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Japan The Middle East
The importance of the Middle East expanded dramatically
in the
1970s with the jumps in crude oil prices. Japan was deeply
concerned with maintaining good relations with these
oil-producing
nations to avoid a debilitating cut in oil supplies.
During the
1980s, however, oil prices fell and Japan's concerns over
the
security of its oil supply diminished greatly.
The Middle East represented only 7.5 percent of total
Japanese
imports in 1960 and 12.4 percent in 1970, with the small
rise
resulting from the rapid increase in the volume of oil
consumed by
the growing Japanese economy. By 1980, however, this share
had
climbed to a peak of 31.7 percent because of the two
rounds of
price hikes in the 1970s. Falling oil prices after 1980
brought
this share back down to 10.5 percent by 1988--actually a
lower
percentage than in 1970, before the price hikes had
started. The
major oil suppliers to Japan in 1988 were Saudi Arabia and
the
United Arab Emirates. Iran, Iraq, and Kuwait were also
significant,
but smaller, sources. These three countries became less
important
oil suppliers after 1980 because of the Iran-Iraq war
(1980-88) and
resulting damage to loading facilities and shipping.
As imports from the Middle East surged in the 1970s, so
did
Japan's exports to the region. Paralleling the pattern for
imports,
however, this share fell in the 1980s. Amounting to 1.8
percent in
1960, exports to this region rose to 11.1 percent of total
Japanese
exports in 1980 but then declined to 3.6 percent by 1988.
Part of Japan's strategy to ensure oil supplies is to
encourage
investment in oil-supplying countries. However, such
investment
have never kept pace with Japan's investments in other
regions. The
country's expanding need for oil helped push direct
investment in
the Middle East to 9.3 percent of total direct investments
abroad
by Japanese companies in 1970, but this share had fallen
to 6.2
percent by 1980 and to only 1.8 percent by 1988. The
Iran-Iraq War
(1980-88) was a major factor in the declining interest of
Japanese
investors, exemplified by the fate of a large US$3 billion
petrochemical complex in Iran, which was almost complete
when the
Islamic revolution took place in Iran in 1979. Completion
was
delayed first by political concerns (when United States
embassy
personnel were held hostage) and then by repeated Iraqi
bombing
raids. The project was finally canceled in 1989, with
losses for
both Japanese companies and the Japanese government, which
had
provided insurance for the project.
Data as of January 1994
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