National / Politics

Japan-Russia economic ties suffer setback after Japanese consortium's proposal for Khabarovsk Novy Airport project rejected

Kyodo

A key infrastructure project seen as a symbol of bilateral economic cooperation with Russia has taken an unexpected turn as a Japanese consortium failed to win support for building a new airport terminal in the Russian Far East, sources from both countries with knowledge of the process said Wednesday.

The modernization of Khabarovsk Novy Airport is among the projects meant to deepen joint cooperation in eight areas, which were agreed on by Prime Minister Shinzo Abe and Russian President Vladimir Putin in 2016. Abe has been seeking to leverage stronger economic ties to make a breakthrough in a long-standing territorial dispute over Russian-held islands off Hokkaido.

Instead, a Turkish consortium began building the domestic terminal of the airport in March, without participation from Japan, the sources said.

Initially arrangements had been made for a joint project that included the terminal’s construction and operation, which was to be funded 49 percent by Japanese firms and 51 percent by the Russian side.

Trading house Sojitz Corp., Japan Airport Terminal Co., and Japan Overseas Infrastructure Investment Corp. for Transport and Urban Development represented Japan’s side with support from the transport ministry.

Japan’s participation had been thought almost certain, with only funding details remaining to be worked out.

The Japanese firms and the airport’s operator had signed a memorandum of intention in December 2016 and reached an agreement on the construction of the new passenger terminal in April last year.

But the Russian side decided on a plan in February in which a state-backed fund and development bank will contribute 3.9 billion Russian rubles ($61.3 million) to the construction project, rejecting a proposal from the Japanese side, the sources said.

The decision apparently exposed a divide between the Russian side’s prioritization of the new terminal’s construction period and the Japanese consortium’s cautiousness about profitability, the sources said.

Despite the rejection of the Japanese proposal, Sojitz said negotiations are underway to take part in operating the new terminal.

Opportunities also remain for Japanese firms to participate in other projects to modernize the airport, such as renovating its international terminal and building a commercial complex.

Since taking office in 2012, Abe has been trying to build a strong rapport with Putin and improve bilateral ties.

The group of islands off Hokkaido have been under Russian control since the former Soviet Union seized them following Japan’s surrender at the end of World War II. The territorial row has prevented the two countries from signing a postwar peace treaty.

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