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Wednesday, Jan. 11, 2012

Economic cooperation can strengthen Japan-Russia ties

Special to The Japan Times

HONOLULU — Recent relations between Moscow and Tokyo have been rocky. This is largely due to Russian President Dmitry Medvedev's November 2010 visit to disputed islands.

As the first Soviet or Russian leader to visit the islands (known as the Southern Kurils in Russia and the Northern Territories in Japan), his visit reignited diplomatic problems that had lain somewhat dormant. Subsequent high-level visits and decisions to invest close to $100 million in socio-economic development and transport infrastructure improvements and to build up Russia's military presence on the islands all served to exacerbate their acerbic relations throughout 2011.

With a new year upon us, can Moscow and Tokyo finally resolve the dispute and deepen cooperation?

The short answer, unfortunately, is that resolution anytime soon is unlikely. First, the legal impasse remains deadlocked. Russia continues to press its claim that Japan renounced all its rights, titles and claims to the Kuril Islands in agreements signed during the closing days of World War II and the San Francisco Peace Treaty. Japan continues to state the islands do not belong to the Kurils and thus, these legal arguments are inapplicable. Additionally, competing voices exist in both capitals. In Russia, over the past decade, there have been two opinions regarding the dispute: retain possession of all four islands or give up Shikotan and Habomai. The Japanese position is also fractured. Over the past few years a number of plans surfaced: the official position of getting all four islands, getting Habomai and Shikotan first while negotiating the return of Kunashiri and Etorofu, or getting 50 percent of the islands' total land area (i.e. Habomai, Shikotan, Kunashiri, and a part of Etorofu).

While the impasse continues, it does not mean Moscow and Tokyo cannot deepen cooperation. They share synergistic economic demands that make them natural partners. According to the International Energy Agency, in 2011 Japan was a top importer of high-demand energy resources. While it ranked third globally as a crude oil importer, it ranked first as an importer of liquefied natural gas (LNG) and coal. Russia, by contrast, was a top global exporter of these resources, ranking third for coal, second for crude oil, and first for LNG. Despite this, Russia has not ranked as Japan's top supplier. According to JETRO, in 2010, Japan's main supplier for crude oil was Saudi Arabia while Australia was its top supplier for LNG and coal. Russia ranked as Japan's 4th largest supplier of coal, 6th for crude oil, and 7th for LNG.

This is reflected in their trade relations. Although bilateral trade has increased over the past decade (now over $24 billion), they are not major trading partners. For example, in 2010 Russia was Japan's 13th largest import partner and 20th largest export partner. If Japan relies so heavily on importing resources that Russia leads in exporting, what are the opportunities lost by not increasing economic cooperation?

Consider first Japan. Japan imports the majority of its energy resources from the Middle East and Southeast Asia. Not only do these shipments face high transportation costs, they also transit waters infested with pirates in the Gulf of Aden or Malacca Strait and face possible resource stoppage should China take aggressive steps to close key sea lanes in the East or South China Seas. Relying more on Russian energy resources would mean reduced transportation costs as well as avoiding the dangers of piracy or Chinese stoppage.

Russia too would benefit. Russia needs capital and technological investment in its Far East energy sector to improve and expand its infrastructure for LNG and oil plants as well as pipelines. While Japanese investments have assisted much in the way of energy-efficient technology and major projects, such as Sakhalin-1 and -2, Russia's Far East energy sector remains underdeveloped. Increasing energy exports to Japan and bolstering ties with Japanese energy firms could help provide this much needed capital.

Despite closer economic ties fostering a win-win situation, relations remain frozen. While it is easy to argue the territorial dispute is the cause, I believe it is a symptom. Closer bilateral cooperation is hindered due to historical mistrust and differing geopolitical interests.

Tokyo is, and has always been, suspicious of communism and Moscow's involvement in Northeast Asia. This suspicion motivated both of its alliances: one with London and the current one with Washington. While Russia today is no longer Communist, there remains a deep mistrust of Russian politics and Moscow's intent in Asia. Similarly, Russia does not share Japan's main geostrategic concerns of China's military modernization and territorial encroachment or North Korea's nuclear and missile programs. Nor do they share visions of what types of power they wish to be and what role the United States should play in the region.

Yet, it is precisely because of the mistrust and differing interests that they should cooperate in the economic realm. Before Tokyo and Moscow can tackle the territorial dispute, they need to build trust and understanding through confidence-building measures in which they share a common interest. Increased economic trade that equally benefits both is one such possibility.

There are already green-shoots upon which to build. After Japan's disasters in March 2011, Russia promised to divert 6,000 MW of electricity from its Far East, send 200,000 tons of LNG, double oil exports to 18 million metric tons, and increase oil product supply. Similarly, late last year Japan's parliament ratified an agreement on nuclear energy cooperation that makes it possible for them to trade nuclear energy related technologies and uranium.

The benefits of greater economic exchange between Tokyo and Moscow could build trust that eventually spills over into other fields of shared interests, such as stability on the Korean Peninsula or nuclear plant safety. Given their difficult history, this is bound to take time. Yet, as the Japanese adage says, "A journey of a thousand miles begins with the first step." Let's hope that 2012 begins on the right foot.

Jeffrey W. Hornung is associate professor at the Asia-Pacific Center for Security Studies in Honolulu. The views expressed in this article are solely those of the author.

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