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Reference ID Created Released Classification Origin
07MOSCOW601 2007-02-09 15:54 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

DE RUEHMO #0601/01 0401554
O 091554Z FEB 07

C O N F I D E N T I A L SECTION 01 OF 02 MOSCOW 000601 
E.O. 12958: DECL: 02/06/2017 
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"" 
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 
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 
MOSCOW 00000601  002 OF 002 
Missed Opportunity? 
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 dis
pute 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 
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 
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. 


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