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Sanctions affect Japanese business in Russia, but promising projects remain, says expert

"Our business fears of being punished and forced to deal with Russia with extreme caution - especially given the possible actions of the US," the expert said

TOKYO, December 27. /TASS/. Japanese business considers Russia to be a promising market, but Western sanctions are seriously affecting its activities there, Michitaka Hattori, Vice Director, Japan Institute for Russian and NIS Economic Studies, said in an interview with TASS.

"The impact of economic sanctions on Japanese-Russian economic ties is very strong and is getting stronger every year. As for Tokyo’s own sanctions against Russia they are formal and don’t strike at bilateral economic contacts. However, even such formal participation of Japan is important in the system of sanctions. Our business fears of being punished and is forced to deal with Russia with extreme caution - especially given the possible actions of the US. This trend has especially intensified during the administration of Donald Trump, who is prone to unpredictable decisions. All this puts the Japanese business relations with Russia in a difficult situation when you want to revive contacts, but also have to hit the brake pedal," the expert explained.

"Generally, the business circles of our country regard Russia as one of the promising markets. Automobiles, tires, construction equipment have become the most important items of our sales in Russia. However, in these sectors Japanese manufacturers have already completed construction of their enterprises in Russia, and there will be no more large-scale investments in those areas. Moreover, unfortunately, the scale of production at these plants is insignificant. Therefore it is difficult to assume that contractor companies will go to Russia on a massive scale, for example, manufacturers of car parts," Hattori said.

New prospects

As an example of successful cooperation the expert mentioned sales of Japanese factory equipment for the Yamal LNG project which is conducted by Russian gas producer Novatek in the Arctic region.

"I think that there are great prospects for bilateral cooperation in supplies of equipment for chemical and energy enterprises. However, such projects mainly depend on the efforts of the Russian side," Hattori said.

The expert also sees Japan’s growing interest in the Russian IT-business, including block chain, mining, artificial intelligence.

"It is possible that new investment opportunities will occur in these areas. However, it is not yet clear whether such projects can grow into a large business comparable to the supply of cars or the import of hydrocarbons," he said.