Анджела Стент - Putin's World - Russia Against the West and with the Rest

The Russian Far East (RFE) remains relatively underdeveloped, underpopulated, and in need of investment, and Putin has gradually made this a priority. It is also an area in which China has historically had territorial claims. Japan, conversely, is an island with few natural resources and has a keen interest in Russia’s abundant energy supplies. Japan is a natural investment partner for this region. At various junctures, the Japanese government has used the unresolved Kuril Islands territorial issue to dissuade its companies from investing in Russia. For some time this was convenient for the Japanese companies because of their reluctance to do business in Russia without the rule of law and predictable conditions. As time has passed, however, much of this reluctance has waned, and Japanese interest in the Russian market has grown.

The Japanese desire to engage in joint energy projects with Russia has been thwarted both by geopolitics and growing Russian resource nationalism. The first project involved Sakhalin Island. In 2003, Russia and Japan signed a contract for the construction of the world’s largest liquefied natural gas (LNG) plant, the Sakhalin-II project, originally led by Shell and two Japanese corporations. The project was designed to have a positive impact on the economy of the Russian Far East. The LNG was to be transported to Japan. But the project ran into trouble in 2006 over the strong-arm tactics of the Kremlin and its Gazprom ally when Shell announced that it had incurred significant cost overruns and the Russian government began to pressure it to sell its stake to Gazprom. Then minister of natural resources Yuri Trutnev weighed in and announced that the production sharing agreement should never have been signed. And environmental official Oleg Mitvol suddenly discovered the project would have serious negative consequences for the wildlife on the island. Shell was forced to halve its ownership in the $22 billion project, cutting its stake from 55 percent to 27.5 percent. Until the very last moment, the Russian authorities tried to pressure Shell into retaining an even smaller share in the project. Gazprom stepped in, buying Shell’s share plus half the stakes owned by Japanese partners Mitsui and Mitsubishi, for just $7.5 billion. A Shell spokesman described this as the equivalent of “paying to enter on the ground floor, as if they were a shareholder at the beginning.” 44Once Gazprom took over the majority share, Putin declared that all the environmental issues had miraculously been resolved. Shell executives took this as a message from Putin to other officials that they should desist from further pressuring Shell and other foreign oil companies in this way.

The second major issue was the route of a proposed Russian oil pipeline to Asia. Whereas traditionally most Russian oil and gas has been exported West, Putin was determined to diversify Russia’s exports and build pipelines that went east. But who should the first beneficiary be, China or Japan? Putin was initially wary of the China route via Daqing in Northwest China and preferred the Japanese pipeline route, which would have gone from Angarsk to the port of Nakhodka on the Sea of Japan. 45The Japanese would have imported the oil by tanker. In 2004, Koizumi offered $5 billion to finance the project, and it appeared it would go forward. But in 2005, the Russian government changed its mind and committed to the Chinese pipeline route, to the disappointment of the Japanese. Apparently both cost factors and geopolitics had prevailed, and the Kremlin decided it was more important to strengthen the relationship with Beijing than with Tokyo.

Russia’s relations with Japan, like those with other major powers, have been heavily influenced by the leaders of both countries. So when Shinzo Abe was elected Japanese prime minister in 2012 and Putin returned to the Kremlin, there were new possibilities for improving relations because of Abe’s determination to resolve the Kuril Islands issue. It was a personal mission for him. His father, Shintaro Abe, foreign minister from 1982 to 1986, had worked with Gorbachev and Shevardnadze to achieve a breakthrough in Russo-Japanese relations. Abe had visited Moscow and laid the initial groundwork for Gorbachev’s visit to Tokyo in 1991. On his deathbed, he expressed to his son the wish that a peace treaty be signed and the islands be returned. Seeking rapprochement with Russia became, as one Japanese expert put it, a “family business.” 46Moreover, during his reelection campaign in 2011, Putin had ordered Japanese and Russian officials to follow the judo command “ Hajime, ” or “Start.”

Abe has prioritized normalizing relations with Russia and is domestically strong enough to continue to push this agenda despite nationalist opposition. He believes he is better placed than any previous prime minister to accomplish this because of his strong power base and influence over the right wing. He also has explicitly delinked the economic and political aspects of the relationship. Concerns about a rising China, Sino-Japanese conflict over the Senkaku Islands ( Diaoyu in Chinese) in the South China Sea (Japan’s other territorial dispute), a disagreement with South Korea over some islets, and the threat from North Korea—all these have reinforced Abe’s determination to improve ties to Russia. He is particularly concerned to prevent the formation of a stronger Russia-China alliance. Moreover, the impact of the 2011 Fukushima Daiichi nuclear power plant accident added urgency to the need to diversify Japan’s energy supplies. Abe focused on cultivating personal ties with Putin. He began the process of rapprochement as soon as he took office, traveling to Russia in 2013—the first visit by a sitting Japanese prime minister in a decade—and laying the groundwork for a Putin visit to Japan. Abe and Putin created a two-plus-two dialogue, involving foreign and defense ministers to begin negotiations on an eventual agreement. Moreover, Kremlin officials said that Russia would not take sides in the Senkaku Islands dispute with China.

When the Winter Olympics opened in Sochi in February 2014, Abe was one of the few Western heads of state to attend. The others boycotted the games over Russia’s legislation penalizing homosexuality and other human rights issues. Then, a few weeks later, Russia annexed Crimea and helped launch a war in Eastern Ukraine. This placed Abe in an awkward position. For the Japanese, Ukraine is far away and not a pressing issue. When the US expelled Russia from the G-8 and imposed sanctions—first over Crimea and then following the July 2014 downing of the Malaysian airliner over Eastern Ukraine—Japan faced a dilemma. As an ally of the United States and a member of the G-7, it felt obligated to impose sanctions. But imposing sanctions could jeopardize the rapprochement with Russia and set back a possible settlement. Moreover, many in the private sector shared the opinion of one prominent businessman: “Why impose sanctions? They are ineffective. Why does the US care about Ukraine? East Ukraine belongs to Russia.” 47

Reluctantly, Japan imposed financial and technology sanctions similar to those imposed by the United States and Europe. Immediately following the annexation, it suspended talks on investment and visa reform and condemned Russia’s actions. After the MH-17 downing, it imposed more sanctions, including freezing assets of those supporting Crimea’s annexation, and financial sanctions for new projects in Russia in line with those of the European Bank for Reconstruction and Development. 48However, this did not satisfy the Obama administration. US officials sought to dissuade Abe from continuing his personal meetings with Putin—but to no avail. 49This increasingly became a source of US-Japanese friction. Meanwhile, Russia sharply criticized Japan’s imposition of sanctions. Abe continued to travel to Russia to pin down a date for a Putin visit to Japan. Japan hosted the 2016 G-7 summit, and Abe unsuccessfully tried to secure an invitation for Putin—after Russia had been ousted from the organization. “We need the constructive engagement of Russia,” Abe said. “I believe appropriate dialogue with Russia, appropriate dialogue with President Putin is very important.” 50