Who Needs a Peace Treaty?

Unlike with the US in the wake of World War II, Japan and Russia have never signed a peace treaty formally ending their brief hostilities in the war's waning days. Japan continues to pine for the return of the southern half of Sakhalin Island and the long chain of islands known as the Kurils, which Russia took as spoils after only a few weeks of war in which the two countries never fired a shot at each other.

That hasn't stopped the two countries acting the way normal, friendly countries act. Both countries exchange ambassadors, carry on normal trade and exchange visits. Japan's Prime Minister Taro Aso met with Russia's President Dmitry Medvedev on Sakhalin Island last November to inaugurate a natural gas deal.

Vladimir Putin made two state visits to Japan during the eight years he served as Russia's president, and, of course, he recently revisited Japan in his new incarnation as prime minister. It was a very business-like and productive two-day trip, resulting in the signing of four trade agreements, including landmark nuclear power agreement.

Since the end of the Soviet Union in 1991, the Japanese-Russian relationship has undergone three distinct phases. At first there was a brief euphoria as Moscow eagerly anticipated substantial Japanese investment in the country, especially in Siberia and the Russian Far East.

When that did not materialize, the two countries tended to lose interest in each other and that trend continued as revenues from oil and natural gas made Russia wealthier in the 2000s. Under ex-president Putin the Russians began to develop and exploit their own natural resources more effectively and didn't need Japan any more.

But lately, as the Russians are becoming worried about overdependence on natural resources and concerned about weak infrastructure and lagging technology, they have rediscovered Japan. They know that Tokyo is not just an economic powerhouse but a technology powerhouse which can help Russia transform itself into a true industrialized nation.

From Japan's point of view, as Russia becomes richer from natural resources, it becomes an ever bigger market for Japanese goods, services and technology. The value of bilateral trade grew five-fold in the past five years, from about $6 billion in 2003 to $30 billion in 2008 Japan is now Russia's third largest trading partner after Germany and China.

That change of heart is best exemplified by the landmark nuclear power agreement that allows for more technical transfer, especially Toshiba's expertise in constructing nuclear power plants enhanced through its acquisition of Westinghouse. Toshiba has already sold off part of Westinghouse to Kazakhstan to cement its relationships there. Will they be tempted to sell another part to Russia's new nuclear consortium, Atomenergoprom too?

So if the economic relationship is going so swimmingly, why bother about signing a treaty to end a war that has been over for more than 60 years? The short answer is the Kurile Islands, or, as the Japanese call them, the Russian-occupied Northern Territories. Over the years, Tokyo has dug in over the proposition that all four of the disputed islands must be returned to Japan; Russia agrees to return two.

One reason is that the Japanese media obsesses with the issue. Even before he left Moscow, Putin had to deny that there would be any breakthrough on the touchy issue during his short visit to Japan. And while Aso may have brought it up in a pro forma way, it was never in the cards that he would seriously discuss a compromise during this trip.

In the unique "tandem administration" that Putin shares with his one-time protégé, Putin's portfolio involves nuts and bolts trade issues. Matters that concern sovereignty belong to the president. The next chance that Aso will have to bring the matter up will be on the sidelines of the G-8 summit meeting in Italy in July.

There is a school of thought that the whole issue should be stashed firmly in the back of the shelf and left there. After all, it is not apparently hampering in any obvious way the growing trade relationship. Best to treat it as "something left over from history," as the Chinese used to describe Hong Kong under the British.

But it should be recalled that the Chinese eventually insisted that the sovereignty of Hong Kong be settled. Shigeki Hakamada, a Russia expert at Aoyama Gakuin University in Tokyo, notes that over the years large numbers of Japanese continue express a mistrust of Russia, which hampers full development of trade and other exchanges.

"It is fed by the Northern Territory issue," he says.

That is no doubt true, although much of the mistrust may also stem from Russia's opportunistic last-minute entry into the World War II, its delay in returning prisoners of war captured in Manchuria and in general antagonisms left over from the Cold War.

Tokyo insists that all four of the disputed islands must be returned before it will sign a peace treaty, while Moscow is willing to concede the two southern-most. Superficially, that seems like a fair compromise, except that the two southern islands, Shikotan and the Habomai, constitute less than 10 percent of the four islands' total land mass.

Various other compromises have been proposed but not formally placed on the table. The most recent, called the "3.5" solution would grant Japan three islands and half of the larger of the four, Kunashiri. Another possible action would be to declare the islands officially Japanese territory but under Russian administration.

It remains to be seen if Prime Minister Aso will put any compromise proposals informally to the Russian president when they meet at the G-8 meeting, although, at best, they would be only preliminary options to begin serious negotiations leading to a summit and presumably grand treaty signing ceremony in Tokyo.

Perhaps, but I wouldn't count on much coming it. Despite it commanding majority in the Diet, the Aso government is weak and may be replaced in a few months by the opposition. Right-wing nationalism remains strong in the premier's party – Aso was even criticized for going to Sakhalin Island for the ceremony marking the first shipments of natural gas to Japan.

Meanwhile, Russia is stymied by its own rising nationalism, a shaky economy and the unique "Siamese Twins" relationship of Medvedev and Putin. So a peace treaty is still illusive, but then with $30 billion in two-way trade who needs a treaty?