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. Last Updated: 07/27/2016

Financial Stakes Mean Treaty Must Be Found

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TOKYO — Russia, the world’s biggest nation, and Japan, its second-largest economy, look set to remain in a technical state of war for some time to come following the failure of their leaders this week to seal a peace treaty.

But the talks between President Vladimir Putin and Japanese Prime Minister Yoshiro Mori, which ended on Tuesday, will help to keep on track the fragile, three-year-old rapprochement between the former Cold War foes.

Putin and Mori quietly dropped a self-imposed, year-end deadline for concluding the treaty and pledged to keep talking about the sole obstacle blocking a deal — the status of four tiny Russian-held islands claimed by Japan since 1945.

"It is very important that Putin in Tokyo stressed the stability of Russian policy toward Japan. He recognized that a problem exists," said Dmitry Trenin of the Moscow-based Carnegie Endowment for Peace research center.

Putin said that despite the persistent lack of agreement over the islands, Moscow and Tokyo had made huge progress since moving to improve strained ties in 1997.

"In the previous 50 years [of the Cold War] we achieved zero results. Just compare that to the past few years," he said.

He cited as examples a deal to allow Japanese trawlers into the fishing grounds around the islands and a decision to allow visa-free trips for former Japanese residents.

All Japanese were forced to leave the islands after Soviet troops seized them at the end of World War II.

The half-century dispute still arouses strong emotions in some quarters, notably among Japan’s noisy ultranationalists who have spent the last few days driving sound trucks around Tokyo demanding the immediate return of the islands.

"It was always clear that there would be no quick solution to the territorial problem. Neither side is ready for compromise because of domestic political reasons," said Boris Makarenko of Moscow’s Center for Political Technologies.

Many Russians oppose the return of the islands, which they see as the just fruits of their struggle against fascism in World War II.

But the Carnegie’s Trenin said he believed Russian public opinion would change due to economic and geopolitical realities. "With time, I think serious coalitions will form in both Russia and Japan calling for a peace treaty," he said. "Russia will understand that without Japanese involvement it risks losing not only four small islands but possibly its whole Far East region."

He was referring to the dire economic and demographic plight of the Far East.

Some observers have speculated that Japan initially moved to repair its relations with Russia in the mid-1990s because of fears about the growing economic and military clout of China in the Asian-Pacific region.

But the strategic value of the islands themselves is questionable for either side. "For Russia, these islands have strategic value only if you consider the United States and its allies [among them Japan] as enemies," Trenin said. "But if you do, then you might as well forget about trying to win foreign investment."

During his talks in Tokyo, Putin repeatedly urged Japanese business leaders to cast aside their doubts about investing in Russia.

Annual bilateral trade stands at a paltry $5 billion, compared to $60 billion between China and Japan.

Trenin said the advantages of potential large-scale Japanese investment in Russia’s eastern regions — unthinkable without a peace treaty — would tip the scales "maybe in six or seven years" in favor of a deal.