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Doing Business : Japan Changes Rules of Engagement for Mideast Trade : After nearly 20 years of virtual compliance with the Arab boycott, Japanese firms are doing business with Israel

January 29, 1991|KARL SCHOENBERGER | Times Sraff Writer

TOKYO — For a clue on how pacifist, mercantile Japan fits into the complex patchwork of political interests in the Middle East, consider its relationship with Israel.

For most of the past two decades, the Jewish state has been a virtual pariah in the eyes of this oil-thirsty and export-hungry economic giant. Japan bluntly and unapologetically chose to serve its strategic energy needs over its avowed commitment to the principles of free trade.

As tribute to the Middle East countries that supply 70 percent of Japan's oil needs, most Japanese companies have meekly acquiesced to an Arab trade boycott aimed at choking the Israeli economy.

Just as a steady supply of cheap oil was a key ingredient in Japan's phenomenal boom after World War II, abiding friendship with the Arab world has been the linchpin of a commercially oriented foreign policy since the oil shocks of the 1970s. And Israel has been the fall guy -- sometimes to the irritation of Japan's closest ally and Israel's chief benefactor, the United States.

But Japan's rules of engagement in the Middle East are beginning to change, recent developments suggest.

Two-way trade between Japan and Israel has tripled in five years, for example. The total remains relatively small--about $1.3 billion last year--but it appears headed for continued expansion while trade with Arab nations is contracting. Already, Japan is Israel's third-largest trading partner.

Both the government and private sector in Japan have been finding ways to circumvent the economic blackmail that traditionally cast a chill on ties with Israel. At the same time, Japan is groping timidly about the world stage for a political role more appropriate to its status as a financial superpower.

Now, with war raging in the Persian Gulf, the region is a proving ground for a fledgling Japanese sense of international destiny that hints at transcending purely economic concerns.

"In the past, there was always an attempt to be as vague as possible, not to commit to either side in Middle East conflicts," such as the Iran-Iraq War or the Israel-Palestine dispute, said Manabu Shimizu, senior research fellow at Tokyo's Institute of Developing Economies. "But with the present crisis, we had to take sides."

The first steps in the adventure were awkward, however, and from the U.S. perspective, seemingly feeble.

Prime Minister Toshiki Kaifu's administration was befuddled and hesitant in responding to Iraq's invasion of Kuwait, but in the end it found no alternative but to shake off old habits of appeasement for oil. Kaifu even made what was by Japanese standards a bold attempt to twist the popular interpretation of the postwar constitution, which renounces the sovereign right to wage war, and dispatch Japanese troops to the gulf for non-combat duty. Strident pacifist opposition forced the prime minister to withdraw his plan.

Still, Japan initially committed $2 billion in support for the multinational forces, and Kaifu is now pledging an additional $9 billion and planning to send military transport planes to help ferry refugees out of Amman, Jordan.

Despite the protective cover of its "peace constitution," Japan on Jan. 21 found itself accused of a "hostile act" by Iraq's ambassador to Tokyo, Rashid Rifai, who said Japanese will be responsible "for every drop of blood shed in Iraq." Even if by default, the die is cast.

Taking a clear stand in the convoluted political affairs of the region does not necessarily play play to Japan's strengths. Again, oil is the culprit, even though Japan has effectively reduced its dependency on imported energ since 1973.

During the Iran hostage crises of 1979, for example, Japan adopted a "neutral" position on the U.S. call for economic sanctions against Tehran. Washington officials were outraged by reports that Japanese buyers snatched up Iranian oil being boycotted by American companies, paying nearly twice the going price.

Japan's ability to project an image as a reliable U.S. ally in the Persian Gulf may hinge on local public perceptions of what exactly is at stake.

Japan got about one out of every five barrels of its imported oil from Kuwait and Saudi Arabia before the Iraqi aggression. And more than 40 percent of its cumulative direct investment in the Middle East--about $1.4 billion--has been pumped into an oil-drilling concession in the "neutral zone" on the Saudi-Kuwaiti border.

And yet the public's attitude has an aura of bemused detachment. The Japanese media are chronicling events in the Persian Gulf as America's war, and a regular stable of pundits and scholars are downplaying Japan's immediate connections and interests in the shoot-out.

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