Why Tokyo Isn't Aiding Moscow - Yet

NEXT month at the Group of Seven summit in Munich, the world's major industrialized nations are expected to confirm a much needed $24 billion aid package for Russia. There are real concerns about Boris Yeltsin's ability to implement reforms. His country desperately needs loans, technology transfer, joint ventures, and management training.

With the United States and Germany constrained by domestic economic factors, the international community is looking to Japan to supply significant aid at this critical juncture. To the dismay of the Japanese, their reluctance to be a major source of aid to Russia has placed them at odds with some of their allies.

France and Germany have been critical of what they see as Japanese stonewalling. Such criticism irritates the Japanese, who want the G-7 countries to press Russia to return a politically sensitive group of islands taken over by the Soviet military in the closing days of World War II.

The disputed territories - the islands of Kunashiri, Etorofu, Shikotan, and the Habomai group of small islands - were taken, in part, as revenge for the humiliating defeat Russia suffered at the hands of the Japanese navy in 1905. The dispute over these islands prevented the conclusion of a post-World War II peace treaty between Japan and the Soviet Union, although the two nations restored relations in 1956.

More than 17,000 Japanese residents were forced off the islands and replaced by Russians. The Japanese government has made the islands a symbol of patriotic nationalism among the public, proclaiming Feb. 7 "Northern Territories Day," to mark the signing of the 1855 Shimoda Treaty that gave the islands to Japan.

The Japanese are now frustrated to find the Russian government is no more accommodating on the issue than were the leaders of the USSR.

Nationalist sentiments among Russians is now a formidable constraint on President Yeltsin's ability to make bold concessions. Yeltsin rose to power largely on his ability to appeal to this Russian nationalism. But his economic reforms are in trouble. Russians are greatly discontented and the Russian military is still shaken by the collapse of the Soviet Union. Yeltsin's hands are tied by conservatives who oppose his reform program and who are against territorial concessions.

Another reason for Moscow's intransigence is that Japanese aid and investment would likely be concentrated in the Russian Far East, something that the various independence movements in the region are counting on.

Last month, Yeltsin said that he'd like to conclude a peace treaty with Japan in 1993, but he also downplayed expectations for his September visit to Tokyo, saying that his five-stage plan for settlement of the territorial issue does not necessarily preclude returning all of the islands.

Japan has long refused any large-scale aid to the Soviet Union, now Russia, until all of the territories are transferred to Japanese administration, ruling out various compromise schemes in which only some of the islands would be returned. Moreover, the Japanese wanted the islands returned prior to conclusion of a peace treaty.

But the Japanese are now willing to delay the transfer of the islands to Japan if Russia will formally recognize Japan's sovereignty. This new two-step policy represents a change in stance for Japan designed to head off criticism from other G-7 nations.

Although the Japanese government will not guarantee or subsidize major investments by Japanese companies, there is some discreet Japanese private sector activity in the Russian Far East, including about 30 Japanese-Russian joint ventures. But these have been somewhat modest undertakings in forestry and fisheries, with thus far little of the large, high-technology enterprises that Russia seeks. Without their government's seal of approval, many firms simply prefer to stay away.

One of the unintended results of the positions of both countries is that expectations of great economic rewards for Russia may be overstated. Removal of the territorial problem may be met with only limited expansion of economic ties.

There is a relatively low level of Japanese interest in undertaking major economic development projects in Russia. It can be argued that the territorial issue provides Japan a convenient excuse for not becoming more economically involved.

Some Russians feel it is necessary to keep Japan interested in maintaining a dialogue by keeping the territorial issue alive. They feel Japan will not be motivated to stay engaged with Russia once the issue is settled. But denying Japan its rights to the islands is not a particularly effective policy, especially for a nation as much in need as Russia is.