Ensuring Japan's critical resource security: Case studies in rare earth element and natural gas supplies

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Article Highlights

  • It is estimated that over 50 percent of Japan's rare earth element imports will come from outside of China by mid-2013.

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  • In 2011, Japan imported about 27 percent of its liquified natural gas from the Middle East, 39 percent from Southeast Asia, and 9 percent from Russia.

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  • China's dominance of the global supply of rare earth elements is spurring Tokyo to take steps toward bolstering its security.

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Introduction

Japan continues to grapple with a challenge that has befuddled it since the early days of its rise as an industrial power: it suffers from a scarcity of the natural resources most critical to its economic well-being and national security. This is especially troubling now compared to recent decades as power dynamics across the Eurasian landmass are in flux, with China, Russia, Iran, and others flexing their muscles or otherwise acting in ways not conducive to a stable international environment. The confluence of these economic and security concerns could prove troublesome for Asia and the United States.

Asia’s Evolving Security Environment. China’s growing assertiveness is largely responsible for Asia’s deteriorating security environment—for Japan’s in particular. Beijing has seemingly abandoned its decade-long policy of “smile diplomacy,” aimed at projecting a nonthreatening countenance to its neighbors. An accounting of just a few of China’s provocative actions in recent years illustrates why those neighbors now feel increasingly threatened. Since 2009, the Chinese government or its maritime forces have:

  • Harassed an unarmed US naval survey ship in international waters;
  • Refused to condemn North Korea’s unprovoked sinking of a South Korean naval vessel or the shelling of a South Korean island;
  • Embargoed the export of rare earth elements (REEs) to Japan;
  • Threatened the Philippine government and civilian vessels in contested waters;
  • Unilaterally announced a fishing ban in the northern half of the South China Sea;
  • Cut the towed survey cable of one PetroVietnam vessel and rammed another;
  • Engaged in a maritime contretemps with the Philippines over the disputed Scarborough Shoal and instituted an apparently permanent “occupation” of the nearby waters;
  • Stoked, or at least allowed, instances of mass anti-Japanese violence in China in response to the Japanese government’s purchase of three disputed islands;
  • Launched an ongoing effort to shift the status quo around the disputed Senkaku (called “Diaoyu” in Chinese) islands, relying on paramilitary and naval vessels and aircraft to do so.


Much of Asia continues to feel increasingly unsettled about China’s rise, but perhaps no one state more so than Japan. Japan certainly has a better capacity for self-defense than do most Asia-Pacific states, but Japan has also been a longstanding target of Communist Party vitriol in a way that the Philippines, for example, has not. Tokyo’s various attempts to apologize for its behavior during Japan’s imperial period, not to mention Japan’s longstanding status as China’s top foreign aid donor, have done little to arrest anti-Japanese sentiments in China. Beijing’s need—whether actual or contrived—to right “historical wrongs” ensures continuing distrust between East Asia’s two most important capitals. Japanese leaders’ occasional revisionist comments regarding Japan’s wartime behavior, of course, do not help matters.

China’s military investments likewise have Japan concerned. The People’s Liberation Army’s (PLA) developing anti-access/area denial (A2/AD) capabilities is designed to keep US forces distant from Chinese shores and deter or prevent those forces from intervening in a conflict on China’s periphery. By wearing away at the credibility of Washington’s security commitment, Chinese A2/AD puts pressure on the US-Japan alliance, heightening Japanese insecurity. PLA modernization of its naval, air, and missile forces threatens Japanese forces as well. Overall, the military balance in East Asia is shifting in a direction less and less favorable to the United States and its key Asian ally, Japan.

At the same time, China has used nonmilitary means to pressure its neighbors and pursue strategic ends in the region. As we will discuss in the next section, Beijing cut off exports of REEs to Japan in fall 2010. During its standoff with Manila over the Scarborough Shoal, China halted the import of bananas from the Philippines. To China, economic coercion appears to be a legitimate foreign policy tool, especially in the early stages of a bilateral dispute.

China has also made use of its nonnaval maritime forces—essentially coast guard equivalents—to enhance its agenda. In recent years, these vessels have regularly entered disputed waters, harassed other states’ research and fishing vessels, and even harried unarmed American naval ships. Beijing seems unconcerned about the potentially escalatory nature of its patrol ships’ activities, evident in its activities in the East China Sea, where Chinese maritime ships are now facing off against Japan’s highly capable coast guard vessels on a regular basis.

Japan and China have thus been engaged in a contretemps at sea since September 2012, after the Japanese government purchased three of the Senkaku islands from a private owner. Japan, China, and Taiwan all claim sovereignty over the islands, though Tokyo has administered them since the 1971 US-Japan Okinawa Reversion Agreement. Chinese vessels have regularly entered what Japan considers to be its territorial waters, previously a relatively uncommon occurrence. Chinese and Japanese ships are tracking and shadowing each other, and Japan’s Self-Defense Forces have even scrambled fighter jets on a number of occasions in response to incursions by Chinese surveillance planes into Japan-claimed air space.

When Tokyo assesses this immediate dispute with Beijing as well as Chinese behavior across the arc stretching from Korea in the north to Asia’s littorals in the south to India in the west, it sees a China that is challenging the existing, US-led security order—an order that has kept the region generally at peace, stable, and increasingly prosperous. Japan and other states in the region are increasingly and rightly concerned with what the region will look like if that order is challenged by an ever more powerful and aggressive China.

In addition to its narrow disputes with China, Japan must also take note of the North Korean leadership’s erratic, crisis-inducing behavior; a Middle East and North Africa awash in uncertainty; a Southeast Asia divided in how to deal with China’s growing assertiveness and power; and a United States focused on domestic problems and willing to accept significant cuts to its defense budget at a time of global insecurity. Naturally enough, this evolution of the security environment is generating concerns within Japan about the country’s potential vulnerabilities and, in particular, concerns over the security of the foreign natural resources required to fuel Japan’s economy. China’s willingness to put pressure on adversaries’ economies, the instability in the oil- and gas-producing world, and the relative decline in America’s ability to guarantee open access to the world’s key sea lanes have brought concerns  about Japan’s critical resources supply security to a head.

The Critical Resource Security Conundrum. The critical resource security conundrum raises a number of converging problems. Most obvious is the economic future of already resource-poor nations such as Japan. Insecure supplies of needed resources could imperil the future development of Japan’s commercial and defense industries (as well as those of the United States). Fortunately, Japan is already looking for alternative sources of supply. But alternative sources require new supply chains with accompanying infrastructure.

The acquisition of new sources and the building of new supply chains will also introduce new vulnerabilities. Overwater routes, especially those across the Asian littorals, are susceptible to maritime disruptions and the problems brought about by ongoing maritime territorial disputes. Indeed, the alleviation of high prices by increased supply could be negated if insufficient mechanisms for safe transport of these materials are in place.

Already sensitive disputes in the South China Sea, East China Sea, and Sea of Japan could be exacerbated if the transport of commodities enters into the security equation. If China perceives efforts to develop new infrastructure as threatening to China’s own supply chains or in violation of its maritime rights, Beijing may take steps that will increase tensions in the region. These issues are serious and need to be addressed in a manner that enhances cooperation between America and its Asian allies and partners.

In this paper, we will consider two critical resource security case studies: REEs and natural gas. Together, they demonstrate how Japan’s resource security concerns are informing Japanese foreign policy in important ways. They likewise provide new opportunities for increased US-Japanese cooperation and new avenues for enhancing US-Japanese security ties.

Read the full paper.

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