V.N. Timoshenko, D.V. Suslov – Russia and Japan: old problems should not interfere with new possibilities

In recent decade Asia Pacific has been an area for dynamic development of international economic cooperation. Creation of new free-trade zones, emergence of newly formed integration blocks and development of blocks that already exist is carried with different degree of intensity. With all that, the relationships between Russia and Japan – the two leading economical and political players in the region – are still characterized by no progressive or dynamic advance. Having the burden of old political disputes since the last century, Moscow and Tokyo still seem not to pay any attention to each other, have no strategic view of new qualitative level of bilateral cooperation and partnership, and ignore the possibilities, available due to the current level of globalization and international division of labor.

So far Russia, being one of the biggest electricity-generating country not only in the region, but in the whole world, is only 15th in the list of Japan’s foreign trade partners (with the total share of only 1,9% of external turnover).  Among Russia’s foreign trade partners Japan in its takes the 8th place (3,7%).

The dynamic of their investment cooperation also doesn’t correspond to the potential of the countries. Russian investments in Japan is mostly symbolic. Japan in its turn is the 8th among the countries, which invest in Russian economy. In the beginning of 2000s the volume of direct cumulative investments from Japan made up only $1,24 million. Meanwhile it is the most effective way of capital expenditures as it brings new technologies and leading management techniques.

Development possibility of bilateral cooperation clearly demonstrates the processes that take place in the far eastern region of Russia. All the major projects that were carried out in the Russian Far East and Siberia for the past 30 years are tied by Russian-Japanese cooperation, they are: Sakhalin-1, Sakhalin-2, LNG plant on Sakhalin, port Vostochny, exploitation of Yakut coal, etc.

At present lots of Japanese companies confirm their willingness for the large-scale cooperation in Siberia and Russian Far East. Japanese authorities also show certain interest. In June 2007 Prime-minister S. Abe had already took an opportunity of international financial and economic forum (G8 summit in Hailigendamm, Germany) to submit to the president V.V. Putin an offer of advancement and stimulation of mutually profitable cooperation between two countries not only on the Cabinet level, but also on local level in 8 regions, also including power industry – the usage of Japanese high technology for oil and gas extraction, peaceful utilization of atomic power; transport industry – securing of logistic line from Asian Pacific countries to Russia and Europe using Trans-Siberian railway; the sphere of informatization and network – cooperation in the field of information and communications technologies; security – joint drug traffic, arms smuggling and illegal seafood trade control; healthcare – cooperation in order to improve the quality of medical services in the Russian Far East and in the Eastern Siberia; development of trade and investments; environmental control; development of interregional exchange. Japanese authorities expressed readiness for partnership in priority areas of modernization of Russian  economy, renewal of ports facilities in the Russian Far East, building of car assembly plants in Saint-Petersburg, Vladivostock, Kaluga, building of construction equipment plants in Yaroslavl, etc. Some of these projects are in the process of implementing.

So, in April of 2011 the memorandum on joint feasibility study of building an LNG plant and gas chemical facility near Vladivostock was signed between joint stock company Gazprom and group of Japanese companies, such as: Itochu, Marubeni, Inpex and Japan Petroleum Exploration.

Marked progress can be seen in car industry. Nissan, Mazda, Mitsubishi and other major car manufactures  have already begun construction of cars on existing or newly opened plants in Russia (for example, Nissan car manufacturing plant near Saint-Petersburg, Mazda’s plant in Vladivostock and plant that manufactures Japanese light trucks jointly with KAMAZ company). Manufacturer of car tyres Yokohama Rubber was opened in special economic zone “Lipetsk”, and car parts plant Takata-Petri Rus was opened in industrial area “Zavolzhie”. Toshiba corporation is building a power converters plant on the base of joint venture for the needs of Russian economy. Japanese company Sumitomo opened a milling plant Terneyles on the territory of Russian Far East. Mitsui built a high-tech exporter company Baikal in Irkutskaya oblast’ for the needs of Japanese construction companies (the high quality of the company’s products is widely known). These projects are perfect examples of how effective and mutually profitable cooperation between Russia and Japan can be.

However it is only a drop in the bucket for the two major countries with such a great economic strength. Politicians, scholars and businessmen of both countries agree that the possibility of getting a greater mutual benefit can be acquired with good level of partnership. Foreign trade and the volume of investments can be increased more than 10 times as early as in mid-term and with all that there will be possibilities for further extension of cooperation. Even shallow analysis shows lots of investment possibilities in such spheres like oil, gas, rare-earth coal and precious metal extraction, coal mining; bioresources and mariculture recycle; creation of agricultural units and organic foods mini-mills; building oil and gas facilities and development of car manufacturing; healthcare (including pharmacy and medical equipment, nuclear medicine, telemedicine, personnel training and joint research and development efforts); metallurgy and metalwork, machine-tool industry, shipbuilding, etc.

Implementation of increased territory development institutions, creation of special industrial areas, cross-border trading sites with benefits and preferences for investors and favourable financial environment are next in turn. So, for example, Russia is integrating the use of special economic zones (territories with favourable terms for investors). Currently there are 17 zones in Russia, and creation of new ones is planned.

It is worth noting that building of metallurgical facilities and minerals, ferrous and non-ferrous scrap metal recycle are available on the territory of industrial SEZ since July, 24. This will give important impulse for power industry and metallurgy development (for example, it will make building aluminium manufacturing plant based on Far Eastern hydroelectric stations highly effective).

Cross-border clusters building of which is in plan for core agencies of the two countries are another institution of economic integration. In this context localization of Japanese companies manufactures (first of all manufacturing of auto parts) with the use of Russian potential. Such an approach provides high profitability taking into account the possibility of using it with SEZ.

After 2020 there will be development of Northern Sea Route (NSR) as a part of cooperation between Russia and Japan. This route will shorten the way from Europe to Japan from 23000 km (through the Suez Canal and the Indian Ocean) to 7000 km. Advantage of the project is clear. Development of NSR has strategic importance for all major countries of Asia Pacific. In this respect active work of China on reorientating the most part of foreign trade cargo turnover to NSR by 2040 can be used as an example.

Thus, as it seen from the given information, the economic relationships between Russia and Japan have firm basis and lots of possibilities for development. Existing manufactures and carrying out of new joint projects bring significant benefits of great importance for both countries.

Prior to the G20 summit in Saint-Petersburg in September 2013 the issues of advancing the development of economic partnership between Russia and Japan take an emphasis. The meeting will be held to consolidate the forces in order to deal with the economic crisis and promote world economic growth and it will particularly define the development character of partnership between Russia and Japan on the long-term basis. In conditions of waiting for the new wave of the economic crisis, competition for market outlets getting more and more severe and pressure of energy resources price it is obvious that this meeting is of a momentous character.

In fact, lots of possibilities for mutually profitable cooperation are available since 2010 to 2020. Correct understanding of the situation and deciding what will be in focus in context of the G20 summit will define the tendencies and possibilities for the future 50 years. In this regard it is not possible for the representatives of both countries to range far and wide from the economic issues, to go into populism and  issues that are not connected with the economic development on behalf of reaching the good for the communities of Japan and Russia.


V.N. Timoshenko, the head of APIR center, doctor of history

D.V. Suslov, the head of East Asia economy department in ERI FEB RAS, PhD, Economics


Translated by Elizaveta Chepkovskaya, APIR center

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