GCC and Japan to restart talks on free trade deal

Hamad Al Kaabi/UAE Presidential Court

• The next round of Japan-GCC talks is scheduled for 2024
• Japanese PM Fumio Kishida is visiting Saudi, UAE and Qatar this week
• In 2022 Japan’s trade with the UAE and Saudi alone topped $100bn

Japan and the GCC are to resume free trade talks, the pair have announced, as Prime Minister Fumio Kishida visits the region.

Kishida is meeting leaders in Saudi Arabia, the UAE and Qatar this week as he seeks to build economic ties across the Gulf. The GCC announcement followed talks between the Japanese prime minister and the council’s secretary-general Jasem Albudaiwi.

The next round of Japan-GCC trade talks is set to take place in 2024.

• GCC and Japan move into fast lane for trade growth
• Saudi Arabia and Japan to work on producing ammonia
• Oil to outer space: the changing face of UAE-Japan trade

Trade between Japan and the GCC members stood at around $80 billion in 2021, with Saudi Arabia and the UAE making up around 80 percent of the total. The relationship is growing rapidly: in 2022 Japan’s trade with the UAE and Saudi Arabia alone topped $100 billion.

“Oil underpins much of GCC-Japan trade,” said Freddie Neve, senior Middle East associate at think tank Asia House, “but Japan is increasingly interested in the opportunities emerging from the Gulf’s development of alternative energy sources, such as hydrogen.” 

Saudi Arabia, the UAE and Qatar account for more than 80 percent of Japan’s crude oil imports but, in 2020, Saudi Arabia sent blue ammonia to Japan.

Since then Japanese energy firms such as Itochu, Inpex and Idemitsu have agreed to buy blue ammonia from Adnoc, while the Japan Bank for International Cooperation has signed a $3 billion financing deal with the oil giant to develop hydrogen technology.

Kishida was in Jeddah on Sunday and held talks with Crown Prince Mohammed bin Salman.

Saudi Press Agency

A roundtable meeting, attended by Kishida and Saudi investment minister Khalid Al Falih, announced 26 memoranda of understanding and investment agreements in sectors including healthcare, green energy, chemicals, manufacturing, finance, technology, agriculture, environment and real estate.

The Japanese PM arrived in Abu Dhabi on Monday morning. Before his visit, he said in a statement that he would be proposing a Global Green Energy Hub initiative.

This project aims to combine the geographical advantage, low-cost renewable energy resources and strong investment capacities of the UAE and the cutting-edge decarbonisation technologies of Japan. 

“By fully utilising these strengths of both countries, we can together turn the Middle East into a global hub in the supply chain of the next-generation fuels and mineral resources,” he said.

Tokyo also intends to propose a Japan-UAE Innovation Partnership described as an “enlarged framework for industrial collaboration”. 

Under this initiative, Japan will make greater efforts to support an expanded flow of foreign direct investment into the country and its semiconductor industry, with a view to increasing the resilience of the global supply chain.

Japanese companies have been involved in the development of the oil sector in Abu Dhabi since the 1960s. More recently, many have contributed to the building of the UAE’s key infrastructure, including the construction and operation of the Dubai Metro and seawater desalination plants.

The UAE has the largest number of Japanese expatriates in the Middle East at approximately 4,500 and hosts about 340 Japanese companies. 

Kishida also highlighted co-operation in space ventures, with the UAE’s KhalifaSat satellite and Mars probe both carried by Japanese H2-A rockets. 

“I am confident that future-oriented efforts such as this will lead to a greater success in the near future,” he said.

Asia House’s Neve said: “Gulf sovereign wealth funds in particular are looking towards Japan for growth opportunities and assets that can support their own countries’ economic diversification away from oil. 

“On the other hand, Japan is interested in the investment opportunities arising from the Gulf’s economic diversification.”