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Japan Warns Russia Delays to Energy Project Could Hurt Ties

Japan is warning that a move by Russia to freeze a huge oil and gas project could hurt ties between the two countries. Japanese companies have a stake in the project, which Japan sees as an important source of fuel for the future.

The Russian government on Monday rescinded environmental approvals for a $20 billion oil and gas project in the Russian Far East, delivering a potentially significant blow to Japan's energy policy.

Royal Dutch Shell's Sakhalin-2 project is the largest private energy investment in Russia. Japan has significant interests in the development. Japanese companies control 45 percent of the project, which was scheduled to begin full production in 2008.

Chief Cabinet Secretary Shinzo Abe says the Russian decision could affect diplomatic ties between the two countries.

Abe calls the project a symbol of cooperation between

Japan and Russia and says he is concerned that a long delay in implementing the project could hurt the overall relationship between Tokyo and Moscow.

Foreign Minister Taro Aso calls the Russian move one-sided.

Aso says the process by which the environmental permit was canceled is unclear.

Russia's resource ministry said it canceled the ecological permit because construction silt and logging is killing salmon in the sub-arctic rivers on Sakhalin Island.

Industry analysts say they do not expect the Sakhalin-2 project - which employs 17,000 people - to be scrapped. They say the delay could be politically motivated. Russia's state-owned Gazprom wants to buy a stake in the operation from Shell, the biggest shareholder, and the move could be intended to strengthen its bargaining position.

Sakhalin Energy, the project's operating company, in a statement posted on its web site, says it is working with the Russian government on the issue of the environmental permits and expects the government to honor its obligations.

The project is already producing crude oil. It is set to become the world's top producer of liquefied natural gas, known as L.N.G, in 2008.

Resource poor Japan, the world's biggest L.N.G. market, is looking to boost Russian energy imports to decrease its reliance on the volatile Middle East for gas and oil.