Long-awaited summit talks between Prime Minister Shinzo Abe and Russian President Vladimir Putin were set to kick off on Thursday at a hot spring resort in the prime minister’s home prefecture of Yamaguchi.

Still, the onsen rapprochement is unlikely to produce a major breakthrough in the postwar territorial row between the two nations over four islands off Hokkaido. Instead, it could lead only to economic cooperation deals with Russia.

Putin’s interview with the Yomiuri Shimbun and Nippon TV on Tuesday underscores the challenging nature of the issue. Ahead of his first visit to Japan in 11 years, Putin made it clear that sanctions imposed on Russia by Japan and other western powers after Russia annexed Crimea in 2014 are a hindrance in the negotiations, according to a transcript released by the Kremlin.

“Russian-Japanese relations are hardly related to the events in Syria or in Ukraine. Therefore, Japan has some alliance obligations. We treat them with respect, but we need to understand the degree of Japan’s freedom and what steps it is ready to take,” Putin said in the interview. “We should look into this, as these are not minor issues. Our foundation for signing a peace agreement will depend on them.”

Abe has shown unusual enthusiasm for solving the territorial dispute since his return to power in 2012, but talks were stalled when Japan joined western powers such as the U.S. and the European Union in imposing sanctions.

Yet informal talks between Abe and Putin at the southern Russian resort town of Sochi in May raised expectations, with Abe underscoring that “a new approach” is necessary, proposing an eight-point economic cooperation plan.

Since the May talks, the leaders have built up a rapport, meeting on the sidelines of the Eastern Economic Forum and the United Nations General Assembly in September, and again at last month’s Asia-Pacific Economic Cooperation summit in Lima.

Abe also created a new ministerial position in charge of economic cooperation with Russia. He appointed Economy and Trade Minister Hiroshige Seko, underlining his efforts to move things forward.

Even so, experts and officials point out the gap between the two countries remains wide. While Tokyo maintains that the four islands have to be returned, Putin points to the 1956 Japan-Soviet joint declaration, which says that while the former Soviet Union “agrees to transfer to Japan the Habomai Islands and the island of Shikotan, the actual transfer of these islands to Japan to take place after the conclusion of a Peace Treaty.”

In the Tuesday interview, Putin repeated his position that the agreement only covers the two islands, emphasizing that the declaration does not describe the terms for their transfer or what side will exercise sovereignty over them.

In stark contrast with the bleak prospects for a peace treaty, the economic deals are likely to move forward.

The two countries are likely to sign dozens of memorandums of understanding for economic deals based on Abe’s eight-point plan. The countries are expected to unveil 30 projects in such sectors as health, energy, personal exchange and culture. Under what Tokyo emphasizes as “win-win” economic deals, Moscow hopes to see a big boost in efforts to resuscitate the nation’s battered economy.

“(The negotiations over the economic deals) have made more progress than I expected,” Seko said on Monday at a news conference at the Japan National Press Club. “We are preparing deals that can be ‘win-win’ even without the peace treaty.”

The Japanese investment is indispensable for the Russian economy. The country’s output contracted by 3.7 percent in 2015 and is projected to decline 0.8 percent this year, largely due to falling oil prices.

Putin has repeatedly pointed out declining trade between the countries. In 2015, Japan’s exports to Russia declined 46 percent, and Japanese imports from Russia dropped 35.5 percent, according Finance Ministry statistics. The Kremlin hopes economic cooperation will spur more Japanese investment.

But experts warn that improved bilateral relations would not necessarily translate into more Japanese investment. Shoichi Itoh, manager and senior analyst at the Institute of Energy Economics, Japan, said that reforms targeting corruption and creating more transparent legal systems are necessary for stable business investment.

He added that a big-ticket energy project led by Japan could drive a wedge between Group of Seven countries, whose companies cannot invest in Russia due to sanctions. Tokyo, meanwhile, has demanded that both Russia and Ukraine abide by last year’s Minsk II cease-fire agreement.

“It is a very sensitive situation,” Ito said. “Japan could come under international criticism if it starts investment projects when sanctions still prevent companies of other countries from doing business in Russia.”

While facing criticism for making progress only on the economic side, Japanese government officials hope the projects will eventually help to forge the trust necessary for peace treaty talks. However, Dmitry Streltsov, head of the department of Afro-Asian studies at MGIMO University, noted that economic cooperation and peace treaty negotiations are two different things.

“The Russian side wants to separate the peace treaty negotiations and the economy. We understand that the treaty is necessary, but Russians will never accept a kind of a ‘business deal’ that the economic cooperation is awarded in exchange for the islands,” Streltsov said.

Still more difficult would be potential joint economic development on the four disputed islands. Putin has said Russia is “ready to consider joint efforts on one, two, three, or four islands.” But when it comes to creating a legal framework to establish which country’s laws will be applied, the sensitive issue of sovereignty comes up. The two countries are likely to start with something less controversial such as expanding visa-free visits to the islands by former residents.

Despite the differences, many experts agree that bilateral cooperation would strategically benefit both Japan and Russia amid a rapidly changing geopolitical landscape, specifically the rise of China, escalated nuclear provocation by North Korea, and the uncertain future of U.S. commitment in the region under president-elect Donald Trump.

Russia has deepened its economic ties with China, especially since sanctions were imposed. Yet the country is also concerned about China’s advance into the Sea of Okhotsk and the Northeast Passage. Further, Russia’s military facilities on the larger islands of Kunashiri and Etorofu, which were initially aimed at Japan and the U.S., could be strategically important when dealing with the Chinese ambition.

“Russia does not want to become too dependent on China in Asia. Geopolitically we want more balance with Asian countries,” said Artyom Lukin, deputy director for research at the School of Regional and International Studies of Far Eastern Federal University in Vladivostok.

The two leaders are also likely to agree on holding a so-called two-plus-two meeting between the countries’ foreign and defense ministries early next year, for the first time since 2013.

Shinji Hyodo, director of the regional studies department at The National Institute for Defense Studies, underscores the importance of defense dialogue in solving the territorial issue. Russia could demand the exemption of the U.S.-Japan security agreement over the disputed islands as the two sides proceed in the negotiations.

“The two countries have to talk about the four islands in the context of security,” Hyodo said. “This issue will not be solved at the political level by offering economic cooperation.”

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