GORBACHEV’S ISLANDS-FOR-ASSISTANCE DEAL: A LOSER FOR JAPANESE AND AMERICAN TAXPAYERS AND FREEDOM

The Center for Security Policy today urged the cooler heads within the Japanese government to continue resisting a likely Gorbachev-proposed real estate transaction during the course of his summit in Japan next week (April 16-19). At a time when Moscow center has abandoned systemic economic reform and crossed the threshold of major civil strife and violent repression, it would be exceedingly unwise from commercial, political and alliance perspectives for the Kaifu government to cut a multi-billion dollar deal on the Northern Territories with Gorbachev and his cadre of hard-liners.

The Soviet Union’s dire financial situation has compelled even Moscow’s hard-line authorities to recognize the need to offer up for sale to Japanese taxpayers the so-called “Northern Territories” — four islands (the Habomais, Shikotan, Kunashiri, and Etorofu) off the northeast coast of Japan — illegally seized by the USSR in the closing days of World War II.

“It is very telling that Gorbachev’s visit to Japan is the first of its kind by a Soviet leader,” said Frank J. Gaffney, Jr., director of the Center. “For over seven decades, Moscow has treated the Japanese as second-class citizens unworthy of serious political attention — that is, until the Soviets’ desperate and self-induced economic plight necessitated the decision to rifle Tokyo’s bulging wallet.”

Gaffney added, “The Japanese should beware of the obvious cynicism involved in Moscow’s efforts in seeking to sell back to Japan — for tens of billions of dollars — Japan’s own territories acquired by Moscow through dishonorable means. In fact, it may be more accurate to call this a leasing strategy, rather than a sale, as the USSR will surely remain in a position to take back these territories at will if its military power and imperial character survive the present crisis.”

“The timing and circumstances surrounding the potential Soviet offer concerning Japan’s Northern Territories are particularly disadvantageous to Japanese taxpayers,” noted Roger W. Robinson, Jr., a Center Board member and former Senior Director for International Economic Affairs at the National Security Council. “After all, there is now little prospect of full Soviet repayment of future large-scale Japanese government-guaranteed credits, giving rise to the specter of heavy taxpayer losses.”

Robinson went on to note that, “Boris Yeltsin and the democratic movement he represents throughout the fragmenting USSR constitute far preferable negotiating partners for Japan down the road than the increasingly repressive and recentralizing forces led by Mikhail Gorbachev.”

Although the signing of a formal peace treaty between Japan and the USSR — an event which has eluded the two countries since World War II — is not likely to occur at this summit, the depiction of “major progress” between the two nation’s leaders could be used to justify large-scale Japanese financial assistance to the central authorities in Moscow. Any such development under present circumstances would have predictable results in the Soviet Union: the fueling of continued strategic military modernization, the underwriting of widening domestic repression and the further deferral of genuine economic reform and democratization measures.

Importantly, Americans have a key stake in the outcome of this summit. To the extent that Japanese multi-billion dollar loans to Moscow ultimately translate into requirements for higher annual U.S. defense spending, Tokyo will have engaged in a major burden-imposing exercise which could further exacerbate U.S.-Japanese tensions.

Expectations that an islands-for-assistance deal would be made this year were heightened at the end of March, when Ishiro Ozawa, then-Secretary General of Japan’s ruling Liberal Democratic Party (who resigned two days ago over an embarrassing gubernatorial election outcome in Tokyo)⁽¹⁾, was sent to Moscow to meet with Gorbachev — largely on the Northern Territories question. In the course of their meetings, Gorbachev created quite a sensation in Japan by publicly acknowledging the existence of the territories dispute for the first time.

Indeed, in a private session with Gorbachev — reportedly in the absence of official note-takers — Ozawa is said to have alluded to the possibility of trading some $28 billion in Japanese economic assistance to the Soviet Union for the return of all four islands to Japan.the Japanese Foreign Minister called a press conference to deny publicly any such arrangement or statement by Ozawa and reiterated Japan’s traditional policy position which explicitly separates any trade and economic assistance from the resolution of the Northern Territories issue. Immediately after press reports of this exchange surfaced,

Notwithstanding this disclaimer, Ozawa’s reputation as a meticulous and trusted interlocutor has given rise to some suspicions in Japan that the prime minister’s office may have been exploring the possibility of such a deal, perhaps without the full concurrence — or even knowledge — of other, relevant govemment ministries. Interestingly, an incident of this sort occurred near the end of last year when Prime Minister Kaifu made public reference to a possible assistance-for-islands deal with the USSR only to have the notion walked back by the Ministries of Finance and Foreign Affairs. To their credit, these two critical ministries seem intent on upholding the integrity of the Japanese government’s formal position that the Soviet Union must return the four islands to Japan up-front and unconditionally before there can be any discussion of substantially expanded economic ties.

There is, however, a persistent rumor in Japan that Gorbachev may well achieve a breakthrough in his meetings in Tokyo: a pledge from the Japanese govemment to proceed with the estimated $7 billion development phase of the joint Sakhalin oil and gas project (originally begun in the mid-1970s, but shelved after the exploration phase was completed, in part in response to the Reagan Administration’s strategic concerns over the energy security and technology transfer implications of the deal). Should this occur, it would likely be interpreted as confirming that the Northern Territories issue and expanded economic assistance are, at minimum, running on parallel tracks, if not directly linked.

While the Northern Territories issue and the related peace treaty will undoubtedly be the focus of media attention, other agenda items of the Gorbachev-Kaifu Summit will likely include the signing of some 11 bilateral agreements dealing with the following subjects:

• The revising and updating of a Soviet-Japan trade agreement to govern the period 1991-1995 (primarily the listing of hundreds of items which will be authorized for trade between the two countries and additional trade facilitation measures);

• A similar agreement governing bilateral coastal trade for the 1991-1995 period (i.e., ports on the Sea of Japan and the coast of Siberia);

• Technical assistance by Japan in support of “perestroika;”

• Expanded cooperation on exhibitions and trade fairs;

• Enhanced cooperation in the peaceful use of nuclear energy. (This agreement will reportedly involve technical and informational exchanges, not a full nuclear agreement involving the export and import of reactors and sensitive nuclear equipment and materials);

• Providing for periodic government-to-government consultations;

• Japanese assistance in overcoming difficulties associated with the Chernobyl nuclear accident;

• Environmental protection cooperation;

• Cultural exchanges for the period 1991-1992;

• Greater cooperation in the protection of cultural artifacts of the two countries; and

• The disposition of citizens interred on each others’ territories.

At the invitation of the Japanese government, Center Board member Roger Robinson as in Japan six weeks ago to hold discussions about the upcoming Gorbachev visit to Tokyo and other matters. Excerpts of an interview with Robinson, portions of which appeared in Asahi Shimbun‘s weekly magazine AERA on 2 April, are attached.

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1. The timing of the Ozawa resignation has prompted some close observers of this unfolding drama to conclude that a Northern Territories deal may not be achieved during next week’s visit by Gorbachev. According to these analysts, Ozawa has been too intimately involved in the negotiations to depart the official scene if resolution of the dispute — through direct or indirect payments — was actually at hand.