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Japan pledged $10 billion on Wednesday to help Southeast Asian economies procure oil as they grapple with a war with Iran and its spread into the Middle East, boosting crude prices and pushing the region into its worst-ever crisis.
The initiative, dubbed “Power Asia,” will see Japan donate 1.6 trillion yen to Southeast Asian countries to strengthen their energy supply chains and help them better procure crude oil and petroleum products.
The support also aims to prevent knock-on effects on Japan’s own supply chains, Reuters reports.
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Japanese Prime Minister Sanae Takaichi unveiled the initiative within the framework of the Asian Zero Emissions Community (AZEC)+ after holding an online summit with some ASEAN member states. Leaders from the Philippines, Malaysia, Singapore, Thailand, Vietnam and other countries attended the meeting.
Takaichi said the support would be equivalent to 1.2 billion barrels of oil, equivalent to a year’s crude oil imports by the Association of Southeast Asian Nations (ASEAN), Reuters reported.
We are closely connected and interdependent with Asian countries through supply chains and other channels. “The senior high school student told reporters after the meeting.
“We rely on Asian countries for supplies of medical supplies, such as equipment for dialysis patients, as well as waste containers and gloves for surgical procedures,” she said.
Takaichi said supporting the Asian country’s supply chain would “in turn boost Japan’s own economy.”
“Together with Asian countries, we will work to build a resilient energy, critical minerals and supply chain framework so that all of Asia can become stronger and more prosperous.”
Reuters said funds will be provided mainly through state-backed financial institutions such as the Japan Bank for International Cooperation (JBIC) and the Japan Export and Investment Insurance Corporation (NEXI).
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Japan’s plans include providing credit to local companies to purchase alternative resources such as U.S. crude oil, as well as financing and loans to companies and the government in Japan’s supply chains.
Support is also included to help diversify energy sources and increase partner country inventories through tank construction.
Southeast Asian countries have smaller oil inventories compared with Japan, leading to increasingly tight supplies of petroleum products such as crude oil and naphtha, the main raw material for plastics. Production disruptions in Southeast Asia are adding to anxiety among Japanese health care providers who rely on Asia for critical supplies such as containers, tubes and gloves.
According to the Japan Natural Resources and Energy Agency, about 90% of the crude oil passing through the Strait of Hormuz is destined for Asia.
Tokyo said it had secured about four months’ worth of naphtha for domestic use, but a growing number of manufacturers have reported disruptions in deliveries in recent days. The government also said on Wednesday it plans to release an additional 36 million barrels from national oil reserves from early May.
Asked whether countries had requested access to Japan’s oil reserves after the AZEC Plus meeting, Takaichi declined to comment but stressed that the agreement did not involve releasing its stockpiles and would not affect domestic supplies.
- AFP Additional editing by Vishakha Saxena With input from Reuters
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