Identifier
Created
Classification
Origin
07TOKYO1267
2007-03-22 06:54:00
CONFIDENTIAL
Embassy Tokyo
Cable title:  

RUSSIA AND JAPAN SEEK TO ADVANCE ECONOMIC TIES

Tags:  PREL PGOV ENRG ECON JA RU 
pdf how-to read a cable
VZCZCXRO2046
RR RUEHFK RUEHKSO RUEHNH
DE RUEHKO #1267/01 0810654
ZNY CCCCC ZZH
R 220654Z MAR 07
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC 1898
INFO RUEHMO/AMEMBASSY MOSCOW 1579
RUEHFK/AMCONSUL FUKUOKA 0325
RUEHNH/AMCONSUL NAHA 2791
RUEHOK/AMCONSUL OSAKA KOBE 3839
RUEHKSO/AMCONSUL SAPPORO 1280
RHMCSUU/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
C O N F I D E N T I A L SECTION 01 OF 04 TOKYO 001267 

SIPDIS

SIPDIS

DEPT. PLEASE PASS TO USTR/MICHAEL BEEMAN. DOE PLEASE PASS
TO DOE/PI: DPUMPHREY, JNAKANO. COMMERCE PLEASE PASS TO
JAPAN DESK/NICOLE MELCHER.

E.O. 12958: DECL: 03/19/2017
TAGS: PREL PGOV ENRG ECON JA RU
SUBJECT: RUSSIA AND JAPAN SEEK TO ADVANCE ECONOMIC TIES

REF: TOKYO 1025

Classified By: Ambassador J. Thomas Schieffer for reasons 1.4 (b,d)

C O N F I D E N T I A L SECTION 01 OF 04 TOKYO 001267

SIPDIS

SIPDIS

DEPT. PLEASE PASS TO USTR/MICHAEL BEEMAN. DOE PLEASE PASS
TO DOE/PI: DPUMPHREY, JNAKANO. COMMERCE PLEASE PASS TO
JAPAN DESK/NICOLE MELCHER.

E.O. 12958: DECL: 03/19/2017
TAGS: PREL PGOV ENRG ECON JA RU
SUBJECT: RUSSIA AND JAPAN SEEK TO ADVANCE ECONOMIC TIES

REF: TOKYO 1025

Classified By: Ambassador J. Thomas Schieffer for reasons 1.4 (b,d)


1. (SBU) Summary. Russian Prime Minister Mikhail
Fradkov's February visit to Japan included visits with
Japan's top leaders and centered on economic issues,
especially trade. Japanese officials noted a new openness in
their Russian counterparts and speculated that Prime Minister
Putin's recent speech calling for a shift toward more
value-added industries had been taken to heart. Discussion
topics included energy, transportation and information
technology (IT),and a number of memoranda of understanding
(MOUs) were signed. Russian and Japanese leaders appear to
have made a conscious decision to sideline discussion of
political issues, such as the Northern Territories, in favor
of promoting economic development. End summary.

Russian PM,s Visit Includes Top Japanese/Russian Leaders
-------------- --------------


2. (SBU) On March 15 Ministry of Foreign Affairs Russia
Division Principal Deputy Director Nakamura gave Econoff a
readout of Russia,s Prime Minister Mikhail Fradkov,s
official visit to Japan during February 27-28. While in
Tokyo Fradkov met with Emperor Akihito, Prime Minister
Shinzo Abe, Minister of Foreign Affairs Taro Aso, Minister of
Finance Koji Omi, Minister of Economy, Trade and Industry
Akira Amari and Chairman of the House of Representatives
Yohei Kono. In addition, Fradkov had a breakfast meeting
with members of Nippon Keidanren, including Chairman Fujio
Mitarai, and attended the Japan-Russo Investment Forum.


3. (SBU) Fradkov was accompanied by Minister of Industry and
Energy Viktor Khristenko, Minister of Transport Igor Levitin,
Minister of Information Technology and Communications Leonid
Raiman and Presidential Envoy of the Far Eastern Federal
District (Minister-level) Kamil Iskhakov. Representatives of

Russian's top ten companies also participated in the visit.

Economic Issues Top Priority
--------------


4. (SBU) Nakamura noted that the visit primarily dealt with
economic not political issues and stressed he believes the
dialogue with Japan is likely to continue into the next
Russian administration. He observed that this visit provided
a new setting for Prime Ministers Abe and Fradkov. Abe is
keen to improve various bilateral relations and doing so with
Russia would follow on the heels of better relations with
China and South Korea. Nakamura added that Foreign Minister
Aso likely will go to Moscow for a follow-up visit to work on
political issues such as the Northern Territories, which were
not raised during this visit. No date has been set for Aso's
trip but Nakamura surmised it likely would be Golden Week in
early May.

Russians Show New Openness Toward Japan
--------------


5. (SBU) Nakamura commented that one month before this visit,
Russian President Vladimir Putin made a speech before Russian
industrial leaders in which he called on the Russian economy
to shift from its current heavy dependence on crude oil and
natural gas exports to more sophisticated value-added
industries. Nakamura posited that this message had
penetrated the Russian bureaucracy and lay behind the less
arrogant, more open nature of the Japan visit. He observed
that the Russian leaders were well prepared for the trip and
had openly invited Japanese investment.

Energy Discussions Include LNG, Nuclear Energy
-------------- -


6. (SBU) Nakamura told Econoff the GOJ emphasized to the
Russian government the importance of liquefied natural gas
(LNG) to Japan. The Russians confirmed that they want to be
a major global energy supplier and to reassure consumers that
contractual responsibilities will be honored. The Russians
also confirmed that the East Siberian pipeline construction
is progressing on schedule. (See reftel for further comment.)


TOKYO 00001267 002 OF 004



7. (SBU) Asked about nuclear energy discussions, Nakamura
said the two countries had agreed to begin negotiations on a
comprehensive nuclear energy treaty in April, including
nuclear material imports. He added that many difficulties
exist between the two countries, however. Japan and Russia
have very different nuclear energy policies partly because
Japan is a member of the International Energy Agency (IEA)
and must allow IEA inspections while Russia, as a non-member,
is under no such obligation. Nevertheless, Nakamura opined
that the Russian government is keen to promote its nuclear
industry, and Japanese private companies -- notably
Mitsubishi, Hitachi and Toshiba -- are increasingly
interested in doing business with Russia.

Transportation, IT Key Topics for Russians
--------------


8. (SBU) Transportation was a major topic of conversation,
said Nakamura. Russia recognizes the need to improve the
aviation and railway sectors, both physically with new planes
and trains and through an increase in the number of flights
between the two countries. Previously, Russia had sought
German high-speed train technology but recently the focus has
shifted to Japan,s bullet train technology, according to
Nakamura. The Russian government also wants to improve the
road infrastructure in the Russian Far East and has admitted
that even in urban areas the infrastructure is insufficient.
Russian Railway President Vladimir Yakunin, a former KGB
officer, will visit Japan to invite Japanese businesses to
work on the Siberian railroad system project, Nakamura said.
He also related that Toyota Corporation has expressed
interest in the railroad project, probably because Toyota
could ship auto parts faster and more cheaply via a
trans-Siberian railroad system from the Pacific Coast to
Russia,s west than it can by ship, as the company must do at
the moment.


9. (SBU) In information technology (IT) Russian strength lies
in its software, according to Nakamura, while Japan,s lies
in hardware, i.e. 3G mobile phones and broadcasting systems.
He said the two countries agreed to promote exchanges and
cooperation through inter-government
meetings.

Variety of MOUs Signed
--------------


10. (SBU) During the visit a total of 15 documents were
signed including five inter-governmental papers, according to
Nakamura. The first was a memorandum of understanding (MOU)
to reorganize the Trade and Economic Inter-Government
Commission Subcommittee, which is designed to enhance
cooperation and exchanges between local governments, such as
Hokkaido and Sakhalin, in order to improve economic ties.
The second document calls for enhancing disaster prevention
and preparedness in case of earthquakes, volcanic eruption
and tsunamis through the exchange of information and data.
Nakamura commented that Japan believes this cooperation will
help lead to a resolution of the northern territory dispute.
The third MOU concerns expanding Japan-Russia trade and
cooperation (see para 11),the fourth is a customs
cooperation treaty for exchanging information, and the fifth
is an agreement to enhance research cooperation on such
instruments as radios.


11. (SBU) Other documents signed during the visit included a
contract for a loan from Japan Bank for International
Cooperation (JBIC) to foreign banks, an agreement between
Japanese financial institutions and Russian banks concerning
loans for the Sheremetyevo Airport, and an MOU to promote
business between Japan,s JETRO and the Russian Union of
Industrialists and Entrepreneurs.

METI Focused on Trade and Investment Cooperation
-------------- ---


12. (SBU) In a separate meeting on March 13, Ministry of
Economy, Trade and Industry (METI) Trade Policy Bureau
Russian Office Assistant Director Masayuki Uesugi outlined
the background leading up to the signing by METI and
Russia,s Ministry of Economic Development and Trade (MEDT)
of the MOU on expanding trade and investment cooperation

TOKYO 00001267 003 OF 004


between the two countries. According to Uesugi, the two
ministries had planned to sign the document during the first
Japan-Russia Investment Forum in St. Petersburg in September
2006, but were unable to finalize the text. A second forum
was held during Prime Minister Fradkov,s visit to Tokyo and
this time working-level officials at the two ministries were
able to work out their differences. The ministries had hoped
that METI Minister Amari and MEDT Minister German Gref would
sign the document but Gref did not accompany Fradkov to
Japan. Ultimately, the MOU was signed by Russian Trade
Representative Aleksandr Lavrentyev and Trade Policy Bureau
Director General Masakazu Toyoda because METI Vice Ministers
Takao Kitabata and Toshiaki Kitamura were both away.

Absence of MEDT Minister Gref
--------------


13. (C) Uesugi theorized that Gref did not come to Japan
because with Energy Minister Khristenko planning to come it
was unnecessary to have two economic Ministers. (Comment: A
more likely explanation for Gref,s absence is that energy
remains the priority in Russia, especially energy technology.
Gref advocates FDI, a less pressing issue for the Russian
government at the moment because Japanese automakers have
already indicated interest in investing in Russia. End
comment.)

Russia Focus on Air, Sea; Japan Focus on Autos
-------------- -


14. (SBU) Asked where Russian business interests lie
vis--vis investments in Japan, Uesugi had no concrete answer
but suggested that Russian securities firms likely would be
top of the list. He echoed Nakamura,s contention that
another possibility is Russia's airline companies because the
Russian government has already indicated interest in
increasing both the routes and the frequency of airline
flights. Uesugi also suggested firms involved with ports and
ships would be interested in investing in Japan.


15. (SBU) As for Japanese investment in Russia, Uesugi told
Econoff that Toyota will start auto production in December,
and Nissan and Suzuki also are investing in the Russian
market. Japanese auto parts subsidiaries such as Denso Corp.
have already established offices in St. Petersburg. In
addition, Japanese construction machinery and electric
appliances companies also have investments in Russia. (Note:
Press reports indicate that Japanese companies are proceeding
cautiously, however, in light of several recent incidents
involving Japanese companies. Russian oil and gas monopoly
Gazprom recently took over control of the Russian oil and gas
project Sakhalin 2 in which Mitsui & Co. and Mitsubishi Corp.
had a 45 percent interest; the Japanese firms' holdings have
been reduced by half. Japan Tobacco is in a court battle in
Moscow over charges that it attempted to evade tax payments
and Matsushita Electric Industrial was abruptly told late
last year to cease doing business with a major Russian mass
retailer. End note.)

Japan, Russia Formalize Trade Investment Promotion
-------------- --------------


16. (SBU) Uesugi told Econoff that in order to support trade
between the two countries, the Japanese and Russian
governments have established the Japan-Russia Trade
Investment Promotion Organization. Within this organization,
the Japan External Trade Organization (JETRO),the Japan
Association for Trade with Russia and Central and Eastern
Europe (ROTOBO),and the Japan Center will support Japanese
companies, while a working group made up of officials from
all of the Russian economic ministries and Russian trade
representative offices in Japan will provide assistance to
Russian companies. The main purpose of the organization,
according to Uesugi, is to give out information, hold
consultations, and resolve disputes. The Trade Investment
Promotion Desk -- or TIP Desk -- is the point of contact
within the organization.

A Good Visit but Nothing New on the Table
--------------


17. (C) Overall, Nakamura and Uesugi were pleased with the

TOKYO 00001267 004 OF 004


way the visit had gone. Nakamura noted that the visit had
been pulled together in a very short amount of time because
the Russians had been very inflexible on dates. Both of them
dismissed the idea that Russia brought anything to the table
other than energy despite Putin's call for a new direction.
They clearly viewed Russia as an opportunity for Japanese
investment but saw little reciprocity.

Comment
--------------


18. (C) Russian and Japanese leaders appear to have made a
conscious decision to sideline discussion of political
issues, such as the Northern Territories, in favor of
promoting economic development. This strategy marks a major
reversal from previous tactics, when Tokyo sought to use
economic pressure to force concessions from Moscow. Though
the present policy de-links economic and political issues,
MOFA believes that the positive resolution of economic
problems promotes the kind of overall positive relationship
that will ultimately lead to resolution of the territories
dispute. The Russian Premier's visit, like Vice Foreign
Minister Shotaro Yachi's January 2007 trip to Moscow, signals
a continuing warming trend, largely because the contentious
political discussions are being ignored.


19. (C) The agreements signed during the visit, while
indicative of the potential for progress on the economic side
of the relationship, highlight the areas of possible
cooperation but do not appear to involve much in the way of
substantive interests from either country. Real progress
will depend on the dynamic among the interested Japanese and
Russian businesses, where the "devil in the details" of each
individual deal will determine the degree of actual progress.
SCHIEFFER