Staff writerJapan will conclude an investment protection pact with Saudi Arabia to help encourage Japanese private investment in the world’s largest oil-exporting nation, government officials said Oct. 17.Prime Minister Ryutaro Hashimoto will agree with Saudi Arabian leaders to begin negotiations on the pact as soon as possible when he visits the Middle East country early next month, the officials said on condition that they not be named. Hashimoto is to make a four-day official visit to Saudi Arabia, his first as prime minister, starting Nov. 7 for talks with King Fahd and other Saudi Arabian leaders on bilateral economic cooperation and the fragile Middle East peace process.Tomiichi Murayama, Hashimoto’s immediate predecessor as prime minister, visited Saudi Arabia in September 1995 as part of a tour of five Middle East countries. The investment protection pact would, among other things, compensate Japanese private companies for possible losses incurred due to changes in Saudi Arabia’s economic policy, including nationalization and seizure of Japanese-funded businesses.Japan has so far concluded similar pacts with several developing countries, including China and Egypt, which at present is the only Middle East country with an investment protection pact with Japan. The Sino-Japanese pact was concluded after the bloody military suppression in June 1989 of prodemocracy demonstrators at Beijing’s Tiananmen Square.The officials acknowledged that while the investment protection pact may have a positive psychological impact on Japanese companies, it alone is unlikely to bring about any significant increase in their investments in Saudi Arabia. Japan, which relies on imported crude oil for most of its domestic consumption, has placed a particular importance on relations with Saudi Arabia, a major crude-oil supplier.In his meetings with Saudi Arabian leaders, Hashimoto, a former international trade and industry minister, is also expected to ask for an extension of Arabian Oil Co.’s drilling rights in the Persian Gulf’s Al-Khafgi oil field. The rights are to expire in 2000 under the current contract, and the two countries are now in negotiations on whether to renew the rights.Arabian Oil, Japan’s largest oil producer, obtained the drilling rights in the oil field, located off the former neutral zone between Saudi Arabia and Kuwait, in 1957. At present, the company produces about 300,000 barrels of crude oil per day, of which 70 percent is shipped to Japan. Crude oil produced in the Al-Khafgi oil field by Arabian Oil accounts for 5 percent of Japan’s total crude oil imports.Although the Al-Khafgi project has long been considered as a symbol of friendship between the two countries, Saudi Arabia has implicitly threatened recently to deny an extension of the drilling rights unless more Japanese private companies invest in the Middle East country.
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