Potes'n'Roll

From Kuriles with love
By M K Bhadrakumar

The geopolitics of the Asia-Pacific region is getting set for a significant makeover, with Russia and Japan embarking on a fresh dialogue at the diplomatic and political level. Japanese Prime Minister Yoshihiko Noda is scheduled to visit Russia in December and preparatory working-level consultations were held in Tokyo this past weekend between Russian Deputy Foreign Minister Igor Morgulov and his Japanese counterpart Akitaka Saiki.

The consultations have been followed up by an unannounced visit by Russian Security Council chief Nikolai Patrushev to Tokyo on Tuesday to meet with Japanese Foreign Minister Koichiro Genba. The weekend's working-level meeting itself signaled the mutual interest to kick-start another attempt to resolve the long-standing dispute between the two countries over the Kurile Islands.

Key to magical garden
Significantly, the weekend talks converged on the importance of the so-called 2001 Irkutsk Statement (which reiterated the 1956 joint declaration between the former Soviet Union and Japan whereby Moscow had agreed to return two of the four disputed islands to Japan).

Russian President Vladimir Putin's imprimatur is writ all over Moscow's renewed bid for a thaw in the seven-decade "cold peace" between Russia and Japan. Patrushev's mission opens a direct line between the Kremlin and the Japanese leadership. This is his first visit to Japan as the secretary of the security council, which is headed by Putin.

Russia and Japan hope to craft through the coming few weeks a suitable formulation on the long journey ahead to resolve the territorial dispute, which could be flagged in some appropriate way as an outcome of Noda's December visit.

Even though the territorial dispute with Russia has been lowered in Tokyo's foreign-policy priority, it continues to be an emotive issue for the Japanese public. The Kuriles hold the key that can open the door to the magical garden of Russian-Japanese normalization.

It has been evident that Moscow hopes to develop a strong relationship with Japan in the field of energy. Russia's bilateral trade with Japan touched US$30 billion last year and is registering growth of 5% this year, but it is far below the potential.

Russia also desperately needs foreign capital and technology to develop regions of Siberia and the Far East. China is a logical partner, since its growing economy and the vast resources in next-door Siberia and the Russian Far East are literally made for each other. But Moscow prefers Japan coming in as well as a counterweight to China.

Intrinsically, of course, Russia sees that Japan's gravitation away from nuclear energy opens a big window of opportunity for it. Japan and Russia reached a preliminary deal in September to build an LNG (liquefied natural gas) plant in Vladivostok with the expectation that most of the gas produced at the plant by 2016 will go to Japan. The plant has an annual capacity of 10 million tonnes and provides for an increased capacity of 25 million tonnes.

Japan is receiving big offers from Qatar and Canada to supply gas and it is also seeking LNG supplies from the US. Canadian Prime Minister Stephen Harper undertook a visit to Tokyo this year with a focused agenda to promote gas exports to the Japanese energy market by tapping into the growing groundswell of "post-Fukushima" opinion within Japan to opt out of nuclear energy.

Clearly, Moscow appreciates the urgency of making some movement on the main sticking point in Japanese-Russian relations at present, which is the territorial dispute, so that the overall bilateral relationship gets a new verve and could kick-start a mutually beneficial economic cooperation.

Sky is the limit
But what is bound to raise eyebrows will be that from Tokyo, Patrushev will also undertake a visit to Hanoi.

This is the second time in the past four months that Russia has sequenced its consultations with Japan and Vietnam and hyphenated the two countries, as it were, in its regional diplomacy. In July, Moscow hosted concurrent visits by the Vietnamese president and the Japanese foreign minister.

Interestingly, according to Kyodo news agency, Japan and Russia agreed at the working-level meeting in Tokyo last weekend to "strengthen bilateral dialogue in a bid to expand cooperation in the fields of security and defense amid the rapidly changing security environment in the Asia-Pacific region".

It added that the Japanese side "briefed" the Russian delegation about its dispute with China over the Senkaku Islands and that the Russian side "expressed hope that Japan and China will continue their dialogue and resolve the dispute peacefully". Put plainly, Tokyo has introduced into the agenda of its "dialogue" with Moscow the topics of its tense relations with China, and Moscow opted to adopt an impeccably correct neutral stance without taking sides.

Beijing will take note that despite the Sino-Russian narrative that the two countries will support each other on core issues of national sovereignty, Moscow refrains from backing China in its territorial dispute with Japan.

Equally, Russian-Chinese negotiations on cooperation in the field of energy are crawling at a snail's pace, while Moscow is pressing the accelerator to expand energy ties with Japan. An idea that was thought to be moribund, the construction of a 1,000-kilometer submarine gas pipeline connecting the Sakhalin fields to the consumers in Tokyo, might well be revived in the new climate of Russian-Japanese dialogue. Tokyo has sounded ExxonMobil to participate in the project, which is expected to cost about $4 billion.

Over and above, the blockbuster $26 billion deal announced on Monday in Moscow, which among other things leaves the British oil group BP taking a 20% equity holding in Russia's No 1 oil company Rosneft, introduces an altogether new paradigm in the consolidation of Russia's energy industry.

For the first time in the post-Soviet era, Russia's state-owned oil major is easing out the country's famous "oligarchs" who used to be shareholders by paying them off and, most important, replacing them with a foreign company. In this paradigm shift, Moscow may well consider at some point opening up the gas sector in a similar fashion to attract Japanese capital and industry.

Suffice to say, it suddenly seems that the sky is the limit for Noda to discuss the avenues of Russian-Japanese collaboration in the field of energy.

Not necessarily 'China-centric'
To be sure, Russia's energy cooperation with Japan increases Moscow's negotiating space vis-a-vis China as well as the European countries.

Recently, the European Union opened an investigation into Gazprom's pricing methods in the European market as well as its functioning as a monopoly. China also stubbornly refuses to accept Russia's contention that the pricing formula for gas supplies should be on par with what Gazprom commands from its European customers.

Both China and the EU will keenly watch the pricing formula for Russian gas supplies to Japan. Of course, the "Japanese card" enables Moscow to warn Brussels not to push the envelope. Russia is apparently in no hurry, either, to strike a deal with China on gas supplies.

At the end of the day, what stands out is the complexity of Russia's hugely important relationship with China, which is rhetorically described as "strategic coordination and cooperation". Moscow is obviously casting its net wide in the Asia-Pacific region.

Arguably, the emphasis on ties with Vietnam and Japan need not be interpreted as Russia's "China-centric" regional policy. But in the heightened security climate in the Asia-Pacific region centered on China's assertiveness in its border disputes with Japan and Vietnam, Russian moves inevitably assume geopolitical overtones.

Vietnam has agreed to provide access to the Cam Ranh Bay base for the Russian Navy and Moscow is encouraging Vietnam's interest in joining the Customs Union with Russia, Kazakhstan and Belarus. Vietnam already figures as a significant market for Russia's arms exports.

The expansion of Russian-Japanese cooperation can only add to Russia's influence in the Asia-Pacific region. Notably, the United States' recent deployment of radar systems in northern Japan doesn't seem to deter Moscow from expanding cooperation in security and defense, although it has voiced concern over their cooperation in missile defense.

Russian commentators have suggested that Moscow's "European experience" with regard to collective security dating back to the Cold War era would have relevance for the Asia-Pacific region. Indeed, Russia's normalization with Japan will be in tune with such aspirations to become an independent and influential player in Asia and the Pacific, which is a region that the US has traditionally dominated.

Ambassador M K Bhadrakumar was a career diplomat in the Indian Foreign Service. His assignments included the Soviet Union, South Korea, Sri Lanka, Germany, Afghanistan, Pakistan, Uzbekistan, Kuwait and Turkey.