After meeting at the Kremlin on April 29, Prime Minister Shinzo Abe and Russian President Vladimir Putin announced their intention to resume talks over the disputed Northern Territories. Situated between Hokkaido and Kamchatka Peninsula, the four disputed islands — known in Russia as the Southern Kurils — were invaded by Stalin three days after Japan’s surrender at the end of World War II.

Since then, unwillingness to compromise on both sides has stalled progress toward resolution of the dispute, and prevented the signing of a formal post-WWII peace treaty between Russia and Japan.

In the past, leaders from both states have backed away from a territorial settlement for fear of domestic political punishment. Is there any evidence to suggest that Abe and Putin will succeed in concluding a peace treaty where their predecessors have failed?

Certainly there are incentives for Russia and Japan to resolve their territorial dispute as a precursor to improving cooperation in pursuit of common economic and security interests. But incentives for a compromise have existed for years. Thus far, there is little reason for optimism that new negotiations will fare any better than previous attempts.

In the economic sphere, the energy sector is an obvious area for Russian-Japanese cooperation. The Far East region of Russia possesses large reserves of oil and natural gas, while Japan depends on energy imports. Japan’s thirst for foreign energy resources following the Fukushima nuclear accident in 2011, provides Tokyo with more incentive than ever for deepening bilateral energy ties. On the Russian side, much needed Japanese investment and technology would allow Moscow to fully exploit its energy reserves and help develop Russia’s impoverished Far East.

Yet, to date, deepening bilateral economic ties have not translated into progress on the islands dispute. From 2005 until the global financial crisis of 2008, bilateral trade grew rapidly, peaking at an all time high of $29 billion in 2008, up from $20 billion in 2007. In 2012, bilateral trade hit $32 billion, a 5.3 percent increase on the previous year. In recognition of Russia’s economic resurgence, in 2003, the Japanese government abandoned its strategy of limiting economic ties with Russia in an attempt to gain leverage in territorial negotiations with Moscow. As a result, since 2007, Japanese car manufacturers Toyota, Nissan and Suzuki have all opened new plants in Russia.

Russo-Japanese ties in the energy sector have also deepened in response to Japan’s increasing reliance on fossil fuel imports since the March 2011 Tohoku earthquake and resulting disaster at the Fukushima No. 1 nuclear plant. Russia’s exports of liquefied natural gas to Japan rose from 6.29 million tons in 2010 to 8.3 million tons in 2012, making Japan Russia’s leading market for LNG. In September 2012, Russian energy giant Gazprom and a consortium of Japanese companies agreed to construct a LNG plant in Russia’s Far Eastern port of Vladivostok.

Despite expanding economic and energy ties, Russia accounts for less than 2 percent of Japanese exports. Clearly, the Northern Territories dispute constrains bilateral trade and investment, leaving considerable untapped possibilities.

In the security sphere, Russia and Japan face the common challenges of rising Chinese economic and military power and of North Korea’s nuclear and missile programs. Japanese and Russian policymakers harbor similar concerns regarding Chinese territorial ambitions. Although Moscow and Beijing currently enjoy friendly relations, for most of the 20th century bilateral ties were encumbered by deep mutual enmity. Among the many former KGB officers in Putin’s inner circle, illegal Chinese immigration in Russia’s Far East is seen as a potential threat to territorial integrity.

Suspicion of Beijing within the Kremlin presents an opportunity for Japan. A settlement on the Northern Territories serves Russia’s interests if it improves security links with Japan. An alliance counterbalancing the influence of China is also in Japan’s interest.

Dmitry Medvedev’s visit to the Northern Territories in November 2010 — making him the first serving Russian head of state to visit the islands — came amidst Japan’s latest spat with Beijing over sovereignty of the Senkaku/Diaoyu Islands. The timing of Medvedev’s visit, less than two months after the arrest of a Chinese fishing boat captain for ramming a Japanese coastguard vessel, suggests that Moscow sought to take advantage of Tokyo’s preoccupation with the territorial dispute. Resolving its territorial dispute with Moscow would enable Tokyo to concentrate its diplomacy on disputes with China and South Korea that might have more significant economic and strategic implications. Tokyo’s tensions with Beijing over the Senkaku Islands might drive Abe to put aside concerns about a domestic political backlash and consider a territorial settlement with Moscow to facilitate improved bilateral relations and thus counterbalance Beijing’s growing regional power.

If Tokyo were to approach territorial negotiations in a spirit of compromise, would Moscow respond in kind? Having failed to agree to a settlement in the 1990s when it was weaker economically, there are fewer incentives for Russia to do so now.

On the other hand, Putin’s reputation as a Russian patriot gives him greater room to maneuver on territorial issues than politicians from the liberal end of the political spectrum. During his first presidency, despite strong nationalist sentiments among the Russian population, Putin signed two border agreements with China. Furthermore, the visits to the islands by Russian officials from 2010 to 2012 that so incensed Tokyo are more associated with Medvedev than Putin.

Putin’s domestic political situation makes a territorial settlement doubtful. At home, Putin’s hold on power is weaker than during his first presidency. Anti-Putin protests since parliamentary elections in December 2011 have added to domestic political instability. In this climate, Putin is unlikely to risk further alienating public opinion by conceding territory to Japan.

Currently a lack of settlement is not preventing either state from pursuing their national economic goals. Economic ties between Russia and Japan have strengthened since the mid-2000s, despite worsening political relations between 2010 and 2012. Growing bilateral trade and investment removes a possible incentive for Moscow to offer territorial concessions and renders a settlement unlikely in the short term. In the long term, changing geopolitical dynamics in Northeast Asia — in particular a common interest in counterbalancing the influence of China — may offer a more promising route to resolution of the dispute.

Tina Burrett is an assistant professor of international relations at Temple University, Japan Campus

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