Russia and Japan: a deal is still possible

Recent talks over disputed territory may not have ended in a definite deal, but this might only be the beginning of a new relationship, Artyom Lukin writes in an article "Russia and Japan: a deal is still possible", published by Policy Forum. In recent months, the long-standing and seemingly intractable territorial dispute between Russia and Japan over the southern Kuril Islands – or the Northern Territories as the Japanese prefer to call it – has shown potential for positive change. Some observers now speak of a window of opportunity to finally normalise relations between the two neighbours who are yet to agree on a peace treaty since the end of World War II.

The current activity in Russia-Japan talks is mostly due to a major change in Tokyo’s position. The Japanese government had for decades demanded that the Soviet Union/Russia return to Japan all the four disputed islands – Iturup, Kunashir, Shikotan, and the group of Habomai islets. But in November 2018, Prime Minister Shinzo Abe, meeting with Putin on the sidelines of the East Asia Summit in Singapore, agreed to negotiate on the basis of the Soviet-Japan Joint Declaration signed in Moscow in 1956.

The significance of the move is that the 1956 declaration only mentions the two smaller islands – Shikotan and Habomai – that the Soviet Union agreed to transfer to Japan “after conclusion of a peace treaty.” Even though Abe never explicitly said so, his consent to proceed from the 1956 declaration implies that Japan has given up on the two big islands which between them comprise of as much as 93 per cent of the disputed territory.

Abe’s logic is clear. Russia has been holding the islands since 1945 – the longer it controls them, the less likely it is they will ever return to Japan. Moscow has always been adamant in its rejection of the four islands’ claim by Japan. That said, ever since Putin became president in 2000, he has been consistent that Russia still respects the 1956 declaration that calls for the cession of the two smaller islands to Japan. Tokyo apparently understands that Putin’s successor may not support even such a modest concession by Russia.

In Singapore, Putin and Abe agreed to accelerate the peace treaty talks and the two have since met twice more in Buenos Aires and Moscow. There have also been talks at the level of foreign ministers and vice ministers. So far very few substantive details have been revealed about the content and progress of the talks, which is understandable given that the issue involves a possible territorial compromise and is already arousing intense nationalistic emotions in both countries.

In the current negotiations, it is Moscow that has the upper hand, as Russia has control over the islands and there is no compelling reason for the Kremlin to rush for a deal. Putin is willing, in principle, to transfer the two smaller islands to Japan, but, as he himself repeatedly made clear, this can only happen under certain conditions.

So far Moscow has been quite vague, at least in public, about what exactly those terms should be. One constant refrain from Russian officials has been that Japan must “fully recognise the outcomes of the Second World War.” This essentially means that Tokyo has to admit that the Soviet Union legally took possession of the southern Kurils from the defeated aggressor, Japan, and now has legitimate sovereignty over them.

Such recognition implies that concluding a peace treaty with Japan is not about Russia ‘returning’ some territories that, according to the Japanese view, it illegitimately occupied by force of arms in 1945, but it is about Russia transferring part of its sovereign territory as a magnanimous gesture of goodwill toward Japan. It goes without saying this will be hard for Tokyo to swallow.

Another category of Russian demands involves political-military issues. There is a concern in Russia that, after their hypothetical handover to Japan, Shikotan and Habomai could be used for deployment of Japanese or, even worse, American military facilities. Such concerns may be overblown. Shikotan and Habomai are actually of little strategic significance. Unlike Iturup and Kunashir, they don’t guard the straits into the Sea of Okhotsk.

Still, any prospect of establishing military facilities on ceded territory, even if they don’t make much strategic sense, would be humiliating for the Kremlin. Moscow needs some form of assurance from Japan that the islands will not be militarised. Abe has reportedly agreed to provide such assurances.

Finally, there is an economic dimension. Albeit comprising just 7 per cent of the disputed territory, Shikotan and Habomai, marked on Russian maps as the Little Kuril Chain, are still a material piece of landmass totalling 361 square kilometres.

On top of that, there’s a 200-mile exclusive economic zone around them in the Pacific Ocean with rich fishing grounds. Shikotan has roughly 3,000 permanent civilian residents and accommodates two large fish-processing factories belonging to private Russian companies. Issues of financial compensation obviously need to be worked out.

More than that, in exchange for its generous gesture of ceding the islands to Japan, Moscow may expect similar generosity from Tokyo, such as spending massive sums on creating and modernising much-needed infrastructure in the Russian Far East.

One way to tackle this might be the creation of a special Russian-Japanese fund – with Tokyo providing the bulk of the capital – for investments in building roads, bridges, airports, energy grids, and other vital infrastructure in Russia’s eastern regions. With a stagnant economy, Russia cannot afford vast investments needed to overcome the backwardness of its Far East.

Despite Moscow’s embrace of Beijing’s Belt and Road Initiative, the Chinese are in no rush to spend money on infrastructure in Russia. Making a grand bargain with Japan may be the only realistic chance for cash-strapped Russia to upgrade its Far East. And, as Southeast Asians can attest, the quality of Japanese infrastructure investments is reliably high.

Some observers express doubts over whether Moscow is serious about pursuing a genuine deal with Tokyo. According to this narrative, perfidious and calculating Putin is playing naïve Abe, dangling the prospect of a territorial compromise to extract economic benefits from Japan and drive a wedge in the US-Japan alliance.

However, the incumbent Japanese leader is hardly a naïve simpleton who can be easily manipulated even by a Machiavellian Putin. Abe, who is set to become Japan’s longest-serving prime minister, is himself the ultimate political beast. The fact that the latest Abe-Putin meeting in Moscow on 22 January produced no public announcements of substantial progress does not necessarily mean that the talks are already doomed.

Russia’s maximalist demands toward Japan – such as Tokyo’s “full recognition of the war outcomes” as well as suggestions that Japan must revise its alliance with the US – follow normal bargaining rules of opening negotiations with the highest asking price. Putin acting as the good cop with his aides playing the bad cops in negotiations with the Japanese is also a well-known tactic.

If Japan agrees to drop demands for Iturup and Kunashir, provides Russia with some assurance to refrain from militarisation of Shikotan and Habomai, and commits to substantial infusions of Japanese capital into Russian economy and infrastructure, Moscow is likely to accept such a deal. For its part, Russia could offer Japanese citizens and businesses privileged access to Iturup and Kunashir, including fishing rights in the surrounding waters.

If Moscow and Tokyo find mutually acceptable diplomatic formulas and reach a package deal, they will still face the challenge of securing domestic support for it. According to polls, only 17 per cent of Russians currently support making territorial concessions to Japan.

To complicate things further, Putin’s approval ratings have been sliding down lately, reflecting discontent over the bleak economic situation and the raise in the retirement age. In such circumstances, the Russian leadership might be cautious about ceding – literally – any ground to Tokyo.

That said, Putin remains the nation’s paramount leader with great authority and could decide to go against the domestic headwinds if he is convinced that a grand bargain with Japan is in Russia’s national interest. In any case, the Kremlin controls a powerful and efficient media machine that can sell the deal to the Russian public.

It remains to be seen whether Putin and Abe will manage to steer the negotiations to a successful end and conclude a peace treaty, solving the long-running territorial problem. But there is certainly a window of opportunity, even if only half-open.