President Vladimir Putin’s recent summit in Japan shows that economic and security considerations may finally be playing an important role in resolving the Kuril Islands territorial dispute.

Russian President Vladimir Putin with Prime Minister of Japan Shinzo Abe. Photo: Kremlin

The first visit of Russian President Vladimir Putin to Japan in seven years may have appeared underwhelming for observers with high expectations. And the visit seemingly left an ambivalent aftertaste with the Japanese public. However, this does not necessarily mean that hopes for a normalization of Russian-Japanese ties should be abandoned. Quite the opposite, in fact: talks should be continued with the gradual approach that is so familiar to Japanese-style negotiators.

Context matters

Contemporary international relations in Asia are fraught with territorial disputes, and the Russian-Japanese dispute has lasted for so long – ever since World War II - that it has become a classic case study in the discipline. However, unlike many other territorial issues, the Kuril Islands conundrum has not been completely abandoned by politicians or accepted as a fait accompli. The parties kept hitting the “retry” button instead of “abort,” and a more than three-year-long charm offensive by Japanese Prime Minister Shinzo Abe has been the most long-lasting and persistent of such attempts to date.

Also read: "Russia, Japan won't let Kuril Islands dispute hold back economic ties"

As is the case of all policy initiatives tinted with idealism, recent attempts to fix the Kuril Islands row had become an easy target for skeptics both in Japan and Russia who could make a not-so-expensive bet on the failure of yet another iteration. Nonetheless, the Kuril Islands settlement, extremely slow as it may seem, seems to be showing signs of progress. After all, it is in both Japan’s and Russia’s interests to have zero issues with neighbors, especially in the increasingly conflict-prone East Asia.

The dispute has an important human dimension – the fate of both the Russian population of the isles and that of the Japanese who had been deported from there – which does not make its resolution easier, due to the sensitivities involved. Prime Minister Abe stressed that dimension by handing over letters from the Japanese deportees, including one written in Russian, to Putin.

And if there was one outcome of practical benefit for ordinary citizens from the summit, it is the pledge of the Japanese government to ease the visa regime for Russians, and, secondly, a pledge by the Russian government to simplify bureaucratic procedures for Japanese visitors of the Kuril Islands.

Should the Russian leader’s proposal to establish a visa-free regime for the inhabitants of Sakhalin and Hokkaido gain traction, it would prove the validity of practical cross-border cooperation as a stepping stone for a larger rapprochement.

Economic rapprochement

The two-day negotiations in Nagato and Tokyo brought the dialogue between Russian and Japanese political leaders back to where they had started the process of fostering normalization – the period between Abe’s 2013 Moscow visit and attendance at the 2014 Sochi Olympic Games. Granted, the Japanese sanctions are still in place but their effect has largely been mitigated.

Firstly, their scope remains narrow and they originated as a G7 solidarity act as a result of peer pressure rather than a standalone initiative. Secondly, the aggregate value of economic deals – some $2.5 billion signed last Dec.16 – may appear not overly impressive at the first glance, given the size of both economies and their respective G20 membership.

However, there are more important indicators at work. The pace of deal origination is steady, the sectors of cooperation are strategic, and over 60 projects of cooperation appear quite impressive in comparison to the past two decades, where the key large Japanese investments in Russia were concentrated in Sakhalin hydrocarbons and the construction of car factories.

For instance, the signing of agreements on the Arctic LNG project between, on the one hand, Russian gas producer Novatek and, on the other hand, Mitsui, Mitsubishi and Marubeni, builds on ongoing cooperation over Yamal LNG and increases the inroads of Japanese companies into the Arctic hydrocarbon reserves, improving prospective energy security for Japan.

Recommended: "Russian gas diplomacy and the Sakhalin-Japan pipeline"

Other noteworthy examples of tangible progress include, firstly, the signing of an $800 million syndicated loan for Gazprom by Mizuho, SMBC and JPMorgan Chase shortly before the Putin-Abe summit, and, secondly, an agreement between Russia's Far East Investment and Export Agency and the Far East Development Fund to establish a joint investment fund with the Japan Bank for International Cooperation (JBIC).

The crucial point here is that the development of economic cooperation with Russia appears to be of interest for Japan, and not only in connection with the islands. Although the Japanese state is capable of facilitating private sector operations in a given country, it can hardly coerce companies into an inopportune venture on the grounds of foreign policy considerations.

Disputed territory is an obvious roadblock

Where Putin and Abe seem to have reached a minor breakthrough is also where prospects are the least tangible: joint economic activities on the disputed isles. On the one hand, attempting to make any forecasts in this regard would be risky at best. Differences over sovereignty are still marked, whereas history is not particularly rife with successful long-lasting precedents of joint ownership, as the cases of the Aigun and Sakhalin condominiums can confirm. On the other hand, the very possibility of compromise – demonstrated to an extent by the Japanese side – is important here, as it is intransigence that has always marred the Kuril Islands dispute.

Russian presidential foreign policy advisor Yuri Ushakov said that experts couldn’t agree on the text of the declaration on joint economic activity until the very end of summit preparations and it required the top leaders to take responsibility. This inference, on the one hand, confirms the validity of Abe’s reliance on building trust with other leaders. On the other hand, it makes the future of Russo-Japanese normalization largely dependent on two people, both of whom are set to seek re-election in 2018, which is hardly conducive to compromises.

Also read: "Why Russia needs stronger ties with Japan"

Therefore, both parties will need to work on the institutionalization of normalization and to expand the pool of stakeholders of that normalization to include a wider array of economic decision-makers in both countries. For instance, Sino-Russian ties had been steadily progressing lately not least because top businessmen in both countries started getting involved as stakeholders on par with political leaders.

Security and insecurities

Still, sorting out security concerns will be crucial. Although the Japanese media has acknowledged the importance of the Kuriles as a naval gateway for Russia, this is not the major problem; rather, it is the possibility of a U.S. military base on the isles in the event of their transfer.

The prospect of encirclement by the U.S. and NATO has been a regular insecurity for Moscow and even the much-forecasted amiability between President Putin and U.S. President-elect Donald Trump is unlikely to alleviate these concerns. Abe’s meeting with Trump, scheduled for Jan. 27, a week after the inauguration, may shed some light on how the U.S.-Japan alliance may affect the possible Russo-Japanese normalization in the coming four years.

Where diplomacy at Nagato was also successful was the resumption of “2+2” consultations between foreign and defense ministers. Japan only has this mechanism with a handful of countries considered close partners (Australia, Canada, India, France, the UK, and the U.S.), so the addition of Russia symbolized its higher partnership status back in 2013.

Yet, no talks in that format have been held since that first round, even though top officials in the security establishment of both countries have been maintaining a parallel dialogue. And the revived “2+2” consultations are likely to be beneficial not only as a discussion between the key heavyweights relevant to the territorial issue.

Recommended: "Russia and the US are both trying to win over Japan"

It may also be a foundation for continuity and future cooperation, as incumbent Japanese foreign and defense ministers (Fumio Kishida and Tomomi Inada, respectively) have been both rumored to be among the potential successors of Shinzo Abe at the helm of the Liberal Democratic Party and, in all likelihood, Japan.

Who knows, should they become leadership challengers, maybe one of them will then be able to claim the resolution of the Kuril Islands territorial dispute in his or her electoral platform or blame the failure on a rival.

The opinion of the author may not necessarily reflect the position of Russia Direct or its staff.