Putin, Abe order joint economic action plan for disputed islands

[TOKYO] Japanese Prime Minister Shinzo Abe and Russian President Vladimir Putin agreed to create plans for economic cooperation on four disputed islands after talks at a hot-spring resort to try to end a divide that's prevented their nations signing a World War II peace treaty.

The two leaders "talked about a special system for joint economic activity on the four islands and the peace treaty," Mr Abe told reporters Thursday at the summit in Nagato, Japan.

"We had frank and very deep discussions" during a one-to-one meeting that lasted about 95 minutes, and talks will continue on Friday, Mr Abe said.

Mr Putin and Mr Abe ordered their officials to start detailed negotiations on the terms and format for economic cooperation on the islands, known as the Northern Territories in Japan and the South Kurils in Russia, Kremlin foreign policy aide Yuri Ushakov told reporters after the talks.

The joint plans in areas including medicine, tourism and fisheries will be implemented on the basis of Russian legislation, since the islands belong to Russia, he said.

Discussions over the disputed islands seized by the Soviet Union in the final days of the war were high on the agenda of the meeting near Mr Abe's ancestral home as he sought a breakthrough with the Russian president over the seven-decade territorial dispute. Mr Abe and Mr Putin head to Tokyo for talks Friday on economic cooperation, from nuclear energy to infrastructure to agriculture.

"The atmosphere in the meeting was very good," Mr Abe said.

At the beginning of their discussions, he said he hoped Mr Putin, who arrived several hours late for the talks, could relieve his fatigue by taking a soak in the hot spring. Mr Putin thanked Mr Abe, and said he hoped their meetings will contribute to the development of relations.

A key to improved ties is the sovereignty of the four islands that the Soviet Union invaded, expelling all 17,000 Japanese residents. Japan's official position is that the islands - home to rich fishing grounds - are an inherent part of its territory and are under illegal occupation. The two countries have yet to sign a formal peace treaty to end the war.

"We talked about freedom for the former islanders to visit their former homes," Mr Abe told reporters after the talks, adding that he'd handed Mr Putin letters from some of them, including one written in Russian.

"In the meeting I kept in my heart the feelings of the islanders whose average age is 81 and who don't have much time left."

Mr Abe told a group of former islanders on Monday that he's determined to resolve the issue "within my generation". Mr Putin has been more circumspect, telling Japanese media in an interview published Tuesday that the two countries can build trust through economic activities that cover the islands, and that talks on the dispute can't be limited by his or Mr Abe's terms in office.

The 16th summit between the pair comes at a crucial time for both countries. Russia has been starved for investment and trade amid low oil prices, and international sanctions over its actions in Ukraine. Japan is on a quest to diversify energy sources, with its nuclear power industry hobbled by the aftermath of the 2011 Fukushima disaster.

The US presidential election victory of Donald Trump, who's seen as relatively friendly to Mr Putin, adds to the prospects for better ties between Tokyo and Moscow.

Japan tends to follow the foreign policy direction of the US, its only formal ally, and relations with Russia suffered after Japan introduced sanctions at the height of tensions over Ukraine, following the lead of the Obama administration.

In a Bloomberg interview in September, Mr Putin said that resolving the conflict over the islands should be part of setting the stage for the long-term development of relations with Japan. But even after 15 meetings, Japan's best-known proponent of better ties with Russia said the two days of intensive talks are just the beginning.

"To imagine that two islands will come back at this summit is unrealistic," said Muneo Suzuki, 68, a former lawmaker from the northern island of Hokkaido.

"We are now on the starting line."

Mr Abe and Mr Putin are scheduled to hold a press conference in Tokyo on Friday. Later in the day, they will attend a Russia-Japan business forum and Mr Putin will visit a judo centre in the capital.

Russian Energy Minister Alexander Novak told reporters in Nagato on Thursday that 23 agreements and memorandums have been prepared between Russian and Japanese companies.

The firms include Novatek PJSC, Rosneft PJSC, Gazprom PJSC on the Russian side, and Mitsui & Co, Marubeni Corp and Tokyo Electric Power Co Holdings Inc in Japan.

The two countries are discussing 65 deals, spanning a range of sectors including energy, infrastructure and health care, Alexey Repik, chairman of the Russia-Japan Business Council said in an interview in Tokyo this week. Japanese investment in Russia rose by 51 per cent in 2015, even as total foreign investment fell by more than 70 per cent.

Still, many obstacles remain to closer Japan-Russia ties. Last month Russia was reported to have deployed anti-ship missiles on two of the disputed islands. Russia told Japan earlier this month that it saw the expansion of US anti-missile defenses in Asia as a threat, after reports that Japan was considering purchasing a new system from the US.

"Negotiations are different with a partner you can trust, compared with a partner you cannot trust," former Vice Foreign Minister Yasuhide Nakayama said in an interview last week.

"They are a threat to Japan," he added, referring to Russia.

His view is shared by many Japanese. A survey published by Pew Research Center last year found 73 per cent of Japanese respondents had an unfavorable view of Russia, one of the highest levels among the countries polled.

BLOOMBERG