Putin Urges Patience in Setback for Abe's Bid for Islands' Deal

(Bloomberg) -- Russian President Vladimir Putin urged patience in efforts to resolve a territorial dispute with Japan that’s lasted since World War II after Kremlin talks Saturday with Prime Minister Shinzo Abe, in a disappointment for the Asian country’s leader, who’s made striking a deal a priority.

“It is important to patiently continue the search for a solution,’’ Putin said. Abe, who’s waged a charm offensive, said Russia and Japan should forge economic cooperation on the four disputed islands to ensure an agreement “acceptable to both nations.’’ Speaking at the St. Petersburg International Economic Forum on Friday, Abe had urged decisive steps to conclude a peace treaty with Russia.

Since coming to power in 2012, Abe has poured time and energy into seeking a breakthrough in the dispute over the islands, called the Southern Kurils in Russia and the Northern Territories in Japan. Russian troops seized the islands at the end of the war and the issue has prevented the two countries from signing a formal peace treaty.

The Japanese leader is eager for a deal partly to counterbalance China’s growing economic and military power in the region, while Russia has shown no sign that it’s in a rush and argues that time is needed to build up their relations.

Investment, Military

As part of his strategy, Abe has pushed Japanese business to put money into Russia though there’s been only limited interest because of concern about the investment climate.

In a setback for Abe’s efforts, Russia has accelerated a military build-up on the islands. The government in Tokyo lodged a formal protest after 2,000 Russian troops held military exercises in February.

The two leaders have now met 21 times, including at a hot springs resort in Abe’s hometown of Nagato in 2016. While they agreed to start detailed negotiations on a plan for joint economic development of the windswept territories, which lie 15 miles (25 kilometers) from Japan’s northern Hokkaido Island, the initiative has barely advanced because of a disagreement over whether the ventures would operate under Russian law.

Russia, for its part, has secured pledges of Japanese energy investments, including in offshore developments and liquefied natural gas projects in Sakhalin and the Arctic, offering Putin the chance to ease pressure on his economy from U.S. and European sanctions over the conflict in Ukraine. The two nations signed a number of agreements after Saturday’s talks involving companies including Marubeni Corp. and Hitachi Ltd.

Still, Japanese business remains wary because “they feel they’ve had their fingers burnt in the Russian market in the past,” said James Brown, an expert in Russo-Japanese relations at Temple University in Tokyo. The Japanese government is “more enthusiastic, but if they put too much money up front without getting concessions then they’re going to get domestic criticism.”

To contact the reporter on this story: Henry Meyer in Moscow at hmeyer4@bloomberg.net

To contact the editors responsible for this story: Gregory L. White at gwhite64@bloomberg.net, Steve Geimann, Jon Menon

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