Certain customs conditions are required…
Caspian Energy (CE): Mr. Ambassador, global transport projects are currently underway in Azerbaijan. How would you assess the processes of regional transport integration of Azerbaijan, Iran and Russia? Do they meet the interests of the region’s economic stability which Japan, as you repeatedly mentioned, is interested in?
Tsuguo Takahashi, Ambassador Extraordinary and Plenipotentiary of Japan to Azerbaijan: Azerbaijanis rich in natural resources and at the same time it is the energy transport and logistics center linking Central Asia with the Caspian region and Europe. Apart from this, it is surrounded by such big countries as Russia and Iran, and thereby has an important geopolitical location. Therefore, Azerbaijan’s sustainable development is of big importance for the stability in the Caucasus. Azerbaijan plays an important, key role in ensuring energy security of Europe. Oil produced within the framework of the development of Azeri-Chirag-Guneshli oil fields, which also involves Japanese companies INPEX and Itochu, is transported through the Baku-Tbilisi-Ceyhan oil pipeline to the Mediterranean shores of Turkey from where it goes to the world markets.
Speaking of the geopolitical importance of Azerbaijan, we proceed from the necessity of developing a transport route between the West and East, as well as North and South. Azerbaijan is a central link of these transport corridors. I welcome promotion of different projects, which will be a transport junction between Asia and Europe. Connection of railways of Azerbaijan, Iran and Russia means the growth of the geopolitical significance of Azerbaijan and its role as a transit hub, which is promoted by the President of Azerbaijan. Besides, after the construction of this railway has been completed, the development of the logistical route is important not only for Azerbaijan but also for the entire international community and Japan. Speaking from the perspective of the economic stability, in addition to transit it is also beneficial in terms of the national export. However, flow of cheap Iranian products is possible in this case. Therefore, I think that certain customs conditions and other measures are required.
Speaking about Japan’s presence in the Caspian region, Japan is supporting Azerbaijani government’s goal to promote diversification of economy, agriculture, tourism, transport as well as power industry sector and establishment of the road infrastructure. So far we have carried out reconstruction of the thermal power plant by using the Japanese concessional credits and now the sixth of electricity of Azerbaijan is generated by the help of Japan.
CE: Japan is the fourth in the world in terms of consumption of conventional energy resources and owns high-precision production technologies. To what extent are the Japanese companies interested in expansion of their activity in the Caspian especially in the Azeri sector of the Caspian?
Tsuguo Takahashi: As I have already mentioned, Azerbaijan is playing an important role in global and regional energy security. Important initiative role belongs to Azerbaijan in construction of the Southern Gas Corridor gas pipeline which guarantees long presence of Azerbaijan in the European gas market throughout the 21st century. Our companies have not been engaged in development of the Caspian gas fields yet. As you know, there are no energy resources in Japan, which is why we are importing them from outside, mainly from the Near East countries. From Russia we are importing about 10% of gas and 8% of oil. The rest comes from the Persian Gulf, Indonesia, Qatar and other regions. As far as oil we are producing in the Caspian is concerned, we are not transporting it to Japan but are using it as a reserve source in case the crisis in the oil market happens. Therefore, we attach big importance to the development of Azeri-Chirag-Guneshli fields in the Caspian. As is known, 19% of shares of INPEX belong to the government of Japan – Ministry of Economy, Industry and Trade. Possessing certain package of shares in ACG project, the government owns certain assets in the event of the oil deficiency in Japan. Therefore, we attach big importance to the development of oil in the Caspian. At the same time, Japan as a country which is fully dependent on oil bought from overseas, finds it important to contribute to the training of manpower from the oil producing countries. INPEX and JOGMEC receive specialists of SOCAR and hold trainings for them in Japan.
Many Japanese companies are interested in operating in Azerbaijan…
CE: How would you assess the investment climate in Azerbaijan for the Japanese investors?
Tsuguo Takahashi: Nowadays, Japan and Azerbaijan have their relations focused mainly in the oil area, Azeri-Chirag-Guneshli projects and Baku-Tbilisi-
Ceyhan oil pipeline. However, considering Azerbaijan’s potential, expansion of the business cooperation in other areas, construction of the plant on assembling ISUZU trucks can also be considered one of the concrete achievements. Many Japanese companies are interested in the economic cooperation with Azerbaijan and they observe the improvement of the investment climate. As is known, rapid decline of oil prices caused economic challenges in the whole world. In spite of this, Azerbaijan is spending resources on the development of the non-energy sector and we appreciate efforts aimed at diversification of the economy. I think Japanese companies have a chance to join this process.
I track the economic reforms promoted by Azerbaijan. The government of Azerbaijan attaches big importance to the improvement of the investment climate and I hope that Japanese companies will be attracted to the market. I support the efforts of the Azerbaijani state, concerning the economic reforms and improvement of the investment climate.
The Japanese tourism companies are capable of “creating” tourism resources in unknown places
CE: When do you plan to attract Japanese companies to the Azerbaijani market?
Tsuguo Takahashi: After the decline of oil prices, almost all countries of the world faced the crisis. A lot depends on energy resources in your country as well. Proceeding from the current situation in the economy, your country is currently actively implementing economic reforms and diversifying the economy. I think that it gives us a big chance and many opportunities for developing economic and friendly relations. Many Japanese companies show interest in development of the cooperation. For instance, there was a project on construction of the metallurgical plant in Ganja about 1.5 year ago. One of our well known companies took part in its projection. But unfortunately, the project was temporally suspended. I was very pleased hearing President Ilham Aliyev’s recent statement about the interest of your government towards the resuming of this project. About a year ago SOCAR was also ready to develop petrochemical production (OGPC). Our company Mitsui wanted to take part in this project. Your company also wished to see ours engaged in this project. However, the company reconsidered priority projects implemented in the world whereafter the engagement in OGPC project was excluded. Thus, we already have certain contacts and there is a big amount of opportunities and chances. In the current hard situation both sides have to make efforts to obtain a good result.
CE: Which projects of the non-oil sector are attractive for the Japanese companies?
Tsuguo Takahashi: Azerbaijan has a big potential in the non-oil sector. Azerbaijan imports many goods and there are Japanese companies considering it a business chance to operate in the market. Apart from this, agriculture and tourism, which the Government of Azerbaijan invests in, attract the attention of the Japanese companies. There are companies, interested in use of the Japanese technologies in the agricultural sector.
Azerbaijan has a favorable climate and soil. It exports vegetables and fruit to the neighbor countries.
In addition to this it has been investing into growing of cotton, silk, hazelnut. If these agricultural crops are competitive in the international market, I think it will have a big impact on the economy of Azerbaijan. Since the foundation of the modern Japanese state in the 19th century, spinning-textile industry of the country was almost the only source for gaining revenues till mid of the 20th century. Besides, it also has big technical facilities and human reserves in this area.
Tourism is an important source of income in developed countries. The tourism potential of Azerbaijan amazes me every time I visit the regions of the country. Broad lands, covered with greenery, saved historical beautiful roads planted with trees, lots of old caravansaries, as well as other dry lands and mountains attract many Japanese with uniqueness and beauty. The Japanese tourism companies are capable of “creating” tourism resources at unknown places. If it involves such country as Azerbaijan which is rich in tourism resources, I think it is possible to create many “golden directions” here. I think combining of several tourism resources will let prolong the stay of foreign tourists here. It will be a big success in terms of gaining foreign currencies. It will be great if the Japanese tourism companies take part in this process.
CE: Mr. Ambassador, free economic industry zone are being created in Azerbaijan at present. Does Japan, as a country of industry zones, plan to take part in these projects?
Tsuguo Takahashi: We are studying this issue, though I can note the insufficiency of information for our businessmen. The Azerbaijani parliamentary economic delegation has recently visited Japan. Therefore, I hope that the Japanese businessmen are widely informed about Azerbaijan’s interest in these projects.
CE: Are there high level visits expected?
Tsuguo Takahashi: President of Azerbaijan has already visited Japan twice and as far as I see, expectations are associated with a visit from Japan now. Baku hosted the annual session of ADB in May of the last year, attended by Vice Premier of Japan Tapo Aco. President of the Parliamentary Group for friendship between Japan and Azerbaijan Akira Amari also visited Baku in October of the last year. I am sure that our Prime Minister will visit Azerbaijan in near future. As far as the current situation in Japan is concerned, visit of the President of the Russian Federation Vladimir Putin has been scheduled for December 15. It will be a big political event.
CE: What hopes does Japan rest on this visit of the President of Russia?
Tsuguo Takahashi: As you know,Japan and Russia have unsolved political issues. The main thing for now is to have a peace agreement signed, which would be the first after the Second World War. Expansion of the economic cooperation between the two countries will be discussed as well. Our Prime Minister met with the President of Russia 13 times. This time the official visit will be paid by invitation of the Japanese side. It means that the government of Japan has a certain plan and intention to reach a mutually acceptable solution. Though we understand that one visit will not suffice to have this issue solved fully.
We have 8 areas of cooperation in the economic sector. It is an energy sector, education, development of small and medium entrepreneurship of Russia and Japan, etc. As far as the expansion of relations in the energy sector is concerned, the Japanese companies are already engaged in the Sakhalin-2 project.
I really would like to speed up progression of the Japanese companies in the non-oil sector of Azerbaijan…
CE: Japanese Eximbank is one of the major instruments of the external trade of Japan. What role will it play in the non-oil sector projects of Azerbaijan?
Tsuguo Takahashi: Japanese Eximbank is a Japanese Bank of International Cooperation (JBIC). Arrangement of the operation of the thermal power plant, which I have already mentioned about, was financed by JBIC. As the function of financing has been passed to the management of JICA, now it operates only as an export-import bank. There are several rules for financing. In case if the Japanese companies decide to invest overseas, they get an investment lending. Apart from financing of the Japanese companies, there is also a rule of financing a government or a company of a foreign state. Export-import operations of the Japanese companies are also financed.
Apart from this, “entrepreneurship development lending” is provided to run business abroad and import from overseas, to develop a balance of international revenues and expenditures of the country, stability of the currency (under condition of purchase of materials and appliances from the Japanese companies), as well as stands as a guarantor of capital investments, lending, obligations of Japanese companies engaged in entrepreneurship abroad. I really would like to speed up progression of the Japanese companies in the non-oil sector of Azerbaijan in order to strengthen economic cooperation between the two countries.
CE: Do you see the prospects of development of the construction sector of Azerbaijan and engagement of the Japanese companies in this area? What can Japan offer for the regional development of the country?
Tsuguo Takahashi: Infrastructure is rapidly developing in Azerbaijan and I assume that the development of the construction sector will keep continuing. There are many small and big construction companies in Japan. Even small and medium companies possess high level technologies. We also have high-level seismic resistance and seismic isolation technologies. Large construction companies are always ready for offers from abroad. Apart from this, the Ministry of Land, Infrastructure, Transport and Tourism of Japan supports small and medium entrepreneurships for promotion abroad.
As far as the Japanese embassy is concerned, there is a “grass roots” program aimed at developing of regions and lending free support to small-scale social projects. So far we have implemented 211 projects. 80 of them include construction of schools and relate to the education field. 56 projects concerned water supply facilities construction, and 62 projects envisaged repair of medical stations. The Japanese state looks after the removal of difference in arranging an infrastructure of cities and regions and finds improvement of infrastructure in regions important for general development of Azerbaijan.
We can offer pollutant control technology for the Caspian Sea
CE: What kind of developments and technologies can Japan offer the Caspian states to clean the Caspian Sea from man-caused pollutants as this issue is always in the center of attention of the Summit of the Heads of Caspian States whose following session is due in Astana in 2017?
Tsuguo Takahashi: Japan has pollutant control technologies and Japanese companies show interest in purification of the water of the Caspian Sea. However, no operations have been performed in this area yet. To all appearances, the Japanese companies, which show interest in this issue, do not know where and from whom they should accept an order to use water purification technologies in projects. If we get a concrete proposal from Azerbaijan in future, we will give a serious thought to it.
CE: The consortium of the Japanese companies has recently received the first results of the shelf production of methane hydrates, one of the most promising energy resources of the future. What have been the results of these developments and are the Japanese companies ready to share their experience with colleagues from Azerbaijan where big reserves of this raw material lie?
Tsuguo Takahashi: In recent years, Japan has conducted numerous tests in exploration drilling in the territorial waters. However, it is assumed that it will take long before commercial production technologies are installed. As a result of exploration of the seabed, over 1700 methane hydrate bearing sites were revealed. According to the newest report announced in September 2016 by the Agency of Natural Resources and Energy under the Ministry of Economy, Trade and Industry of Japan, presence of 600 ml cubic meters of resources (if conversed into methane gas, it equals to the volume of natural gas consumed in Japan within two days) was revealed in the Japanese Sea near the shores of Niigata.
As we are are exploring technologies on recovery of methane hydrates in the upper layer and doing survey to define their theoretical condition, it is early to speak about joint work with Azerbaijan. Personally, I think that reduction of energy dependence of Japan on import by using methane hydrates as a raw material is more preferable for our country. Therefore, it would be very good to cooperate with Azerbaijan in this area.
Thank you for the interview
Interview made by Sabina Mammadova, Emil Mammadov