RUSSIA-JAPAN RELATIONSHIP: NOT YET A NEW CHAPTER

C O N F I D E N T I A L SECTION 01 OF 02 MOSCOW 000601

SIPDIS

SIPDIS

DEPT FOR EUR/RUS

E.O. 12958: DECL: 02/06/2017
TAGS: PREL PGOV ECON JA RS
SUBJECT: RUSSIA-JAPAN RELATIONSHIP: NOT YET A NEW CHAPTER
(C-AL7-00069)

REF: SECSTATE 9037

Classified By: Ambassador William J. Burns. Reasons: 1,4 (B/D).


1. (C) Summary. Despite growing economic ties and a newly
launched strategic dialogue, improvements in Russian-Japanese
bilateral relations will likely continue to move at a glacial
pace. The disputed Kurile Islands remain a sticking point;
oil-rich and confident Russians see little gain in making
concessions to Japan on this politically-charged issue. We
doubt that much progress toward real improvement in
Russian-Japanese relations is possible in the run-up to
presidential elections here in 2008. End summary.

FM Aso's Remarks: ""Creative""
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2. (C) During a February 5 meeting with the Ambassador,
newly appointed Deputy Foreign Minister for Asia Aleksandr
Losyukov reacted to FM Aso's Diet comments in mid-December
about dividing the disputed islands based on acreage by
politely labeling such ideas as ""creative.""


3. (C) The Head of the MFA's Japan Desk Aleksandr Iliyshev
dismissed Aso's remarks for the following reasons:

-- the MFA does not believe that Japan will change its
official position;

-- a mathematical formula, no matter how sophisticated,
cannot solve a political problem.

Iliyshev maintained that the territorial dispute could only
be resolved when the relationship reached a certain level of
maturity, as witnessed by the Sino-Russian example, where a
2005 territorial settlement had been preceded by years of
steadily closer ties. With bilateral relations the way they
are now, ""it is difficult to imagine a solution."" Iliyshev
believed that the Japanese approach -- resolve the
territorial dispute, then everything else, including a peace
treaty, would follow -- simply would not work.


4. (C) Iliyshev's views on Aso's remarks were shared by
Moscow Japan experts and the Japanese Embassy. The latter
privately dismissed Aso's remarks, echoing the Japanese
Foreign Ministry explanation of the proposal as a mistake.
Georgiy Kunadze, a Japan specialist and former Ambassador to
South Korea, termed Aso's remark, ""amateurish and offhand,""
not worthy of a serious response. He was simply ""dreaming
aloud,"" Kunadze thought.


5. (C) Russian officials agreed that increasing economic
ties will be the first step to improve the overall bilateral
relationship. Japanese trade and investment with Russia,
while low compared to other top economies, has steadily
increased over the past five years. According to data from
Russia's Federal Customs Service, Japan's 2006 two-way trade
with Russia, through November, totaled slightly under USD 11
billion, more than twice the level of 2002 trade. For the
first three quarter of 2006, Japan invested USD 2.6 million
in Russia. Japan's top investment in Russia are in the
tobacco industry (JT International) and a partial interest in
Sakhalin Energy Company (Mitsui and Mitsubishi). In 2006,
Nissan agreed to invest about USD 200 million to manufacture
autos near St. Petersburg. The first cars are expected to
roll out in October 2008.

Strategic Dialogue: Different Agendas
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6. (C) Efforts to reinvigorate the relationship beyond the
territorial dispute have been slow to gain traction. The
idea of a strategic dialogue, first hatched during the
November 2005 visit by President Putin to Tokyo, was
formalized in November 2006 on the margins of the APEC
meeting in Hanoi. Talks are to be held at the DFM level
twice a year. The MFA told us that it did not see the
meetings as a channel for resolving the territorial issue,
but as a confidence building mechanism, covering all areas of
the bilateral relationship. The Japanese Embassy offered a
different view, arguing that the territorial dispute would be
part of the dialogue's ""hidden agenda."" The first meeting in
Moscow on January 23-24 yielded little, as the two saw the
purpose of the talks differently. Russia had hoped to win
Japan's agreement to boost cooperation in Central Asia and in
the Russian Far East. The Japanese delegation was, according
to the Embassy, impatient with the Russians' lengthy
""philosophizing"" about the ""common interests"" of the two
countries.


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Missed Opportunity?
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7. (C) Many Russian experts thought that Japan missed a
window of opportunity in the nineties, when Russia
desperately needed economic assistance. ""The Japanese refused
to give us a helping hand when we were poor and weak,""
Kunadze said, and ""the golden opportunity to resolve the
territorial dispute disappeared."" Now that Russia's economy
is growing robustly, the chance of concessions from the GOR
was slim. Weariness about discussing the issue is prevalent
on the Russian side. As Kunadze noted, there had been talk
about resolving the dispute either ""now or never"" since the
Brezhnev era. He scoffed at the idea that a solution must be
found while Putin is President. The Japanese diplomat
agreed. If anything, he argued, Putin, boosted by the
newfound sense of Russia's power, would be reluctant to give
up more than was sketched out in the 1956 Joint Declaration.
The GOR claims that the Declaration gives Japan only two
small islands: Shikotan and Habomai.


8. (C) Specialists at the government-sponsored Russian
Institute for Strategic Studies considered the territorial
dispute between Russia and Japan ""non-existent."" According
to Vladimir Fedotov and Bakhtiyar Mirkasymov, the issue was
settled by the 1956 agreement. Fedotov argued that
""resolving"" the issue again should not be a pre-condition for
progress on other parts of the bilateral agenda, as Japan had
insisted. There are a handful of experts who suggest that
all four islands could be returned. Villya Gelbras of Moscow
State University saw little value in keeping the islands at
the expense of developing a ""normal"" relationship with an
important country when the islands were ""not Russia's in the
first place."" Gelbras allowed that few in Russia shared his
view, however. He warned that emotions runs high on the
issue, as it has been endlessly politicized by both
governments.


9. (C) Kunadze saw nothing to gain in returning all four
islands to the Japanese. Russia knows that Japan's strong
alliance with the U.S. meant the two countries would never be
full-fledged allies, he said. The current, ""stagnant""
relationship works for Russia for the time being, added
Kunadze. The economic relationship -- and Japanese
investment -- will continue regardless of political
differences.


10. (C) Comment: We detect no increased interest in
resolving the territorial issue among GOR officials or among
Moscow's Japan watchers. At the same time, growing economic
ties are creating the conditions for better overall
relations, and the strategic dialogue should over time
provide a forum to move forward on some political issues.
However, this process of normalization will continue to move
at a glacial pace, and only a breakthrough on the Kuriles
will result in dramatic change.
BURNS