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The Budding Russia-Japan Relationship

By Fred Stakelbeck | August 30, 2006

Japan finds itself at a crossroads, facing important economic, energy and security issues that are forcing Tokyo to revise its foreign policy, while at the same time maintaining friendly relations with the West and traditional ally the U.S. One example of this change is Japan’s relationship with long-time military adversary Russia.

In June, Japan and Russia agreed on the importance of cooperation between the two countries in the Asia-Pacific region. Japanese Foreign Minister Taro Aso and Russian Security Council Secretary Igor Ivanov exchanged opinions on a variety of security issues, including North Korea, the abduction of Japanese nationals by North Korea and Iran’s continuing nuclear ambitions.

Recently, Tokyo has worked on behalf of Moscow in its pursuit of WTO membership and in March, a visa-free policy between both countries was reinstated. Moreover, Russian President Vladimir Putin pointed out at the recent G8 Summit held in St. Petersburg that bilateral trade had grown by 70 percent in 2004 and by 30 percent in 2005. For his part, outgoing Japanese Prime Minister Junichiro Koizumi has called for a doubling bilateral trade, noting that the number of Japanese companies operating in Russia has increased from 60 to 130 in the past five years.

Although economic relations have played an important role in the budding relationship, Japan’s pursuit of energy resources has been the driving force behind improved relations between the two countries. Japan contains almost no oil reserves of its own, but it is the world's third largest oil consumer behind the United States and China. Of the oil consumed in Japan, 75 to 80 percent comes from OPEC, particularly Middle East countries such as the United Arab Emirates, Saudi Arabia, Kuwait, Qatar, and Iran. Recognizing the volatility of the Middle East region, Japan, like its Western counterparts, has sought to diversify its energy stream.

Enter Russia.

Russia holds the worlds largest natural gas reserves, the second largest coal reserves and is eighth in total oil reserves. According to the Oil and Gas Journal, an industry publication, Russia has proven oil reserves of 60 billion barrels with undiscovered conventional reserves larger than those of any other country in the world. By 2005 Russian total production averaged almost 9.5 million barrels per day (bpd) making Russia the world’s second largest producer of crude oil, behind only Saudi Arabia. All of this makes Russia an attractive energy partner for Japan.
At the conclusion of the recent G8 summit, Russia and Japan agreed to build a US$6.5 billion East Siberia-Pacific pipeline that is expected pump 80 million metric tons of crude a year, or 1.6 million barrels per day (bpd), from Russia’s Far East to the Asia-Pacific region, with a branch going to mainland China. Japan’s Prime Minister Koizumi has said the pipeline project will be “mutually advantageous.”

Japan’s government-affiliated Japan Oil, Gas and Metals National Corp has been named as a possible player in the pipeline deal, with Japanese firms Sumitomo Corp and Inpex Corp also showing interest. Oil deposits in eastern Siberia and the Russian Far East are estimated at 20 billion tons, of which, only 950 million tons have been explored.

Another area of joint Russia-Japan cooperation has been Sakhalin Island, a large island northwest of Hokkaido settled by Russia and Japan for centuries. According to the Business Information Service for the Newly Impendent States (BISNIS), Sakhalin contains an estimated 350 million tones of oil and 600 billion cubic meters of natural gas. A consortium of thirteen Japanese companies known as the Sakhalin Oil and Gas Development Co Ltd hold significant shares in the offshore Sakhalin I and II projects with an eye on two other projects. Additional oil and natural gas deposits in the Russian Far East Republic of Sakha, the Kamchatka Peninsula and Magadan have also attracted Japanese interest.

The pipeline agreement and Sakhalin cooperation come as other energy disputes in the bilateral relationship remain unresolved. In particular, the lack of a peace treaty over the disputed Kuril Islands, which the Soviet Union claimed at the end of World War II, has caused continued friction. But in June, Russian President Vladimir Putin seemed to dismiss the dispute, noting, “In relations with Japan, the line toward continuing political dialogue and boosting economic cooperation is completely justified while maintaining a principled approach toward a peace treaty and a sincere desire to see it concluded.”

Just last week, Russia announced a US$630 million plan to develop the disputed Kuril Islands, or Northern Territories, as they are referred to in Japan. The “Draft Plan for 2007-2015” outlines plans to build an all-weather airport this year and an energy production infrastructure. Russia’s security service, the FSB, plans to broaden its restricted border zones around the islands.

Although progress has been made in the relationship, serious disagreements and inconsistencies still exist. Contradicting President Putin’s recent conciliatory comments and offers to cede partial control of the Kuril Islands, Russian Economic Development and Trade Minister German Gref said recently that there were no plans to handover any of the disputed Kuril Islands to Japan.

In an abrupt shift this month, Russian President Vladimir Putin confirmed that his nation's trans-Siberian oil pipeline will export oil to China, instead of Japan, first. This was an obvious surprise to Tokyo and raises questions concerning the trustworthiness of Moscow.

Finally, the Russian patrol boat attack two weeks ago that took the life of a Japanese crab fisherman near Kaigara Island, one of several islands claimed by both Russia and Japan, will hurt the relationship. Japan called the act “unacceptable,” while Russia’s Deputy Ambassador Mikhail Galuzin demanded Japan respect Russian territory.

Continued altercations and unsettled issues leave the future of the relationship in doubt. Will both countries become strong energy partners, or will historical differences continue to present insurmountable obstacles which lead to conflict?

Fred Stakelbeck is a Board Member with the Center for Threat Awareness. He is an expert on the economic and national security implications for the U.S. of Asia’s emerging regional and global strategic influence.

1 Comment

Sidelights: Only the most southerly Kuril islets are under J-R dispute. But these are situated at Sea of Okhotsk exits. While macroeconomic forces make for Japanese-Russian complementarity, long standing animosity stands in the way. Japan's emergence from under the protective U.S. umbrella will mean a more nationalistic and better-armed Nippon. It's unlikely that a so-called 'comprehensive settlement' will soon be arrived at.