Japan Faces a New Russia

Posted in Japan | 27-Aug-06 | Author: Hisane Masaki| Source: OhmyNews International

[Commentary] Fishing row reflects newly cash-rich Moscow's harder line

The recent flare-up of a fishing row between Japan and Russia serves as a vivid reminder of how explosive the two countries' long-standing territorial disputes remain. It also reflects Russia's recent harder line on the World War II legacy.

Russia has accused three Japanese fishermen detained since a clash on Aug.16 of poaching and illegal border crossing. The men were held after Russian border guards shot dead a fourth sailor in disputed waters between the two nations. Russian officials said the fishing boat, the Kisshin Maru No. 31, violated its waters and refused orders to stop.

A warning shot accidentally killed the crew member, they said. Japan has demanded an immediate release of the three men. The crew was fishing in waters around four islands -- called the Southern Kurils in Russia and the Northern Territories in Japan -- that are claimed by both nations.

Flush with oil money, Russia is gaining the upper hand over Japan in diplomatic negotiations. Japanese Prime Minister Junichiro Koizumi and Russian President Vladimir Putin met during the last Group of Eight (G8) summit in St. Petersburg in July, but failed to make any progress on two issues at the top of the agenda between the two countries.

To be sure, the two issues -- the territorial row over islands off the northernmost main Japanese island of Hokkaido and the construction of a 4,100-kilometer oil pipeline from eastern Siberia's oilfields to the Pacific coast -- are not directly related to each other. But the lack of progress on both of them reflects the new reality that Russia does not need Japanese economic assistance as much as it once did.

Japan and Russia have long been at loggerheads over the sovereignty of the islands in question. The dispute over islands off northeastern Hokkaido has prevented Japan and Russia, both G8 members, from concluding a peace treaty formally ending World War II hostilities. The disputed islands are the Etorofu, Kunashiri and Shikotan Islands plus the Habomai islet group, which were all seized by Soviet troops in the closing days of World War II. The disputed islands are surrounded by rich fishing grounds.

In 1956, Japan and the then Soviet Union issued a joint declaration normalizing bilateral diplomatic ties. In that declaration, Moscow promised to return Shikotan and the Habomai islet group -- the two smaller islands -- after the signing of a peace treaty. At the height of Cold War tensions, Moscow declared the 1956 joint declaration null and void and then continued to insist until the end of the Cold War that no territorial issue existed any longer between the two countries.

But after the demise of the Soviet Union, then Russian President Boris Yeltsin visited Tokyo in October 1993 and issued the Tokyo Declaration with then Japanese Prime Minister Morihiro Hosokawa calling for conclusion of a peace treaty after resolving the dispute over ownership of the four islands based on the principles of "law and justice" and past documents agreed upon between Tokyo and Moscow, including those of the Soviet era.

Despite changes of government on both sides, Japanese and Russian leaders had since issued political statements reaffirming the importance of resolving the territorial dispute based on the past documents signed between the two countries, especially the 1993 Tokyo Declaration, when they visited each other's capitals.

The St. Petersburg meeting was the first between the two leaders since last November, when the Russian leader made an official visit to Tokyo, his first in more than five years. In the Tokyo meeting, the two leaders signed a dozen documents on expanding business cooperation and technological issues. But as widely expected, the two leaders failed to achieve a breakthrough on the territorial dispute. Even worse, the gulf between the two sides over the islands row had grown so wide that no joint political statement on the dispute was issued. It is quite unusual that no political statement is issued when top leaders of Japan and Russia make official visits to each other's capitals.

Although Japan wanted Koizumi and Putin to sign a new political statement reaffirming their determination to resolve the islands row based on the 1993 Tokyo Declaration and other previous documents, Russia hardened its stance and balked at going along with the Japanese idea. Russia is widely seen as seeking to make the 1993 document a dead letter because it calls for a settlement of ownership of all the islands in question.

Russia now apparently wants to resolve the territorial tiff in line with the 1956 Japan-Soviet Joint Declaration, which stipulates that Moscow would return only the two smallest of the islands after the conclusion of a peace treaty. In addition, Japan and Russia interpret the 1956 document differently. Russia regards it as a promise to return the two smaller islands only as a "goodwill gesture" after concluding a peace treaty and insists that negotiating over the two larger islands is out of the question. Japan regards the 1956 document as having resolved the fate of the two smaller islands and left only the two larger ones on the negotiating table. Koizumi pressed Putin to reaffirm the effectiveness of the 1993 Tokyo Declaration, but in vain.

Energy was also high on the agenda at the Putin-Koizumi talks in November -- Japan as a consumer and financier and Russia as a producer. Japan and China have lobbied for alternative routes for a pipeline from eastern Siberia's oilfields to Pacific Rim nations. Russia has played off the two energy-hungry Asian nations against each other. Japan failed to gain a guarantee that Russia will give priority to building a "Pacific route" from Taishet near Lake Baikal to Perevoznaya Bay near Nakhodka on Russia's Pacific Coast via the halfway point at Skovorodino, near the Russia-China border, rather than to building a "China route" heading to Daqing, northeastern China, from Skovorodino. Japan and Russia signed an agreement only to accelerate talks on the Pacific route.

Russian state pipeline monopoly Transneft is building the pipeline in two stages. It expects to finish the first stage at Skovorodino in 2008. Construction work on the first stage linking Taishet and Skovorodino began in late April. No date has been set for the second stage.

Koizumi and Putin met again in St. Petersburg in mid-July. To be sure, unlike the previous meeting, the latest one was not for full-scale negotiations. In fact, it lasted for only 40 minutes. No breakthrough had been expected on the long-running islands dispute in the first place. Still, there had been expectations in Japan that some progress might be made on the pipeline issue. But the expectations were betrayed. Koizumi and Putin agreed just to continue talking about the territorial and pipeline issues.

Japan wants to sign an intergovernmental agreement on the pipeline but Putin rejected the idea. After talks with Koizumi, Putin said, "our position is that this project is purely commercial and the state should not take on any obligations connected with its implementation." Japan was widely expected to put up soft loans for construction, but Putin said finding money for the project did not present a problem. The priority, he said, was to explore and develop the untapped reserves of eastern Siberia in order to provide the oil to fill the pipe.

What Japanese government officials have long taken for granted as a negotiating chip -- Japan's economic power -- seems to have lost much of its luster, at least in the eyes of Russian leaders. For Russia, the strategic significance of Japan has declined. While Japan's economic power has been relatively on the decline after the burst of the asset-inflated "bubble economy" of the late 1980s, the Russian economy has been barreling ahead in recent years, thanks to high prices of crude oil, the country's main export item. Russia, the world's second largest oil producer, has posted robust economic growth and its gold and foreign currency reserves have hit record high levels.

Russia announced on Aug. 21 that it has finished paying off its $22.5 billion Soviet-era debt to the Paris Club of international sovereign creditors ahead of schedule. Its huge oil and gas wealth has allowed it to fast-track the repayments. A default on the debt, built up during the life of the Soviet Union, triggered a Russian financial crisis in 1998. The current situation is a stark contrast with just about a decade ago when Putin's predecessor Boris Yeltsin made what the current Russian government now thinks were too many concessions on the territorial row, driven by the need to seek Japanese help in turning around the then ailing Russian economy.

These days, the attraction of the Russian economic magnet for Japan seems even stronger than that of the Japanese one for Russia. Japan's direct investment in Russia jumped more than seven-fold in fiscal 2004, which ended in March 2005, to $51 million, from fiscal 2003, although the figure represented a still minuscule 0.1 percent of the country's overall direct investment abroad.

Among other recent high-profile investments in the economically booming and resource-rich Russia, Toyota Motor Corp's first Russian assembly plant will open in St. Petersburg next year, and Nissan Motor Co. also announced a plan recently to build a plant there. During his Tokyo visit last November, Putin praised Toyota's plant construction as the "right decision" and challenged other Japanese investors to follow suit in order to gain a larger slice of the growing business pie in Russia. He noted that Japan accounts for only 1 percent of overall foreign investments made in his country.

In the energy sector, too, Japanese companies are investing billions of dollars to help extract oil and natural gas in nearby regions of Russia, such as the Exxon Mobil Corp.-led Sakhalin I and Royal Dutch Shell PLC-led Sakhalin II projects in Russia's Far East.

Resource-poor Japan is barreling ahead to rev up its energy security, driven by the specter of another oil crisis, the global rush for energy resources and a simmering gas dispute with China in the East China Sea. Recently, Japan's Ministry of Economy, Trade and Industry (METI) released publicly the New National Energy Strategy, which calls for, among other things, strengthening relations with resource-rich countries, securing energy resources abroad through the fostering of more powerful domestic energy companies, and boosting the ratio of "Hinomaru oil," or oil developed and imported through domestic producers, from the current 15 percent to 40 percent by 2030.

Japan imports almost all of its oil, nearly 90 percent of which comes from the volatile Middle East. To be sure, there are strong expectations that imports of oil from eastern Siberia through the proposed pipeline to the Sea of Japan, if and when they go into full swing, will help diversify oil sources and contribute to stable oil supplies to Japan in the long term.

But there is growing international distrust toward Moscow with regard to energy security. At the G8 summit in St. Petersburg, where energy security was high on the agenda, Putin failed to dispel the distrust. The Putin administration's policy has placed the Russian energy industry under greater state control. In January, Russia temporarily stopped gas supplies to Ukraine in a price dispute. All of this has stirred considerable alarm among European countries that depend heavily on oil and natural gas supplied by Russia.

In St. Petersburg, the G-8 leaders agreed on an action plan to bring greater stability to energy markets. The program will promote development of more transparent and predictable energy markets and support energy-saving programs. If Russia wants to attract more foreign investment in its energy sector, it needs to win the confidence of potential investors, many analysts say. On the oil pipeline linking eastern Siberia with the Sea of Japan, some Japanese government officials, concerned about the future possibility of a sudden halt to supplies as happened to Ukraine, have begun to question: Will the pipeline actually contribute to ensuring Japan's energy security?