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Can Japan, Russia find a way for reconciliation?

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The relations between Japan and Russia have been strained by two reasons:  four islands between them known as Kuril islands and US pressure on Japan not go for any credible alignment with their “common” ideological foes. Russia and Japan did not sign a formal peace treaty at the end of World War Two because of a dispute over islands in the Western Pacific, called the Northern Territories in Japan and the Southern Kuriles in Russia.

The islands were seized by Soviet forces at the end of World War Two and 17,000 Japanese residents were forced to flee. As no peace treaty was signed between Japan and Russia so far, the two countries are still technically at war.

The Kuril Islands stretch between the northernmost Japanese island of Hokkaido and Russia’s Kamchatka. The entire archipelago is currently administered by Russia, which received them after WWII under the 1945 Potsdam Declaration. Japan claims sovereignty over the two southernmost large islands of Iturup and Kunashir, as well as the Shikotan and Habomai islets, citing their history as Japan’s northern territories. Russia and Japan did not sign a peace treaty after WWII over the issue.

Moscow claims sovereignty over the islands based on the post-war agreement signed by the Allies in 1945. The pact stipulated the South Kurils became part of the USSR following the war which Japan lost.

Russia maintains that the Soviet Union’s sovereignty over the island was internationally recognized under the agreements signed after the WWII. While addressing the issue, President Putin stressed that signing a peace deal remains a priority for both countries despite “different views” on the matter. “We are united in one – the problem should be solved,” he said. Russian leader though noted that it should be done with full respect to the mutual interests.

Seventy years after the end of the Second World War, Russia and Japan have their eyes firmly on the rewards of peace as they negotiate a mutually beneficial solution to their dispute over the islands known in Tokyo as the Northern Territories and in Moscow as part of the Kurils.

Russian president Vladimir Putin’s visit to Japan in December last year marked a major thawing in relations. He and Japanese Prime Minister Shinzo Abe have pledged to increase economic co-operation and improve access to former residents of the islands as they seek a long-term arrangement.

Relations between Moscow and Tokyo suffered an additional blow after Japan joined the ranks of the states imposing sanctions on Russia following the Ukraine crisis. In a bid to improve ties, Japan’s PM visited the Russian city of Sochi in May, where he made proposals, including the establishing of joint infrastructure in Russia’s Far East.

As of 2016 matters remain unresolved, and these disputes have effectively soured relations between the two countries. According to a 2012 Pew Global Attitudes Project survey, 72% of Japanese people view Russia unfavorably, compared with 22% who viewed it favorably, making Japan the country with the most anti-Russian sentiment surveyed. Since 2017, relations between Russia and Japan have improved.

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Tension and improvement

Japan pursues a joint foreign policy along with NATO leader USA and in most issues Tokyo adopts the American approach as its own. This is the major reason why Russia and Japan have not been able forge strong ties as Washington opposes any link with the Kremlin.   

Russia and Japan have been unable to sign a peace treaty in order to realign the ties after World War II due to the Kuril Islands dispute. Over the past decades Tokyo repeatedly stressed that a peace treaty with Moscow is linked to handing back control of the territories.

The dispute has prevented the two parties from formally signing a peace treaty because Japan lays claim to four islands which became part of the Soviet Union when fighting ended in 1945. “Russia’s constructive engagement is essential in resolving global challenges,” Abe said. “Historically Russia has been a very important to Japan, and I think the situation is the same for Russia. It’s an important partner for stability in the Asia Pacific region,” Japan’s foreign press secretary Norio Maruyama told Euronews.

When Boris Yeltsin took power in Russia in late 1991 upon the dissolution of the Soviet Union, he took a stand in opposition to relinquishing the disputed territories to Japan. In September 1992, Russian president Yeltsin postponed a scheduled visit to Japan. The visit took place in October 1993. He made no further concessions on the Kuril Islands dispute over the four Kuril Islands (northeast of Hokkaido), a considerable obstacle to Japanese-Russian relations, but did agree to abide by the 1956 Soviet pledge to return Shikotan and the Habomai Islands to Japan. Yeltsin also apologized repeatedly for Soviet mistreatment of Japanese prisoners of war after World War II.

In March 1994, then Japanese minister of foreign affairs Hata Tsutomu visited Moscow and met with Russian minister of foreign affairs Andrei Kozyrev and other senior officials. The two sides agreed to seek a resolution over the persistent Kuril Islands dispute, but the decision of the dispute is not expected in the near future. Despite the territorial dispute, Hata offered some financial support to Russian market-oriented economic reforms, hoping for relative change in Russian attitude to the islands in Japan’s favor. In 1998, the newly elected Japanese Prime Minister Keizō Obuchi had focused on major issues: signing a peace treaty with Russia, and renewing the Japanese economy. However, he died soon afterwards.

On August 16, 2006, Russian maritime authorities killed a Japanese fisherman and captured a crab fishing boat in the waters around the disputed Kuril Islands. The Russian foreign ministry has claimed that the death was caused by a “stray bullet”. .On September 28, 2006, Russian Foreign Minister Sergei Lavrov said Russia would “continue the dialogue with the new Japanese government. We will build our relations, how the peoples of the two countries want them to be.

The dispute over the Southern Kuril Islands deteriorated Russo-Japan relations when the Japanese government published a new guideline for school textbooks on July 16, 2008 to teach Japanese children that their country has sovereignty over the Kuril Islands. The Russian public was generally outraged by the action and demanded the government to counteract. The Foreign Minister of Russia announced on July 18, 2008 ” these actions contribute neither to the development of positive cooperation between the two countries, nor to the settlement of the dispute,” and reaffirmed its sovereignty over the islands.

In 2010, President of Russia Dmitry Medvedev became the first Russian president to take a state trip to the Kuril Islands. Medvedev shortly ordered significant reinforcements to the Russian defences on the Kuril Islands. Medvedev was replaced by Vladimir Putin in 2012. In November 2013, Japan held its first ever diplomatic talks with the Russian Federation, and the first with Moscow since the year 1973.

In recent years the relations got strained. In March 2014, following Russia’s annexation of Crimea, Japan imposed several sanctions against Russia, which included halting consultations on easing the visa regulations between the two countries and suspension of talks on investment cooperation, joint space exploration and prevention of dangerous military activity, obviously annoying the Kremlin.

On 3 Sep, 2016 PM Abe called on President Putin to “take responsibility” to boost the bilateral ties, while talking to the Russian leader on the second and last day of a major economic forum in the Far Eastern Russian city of Vladivostok. “Let us overcome all difficulties and leave the people of the next generation a world in which our two countries will reveal their powerful potential. Let’s put an end to this abnormal situation, which lasted 70 years, and together launch a new era in Japanese-Russian relations,” Abe said.

Japanese PM Shinzo Abe said Japan wants to resolve a territorial row that has over-shadowed ties with Russia since World War Two. “A peace treaty between Japan and Russia has not been concluded yet, even after 70 years have passed since the end of World War Two,” Abe told reporters in London. “It is an extremely unusual situation. Infinite possibilities are latent in the cooperation between Japan and Russia.”

During the gathering in Vladivostok, President Putin and PM Abe agreed to once again meet on December 15 in Japan. Resolving the territorial dispute and boosting economic cooperation is set to top the agenda of the gathering, the territorial dispute, however, did not move forward even an inch after the visit.

The second meeting between Putin and the Japanese prime minister this year, and Putin’s first visit to a Group of Seven nation since top Western powers and Japan slapped sanctions on Russia over the annexation of Crimea in 2014. The sense that something extraordinary might be in the air was boosted by reports in the Japanese media that the USA had repeatedly urged Abe not to meet with Putin, but the objections had been “brushed off” by Tokyo. “People are seeing this meeting as a possible breakthrough, but we see it as the beginning of an important new process,” says Sergei Markov, a past adviser to Putin. “Japan seems willing to change its direction and renew its relations with Moscow and we welcome that. But solving the territorial issue is not a simple matter; it might take decades.”

Expectation

Many experts believe that, for the first time since at least 1956, there could be an opportunity to formally end World War II between Russia and Japan, solve a long-running territorial dispute over the Kuril Islands, and through that new political relationship finally unlock a flood of Japanese investment into Russia’s undeveloped far eastern region.

Expectations have grown that Putin and Abe might formally end World War II animosity between Russia and Japan during their meeting, but the Kremlin warned that any progress in the ties is unlikely. Still, Russians see great opportunity to be had. The Kremlin is furiously tamping down expectations for the unusual summit meeting between President Vladimir Putin and Japanese Prime Minister Shinzo Abe at a hot springs resort near Abe’s home town of Nagato. That’s not surprising, since the hopes that have been aroused are nothing short of breathtaking.

Political economy

Though the two restored diplomatic ties long ago, the spat has prevented the conclusion of a formal peace treaty and has been cited by successive Japanese governments as a reason not to enter into major economic cooperation with Russia.

The outlines of a compromise were reached soon after World War two in 1956 following the demise of Joseph Stalin, under which the then-Soviet government would relinquish the two southernmost islands in return for a peace treaty and normalization of relations with Japan. That deal was reportedly scuttled by pressure from Washington, which threatened to keep control over Okinawa if Japan went ahead with the exchange. After that the dispute hardened, and has become a staple rallying cry for nationalists in both Russia and Japan.

The economic relations between the NATO member and anti-NATO Russia have been very nominal. Although Japan joined with the Group of Seven industrialized nations in contributing some technical and financial assistance to Russia, relations between Tokyo and Moscow remained poor.

Russia and China for a long time long had tension over disputed territories. But Russia made up with its neighbor China by surrendering it the disputed territories. Possibly Japan also expects similar positive gesture form the Kremlin but does not want to come out of US clutches and the NATO that target Russia. Worse, Japan, on instructions from USA, slapped sanctions on Russia over Crimea issue. This cannot make Moscow happy.

Trade between Moscow and Tokyo has quadrupled since 2006. In 2013 trade between our countries reached a record-high [$34.8 billion. In 2015 the volume dropped by almost 40 percent due to falling oil prices, Trade turnover between Russia and Japan grew by 25 percent compared to last year in the first quarter of 2017, owing to the development of the political and economic cooperation. The export of food products, textile, rubber goods and cellulose products from Russia is actively developing. The volume of export to Russia increased by 14 percent, the supplies of the Russian goods to Japan grew, the growth stood at 29 percent. The investment attractiveness of Russia has increased because the Russian economy “set the course toward the recovery from the two-year-long decline

At a time when the return of even the two islands of Shikotan and Habomai appears hopeless, the fact that methods of travel for former residents of the islands have expanded, making it easier for them to visit the islands, is in itself welcome, even as they remain deeply resentful that no mention at all has been made of the return of the territories. On the other hand, they view the progress of joint economic activities with caution, for if these proceed, they will complicate requests for compensation in respect of assets left behind on the islands.

Meetings between Japanese and Russian diplomats are often accompanied by promises of large Japanese investment in Russia. The Putin-Abe summit in December 2016 was no different. Japan believes that investing in Russia demonstrates tangible benefits that could accompany improved relations between the two countries.[4] Russia is happy to accept foreign investment.  Russia is looking for Japanese investment in the Far East, while Japan hopes to recover the territories lost after WWII. However, Russia has repeatedly rebuffed Japanese claims. 

Main factors that limit the prospects of economic ties between Japan and Russia include, first, foreign investors of all nationalities find Russia a difficult place to do business, few attractive investment opportunities and Russian business is mired in corruption and red tape. .The Japanese government refuses to convince Japanese firms that Russia is an attractive place to invest. In fact,  the government does not promote  that at all. The Russian Far East is not economically important to Moscow, and infrastructure lags behind that of Russia’s most developed regions. Even if Japanese firms decided to significantly increase investment, there is no reason to think this would change the Kremlin’s political calculations that drive diplomacy with Tokyo.

Meanwhile, the development of the Nemuro region, which adjoins the Northern Territories, had been hampered by prohibitions on business and free travel between Nemuro and the islands. So joint economic activities that involve doing business with the islands, no matter what form they take, are much anticipated.

The two Asian neighbors agreed to jointly invest $1 billion in Japanese development of the Russian economy, along with other commercial ventures by Japanese firms. And the surviving former Japanese residents of the islands, who were forced to leave after the Soviet invasion, might be able to visit their ancestors’ graves.

Though the purpose of meetings is to explore ways that economic cooperation can be strengthened through a “special system” that would not undermine either side’s legal claim on the islands, there is skepticism in Russia about how benign Japan’s intentions truly are.

Moscow and Tokyo are currently working on creating a ‘green corridor’ to simplify customs procedures and boost trade.  Japan talked about joint Russia-Japan energy projects Sakhalin-1 and Sakhalin-2, and Russia’s crude oil supplies to the country.

Japanese companies have invested and operate in the Russian automobile and construction industries. About 14 percent of all Russian cars are produced in Russian factories by Japanese manufacturers. Imports of Japanese cars and industrial machinery have been significantly reduced as a result of Western sanctions against Russia. Japanese banks have problems providing export credit for equipment sold to Russia, while sanctions make it difficult to conduct business using US dollar transactions.

In 2014 Japan followed US sanctions with 23 visa bans on Russian citizens, including government officials. Russian ambassador to Japan Evgeny Afanasiev said the investment attractiveness of Russia has increased because the Russian economy set the course toward the recovery from the two-year-long decline

Russia in Asia

Major territories of Russia lie in European continent. Though it hates USA and American superiority manners Russia looks to European culture and civilization and is eager to join it.

Russia’s main foreign policy aims remain largely focused on its Western front — in Eastern Europe, in the Black Sea, and increasingly in the Middle East. Russia’s political elite keeps its money in Europe, educates its children in Europe, vacations in Europe, and assesses its geopolitical stature in relation to the USA.

For decades Moscow has been working to make its foreign policy goals West focused and it uses Asian links only to increase Russia’s leverage in negotiations with the West. With China, Russia is showcasing a strong alliance that can withstand any pressure tactics of USA and Europe. Russia has strengthened diplomatic, military, and energy ties with China. But the Kremlin has done so not because it is interested in Asia per se, but rather because it wants to show Western powers that it has other diplomatic options.

Thus Asia is not Russia’s priority but the West is to achieve that goal Russia is using all possibilities in Asia, China being the major Asian power. .

A significant strain in Russian foreign policy thinking interprets US alliances less as agreements between equal sovereign countries, and more as command-and-control relationships, with dictates coming from Washington. Russian foreign policy circles do not view Japan as an independent actor due to its security relationship with the USA.

The Kremlin places relatively little emphasis on its foreign policy in Asia. Many Russians believe that Japan’s security alliance with the USA means that Tokyo is not a fully independent diplomatic actor. Both factors mean that Moscow is not prepared to spend significant diplomatic energy or political capital in developing relations with Japan.

While Russian leaders regularly attend summits in the West, they often skip key meetings in Asia.[2] Moscow devotes far more resources to managing its relations with the West. That leaves little time for Tokyo

The perception in Moscow that Japan cannot make independent decisions reduces Russia’s willingness to spend political capital improving relations. Combined with the Kremlin’s general lack of focus on Asia, this means that Japan plays only a minor role in Russia’s foreign policy agenda.

Sino-Russian bilateral trade in the first ten months of 2015 touched $55.9 billion, a fall of 29 percent from the same period a year ago. From January to October 2015, China’s exports to Russia stood at $28.46 billion, a fall of 35.7 percent from a year ago, while Imports from Russia fell by 20.7 percent and stood at $27.45 billion.

 Japan wants improved ties with Russia today to hedge against China. But for Russia, the most urgent priority is good ties with China to hedge against Washington. For Tokyo, a key rationale for improving relations with Russia is the rise of China and Tokyo wants to reduce the importance of Russian links with Japan. . China’s power is increasing, and Russia is currently aligned with China on many questions of Asian politics and security. Improving economic ties between Russia and Japan would make Russia less dependent on China, thereby weakening Beijing’s position. From Japan’s perspective, the goal is not to forge an alliance with Russia but to ensure that Russia is not forced into a de facto alliance with China because Moscow lacks other partners in the Asia-Pacific region.

 The specifics of Tokyo’s defense build up make Russia worried. For example, Japan sees missile defense investment as crucial to mounting an effective defense against North Korean missiles. But Russia interprets Japanese investments in this sphere — which take place in close cooperation with the USA — as potentially part of US efforts to strengthen anti-missile capabilities along Russia’s border.

USA does not want any real improvement in Russo-Japan relations that would result in Tokyo relinquishing its ties with Washington which could spell disaster for NATO as well. USA has gone for punishing the Kremlin in a big way, though that would not make any real impact on Russian economy.

Little progress

The main reason why Japan could not achieve a peace treaty and resolution of territorial disputes with Russia obviously is the superpower- the Uncle Sam. USA doesn’t want to lose the Asian economic power Japan to Russia as that would weaken NATO terror operations across the globe. Washington is keeping a close eye on any developments in Japan-Russia relations, of course. 

The purpose of the April 24 teleconference between Abe and President Donald Trump was to keep the USA in the loop. What really was the outcome of the Abe-Putin summit talks on April 27?  Following the “success” of the Japan-Russia summit in December last year, the stated purpose of the visit was to move forward with the agreement reached at that summit, toward a resolution of the Kuril Islands (Northern Territories) issue, involving the question of disputed islands off the coast of Hokkaido.

Regarding the issue of visits to ancestral graves, former islanders will be transported by air on Russian chartered aircraft from Nemuro Nakashibetsu to Kunashiri and Etorofu. In addition, a new checkpoint will be opened to facilitate entry to the Habomai islets, an area that was previously difficult to access directly. On the issue of joint economic activities, a Japanese-Russian investigative group will be organized to conduct an on-site survey. Abe emphasizes that nothing is new. Air travel to the islands was in operation at one point in 2000. It was also possible to access the Habomai islets in the past.  Visits to ancestors’ graves by chartered aircraft are referred to as “special visits to ancestors’ graves,” and may be granted for a single visit only. No progress was made on the Kuril Islands issue itself. Putin spoke at length about the economy, making only brief reference to the “peace treaty” toward the end, which he said should be in a form that was advantageous for both countries. Abe too, as before, emphasized his accomplishments, praising himself for them, , with no mention whatsoever of the territorial issue..

During a bilateral summit meeting in Moscow on April 27, Japanese Prime Minister Shinzo Abe and Russian President Vladimir Putin sought to make concrete progress toward deepening trust, resolving the issue of the disputed Northern Territories – the Kuril Islands – and concluding a peace treaty. Japan and Russia agreed that a joint public-private survey mission would be sent to the Northern Territories as early as May to research how the two countries can pursue economic cooperation. Areas of research for potential cooperation include fish and sea urchin farming and ecotourism. This step is in line with Abe and Putin’s December agreement to launch talks on joint activities on the islands.

In addition to the Ukraine issue, which necessitated the imposition of sanctions on Russia by the Group of Seven powers, Japan and Russia now differ on other issues that previously posed relatively few conflicts, most notably North Korea and Syria. On the latter, Japan had no option but to support the US strike on Syria; and as for the former, Russia has blocked Washington’s call for action, adopting a stance that emphasizes a peaceful resolution of the North Korean issue.

Going forward, Japan has no choice but to continue to support the US stance, so the recent tensions in US-Russian relations will cast a dark cloud over improved relations with Russia. And given recent revelations, there is a high likelihood that relations between the United States and Russia will only become more complicated, and pressure on Japan will increase. Abe’s attempts to achieve better relations with Russia with no regard for how his actions may appear are now looking increasingly risky.

Relations between Tokyo and Beijing are very tense these days. Japan basically tries to go everywhere that China goes – Africa, Latin America – to try and counter Chinese influence. The growing closeness between Russia and China is of the utmost concern to the Japanese, so there is an obvious effort under way to offset that.

The Russian media is heralding more than 60 intergovernmental and commercial agreements set to be signed during the visit. But most of those appear to be “memorandums of understanding” – vague commitments to do something in future rather than finished plans. And it’s hard to see how Russia’s Far East, with its difficult investment climate and scanty infrastructure, could rapidly absorb any big inflow of capital.

Nevertheless, most experts say the core issues of territorial compromise and a peace treaty have remained elusive and all results so far are only in the form of a “face-saving declaration” at the end of summits. Public opinion in Russia is solidly opposed to exchanging any Kuril Islands for a peace treaty with Japan, a view expressed by 78 percent of Russians in a recent poll by the independent Levada Center in Moscow. Polls suggest Japanese public opinion is more open to a deal, but that growing numbers expect Russia to return all four Kuril Islands rather than just the two Moscow would be willing to discuss.

Russian foreign policy experts caution against any breakthroughs at the summits even amid a rapidly changing world picture. “Putin is at the height of his power and popularity, and he has a lot of political capital to spend”. US-Russia relations are expected to produce a thaw during the Trump rein.

Is a Russia-Japan ‘reset’ possible?

At a meeting in December Japanese PM Shinzo Abe and Russian President Putin agreed to take steps that might someday help resolve a 71-year dispute over a string of islands. They agreed to explore joint economic projects on the islands under a possible “special” legal framework that would, in the words of Abe, not “infringe on the sovereignty positions of either side.”

From the press conference Abe held with Russian President Vladimir Putin it is clear that, as with the summit in December, no progress was made on the Kuril Islands (Northern Territories) issue itself. The phrase “resolution of the territories issue” was not used once at the press conference.

Several territorial disputes between the neighboring countries generally take similar position, except India and Pakistan because they occupy another nation – Jammu Kashmir – over which both claim disputes. In many countries, a popular reaction to globalization has led to the election of leaders – such as in the USA – with a strong passion for nationalism. These leaders often demand greater sovereignty over the economy or, in some cases, territory. To cool these passions and prevent conflict, nations tend to find a common purpose. A good example was a recent summit between Japan and Russia.

Nationalists in both countries, which include Putin and Abe, insist on sovereignty over the islands. And after Putin took Crimea from Ukraine in 2014, he may have little inclination to give land to Japan. Yet both men, for strategic reasons, see advantages in working together on economic goals as they keep talking about ownership and control of the islands. Even the deepest gulf can look less worrisome if spanned by at least one bridge.

The nub of the dispute is four tiny islands off the northern tip of Japan that the USSR seized and annexed in the closing days of World War II. Russia refers to them as the “southern Kurils” while Japanese call them their “northern territories.”

What is new and different right now is that Abe has reversed the policy of previous Japanese governments, and allowed that economic cooperation could come before a resolution of the territorial dispute. For Abe, whose previous attempt to forge an opening with Russia was derailed when the West imposed sanctions against Russia after its annexation of Crimea from Ukraine, it’s really important to use this window of opportunity now that the new government by Donald Trump assumed power at White House, to get some progress. The ideas about the changing Asia Pacific do not seem worked-out by the new Trump regime at all.

For Putin it’s a chance to demonstrate, by courting a G-7 country, that Russia is not isolated. The visit sent a strong message, not only to the West but also to China, that Moscow has other options. Japan may also be using the situation to send its own signal to China, which has enjoyed a fast-growing relationship with Russia amid the recent East-West tensions, that Moscow’s allegiance cannot be taken for granted.

Even if the spigot opens and Japanese investment is freed to invest in Russia, the potential is hard to gauge.

Observation

Russo-Japanese relations cannot be expected to improve tangibly unless Japan amends its policy of blindly following the US dictates and begin formulates its independent external policy. Otherwise, all economic invocations by trade etc would only keep the tensions under check. Keeping the vital territorial issue at bay would not help them stabilize the ties and end mutual tensions. Moscow expects a genuine change of mind in Tokyo and not just extending few carets – after all, Russia is not a third world country. 

Japan’s policy toward Russia highlights how difficult it is for Japan to have a foreign policy independent of the US preferences. Whenever progress is made in the Japan-Russia relationship, a black swan event, such as the Russian annexation of Crimea or the US cruise missile strike on Syria, threatens to undo it all.

Abe dreams of concluding the peace treaty that eluded his father needs to have his work cut out for him trying to balance demands from Washington and Moscow. Towing the US line for everything will not do any good in improving the ties with Moscow. .

Following the bilateral summit, Abe and Putin both called on North Korea and other countries to avoid behavior or rhetoric that could increase tensions around Pyongyang’s nuclear program and stated they had agreed to closely cooperate to try to help defuse tensions. Maybe, they have done it under US direction. The joint military exercises  near Guam involving Japanese, USA, French, and British forces are a sign of how Japan’s defense relationship with European partners can become institutionalized – a partnership that had long been seen as “exotic” and difficult to materialize.

As the Russo-Japanese territorial disputes do not look resolvable with each sticking to their own positions without any relaxation, Russia and Japan seem to have agreed on a move toward resolving a territorial dispute by first focusing on a common goal: joint development of the islands.  If it works, the agreement may be a model for similar disputes in Asia.

Several of Asia’s many island disputes have led to joint development of resources as a way to avoid direct confrontation over territory or to create political conditions for an eventual settlement. The Japan-Russia deal could become another model. The proposed joint development will bring the two peoples closer together, said Mr. Putin, and “help foster trust toward a peace treaty.”

That last point is critical. Moscow and Tokyo have never formally ended hostilities from World War II. And toward the end of the war, the then-Soviet Union took over the islands, which were long held by Japan. Among the Japanese, they are known as the Northern Territories. To Russians, they are the Southern Kurils.

Japan needs to kick the United States military out of its country. World War 2 ended a long time ago, time for the Americans to move along. Japan should have to look after itself now. The Japanese have not forgotten the rapes of their local women committed by the US military bases there as well as the trouble they are causing for the local communities.

The UK needs Russia after it leaves the EU as the goal all along for the European Union has been to form a superstate. It won’t be surprising if the UK and Russia would have a joint Naval exercise in UK waters

Russia is seen returning to Asia with stronger bonds with China, and improving relations with Japan are certainly on the agenda. Maybe no big surprises in the form of dramatic positives will emerge, but some kind of movement for sure.

Moscow and Tokyo are discussing the possibility of organizing cruises around the South Kuril Islands, the Kyodo news agency reports quoting diplomatic sources. This is a part of a plan to develop business links in the disputed territories.

Following the visit by Russian President Vladimir Putin to Japan in December last year, Moscow and Tokyo agreed to start joint economic activities on the islands. Putin will meet Japanese Prime Minister Shinzo Abe in Vladivostok in September to continue the discussions. The countries plan to develop fishing, tourism, healthcare and ecology in the region.

For now, there is nothing to indicate how Abe’s key initiatives will subsequently unfold. Even if all the latest plans materialize, there is no guarantee they will be sustainable, and even if they are, it is doubtful that they will lead to the resolution of the Territories’ issue. Leaving aside the question of the future, it can be considered as a kind of gambit by Japanese government to show the public that things are now moving. The prospect of significantly expanded economic relations between the two countries is limited.

As a result of the tension between the economic giants the people living in the region feel being besieged by these powers.

Don’t they deserve a usual, if not honorable, life at all?

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East Asia

China Vision: China’s Crusade to Create a World in its Own Image

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In the wake of Chinese leader Xi Xinping’s moves to make himself ruler for life, everyone is wondering about his government’s ambitions for its role in the world.  Daniel Wagner has written about what the trends indicate in China Vision: China’s Crusade to Create A World in its Own Image.

The book notes the paradox that China is in regards to investment.  The world’s 2nd largest economy continues to accept billions of dollars in development loans from banks like the World Bank and Asian Development Bank.  Meanwhile, Chinese state banks are loaning trillions of dollars to countries around the world.  Chinese entrepreneurs are feverishly setting up businesses abroad and purchasing foreign companies and real estate. If a foreigner wants to invest in China though, they must accept ownership stake limitations and obey rules that explicitly make them less competitive.  In regards to domestic investment, Wagner argues that China invests way too much on grand public projects, like apartment blocs that remain largely vacant, and not enough on small-midsized businesses.  One of these days (the next global recession?), the chickens will come home to roost and China will have to re-evaluate its blank-check policy.

Much of the book focuses on China’s role in foreign diplomacy and commerce.  The fledgling superpower is in the process of spending trillions of dollars on loans to the developing world, particularly through its Asia-oriented Belt and Road Initiative.  These no-strings attached loans give China enormous power over many of the poorest countries in the world.  Many people, like former Maldivian PM Mohamed Nasheed, have outright accused China of imperialist behavior.  The author writes that, “Kenya was to be forced to relinquish control of its largest and most lucrative port in Mombasa to Chinese control as a result of Nairobi’s inability to repay its debts to Beijing.”  China also owns ports in locales as diverse as Djibouti City and Zeebrugge, Belgium.  Chinese firms are likewise emulating some neo-colonial tendencies.  For instance, Wagner writes that, “Fewer than half of these [African-based Chinese] firms sourced inputs or had African management.”  Controversial Chinese real estate projects like Forest City, Malaysia are arguably examples of literal colonialism.

Through this strategy of buying friends and building a global network of ports, China is strengthening its impunity as a Top 3 naval power.  Increasingly, China is treating the South China Sea as its private fiefdom by ignoring credible territorial claims of the Spratly Islands and Scarborough Shoal by the Philippines, Indonesia, Japan, Brunei, Malaysia and Vietnam.  Most disturbing of all is Xi’s recent verbal aggression towards Taiwan.  By buying friends, China can mute criticisms of this military aggression in the UN and isolate foes like Taiwan (only 19 countries have diplomatic relations with it).  With a rapidly expanding fleet of sea craft, the People’s Liberation Army Navy is better equipped than ever to project hard power via all of China’s ports, from off the coast of the Philippines to Belgium…. On this dire note, I wish Wagner had written more about the budding conflict between China and the other 1B-person country in the world, India.  I predict that the dichotomy between democratic India and totalitarian China will determine the future of humanity.  Seeing as India & China (and China’s close ally Pakistan) all possess thermonuclear weapons and have recent military skirmishes with each other, one can only hope that the Tiger and Dragon don’t initiate WWIII squabbling over a sleepy locale like Kashmir or Nepal.

In the final section of the book, Wagner writes about China’s dominance in the virtual sphere.  Chinese tech companies like Baidu, Alibaba and Tencent are rapidly catching up and even beating Silicon Valley in terms of traffic, profitability and innovation (most importantly, AI).  China has also become the de facto global leader in green technology.  China’s blank-check philosophy funds these rapid advancements.  A lot of this apparent innovation, however, is fuelled by corporate espionage.  For the past few decades, Chinese firms (often with official backing) have been using spies and hacking to steal blueprints and thus reverse engineer inventions.  Ironically, these knock-offs are oftentimes sold to the US government, which creates a huge security risk.  In many cases, Western companies willingly share confidential data with China in order to be granted access to the Chinese market.

China’s running racket of stealing IP and personal user data from US companies that choose to operate in China demonstrates the importance of government regulation… In this case regarding national security and user privacy protection.  Ironically, China enforces data encryption and other cybersecurity measures through regulations like the 2017 Cybersecurity Law.  The willingness of Western companies to literally sell themselves out to China in the frenzied hope of making a quick buck in the world’s largest market is textbook junkie-mentality.  These free market free-basers expose their fundamental flaw in the face of China’s system of state capitalism.  By ceding responsibility of investment from the government to the private sector solely, countries like the US are being vastly outspent by China in everything from space travel to quantum computing research.  As economists like Michel Aglietta and upstart politicians like Alexandria Ocasio-Cortez point out, the state must be responsible for picking up the slack when the free market fails to focus on important long term projects, like a Green New Deal (China already has its own publically funded version of the GND).

China Vision is a good account of the Chinese Communist Party’s domestic heavy-handedness and foreign diplomacy-via-blank-check.  The two are interconnected, as China’s crackdown on internal dissidents informs how it treats foreign countries and human rights activists who dare to oppose it.  Through China’s Belt and Road Initiative of loaning billions of infrastructure dollars to developing nations, it can control them through a carrot-and-stick approach.  China’s spy state apparatus is also being used to sabotage foreign humanitarian organizations, religious groups, governments and companies.  The CCP may soon export its surveillance state blueprint to other interested authoritarian states, setting the stage for a cold war between China and its client dictatorships & the Western democracies.  The People’s Liberation Army is preparing for this possibility with a huge naval buildup in the contested South China Sea, aided by all of the “civilian” ports that it’s building there under the auspices of the BRI.  Daniel Wagner’s book does a good job of explaining these geopolitical trends in a concise and even-handed way.  He explains how colonialism and the Cold War helped to shape China’s cynical outlook on the world and doesn’t exaggerate China’s capabilities.  Anyone in politics, tech, economics or the NGO sphere will learn a lot from this book.

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East Asia

China’s economic transformation under “New Normal”

Sultana Yesmin

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China’s double digit growth, also termed as “old normal growth” had dominated the country’s economy since 1980s. Despite the rapid economic development over the last few decades, this old normal growth has encountered some setbacks, including economic imbalance, income inequality, limited consumption choices against increasing level of demand, and environmental challenges.

Given this context, a comprehensive new development model, “new normal”, incorporating the innovation, coordination, greening, opening up, and inclusiveness, is formulated by Chinese authorities to enable wide-ranging growth and development throughout the country.

Analysts refer to “new normal” as China’s new phase of economic development. The recent trend of “growth slowdown” or “new normal” economic growth is also referred to new strategy of Chinese foreign policy by the analysts.

During the 2014 Asia-Pacific Economic Cooperation (APEC) CEO Summit in Beijing held on November 09, 2014, Chinese President Xi Jinping first used the phrase as “new normal stage of Chinese economy.” President Xi also referred to China’s stable economic growth in order to improve and upgrade economic structure under the “new normal” conditions.

Subsequent to this, China’s 13th Five-Year Plan (2016-2020) incorporates the “new normal” in economic development with a particular vision of building a moderately prosperous society in all respects by 2020. The key significant features of China’s “new normal” are:

Slower economic growth

One of the key reforms or significant changes on China’s medium-high economic growth rather fast growth over the past few years is exceedingly evident. To be mentioned, over the past 40 years, China has maintained an average annual growth rate of around 9.5 percent that transformed an impoverished nation to an upper-middle-income nation.

In contrast, the gross domestic product (GDP) growth rate lowered from 7.5 percent in 2012-2014 to 6.8 percent in 2017. According to China’s National Bureau of Statistics (NBS), the GDP growth rate was relatively same, 6.6 percent, in 2018, with an expected target of around 6.5 percent at the same time.

For the purpose of economic restructure and high-quality development, China’s local governments have also lowered their GDP growth targets in the same year. The new trend of normal flow of growth is projected to be relatively same in the upcoming years.

Yiping Huang, Professor of economics at the National School of Development, Peking University, and an adjunct professor at the Crawford School of Public Policy, ANU, refers to such transformation of China’s growth model as the transition from “economic miracle” to “normal development,” which is the partial departure from the traditional bottom-up approach.

The World Bank also mentions that, China’s economic slowdown is not unexpected, rather desirable from both from short and medium-term perspectives aiming at fostering China’s transition to a modern economy through the new model. This transition denotes a clear move from high speed growth to slower, steadier, and more sustainable economy.

Market-oriented reform

One of the significant aspects of China’s “new normal” economic model is to facilitate market for playing “decisive role” in allocating economic resources. The “new normal” endeavors for making interest rates, currency exchange rates, and land prices more market-oriented. Incremental steps have already been taken towards the liberalization of interest rate and exchange rate set by market forces, cutting taxes, and reducing costs in order to widen market access, stimulate market vitality, and support economy.

The improvement of market environment, enhancement of private investment and investment-led growth, establishment of comprehensive pilot zones, facilitation of interest rate controls on loans, proactive fiscal policy, prudent monetary policy, and the increase of effective supply among other significant measures have also been outlined in the report on the Work of the Government delivered by Premier Li Keqiang at the Second Session of the Twelfth National People’s Congress on March 05, 2014.

Supply-side reform

President Xi first announced the phrase “supply-side structural reform (SSSR)” in late 2015, which injects new impetus into China’s economic policy framework. The SSSR mainly focuses on reducing distortions in the supply side of the economy and upgrading the industrial sector.

A study on China’s SSSR conducted by Reserve Bank of Australia finds five core policy objectives of China’s supply supply-side reform–cutting excess industrial capacity; reducing leverage in the corporate sector; de-stocking of property inventories; lowering costs for businesses and addressing “weak links” in the economy.

In this regard, China has focused on overcapacity reduction, especially in coal and steel production. As for example, more than 65 million metric tons of steelmaking capacity and over 290 million tons of coal-production capacity were eliminated in 2018.

Moreover, the government has already reduced tax to foster business friendly environment. President Xi has underscored the necessity of strengthening areas of weakness to boost the supply of the public goods and services.

Innovation driven economy, the vital part of SSSR, attempts to enhance the quality of products, reduce ineffective and lower-end supply through the advancement of artificial intelligence, big data, and the inauguration of 5G mobile communication equipment etc.

Services-driven economy

As per the push for services-driven economy, the socio-economic issues for the improved people’s wellbeing have also been addressed in the “new normal”. President Xi Jinping remarks, “Comprehensively deepening reform will not only liberate the productive force but also unleash the vitality of the society.”

The 13th FYP highlights the development of services and measures to address environmental challenges in order to reduce pollution and amplify energy efficiency. During the 2014 Beijing APEC meetings, temporary shutdown of Chinese factories was given “priority of priorities” to curb pollution and ensure air quality. As per the policy, China has started accelerating the development of clean energy industry from 2018.

The green development aside, robust consumption, reducing social imbalances, improving education and healthcare facilities, and expanding social protection get equal priority in the new phase of economic development.

Opening up through Connectivity

The new phase of Chinese economic growth is based on political economy that anticipates trans-border trade and investment facilitation as well as border connectivity through greater integration and sustainable relations among nations. China’s stretching connectivity over Asia, Africa, and Europe through the “Silk Road Economic Belt” and the “21st Century Maritime Silk Road”, altogether known as Belt and Road Initiative (BRI), is extending influence from South China Sea to Indian Ocean. RMB internalization and China’s leading role from multilateral trade forums to climate change accords clearly signify the “new normal” policy of President Xi Jinping.

Implications on China’s socio-economic development

The “new normal” economic model has far-reaching impacts on China’s comprehensive development and path towards building a moderately prosperous society.

First, China’s has comfortably been maintaining its position as the world’s second largest economy. National Bureau of Statistics (NBS) reports, despite the slowdown of GDP growth rate, China contributed more than 30 percent to world economic growth during 2017. Hence, the investment-led growth since 2012 has resulted huge benefits for Chinese businesses and the overall economy.

Second, Chinese people are getting relief from the side effects of old model, mentioned earlier. The country has been witnessing growing equality among people, comparatively equal income distribution, robust consumption, environment-friendly industrialization, quality products, and other developments in other socio-economic sectors.

Third, Qualitative than quantitative aspects of economic growth, balanced and sustainable growth, stable employment, innovation, green development, investment intensification, faster industrial upgrading, and opening up are leading to China’s dream towards a sustainable socio-economic development. For example, the number of Chinese enterprises, around 27 million, and market entities have been increased in China over the past few years under both market and supply-side structural reforms. These new business hubs are boosting the country’s structural transformation and economy.

Finally, China’s new phase of economic growth and new historic juncture reiterate China’s development as per the vision broadly prescribed in Socialism with Chinese characteristics for a new era.

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East Asia

The Slippery Slope of Sino-US Trade War

Syeda Dhanak Hashmi

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Change is the only constant. After a struggle for supremacy in geopolitical and geo-economical spheres, now technological realms have also been contested among superpowers. The Fourth Industrial Revolution is at the verge of breaking out and it is expected that this stage of modernization will tug the very fabric of society and will alter the way individuals interact with each other and world at large. Ongoing industrial innovation will act as a modus operandi to transform global economies, communities, and politics.

The world is in stern need of a modern global architecture before the fourth industrial revolution starts encroaching on us. That is why a trade tussle emerged on statist lines among all major economic stakeholders of the international economy, especially among those having a larger share in business with the United States. The US President Donald Trump opted a pre-emptive approach and imposed tariffs and nuisance in global economies. Eminent journalist, Bob Woodward highlighted the fact in his book ‘FEAR’ that USA’s protectionist elements are far-greater than ever before and such actions will hinder economic peace with traditional allies or trade partners. Trump’s tariff imposition on China and renegotiation of NAFTA and Free Trade Agreements with EU leaves no doubt about Woodward’s projections. Another famous Nico Colchester prize-winner financial journalist, James Politi of Financial Times referred exchange of tariff brawls between USA and China as “protectionist firepower” by Trump administration aiming against China. To cut short, current trade tariff discourse is in order to contain China in geopolitical, economic and technological leadership.

An ongoing trade war is economic intimidation and coercion by the USA towards China to redevise their trade agreements and get more favorable terms for the country, which will also advance Trump’s populist mantra of America First. Trade tariffs were imposed as a consequence for not responding the sheer allegations on Chinese companies by US administration of unprecedented level of larceny and infringement upon intellectual property rights. US Politicians claim that industrial migration and capital flight from the US to China was the reason of unemployment in the USA, but economists condemned the long-term policies like reliance on imports and not saving much for the future.

China’s rise is perceived as a threat to hegemonic stability, thus an influx of uncertainty is stirring in the realm of international political economies. This rise is analogous to the Thucydides trap and also depict similar characteristics as of power transition theory. But the fault line of this predicament lies in the technological advancement of China by virtue of US private enterprises and regional economic connectivity ventures of the country. In short, it is a feud between the two leading economic powers to overhaul world trading practice (its terms and conditions) coupling with technology and knowledge-based economy with an intent to hedge and wedge each other being the contenders of global hegemony.

Both economic powers, China and USA have been in a state of economic tug of war since June 2018. To resolve his sticky situation, Trump administration imposed 25 percent import tax on $50 billion worth of products of Chinese origin in order to overcome the trade deficit between both economic giants. China countered this move by levying duties on the produce of USA and more than three rounds of tariffs worth $250 billion were exchanged among both parties, in addition, both parties threatened with each other with penalties of $267 billion. However, both countries had annual trade relations of $710.4 billion in 2017 and China is ranked as the third largest export market for the USA.

The Chinese government was alleged for backing their private companies by injecting billions of dollars every year and termed as state-owned private enterprises by several journalists and newspapers. In addition, Chinese companies were suspected to violate patent rights especially the ones related to modern technology and Chinese authorities for restricting foreign companies to access their markets freely. China also announced its strategy named ‘Made in China 2025’ which implies that majority of end-user products will be developed by China in near-term while it is also a challenging situation for the USA for being a techno-center of the world. Vision 2025 asserts that China will be a front-runner in modern technologies like Artificial Intelligence and Biotechnology in the respective year .

While campaigning for elections, Republican President of USA, Donald Trump also proclaimed that Chinese development is equivalent to ‘rape’ and his administration will levy 45 percent tariffs on total imports from China. Formerly China had been under tariff regime of USA on products worth of $50 billion annually and President-Elect also threatened Chinese government to take a radical stance and impose further 25 percent taxes on January 1st, 2019 on products worth $200 billion. Chinese government retaliated this move by imposing tariffs worth $60 billion despite economic coercion from the US government of striking further duties on all products of Chinese origin.

Joseph Stiglitz, an eminent scholar, and Nobel laureate explained stated that:

The United States has a problem, but it’s not with China. Predicament lies in America because they saved too little, and borrowed and imported too much“.

USA and China are heading towards a war which no one wants at this point in time.In this modern era, the US and China must see ahead of time and resolve their bilateral relations which is a cause of disturbance in the international economic order. To do so there is a need to establish new norms of trading and economics which incorporate prevalent treaties and meet the requirement of the 21st century.  To serve the purpose rules should be developed to cater the technology related matters in international trading practices.

Current global situation of power transition and hegemon desiring stability depict the same case as of Thucydides trap which is an outcome of structural pressures spiraling from an emerging power challenge the ruling one. Although this theory is ancient but very relevant to the on-going trade-brawls of China and USA, a case where the leadership of both countries sings hymns of making their country great again. This conflict has no resolution other than either party accepts the dominance of other whereas in this case China is not going to cap and roll their economic endeavors, and the US will also not concur to Chinese supremacy in Pacific, cyberspace and external space. There are certain stern measures which competing economies will have to take in order or else it could be an all-out war.

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