[Discussants: Takeshi Hashimoto (moderator), Chikahito Harada, Nobuo Shimotomai, Kunio Noji, and Teruo Asada (profiles at end of article)]
With the dramatic changes in the environment surrounding Japan, it is critically important that Japan expand and deepen its economic ties with Russia to ensure the prosperity and stability of the Asia-Pacific region. The Keidanren policy proposal titled “Fundamental Approach to Japan-Russia Economic Relations” (released in December 2015 [hyperlink added by JMH]) states that “it would be difficult to conclude that the full potential for bilateral trade and investment has yet been exploited.” The policy proposal then goes on to suggest concrete ways to improve the [Russian] business environment. In light of the above policy proposal, the round-table identified issues in expanding and deepening Japan-Russia business and exchanged views on the outlook for the future.
Current state of Japan-Russia relations
Hashimoto: To start our discussion, I would like to ask each of you to give your impressions of the current state of Japan-Russia relations. Chikahito Harada was Japan’s ambassador to Russia for almost five years through the end of 2015 and is currently in charge of high-level political and economic negotiations and consultations as representative of the Japanese government. I would like to ask him to lead by offering his analysis of the current state of Japan-Russia ties, including politics and security.
High-level political dialogue is being held frequently
Harada: Building strong and stable Japan-Russia ties aligns with the strategic and geopolitical interests of Japan. Our basic stance is to emphasize dialogue with Russia while working hand in hand with the G7 to address such international issues as the situations in Ukraine and Syria. Japan-Russia ties have been positive recently as political dialogue has been reenergized since Foreign Minister Fumio Kishida’s visit to Russia in September 2015.
At the Japan-Russia summit held in Sochi in May this year, Prime Minister Shinzo Abe and President Vladimir Putin engaged in long meetings and exchanged views on promoting ties in a broad spectrum of areas, including politics, economy, security, culture, and person-to-person interactions. Allow me to describe the highlights of this meeting.
First, the two leaders agreed to engage in frequent high-level political dialogue and frequent exchange of VIPs and to continue summit-level dialogue taking advantage of opportunities afforded by international conferences. Since the Sochi summit, Deputy Prime Minister Yuriy Trutnev visited Japan in May, and State Duma (Lower House) Chair Sergey Naryshkin traveled to Japan in June. Moreover, Federation Council (Upper House) Chair Valentina Matvienko is considering visiting our country.
At the invitation of President Putin, Prime Minister Abe intends to attend the Second Eastern Economic Forum, which will be held in Vladivostok in September this year. The two leaders will probably have their next summit meeting on that occasion. [At the May summit meeting] the two leaders agreed that President Putin would visit Japan at the most appropriate time and confirmed that they would make the preparations necessary to ensure the visit would be fruitful.
Turning to politics, the most important issue for Japan is negotiations regarding the Northern Territories. For a breakthrough to be achieved in the stalled negotiation of a peace treaty, the two leaders agreed to vigorously promote negotiations taking a “new approach” that goes beyond the thinking of the past and to hold the next round of negotiations in Tokyo in June.(1)
Looking at economics, Prime Minister Abe described [at the May summit meeting] the work Japan is doing to promote Japan-Russia economic exchange, and he proposed an eight-point plan for cooperation to reform Russian industry and the Russian economy. President Putin showed great interest in the cooperation plan and welcomed it warmly.
Turning to security, the two leaders agreed to hold Japan-Russia Security Consultations and Counter-Terrorism Consultations in the near future(2) and to continue to promote exchange between their defense authorities as well as exchange between their coast guards and border protection authorities. This is expected to enhance trust between the two nations.
In sum, it can be said that the summit meeting in Sochi added momentum to advancing Japan-Russia bilateral ties in a broad spectrum of fields.
Resource exports to Asia will increase
Hashimoto: Turning to Japanese companies, JGC Corporation and Chiyoda Corporation are participating in plant construction projects, and Mitsui O.S.K. Lines is participating in marine transport projects. To successfully launch such projects requires smooth project finance. A further deepening of Japan-Russia relations is desired as there are issues that need to be resolved amid the current political and economic environment.
Thank you for sharing your views, each from your unique perspective. Allow me to pull together the common threads of what has been said about the current state of Japan-Russia ties. I think we agree that Japan-Russia economic relations have great potential although the situation still cannot be taken lightly in the short term. Moreover, in light of the close relations between the leaders of the two nations, there is a chance that there will be significant movements in Russia’s relations with Japan over the medium to long term if the situation surrounding Ukraine improves. This is also true of Russia’s ties with the West.
A new generation is starting to close the gap between Japan and Russia
Shimotomai: As I mentioned earlier, Russia has no choice but to shift toward the East amid today’s global economy. Japan, China, and South Korea are its potential counterparts for this, and each country offers [different] merits and demerits for Russia.
Let’s look at China first. China and Russia have drawn closer since they agreed on a final demarcation of their border 12 years ago, and many Chinese companies are doing business in Russia. On the other hand, the economic and military rise of China is a threat to Russia. The two nations face complex issues particularly surrounding Arctic Ocean development and Central Asia. Turning to South Korea, this country entered the Russian market quickly after the collapse of the Soviet Union and developed a network while Japan placed distance between itself and Russia. It cannot be overlooked, though, that South Korea has a smaller economy than Japan and China.
How about Japan? The generation that had deep ties with Russia since the Soviet era did not have any opportunities because the parameters were different over the past 20 years. On the other hand, a young generation has risen up in both Japan and Russia and is starting to bridge the gap.
On the Russian side, many outstanding people are interested in Japan. For example, more and more students at the Primakov National Research Institute of World Economy and International Relations (IMEMO) and the National Research University Higher School of Economics are studying Japanese. They are not fettered by the past and are endeavoring to create ties by taking a new approach in relation to Japan.
On the Japanese side, the fact is that understanding of Russia has decreased since the collapse of the Soviet Union. Although there are people in each field who are making unique inroads, the fact is that overall many Japanese have a negative image of Russia perhaps because they have been influenced by Western media. Mr. Noji mentioned that corporate leaders should learn about Russia. Person-to-person interactions between Japan and Russia pale in number compared with those between Japan and China and between Japan and South Korea. In addition, fewer young Japanese are pursuing Russia studies. To develop new networks between Japan and Russia, Japan must maintain a high standard of Russia studies in both quality and quantity at the university level. On a bright note, Japan-Russia historians, including many young middle-echelon scholars, have engaged in dialogue on the 160-year history of exchange between their countries since the 1855 Treaty of Shimoda, while recognizing their differences, and they have published parallel histories.
Japanese corporations want to engage in joint projects, setting aside differences in perspective
Hashimoto: I would like to point out a few challenges, drawing on my experience in the marine transport industry. Mitsui O.S.K. Lines aims to continue to engage in marine transport in seas with very harsh weather conditions, like the Arctic Ocean, the Bering Sea, and the Sea of Okhotsk. Close economic and technological ties between Japan and Russia and the provision of personnel are essential for safe navigation in these waters.
There are high expectations for the future development of Arctic Ocean sea lanes, but to ensure that LNG ships, tankers, and container ships can safely navigate these sea lanes, various steps must be taken: navigation support centers must be established along the Arctic Ocean coast, icebreakers must be stationed, and training facilities for crew members must be improved.
Person-to-person interactions on all levels should be promoted
Shimotomai: It is thought that energy will become less important to the Russian economy going forward, and this is a positive for Japan. Currently, Japan imports about 10% of its energy from Russia, and it is estimated that this will increase to around 20% in the future. As a result, huge projects, such as building energy infrastructure like pipeline and power lines, will probably also become feasible.
The gap in expectations between Japan and Russia is an issue. The economy is Russia’s highest priority, while Japan is seeking improved relations overall, including the Northern Territories. How to bridge that gap is a sensitive issue, and I think the Abe administration is moving forward in a very effective way, including setting a schedule.
Japanese companies’ business with Russia will expand into new fields
Asada: I have the sense that Japan-Russia relations entered a new stage with the summit meeting in Sochi. Until now, even Japanese trading companies have not actively sought to expand business with Russia beyond the field of resources. Embarrassingly, this is even to the extent that employees hide the fact that they can speak Russian because they do not want to be involved in business with Russia.
As Ambassador Harada said, however, we are now doing business in nontraditional fields thanks to President Putin’s warm response to the eight-point cooperation plan. In the past, we only did business in the upstream sector of the energy industry, such as oil and natural gas. Now, however, opportunities are expanding in the downstream sector, such as the petrochemical industry. Moreover, the spectrum is widening to include projects related to urban environment infrastructure, such as improvement of waste treatment and water supply and sewerage, as well as core infrastructure, including the expansion of harbor facilities.
The greatest challenges in developing new business overseas are public safety and infrastructure. In these respects, Russia, while not perfect, offers better conditions than South America, Southwest Asia, and the Middle East. Although Russia’s harsh weather is a challenge, the nation has significant potential.
In [Keidanren’s] “Fundamental Approach to Japan-Russia Economic Relations,” the section titled “Issues to be addressed under the leadership of both governments” offers four priorities: (1) development of core infrastructure and urban environment infrastructure in Russia; (2) bilateral public- and private-sector cooperation aimed at modernizing the Russian economy; (3) intergovernmental discussion aimed at encouraging the movement of persons; and (4) Japan-Russia cooperation in the Arctic Ocean. I believe that these address the various issues raised today.
Hashimoto: I would like to end today’s round-table by expressing the Japanese business community’s commitment to further expand business dialogue with Russia in order to develop untapped potential by harnessing each of our strengths with an eye ultimately to resolving bilateral as well as global-scale issues. Thank you all.
(The round-table was held at Keidanren Kaikan on May 30, 2016) (Abridged)
[Profiles of discussants: Takeshi Hashimoto (moderator) is chair of the transport subcommittee of the Keidanren Japan-Russia Business Cooperation Committee and senior managing executive officer of Mitsui O.S.K. Lines, Ltd. Chikahito Harada is government representative and ambassador extraordinary and plenipotentiary for Japan-Russia relations. Nobuo Shimotomai is professor at the Hosei University Faculty of Law. Kunio Noji is vice-chair of the Keidanren Board of Councillors and chairman of the board at Komatsu Ltd. Teruo Asada is chairman of the Keidanren Japan-Russia Business Cooperation Committee and chairman of the board at Marubeni Corporation.]
(1) The peace treaty negotiations were held on June 22.
(2) The Japan-Russia Security Consultations were held on July 4, and the Japan-Russia Counter-Terrorism Consultations were held on June 23.