Japan and Saudi Arabia are reportedly set to sign an agreement that would allow Japan to make emergency requests for supplies of crude oil under extraordinary circumstances, in case of a terrorist attack, unrest in the Middle East or a sudden increase in the price of oil.
Saudi Arabia, one of the world’s biggest sources of crude oil, is expecting a decline in exports due to the growing demand domestically and plans to expand Saudi oil refineries to export more refined products. Japan is one of the world’s biggest importers of oil in the industrialized world and is extremely vulnerable to any sudden halt to shipments. The telephone hotline to Saudi Arabia will bind ties between one of the world’s largest oil importers and the top producer in OPEC. China and India are the Asian countries that are highly dependent on oil to fuel their economies. However, they do not have access to emergency stockpiles, unlike Japan and Western countries. Japanese Economy, Trade and Industry Minister Toshimitsu Motegi will travel to Saudi Arabia to sign the pact and then visit other oil exporters in the Middle East, including the United Arab Emirates.
The oil market has been in flux for the past months, particularly due to tensions in the Middle East and the West’s dispute with Iran and its nuclear program. Western sanctions have felled Iran’s exports by 1 million barrels per day by the end of 2012. These sanctions are aimed to force oil importers like Japan to drastically reduce their purchase of Iranian oil. Iran has threatened to cut off shipments and block major shipping routes in retaliation for this embargo.
[ via The Express Tribune ]