-ti- CRS--Russian-Japanese Impasse and Its Implications March 10, 1993 Congressional Research Service Report for Congress by Stuart D. Goldman (Specialist in Soviet Affairs--Foreign Affairs and National Defense Division) RUSSIAN-JAPANESE IMPASSE AND ITS IMPLICATIONS SUMMARY Relations between Russia and Japan are seriously strained. At the heart of the impasse is a territorial dispute over a group of islands seized by the Soviet Union in 1945 and claimed by both countries. The Japanese Government maintains that there can be no normalization of relations between the two countries until Russia agrees to return the islands. Japan may refuse to participate in large-scale economic assistance to Russia until it is satisfied on the territorial question. Because of economic and political weaknesses in the other major industrialized democracies of the G-7, Japan's role in assistance to Russia in the near term could be decisive, especially as Tokyo is to host the 1993 G-7 summit. Some believe that economic conditions in Russia now are so grave that the continuation of democratic government and market reform are dependent upon prompt, large-scale, external economic assistance. The Russian Government appeared to be moving toward accommodating Japan on the disputed islands in 1992, despite opposition by Russian nationalists to territorial concessions to Japan. In September 1992, however, President Yeltsin abruptly canceled a long-planned trip to Japan, citing Japanese inflexibility on the territorial issue. This decision was probably driven by domestic political considerations: the growing strength of the anti-Yeltsin forces and their vehement opposition to returning the islands to Japan. The manner of Yeltsin's trip cancellation, combined with several additional irritants, soured bilateral relations . Both Russia and Japan appear to have adopted uncompromising positions on the territorial dispute from which they may find it difficult to retreat. Thus, it is possible that the territorial dispute could block effective G-7 assistance to Russia this year, further jeopardizing the prospects for Russian democracy and market reform. President Bush and President Clinton have both indicated that the success of democratization and market reform in Russia is probably the single most important international issue for the United States today. Some see this as a unique opportunity to influence events of immense global significance. Others question whether success in Russia's vast experiment in democratization and market reform can be effectively influenced by external assistance. The United States, however, is seriously constrained in its ability to provide direct economic aid to Russia because of domestic economic problems. Thus, if external assistance is crucial, it may be that a high-level U.S. diplomatic initiative to help resolve the Russian-Japanese impasse is the most cost-effective and practical step the United states could take right now to influence Russian developments. That course, however, entails potential costs and risks for the United States, and to succeed it would have to overcome the political inertia and conservatism in both Russia and Japan that obstructs a settlement. The July 1993 G-7 summit in Tokyo provides a target and a deadline for possible U.S. action on this issue. TABLE OF CONTENTS INTRODUCTION ......................................... 1 BACKGROUND ........................................... 1 YELTSIN'S CANCELED TRIP TO TOKYO AND THE SUBSEQUENT IMPASSE............................................. 4 RUSSIAN OPPOSITION TO RETURN OF THE ISLANDS ........ 6 THE ABRUPT CANCELLATION OF YELTSIN,S TRIP .......... 7 IMPLICATIONS .........................................10 IMPLICATIONS FOR RUSSIA ............................10 IMPLICATIONS FOR JAPAN .............................12 IMPLICATIONS FOR THE UNITED STATES .................14 POSSIBLE U.S. ROLE: PROS AND CONS ....................14 RUSSIAN-JAPANESE IMPASSE AND ITS IMPLICATIONS INTRODUCTION This report examines the following series of linked premises: 1) Russia's democratic and market reforms are in trouble and may fail if that country does not receive prompt, large-scale external economic assistance. 2) Without substantial Japanese support and participation, the G-7 nations may not commit themselves to large-scale aid to Russia this year. 3) Japan is unlikely to provide major assistance to Russia unless the impasse centered on their territorial dispute is resolved. 4) Therefore, a U.S. diplomatic initiative aimed at helping Tokyo and Moscow resolve their impasse might be a quick and cost-effective means for the United States to influence Russian developments. 5) Such an initiative, however, would have to overcome formidable obstacles in both Russia and Japan. The basic concept for this report grew out of a series of meetings the author had in Tokyo and Beijing with high-level Japanese and Chinese Government officials and scholars in October-November 1992. The author also consulted with Russian Government officials on these questions in Moscow (June 1992) and Washington (1992-1993). BACKGROUND Relations between Moscow and Tokyo have been marked by tension and recurring conflict for a century. Russia led the "Triple Intervention" of European powers against Japan in 1895, denying Tokyo the main fruits of its victory over China in the Sino- Japanese War, only to seize the contested territory in Manchuria itself in 1898. Continued Russo-Japanese competition over Korea and their larger struggle for dominance in Northeast Asia led to war between them in 1904-05, in which Japan triumphed. In the aftermath of the Russian Revolution and Civil War, Japan intervened massively in the Russian Far East, occupying large areas of Russia that it hoped to annex. The last Japanese troops withdrew from Soviet territory in 1925. Japanese and Soviet armies fought two undeclared border wars in 1938 and 1939. In August 1945 the U.S.S.R. joined in the war against Japan, attacking and defeating Japanese forces in Manchuria and the Northwest Pacific, and seizing the Kuril Islands. Some 600,000 Japanese POWs were kept in Soviet labor camps until the mid-1950s; 60,000 died there. During the Cold War Moscow viewed Tokyo as an ally and puppet of the United States while Japan viewed the Soviet Union as a dangerous and hostile neighbor. With the end of the Cold War and the dissolution of the U.S.S.R., Russia's relations with the West were transformed from enmity to friendship. Russo-Japanese relations, however, remained strained largely because of the territorial dispute. CRS-2 Area map of disputed Kuril Islands. Available by contacting Gateway Japan at (202) 265-7685. CRS-3 The disputed islands, commonly but inaccurately described as four in number, are: Iturup and Kunashir (Etorofu and Kunashiri in Japanese), two relatively large islands, the much smaller Shikotan, and a group of tiny islets known as the Habomais. The Russians call them all collectively the Southern Kurils. To the Japanese they are the Northern Territories. The closest of the Habomais are only 2-3 miles from Hokkaido, the northernmost of Japan's four main islands. Approximately 25,000 Russians live on these islands, mainly on Iturup and Kunashir. In August-September 1945 the Red Army seized the entire Kuril Archipelago from Japan. The disputed islands were captured after Japan surrendered. In the San Francisco Peace Treaty of 1951, formally ending the Pacific War, Japan renounced the Kuril Islands. No recipient state was named. The Soviet Union, dissatisfied with this omission and with the impending U.S.-Japan Security Treaty, did not sign the San Francisco Treaty. Japan claims that the four disputed islands are historically part of Japan's home islands and were never occupied or administered by Russia or the Soviet Union before 1945. Moscow claims that they are part of the Kurils, promised to Stalin by Roosevelt and Truman at Yalta and Potsdam, conquered by the Red Army in the last days of the Second World War, and renounced by Japan in 1945 and 1951.1 The United States played a role in this dispute and the resultant impasse. In early 1945 President Roosevelt agreed to give the Kurils, among other territories, to the Soviet Union to induce Stalin to enter the war against Japan.2 The precise extent of the Kurils was not defined at that time. In 1956, when the U.S.S.R. and Japan were negotiating a bilateral settlement of issues connected to the Second World War, U.S. Secretary of State John Foster Dulles secretly intervened to block a territorial compromise and a possible political rapprochement. In the bilateral talks, Moscow had pledged to return Shikotan and the Habomais to Japan after the signing of a formal peace treaty, if Japan renounced claims to Iturup and Kunashir. Dulles privately warned Japanese Foreign Minister Shigemitsu that if Tokyo renounced claims to the two larger islands, the United States might refuse to return Okinawa to Japan.3 Tokyo ----------------------------------------------------------------- 1 For a fuller discussion of the territorial dispute and its impact on Soviet- Japanese relations see, U.S. Library of Congress. Congressional Research Service. Soviet Policy Toward Japan and the Strategic Balance in Northeast Asia, by Stuart D. Goldman, February 27, 1984. CRS Report 84-64 F; and U.S. Library of Congress. Congressional Research Service. East-Asia: Disputed Islands and Offshore Claims -- Issues for U.S. Policy, by Robert G. Sutter, July 28,1992. CRS Report 92-614 S. 2 U.S. Department of State. Foreign Relations of the United States [hereafter cited as FRUS], 1945: The Conferences at Malta and Yalta. Washington, D.C., U.S. Government Printing Office, 1955. p. 984. 3 Okinawa was then under U.S. military occupation, although the United States recognized residual Japanese sovereignty over the island. Tokyo wanted (continued...) CRS-4 backed away from the agreement and there was no peace treaty or normalization of relations. In 1960 Moscow, citing the U.S.-Japan Mutual Security Treaty as an anti-Soviet act, renounced the 1956 pledge to return Shikotan and the Habomais to Japan. To this day there is no formal peace treaty marking the end of World War II between Moscow and Tokyo. The disputed islands now have only limited economic and military value. Their significance for both Russia and Japan is primarily symbolic. But the symbolism is powerful. They have become touchstones of national sovereignty and honor. Governments that are politically weak or under domestic attack -- such as those of Prime Minister Miyazawa and President Yeltsin -- cannot ignore the political importance of such symbols. Yeltsin's Canceled Trip to Tokyo and the Subsequent Impasse Soviet-Japanese relations remained strained throughout most of the Cold War period. Japan's anti-communist policies and its role as a key U.S. ally marked it as a Soviet enemy. Because of Japan's military weakness and the Soviet perception that it meekly followed the U.S. foreign policy line, Moscow came to see Tokyo as a spineless American vassal and adopted a generally unfriendly tone, backed by brandished military might. The Soviet military build-up in Northeast Asia, Moscow's militaristic and aggressive policies, and its heavy-handed diplomacy antagonized Tokyo.4 A temporary upturn in Soviet-Japanese relations, marked by a sharp increase in bilateral trade, parallelled the broader East-West detente of the early to mid-1970s. Even before the international crisis provoked by the Soviet invasion of Afghanistan, however, Japanese enthusiasm had cooled because of disappointments over Soviet economic performance and lack of profits in their joint ventures. Meanwhile, for nearly 50 years the territorial dispute remained an important factor in bilateral relations, especially in the 1980s, when Tokyo elevated recovery of the islands to a major foreign policy goal. In 1986 Mikhail Gorbachev announced that normalizing relations with Japan was one of his top foreign policy priorities, but he did not succeed. When he finally visited Japan in mid-1991 (the first Soviet or Russian leader ever to do so), he brought no major territorial concessions and was humiliated by Japanese ---------------------------------------------------------------- 3(...continued) the United States to return Okinawa to Japanese jurisdiction. (This occurred in 1970.) Dulles implied that a provision of the San Francisco Peace Treaty could allow the United States to keep Okinawa if Japan acknowledged permanent Soviet sovereignty over Iturup and Kunashir in return for Soviet return of Shikotan and the Habomais. The documents on this episode can be found in FRUS, 1955- 57, Vol. XXIII. p. 28-29, 40-46. 4 Soviet Foreign Minister Gromyko's oft-repeated recommendation that Tokyo look to Finland as an appropriate model for its relations with the U.S.S.R. neatly captures the prevailing tone of their bilateral diplomacy. CRS-5 political and business leaders who refused to consider major economic assistance programs or investments.5 They lectured him on the necessity of returning Japan's Northern Territories and also made it clear that the economic and political turmoil in the U.S.S.R. discouraged extensive Japanese investment. Boris Yeltsin, Russia's first democratically elected leader, vowed to do better. In January 1992 Yeltsin announced that he would visit Japan in September. He hinted publicly of new flexibility and possible compromise on the disputed islands.6 In published interviews in August and September, Yeltsin said he was examining eight (later 14) different options for resolving the territorial dispute. Russian Government officials, including Foreign Minister Kozyrev, went even further, raising hopes for concessions in Japan.7 Japanese expectations were also heightened by Moscow's peaceful acquiescence in the collapse of the Warsaw Pact, the reunification of Germany, the dissolution of the U.S.S.R., and the loss of most of the non-Russian periphery of the Soviet Union. Surely, thought many Japanese, after accepting such momentous changes, Russia would not balk at returning four small islands. While it cannot be proved with certainty, it seems likely that Yeltsin favored returning the islands, in expectation of urgently needed large-scale Japanese economic assistance.8 Foreign Minister Kozyrev clearly favored this course. However, strong opposition to this policy arose in Russia, resulting in Yeltsin's last-minute decision to cancel his trip to Japan. ---------------------------------------------------------------- 5 Gorbachev acknowledged Soviet "black deeds" in connection with the mistreatment of Japanese POWs after World War II, but stopped short of a formal apology. He also officially acknowledged the dispute over the four islands. These moves did not impress Tokyo, which had hoped for far more. 6 Yeltsin visited Japan in 1990, before Gorbachev's trip and before his election as President of Russia. At that time he suggested a five-step plan, to be implemented over 15-20 years, to resolve the territorial dispute: 1) Moscow would formally acknowledge the territorial dispute with Japan. (Gorbachev did this in his April 1991 visit.) 2) Moscow would establish a free economic zone on the four islands. 3) Moscow would demilitarize the islands. 4) The two countries would sign a peace treaty. 5) The two sides would agree to postpone final solution of the territorial issue "until the next generation." 7 In one of Kozyrev's first official acts as Foreign Minister of a sovereign Russia, after the August 1991 Soviet coup attempt, he confirmed the legality of the 1956 Soviet-Japanese Joint Declaration in which Moscow pledged to return Shikotan and the Habomais to Japan after the conclusion of a peace treaty between them. In 1960 Soviet Foreign Minister Gromyko had renounced this pledge. During a visit to Tokyo in 1992, Russian Minister of Press and Information Mikhail Poltoranin suggested the "Okinawa formula" as a possible means of settling the territorial dispute. This apparently was his own idea, but the Japanese may have thought it was a trial balloon. 8 Based on interviews of Russian Government officials in Moscow, November 1991, June 1992. CRS-6 RUSSIAN OPPOSITION TO RETURN OF THE ISLANDS President Yeltsin and Foreign Minister Kozyrev are characterized by admirers and foes alike as "westernizers." Their foreign policy is to cooperate fully with the West to achieve maximum integration of Russia with the advanced industrial democracies, whose political and economic systems they wish to emulate, and from whom they seek large-scale economic assistance. The most irreconcilable opposition to their policies is an uneasy coalition of unreconstructed hardline communists and ultra-nationalists. This group, the self-styled "patriotic front," is known pejoratively by its foes as the "red-brown" alliance.9 They advocate the restoration of a centralized, authoritarian, multinational U.S.S.R. or a new Russian Empire -- by force if necessary. They view the advanced industrial democracies as natural enemies that are determined to keep their country impoverished, exploited, weak, and divided. Although they have sometimes sharply differing vision's of Russia's future, the one thing on which they fully agree is their vehement opposition to the government's foreign policy, which they view not merely as too weak, but as a treasonous sell-out to the West and a betrayal of Russia's national interests. This attack extends to virtually every aspect of the government,s foreign policy, including the prospect of "surrendering or "selling" Russian territory, won at the cost of Russian blood, to rich and "arrogant" Japan. Not only the extremist "red-browns," but more moderate nationalists, patriots, and "statists," including some prominent members of the government, also criticize Russia's foreign policy as too weak and conciliatory. The Democratic Party of Russia, the Constitutional Democratic Party, Russian Vice President Aleksandr Rutskoi, and Presidential Advisor Sergei Stankevich can be mentioned in this regard. They criticize Yeltsin and Kozyrev for making too many concessions to the other newly independent states of the former Soviet Union and to the West, losing sight of Russia's national interests and failing to protect the 25 million Russians who suddenly find themselves living in foreign countries. They also speak out strongly against any return of the Southern Kurils to Japan. Many Russian military men also oppose returning the islands to Japan. In addition to issues of national honor and prestige, they advance a military-strategic argument. Returning the islands to Japan, they argue, would deprive the Russian Navy of control of important passages between the Pacific and the Sea of Okhotsk, impeding naval movements in the event of war and, perhaps more importantly, giving hostile naval forces, especially anti-submarine warfare units, access to the Sea of Okhotsk, which they have long regarded as a secure bastion for their ballistic missile-launching submarines. Opposition to territorial concessions to Japan is strong in Eastern Siberia and the Russian Far East, where there is growing support for increased regional autonomy. Some there even advocate full independence from Moscow. These separatist sentiments derive in part from the long held belief that Moscow exploits their regions economically, extracting vast wealth from gold, diamonds, gas, oil, ------------------------------------------------------------------- 9 Red is for communist, brown for fascist. CRS-7 and timber resources while returning only a small fraction of the value to their regions. Some local and regional leaders argue that their regions could be wealthy if they controlled these resources themselves. In addition, the waters in the vicinity of the disputed islands contain rich fishing grounds. Cession of the islands might reduce the extent of Russia's fishing grounds, which provide an important source of food and income for Sakhalin Oblast, of which the Southern Kurils are a part. Valentin Fedorov, Governor of Sakhalin Oblast, threatened in 1992 that Moscow's return of the islands to Japan could spark secession in the Russian Far East. Talk of separatism and independence may be political posturing or part of a negotiating strategy aimed at securing a larger share of resources, but central authorities in Moscow are also concerned because it strengthens the centrifugal forces that threaten to weaken or fragment the Russian Federation. Throughout 1992, as the government of the newly independent Russian Federation struggled to develop its own foreign policy and redefine its relations with its neighbors and its role in the world, a debate arose over what the principles and orientation of that foreign policy should be. The foreign policy debate intensified and merged with the larger debate over Russia's fundamental domestic political and economic policies. The foreign policy "westernizers" are democrats and free market economic reformers. The ultranationalist "red-browns" are mostly hard-line communists or authoritarian right-wingers who would retain much of the statist, command economy. Thus, the Yeltsin Government's domestic enemies almost uniformly opposed its foreign policy as well. The Russo- Japanese territorial dispute was gradually drawn into this power struggle and, as often happens in times of political instability, subordinated to the requirements of domestic politics. THE ABRUPT CANCELLATION OF YELTSIN'S TRIP On September 9, 1992, four days prior to his scheduled departure for Japan, President Yeltsin made the surprising announcement that the trip was indefinitely postponed.10 There was no pretense of illness or pressing domestic affairs. Presidential spokesmen placed blame for the postponement squarely on the Japanese Government, accusing it of being obsessed with and inflexible on the territorial question. Yeltsin complained that Japan, alone among the G-7 states, had refused to give "even one kopek" of aid to Russia. Others charged that Tokyo had warned that it might not be able to guarantee his security there. Japanese public opinion was offended by what was perceived as Russian rudeness, and the government was privately infuriated by the accusations, although publicly it tried to minimize the episode. It may be argued that the Japanese government was focused too single-mindedly on the territorial question, although others might reply that the focus was justified. In any case, this concentration on the Kurils issue was certainly not something newly discovered ----------------------------------------------------------------- 10 Yeltsin had planned to visit South Korea directly after leaving Japan. The Korea trip was also postponed on September 9, but was soon rescheduled. Yeltsin visited Seoul November 18-20,1992. CRS-8 by Moscow only days before the scheduled trip. The Japanese Foreign Ministry was particularly offended by the charge of inflexibility. On September 2, Foreign Minister Watanabe had met with President Yeltsin in Moscow to lay the final groundwork for the Tokyo summit expected 11 days later. He reportedly brought with him evidence of Japanese flexibility on the islands. Tokyo's position for years had been that Moscow must return all four islands immediately, simultaneously, unconditionally, and without compensation, and that all Russians must leave immediately. Watanabe had come to tell Yeltsin, "as one politician to another," that Tokyo was prepared to be flexible on the timing, modality, and conditions of transferring the islands, and to give "humanitarian considerations" to Russians who wanted to remain there, provided that Russia's clear goal was to return all four islands. According to senior Japanese officials, Yeltsin flatly refused to discuss the matter with Watanabe, saying that he would discuss it only with Prime Minister Miyazawa in Tokyo.11 Russian officials give a somewhat different account of this meeting. 12 On the aid issue, it may be true that Japan, in view of its economic strength, had given proportionally less aid to Russia than others in the G-7. In October 1991, however, Japan announced a $2.5 billion aid package ($1.8 billion in trade insurance, $700 million in loans). In addition, Japan had extended about $75 million in humanitarian grant assistance by September 1992. Japanese officials viewed these amounts as substantial, comparable to the aid given by such G-7 countries as Britain and France, -- and certainly more than "one kopek."'13 As for the question of security in Tokyo, Japanese officials claim that doubts were raised by Russian security men rather than the Japanese. Why, then, did President Yeltsin cancel the trip at the last minute? Most experts agree that the decision was driven primarily by domestic political considerations -- that the domestic political costs of making territorial concessions to Japan at that time outweighed the potential benefits from Japan.14 ----------------------------------------------------------------- 11 This account is based on interviews with Japanese Foreign Ministry officials and others in Tokyo in October 1992. 12 According to Russian Foreign Ministry officials interviewed for this report, Moscow "received signals, perhaps incorrectly," that Watanabe was bringing compromises on the territorial dispute. In his preliminary meetings in Moscow, however, he allegedly gave no hint of flexibility. In his meeting with Yeltsin, they say, he asked the Russian President first to give his ideas on how to resolve the issue. Yeltsin reportedly was offended by this approach and refused to be drawn out. Thus the meeting, and Watanabe's mission, ended on a sour note. 13 Figures from Japanese Ministry of Foreign Affairs, February 1993. In addition, six weeks after Yeltsin's trip cancellation, Japan pledged another $100 million in humanitarian assistance grants at an international conference in Tokyo on aid to the newly independent states. 14 Such political calculation apparently was not restricted to Russian policy toward Japan. In October Yeltsin announced suspension of Russian troop withdrawals from Estonia and Latvia, despite strong U.S. and European pressure (continued...) CRS-9 On September 6, during a live Moscow-Tokyo "T.V.-bridge" interview with Japanese journalists, Yeltsin confirmed that he would go to Japan as planned. On the morning of September 9, only hours before the cancellation was announced, State Secretary Gennady Burbulis (Yeltsin,s reputed right-hand-man) and Foreign Minister Kozyrev held a press conference on preparations for the Japan trip. These men, who were normally at the center of foreign policy decisions and were the most prominent advocates of the trip, apparently were either out of the loop on the decision to cancel the trip or were overruled in a last-minute decision. When Yeltsin announced the trip cancellation on September 9, he said that the decision had been taken by a vote of the Russian Security Council that day. That newly formed body, chaired by Yeltsin, included Russia's top national security officials.15 As noted above, Yeltsin said that their decision was based on Japan's lack of cooperation. Another explanation is that a majority of the Security Council convinced Yeltsin that it was politically too dangerous for him to be seen as surrendering Russian territory to Japan at that time: that many ordinary Russians would see it as treasonous, that it would provide potent ammunition for his political enemies, and that it would drive some of his parliamentary supporters into opposition. They also argued that Japan was unlikely to offer enough economic assistance to justify the political cost.16 Regardless of the relative weight of domestic political considerations and the dynamics of bilateral relations in the trip cancellation, the fact that the decision was made so abruptly and at the last minute reflects poorly on Russian diplomacy and decision-making. Placing the blame on Japan may have been a tactic by the Yeltsin Government to avoid the appearance, at home, of weakness or indecisiveness in this affair. In any case, Moscow adopted the posture of the aggrieved party. It then went on to add insult to injury from the Japanese perspective. A few days after the announced trip cancellation, the Russian Government revealed that it had discovered in secret Soviet archives the flight recorder of the Korean Airlines Flight 007 that had been downed by a Soviet fighter plane near Sakhalin in September 1983. Copies of the transcript from the flight recorder were officially presented to representatives of the governments of South Korea ------------------------------------------------------------------ 14(...continued) to continue the withdrawals. This too was regarded as a concession to Russian nationalists in the run-up to the 7th Congress of Peoples, Deputies. 15 In addition to President Yeltsin, the Security Council included: acting Prime Minister Yegor Gaidar, Foreign Minister Kozyrev, Defense Minister Pavel Grachev, Security Minister Viktor Barannikov, Interior Minister Viktor Yerin, Head of the Presidential Administration Yuri Petrov, Security Council Secretary Yuri Skokov, and Sergei Filatov, First Deputy Chairman of the Supreme Soviet. 16 This account is based on information from Russian officials in Moscow and Washington. CRS-10 and the United States and the International Civil Aviation Commission. This was done primarily to damage Gorbachev's reputation. But in what appeared to be a studied insult, the Russian Government literally kept a Japanese delegation waiting in the hallway and refused to give them an official copy of the transcript,17 although it was obvious that they could obtain copies from any of the other recipients.18 At about the same time, it was announced in Moscow that the Sakhalin Oblast government had accepted a proposal from a Hong Kong corporation for large-scale economic development of Shikotan Island.19 Both events were viewed by Tokyo as intentionally unfriendly acts and were protested by Japanese officials and by the press. This was the troubled state of Russian-Japanese relations in the autumn of 1992. The passage of time has reduced the intensity of bitterness on both sides, but there has been little substantive improvement in bilateral relations and no progress on the underlying problem of the disputed islands. IMPLICATIONS Of all the major powers of the world, only Russia and Japan remain enmeshed in a lingering Cold War confrontation, without a peace treaty to formally conclude the war between them that ended in 1945 and without normal bilateral relations. The absence of normal relations, the impasse between them, is now due primarily to the disputed islands. IMPLICATIONS FOR RUSSIA Ultimately, the Russians themselves will be responsible for the success or failure of their attempted transition to a market economy. No politically realistic amount of external economic assistance can guarantee a successful transition. But many specialists in Russia and the West believe that in the short run --1993- 1994 -- substantial external economic assistance is essential if the reforms are to have a chance, and that if the economy collapses and the economic reforms fail or are abandoned, democratic government will likely give way to authoritarianism. In this view, prompt, large-scale western assistance would --------------------------------------------------------------- 17 Twenty-eight of the victims on flight KAL 007 were Japanese. 18 Russian Foreign Ministry officials interviewed for this report assert that this was merely a protocol matter. President Yeltsin, they say, had received personal requests from President Bush and South Korean President Roh Tae Woo for the flight recorder information, but Japanese Prime Minister Miyazawa made no comparable request. The two-man Japanese delegation arrived unexpectedly and announced itself to the Russian Government from the Moscow airport. 19 Several weeks later the improbable story about an international resort on Shikotan was disavowed by Moscow. Some believe it may have been a ploy launched by Fedorov, the Governor of Sakhalin. CRS-11 strengthen the resolve of the reformers in the Russian Government, demonstrating that they are not alone, that the West is really supporting them. Proponents also note that the current exchange rate of nearly 700 rubles per dollar gives a big multiplying effect to western aid. For example, $20 billion equals 14 trillion rubles. Such a sum, it is argued, would be a substantial contribution to a Russian social safety net or an enterprise investment fund and could have a significant short-term political impact.20 Some experts see Japan as central to the prospects for large-scale economic assistance to Russia this year. This has been succinctly put in an "aid syllogism" developed by a group of American, Japanese, and Russian scholars: "Without substantial external economic assistance, reform will fail and with it the democratic Russian experiment; without Japan there will be no substantial external economic assistance; and without normalization there will be no substantial Japanese assistance."21 The aid syllogism can be criticized at several points. One is its assertion that without Japan there will be no substantial assistance to Russia. This rests on the collective authors' premise that Japan "is the only major surplus economy in the world"22 and that all the other G-7 countries are in such economic and/or political distress that without a major aid commitment from Japan, the others will be unable or unwilling to do much for Russia.23 This premise may be faulted for exaggerating Japan's economic strength and underestimating the seriousness of the bursting of Japan's "bubble economy," the sharp drop in Japanese real estate and stock market values, and the resulting economic recession. Yet, despite these difficulties, Japan is probably still economically among the strongest of the G-7 now and certainly the one whose potential for aid to Russia has been least tapped. The fact that Tokyo will host and chair the July 1993 G-7 summit gives Japan additional influence and responsibility. ---------------------------------------------------------------- 20 A prominent advocate of this view is Jeffrey Sachs, one of the architects of Poland's economic "shock therapy" and a close advisor to the Yeltsin-Gaidar Government. Professor Sachs has testified along these lines before several Congressional Committees, most recently the House Foreign Affairs Committee, February 24, 1993. 21 Beyond Cold War to Trilateral Cooperation in the Asia-Pacific Region. Graham Allison, Hiroshi Kimura, and Konstantin Sarkisov. Strengthening Democratic Institutions Project. Harvard University. Cambridge, Massachusetts. 1992. p. 25. [Hereafter cited as Trilateral Cooperation.] Graham Allison is the Clinton Administration's Assistant Secretary of Defense-designate for Policy and Plans, a new position created by Secretary of Defense Aspin which, among other things, will coordinate DoD policy toward the states of the former Soviet Union. 22 Ibid., p. xii. 23 It is not only a matter of direct bilateral Japanese aid, but also Japan's role in multilateral aid, such as debt relief and a ruble stabilization fund. CRS-12 The final element of the "aid syllogism" seems logical: without normalization of relations between Russia and Japan, there will not be substantial Japanese economic assistance to Russia. Some skeptics argue, however, that even if Russia succeeded in normalizing relations with Japan by settling the territorial dispute, Japan would be reluctant to make major aid or investment commitments at this time because of Russia's political and economic turmoil. Some Russians believe that traditional Japanese antagonism toward Russia would prevent Tokyo from becoming a major aid donor or investment partner. On the other hand, other specialists note that Japan has more economic specialists and businessmen studying conditions on the ground in Russia than any other western nation.24 This would seem to indicate significant Japanese interest. The likelihood of Japanese assistance is discussed further below. IMPLICATIONS FOR JAPAN The conventional wisdom in Tokyo is that because Russia needs Japanese economic assistance so desperately, and Yeltsin wants so much to be invited to participate in the G-7 summit in Tokyo in July 1993, Russia will have to make major concessions to Japan on the islands in the first half of 1993. If Russia behaved as an economic "rational actor," as many Japanese believe it should, or if its policy on the territorial dispute were governed by Marxist economic determinism, Tokyo's conventional wisdom would be sound. It may, in the end, prove correct. But many experts believe that Tokyo's conventional wisdom in this case is a serious miscalculation, because Russian policy toward the disputed islands now is driven primarily by the requirements of domestic politics, and the Russian political dynamic precludes surrender of the islands at this time. The implications of this for Japan could be quite significant. If large-scale external economic assistance really is essential to the success of Russian reform at this time, Japan could be missing an opportunity to contribute to the transformation and democratization of its huge neighbor, a country that has been a major factor in Japan's foreign relations -- and frequently a major threat -- since Japan ended its isolation in the mid-19th century. Indeed, it is arguable that Japan may have an even stronger national security interest than the United States in a democratic, western-oriented Russia.25 Since the beginning of the Cold War over 40 years ago, Japan's dependence on the United States for military security has been absolute. That dependence -- the self-denial of war-making authority or potential -- initially written into the Japanese Constitution by U.S. occupation forces, has become so sacrosanct a part of Japan's political culture that the public refuses to alter it. Most Japanese, including politicians, seem to assume that an American security -------------------------------------------------------------- 24 Information provided by John Hardt, Associate Director of CRS and Senior Specialist in Soviet Economics. 25 Some Japanese officials interviewed for this report agreed with this assessment, but said that theirs' was a minority view in their government. CRS-13 umbrella is a natural, permanent element of the geopolitical landscape. But the collapse of the Warsaw Pact and the dissolution of the Soviet Union are geopolitical earthquakes of such magnitude as to fundamentally reshape that landscape. From the American perspective, The Threat -- i.e., of general nuclear war or a Soviet/Warsaw Pact blitz across Western Europe -- has virtually disappeared. Leaving aside for a moment considerations of Russian intentions and capabilities, not only are the former Warsaw Pact states now a barrier against potential Russian aggression against NATO, but so is a robust and very well-armed Ukraine, which is absolutely determined to defend its independence. Even in a worst-case scenario, if ultranationalists came to power in Russia and decided, for whatever reason, to adopt a militarily confrontationist posture toward the West, they could not recreate a military threat to Europe anything like the magnitude of that posed by the U.S.S.R. ten years ago, because of the geopolitical changes noted above and Russia's economic weakness. Thus, it seems likely that the U.S. military force reductions already in progress will continue. President Clinton and Secretary of Defense Aspin favor lower force levels than did President Bush and Secretary Cheney. The reemergence of a hostile Russia might cause U.S. decision makers to reconstitute some of these forces, but that would take time. Meanwhile, in a worst-case scenario, an ultranationalist, militaristic Russia could be a most unpleasant neighbor for Japan -- particularly if the U.S. security umbrella had been substantially weakened. Such a Russia would not only be most unlikely to return the disputed islands to Japan, but it might create a new threat environment in which Japan would feel more responsible for its own defense -- at considerable cost to its present political and economic order. Some Japanese experts on Russia interviewed for this project in late 1992 were so disgusted by the Yeltsin Government (which, they complain, gives the West virtually everything it seeks but only aggravates Japan) that they said Tokyo should "sit on its hands" and wait patiently for the post-Yeltsin era. Many would argue, however, that this would be a self-defeating policy, since it is unlikely that any post-Yeltsin Government would be more cooperative toward Japan than is the present one.26 In the event of the worst-case Russian scenario, however, Japan might become a scapegoat in the United States and Europe in the debate that would likely ensue over "who lost Russia?" These and similar calculations may be gaining credence in Tokyo as Russia's political and economic crises deepen and Yeltsin's hardline opponents grow stronger. Some Japanese officials privately assert that Japan's hands are not completely tied by the territorial dispute and that in view of the urgent situation in Russia~ Japan might be willing extend large-scale economic assistance without normalization of relations.27 If so, this would invalidate a central premise of --------------------------------------------------------------- 26 Some Japanese, such as former Prime Minister Nakasone, assert that Japan's best chance for recovering the islands is when there is simultaneously a strong Russian government and a weak Russian economy. Then the government would have both the economic incentive and the political will to make territorial concessions. 27 Discussion with Japanese Foreign Ministry official, March 1993. CRS-14 the aid syllogism. Japan's official position as of mid-February 1993, however, was that greater bilateral economic relations with Russia was linked to progress in the normalization process according to a "balanced expansion" principle. Japanese officials expressed the hope that Russia would reciprocate their efforts to move forward together toward improved relations, but noted that Japan could not and would not move unilaterally.28 Perhaps there is internal debate on this issue within the Japanese Government. IMPLICATIONS FOR THE UNITED STATES Russia's transition to democracy and a market economy, even if successful, would probably take many years, perhaps a generation or two. In the long run it would depend far more on what the Russians themselves did than on external economic assistance. But advocates of aid to Russia argue that in the short run, for political reasons, prompt, large-scale economic assistance is needed to sustain Yeltsin's reformist government. This proposition seems persuasive to many, but not all, and cannot be proven. Furthermore, it is not certain that Japan would be willing suddenly to become a major Russian aid donor or investor even if the territorial dispute were resolved. On the other hand, if the aid syllogism is essentially accurate, its implication for the United States is that the Russo-Japanese impasse puts in jeopardy the Russian political and economic reforms that both the Bush and Clinton Administrations have characterized as the most important international development in the world since 1945. Viewed in this light, U.S. policy should seek to help Moscow and Tokyo overcome their impasse. Hardly anyone in Washington would object to such a goal, per se. The salient questions are: is this goal achievable; if so, how; and at what cost? POSSIBLE U.S. ROLE: PROS AND CONS In view of the entrenched position of both sides, any U.S. attempt to end the Russia-Japan stalemate could require an all-out U.S. diplomatic effort comparable to the effort that brought a revival of the Middle East peace talks after the Persian Gulf War. This implies, inter alia, shifting U.S. policy from unconditional support of Japan's regaining the disputed islands -- as articulated, for example, by President Bush at the July 1991 G-7 summit in London -- to a position as a broker between the two parties. The United States, together with Japan, might offer Russia specific guarantees, such as restrictions on their naval deployments and operations in the Sea of Okhotsk, so that Russian security in the Asia-Pacific region need not be undermined by a change in the status of the disputed islands. Washington might also be called upon to act as a political guarantor of certain provisions of a settlement. The most significant acts, concessions, and compromises, however, would have to come from Tokyo and Moscow. The Japanese Government, however, says that it is opposed to U.S. or ---------------------------------------------------------------- 28 Discussion with Japanese Foreign Ministry officials, February 1993. CRS-15 international mediation in the territorial dispute.29 Japanese diplomats caution that a U.S. shift away from its long-held position of full support for Tokyo on the territorial dispute might harm U.S.-Japan relations.30 This report does not attempt to describe scenarios for achieving normalization of relations between Russia and Japan. There are many such possibilities. For example, the study by Allison, Kimura, and Sarkisov, cited above, contains an extensive list and analysis of scenarios.31 Arguments against an immediate, high-priority U.S. effort to help Russia and Japan overcome their impasse include the following elements: * It may fail. Although it is in the interest of both Moscow and Tokyo to normalize bilateral relations and resolve the impasse between them, dramatic action by either government to reach a compromise settlement on the territorial dispute at this time carries high political risks. Some of the most fervent advocates of U.S. involvement acknowledge that, "the balance of forces in the domestic politics ... of each favors continued stalemate rather than solution. In both countries, leadership is too weak, too timid, or too distracted to devise and pursue a strategy for circumventing and overcoming the very real domestic obstacles that stand in the way."32 * If Washington were to launch the sort of diplomatic initiative contemplated above, and it was unsuccessful, it might alienate the Russian and/or Japanese governments by exposing them to unwanted international pressure and/or domestic political injury. * There is cynicism in Russia and Japan about America's role in creating and fostering the territorial dispute, and skepticism, especially among nationalists in both countries, about the wisdom of entrusting the United States with a central role in an issue of vital national interest. * President Clinton is committed to focusing "like a laser beam" on domestic economic problems. Launching an intense, high-level, high-risk diplomatic initiative, which might also entail increased U.S. economic assistance, might be viewed as an unwelcome and dangerous distraction from the Administration's domestic priorities. ----------------------------------------------------------------- 29 Ibid. 30 Discussion with Japanese diplomat, March 1993. 31 Trilateral Cooperation, p. 20-68. 32 Ibid., p. 38. CRS-16 The arguments in favor of an immediate, high-priority U.S. effort to help Russia and Japan overcome their impasse include the following elements: * The new Clinton Administration and 103rd Congress may find it difficult economically and politically to boost direct U.S. economic assistance to Russia at a time when most Americans see domestic economic problems as our top priority. A major U.S. diplomatic initiative aimed at resolving the Russian-Japanese impasse may be the most cost-effective and practical step the United States could take now to influence developments in Russia at what appears to be a decisive point in the post-Soviet transition. * This is a time-urgent problem. The Russian economy is on the brink of hyperinflation and a collapse of production. If the aid syllogism is accurate, foreign assistance in such areas as debt relief, currency stabilization, strengthening the social safety net, and defense conversion, is needed very soon in order to stave off a catastrophic economic collapse that could well doom the democratic and market reforms and lead to a chaotic break up or a reactionary, authoritarian, ultranationalist government. This calls for an immediate, high-priority U.S. effort. The July 1993 G-7 summit in Tokyo provides both a target and a deadline for action. * In addition to being in the U.S. interest to help overcome the impasse, some argue that the United States bears some special responsibility in this regard, partly because of its role in contributing to the creation of the impasse in 1945 and 1956,9a and partly because of its unique leadership role in the post-Cold War world and its special relationship with Japan and Russia. No other country has as much influence and authority in Tokyo and Moscow, and the ability to act as an honest broker, to persuade those governments that,together with Washington, they must seek ways to overcome the impasse now, despite the political risks of such an undertaking to each of them. * A successful U.S. effort would not only help avert the unwelcome outcome of an authoritarian, ultranationalist regime in Russia, it would demonstrate to Russia in concrete and practical terms the value of continued cooperation with the democratic West in general and the United States in particular. If the United States succeeded in helping Japan regain the islands, this would demonstrate to Japan in the most dramatic fashion that the U.S.-Japan alliance has enduring value beyond the Cold War, and that despite trade friction, cooperation with the United States should remain a high priority. ----------------------------------------------------------------- 33 For details on the U.S. role in these events, see Trilateral Cooperation, Appendix G.