Change of the government in Tokyo is unlikely to lead to major changes in Russian-Japanese relations. However, it inevitably prompts a review of their prospects. Relations with the previous government deteriorated sharply because of the aggravation of disputes over the southern Kuril Islands.

       On August, 30 Finance Minister Yoshihiko Noda was elected Prime Minister of Japan. The Democratic Party retained power, but the Naoto Kan government resigned. The new Cabinet has a myriad of domestic problems to tackle, namely: crippling national debt, tax difficulties, and the disproportionate rate of the yen not to mention the continuing urgent need to deal with the consequences of the earthquakes, tsunami and of course the accident at the Fukushima-1 nuclear power station. In foreign policy, however, the new government is unlikely to seek any radical changes to existing priorities. Much like his predecessor, Yoshihiko plans to strengthen the U.S.-Japanese Alliance. He is concerned about China's military programs and insists on the need for a speedy resolution, in Japan’s favor, of the territorial dispute with Russia.

       This change of the government in Tokyo is unlikely to lead to major changes in Russian-Japanese relations. However, it inevitably prompts a review of their prospects. Relations with the previous government deteriorated sharply because of the aggravation of disputes over the southern Kuril Islands. In February 2011 analysts even discussed the possibility of a localized military conflict between Russia and Japan. However, even setting this troubled past aside, we should admit that 80% of the agenda of the Russian-Japanese dialogue focuses on the problem of what the Japanese call the "Northern Territories". There are heated discussions on fisheries, the delimitation of shelf areas in the Sea of Okhotsk and the Sea of Japan, Japanese automobile exports to Russia’s Far East, and the development of the Japanese Navy under the U.S.-Japan security treaty of 1960. Still, the fact remains that the "Northern Territories" issue has been blown out of all proportion in the Russian-Japanese political context.

       This is no accident. Back in 1982, Japanese Prime Minister Yasuhiro Nakasone announced a strategy under which Tokyo would raise the question of ownership over the southern Kuril Islands in any and all contacts with Moscow. Since then, almost all the subsequent Japanese governments have followed this doctrine. The Russian leadership has come to regard this approach as the norm. Moscow is becoming increasingly convinced that, in the foreseeable future, it will barely be possible to build any kind of constructive dialogue with Tokyo. After the failure of the negotiations in 2005, the Kremlin is more inclined to think that the "Northern Territories" issue is of more concern to Japan than Russia.

       Over the past 40 years, Japan and Russia have tried to eliminate the issue from their bilateral relations Thus, in 1973, the Japanese Prime Minister Kakuei Tanaka and chairman of the USSR Council of Ministers Alexei Kosygin agreed that resolving outstanding issues left over from World War II and signing a peace treaty would contribute to the establishment of truly friendly relations between the two countries. Consequently 1993 saw the signing of The Tokyo Declaration on Russia's recognition of all the Soviet-Japanese agreements, and the agreement on cooperation in the exploration and use of space for peaceful purposes. In Krasnoyarsk (November 1997), Russian President Boris Yeltsin and the Japanese Prime Minister Ryutaro Hashimoto discussed the issue of splitting the negotiations in two parts: the first one concerning a peace treaty and the other addressing the “Northern Territories” issue. Over the next five years the phrase “Krasnoyarsk formula" became a constant of the political lexicon. But all these attempts failed due to the exaggerated priority accorded to the territorial issue in Japan.

       The most credible, concerted attempt to move bilateral relations beyond the territorial dispute was made by the Prime Minister Yukio Hatoyama (2009 – 2010). He advocated the diversification of Japanese foreign policy as part of the creation of the East Asian Community. Building relations with Russia beyond the dispute over the "Northern Territories" was an important component of this policy. President Vladimir Putin and Prime Minister Shinzo Abe had already agreed on Japan’s participation in the economic development of the Russian Far East at the Group7 summit in Heiligendamm (Germany, June 2007). On September 23, 2009 Prime Minister Yukio Hatoyama and President Dmitry Medvedev agreed to continue the dialogue on resolving the territorial dispute and concluding a peace treaty. In February, 2010, while discussing the issue, Prime Minister Hatoyama, in addition to again raising their desire to see the four disputed islands returned to Japan, also highlighted the need to develop trade relations with Russia. Thus under Hatoyama’s policy, Russian-Japanese dialogue should include negotiations on the "Northern Territories" issue.

       Over the past year Naoto Kan’s policy has actually destroyed his predecessor’s achievements. But reducing relations with Russia to this territorial dispute could prove a serious strategic blunder. Over the past two years, the balance of power in the region has changed. This may have adverse consequences for Japan.

       First, Russia is completing the construction on the Eastern Siberia – Pacific Ocean (ESPO) oil pipeline. The next stage in this development may be a gas pipeline that runs from Yakutia-Khabarovsk-Vladivostok. ESPO will allow Russia to export oil directly to China, and eventually to South Korea. By contrast, Japan remains dependent on oil delivered by sea (including via highly vulnerable Malacca Strait) and on nuclear power. China and South Korea also have a significant competitive advantage over Japan in the form of guaranteed hydrocarbon supplies.

       Second, Tokyo has held back from cooperating with Russia in the missile and space sector. At present, China and the ASEAN countries are successfully importing Russian space technologies. China used them for manned flights, Indonesia – for developing a unique "air launch" system, Malaysia – for laying the foundations of its missile capabilities. The Russian-Japanese treaty (1993) on cooperation in outer space remains essentially unrealized.

       Third, Japan excludes itself from participation in the economic development of the Russian Far East. By contrast, the United States, Canada and South Korea show growing interest in this. Not only does the development of Russia’s Far East involve enhancing mining and maritime routes in the Northern Pacific Ocean, it also raises the specter of a “Northern alternative to ASEAN” as discussed by U.S. and Russian experts.

       This Economic Community includes Russia, USA, Canada and South Korea. In APEC, Russia, the United States and South Korea are discussing the possibility of nuclear energy for the "Northern ring" of the Pacific. Japan has chosen to remain an outsider.

       Over the past twenty years, Japan's position in the Asia Pacific region has changed. Today, by technology leaders we mean China, South Korea, and most recently – the ASEAN countries. For twenty years the Japanese economy has been running at zero growth. In 1994, Japan opened its domestic market for U.S. goods on unfavorable conditions. Politically, Tokyo is isolated in the Asia Pacific region. It should suffice to recall the numerous anti-Japanese demonstrations that regularly take place across North-East Asia. Development and economic cooperation with Russia would be a strong move taking Japanese diplomacy in an unexpected direction. However, the territorial dispute over these, now notorious, islands prevent Japan from making the most of this opportunity.

       Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.