Russian Resource Development and Japan’s Involvement
As the Strait of Hormuz crisis has made clear, Japan remains highly dependent on the Middle East for its crude oil procurement. From the standpoint of energy security, diversifying supply sources is essential, and Russia is one of the few countries capable of serving as an alternative source of crude oil.. In 2015, Russian crude accounted for 8.8% of Japan’s total crude oil imports. A similar pattern can be observed in natural gas importsthe : while Australia accounts for around 40% of Japan’s imports, Russia’s share has remained at around 10%.
Japan has also been substantially involved in Russian energy production projects. Amid the turmoil following the dissolution of the Soviet Union, production sharing agreements (PSAs) favorable to foreign investors were concluded, and Sakhalin-1 and Sakhalin-2, both involving Japanese companies, were launched in the 1990s. These were followed by INK-Zapad and the Yamal LNG project on the Arctic Ocean coast, as the focus of energy development shifted from Sakhalin to Eastern Siberia and eventually into the Arctic.
The Northern Sea Route in Practice
Against the backdrop of climate change, use of the Northern Sea Route has expanded since 2010. Over the past 15 years, the number of voyages between Europe and Asia has increased 26-fold, while transit cargo volume has risen 32-fold. Total cargo throughput is now approximately 21 times greater than transit cargo volume. At the same time, because there are no major centers of demand along the Northern Sea Route, it is difficult to combine multiple transport needs. Compared with the route via the Suez Canal, its transport volume has averaged only around 1.6% over the past 15 years. As a result, one-way shipments of energy resources predominate, while the domestic laws of Arctic coastal states such as Russia, the United States, and Norway exert a significant influence over the use of Arctic shipping routes.
Oil and Gas Potential in the Arctic
The Arctic coastal region has substantial oil and natural gas potential. Recoverable reserves across the Arctic as a whole are estimated at approximately 311.7 billion barrels of oil equivalent (BOE), exceeding Saudi Arabia’s crude oil reserves of 297.5 billion BOE. The cost of producing crude oil in the Arctic ranges from roughly USD 40 to USD 100 per barrel, with an average of around USD 70. Russia possesses vast continental shelves and sedimentary basins, as represented by the Lena, Yenisei, and Ob river basins, and is particularly promising as a natural gas resource region. In addition, sea-ice conditions from the Norwegian Sea to the Barents Sea are favorable for navigation, as illustrated by Murmansk, which remains an ice-free port under the influence of the Gulf Stream. The circulation pattern created by the Earth’s rotation causes sea ice to accumulate along the Canadian and Alaskan coasts.
The Reality of Russian Resource Development
Russia’s resource development in the Arctic, however, has not necessarily proceeded smoothly. In practice, projects have moved forward despite substantial costs in order to remain commercially viable. Fluctuations in oil prices and sanctions imposed by the United States and Europe have affected the progress of resource development projects, while projected crude oil output and natural gas production have declined. Russia has therefore sought to promote resource development in the Arctic by applying tax exemptions to individual projects.
Operation of the Northern Sea Route also involves significant additional costs. In 2016, NOVATEK announced plans to construct transshipment terminals in Murmansk and Kamchatka and expand its transport scheme, but such efforts have not fully resolved the cost problem. In addition to the issue of upstream interests, the need to bear the costs of constructing and operating ice-class LNG carriers and building terminals is a defining feature of this region and of the Northern Sea Route. These costs also place Arctic projects at a disadvantage relative to other oil- and gas-producing regions in terms of both project economics and the investment environment for foreign capital.
The construction cost of an ice-class LNG carrier is approximately 1.5 to 2 times that of a conventional LNG carrier. Charter rates are also high. Whereas a conventional LNG carrier is generally equipped with around four engines, an ice-class LNG carrier requires six, making it less fuel-efficient as well. In addition, icebreaking tankers face challenges in maintaining sailing schedules. Because they must navigate while breaking through sea ice, delays can occur, and disruptions to transport schedules may generate additional costs such as contractual penalties. In fact, looking at the destinations of exports from the Yamal LNG project, slightly less than 80% are bound for Europe, while shipments eastward account for only 23% because sea ice remains around the Bering Strait.
Short- to Medium-Term Outlook for LNG
Following the outbreak of the Strait of Hormuz crisis, LNG supplies from Qatar and the United Arab Emirates were halted. Against this backdrop, the European Union announced its 21st sanctions package on July 23, allowing, for one year, the transfer of Russian LNG to third countries. This is a notable development at a time when the EU is increasing pressure on Russia through measures including prohibitions on long-term LNG supply contracts and pipeline-based natural gas supply contracts. A comparison of Europe’s natural gas procurement before and after Russia’s invasion of Ukraine shows that Europe has not necessarily eliminated Russian gas from its supply mix. Indeed, Russian LNG imports increased between 2021 and 2025.
The supply-demand outlook for natural gas likewise illustrates the scale of Russia’s LNG supply potential. LNG supply is expected to remain tight from 2025 through 2026, but the balance is projected to ease from 2027 onward, with oversupply anticipated by 2030. Thereafter, demand is expected to exceed supply again around 2035. Against this short- to medium-term supply-demand outlook, LNG development in the Arctic is attracting growing attention.
Moves by the Trump Administration
In the United States, there are signs of a more conciliatory approach toward Russia. At the center of this trend is the prospect of U.S.-Russia energy cooperation in the Arctic. In February 2025, when Kirill Dmitriev, CEO of the Russian Direct Investment Fund (RDIF), met with U.S. Special Envoy Steve Witkoff, reports emerged that U.S.-Russia energy cooperation in the Arctic was under consideration. LNG development in Alaska is regarded as one form of such cooperation, and in March 2026 a new Polar LNG project in Alaska was announced. Furthermore, on June 3, President Vladimir Putin authorized the sale of TotalEnergies’ stake in Arctic LNG 2. The divested interest could potentially be transferred to a U.S. company in the future.
With no clear end in sight to the war in Ukraine, the progress of U.S.-Russia energy cooperation warrants close attention. As noted above, LNG demand is projected to exceed supply around 2035. If supplies from Arctic LNG 2 were lost, importing countries could be forced to procure more expensive LNG.
Greenland, which has attracted attention under the so-called “Donroe Doctrine,” is believed to have significant resource potential in rare earths and rare metals. At the same time, however, challenges remain in monetizing these resources and securing the substantial initial investment required for development, including port infrastructure. Chinese and Russian involvement is also not particularly large-scale at present. In light of these circumstances, President Trump’s interest in Greenland may be motivated not only by the acquisition of resources, but also by a desire to shape his historical legacy.
China’s and Japan’s Energy Strategies
China is moving toward the construction of the “Power of Siberia 2” gas pipeline, which would connect the Arctic region with Beijing and which President Putin has reportedly suggested renaming “Power of Siberia 2” as “Power of Baikal”. This development, however, is not necessarily desirable from Russia’s perspective. Following Russia’s annexation of Crimea in 2014, Western sanctions created a precedent in which the price of gas supplied through the existing “Power of Siberia” pipeline connecting Eastern Siberia and China was kept low. If China’s LNG procurement proceeds smoothly in the future, China could also emerge as a major “portfolio LNG exporter.”
For Japan, Russia is an important country when considering both leverage vis-à-vis China and the diversification of energy supply sources and routes. It is therefore necessary to develop an accurate understanding of the actual nature of Russia’s Northern Sea Route. As discussed above, the route is characterized to a significant degree by the one-way transport of energy resources, and its use also requires various negotiations with the coastal states concerned. In making use of the Northern Sea Route, Japan should consider a multilayered approach that advances bilateral consultations alongside multilateral frameworks such as the Arctic Council.
Russian Resource Development and Japan’s Involvement
As the Strait of Hormuz crisis has made clear, Japan remains highly dependent on the Middle East for its crude oil procurement. From the standpoint of energy security, diversifying supply sources is essential, and Russia is one of the few countries capable of serving as an alternative source of crude oil.. In 2015, Russian crude accounted for 8.8% of Japan’s total crude oil imports. A similar pattern can be observed in natural gas importsthe : while Australia accounts for around 40% of Japan’s imports, Russia’s share has remained at around 10%.
Japan has also been substantially involved in Russian energy production projects. Amid the turmoil following the dissolution of the Soviet Union, production sharing agreements (PSAs) favorable to foreign investors were concluded, and Sakhalin-1 and Sakhalin-2, both involving Japanese companies, were launched in the 1990s. These were followed by INK-Zapad and the Yamal LNG project on the Arctic Ocean coast, as the focus of energy development shifted from Sakhalin to Eastern Siberia and eventually into the Arctic.
The Northern Sea Route in Practice
Against the backdrop of climate change, use of the Northern Sea Route has expanded since 2010. Over the past 15 years, the number of voyages between Europe and Asia has increased 26-fold, while transit cargo volume has risen 32-fold. Total cargo throughput is now approximately 21 times greater than transit cargo volume. At the same time, because there are no major centers of demand along the Northern Sea Route, it is difficult to combine multiple transport needs. Compared with the route via the Suez Canal, its transport volume has averaged only around 1.6% over the past 15 years. As a result, one-way shipments of energy resources predominate, while the domestic laws of Arctic coastal states such as Russia, the United States, and Norway exert a significant influence over the use of Arctic shipping routes.
Oil and Gas Potential in the Arctic
The Arctic coastal region has substantial oil and natural gas potential. Recoverable reserves across the Arctic as a whole are estimated at approximately 311.7 billion barrels of oil equivalent (BOE), exceeding Saudi Arabia’s crude oil reserves of 297.5 billion BOE. The cost of producing crude oil in the Arctic ranges from roughly USD 40 to USD 100 per barrel, with an average of around USD 70. Russia possesses vast continental shelves and sedimentary basins, as represented by the Lena, Yenisei, and Ob river basins, and is particularly promising as a natural gas resource region. In addition, sea-ice conditions from the Norwegian Sea to the Barents Sea are favorable for navigation, as illustrated by Murmansk, which remains an ice-free port under the influence of the Gulf Stream. The circulation pattern created by the Earth’s rotation causes sea ice to accumulate along the Canadian and Alaskan coasts.
The Reality of Russian Resource Development
Russia’s resource development in the Arctic, however, has not necessarily proceeded smoothly. In practice, projects have moved forward despite substantial costs in order to remain commercially viable. Fluctuations in oil prices and sanctions imposed by the United States and Europe have affected the progress of resource development projects, while projected crude oil output and natural gas production have declined. Russia has therefore sought to promote resource development in the Arctic by applying tax exemptions to individual projects.
Operation of the Northern Sea Route also involves significant additional costs. In 2016, NOVATEK announced plans to construct transshipment terminals in Murmansk and Kamchatka and expand its transport scheme, but such efforts have not fully resolved the cost problem. In addition to the issue of upstream interests, the need to bear the costs of constructing and operating ice-class LNG carriers and building terminals is a defining feature of this region and of the Northern Sea Route. These costs also place Arctic projects at a disadvantage relative to other oil- and gas-producing regions in terms of both project economics and the investment environment for foreign capital.
The construction cost of an ice-class LNG carrier is approximately 1.5 to 2 times that of a conventional LNG carrier. Charter rates are also high. Whereas a conventional LNG carrier is generally equipped with around four engines, an ice-class LNG carrier requires six, making it less fuel-efficient as well. In addition, icebreaking tankers face challenges in maintaining sailing schedules. Because they must navigate while breaking through sea ice, delays can occur, and disruptions to transport schedules may generate additional costs such as contractual penalties. In fact, looking at the destinations of exports from the Yamal LNG project, slightly less than 80% are bound for Europe, while shipments eastward account for only 23% because sea ice remains around the Bering Strait.
Short- to Medium-Term Outlook for LNG
Following the outbreak of the Strait of Hormuz crisis, LNG supplies from Qatar and the United Arab Emirates were halted. Against this backdrop, the European Union announced its 21st sanctions package on July 23, allowing, for one year, the transfer of Russian LNG to third countries. This is a notable development at a time when the EU is increasing pressure on Russia through measures including prohibitions on long-term LNG supply contracts and pipeline-based natural gas supply contracts. A comparison of Europe’s natural gas procurement before and after Russia’s invasion of Ukraine shows that Europe has not necessarily eliminated Russian gas from its supply mix. Indeed, Russian LNG imports increased between 2021 and 2025.
The supply-demand outlook for natural gas likewise illustrates the scale of Russia’s LNG supply potential. LNG supply is expected to remain tight from 2025 through 2026, but the balance is projected to ease from 2027 onward, with oversupply anticipated by 2030. Thereafter, demand is expected to exceed supply again around 2035. Against this short- to medium-term supply-demand outlook, LNG development in the Arctic is attracting growing attention.
Moves by the Trump Administration
In the United States, there are signs of a more conciliatory approach toward Russia. At the center of this trend is the prospect of U.S.-Russia energy cooperation in the Arctic. In February 2025, when Kirill Dmitriev, CEO of the Russian Direct Investment Fund (RDIF), met with U.S. Special Envoy Steve Witkoff, reports emerged that U.S.-Russia energy cooperation in the Arctic was under consideration. LNG development in Alaska is regarded as one form of such cooperation, and in March 2026 a new Polar LNG project in Alaska was announced. Furthermore, on June 3, President Vladimir Putin authorized the sale of TotalEnergies’ stake in Arctic LNG 2. The divested interest could potentially be transferred to a U.S. company in the future.
With no clear end in sight to the war in Ukraine, the progress of U.S.-Russia energy cooperation warrants close attention. As noted above, LNG demand is projected to exceed supply around 2035. If supplies from Arctic LNG 2 were lost, importing countries could be forced to procure more expensive LNG.
Greenland, which has attracted attention under the so-called “Donroe Doctrine,” is believed to have significant resource potential in rare earths and rare metals. At the same time, however, challenges remain in monetizing these resources and securing the substantial initial investment required for development, including port infrastructure. Chinese and Russian involvement is also not particularly large-scale at present. In light of these circumstances, President Trump’s interest in Greenland may be motivated not only by the acquisition of resources, but also by a desire to shape his historical legacy.
China’s and Japan’s Energy Strategies
China is moving toward the construction of the “Power of Siberia 2” gas pipeline, which would connect the Arctic region with Beijing and which President Putin has reportedly suggested renaming “Power of Siberia 2” as “Power of Baikal”. This development, however, is not necessarily desirable from Russia’s perspective. Following Russia’s annexation of Crimea in 2014, Western sanctions created a precedent in which the price of gas supplied through the existing “Power of Siberia” pipeline connecting Eastern Siberia and China was kept low. If China’s LNG procurement proceeds smoothly in the future, China could also emerge as a major “portfolio LNG exporter.”
For Japan, Russia is an important country when considering both leverage vis-à-vis China and the diversification of energy supply sources and routes. It is therefore necessary to develop an accurate understanding of the actual nature of Russia’s Northern Sea Route. As discussed above, the route is characterized to a significant degree by the one-way transport of energy resources, and its use also requires various negotiations with the coastal states concerned. In making use of the Northern Sea Route, Japan should consider a multilayered approach that advances bilateral consultations alongside multilateral frameworks such as the Arctic Council.