Monday, January 23, 2012

East Asian energy dilemma over Iran....

East Asian energy dilemma over Iran....
By Yong Kwon

A few months before the outbreak of the Suez Crisis in 1956, Japanese economist Wakimura Yoshitaro pointed to the transport of Middle Eastern oil as a potential flashpoint for global conflict. His assessment appears obvious in retrospect, but his policy recommendation to deal with this serious threat to economic and political stability still remains relevant.

Throughout the 1950s and 1960s, Wakimura and several other prominent economists argued that reliance on oil increased the risk of Japan being dragged into an unwanted war. Therefore, to ensure Japanese neutrality, the best policy for Tokyo would be to develop an independent and reliable source of energy. [1] At the time, people looked to nuclear energy.

More than half a century and a meltdown later, when confidence in nuclear power is at an all-time low and alternative sources of energy are still unready to be applied on an industrial scale, Washington's expansion of the diplomatic and economic offensive against Iran comes as an unpleasant reminder to East Asian nations of the cost of maintaining ties with the United States.

Furthermore, US President Barack Obama's imposition of US foreign policy interests in the Middle East will undoubtedly lead Seoul and Tokyo's attention to develop deeper political ties with Beijing, something Washington has been working to prevent since its strategic refocusing to the Asia-Pacific.

The Middle East has always been a contentious issue in Washington's relationship with Seoul and Tokyo. In particular, economically coercing Tehran is difficult for the two countries because a significant share of their petroleum imports come from Iran. This supply constitutes a vital lifeline to two economies deeply invested in shipping, transport, and heavy industry. The recent urging by the US to reduce or ban oil imports from Iran was met with negotiations from both governments to find alternative means of punishing the Islamic Republic while protecting their vital supply.

Since December of last year, the Japanese government has prohibited domestic businesses from working with Iranian banks and frozen the assets of several Iranian organizations. However, Japanese banks have been allowed to continue doing business with Iran's central bank, which settles the accounts for the oil trade.

South Korea has followed suit by forbidding new investments in Iranian oil and blacklisting Iranian firms, but not taking measures to reduce the supply of the much-valued energy source. Obviously the two governments do not intend to rupture their relationship with the United States. Both states recognize the vital role that Washington plays in regional security and commerce. Nonetheless, the sanctions on Iran remain a divisive policy because it forces both countries to choose between maintaining economic stability and establishing grounds for greater cooperation in security.

Some Israeli security experts have joined US officials in forwarding the view to Seoul that it would be in South Korea's best interest to join the tough sanctions as this would invariably put pressure on North Korea as well. [2] They added that Seoul should not worry about oil imports from Iran because other Gulf nations will increase their supply to supplement South Korea's needs.

While it is true that the ties between Iran and North Korea create greater impetus for South Korea to seek means to prevent Iranians from developing nuclear capabilities, the ongoing measures introduced by the United States have only brought on larger security problems while weapons technology transfers and sharing arrangements are likely continuing undeterred between Pyongyang and Tehran. [3]

Meanwhile, Seoul is seeking alternative sources of crude oil to satisfy its needs in case it has no other choice but to abide by US foreign policy in the Middle East. Likewise, Tokyo has yet to provide an official answer on reducing the import of oil from Iran and probably will not do so until it can secure alternative suppliers.

There appears to be confusion within the fledgling Yoshihiko Noda administration on how to approach the matter. When US Secretary of the Treasury Tim Geithner visited Japan earlier in January, Finance Minister Jun Azumi suggested that Japan will reduce its oil procurement from Iran.

However, Noda, who assumed office in September, has reversed the statement, clarifying that his government has not concluded on whether to follow Washington or not. Meanwhile, certain members of the Diet (parliament) in the opposition Liberal Democratic Party such as Taro Kono have supported Japan having a separate foreign policy from the United States when it comes to Iran. [4]

For the two countries, fears that the escalating crisis along the Straits of Hormuz will raise oil prices to backbreaking levels, regardless of their participation in the sanctions, remains prevalent as they attempt unsuccessfully to remain uninvolved as possible.

Enter China. On his state visit to Qatar, Chinese Premier Wen Jiabao clearly noted Beijing's opposition to both Washington's sanctions and Iran's threat to close the Straits of Hormuz. China has proposed discussing the matter of Iran's nuclear developments at the United Nations with the five permanent members of the Security Council. This solution would be to the best interest of South Korea and Japan as well.

China's passive and pragmatic opposition to US policy on Iran reveals how Washington's aggressive policies in one part of the world could hurt its influence in East Asia. South Korea and Japan are already inextricably more closely tied to the Chinese economy than to the American one.

Even with the US-Korea Free Trade Agreement and the Trans-Pacific Partnership that is under development with Japan, it is hard to foresee the United States taking over China as the principal mover of the region's economic development. Therefore, when East Asian states are forced to undertake high risk issues that are practically non-essential to them, such as Iran's nuclear program, it only highlights the slowly diminishing importance of the United States.

By all means, Washington is still a critical player in the Asia-Pacific, both economically and militarily; however, it increasingly appears out-of-touch with the real concerns of its allies and lacking a long-term game plan for the region.

Obama should revisit the issue that Wakimura Yoshitaro saw as the key problem with the Middle Eastern oil supply. The late economist recognized that the only way stable commerce could continue in the region is if Western states negotiated with, rather than dictate to, oil producing nations, appreciating their aspirations and excising fears. These are not merely the words of a bygone economist, this is diplomacy 101.

1. Laura Hein. Reasonable Men, Powerful Words. Washington D.C: Woodrow Wilson Center Press, 2004.
2. Kirsty Taylor.
Israeli experts urge Korea to sanction Iranian oil imports. Korea Herald, January 19, 2012.
3. Joshua Pollack.
Ballistic Trajectory: The Evolution of North Korea's Ballistic Missile Market. The Nonproliferation Review, July 2011, Vol. 18 No. 2.
4. Event,
Reviving Japan: Can It Win the Asian Century? Washington, DC: American Enterprise Institute, January 4, 2012.