Japan and the GCC to reenergize and expand ties

The Iran war has made Japan keenly aware of how totally dependent it is on oil from the Gulf, which made up more than 95 percent of its oil imports before the closure of the Strait of Hormuz, along with a slew of other related products, such as naphtha. Saudi Arabia and the UAE alone accounted for more than 80 percent of its oil import needs. In addition to the emergency measures it took within Japan after the war began, Tokyo also reached out to Gulf Cooperation Council countries to work out what they could do from their end.

Along with trade, Japan and the GCC states are seeking to develop their political and security ties. Drone interception technology, maritime security and military industries are among the areas of discussion.

A flurry of meetings ensued between Tokyo, Riyadh and other GCC capitals to reenergize free trade negotiations and, more recently, trade and investment dialogue. Similar negotiations took place in fits and starts over 20 years but never concluded. Much of the delay can be attributed to bureaucratic inertia. Negotiators were quite transactional, given to a zero-sum calculus and an all-or-nothing approach, which led nowhere.

Those factors contributed to a significant drop in trade and investment between Japan and its GCC partners. In 2006, Japan was the bloc’s second-biggest trading partner after the EU. In 2008, GCC-Japan trade surpassed $170 billion. Last year, it was only $120 billion, a drop of about 30 percent. Their two-way trade was previously two-and-a-half times greater than the GCC’s trade with China. Today, by contrast, Gulf-China trade is nearly triple the bloc’s trade with Japan. China is by far the GCC’s top trading partner and the GCC-China free trade agreement is very close to being concluded.

This drop in trade and investment happened despite the deep political and historical ties between Japan and the Gulf states.

A drop in trade and investment happened despite the deep political and historical ties between Japan and the Gulf states

Dr. Abdel Aziz Aluwaisheg

Saudi-Japanese relations go back more than 100 years, to when a Japanese traveler, Mitsutaro Yamaoka, visited the Kingdom in 1909 and met King Abdulaziz. Much of the Japanese knowledge of Saudi Arabia at that time came from Yamaoka’s books. Despite some exchanges of visits between the two countries in the interwar period, ties did not grow much because of that era’s turbulence in East Asia, including Japan.

However, Saudi-Japanese relations grew significantly after the Second World War. A diplomatic incident accounted for much of that growth. In 1953, during the coronation of Britain’s Queen Elizabeth II, Prince Fahd bin Abdulaziz noticed that British protocol had seated him ahead of Japanese Crown Prince Akihito. Fahd insisted that Akihito take his place on account of him being crown prince while he was not. Japan’s royal family never forgot that favor and made it a tradition that every crown prince should make Saudi Arabia the destination for his first foreign visit. That tradition continues today. Fahd became king of Saudi Arabia in 1982 and Akihito emperor of Japan in 1989 and they enjoyed a very warm rapport because of that incident in 1953.

In the same year, an economic delegation visited Saudi Arabia, before diplomatic relations were established in 1955. In 1957, a Japanese company got a concession to explore for oil in Saudi Arabia.

Tokyo enjoys strong political and economic ties with all GCC countries. Currently, oil represents the backbone of those ties, but the two sides hope to diversify and grow their trade and investment ties to at least what they were 20 years ago.

In addition to the 30 percent drop in merchandise trade since 2008, Japanese investments in the GCC have not grown in volume and their share of foreign direct investment flows into the Gulf has been halved from 4 percent 20 years ago to less than 2 percent today. GCC investments in Japan, although growing at a healthy rate, still represent less than 0.1 percent of overall GCC investment outflows.

To achieve concrete results, the two sides need to move from ad hoc transactions to more institutional and legal frameworks

Dr. Abdel Aziz Aluwaisheg

The two sides have sought to establish legal frameworks for their economic relationship. Although there have been some positive steps recently, they have yet to conclude a free trade agreement, notwithstanding 20 years of trying. In 2012, the GCC-Japan Joint Action Plan was agreed with the aim of reenergizing trade talks and contacts between officials from both sides, while encouraging ties between their business communities. However, very little progress has been made.

To achieve concrete results, the two sides need to move from sporadic meetings and ad hoc transactions to more institutional and legal frameworks. Equally important, economic and people-to-people ties need to be tied to more strategic goals, including defense and security.

More frequent high-level visits are needed to give the right political and strategic signaling. Late Japanese Prime Minister Shinzo Abe visited the region 10 times during his second term (2012-2020). It is true this was in part a reaction to the Fukushima nuclear incident and Japan’s need to deal with its aftermath, both in energy terms and for other sectors.

The visits to Japan of King Salman in 2017 and Crown Prince Mohammed bin Salman in 2016 led to important agreements between the two countries, including Saudi-Japan Vision 2030, which is based on three pillars: political, economic and cultural.

The current crisis caused by the closure of the Strait of Hormuz is no less severe than Fukushima. In addition, the reduction of production capacity of most GCC states will affect their export capacity even after the strait reopens. The two sides need to engage speedily on how Japan could help in the recovery.

The current crisis highlights the need to widen the scope of GCC-Japan cooperation. Renewable energies, strategic reserves and defense should be among the new areas, including, for example, drone technology and interceptors and the development of advanced fighter jets.

• Dr. Abdel Aziz Aluwaisheg is the GCC assistant secretary-general for political affairs and negotiation. The views expressed here are personal and do not necessarily represent those of the GCC.

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