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4 November 2016

Will the lure of strategic and economic gains be enough for Abe and Putin to overcome decades of nationalistic intransigence and resolve their countries’ territorial disputes? Graeme Auton examines the odds.

When Prime Minister Shinzo Abe and President Vladimir Putin meet in Nagato, Yamaguchi Prefecture, in mid-December 2016, Japan and Russia will have the best opportunity to resolve their territorial differences over the Northern Territories/Southern Kurils since 1998.

In April of that year Prime Minister Ryutaro Hashimoto and President Boris Yeltsin, at their Kawana summit, weighed a Japanese proposal to combine Russian administrative control of Kunashiri, Etorofu, Shikotan and the Habomais group with Japanese “residual sovereignty” over the islands. Seven months later Prime Minister Keizo Obuchi and Yeltsin met in Moscow to consider a Treaty of Peace, Friendship and Cooperation that would encompass a “special legal regime” for the four islands. 1998 was a year of economic and financial crisis in Russia. It was also the sixth year of the deflationary crisis associated with Japan’s ‘bubble economy’. Both the Yeltsin government and Japan would have benefited from the closer economic relationship that might have followed a resolution of the territorial dispute. Yet, in the end, compromise was a bridge too far for both sides, and a brief period of promise in the Russo-Japanese relationship fell prey to the strident nationalism of Vladimir Putin and Junichiro Koizumi.

Almost two decades later nationalism remains a dominant force in both Japan and Russia, as the two countries confront rapidly-evolving geopolitical challenges. It is worth considering the incentives each has for resolving or at least ameliorating their differences. At the same time, an assessment of the likelihood of agreement being reached between Tokyo and Moscow has to be tempered by an understanding of certain realities that remain unchanged.

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The Putin government has several incentives for arriving at a compromise over the Northern Territories.

The first is to achieve some sort of strategic breakout from the cordon of economic sanctions imposed on Russia by Western powers following its 2014 annexation of Crimea and the subsequent conflicts in Ukraine and Syria.

Second, as the price of oil continues to hover around US$50 a barrel, Russia – heavily dependent on oil and gas exports – has a deep interest in expanding its energy markets, particularly as energy exports to China have proved less beneficial than anticipated.

Third, the Putin government wants to bolster the economy of the Russian Far East (RFE) and reverse that region’s relentless population decline. Japan is a potentially critical source of investment for the RFE, one that could ameliorate the region’s future reliance on China. The degree to which oil and natural gas development in the RFE could benefit from Japanese financial and technological support is evidenced by Japan’s Ministry of Economy, Trade, and Industry considering ¥1 trillion in funding for Rosneft, Russia’s state-owned oil company.

Fourth, though Russia and China may have formed an “axis of convenience” (to borrow Bobo Lo’s phrase), the geopolitical competition between Moscow and Beijing is unlikely to abate in perpetuity. Russia has a long-term interest in balancing against China in ways that do not involve engaging the US, and Japan could play a critical role in such an effort.

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Likewise, Japan has strategic interests in a deal with Russia that goes beyond the possibility of achieving partial sovereignty (or at least some measure of administrative control) over the Northern Territories. The country needs to diversify its sources of oil and gas as it decommissions its nuclear power plants and the massive energy projects on Sakhalin Island are only a stone’s throw from Hokkaido. The RFE is also a potential source of iron ore, copper, gold, diamonds, and timber.

Beyond this, Japan obviously shares Russia’s long-term interest in balancing against China and stabilising Northeast Asia. If there is any lesson that has emerged from the 2016 US presidential election, it is Tokyo’s need to hedge against potential American unreliability – underscored by Donald Trump’s questioning of US military ties to Japan and South Korea and by the failure of both major presidential candidates to support the Trans-Pacific Partnership. A hedging strategy would be helped by a better working relationship with Moscow.

In the late 1990s, Hashimoto and Obuchi sought to embed the territorial issue in the broader tapestry of Russo-Japanese diplomacy and to pursue a ‘multi-layered’ strategy that recognised territory as only one facet of a much broader relationship. Unfortunately, their efforts reached beyond what was sustainable at that time in either Japanese public opinion or the Byzantine struggles going on within Japan’s Foreign Ministry. In fact, efforts to resolve the Northern Territories dispute – going back to the 1956 Japan-Soviet Joint Declaration that established diplomatic relations but failed to produce a post-World War II peace treaty – have been repeatedly held hostage to nationalism and intransigence in both countries.

There is little reason to believe that the forthcoming Putin-Abe talks can depart from this unfortunate legacy, though Putin certainly needs to punch more holes in the Western sanctions regime and Abe has a strong interest in reducing Japan’s regional isolation. If nothing else, Russo-Japanese reconciliation might set a useful example in the resolution of some of East Asia’s other territorial issues, including Japan’s disputes with China over Diaoyu-Senkaku and with South Korea over Dokdo/Takeshima.

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Auton, Graeme. 2017. "Japan And Russia: A Pivot Point? - Policy Forum". Policy Forum.