Japan to offer Russia “$20bn deal” for return of two Kuril islands

Japanese Prime Minister Shinzo Abe is to propose a vast programme of investment in Russia in return for two small islands in the Kuril chain, according to Russia’s Izvestia newspaper.

According to a source "close to diplomatic circles in Japan" the Abe government is planning to initiate a diplomatic process to resolve the dispute when Vladimir Putin, the president of Russia, visits Tokyo in December.

Japan hopes first to regain control of two islets, Shikotan and Habomai, and then extend negotiations to the larger landmasses of Iturup and Kunashir, the newspaper reports.

In return, Japan is prepared to offer funds to build up the physical and social infrastructure of Russia’s Far East.

A continuing dispute over their ownership has prevented Russia and Japan agreeing a formal peace treaty, which means they are technically still at war

Although it is too early to put a value on these projects, the source told Izvestia that they might involve some 100 schemes worth something like $20bn.

Abe is said to enjoy good personal relations with Putin, and is reportedly aiming at a partial resolution of the Kurils dispute before the next Japanese general election in 2018.

The Kuril archipelago is a group of 56 islands in the Sea of Okhotsk. The southernmost islands were annexed by the Soviet Union in the final days of the Second World War.

A continuing dispute over their ownership has prevented the two countries agreeing a formal peace treaty, which means they are technically still at war. 

Any deal would fit in with Russia’s plans to develop its far eastern region, which has been constrained by a lack of funds. Up until now, it has mainly looked to China as a source of investment capital; the addition of Japanese money would help Moscow’s "pivot to the east", a key policy of the Putin regime.

The deal for the return of the "Northern Territories" would also be important to Japan, a country that is in considerably more need of living room than Russia. The Far Eastern Federal District has a population of about 6.2 million, but is larger than Japan, which has a population of more than 120 million.

In a separate development, Russian logistics firm Samarga Holding has unveiled plans to invest 400bn rubles ($6.5bn) in a warm water port south of Vladivostok, as well as a 500km rail link to the Trans-Siberian railway at the city of Khabarovsk.

Samarga says it hopes to build a universal seaport with a capacity of 80 million tonnes a year and ferry links to the Sakhalin and Kuril islands.

Alexander Vasilyev, a director of Samarga, told the RIA Novosti agency that the company was working on the business plan and was looking for investment from China, Japan and Korea – making it a candidate for Abe’s infrastructure funding.

He added that his company has established contracts with Japan’s Rotobo business association

Image: A sign in Hokkaido calling for the return of "Japan’s" four Kuril Islands (Shirokazan/Creative Commons)

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