Freidman discusses how Japan's nuclear plants were an attempt to provide itself with an alternative to having to import 100% of their energy needs and how the post-tsunami problems with the reactors have shaken Japan's faith in that supposed safety net.
The last time Japan felt threatened over imports led them to war with the U.S. and so I reached back to the WWII Japanese propaganda film The Most Beautiful for today's Hot Stratfor Babe, Yoko Yaguchi. As far as I can tell that's her above.
The Most Beautiful was released in 1944 and is Akira Kurosawa's second film as a director. It is a propaganda film which centers on a group of teenage girls working in an optics factory to support the war effort. Yoko Yaguchi was the star of it, and she was to eventually marry Kurosawa.
My best wishes go out to the Japanese. The scale of suffering and destruction they have endured these last several days in unimaginable. It is going to take extraordinary effort and treasure for them to rebuild. I hope the U.S. gives them our full support.
JAPAN, THE PERSIAN GULF AND ENERGY
By George Friedman, March 15, 2011
Over the past week, everything seemed to converge on energy. The unrest in the Persian Gulf raised the specter of the disruption of oil supplies to the rest of the world, and an earthquake in Japan knocked out a string of nuclear reactors with potentially devastating effect. Japan depends on nuclear energy and it depends on the Persian Gulf, which is where it gets most of its oil. It was, therefore, a profoundly bad week for Japan, not only because of the extensive damage and human suffering but also because Japan was being shown that it can't readily escape the realities of geography.
Japan is the world's third-largest economy, a bit behind China now. It is also the third-largest industrial economy, behind only the United States and China. Japan's problem is that its enormous industrial plant is built in a country almost totally devoid of mineral resources. It must import virtually all of the metals and energy that it uses to manufacture industrial products. It maintains stockpiles, but should those stockpiles be depleted and no new imports arrive, Japan stops being an industrial power.
The Geography of Oil
There are multiple sources for many of the metals Japan imports, so that if supplies stop flowing from one place it can get them from other places. The geography of oil is more limited. In order to access the amount of oil Japan needs, the only place to get it is the Persian Gulf. There are other places to get some of what Japan needs, but it cannot do without the Persian Gulf for its oil.
This past week, we saw that this was a potentially vulnerable source. The unrest that swept the western littoral of the Arabian Peninsula and the ongoing tension between the Saudis and Iranians, as well as the tension between Iran and the United States, raised the possibility of disruptions. The geography of the Persian Gulf is extraordinary. It is a narrow body of water opening into a narrow channel through the Strait of Hormuz. Any diminution of the flow from any source in the region, let alone the complete closure of the Strait of Hormuz, would have profound implications for the global economy.
For Japan it could mean more than higher prices. It could mean being unable to secure the amount of oil needed at any price. The movement of tankers, the limits on port facilities and long-term contracts that commit oil to other places could make it impossible for Japan to physically secure the oil it needs to run its industrial plant. On an extended basis, this would draw down reserves and constrain Japan's economy dramatically. And, obviously, when the world's third-largest industrial plant drastically slows, the impact on the global supply chain is both dramatic and complex. [continued after the jump]
