TOKYO, 18 December 2007 — Japan and the United Arab Emirates yesterday signed an accord to strengthen economic ties, including a deal for Japanese banks to extend a multibillion-dollar loan to a state-owned Abu Dhabi oil firm. Japan hosted high-level economic talks with the UAE in the face of growing competition for energy from the fast-growing Chinese and Indian economies. The deal came at the first meeting in Tokyo of a joint economic committee made up of cabinet-level officials.
“I feel certain we will be able to forge a more idealistic partnership by combining stable supplies of crude oil from the UAE and extending Japan’s technological and financial aid,” Foreign Minister Masahiko Komura told the meeting, according to a Japanese official.
Japan relies on the Middle East for roughly 90 percent of its oil, and the UAE is its second-biggest supplier after Saudi Arabia, meeting about 25 percent of its needs.
Japan has voiced concerns about securing resources in the face of rising competition from China and India.
“Japan-UAE relations have been developing steadily and such relations are particularly strong in the field of energy and gas,” UAE Crown Prince Mohammed bin Zayed Al-Nahayan told Japanese Trade Minister Akira Amari, according to a Japanese official. “We want to continue to cooperate with Japan.”
Under the agreement, the two countries will strengthen their partnership in the field of energy, jointly boost support for small businesses and speed up talks on legal arrangements to avoid dual taxation.
As part of the accord, the state-owned Japan Bank for International Cooperation agreed to team up with private-sector banks to provide loans of three billion dollars to the Abu Dhabi National Oil Company, officials said.
“The Japan Bank for International Cooperation signed the deal with the Abu Dhabi National Oil Company,” said the bank’s spokesman Ryutaro Nishizaki.
The loans will be provided on the condition that the UAE ensures long-term oil supplies for Japan, a source close to the deal said.
On the sidelines of the talks, Abu Dhabi Crown Prince Sheikh Mohammed bin Zayed Al-Nahayan, who arrived here on Sunday, held a series of meetings with Japanese leaders, including Prime Minister Yasuo Fukuda.
“Our cooperative relations in the field of energy is a base of the bilateral relations, and extremely important,” Fukuda told Mohammed, according to a Japanese government official.
Fukuda also said Japan was ready to transfer energy-saving technology to the Arab state and provide support for the country’s effort to improve its education system.
“The crown prince told our prime minister that relations between the UAE and Japan are ideal, and he said he hopes the bilateral relations will make further progress,” the official said.
The UAE is the second-largest supplier of oil to Japan, Asia’s biggest economy.
The one-day economic meeting between Japan and the UAE was the first of its kind and came amid increased efforts between the two countries to strengthen ties following a visit earlier this year by then prime minister Shinzo Abe.
The economic talks, chaired by Japan’s Foreign Minister Masahiko Komura and his UAE counterpart Sheikh Abdullah bin Zayed Al-Nahayan, also called for progress in free trade negotiations between Japan and Arab nations.
Japan and the six GCC nations — Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE — began free trade talks last year with the intention of concluding an accord in 2008.
Yesterday’s talks come as UAE investors, flush with petrodollars, show increasing interest in Japan.
Japanese energy giant Cosmo Oil said in September that it would sell a 20 percent stake in its business to the Abu Dhabi-owned International Petroleum Investment Company.
Dubai International Capital meanwhile said in November that it had bought a “substantial” stake in Japanese consumer electronics giant Sony Corp.
In a related event, the Japan Bank for International Cooperation (JBIC) is set to sign a deal to co-finance up to $3 billion in loans to the Abu Dhabi National Oil Co. (Adnoc) of the UAE, an industry source said yesterday.
The deal comes after the state-backed Japanese bank signed a strategic partnership with state-run Adnoc earlier this year in a bid to deepen bilateral ties in the oil and gas sector and secure long-term crude oil supply deals for Japanese oil firms.
Adnoc will get the proceeds as a form of an advanced payment for crude oil sales to Japanese oil firms, and return it via the long-term crude exports to Japan, the source said.
JBIC’s loan, to be coordinated with a few private banks, is due to be signed in Tokyo later in the day, the source said. JBIC declined comment.