Bloomberg News

Abe Uses First Russian Visit in Decade to Revive Peace Talks (2)

April 29, 2013

Japanese Prime Minister Shinzo Abe

Japanese Prime Minister Shinzo Abe, who has highlighted ties with Russia among those “holding the greatest potential” for Japan, said that he’s bringing a delegation that includes more than 120 business leaders, representing the biggest ever economic mission to Russia. Photographer: Tomohiro Ohsumi/Bloomberg

Russian President Vladimir Putin and Japanese Prime Minister Shinzo Abe agreed to revive stalled talks on a peace treaty to formally end World War II hostilities between the two countries.

The two leaders instructed their foreign ministries to accelerate discussions of “mutually acceptable options” and voiced “determination” to use bilateral talks to bridge differences and sign a peace accord, according to a joint statement issued to reporters in Moscow today.

Abe is using the first trip to Russia by a Japanese premier in a decade to break an almost seven-decade-long territorial dispute and win more access to energy resources. Putin said the two sides are “sincere” in seeking a diplomatic breakthrough and want to harness stronger economic ties to advance the talks.

“I’ll personally deal with this issue, which is the biggest unsolved question in relations between our countries, and will apply all my efforts to solve it,” Abe said in the Kremlin in remarks translated into Russian.

Abe met Putin in the Kremlin midway through a three-day visit to discuss energy, trade and investment. The countries’ relationship has been hamstrung by a dispute over islands known as the Northern Territories in Japan and Southern Kurils in Russia that were seized by the Soviet Union in the final days of the war.

China Tensions

The first official visit by a Japanese premier since Junichiro Koizumi’s trip in 2003 follows rising tensions with China over East China Sea islands as Abe vowed last week to protect the territories by force if necessary. Visits by lawmakers to a Tokyo shrine viewed as a symbol of wartime aggression have further strained ties that are near their lowest level since bilateral relations were established in 1972.

“Relations between Japan and Russia are dominated by the China factor,” Fyodor Lukyanov, the editor of Russia in Global Affairs, a foreign policy magazine, said by phone April 26. “Both countries are trying to balance China’s growth as the most important country in the region and this is leading to a thaw.”

Russian exports to Japan are dominated by energy products, with natural resources accounting for more than 80 percent of all shipments. Japan is Russia’s second-biggest trading partner in Asia after China, with turnover rising 5.3 percent last year to $32 billion, ranking it behind Italy and Turkey, Russian government data show.

Rosneft, Novatek

Russian energy companies OAO Rosneft (ROSN) and OAO Novatek (NVTK) signed memorandums today to cooperate with Japanese companies, including Mitsui & Co. (8031) Japan Bank for International Cooperation and the Kremlin-backed Russian Direct Investment Fund pledged $500 million each to create a joint investment platform.

Japan, the world’s third-biggest economy and the largest buyer of natural gas, is jostling with China for access to Russian energy riches. With China becoming more assertive in the Asia-Pacific region, more than doubling its military spending since 2006, Japan and Russia are seeking a counterweight to Asia’s biggest economy as they review their ties, according to Lukyanov.

China National Petroleum Corp. signed a deal to import at least 743,000 barrels of crude oil a day from state-run Rosneft by 2018. OAO Gazprom (GAZP), Russia’s gas export monopoly, plans to build a 38 billion cubic meter gas pipeline to China by 2018 if the two sides can agree on pricing this year.

Gazprom is ready to invest in a gas terminal and distribution network in Japan, Putin said after the talks today.

Medvedev’s Trip

The relationship with Japan had taken a turn for the worse last year after Prime Minister Dmitry Medvedev visited the disputed islands, prompting Japan’s Foreign Ministry to summon Ambassador Evgeny Afanasiev in June to protest. Japan is now planning to “work vigorously toward the settlement of the issue of the Northern Territories,” and conclude a peace treaty, the ministry said in the document.

Putin, who met Japan’s former Prime Minister Yoshiro Mori two months ago, said in December he’d received “signals” suggesting Japan may be ready to sign a peace treaty, previously hindered by a disagreement over the archipelago.

The chain, seized by the Soviet Union at the end of World War II, is located about 7,000 kilometers (4,350 miles) east of Moscow and 15 kilometers away from Japan’s northern island of Hokkaido.

‘Political Will’

Speaking in an interview broadcast yesterday on Russian state channel Rossiya 24, Abe said the nations must show the “political will” to break the deadlock, adding there’s no “magic wand” to resolve the disagreement.

Abe, who has highlighted ties with Russia among those “holding the greatest potential” for Japan, said that he’s bringing a delegation that includes more than 120 business leaders, representing the biggest ever economic mission to Russia. Abe plans to speak at an event promoting Japanese food during his stay in Moscow.

Putin met the Japanese leader in 2006-2007 during Abe’s previous stint as prime minister at Asia-Pacific Economic Cooperation summits and a Group of Eight forum in Heiligendamm, Germany.

Japan is seeking new energy supplies after shutting most of its nuclear reactors because of safety concerns after the 2011 tsunami and earthquake caused a meltdown at the Fukushima Dai- Ichi plant. Russia, the world’s biggest gas exporter, needs billions of dollars in investment to fund projects in its underdeveloped and resource-rich Far East.

LNG Projects

Rosneft, the world’s largest publicly traded oil company by output, signed a memorandum this month with Japan’s Marubeni Corp. (8002) to consider cooperation on exploration and liquefied natural gas projects in Russia’s Far East. The company, which is seeking to double gas output by 2020, may spend as much as $25 billion on a Sakhalin liquefied natural gas plant, according to Alexander Khoroshavin, the island’s governor.

Gazprom invited Japan to invest in an LNG plant in the Pacific coast city of Vladivostok, NHK reported April 18. The facility is scheduled to start output in 2018 and will eventually produce 15 million tons a year. The plant will cost about 220 billion rubles ($7 billion), Chief Executive Officer Alexey Miller said in October.

“Russia is endowed with rich resources and Japan has high technologies, making relations between our countries mutually complementary and mutually beneficial,” Abe said in the interview on Rossiya 24.

To contact the reporters on this story: Jake Rudnitsky in Moscow at jrudnitsky@bloomberg.net; Stepan Kravchenko in Moscow at skravchenko@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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