperation Center for Middle East (JCCME) in Tokyo and Osaka on March 23rd. In total, eighteen West Asian and North African countries attended the forum. Hassan al-Hashimi, Director of External Relations at the Dubai Chamber of Commerce met with counterparts from Tokyo and Osaka to discuss bilateral cooperation and information exchanges.

Shingetsu Institute

The Shingetsu Institute is a Japanese Institute that specializes in the Study of Japanese-Islamic Relations. It was founded by Michael Penn at the beginning of August 2004 in Kitakyushu, Japan.

I joined the Shingetsu Institute recently and I will be contributing analysis of news and articles related to the UAE and other Muslim world countries.

My first newsletter was published on Jan 23rd, here it is:

JAPAN-UAE NUCLEAR ENERGY COOPERATION LAUNCHES A NEW ERA

The UAE is on its way to becoming the first Arab country to develop nuclear power and Japan will play a major role in getting the UAE there. We at the Shingetsu Institute have been tracking the development of the potential nuclear cooperation between Japan and the GCC countries since May 2007 when Japan’s prime minister at the time Shinzo Abe visited Qatar and politely dismissed Qatar’s request for Japanese help in obtaining nuclear technology.

The latest move in the UAE has very serious implications in the region, and a decision like this does not come as a complete surprise since Japan is only following the lead of the US, France, and the UK. Condoleezza Rice, the former US secretary of state, and Shaikh Abdullah Bin Zayed al-Nahyan, the UAE foreign minister, met on January 15th and signed a bilateral agreement for peaceful nuclear cooperation. Shaikh Abdullah said in a statement: “Under the terms of this agreement, the UAE will gain access to significant capabilities and experience in the peaceful use of nuclear energy. This will allow the UAE to develop its civilian nuclear program to the highest standards of safety, security, and non-proliferation.”

Shortly after that, on January 19th, METI Senior Vice-Minister Takamori Yoshikawa forged an agreement with UAE’s Ministry of Foreign Affairs Undersecretary Saif Sultan al-Aryani to help the UAE in developing their nuclear ambitions. As previously mentioned, the UAE has also signed similar agreements with the UK and France.

Japan will help the UAE develop a civilian nuclear program that may result in the UAE introducing its first nuclear reactor in 2017. Most of the help will be focused on training and education in regard to running and constructing a civilian nuclear plant. The UAE and Japan must still sign a nuclear treaty that allows Japanese manufacturers to sell their reactors to the UAE. This step is required by international law to ensure that nuclear technology will only be used for civilian energy and not for any military purposes.

As most recently reported in Newsletter No. 1215, Japan is arriving late to the game and took the role of a follower rather than a leader in this initiative. It’s yet to be seen if Japan signs similar agreements with other GCC countries interested in nuclear energy, such as Bahrain and Qatar. I would not be surprised if Japan waits until the US and/or the EU blesses the transaction before taking any steps there as well. Iran is obviously out of question for the time being.

We expect this announcement will strengthen the relationship between Japan and the UAE, and some advantages are already beginning to appear. However, we will discuss those matters in a Newsletter next week.

My Second newsletter was published today, here it is:

THE DEEPENING OF JAPAN-UAE ENERGY COOPERATION

This Newsletter is a continuation of what we reported in Newsletter No. 1259 last week. As we noted at that time, Japan will help the UAE develop a civilian nuclear program that may result in the UAE introducing its first nuclear reactor in 2017. This will definitely strengthen the relationship between Japan and the UAE. In this newsletter we will focus on two announcements that seem to be a result of new relationship between the two countries.

Foreign companies have been trying to maintain their oil exploration rights in the UAE. Companies like BP and Royal Dutch Shell are still wondering if their concession rights will be withdrawn when their contracts expire within the next ten years. The UAE has given only a few concession extensions to some American companies.

However, we now learn that the Japanese-owned company Abu Dhabi Oil has secured a twenty-year extension of its concession rights in the UAE. It has been operating under a 45-year concession that expires in 2012. The Japanese corporation Cosmo Oil (the fourth biggest refiner in Japan) owns Abu Dhabi Oil. The Abu Dhabi government’s investment arm International Petroleum Investment Company (IPIC) acquired 20% of Cosmo Oil in 2007.

The UAE is Japan’s second largest supplier of oil after Saudi Arabia. It thus does not surprise us that a Japanese (and partially UAE-owned) oil company received an extension of their concession, especially in light of the new nuclear cooperation agreement between the two countries.

In another announcement that showcases the strengthening relationship between the two countries, a UAE Clean Energy Venture company called Masdar formed a venture fund with Japan’s SBI Holdings. The two companies have agreed to invest US$10 million each to create a fund that will invest in Solar, Wind, and alternative energy startups. The two companies aim to invest up to US$300 million in alternative energy ventures. The UAE is trying to stay strong in the energy industry as the world shifts to rely on non-oil based energy resources.

As you will further read in the news briefs, the UAE and Japan are also bolstering their airline connections. This was announced before the nuclear cooperation agreement between the two countries. We should probably look forward to more examples of cooperation and/or joint ventures between the two countries in the near future.

UAE NEWS BRIEFS

UAE Foreign Minister Shaikh Abdallah bin Zayed al-Nahyan held a 15-minute phone call with Foreign Minister Hirofumi Nakasone on December 10th. They spoke primarily about the terrorism in Mumbai and cooperation with Pakistan.

Etihad Airlines based out of Dubai, UAE signed an agreement with the Japanese government to start flying weekly flights to Tokyo, Osaka, and Nagoya.

Emirates Airlines already operates daily flights to Osaka and Nagoya. They will also be sharing the weekly flights to Tokyo with Etihad Airlines (five weekly flights each).

The Inter Location Company held a Japanese Art Exhibition in Dubai. Part of the exhibition’s income went to the Rashid Paediatric Therapy Center.