Japan announced on Wednesday that it would provide $10 billion in financial aid to Southeast Asian countries hit hardest by a surge in oil prices.
Southeast Asian countries have been the worst hit by disruptions to global oil supplies due to Iran’s blockade of the Strait of Hormuz, with Bangladesh the first to face the possibility of its fuel supplies completely running out. In an effort to forestall the possibly catastrophic economic impacts on the region, Japanese Prime Minister Sanae Takaichi said Tokyo would give $10 billion in subsidies to countries in the region.
“Japan will not simply provide oil to countries struggling due to the situation in the Middle East, but will work together with Asian countries to build a resilient energy and critical mineral supply chain,” she said, adding that the total represented one year of Southeast Asian oil imports.
The funds are intended to help Southeast Asian economies find substitutes for their blockaded Gulf trading partners, such as U.S. oil and gas exporters.
The move isn’t simply a goodwill measure to boost Japanese prestige in the region. Japan has been increasingly affected by the downstream effects of Southeast Asian economies’ decreasing production of oil-based goods. Regional producers use oil for products ranging from plastics to medical equipment.
The fertilizer and agricultural industries in Southeast Asia have been among the worst hit. One-third of internationally traded fertilizers and roughly 45% of sulfur exports, a key ingredient in phosphate fertilizers, pass through the Strait of Hormuz. Cheap fuel is also needed to power agricultural equipment.
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Japan’s far-sighted decision to stockpile one of the largest strategic petroleum reserves on Earth has insulated it from the direct consequences of rising energy costs. Tokyo began withdrawing from its large oil reserve, which can last 264 days. However, the stockpile is set aside to address domestic demand and will not be directed to foreign countries.
The new major aid package is just the latest way Japan’s strategic position has improved to the detriment of China’s.