Japan Shines Brightly at the Eastern Economic Forum of 2016

The Eastern Economic Forum (EEF) 2016 took place on Russky Island near Russia’s eastern city of Vladivostok on 2nd and 3rd September. The forum included participants from China, Japan, South Korea, India, Vietnam, Australia, the United States and Singapore. The total number of attendees was approximately 3,300 people, including 207 Russian companies and 94 foreign companies from 56 countries. Japan with 246, China with 227 and South Korea with 128 had the most participants per nation. There were over 200 agreements, worth 1.7 trillion rubles ($26 billion), signed at this year’s event.

Some major deals signed included a letter of intent to implement the investment project at the Amur gas and chemical complex, the construction of a complex for production of mineral fertilizers in the Primorsky region, an agreement to develop the Natalka field and the development of the Verkhne-Munskoe kimberlite field.

However, the most interesting development was not only the sizeable contingent of Japanese delegates but also a willingness to broaden bilateral trade and integration between Russia and Japan. We have discussed before the geopolitical significance of Japan, who are a key swing nation, as we move towards the new paradigm and a multipolar world.

Russian President Vladimir Putin met with Japanese Prime Minister Shinzo Abe on the periphery of this forum with Moscow suggesting that Abe’s visit to the EEF signified Tokyo’s interest in developing trade and economic cooperation with Moscow. Furthermore, Abe said at the meeting, “as a neighbour, Japan is ready to make every effort for the development of Japanese-Russian cooperation in the region.”

Putin also said that Moscow is giving careful consideration to Tokyo’s cooperation proposals made during Abe’s visit to Sochi in May adding, “we have restarted work on the foreign ministers’ level. We are carefully examining your proposals, which you brought forward during the Sochi visit.” Putin continued, “it is very important to boost the bilateral contacts on the political level.”

Putin was keen to point out that Russia are ready to develop sea port infrastructure with Japan to supply liquefied natural gas (LNG) to the country. “As for port capacities of the Far East, you know that 70 percent of the total LNG output produced on Sakhalin is exported to the Japanese market. We are aware of Japan’s needs, we understand the problems related to nuclear power, we are ready for cooperation, including developments projects, if required, to promote sea ports facilities, because LNG transportation has its specific aspects and requires additional investment,” Putin said.

Putin intends visiting Tokyo in December, with Russian foreign minister Sergey Lavrov saying that a number of major joint Russian-Japanese projects are ready to be implemented and that ongoing discussions, related to additional projects, will continue during Putin’s visit to Tokyo in December.  Interestingly, both nations also stated that they were getting close to lifting sanctions-linked restrictions imposed on Japanese investors with regards to investing in Russia and discussed Japanese banks making investments in Russian projects.

Russian Economic Development Minister Alexei Ulyukayev, noted at the EEF, how Japan and Russia had overcome stagnation, in economic relations, which were prevalent several months ago. “I think this is a historic opportunity for us, and the parties understand that, in order to compensate for this stagnation and return to the positive trend in our relations,” Ulyukayev said.

Russia and Japan have agreed to continue the pilot project on the 100% possibility of providing loans to Russian large-scale projects, such as Arctic LNG, and the third stage of Sakhalin-2 project. Russia have proposed 50 projects in the Far East for financing through a fund with the Japan Bank for International Cooperation (JBIC) and the Far East Development Fund.

Abe and Putin also discussed signing a formal peace treaty after over 70 years since the end of World War II. The dispute surrounds four islands, which Russia calls the Southern Kurils and Japan the Northern Territories. Lavrov said that discussions will continue and the results will be announced during Putin’s visit to Japan in December, adding that Tokyo has indicated its readiness to discuss the joint development of the islands, as well as increasing cultural ties in the area.

The success of the EEF was no surprise given Russia’s desire to develop the region and the willingness of other nations to participate in this process. However, whilst the meeting of Abe and Putin did not exactly steal the show, one could argue that it was an interesting development given that the G20 meeting, in Hangzhou, China, commenced on 4th September. It would suggest that both Abe and Putin wanted to meet away from the glare of the G20 meeting and in a more private setting. The public overtures suggest that Russia and Japan are keen to enhance future relations and you can be sure that privately discussions were held to emphasise that Russia will support Japan during their transition from the over-bearing influence of Washington.