The Gulf Cooperation Council (GCC) countries and Japan have been important economic partners for several decades, chiefly in the energy sector. While the oil and gas sectors are still very important, especially after the 2011 Fukushima nuclear disaster, Japan is diversifying its bilateral relationship keeping in mind two factors – first, reviving its own economy; and second, the economic diversification programmes in the Gulf countries.

Under the banner of economic diplomacy, this amicable economic relationship has diversified into the non-oil domain to include collaboration in a variety of traditional and non-traditional sectors, including investments, science and technology, education, tourism, and even security, among others. There are also attempts to bring new-age sectors like advanced robotics and artificial intelligence into the mix.

Though the share of non-oil trade in the overall trade volume is small at present, it not only occupies an important place, but is also expected to garner a bigger share in the future. While arguing that energy ties remain the bedrock of the GCC-Japan ties, this chapter highlights the recent developments and evolving opportunities in the non-oil sector. It does this by specifically focusing on Japan's expanding partnership with Saudi Arabia and the United Arab Emirates.

The chapter also identifies certain challenges that require attention to maintain the momentum and suggests ideas that could add teeth to Gulf-Japan economic interdependence beyond oil in the future. This includes the possibility of developing multilateral partnerships with Japan and other countries in the region and beyond.

Key Dynamics

After the Great East Japan Earthquake and the Fukushima nuclear disaster in 2011, energy policy in Japan changed remarkably, returning to fossil fuel, thus increasing its dependence on the oil-producing GCC countries. In 2015, Japan imported 34% of its crude oil from Saudi Arabia, 24% from the UAE, 11% from Qatar and 7% from Kuwait. The Gulf region – mostly Qatar, Oman and the UAE – is also an important supplier of liquefied natural gas to Japan.

The longstanding bilateral economic relationship through energy-related trade also laid a solid foundation for interchange in the non-oil economy. In 1997, Japan and Saudi Arabia promoted a ‘Comprehensive Partnership Towards 21st Century’ to improve political, economic and other new areas of cooperation. This was followed by the signing of the ‘Japan-Saudi Cooperation Agenda’ in 1998. The economic exchange between the two countries has advanced considerably since then.