S/P DIRECTOR KRASNER'S MAY 10 MEETING WTIH DEPUTY

C O N F I D E N T I A L SECTION 01 OF 03 TOKYO 002610 SIPDIS SIPDIS STATE FOR EAP/J, EAP/EP. PLEASE PASS TO USTR CUTLER, BEEMAN, NEUFFER, GENEVA FOR USTR E.O. 12958: DECL: 05/12/2026 TAGS: PREL ECON ETRD ENRG IR KS RS CH ID JA SUBJECT: S/P DIRECTOR KRASNER'S MAY 10 MEETING WTIH DEPUTY MINISTER YABUNAKA REF: TOKYO 2609 Classified By: Deputy Chief of Mission Joe Donovan. Reason: 1.4 (b)(d) ¶1. (C) Summary. In a wide ranging discussion on May 11, MOFA Deputy Minister for Economic Affairs Yabunaka told visiting S/P Director Stephen D. Krasner: -- The main focus for Japan at the St. Petersburg G-8 summit is to be energy security, but he was skeptical that a useful outcome could be reached. -- Japan was totally opposed to Iran's obtaining nuclear weapons and could withstand an oil blockage by acquiring replacement oil on the global market even though approximately 20% of its oil came from Iran. However, Japan was concerned that China would effectively undercut any pressure that might be brought to bear through oil sanctions. -- Excluding the U.S. from East Asian architecture would be "fatal." Thus Japan opposed admitting Russia to the EAS, without the U.S. also being included. Japan would continue to more closely engage India and move to include it in regional groupings. -- Japan's relations with Korea would improve within six months with a new Japanese PM, and were manageable until then, even should the Koreans conduct oceanographic mapping around the Liancourt Rocks. -- Yabunaka agreed with Krasner's suggestion that Japan and the U.S. jointly consider a more differentiated approach to the foreign assistance that would be appropriate to countries in various stages of development. End Summary. G-8 Summit and Energy -------------- ¶2. (C) MOFA Deputy Minister for Economic Affairs Mitoji Yabunaka discussed a wide range of issues with visiting S/P Director Stephen Krasner over lunch on May 10. They were joined by DCM Joe Donovan and S/P member Evan Feigenbaum. Yabunaka, who is G-8 sherpa for Japan, observed that Russia had chosen energy security as a focus of the summit because energy was an area where Russia retained a high degree of global importance and was also an area where the government exercised control domestically. What Japan wanted to come out of the summit were clear principles on energy security and on the need for stable and reliable supply, notably that energy should not be used for political purposes. However, each nation viewed energy security differently and the summit schedule was so packed that Yabunaka was not confident that a useful outcome could be achieved. He noted that his two standing instructions from the Prime Minister were to be cooperative with Russia as summit president and to be sure the summit was a success. He joked that these were contradictory. ¶3. (C) Russia, Krasner noted, had chosen what initially appeared to be non-controversial subjects for the summit. It had a low definition of summit success: that the meeting was held, nothing bad happened and Putin would be seen as a world leader. With its energy supplies, Russia was in a position to be an arbitrator of global energy markets, but it seemed to have no such vision and conducted energy relations bilaterally. Even if it had such a vision, Krasner wondered if Russia could execute it due to corruption and concentration of power. Noting that 20% of Nigeria's oil production was stolen, Krasner said that one of the best ways to help ensure energy supply was to help improve governance in oil producing countries. Responding to Yabunaka's comment that Japan would support energy efficiency targets, Krasner said that President Bush had raised the public consciousness of this issue and that America was investing large amounts in alternative energy sources. He also noted the current rise in oil prices was not causing the same macroeconomic damage as the rise in the 1970's because of increased efficiency. Iran -------------- ¶4. (C) Japan opposed "without question" Iran developing nuclear weapons, Yabunaka reaffirmed. Picking up on an earlier comment of Krasner's that the market for oil was TOKYO 00002610 002 OF 003 truly global, Yabunaka said that even though Japan gets 20% of its oil from Iran, this was not a big issue for Japan's policy, because they had the money to buy oil elsewhere. However, Japan worried that China could undercut oil sanctions on Iran by picking up the slack. Krasner said he did not expect oil sanctions to be imposed due to the cost such sanctions would have for the consumer. He said that the Iranian regime would desist from making nuclear weapons if it deemed it necessary to do so for domestic reasons. The revolution had not delivered on its promises and Iran could not afford to be isolated from the West. China could not help Iran in this regard. ¶5. (C) Yabunaka worried that if the UNSC could not take action on Iran that the issue would come up in the G-8 summit. Krasner said if the UNSC could not make progress it would be because of Russia and therefore questioned whether the G-8 would be able to make progress. He concluded that the UNSC was the way forward on the issue, at least for now. East Asia Architecture -------------- ¶6. (C) Excluding the United States from East Asian architecture would be "fatal," Yabunaka stated. He explained how Japan had pushed for the EAS to be opened up to India, Australia and New Zealand, but had said that to have Russia join without the U.S. also joining would be impossible for Japan. Japan would continue to support engaging India more closely in regional organizations. Yabunaka noted that while he supports APEC, it was difficult to make such a large organization more productive. ¶7. (C) Krasner responded that it was key that the U.S. remain engaged in Asia, although the U.S. also recognized that the development of Asian regional institutions was normal. The question was how to combine these two facts. Feigenbaum noted that the problem in East Asia was not a lack of regional organizations but the fact that there were too many. One could not simply look at EAS in isolation from other groupings. If EAS took on a security function it would likely compete with and potentially undermine ARF. Likewise for APEC in many economic areas. There has to be a joint effort by like-minded countries to look at the whole chessboard of organizations together. Otherwise, process, tactics and inertia would push the creation of new organizations, whereas the U.S. favored a functional approach that built "community" not simply by declaring it but by creating a track record of success on mutual interests and key problems. Feigenbaum floated the idea of likeminded states such as the U.S., Japan, Australia, and Singapore working together informally to develop a common picture, including how organizations impacted each other. Yabunaka appeared interested but was non-committal. South Korea -------------- ¶8. (C) The current tensions between Japan and South Korea meant that the United States would find it more difficult to build on its good relationship with both countries in developing a regional architecture together with them, Krasner noted. He asked whether the situation would change. Yabunaka replied that he expected better relations within six months, under the new Japanese Prime Minister (who is expected to assume office in September). As if by way of explaining that the current problems between Japan and Korea were not deep, Yabunaka commented that when PM Koizumi visited Seoul, shortly after his second trip to Pyongyang, President Roh had publicly dismissed the historical and Yasukuni shrine issues as not standing in the way of improved Japan-ROK relations. Now things in Seoul had apparently changed. In response to a question about the Liancourt Rocks dispute, Yabunaka said that it could be managed and that even another South Korean oceanographic expedition would not blow the dispute out of control. Yabunaka also asserted that Korean enthusiasm for China was waning, as Korean companies were encountering stiff competition there. ODA --- ¶9. (C) Krasner noted that Randall Tobias had been appointed to coordinate all aid programs under USAID and State. Tobias was developing five-year plans for aid programs and TOKYO 00002610 003 OF 003 trying to think strategically about what form of aid was appropriate for countries at different levels of institutional development. He asked if Japan would be interested in discussing this second item. Yabunaka replied affirmatively, and noted the success of the U.S.-Japan Strategic Development Alliance working on improving the business climate in Indonesia. Now, the Indonesians were asking where the Japanese investors were. However, Indonesia still had reputational problems among Japanese business as well as tax and labor issues that made it less attractive than Vietnam as a business destination. However, the Indonesian Finance Minister had recently asked for Japan's help in reorganizing their customs procedures, which Japan would provide. ¶10. (U) S/P Director Krasner cleared this message. SCHIEFFER