Introduction
Since the 19th century, Russia and Japan have had turbulent relations based on various issues, with the main one being boundary disputes over a chain of islands that lie between the two states. The South Kuril Islands have been a contentious issue between Japan and Russia from as early as 1855, with each state claiming sovereignty over the islands and the resources therein. Over the years, there have been several attempts to resolve the boundary dispute through peaceful avenues such as treaties and conferences and sometimes, when inevitable, through war, as each state tries to assert its sovereignty. The tag of war has had various effects on both countries, with the most prominent ones affecting the political, social, and economic facets. This paper analyses the boundary dispute, including its history and present status, and how the dispute affects trade between the two countries. It aims at providing statistical support to the facts for a more concise and objective viewpoint.
Historical background
Trade relations between Japan and Russia face many difficulties. To understand the root of these challenges and the current economic trends between the two states, it is important to analyze the historical background of the relations between the two states. The stalemate by the two countries over the boundaries dispute, which has been active since 1855, affects trade including policies on the mobility of people across the borders, laws that apply to the borders, taxation policies, and market policies for people looking to exploit the potential markets in either country in various ways.
The Kuril Islands are a series of islands between Russia and Japan. As aforementioned, there have been controversies over the ownership of the islands since 1855, with both Japan and Russia (then the Soviet Union) laying claim over ownership of the island. The islands include Etorofu Island, Kunashir Island, Shikotan Island, Hobamai Island, and Sakhalin Island, and the latter two lie to the north of Japan and close to the mainland. The Treaty of Shimoda is the earliest known treaty between the two states. Its provisions placed the border between “Etorofu and Uruppu, with the whole of Etorofu belonging to Japan and the rest of the islands north of it belonging to Russia” (Elleman, Nichols & Ouimet, 1999, p.492). However, the treaty overlooked the mentioning of a few islands, thus creating an assumption that they belonged to Japan based on their location.
In 1904, there was a war between the two countries, which ended in favor of Japan. In the quest to end the war, “the countries established the treaty of Portsmouth in 1905, by giving half of the Sakhalin Islands to Japan as part of its conditions” (Carlile, 1994, p.419). However, Russia was not pleased with the situation, and at the beginning of the Second World War, a battle to end the border conflict, which is known as the Battle of Khalin Gol, erupted. However, even though there was relatively calm up until 1945, when the Second World War ended, and the Cold War began, there was still tension between the states over the islands. In February 1945, the Soviet Union, the USA, and Britain signed the Yalta Agreement, which demanded that after Germany’s concession in the war in Europe, the Soviet Union would join Britain and America as part of the allied forces against Japan on condition that the southern part of Sakhalin Islands would be returned to Russia (Carlile, 1994). However, the wording of the treaty left out the mention of the Northern islands, hence giving Japan a viable argument over their ownership.
In August of the same year, Japan signed the “Potsdam declaration announcing the end of the war, and thus Russia used this situation to its advantage and started an invasion of the Kuril Islands, consequently expelling Japanese inhabitants and declaring sovereignty over the land” (Elleman, Nichols & Ouimet, 1999, p.494). The declaration limited Japan’s sovereignty to a few specifically mentioned islands, including Honshu and Hokkaido. The wording of the treaty remained ambiguous over the ownership of the northern islands. Thus Japan felt justified to lay claim over the islands as it argued that it had not acquired the islands through greed and violence because they did not belong to the Soviet Union after all (Aggarwal, 2006). Later, in 1951, a dispute arose during the preparation of the San Francisco Treaty between the US and the Soviet Union. The treaty aimed to end the border conflict permanently; instead, it resulted in further disagreements like the previous ones.
The United States was of the opinion that since Russia had occasioned partial breach of the Yalta agreement, strict adherence to it was no longer required and that the Portsmouth agreements ought to take precedence. The main contentious issue regarding the treaty was that it stated that Japan would forego all claims to Southern Sakhalin, but did not require Japan to recognize the Soviet Union’s sovereignty over the islands (Clark, 1992). Japan was one of the forty-nine states that signed the treaty. Britain and the US held the view that since the Soviet Union did not sign the agreement, it thus did not confer territorial sovereignty to the state. Later on, Japan also argued that some islands were not part of the Kuril Islands during the period that the treaty was signed, and thus it assumed the right to govern them as part of its territory. In October 1956, the two states signed the Soviet-Japanese Joint Declaration at Moscow in a bid to end the ‘war’ between them (Hara, 2001). However, the agreement did not provide a resolution on the border dispute. Nothing much has changed since then, and the dispute continues to affect various aspects of the interactions between the two states.
Effects of the border dispute on trade
Even though most countries have gone past their rivalry from the Second World War and the Cold War, Japan and Russia continue to be slaves of their territorial dispute, thus creating numerous negative effects on their economies and hindering interactions that have the potential to provide their economies with tremendous growth. One such effect is a hindrance to people’s free mobility that results in the hindrance of potential trade opportunities. Most of the Kuril Islands are presently under Russian administration, thus forming the Kuril district. Although Russia had initially introduced visa-free entry of Japanese citizens to the Kuril Islands, the head of the Kuril District dropped the program, hence locking out potential trade between the people on the islands and Japanese citizens. Reports indicate that the area is a hostile zone for Japanese traders, with incidents of Russian security officials using lethal force on Japanese anglers found fishing on the islands. In a world where globalization is happening at a blurring speed, the issue creates a major setback and warrants negative responses from other countries.
It is worth noting that even though both states have a long way to go regarding trust and mutual understanding, they are making gradual progress towards the resolution of their rivalry. However, the pace at which the progress is taking place is slow and lacking in terms of mutual benefits through bilateral trade. For instance, according to a report by the Ministry of Economy, Trade, and Industry in Japan, for the year 2011, Japan and Russia are fourth and ninth respectively concerning their contribution to the world’s GDP (Panov et al. 2012). The report also indicates that Russia is one of the greatest producers of oil and natural gas in the world. The report indicates that as of 2010, Russia contributed 12.9% of the world’s oil, followed by Saudi Arabia at 12.0% and Iran at 5.2% (Panov et al. 2012). It also contributed 18.4% of natural gas, second to the USA at 19.1% and followed by Canada at 5%. The report also indicates that in 2010, Japan mainly imported oil from Saudi Arabia, the United Arab Emirates, Iran, and Russia was a distant 6th place with only 6.8% compared to Saudi Arabia’s 30.3% (Panov et al. 2012).
Japan’s suppliers of choice for natural gas were Malaysia at 19.9%, Australia at 19.0%, and Indonesia at 18.3%. Russia was Japan’s sixth choice supplying 8.9%. These statistics are evidence of the distance that Japan would prefer to travel far away to obtain its imports even though the products are readily available from its neighbor, Russia. The situation places both countries at a huge disadvantage as each of them incurs great losses every year. For instance, Japan incurs losses from the transportation of oil from Saudi Arabia in comparison to the amount of money it would cost to transport the same amount of oil from Russia in the instance that relations between the two are amicable. On the other hand, Russia would benefit greatly from revenue generated by the exportation of raw products such as oil and gas to Japan, as well as the technical expertise to repair and improve its infrastructure at affordable rates through liaising with Japanese engineers.
There are various reasons leading to the listed above statistics, most of which link to the problems that Japanese companies in Russia face, as noted in the report. The companies expressed dissatisfaction in various aspects of Russia’s policies. One of the issues they raised was inadequate infrastructure, including the inability to provide efficient storage facilities at the seaports. Another infrastructural concern was damage to railway lines during winter, which caused inconveniences in transport. Japan is one of the leading countries in technological advancements, and it would thus be more beneficial to both countries if relations between them were more cordial.
Another concern that the companies indicated was Russia’s unclear economic policies. The policies in Russia concerning foreign companies are strict and subject to constant change, which, in effect, creates an unpredictable market environment for goods and uncertainty for productivity (Tsuda, 2011). For instance, the dictation of areas where foreign companies should set up their businesses creates an unfair advantage for the local companies against their foreign competitors. In this regard, the companies complained of inconsistent promoting strategies for car parts, unclear taxation policies, and inadequate private-public partnership policies. Although governments must do their best to promote local production, every business establishment should enjoy fairness in their operations regardless of whether it is local or foreign. Another advantage that a country gets from incorporating foreign competition is a reduction of prices, thus creating relief for citizens. Also, competition ensures that local companies produce high-quality goods and improve innovation due to the fear of losing demand to foreign competitors. Foreign companies also provide revenue for local governments to increase the gross domestic product of a country and fund available for development projects.
Insufficient and inconsistent administrative procedures were another issue that the companies raised, indicating corruption, complex procedures, and different interpretations of policies as some of the problems related to the issue (Tsuda, 2011). The complexity in the procedure to set up and operate foreign companies in Russia has made it difficult and expensive for most Japanese companies operating in the country. This measure has been a deterrent for most companies wishing to expand their market by diversifying into Russia. The likely outcome of this problem is the possible reciprocation of the same measures to Russian companies wishing to expand into Japan. This aspect is bound to create a stalemate or stifle progress that the two states have worked hard to create over the years. Both countries have to be willing to compromise to produce any tangible progress (Aggarwal, 2006).
Progress on bilateral trade
There is slow progress on the resolution process of the boundary dispute, as it has not developed much since 1956. However, Japan and Russia are working on ways to resolve the conflict and embrace the benefits that come with such resolution, including better trade relations leading to greater economic development (Panov et al. 2012). According to the Japan-Russia action plan by Japan’s Ministry of Foreign Affairs (MOFA), there have been various attempts at resolving the dispute and enhancing trade including the signing of declarations such as the 1993 Tokyo Declaration on Japan-Russia Relations and 1998’s Moscow Declaration on Building a Creative Partnership between Japan and the Russian Federation. MOFA also indicates that the two countries have formed committees and sub-committees to discuss matters of trade and boundary disputes, including the Subcommittee on Border Demarcation and the Subcommittee on Joint Economic Activities. In the year 2000, the two countries created the Program for Deepening the Trade and Economic Relationship between Japan and Russia with the main objective of stimulating cooperation in trade and economic areas for the mutual benefit of both countries. The future of bilateral trade for the countries is thus salvageable and worth looking forward to as long as the countries put in their best efforts.
Conclusion
The boundary disputes between Japan and Russia have been active for over a century, and they have created a stalemate to the level of interaction between the two states over the years. Bilateral trade between the two states has suffered a huge blow by negating the potential progress that a symbiotic relationship would create for the two countries. Problems such as lack of free mobility for citizens from the two countries, inadequate economic policies, inadequate infrastructure, and misunderstandings caused by stigma create a deadlock for development, which seems out of place in the modern age where globalization has created vast opportunities for trade for all countries. Therefore, it is in the best interest of both countries to find an amicable solution to the border dispute to provide their citizens with opportunities that would immensely benefit both economies.
Reference List
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Clark, G. (1992, July 18). Tokyo’s Claim to the Kurils is Shaky. The New York Times, p.33.
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Tsuda, T. (2011). Japan-Russian Economic Relationship. The Fourth Japan-Russia Energy and Environment Dialogue in Nigiita. Japan: Ministry of Energy, Trade and Industry.