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RR RUEHFK RUEHKSO RUEHNAG RUEHNH RUEHVK
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R 230912Z OCT 06
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC 7679
INFO RUEHMO/AMEMBASSY MOSCOW 1312
RUEHTC/AMEMBASSY THE HAGUE 1046
RUEHFK/AMCONSUL FUKUOKA 8541
RUEHNAG/AMCONSUL NAGOYA 8217
RUEHNH/AMCONSUL NAHA 1077
RUEHOK/AMCONSUL OSAKA KOBE 1924
RUEHKSO/AMCONSUL SAPPORO 9609
RUEHVK/AMCONSUL VLADIVOSTOK 0023

UNCLAS SECTION 01 OF 02 TOKYO 006163 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ENRG PREL JA RU
SUBJECT: SAKHALIN 2 PARTNER CONFIDENT PROJECT WILL NOT BE 
CANCELED 
 
¶1. (SBU) Summary.  Former Japanese Ambassador to Russia 
Takehiro Togo, currently senior counselor at Mitsui and Co., 
which is part of the Sakhalin 2 consortium, told Econoff on 
October 17 that the Russian government had no desire to pull 
the plug on the Sakhalin 2 project despite environmental 
concerns surrounding it.  The Russian government was 
currently pursuing a number of natural resource 
investigations, not just Sakhalin 2.  Togo suggested that 
talks between Royal Dutch Shell and Russian oil major Gazprom 
over swapping shares in different projects were not going 
well and that may have played a role.  He strongly suggested 
that the inclusion of Gazprom in the consortium would benefit 
all concerned while noting Russian government concern over 
the ballooning cost of the project.  Togo also highlighted 
the mutually beneficial relationship of Russia and Japan in 
the energy field.  End Summary. 
 
¶2. (SBU) Former Japanese Ambassador to Russia (1996-99) 
Takehiro Togo, now serving as a senior counselor at Mitsui 
and Co., told Econoff on October 17 that Russia has no 
interest in seeing the Sakhalin 2 project canceled over 
environmental concerns.  He suggested that Sakhalin 2 had not 
been singled out; Russian President Vladimir Putin recently 
ordered a range of investigations into Russia's natural 
resources because of environmental concerns and around 200 
licenses have been canceled in the last few months, including 
those for oil and natural gas projects as well as for mining 
facilities.  In part, this was due to the rising criticism of 
the way the licenses were issued, according to Togo.  In the 
case of Sakhalin 2, the Russians were claiming that 50 
percent of the environmental agreement had not been observed 
by the consortium.  Togo also noted that normally 
environmental issues were addressed after a project had been 
completed, for example, replacing trees that had been 
removed. 
 
¶3. (SBU) Togo told Econoff that in addition to environmental 
concerns, political pressure had contributed to the 
cancellation of the Sakhalin 2 environmental license.  Royal 
Dutch Shell and Russia's Gazprom have been negotiating to 
swap shares in projects which would bring Gazprom into the 
Sakhalin 2 consortium (currently Shell holds 55 percent, 
Mitsui and Co. 25 percent and Mitsubishi 20 percent) and 
those negotiations have not been going well.  Togo said there 
were two concerns: the calculation of Sakhalin 2's costs and 
the environmental issues.  Togo told Econoff that it was 
highly unusual for costs of such projects to double in size 
as they reportedly have with Sakhalin 2.  Far more common is 
for costs to increase by 20 or 30 percent.  Togo repeated 
several times that including Gazprom in the consortium would 
be of great benefit to all.  He also emphasized that 
canceling the project would be far too costly to everyone 
because the first phase of the project, which is expected to 
produce 9.6 million square meters of natural gas, is about 80 
percent completed. 
 
¶4. (SBU) Gazprom's Chairman of the Board Dmitry Medvedev, who 
is also First Deputy Prime Minister of the Russian 
Federation, recently visited Mitsui and Co. to indicate 
Gazprom's deep interest in joining the project.  He wanted to 
talk directly with Mitsui and Mitsubishi mainly because of 
their relationship with Japanese consumers.  Medvedev 
questioned Togo about the lack of active Japanese 
participation in the project and Togo explained that Japanese 
companies have little experience in exploration but wish to 
protect shareholder interests.  (Comment: Currently Japanese 
gas companies have contracted to buy more than half of 
Sakhalin 2's natural gas supply.  End comment.)  Togo 
acknowledged to Econoff that more talks were necessary 
between Japanese companies and Gazprom. 
 
¶5. (SBU) Togo noted that this was the first time Japanese 
energy consumers had shown interest in Russia as a supplier 
and that Russia was a very convenient source of natural 
resources.  This was also the first time that Russia had 
realized the value of liquefied natural gas (LNG) because it 
could reach the consumer without need of a pipeline, which 
helped Russia diversify its consumer base. 
 
¶6. (SBU) Comment:  Togo is uniquely placed to understand 
Russian strategic thinking and Japan,s oil consumers.  Given 
his long relationship with the Russian government and his 
work with Mitsui, he is more likely to put a positive spin on 
the problems involving the Sakhalin 2 project. 
 
TOKYO 00006163  002 OF 002 
 
 
 
¶7. (SBU) Bio Note: Togo served as a diplomat in Washington 
during 1979-81, and served in the Japanese Embassy in Russia 
four times under Khrushchev, Brezhnev, Gorbachev, and Putin. 
He was planning to participate in the 50th anniversary 
celebration of the Japan-Soviet Joint Declaration (October 
19, 1956) in Moscow this week. 
SCHIEFFER