The Chrysanthemum & The Bear

Paul Goncharoff

Courteous and professional diplomacy may not be entirely dead in our brave new world. To appreciate the nuances of this sentence one only has to look back into recent history. Since World War II ended, no peace treaty between Moscow and Tokyo has been signed to this day. The key fly in the ointment to peace has been the unresolved territorial dispute around the southern part of the Kuril Islands chain – Iturup, Kunashir, Shikotan and the Habomai group. This matter has been both emotional and pragmatic over the years, rising and ebbing like tides influenced by a geopolitical moon.

The Kuril Islands impasse gathered steam during the Cold War in the aftermath of World War II and finds its roots in the wording and intent of the Yalta agreement (February 1945), the Potsdam Declaration (July 1945) and the Treaty of San Francisco (September 1951). The Soviet Union refused to sign the Treaty of San Francisco and stated that the Kuril Islands issue and the new iterations were one of the reasons for its opposition to that Treaty.

The original Yalta Agreement, signed by the major allied powers set out the following:

The leaders of the three great powers – the Soviet Union, the United States of America and Great Britain – have agreed that within two to three months after Germany surrenders, and the war in Europe stopped, the Soviet Union shall declare war against Japan on the side of the Allies on condition that…

  1. The former rights of Imperial Russia violated by the attack by Japan in 1904 will be restored.
  2. The southern part of Sakhalin as well as the islands adjacent to it shall be returned to the Soviet Union.
  3. The Kurile Islands shall be handed over to the Soviet Union.

In the years following the dissolution of the “Great Alliance” other factors came into play, geopolitics, domino theories, wars in Korea and Vietnam, and spheres of influence. In sum the whole cold war bouquet of changing military perceptions, viewpoints, evolving economics, and shifting political positions. The initial clarity of the Potsdam Declaration was picked at, amended and interpreted by a gaggle of legislators, resulting in these various declarations becoming “clear as mud”.

Fast forward – the “communist threat” posed by the Soviet Union disappeared over 25 years ago along with the Union of Soviet Socialist Republics. Out of the ruins of the USSR, a number of sovereign nations emerged, the largest of which is the Russian Federation, which also is the inheritor of the rights, and obligations of what was once the Soviet Union. Still, no peace treaty with Japan.

Meanwhile, historical enemies such as Japan and China with the blessings of the USA managed to come to terms in developing a working relationship. Today there are over 30,000 Japanese businesses registered and doing business with China. With Russia the number fluctuates between 300 and 400 which I am sure has something to do with the lack of a defined and clear relationship, partly to do with the Islands, and partly due to western geopolitical pressures to keep the relationship a long term work in process, usefully for some remaining unresolved and unblessed.

That being said, almost all of the major Japanese companies are well represented in Russia, have a very active trading relationship with everything from automobiles, electronics to oil, and gas developments for more than a quarter century. What has been missing are the midsized and small Japanese companies who are at the cutting edge of agriculture, alternative energy and a host of niche businesses, which would find ready cooperation and markets in Russia.

At the start of this February the Japanese government made it known that it has prepared and will present to the Russian government an urban development project for the city of Vladivostok in the Far East of Russia. This is part of the two countries’ economic partnership planning which is an outgrowth from the meetings between Putin and Abe these past two years. It has come together as there are national interests involved best addressed between two sovereign nations, and not by a multinational committee.

The Vladivostok project includes several subsets, among which are a Japanese AI traffic signal system that automatically adjusts signals in real time to reduce congestion, a technology to renew old sewage pipes without the need for excavation and a new Japanese technology for ecologically responsible garbage incineration that reduces air pollution. These projects, together with improving urban infrastructure, aquaculture, wind energy, greenhouse agriculture, tourism and property development form a strong and serious business foundation. The Japan Bank for International Cooperation and other sources within both Russia and Asia shall provide funding through financing.

It looks like common sense and pragmatic business can in fact lead the diplomatic horse to water. Without the noise, show, spin and drama so popular today. Both the Russians and Japanese are actively preparing to engage in new consultations at deputy minister level specifically to iron out ways to expand joint economic activities in the southern Kuril Islands. It is hoped that by enhancing two-way business and joint investments in common territories, that the political and diplomatic frictions will over time come to be resolved to the benefit and interests of both.

A great deal of planning and development work is ongoing in the Far East of Russia that is not making news in the western world. Partly because some of the projects like the Power of Siberia pipelines extending into China and planned for Japan, or the mainland to Sakhalin then to Hokkaido land bridge, may not meet the narrative desired by the various press services. Perhaps it is because these initiatives do not have a US Dollar component, or are not being led by US supported initiatives. Whatever the reasons, this region will be a global economic game changer for the 21st century and the parts needed to make it a reality are now finally coming together.

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