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RR RUEHFK RUEHGH RUEHKSO RUEHNH
DE RUEHKO #2529/01 1570820
ZNY CCCCC ZZH
R 060820Z JUN 07
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC 4247
INFO RUEHBJ/AMEMBASSY BEIJING 7300
RUEHMO/AMEMBASSY MOSCOW 1690
RUEHFR/AMEMBASSY PARIS 5518
RUEHUL/AMEMBASSY SEOUL 3359
RUEHFK/AMCONSUL FUKUOKA 1412
RUEHNH/AMCONSUL NAHA 3841
RUEHOK/AMCONSUL OSAKA KOBE 4974
RUEHKSO/AMCONSUL SAPPORO 2272
RUEHGH/AMCONSUL SHANGHAI 0162
RUEHIN/AIT TAIPEI 6451
RHMCSUU/DEPT OF ENERGY WASHINGTON DC
RHHMUNA/HQ USPACOM HONOLULU HI

C O N F I D E N T I A L SECTION 01 OF 02 TOKYO 002529 
 
SIPDIS 
 
SIPDIS 
 
PARIS FOR USOECD. DOE PLEASE PASS TO DOE/PI: DPUMPHREY, 
JNAKANO. PACOM FOR D. VAUGHN. 
 
E.O. 12958: DECL: 06/04/2017 
TAGS: ECON ENFR PREL PGOV CH JA
SUBJECT: ANRE'S HOSAKA "BORED" WITH EAST CHINA SEA 
DISCUSSIONS 
 
Classified By: Ambassador J. Thomas Schieffer for reasons 1.4 (b,d) 
 
¶1. (C) Summary.  The eighth round of director- general level 
talks between Japan and China on May 25 over the disputed oil 
and natural gas deposits in the East China Sea broke no new 
ground.  Japan expected a new proposal from China but none 
was proffered. The two sides will step up the frequency of 
their meetings in hopes of reaching a resolution before Prime 
Minister Shinzo Abe,s expected visit to China in the autumn. 
 Politics have not yet affected the talks although a Cabinet 
shuffle after the July 11 Upper House elections might change 
that.  Japanese investment in East Siberian energy projects 
remains small.  The Ministry of Economy, Trade and 
Industry,s June sale of shares in Japan Petroleum and 
Exploration Co. was decided in 2003 and therefore 
unsurprising.  End summary. 
 
"Bored" with Lack of Progress on East China Sea 
--------------------------------------------- -- 
 
¶2. (C) Ministry of Economy, Trade and Industry (METI) Agency 
for Natural Resources and Energy (ANRE) Petroleum and Natural 
Gas Division Director Shin Hosaka told Econoff on May 31 that 
despite positive media coverage of the May 25 director 
general-level (assistant secretary-level) meeting between 
China and Japan, he remained very skeptical and "bored" with 
the process.  Ministry of Foreign Affairs Asian and Oceanian 
Affairs Bureau Director General Kenichiro Sasae and ANRE 
Director General Harufumi Mochizuki met with Chinese Foreign 
Ministry Department of Asian Affairs Director Hu Zhengyue for 
the eighth time to discuss joint development of the oil and 
natural gas deposits under the East China Sea.  Sasae 
announced to the media afterward that the meeting was 
successful in deepening understanding between Japan and 
China.  At the root of the discussion is the dispute over the 
boundary line delineating the two countries, exclusive 
economic zones (EEZs).  Hosaka reported that the two sides 
agreed to convene director general-level meetings once a 
month and director-level (i.e., U.S. office director 
equivalent) meetings twice a month.  The schedule of the next 
director general meeting is not yet decided but probably will 
be at the end of June in Tokyo. 
 
Contrary to Expectations, No New Chinese Proposal 
--------------------------------------------- ---- 
 
¶3. (C) Japan was surprised and disappointed that China did 
not offer any new proposals for joint development of the East 
China Sea.  Hosaka explained that Liberal Democratic Party 
(LDP) politicians Taku Yamasaki, Koichi Kato and Masahiko 
Komura had traveled to China on April 27-28 to meet with 
Chinese State Councilor Tang Jiaxuan who told them that China 
was preparing a new proposal for joint development of the 
natural resources in the East China Sea.  As a result, the 
Japanese delegation did not prepare anything new and so was 
frustrated that China offered nothing during the May 25 
meeting.  Hosaka added that the Japanese oil company Teikoku 
Sekiyu is anxious to begin exploration of the disputed area 
but so far has refrained due to concerns over safety. 
 
Abe,s Autumn China Visit a Motivation 
------------------------------------- 
 
¶4. (C) Hosaka noted that Prime Minister Shinzo Abe,s plans 
to visit China in the autumn to meet with President Hu Jintao 
is motivating both sides to find a resolution but Hosaka is 
highly doubtful this is possible. 
 
Politics Could Start to Play Larger Role 
---------------------------------------- 
 
¶5. (C) Asked whether the upcoming Upper House elections and 
possible Cabinet shuffle would have any effect on the talks, 
he said no, although he cautioned that this could change.  If 
Abe's popularity continues to decline and LDP Policy Research 
Council head Shoichi Nakagawa, for example, who is a 
hard-line negotiator on China issues, were to take a more 
 
TOKYO 00002529  002 OF 002 
 
 
prominent role in the administration, politics might start to 
play a larger role. 
 
Japanese Investment in East Siberia Remains Small 
--------------------------------------------- ---- 
 
6 (C)  Hosaka continued to maintain that Japanese investment 
in Russia's East Siberia is marginal.  Currently Japanese 
companies are involved in two projects in the region, one 
with Russian gas major Gazprom and the other with oil major 
Rosneft.  Hosaka said that ANRE plays the role of 
intermediary between Japanese companies and Gazprom in the 
downstream gas project that came out of the February 2007 
ministerial meeting between Russian Industry and Energy 
Minister Viktor Khristenko and METI Minister Akira Amari in 
Tokyo in February 2007.  Hosaka has no confidence in the 
Rosneft project involving a proposal for a Pacific coast oil 
refinery because Russian Minister of Economy and Trade German 
Graf has insisted many times there is not enough oil to fill 
a pipeline to the Pacific coast. 
 
METI's Sale of JAPEX Shares Unsurprising 
---------------------------------------- 
 
¶7. (C) Hosaka explained that the recent announcement about 
METI's plans to sell its shares in Japan Petroleum and 
Exploration Co. (JAPEX) should surprise no one because the 
Japanese government decided in 2003 to sell them.  Now is the 
right time based on  energy security and maximizing returns 
for the government and the Japanese people.  The current 
market environment is very good, he said, so the government 
has decided to reduce its stake in JAPEX from 49 percent to 
34 percent.  METI's remaining one-third ownership ensures 
that METI can maintain its influence in the company were 
China or Russia, for example, to buy up some of the shares. 
 
Comment 
------- 
 
¶8. (C) The East China Sea talks drag on with neither side 
willing to alter its position on where joint development 
might occur in the East China Sea.  Hosaka's comment that he 
is "bored" is indicative of the inflexibility in both Beijing 
and Tokyo on the substance of the East China Sea issue 
despite the ostensibly successful visit by Chinese Premier 
Wen Jiobao in April and the Abe-Hu summit planned for the 
fall. 
SCHIEFFER