Economic Relations of Japan with Iran and Saudi Arabia -A Comparative Study

This study aims at comparing the economic relations of Japan with Iran and with Saudi Arabia. The comparison of these two relations is important as Iran and Saudi Arabia are leading exporters and Japan is a large importer of crude oil in the world. After a brief overview of the history of these two relations, the criteria of trade complementarity, i.e. Trade Potential Naive Assessment, Cosine Measure and Drysdale's Index are taken into account. Further, FDI in Iran and Saudi Arabia are studied based on the indicators of FDI value, FDI contribution to GDP, and the International FDI Performance Index. These indices indicate that in spite of the long aged Japan-Iran economic relations, these relations have been reduced in recent years both in trade and in foreign investment. Since, Japan needs to maintain dynamic and sustainable relations with its two main energy-providing countries; it has recently made direct investments in oil and gas extraction in Saudi Arabia in return for purchasing oil from this country. Comparatively, considering the high trading capacity between Iran and Japan, it would be time for the two countries to negotiate on the export of crude oil to Japan in return for expanding economic ties in joint ventures such as co-participating in the construction of extraction platforms and refineries in Iran, as well as gas stations in Japan and selling petroleum products on the Japanese (and East Asia) market.