Japan's Nuclear Hangover

Tokyo is looking for new energy supplies after Fukushima. And that could mean bad news for Beijing.

Nearly three years after the nuclear meltdown at Fukushima, a cloud still hangs over Japanese energy policy, with dire implications for the country's economy. Tokyo is unsure whether it can continue to rely on nuclear power -- and in the meantime is searching for new energy opportunities from East Africa to Russia to the United States. If Japan can find the new supplies, it won't just get the oil and gas the country needs. It could bolster its defenses against an increasingly assertive China, too.

The Japanese government has again delayed the release of its long-awaited energy plan, meant to point the way to a sustainable future in the wake of the accident that shut down all fifty of the country's nuclear reactors in March 2011. Toshimitsu Motegi, the trade and industry minister, said the government was still studying thousands of public comments to the draft proposal, and is still grappling with how to get the energy that Japan needs without strangling its economy with high prices.

At the heart of the issue is the question of what to do with nuclear power. The current government, led by Shinzo Abe, wants to keep nuclear power in the mix, and called it an important source of energy in a draft energy plan released in December.

The Japanese public, in contrast, and a growing roster of big-name politicians, including a pair of ex-prime ministers, have grown increasingly cool toward nuclear power since Fukushima. Continued reliance on nuclear power, one of Japan's biggest newspapers said, is "totally unacceptable."

"There's still a huge discussion about how to treat nuclear power in the future, so it will take more time," to finalize the country's energy plan, said Hidehiro Muramatsu, the U.S. director of Japan Oil Gas and Metals National Corporation, at an event in Washington, D.C. on Tuesday.

The problem: Without nukes, the country has little choice but to import very expensive natural gas in order to keep the lights on. Liquefied natural gas in Japan costs about $16 per million BTUs, or nearly four times what gas trades for in the U.S. That growing dependence on imported natural gas is battering the Japanese economy and has the country scrambling to line up cheaper sources of supply from all over the world.

To wit: The year before Fukushima, Japan ran a trade surplus of nearly $70 billion. In 2011, after Fukushima, it slipped into a trade deficit for the first time in 30 years. In 2013, as pricey energy imports piled up month after month, Japan's negative trade balance topped $110 billion. About half of that is due to the need to import greater amounts of pricier fuel, Japanese officials said. More than 60 percent of Japanese LNG imports came from the spot market, rather than from longer-term contracts that usually offer better pricing terms.

That energy bill is taking a toll on Japanese firms and drawing a sharp contrast with the fortunes of companies in energy-rich countries, such as the United States.

"There is pressure on companies to move overseas as they are unable to endure rising fuel and electric power costs," Motegi, the industry minister, warned last fall. Firms in other places with expensive energy are also feeling the pressure. Many European and Australian firms are decamping for the United States, where natural gas as a fuel and a feedstock is cheap and abundant.

In response, Japan is turning over every rock in its quest to line up cheaper, longer-term energy solutions. That is deepening Japanese relations and trade ties with a spate of countries around the Pacific Rim, including the U.S., Canada, Australia, and Indonesia. Not coincidentally, those countries are all key to the U.S. rebalancing to Asia.

Japan's quest for gas has also intensified relations with India; together they speak of forming a "buyers' club" of big LNG importers to bolster their muscle in global energy markets. Abe is expected to visit India later this month.

Japan's energy hunt is also opening the door to closer ties with Moscow, which is itself looking to find new Asian markets for its natural gas, given sluggish demand growth in Europe.

Japan's need for energy is bringing it closer to Canada and especially the United States, after several years of tension over Okinawa. Japanese officials have been begging Obama administration officials to speed up the approval process for new LNG export terminals, which would offer Japan the opportunity to get cheaper natural gas. LNG shipped from the United States, including the cost of liquefying and transporting the stuff, could still be about one-third cheaper than what Japan pays today. Japanese companies have already secured the rights to about one-fifth of the natural gas the U.S. Energy Department has approved for export.

U.S. lawmakers have tried to help even more: Bills introduced last year in the House and Senate would have streamlined gas exports to NATO countries and Japan, with the explicit goal of helping U.S. allies diversify their energy supplies and strengthen their economies.

And Japan's gas hopes aren't just limited to the lower 48 states, but are focused on Alaska too, says Shoichi Itoh, a researcher at the Institute for Energy Economics in Japan. Alaskan officials inked a deal with Japanese development banks last fall to underwrite the development of new natural-gas pipelines and export terminals to replace the export capacity lost when Conoco Phillips mothballed the 40-year-old Kenai LNG plant last year.

Japanese firms are stakeholders in four new projects in Australia, including the first floating LNG terminal, as well as two new projects in Indonesia. Muramatsu of Japan Oil and Gas says that East Africa, especially Mozambique, will be a potentially crucial source of gas supplies for Japan in the future. China, of course, is also diving head first into sub-Saharan Africa's newfound oil and gas riches.

But matching Japanese thirst for gas with Russian needs to find new markets may pay the biggest geopolitical dividends. Russia already provides about 10 percent of Japan's LNG imports, but Moscow and Tokyo are talking about more investments to increase LNG trade between the two countries. Relations have been strained since World War II, which between those two, never formally ended.

"There is a window of opportunity that has opened for an historic rapprochement between Tokyo and Moscow," Celine Pajon, a Japan researcher at the Institut Francais des Relations Internationales, told Foreign Policy. She wrote about that rapprochement late last year, speculating that it could one day go so far as to resolve long-standing territorial disputes.

From a strictly energy point of view, deeper trade ties between Russia and Japan would give Tokyo access to more long-term gas supplies, which come cheaper than spot purchases. And it could give Moscow more leverage when it deals with other potential energy consumers. That's no small matter when Russia and China, are still trying to settle the price for shipping Siberian gas to Northeast China after a decade of haggling.

But it's not just about energy, especially when Japan is under the tutelage of nationalist premier Abe. Moving closer to Moscow provides another possible check to an assertive China that has increasingly raised concerns in Tokyo.

"Japanese diplomatic and strategic circles consider the current Sino-Russian relationship to be unbalanced and plagued by an ever-growing number of glitches, which seem to make it increasingly problematic for the Kremlin. By forging closer ties, Moscow and Tokyo can therefore diversify their diplomatic relations and provide a counterweight to Beijing. Geopolitical concerns and objectives are shaping to a large extent Japan's energy diplomacy," she said.

Toru Yamanaka - AFP - Getty

National Security

What Was Edward Snowden Doing in India?

And why was he taking "ethical hacking" classes there?

Nearly three years before he revealed himself as the source of leaked documents about NSA surveillance, Edward Snowden traveled to New Delhi, India. There, he spent six days taking courses in computer hacking and programming at a local professional school, according to school officials and people familiar with Snowden's trip. Working with a private instructor, Snowden, who was then a contractor for the spy agency, took a course in "ethical hacking," where he learned advanced techniques for breaking into computer systems and exploiting flaws in software. The class's ostensible purpose is to train students to protect computers and their contents from thieves and spies. But in order to do that, they learn how to break into computers and steal information. Snowden also inquired about methods to reverse-engineer the world's most popular kits for committing widespread online crime.

Snowden didn't disclose his India trip to investigators when renewing his top-secret security clearance the following year. It was that clearance, NSA officials say, that gave Snowden access to the 1.7 million classified files he later stole from the agency's computer networks and databases. U.S. intelligence officials have faulted the company that conducted Snowden's background check for not more thoroughly questioning him about overseas travel and what foreign nationals he may have met with, which is standard procedure for detecting whether someone is spying for a foreign power. They have characterized the background check as flawed and incomplete.

But Foreign Policy has learned that Snowden's trip to India should not have been a mystery to the U.S. government or intelligence agencies. Snowden was in the country in his capacity as an NSA contractor "to assist as a technical expert" at the U.S. embassy in New Delhi, according to an individual with knowledge of the situation who asked not to be identified. Snowden also told his computer instructor that he worked for the NSA and that he was in the city "on business," said Rohit Aggarwal, the CEO and founder of the school, Koenig Solutions. Government employees and contractors are not required to disclose foreign trips of an official nature, and may even be instructed not to, in order to avoid compromising intelligence operations and programs, according to two former U.S. intelligence officials.

Snowden's time in India has been covered in the Indian press but has received little attention in the United States. The travels offer a rare glimpse into his activities in the years before he became arguably the most famous leaker of classified secrets in American history.

Precisely what work Snowden did at the embassy in New Delhi is unclear. At the time, he worked as a technology specialist for Dell Inc. at an NSA facility in Japan. U.S. intelligence personnel are often stationed in American embassies, so it's conceivable that Snowden could have been working on surveillance equipment in New Delhi. Among the documents that Snowden disclosed were those describing a program called Stateroom, which gathers electronic communications using equipment based in U.S. embassies around the world. Other documents Snowden released showed that the NSA may have spied on the Indian embassy in Washington and on the country's mission to the United Nations.

Calls and emails to the U.S. embassy in New Delhi were not returned. Spokespersons for the NSA, the CIA, and the Office of the Director of National Intelligence all declined to comment for this article.

According to officials at the Koenig school, Snowden flew to India from Japan, arriving on Sept. 2, 2010, and staying for one night at New Delhi's Hyatt Regency hotel. A Koenig representative picked him up at the hotel on Sept. 3 and then drove Snowden to a lodging facility provided by the school. He stayed there until Sept. 9 while he took classes, and then returned for one more night at the Hyatt before leaving India on Sept. 11, the school said. (Indian news publications, citing official travel and immigration documents, also show that Snowden was in the country during this period.)

Snowden's instructor said he made no secret about his work for the NSA. While he didn't describe the specific purpose of his visit, he did say he wanted to squeeze in some computer coursework while he was in town. The U.S. embassy is only six miles from the Koenig school. Snowden paid the $2,000 tuition and lodging fee himself, using a personal credit card, Aggarwal said.

Snowden's instructor described him as quiet and diligent. He didn't take many breaks. And he already had a high-level of knowledge about computer science, hacking, and programming.

Had background investigators inquired about Snowden's travels, they likely would have asked if he'd had any contact with foreign nationals while he was abroad. All security clearance holders are required to disclose significant contact with foreigners. But any instructors and students Snowden met probably wouldn't have risen to that level, a former intelligence official said. A Koenig spokesman said the school could only vouch for Snowden's whereabouts while he was taking courses during the day. "Other than our people and students we would have no idea whom he met," said the spokesman, Somit Biswas.

In addition to the ethical hacking course, Snowden took a class in the Java computer programming language. Snowden said the course "would help him in 'organizing a team who does' work on Java" at Dell, a Koenig spokesperson said, citing a questionnaire that Snowden was required to fill out before he came to the school.

"His stated goal for coming to train at Koenig ... was 'getting knowledge and evaluating Koenig's training program for my company. Certification might be nice, but it is not necessary,'" Biswas said. "He had also stated that his employers had approved Koenig as a training provider and that he would also be writing a review of the training experience which would help his company to evaluate Koenig as a future training partner and might be mutually beneficial to both."

David Frink, a spokesperson for Dell, declined to comment. "We have not discussed Mr. Snowden's role with Dell and don't plan to," he said. The Wall Street Journal reported last year that Snowden's "work supervisor" informed investigators performing his background check that he had gone to India, but that they failed to clarify the purpose of the trip, resulting in a report that "did not present a comprehensive picture of Mr. Snowden," according to an intelligence documents.

Biswas said Snowden also inquired about courses in the analysis and reverse engineering of malicious computer code, such as the the ZeuS, Fragus, and SpyEye crimeware kits. That was a curious request, and potentially at odds with his interest in ethical hacking. Understanding malware is important for defending against it. But these are not ordinary malware. ZeuS is the world's premier toolbox for custom-building online crime campaigns. It has been used to infect millions of computers around the world. All three programs have been used by criminals to commandeer individuals' computers and to steal financial information. SpyEye allows criminals to create fake bank web pages, in order to trick people into entering their login and password, which the criminal then steals and uses to enter, and empty, their accounts. Last year, Microsoft filed a civil complaint alleging that clusters of computers infected with ZeuS have been used to steal more than $100 million.

It's not clear why Snowden wanted to know about reverse engineering financial crime malware, but his resume indicates he may have been working on cyber security-related projects while a contractor with Dell. Koenig told Snowden that it didn't offer courses along the lines he was interested in, but that it was considering adding them to its curriculum.

Snowden abruptly ended his coursework before completing a final portion of his training, Aggarwal said, in computer hacking forensics and an administrator course in the Linux operating system. "He was supposed to come back one morning, but he didn't. He sent an email saying, please cancel the rest of my courses. I have a medical condition and need to go back to Japan for medical advice," according to Aggarwal. Snowden spent the night of September 10 at the Hyatt Regency, and then left India the next day, he said.

Snowden completed the ethical hacking course and the course in Java programming, Aggarwal said. A source who is familiar with Snowden's professional resume, which was current as of 2013, said it lists his certification in ethical hacking as well as computer network defense. The only reference to even remotely anything like Java, this person said, appears in relation to Snowden's work for a website company called Clockwork Chihuahua. There, Snowden said he edited JavaScript (which is loosely related to, but is not the same as Java). Snowden also claimed to have Japanese language skills and to be "comfortable working in austere environments," according to his resume.

U.S. officials have said that Snowden began downloading secret NSA files while he was working for Dell, in April 2012. He went to work for another NSA contractor, Booz Allen Hamilton, the following year. Snowden told the South China Morning Post that he took the job in order to access classified NSA documents.

"My position with Booz Allen Hamilton granted me access to lists of machines all over the world the NSA hacked," Snowden said. "That is why I accepted that position about three months ago." Snowden worked for the company only a few months, at a facility in Hawaii. There, he took more documents before ultimately fleeing to Hong Kong. He is currently living in Russia, where the government has granted him temporary asylum.

A computer security training professional in the United States said it's not unusual for Americans to take courses abroad, particularly in India, where the tuition is a fraction of what it can cost in the United States. But the expert criticized the teaching of so-called "ethical hacking."

"They can call it 'ethical,' it's still hacking. You're teaching someone how to break into a system," the expert said.

Aggarwal, the Koening CEO, said it's not unusual to find U.S. intelligence employees taking courses at his school, and that between 50 and 100 American military service personnel take courses there each year, as well as at a location in Dubai. A Defense Department spokesman could not confirm that military personnel have taken courses at the school, or that it's been approved by the Pentagon as a training facility. But personnel responsible for protecting the department's computer systems are required to obtain commercial certificaitons, including in ethical hacking.

Photo illustration by FP


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