"CEAC Commentary" introduces news analyses andopinions in Japan on topics related to regional
cooperation and integration in East Asia, but they do
not represent the views of CEAC as an institution.

February 22, 2017

Abe’s Rubicon Crossing over the Kuril
Territorial Talk with Russia
By KODAMA Katsuya
We had some expectation that there would be some progress in the Kuril Islands
problem when Russian President Vladimir Putin visited Japan. Putin’s approval rate athome is quite high, and he is a “strong” leader both from positive and negative
perspectives. Abe is also a strong leader, as he still boasts high approval rate. It is necessary
for both sides to make a compromise to resolve the Kuril Islands problem, and that needs
strong leadership. If we miss this opportunity, the Northern Territories shall not be
returned forever to Japan.
The Russian economy boomed before 2014, thanks to rising oil prices, but since2015, Russia has fallen into severe situations due to falling prices of oil and gas, andsanctions imposed by the United States and the EU over the Ukrainian problem. Therefore,
it was expected that both sides had common interests in settling the territorial clash, sinceRussia wanted Japanese investment, and Japan wanted the Northern territories returned.
However, since oil price is recovering, and Donald Trump won the presidential election in
the United States, the Kremlin may have changed their mind, and they can withdraw thecarrot of returning disputed Kuril Islands in the negotiation with Japan.
It is reported that Prime Minister Abe and President Putin talked very friendly atthe bilateral meeting, but there was hardly any progress in the Kuril Island territorialnegotiation. Regarding the peace treaty including the settlement of the Kuril Islandproblem, both sides said there were many problems that needed to be resolved, and mutual
efforts for confidence building were necessary. It is quite doubtful whether the Russian sidetakes the Kuril issue into consideration seriously to conclude the peace treaty with Japan.
As to the economic cooperation plan, Japan agreed to invest 300 billion yen intotal, including those from private sector. Among private businesses, more than 60
agreements had been reached between Japan and Russia, including a joint venture of coal"CEAC Commentary" introduces news analyses andopinions in Japan on topics related to regional
cooperation and integration in East Asia, but they do
not represent the views of CEAC as an institution.

mining in East Siberia, loans to liquefied natural gas development projects in the Arcticregion, and so forth. Natural resources in Siberia are valuable to Japan. Economic activities
bring benefits on both sides, and it is wrong to see that Japan shares the burden unilaterally.
Confidence building through economic cooperation and economic activities is the vital coreof building a friendly relationship. This is the royal road of diplomacy.
However, both Japan and Russia are hesitant to develop mutual relations. TheRusso-Japanese relationship falls into turbulence occasionally, depending on theirrelationship with the United States. Actually, US President Barack Obama is taking
retaliatory measures to Russia now, as they launched cyber-attacks to help Donald Trump
win in the US presidential election. Also, European nations agreed to prolong current
sanctions on Russia over the Ukrainian problem until the end of July, at the EU summit lasttime. These trends are completely at odds with Japan’s hope to develop economic
cooperation with Russia.
At this stage, things are totally unpredictable. Putin and Trump are seemingly
cooperative each other, but we have to be prepared for a scenario that something cantrigger tensions between both leaders suddenly. In other words, even if Japan makes a hugeinvestment in Russia, that may end up in failure. Also, our Northern territories have notbeen returned yet. Therefore, if diplomatic relations turn worse, there is a risk that such ahuge investment inflicts terrible a loss, without making any profit. I am afraid that Japan
has taken a dangerous risk without a solid prospect of success. Putin’s diplomatic
technique is incredibly consummate.
Nevertheless, in view of current situation, Japan hardly has any alternative but
taking the risk, in order to provoke progresses in the Kuril territorial talk. I believe thatPrime Minister Abe was well aware of the risk when he made the decision. It is necessary tosend strong messages to Russia continually so that the Kremlin will not understand thatthe Kuril Island dispute has been settled as both countries reached an agreement foreconomic cooperation. Regarding the territorial issue, I believe that the return of Kunashir
is indispensable, even it is partial. If Japan is dedicated to make investments, Kunashir isessential, in terms of fishery and tourism.
Therefore, I would suggest a 2 and half return of the Northern territories,
including Habomai, Shikotan, and western half of Kunashir. That makes a favorable
environment for a full-fledged Japanese investment in the region, which will ultimately"CEAC Commentary" introduces news analyses andopinions in Japan on topics related to regional
cooperation and integration in East Asia, but they do
not represent the views of CEAC as an institution.

help Russia. Above all, we must be enduring and steadfast. It is tough to make a successful
deal with a strong leader like President Putin. This economic cooperation agreement is veryrisky for Japan. Can we win a bet? We need to watch the Russo-Japanese diplomatic tug ofwar for several years to see the final outcome.
(This is an English translation of the article written by Dr. KODAMA Katsuya, Presidentof the Socially Responsible Investment, which originally appeared on the e-forum“Hyakka-Somei (Hundred Ducks in Full Voice)” of CEAC on December 23, 2016.)