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C O N F I D E N T I A L SECTION 01 OF 05 TOKYO 002269 
 
SIPDIS 
 
SIPDIS 
 
PARIS FOR OECD. DOE PLEASE PASS TO DPUMPHREY, JNAKANO. 
PACOM FOR D. VAUGN. 
 
E.O. 12958: DECL: 05/17/2017 
TAGS: PREL ECON ETRD ENRG XF EG KUNC QA SA AE JA
SUBJECT: ECON CONTACTS CONFIRM SUCCESS OF ABE'S MIDDLE EAST 
TRIP 
 
REF: TOKYO 2190 
 
Classified By: Ambassador J. Thomas Schieffer for reasons 1.4 (b,d) 
 
¶1. (C) Summary.  Separate talks with METI and Keidanren 
officials largely confirmed MOFA and Kantei reports (reftel) 
that Prime Minister Shinzo Abe,s April 28-May 2 visit to the 
Middle East was a success.  One official emphasized the 
improved relationship with Saudi Arabia but explained that 
the offer to store Saudi Arabian oil in Okinawa was still 
being negotiated.  He also noted that the large loan agreed 
between the Japan Bank for International Cooperation (JBIC) 
to U.A.E.,s Abu Dhabi National Oil Company (ADNOC) likely 
was made in support of U.A.E.,s Japanese Ambassador, a 
former JBIC employee.  A second official bemoaned the slow 
pace of Japan,s FTA negotiations with the Gulf Cooperation 
Council (GCC) and highlighted the political and business 
concerns Japan has with Egypt.  A Japan Business Federation 
(Keidanren) representative discussed the broad range of 
businessmen who joined Abe on the trip but noted the 
difficulty Japanese businesses will have finding employees 
for Gulf-based factories.   End Summary. 
 
Japan-Saudi Relationship on the Mend 
------------------------------------ 
 
¶2. (SBU) Ministry of Economy, Trade and Industry (METI) 
Agency for Natural Resources and Energy (ANRE) Petroleum and 
Natural Gas Division Director Shin Hosaka, who accompanied 
Prime Minister Shinzo Abe on part of his visit to Saudi 
Arabia, U.A.E., Kuwait, Egypt and Qatar in late April and 
early May, said he was pleased that the Prime Minister had 
traveled to the Middle East.  In particular, he observed that 
Abe,s talks in Saudi Arabia significantly contributed to 
repairing the relationship between the two countries.  Hosaka 
described how the relationship had soured after Japan lost 
its concession in the large Saudi Khafji oil field in 2000 
and said there had been very few official visits since then. 
Hosaka and ANRE Director General Hirofumi Mochizuki made a 
trip to Saudi Arabia in December 2006, Hosaka reported, 
during which they found the Saudis to be very frank and 
friendly.  Hosaka posited that that visit surely had led to 
the positive outcome of Abe,s meetings as well as the 
subsequent meetings held for METI Minister Akira Amari 
 
TOKYO 00002269  002 OF 005 
 
 
(septel), whom Hosaka also accompanied.  (Note: Saudi Arabia 
is Japan,s largest oil partner, exporting 579 million 
barrels to Japan in 2006 or 29 percent of Japan,s total. 
U.A.E. is second with 524 million barrels or 26.2 percent 
followed by Iran with 141.5 million, 11.3 percent; Qatar with 
207 million, 10.4 percent; and  Kuwait 141.5 million, 7.1 
percent.  End note.) 
 
Abe Jumps the Gun on Saudi Stockpiling 
-------------------------------------- 
 
¶3. (C) Hosaka revealed that ANRE had been working for some 
time behind the scenes on the idea of offering Okinawa-based 
tanks to Saudi Arabia to store oil in exchange for Japan,s 
access to the oil in a crisis.  When Abe heard about the 
proposal he wanted to go public with it during his Middle 
East trip, according to Hosaka.  Negotiations with the Saudis 
are not yet complete but the pressure to conclude them is now 
much greater, he said.  He explained that the Japanese 
government owns storage tanks in Okinawa as do several 
Japanese private companies.  Two of these companies have 
shown interest in cooperating on this project but Hosaka said 
it was still unclear whether Saudi Arabia's state-owned oil 
company Aramco was interested because Aramco already enjoys a 
robust market for its oil right out of the ground.  Hosaka 
also confessed he had heard a rumor that the Korean president 
had proposed something similar to the Saudi government a 
month earlier but the Saudi government believes it to be a 
strictly commercial venture and asked to be left out of the 
negotiations with the Koreans.  Hosaka also said China may 
have approached the Saudis as well.  Aramco already has a 
refinery joint venture in Qingdao, he said, which might 
persuade Saudi Arabia to sign a stockpile agreement with 
China instead of Japan or Korea. 
 
JBIC Loan to U.A.E. 
------------------- 
 
¶4. (C) Abe,s visit to U.A.E., despite the country's status 
as Japan,s second largest oil importer, was the first by a 
Japanese prime minister in 29 years, Hosaka noted.  The main 
news to come from this part of the visit was the Japan Bank 
for International Cooperation (JBIC) agreement to loan Abu 
Dhabi National Oil Company (ADNOC) $5 billion for oil 
 
TOKYO 00002269  003 OF 005 
 
 
projects, he said.  Hosaka disclosed that Japanese Ambassador 
to U.A.E. Takuma Hatano is a former employee of JBIC.  The 
bank was looking to support Hatano in some way, according to 
Hosaka, despite the fact that ADNOC has plenty of money and 
is in no need of a loan. 
 
Trip Broadens Japan-Middle East Trade Relationship 
--------------------------------------------- ----- 
 
¶5. (SBU) In a separate meeting, Ministry of Economy, Trade 
and Industry (METI) Middle Eastern and African Affairs 
Director Michio Sakuramachi told Econoff that Prime Minister 
Shinzo Abe,s trip to the  Middle East in late April had been 
successful because it had begun to create to a multi-layered, 
comprehensive trade relationship with the Middle East instead 
of one focused exclusively on oil.   Sakuramachi related that 
-- unexpectedly -- key members of each of the Gulf 
countries, royal families had attended the meetings with 
Abe, leading to an even greater sense of accomplishment. 
 
GCC Free Trade Agreement 
------------------------ 
 
¶6. (SBU) Sakuramachi reported that the Gulf Cooperation 
Council (GCC) would hold an unofficial midterm meeting in 
June to discuss the free trade agreement (FTA) under 
negotiation with Japan.  (Note: Japan is negotiating an FTA, 
not an economic partnership agreement (EPA), with the GCC. 
The FTA will include only goods and services as opposed to 
the broader-ranging Japanese EPA.)  He mused that the process 
was slower than he had hoped and expected, mainly due to 
scheduling problems.  (Note: The first meeting was in 
September 2006 and the second in January this year.)  At the 
moment the GCC is focused on its FTA with the European Union, 
Sakuramachi reported, which ought to help spur talks with 
Japan by providing a model agreement.  The Japan-GCC FTA has 
political implications as well, he said, which encourages 
both sides to speed up the process. 
 
Egypt Offers Little of Interest to Japan 
---------------------------------------- 
 
¶7. (C) Sakuramachi admitted that Egypt has little to offer 
Japan in the energy realm but remains important from a 
 
TOKYO 00002269  004 OF 005 
 
 
political point of view.  Japan would like to strengthen its 
relationship with Egypt in order to demonstrate its 
commitment to the region's peace process, according to 
Sakuramachi.  Egypt remains unattractive to Japanese 
businesses because of corruption, however, he said. 
 
Broad Range of Japanese Businesses Make the Trip 
--------------------------------------------- --- 
 
¶8. (SBU) Japan Business Federation (Keidanren) Managing 
Director Masakazu Kubota told EMIN that Japan,s oil trade 
with the Middle East remained its primary business but that 
Japan hoped to increase its non-oil trade with the region. 
One hundred eighty Keidanren companies accompanied the Prime 
Minister on his trip to the Middle East, including 
representatives from energy, chemicals, pharmaceuticals, 
finance, information technology (IT), automobiles, electric 
appliances and construction.  In addition to increasing trade 
between Japan and the region, Japanese companies are 
interested in increasing their investment in the Middle East 
and in promoting advances in such areas as infrastructure, 
human resource development, and information and communication 
technology, according to Kubota.  He added that follow-up on 
the trip would be very important if these goals are to be 
achieved. 
 
Finding Employees for Japanese Factories an Issue 
--------------------------------------------- ---- 
 
¶9. (SBU) Kubota acknowledged that Japan is a late-comer to 
the Middle East but said Japan hoped to play a role in the 
region's modernization and that the Middle East held many 
business opportunities for Japan.  Kubota noted, however, 
that given the standard of living enjoyed by much of the 
population in the area, finding workers for businesses such 
as car manufacturing was a challenge; the wage was simply too 
low.  He dismissed security concerns, however, saying 
Japanese companies have not taken any special measures to 
protect themselves. 
 
Government-to-Government Business Discussions Essential 
--------------------------------------------- ---------- 
 
¶10. (SBU) Kubota explained the importance of 
 
TOKYO 00002269  005 OF 005 
 
 
government-to-government business discussions in the Middle 
East where business is primarily conducted by government-run 
companies.  The Japanese government had to get involved to 
get Japanese business through the front door, he claimed. 
Kubota also noted with relief, like our MOFA contacts, that 
part of the success of the trip was the fact that no one got 
sick -- most of the Japanese companies sent senior 
representatives who are in their 70s and 80s. 
 
Comment 
------- 
 
¶11. (C) The Embassy's broad range of Japanese government and 
business contacts all confirm the success of Abe,s Middle 
East visit, although to some, "success" clearly means only 
that he went at all.  This may also be true of the enormous 
Japanese business delegation.  However, seeing the Middle 
East first hand may have strengthened the businessmen's 
conviction that there is little or no opportunity for many of 
them in the region.  As one contact noted, follow-up on the 
trip will be key.  Japan,s stockpiling idea got plenty of 
press attention but negotiations are on-going and success is 
far from guaranteed.  Nevertheless, from a diplomatic and 
political standpoint, the trip was long overdue and certainly 
improved Japan,s relations with the countries Abe visited. 
SCHIEFFER