Japan to mend trade ties with Riyadh

By F.J. Khergamvala

TOKYO, MARCH. 4. Japan has begun planning a series of high-level exchanges with Saudi Arabia in an effort to contain the fallout from a serious rupture in its economic relations with Saudi Arabia as a result of the collapse of an oil drilling concession.

A visit to Riyadh by the Foreign Minister, Mr. Kohei Kono, and the former Prime Minister, Mr. Ryutaro Hashimoto, are in the works and Japan wants to invite the Saudi Foreign Minister, Mr. Saud Al Faisal. This suggests that the Obuchi Government here fears that the damage could spill over into bilateral ties with the six Gulf regimes and with the Gulf Cooperation Council as a whole.

Recently, efforts afoot for nearly two years to salvage a 40-year-old drilling concession by the Japan-based Arabian Oil Co. on the Saudi part of the offshore Khafji oil fields collapsed. Consequently, an economic aid package worth 800 billions yen offered to Saudi Arabia will now be withdrawn.

The breakdown was a mix of complex economic, energy- related and cultural factors and now Japan may have to renegotiate a similar concession with Kuwait with a weaker hand. The loss of the concession may represent a slight reversal in Japan's post-oil shock policy of developing its own oil fields as well as a policy by many oil producing nations not to grant or renew drilling rights to foreign entities except on highly favourable terms.

The Arabian Oil Co. had a concession to produce 400,000 barrels a day from the Khafji field in the Saudi-Kuwait Neutral Zone. Two years ago, it produced 280,000 barrels a day, of which 150,000 barrels were exported to Japan. Japan imported less than four percent of its total oil needs from this field.

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Section  : International
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