JAPAN'S CHANGING RELATIONS WITH CHINA AND THE USSR

Created: 2/1/1981

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Japan's Changing Relations With China and the USSR

A Research Pa**s

Japan's Changing Relations With China and the USSR J

Japan's Changing Relations With China and Ihe l_ SSR(

Japan's lilt toward China and away from the USSR over the past decadeundament jI shift in the strategic equilibrium in Norihcasi Asia. Tokyo can no longer plausibly claim t did in the io be pursuing an evenhanded policy toward the two Communist powers Instead. Tokyo is steadily weaving closer ties with Beijing, while its relations wnh Moscow have cooled considerably.

Barring unexpected changes in the determinants shaping Tokyo's policy. Soviet-Japanese relations probably will remain cool through at least the. Sino-Japanese relations, on ihe other hand, probably willto grow stronger. On the assumption lhat this will take placeontext of continued coolness in US-Sovietealthy LS-Japan alliance, and further improvement in Sino-US relations, the Soviet Union will find itself increasingly isolalcd in Northeast Asia

This does noi mean thai Japan desires lo align ilself with China againss the Soviet Union or loadopl an antagonistic stance toward ihai country The Japanese Government believes lhat cither policy would endanger national security and will be careful that the realignment does nol proceed too far. Particularly in areas of Soviet sensitivity. Tokyo will resist pressure to make iis policies conformhose of Beijing. Moreover. Japan is likely to experience frustration in its economic dealings wilh China and loively interest in stable, if not greatly expanded, trade with the USSR.

( Olltl'llls

Past

Till Toward

Hopes for Balanced Rclaiions:

" Policy Paralysis at2

An End lo Even handedness:

Current

Key Determinants of Japanese Policy

Consideralions

of Changing Relations Among ihe Big Powers

of Independent Japanese Judgments

Consideralions

Development Projects

Considerations

Drift Toward Beijing

11 lhf M. 1 1 1 ^ r 1 L

-

dcenancs

7

Trade With China and the

Resource Development Projects in China and the

Appendix In hies

Trade Wiih China and ihc USSR

A.3

Imports of Fuels From China and the USSR liinsncii" ImmiK iif Wiwrl FrnmSSR

2

Exports of Machinery to China and the USSR

Exports ol Steel to China and the USSR

Backed Japanese Loan Commitment* Related to Resource Development Projects: USSR

1

Future Japanese-Supported Resource Development Projects' USSR

Backed Japanese Loan Commitments Related to Resource Development Projects: China

Resource Development Projects: China

Future Jarjancsc-Supportcd Resource Dcvclopmcni Projects: China

7

Trade With China and the USSR

luran'i Immrlt Fnun fsninu anilSSB

Q

Exports to China and the USSR

10

Resource Development Projects

Loan Commitments Related to Resource Development Projects in China and the USSR

Attitudes Toward the United States, China, and the USSR

Japan's Changing Relations With China and the L'SSR I

toward China

Japan's relations with the two Communisi powers thai dominate the Asian continent haveun-dawental change over the pasi decade The process of change has moved through two distinct periods The first coveredhile the second began8 and may not yet have concluded. At the beginning ofs. Ihe Japanese Government was attempting toeasonable balance in its approach to the two rival Communisi siaies and had reason to hope thai it could improve relations with both. By the end of the decade, the Japanese had succeeded in strengthening iheir ties with China, but relations with the USSR had deteriorated, and Tokyo could no longer plausibly claim to be pursuing an even handed policy toward the two powers |

Hopes for Balanced

In the. conditions appeared to the Japanese to be exceptionally propitiousajor improvement in iheir relations with both China and ihe Soviet Union. The United Slates' opening to China and the relaxation of US-Sovici tensions cleared the way for the Japanese to work out an accommodation of ihetr own with Ihe Chinese and to attempt an improvement in relations with Moscow. The restoration ofrelations wjih China proved easy enough. Even before Tanaka became Japanese Prime Minister ineijing made it clear that it was prepared toeasonable agreement!

2 laid to rest theTaiwanissue that had blocked ihe normali zation of relations. |

Tanaka next moved ioimilar breakthrough on ihe Soviet front. Although diplomatic relations had been restoredapan and the Soviet Union had never agreedeace treaiy after World War II. The only obstacle loreaty was Moscow's

refusal io return four small islands north ofso-called Northern Territories that il had seized in the closing days of the war and that the Japanese consider an integral part of their homeland

Tanaka apparently calculated thai the prospect ol rapidly warming relations between Japan andChinese antagonists would be sufficientfor ihe Soviets to think seriously about relaxing their grip on the disputed islands. In addhion. ihe Soviels were displaying more interest in involvingin Ihe economic development of Siberia. Pan of Tanaka's strategy seems to have been to give the Sovieis concrete incentives to come lo terms on ihe territorial issue by cultivating their desire for large-scale Japanese participation in various Siberiandevelopment schemes Immediately after his trip to China, the Prime Minister sent ForeignOhira to Moscow to prepare the way for him toisit io ihe Sovietrip viewed as the logical sequel lo Tanaka's pilgrimage to Beijing. I

The Tanaka-Brezhnev summit in Moscow in3 proved to be the apex of Soviet-JapaneseBrezhnev spoke enthusiastically of ihe advantages both parlies would derive from economic cooperation in Siberia; Tanaka responded positively and theApril released SI billion in Export-Import Bank credits far three large Siberian development projects. Tanaka also vigorously presented Japan's case forof the Northern Territories. Although Brezhnev promised nothing, he held out the hope of flexibility by permitting the territorial issue to be included if onlythe list of issues to be discussed during any future peace treaty negotiations. BtMM

Tokyo found Ihe Chinese responding to its courtship of the Soviet Unionwo-track strategy. Beijing worked to sustain the momentum built up in theprocess, cultivating allies throughout the Japanese political world, promoting rapid tradeandesire to press aheadreaty

oi peacefriendshipihe *amc time. Beuingji true fncndvlupmuti be band on common principlesnot jW> the principle of oppusiinin lo '. ffi i'b) ihird countrieshe USSR) to establish hegemony in ihe Asia-Pacific area. Already enshrined in2 Tanaka(hnu Joint Statement, thisthe Chinese said.have lo be incorporated in any future treaty betweenountries!

The Soviet leadership apparently concluded lhat. in Ihe long run. the USSR would lose more than il gainedil gave up the Northern Territories in returneace treaty. Moscow was noi willing to moderate its position on the Northern Territories, even though it was anxious to obtain additional Japanese assistance in developing Siberia; the Soviets even asserted, wilh increasing vigor, thai they had no intentionr returning the islands. The USSR may have taken this hard line in pan because ii calculated that economic self-interest would prove stronger than national ism. lhai the Japanese would not permit iheir desire for reversion of ibe islands to interfere with their access to Siberian resources, and that ultimately they would permil Ihe territorial issue lo fade away. Al the same lime thai the Soviet* forced ihe indefinile poslponc-mentoviet-Japanese peace treaty, they also made dear that they would view as unfriendly anda Japanese decision toeace treaiy wnh China lhat included an "antihegemony" clause |

Policy Paralysis al Mid-Decade

Bent on establishing good or al least businesslikewith both Ihe Soviet Union and China, Tokyo found itself in an increasingly awkward position and with not as much leverage or freedom of maneuver as il apparently believed it had when il embarked on iu peace offensive. the Japanese Government had reached an impasse. Tokyo's di-lemmu arose in purl from tbe way in which it defined Japan's security and foreign policy interests. Primekuda summed up some of tbe mostpolicy goals in his call for an "omnidirectional, equidistant" peace diplomacy. This seemingly vacuous formula actuallyardhcaded assessment lhat il was in Japan's interest, first, io keep out of Ihe SimvSoviet dispute by maintaining ar ccl.distantbetween ihe two great Communist antagonists; and second, to adopt an accommodating,posture toward ihe outside uorld in general but particularly luaard ihe Soviet Union and China, ibe only countries lhatutcniial threat to Japanese security^

Wnh Moscow and Beijing each attempting io draw Japan to its side or, tailing lhat. io ensure thai Japan did not gravitate toward the other. Tokyo'sio maintain an "equidisiant posit ion" mortgaged its policy to the Communist powerfxncd lo strengthen relations wilh Japan BMtm

For several years, the situation remained frozen If it changed al all, Japan's relations with boihcountries cooled.

i The public also was gradually becoming mure .iw.uc of ihe growing Soviet military presence in the tarnd Japanese businessmen werethai dealing with ihe Sovieis was more difficult iban they had anticipated al ihe beginning of (he decade. Wilh regard lo China, many Japanese -ere apprehensive that the growing strength of the radical "Gang of Four" might damage bilaicral trade andevival of anuforcign sentiment and the reappearance of some of ihe excesses of the Cultural Revolution.

Ass tad loK-80

The stalemate in Japan's rcialtortt with China and ihe Soviet Union was broken by the purge of the Gang of Four inhe moderates who came to power emphasized modernization and thought thai foreign assistance would accelerate ihe process The Japanese believed the renewed Chinese interestreaty stemmed from ihe growing status of Dengof thehis appareni belief thai Japan could play an important role in China* modernization. Thai Deng, no less than those he supplanted, warned to mrn Japan against the Soviet Union did noi in ihe end pose an insurmouniublc obstacle io Prime Minister Fukuda. because he had no intention of permuting Japan lo be turned against anyone and because Deng proved sufficiently flexible ioomprot

"^Secret

As ihc prospects lor an eventual agreement between China and Japan improved. Moscow set aboul tryingerail thee approachhosethreats and pressure and provedOfficial statements and propagandatoward Japan warned of unspecified direif Tokyoreaty containing an antihegcmony clause. Not coincidenlty. al least in Japanese eyes, the Sovicis began to strengthen their garrison in the Northern Territories, (herebythe ease with which their armed forces could be brought to bear against Japan and their determination to incorporate the disputed islands permanently into the USSR. The rhetorical threats and the mililary gestures took placeackdrop of what the Japanese began to secteady and increasingly troublesome Soviet military buildup in the Far Easl.

L nion: Japan mil proceed to improve relationsi IfV

decides toapprochement with Japan, itfind thai Tokyo is ready to respondn an> case. Japan will nol permit ils China policy to be dictated by the Sovici Union, norermit itselfe coerced

Despite any impression thai Beijing may try in create aboul the character of Ihc emerging SinO-Jarxinesc relationship. Japan will not align itself with China against the USSR

Current Trends

The trends in Si no-Japanese-Soviet relations already in evidence8 were reinforced by the signing of ihe Peace and Friendship Treaiy and, as ofrc continuing in Ihc same direction.

Japanese Government refused to be intimidaled; on8 iteace and Friendship Treaty wiih China that bound bolh countries to opposeBeijing hadleft each free to define its own posiiion loward thirdJapan wanted. Tokyo was satisfied that the treaiy did not commit Japan lo concrete actions against the Soviet Union and stressed in its explanations to the Soviets that it had no intention of participating in an anti-Soviet cabal. At the same lime. Tokyo felt little need to go beyond thai assurance, when the USSR displayed so little interest in responding to Japanese desires and few inhibitions aboul trampling oncnsibiiitics.H

In general, the position taken by the Fukudamay be summed up as follows.

Japan would prefer toalance in us relations wilh China and theion. its policies can no longer be unaffected bv those that China and the Sonet Union adopt toward Japan.

has shown thai it wishes friendly relations wiih Japan. If ihc Soviet Union not only is unwilling to take steps necessary to improve relationsbui objects to friendly relations between Japan and China, then so much the worse for the Soviet

The strengthening of Japanese-Chinese relations was symbolically confirmed by Prime Minister Ohira's visit to Beijing in9 and Premier Huaeciprocal trip lo Tokyo inhis exchange of visits by the heads of the two the first in the history of Sino-Japanesetogetherua's attendance at Ohira sin June, closed the cycle that Ohira. as foreign minister, had helped io open eight years earlier, when he set the stage for2 Tanaka-Chou summii

Before he died, Ohira made it clear to ihc Chinese that ihe time had come to move beyond sentiment and ritual to substance. The basic framework of treaties and agreements was in place. The governments of the Iwo countries had mci and held discussions at the highest levels. There were many indications that both sides were firmly committedustained, long-term effort io consolidate friendly relations with oneNow. Ohira asserted. Japan and China musi give substance to the relationship, most importantly by expanding Sino-Japanese economic ties, and also by broadening the range of political issues ihat could be discussed franklyT

el_

One signore mature relationship. Ohirawouldess compliant and more siraightorward Japanese approach to China Far fromjulingof Japan'* friendship with China, this wouldransition io what Ohira described as true friendship,ecognition andof one another's shortcomings and of theof opinion that would be certain to arise

Ohira demonstrated what he meant by stressingthat, although good relations with China were important to Japan, they would have lo be conducted in the context of Japan's relations with other countries, particularly the member states of the Association of Southeast Asian Nations and the United States.although Japan would do iis best to supporl the modernization of China's economy, it would not help with China's military modernization or support China's anti-Soviet policies.

The Chinese appear to have accepted Ohira'sof Ihe spirit in which future Sino-Japanese relations should be conducted. To the extent that the two governments manage to act in this spirit, the chances that the relationship will prove resilient enough to absorb occasional setbacks will be enhanced.

Union. All of these moves have intensified Soviettoward the Japanese

Tokyo will attempt lo curtail this potentiallytrend. The new Suzuki government has already expressed interest ineasure of normality to Japanese-Soviet relauons. It has also taken the position, however, that if the Sovici Union wishes an improvement in relations il will have to take Ihenol only on the longstanding territorial issue bui also on Afghanistan. On neitherc the Soviets conceded lhal there isroblem to be discussed.

Key Determinants of Japanese Holies Strategic Considerations

The evolution of Japan's relations with iis two powerful Communist neighbors hasroductomplex of interrelated forces. Among them, none has been more important than the shifting strategic equilibrium among the four major actors engaged in Northeast

among the As la.|

certain amount of distrust between Tokyo andwas probably inevitable in the wake of the signing of the Peace and Friendship Treaty. Nevertheless. Tokyo clearly wished lo contain the damage done to the Japanese-Soviet relationship and almost certainly would have tried to improve ties with Moscow had the Soviets not invaded Afghanistan, by coincidence only two weeks after Ohira returned home ftom his highly successful summit meeting with Hui.B

The invasion has added new difficulties to Japan's relations with ihc Sovicithat it hasor drastically altered exisling patterns but it has accelerated and reinforced trends already in progress. Japanese antipathy toward and distrusi of the Soviet Union have reached what may be postwar highs.aboul Soviet intentions and aboutilitarily stronger USSR has

The guscrnmcm's second assumptionthat Swo-Sovici relations would remain antagonist or at kgOt eoui. The Japancw seem never to have believed that rotation* between China and the Soviet Union might heal sufficiently to permit the two rival* to coordinate iheir policies toward third count 'ks Since at least the. therefore. Japan no lunger has had to worry that its two most important potential enemies might join forces agamsl it at they had in thehis appraisal has greatly enhancedense oi" security In principle, it should also have increased Tokyo's ability to maneuver betweenommunist powers

Tokyo was aware that ihe hand of friendship that China was extending to Japan and the United Slates was guidedalculated intent lo isolate the Soviet Union. Tokyo also believed, however, thai Washington intendedse improved relalions with China to give the Soviets an incentive lo improve iheir own relations with ihe United Slates. In ihe US scenario, detente along one axis would be the prelude to detente rather than confrontation along the other. US efforts toa relaxation of tensions with ihe Soviets not only provided Tokyoodel lhat it foundand certainly preferable to that of China's hostility toward Moscow -it also cleared ihe way for Japan to emulate lhat model. As in thccaseofSino-Japanese ties, progress in improving Japanese-Soviet relations

Even as Ihe Japanese prepared to conclude the Peace and Friendship Treaty, they insisted that theof Ihe normalization process with China should beositive bilateral development with no significant negative implications for other countries. Tokyo seems to have calculated lhat once the treaty was signed Soviet antipathy toward Japan would prove short lived|

In retrospect, this estimate seems to have resulted partially from wishful thinking. Il is now clear thai Japan's growing relationship with China carries with it more substantial external costs than Ihe Japanese probably expected or believe they should have to pay. Some Japanese suspect, for example, lhat the securing of China's Japanese Dank may have helped free the Chinese to invade Vietnam, an act that helped Moscow strengthen its position in

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.iiwidiscovering ihat belter Sine-Japanesecm*lcnt source ol tension inwith ihc Soviet Imoi fcicn beforeii * clear especially to ihe Soviets lhal ihe cumulative cfi'cci ol aJapancsc-US alliance, improving Sino-USmil ihe continuing eoOsoMjti.ui of relation* between China and Japan would be the cinkacencerilateral entente It wa> also clear that none of the three *ii well disposed mwacd Ihc USSR and that each, wilh varying degrees ol intensity, viewed thaihe principal threat to iiv security Thui 'S: Soviet leadership had good reason io suspect (h- UhSovicthc making. Ifoalition jelled into theof an alliance, ihc national iccuriiy interests of ihe USSR would be gravely affected. Hence iheSoviet effort to warn all cooccrncd Japan, the weakest and rnosi susceptible toit would view with alarm further movement inK*ikn.|

> less, the Soviet Union imsdedthis case it seems to havee Soviet,the effect of their actions on others.Stales is increasing defense spending,allies'Japan- to follow suit, andihc door to the transfer of rtoaleihal miliury

Although the cxtcnl of the Japanese reaction canthere is no doubt that tbe invasionstrong effect and helped alter the terms ofthe domestic debate on security and foreign

As for China,as applauded the reaction in the United States and Japan and has invited the two countries-somewhatheiroin withorldwide anti-Soviet united front. By invading Afghanistan, the Soviet Union hasowerful impetushose trends in US-Japan-China relations that il finds most disturbing.

Japan has iis own interpretation of where its strategic and foreign policy interests lie, and the broad outlines of the policies it has devisedrotect these interests arc clear. First, the Japanese Government believes more strongly now thanears ago that Japan musi maintain strong, friendly relations with the United Stales This has implications for how Japan willits relations wiih China and the Soviet Union.

The Soviets must not be afforded opportunities to foment discord between Japan and the United States.

Japan must not submit to Soviet pressureeaken it* security lies wiih the United Slates

If relations between the United States and the Soviet Union deteriorate, in general Japan should side wilh Washington.

must not be per mined toource of rivalry and distrust between Japan anditrd States. Japan should work with the Untied Slates toooperative approach to Beijii

Second, the Japanese are convinced that their long-term strategic interests are best served by maintaining good relations with China. The Japanese do nut warn ever again lo be in conflict with China, or even to be estranged from ihat country, as ihey were during the Cold War. Being on good termsChina not onlyess threatening security environment,o frees Japanese attention and resources for otherIn support of this objcciivc, Tokyo has devised several mutually reinforcing policiesIl hasroad, sustainedultivate the trust and goad will of the Chinese leadership.

It has avoided pressing for the resolution of poieft-nally contentious issues.

It has given evidence thai it wishes to be asas possible of the Chinese modcrmraton effort.

It has demonstrated its commitmcni to establishing closer Sino-Japancse relations by resisting strenuous Soviet opposition lo thai proccssH

Over the longer term, the Japanese apparently hope lhat these measures will help to strengthen the position of the relatively moderate elements in Beijing lhat Tokyo believes are most likely to want to remain on good terms wilh Japan. Ai the same time, there can be no guaraniee that fulurc Chinese governments will always be as friendly toward Japan as the Current one is. The consequence for policy is that Tokyo will noi directly support the modernization of ihe Chineseestablishment and has serious reservations about the wisdom of US policies thai might serve thai end.

Third, ihe Japanese arc determined lo ensure thai Tokyo and Moscow never come into conflici or even driftituation inossibility of conflict exists; Tokyo is mindful thai the Soviet Union could easily destroyolicy in support of this interest has been more difficult to devise. In general. Tokyo has tried to implement iwo seemingly coniradictory but actually balanced policy lines. First, it has:

Sought io reassure Moscow (hat Japan has no hosiilc intentions toward ihe Soviet Union and will noi join wiih third countries in hostile actions against il.

Tried lo show that il is willing to cooperateusinesslike basis with Moscow's effort lo accelerate the economic development of Siberia.

Maintained that it is ready toeace treaty as soon as Moscow returns the Northern Territories.

Ai ihe same time, Tokyo has made clear that it is noi wholly passive. In

Acquired through Ihe Mutual Security Treaiy with ihe Unitedeterrent against Ihe perceived Soviet threat.

Created armed forces of its own io supplement, and enhance ihe credibility of. the treaty.

Has persisted in pursuing good relalions wiih Ihe two most threatening potential enemies of ihe Soviet Union.

Hasss inhibited jbout expressing Hs displeasure *iih. and taking counter measures against. Soviet actions deemed deirimcnlal toinicrc-isM

Economic Consideralions

A widespread assumption exists thai Japanese foreign policy is dominated, if not determined,rive for economic advantage. In ihe case of relalions with China and the Soviet Union, however, broad strategic considerations not only haveore potent role in shaping major policy decisions, but havetrong influence over ihe manner in which many apparently unrelatedbeen conducted M

Nonetheless. Japanese decisionmakers have been sharply attuned lo economic considerations, which have influenced iheir view of how. and for whatJapan should approach the Soviet Unioni^^l

Trade. The trading rclaiionship between Japan and ihe Iwo Communist powers has been based on an exchange of Chinese and Soviet energy resources, raw materials, and relatively unsophisticated manufaciurcd goods for Japanese siccl, machinery, and whole plants

In the case of China. Japanese imports and exports have followed roughly parallel lines and have moved through two periods of rapid increase,35 and8 lo the present (see'The growth curves for Sinn-Japanese trade generally have followed those for China's Overall foreign trade; both have tended to respond to economic and politicalwiihin China. I

In the case of the Soviet Union, imports grew rapidly34 and then leveled off. Similarly, exports expanded46 and then slowed. The Iwo bursts of activity in Sino-Japanese Iradewith major political breakthroughs in bilaicral relations, and the upsurge in Japanese-Soviet trade occurred during the years when bilateral relations were relatively good.fl

' Data on Japan's trade with China and ihcSvuci Union* re provided in *ppendii *

China generally has been the more imnonant trading partner for Japan. In every ic,irhe value of Japan's ctports io China exceeded that of iis cvponshe Soviet Union. Jn every yearmports from China have been greater than those from the USSR. In the past two sears, the gap between the two W countries in both eaiegories has widened dramatically.

From China

FVcxnt ot Toifli

PFl'rilnjm Inippfls 16

ia 11

impressive as the rates of growth in bilateral trade have been in some years, Japan's trade has expanded so raptdly that the percentages of the toul accounted for by China and tbe Soviet Union have remained tow. The Soviet share of Japanese imports has beenercent for the pasi six years and has been declining.rowing but is stillerceni The proportion of Japanese exports accounted for by ihe two countriesnly slightly largerercent for the Soviet Union,ercenthin.ig^H

assessing the extent of la pun's dependence on China and ihe USSR il is necessary io examine ihecofnposilion of the iwo countries' trade with Japan (seeapanese imports from China and the USSR are dominated by raw materials. In the critical energy sector. Japan has noi been dependent cc either countryarge enough proportion of itsto give either China or ihe USSR significant economic or political leverage over Japan.|

600

USSff

he value ol Japan's petroleum imports from China has grown rapidly, yet China's share of Japan's total petroleum imports has remained low and stableercent. Japan obtains even less of its petroleum from ihetMnH

The relative position of the two Communisi powers is reversed when il comes io coal. Japan has drawn much more of iu coal from the USSR than from China Tbe value of imports from China, however, is increasing, while lhat from them is declining. The Soviet share of Japan's total coal imports, although not insignificantercent, has noi beenlargc.B|

The one commodity lhat looms large in Soviet exports to Japan, and whichegree of Japanese dependence, is umber. Although Ihe Soviet share fell

erccrtlor nuisi of ihc pasi decade Sovici limber.iceounied forndperceni ol' Japan's limberp.in obtains no limber from

Japanese businessmen consider ihc Sovici Union and China In be irnponanl export markets. Although iheir respective shares in total Japanese exports have been small, the Japanese believe ihc long-lerm potentialapid increase in demand for Japanese technology, equipment, and steel is large. Moreover, these markeis have taken on greater importance as recession in Ihc West has lowered the demand for such goods (sec figure

The two most prominent commodity categories of Japanese exportshina and ihc USSR are steel and machinery. In machinery, the Soviet Union has proved to be Ihe larger and more stable market; exports to China have oscillated in response to shifts in Beijing's foreign trade and modernization policies.owever, ihc gap between the two almost closed. In four of the past five years, machinery exports lo the USSRercent of total Japaneseio be favorably noted by Japanese businessmen and officials. I

With almostercent of Japanese steel cxpons going to China and ihe USSRegree of export dependence scents to have developed in steel. In this area China ranks first, with imports from Japansteadily,alue of more than SIillion and accounting for more thanerceni of Japanese sleel exports in each of ihe past two years. Exports io the Soviet Union are also substantial,ercent of mini steel exports for ihc past five years (excepthen they jumped toapanese steelmakers, therefore, can by no meanslo ignore these markets.

Resource Derelopmeut Projects. An important aspeel of Japan's effort to promote expanded trade with the two Communist countries has been Tokyo's support for rcsourcedcvelopmcnt projects in both China and the ssie

'information on these proiecis i* providedoc nth* BIJH

Peicant o'

Figureapan's Exports to China and Ihe USSR

Machinery

J000

V,

71 72 73 7a 7S 76 ti 70 79

Steel

Maiiosiu> i

PticvM olp i*

ixwoChina

77 78 79

71 71 ?3 74 7S

USSR

A basic component of Japan's long-term economic strategyontinuing worldwide search for fuels and raw materials. Two key elemenl* of this, process are an effort to diversify Japan's sources of supplyeadiness to provide the credits, capital goods, and technology necessary to develop new mines, oilfields, and timber deposits

The trade data suggest that, in general, China and the Sovici Union have not emerged as important sources of supply Nevertheless, so massive are Japan's require-mcnis that the joint projects it has negotiated, first

with thenujn and more recently wiih Oiina. -ire from their points ol view impressive in scope and reprcsenl htidK needed >ource* ol foreign exchange (sec figure i'U

The first requirement of resource developmcnl projects has always been credit. The projects tend to have length) gestation periods and to be very expensive, and prospective partners often have been able to expand production to meet Japanese needs only when Japan has been willing toajor share of the costs. China and the Soviet Union have been no exception.

ong before Beijing was willing to permit foreigners to participate in jotnt projects. Moscow negotiated its first resource developmeni contract wiih Japan. The formula devised became the prototype for all subsequent bilateral compensation} million worth of machinery,and consumer goods backed by Export-Import Bank credits and in returnortion of the natural resources that werethis case, logs and timber for Japans housingecond agreement followedallingillion in Japanese equipment in return for manufacturing pulp and wood chins for the Japanese paper industry. In addition,he Japanese put togetherillion package that permitted the expansion of Vostochnyy Porl near Nakhodka so that it coulda larger volume of coal and timber exports to Japan

It was not. however, when Tokyo made its first large-scale, government-to-government loans to the Soviet Union, that the process got under way in earnest.ighly political gesture.xport-Import Bank released more than SI billion inillion for equipmentecond major timber0 million for developing the Chul'man coal field in South Yakutia,illion toward the cost of the initial exploration phaseossible multi-billion-dollar effort to exploit Yakutia's natural gas deposits. In addition. Japan2 million to exploration for Sakhalin offshore oi) andrepayment dependent upon discovery of oil. Much of the expansion in bilateral trade that took place in subsequent years was fueled by these loans (see figure

In the Soviet Union land later inhe Japanese often became deeply involvedhenic-css.allltuugh ihey were permittedlin-ned on-Mic oresenceand no ccuitv participation, la the case of Siberian timber, .'or example, Japan provided

in project planning and execution.

- The machinery necessary to reach and cui the timber

and transport itail line or river.Plants for processing some of the timber inio pulp.

wood chips, or lumber

Equipment and technology necessary to expand port-handling capacity.

Ships to carry the timber and timber products to Japan.

Consumer goods lo lure Soviet workers to work on

None of these ventures would have materialized had Japanese businessmen and officials not been convinced that ihey were profitable and consistent with the broad, long-term economic interests both of theindustries and of the countryhole- At the same time, however, the government also hoped lhat the ventures would demonstrate Tokyo's good u. ill and help promote an improvement in bilateral relation* possibly even inducing the Soviets lo discuss theterritorial issucj

. Japan's interest in Siberianseems in have waned. All of the credits released since then have been supplementary to agreements made earlier:

additional loans for equipment for Southmillion7illion inthe lotal for the projectillion.

illion loan for Sakhalin oil and gas exploration, raising the total for the projectillion.

arge-scale timber development deal is expected to be reached soon: this will represent the third phaserojeci that has been under way since

No wholly new projects have been undertaken.ihe giant Yakutsk natural gas venture seems certain to go the way of the abortive Tyumen oil pipeline scheme. Existing projects will be continued

r inureapanese Loan Commitments Related lo Resource Development Projects in China and the USSR

ac US OMa-*

perhaps expanded, but no dramatic departures appear to be in Ihc offing.B

Both sides had iheir reasons Tor not pressing ahead wiih new resource deals. The Soviels have moved more slowly in recent years, both in expanding trade with the West and in negotiating joint projects in Siberia. The rapid growth of Moscow's debt in theore cautious approachime. Moreover,in installing and operating the large amount of imported equipment ledharp drop in orders from the WcsUjB

Japan has been reluctant to move further ahead in Siberia for both economic and political reasons.severe climate, great distances, and perennial

labor shortages arc serious obstacles to profitable development. Moreover, the Soviets have proved to be difficult business partners. They have sometimes overplayed (heir hand, apparently convinced that the Japanese, hungry for the resources lhat Siberia has to offer, will ultimately accept Soviet terms. Butentrepreneurs are used to operatinglobal economic arena and evaluate Siberian resourceprojects in light of the alternatives. During the. Japanese businessmen seemavethat it would be more prudent and profitable to pursue diversification elsewhere. Nevertheless, ihcy have kept the door open by continuing at least to discuss new projects with the USSR.

ol" political relalions during

these Mine year, also seems to have attettcd Tokyo'sto buck -line c* projects in Siberia. Japan* political and bureaucratic leaders evidently saw link strategic inccniivc for promoting ventures that were ohen questionable economically ami lhat would increase the country's dependencee Soviet Unionime when Moscow seemed increasingly unfriendly and oblivious to Japanese hopes for Soviet flexibility in the political arena The Scnictinvaswn of Afghanistan reinforced this perceptlor.H

The Chinese did not finally decide lhat il was in their interestnvite Japanese involvement in resource developmentgn The change in policyonsequence of iwo converging imperatives First,decided lo step up the pace of nwderni/ation by importing more foreign technology, machinery, and whole plants, (he Chinese leadership had to devise means of earning more foreign exchange. Among the most promising options was to greatly increase their export* of coal and petroleum, both of which couldeady market in Japan. If the Japanese could be persuaded to provide the credits necessary lo expend oil and coal production, thts would help Beijinga second problem- meeting China's ownenergy requirements. Bcuing also may have been receptiveokyo's overtures because the Japanese were willingelp remove the transportationimpeding ihe expansion of China's export capacity and because ihey offered generous financial arrange mens easier in terms of interest rate* and repayment periods than those granted the Soviets and easier than those offered China by other Western naiiuns.H

As in the case of its ventures in ihe Soviet Union. Tokyo's position on resource development projects in China has been tbc productomplex of political and economic ctmatdcratiooi. Political objectives seem lo have weighed more heavily in shaping the Japanese approach toward China, however, most obviously in Tokyo's decision to extend aid in the form of long-term loans at highly concessional interest rates. Tokyohopes that this asd and the expanded exports Hpermit will not only helpement closer bilateral relations but will support, if only indirectly and marginally, stability in China. The Japanese believe

that thecu'reni leadcr.hip in Beijing is more likely than any other to discern the benefitsmj oliable, friendly relalumshipwiih Japan and -in spttcof the invasion of Vietnam iwo yearsless likelyead China into dangerous foreign adventures that might disrupt its moderni/ation pro-ce

Resource dcvelopmcni agreements concluded with China this year abo are intended io serve definite cconomK otyjccitvcs. The Japanese see China, like Siberia,romising alternative source of supply for the energy resources Japan needs The Long-Term Trade Agreementigned inapid expansion in bilateral trade batedapid increase in Chinese ml exports. Inhen it began to appear that the Chinese would not be able io raise the capital necessary to expand their oil production. TokyoZ billion line of credit from ihe Export-Import Bank lo develop China's capacity to produce and export energy resour

The focus of the joint effort in the petroleum sector is Ihe offshore fields in ihe Bohai Gulf. Ininal agreement was reachedport-Import Bank loan thai the Chinese could use to cover their half of development costs Since this sum is io be matched by the Japanese investors participating in the venture, ulmost SI billion in Japanese capibeen committed lo this one project. I

Beginningowever, Beijing began to suggest lo the Japanese that it might noi be able la sustain the rale of increase in oil exports io Japan called for in the LTTA, that, instead, oil exports probably would level off, and that it might lake longer than anticipated to bring the Bohai field into production. Meanwhile, ihe Chinese stressed, until new oil became available, coal offered the besi hope of fostering further increases in

China's failureulfill the promises it had madewing largely io excessively optimistic oil-production forecasts made in the, cameisappointing setback to those Japanese who had been at the forefront of tbc effort toajor expansion in bilateral trade Together with other commercial difficulties encountered at this time.

Baikal, iheo.il-related projects .ire concentratedmall area around Bohui. which ise location of ihe Japanese oil exploration clVori.J

Polonstions

Many of Ihe events and trends ouilmed aboveroiigh. and arc distorted by. the domestic political process, from which they return to the decisionmakers, often in narrowly focused, idiosyncratic, cmoiion-ladcn forms. Two closely related key points need lo be made in this conncciton. one related to generalperceptions of the Soviets and Chinese, the other to Sovici and Chinese access to the Japanese political

'uolic attitudes appear to nave undergone dramatic changes over the pastears (seeuring. JO toercent of the Japanese disliked both countries. Lessercent liked one or the oihcr. With the advent of detente, however, dislike of China and the Sovici Union declined. In ihc case ol China, negative perceptions plummeted in the wake of ihc euphoria surrounding the restoration of diplomatic relations, and increasing numbers of Japanesecame lo hold positive sentiments toward Beijing. No Compaq-He upswing in liking for the Soviet Union occurred H

The most striking development to take place after the shift in opinion in theas the increase in public dislike for the Soviet Union in the later years of the decade; in the year since Afghanistan, it has risen to unprecedented heights. Thus, at the beginning of, the Japanese public is far more favorablytoward China than loward China's adversary.

two ports, two railroads, and seven coal mines are mutually dependent and reflect whai appears io be an integrated development strategy designed to expedite ihe flow of coal to Japan. Unlike theresource development projects in ihc Sovici Union, which are scattered across Siberia east of Lake

The Chinese have found it much easier than have the Soviets to penetrate and influence ihe Japanesesystem. The Japanese people are highly conscious of the extent to which Chinese civilization hastheir ownintellectually, artistically.

rcs-

linguistically. Jtid in terms ol social, political, and religious norms. The Japanese also appear io respondhe fact that the two peoples are of similar racial stock. Overall, this respeci and affinity for China affects current Japanese attitudes. In addition, many people feel residual guilt aboulion against China in.

ln general, therefore, the Japanese public is more likely to be sympathetic toward Chinese points of view and more willing lo be persuaded that they are worth serious consideration The Chinese have recognized tbe opening this has given them and for JO years haveophisticated campaign to build support in Japan and persuade the Japanese to back positions UvoreC by China gjjfffffffj

acti ras tjc Clive |

Except for Ihc steadily shrinking minority of Japanese who still took to the Soviet Union as Ihe chief defender of world socialism, few Japanese feel anyCultural, orwith Ihc USSR. On the contrary, most Japanese strongly dislike parlicularly the Sovietare aware of their country's historic rivalry with theEmpire What respect there is tends to be directed at the Soviethere the respect is colored by fear. Far from feeling guili toward tbe Soviet Union, the Japaneseense of grievance for Moscow's last-minute entry into World War II and lis annexation of what they regard as Japanese territory The Soviets have notampaign similar to that mounted by Beijing, possibly because ihcy have realized thai Inlimate no comparableexisted for them To the extent that they have tried to intervene in the Japanese political process, their approach has generally been crude and counter-prod u

From the perspective of the Japanese decisionmaker, efforts to strengthen relations with China will thus tend lo be popular, while similar efforts to improve relations with the Soviet Union are likely to yield more limited political rewards. Given ihc recent increase in popular antipathy toward the Soviets, Japanesemay be more inclined toirm position toward the USSR, while ihcy will tend to viewto close Si no- Japanese relationsiability*.H

Prospects

Continued Drift Toward Beijing

Tokyo's drifi toward China and away from ihcSouci Union appears to have gathered considerableBarring unexpected changes in Ihe complex of determinants shaping Tokyo's policy, Soviet-Japanese relations probably will remain cool through at leasl Ihcthey may even deteriorate further. Sirvn-Japancsc relations, on the other hand, probably will continue to grow stronger JJ

On ihc assumptionhis will take placeontext of continued coolness in US-Soviet relations, ahealthy US-Japan alliance, and furtherinSino-L'S relations, the Soviet Union will find iiself increasingly isolated in Northeast Asia. If, as seems likely. Moscow attempts io arrest thisby resorting to ihe same heavyhanded methods it has used in the past, it will only reinforce the process, which has come to be sustained by ihc shared concern of the othcrthree powers about Soviet behavior and intentions JH

This does not mean that Tokyo desires to take sides with Beijing against the Sovietlessan alliance with China or adopt an antagonize stance toward the USSR. The Japanese are convinced that either policy would endanger national security, and they will be careful to ensure that the realignment does not proceed too far. Should there be signs of an incipient crisis in Sovici-Japanese relations, Tokyo will doits best to avert it. By the same token, while Tokyo is likely to invest considerable effort in furtherJapan's relationship with China, it will alsoertain distance from the Chinese It will resist pressure lo conform us policies to those of Beijing, particularly in areas of Soviet sensitivity. For at least the next few years, it is not likely to cooperate, except indirectly, in China's military modernization program orermit iis defense officials to go beyond limited contacts wiih their Chinese counterparts. In addition, the Japanese have concerns of their own aboulilitarily powerful China mighi portend for their security JJJ^B

5

Japan also is bound lo experience considerablein iis future economic dealings with China and toively interest in ihe economic benefits of stable, if not greatly expanded, trade with the Soviet

Siberian oil and gas. coal, and timber will be inin Japan for the indefinite future,esire to retain and expand access to this source of supply will inhibit the government from taking sieps that itmight seriously alienatetaking the lead inevere sanctions policy against the Soviet Union. In addition, the Japanese consider thealuable market for exports of technology, machinery, whole plants, and steelThe government has backed ihcsc exports in the past wiih fix port-Import Bank credits and is likely to continue to do so. particularly if slow growth in the West limits Japanese sales in these markets. On the other hand, to the extent that bilateral relations cool. Tokyo is likely to become more cautious aboutits financial stake in the Soviet Union or becoming dependent on that country for toohare of its requirements for imported fuels and raw materials. |

erious deterioration in bilateral relations. Tokyo will approve Japanese participation in theof Sakhalin offshore oil and gas resources.

.pects lor the development olSakl seem promising but lull-scale production its nol likelyinI to proceedhird timber project will ensure coniinuitihipments of timber products lo Japan, bui ai roughly the same levels as in the pastc)

What might cause Tokyoeview the bidding on Siberian resource development projects wouideepening of ihc crisis in world energy supplies. One possibility ihat already may be under consideration would be to accept the steam coal overburden currently being stripped from the Chul'man coking coalto be exported to Japan. Another and morepossibility is that the Japanese could decide to go ahead with Ihc large Yakutsk natural gas projeciUS participation. Here again, however, large-scale deliveries of steam coal probably would not begin until ther of gas until ihc later years of the

If, as now seems likely, Japanese businessmen decide that il it worthwhile to proceed to the production phase. Tokyo probably will approve Ihe project. Although this could turn oute larger than any of the joint resource development venturesthus far, Ibc volumes of oil and gas delivered to Japan siill would not be large enough loignificant degree of energy dependence on the Soviet Union. For strategic and economic reasons. Tokyo would insist that any imports of Sonet natural gas beiquefied form by tankers raiher thanipeline toc- >

In any case, given the present slagcof the various joint resource development projects, it i* unlikely thatof Soviet natural resources could increase substantially before theecause:

Nevertheless. Tokyo's commitment to support China's modernization effort is not likely to be shaken, and Japan's trade with China probably will continue to be larger than that with the USSR. Moreover,5ikely in be exporting more nil and coal to Japan than will the Soviet

If Japan continues to move toward China and away from the Soviet Union, and if the incipient Japan-China-US entente continues to coalesce, US interests will be affected in two principal ways:

Tokyo will be likely to persist in its effort to strengthen its defense lies with the United States and increase its conventional military capabilities by accelerating implementation of its midterm defense plan.

Moscow, for its pan. is likely to perceive ihcscas threatening, or at least damaging, to Soviet interests and might initiate counicrmcasurcs in other regions or on other issues that wouldaffect US interests.!

Alternative Scenario*.

Japan will continue to drift toward China and away from the USSR unless one or more of the major assumptions in this itudy proveAmong these assumptions, perhaps the most critical involve future Soviet and Chinese policies toward Japan^^Jj

This paper has assumed thai China'* policy toward Japan isunction of. first. Selling's strategy for dealing with the perceived threat from the Scwiei Union and. second, its vlratcgy for acceleratingOf the two, ihe second is probably Ihe most susceptible loivcn the magnitude of the task that China's current leadership faces over the next few

years, it is possiblecries of overlapping and reinforcing failure* could generate *oe*al. economic, and political stresses sufficiently serious toreakdown in the modernization program andajor leadership crisis. Inevitably, one result wouldlow to Chinese foreign trade and Sino-Japancvc economic relations, as well as lo Chinese economic growth. If the domestic Chinese crisis spills over into the foreign policy arena. a> similar crises have in the past, Japan's overall relations with China couldseriously strained. If the Japanese found their friendly overtures being rejectedorefundamentalist breed of Chinese leaders, they might be less forbearing and understanding than they have been in the pasi. In any case, the current trend toward sirongcr^nore cordial bilateral relations would be reversed

It is more difficult tolausible scenarioa change in Sovici policy toward Japan ihai would be substantial enough to slow, much less reverse, the trend toward increased tension in bilaicral relations. From the Japanese perspective, there are two principal problems: Moscow's refusal to settle ihe territorial issue on terms satisfactory to Japan and. morethe aggressiveness that has characterized the recent foreign policy of the Sovici Union as symbolized by its invasion ofajor improvement in bilateral relations almost certainly could noi be achieved without major changes in the Soviet approach to both problems This is not likely looccur*^^

An adverse Japanese reaction probably is one of the potential costs ihe Soviets find least painful towhen making decisions affecting basicor foreign policy. Therefore, it is more fruitful io focus on ihe possibility thai Moscow might alter its policy on the NorihcrnTerrilories, the less important of the iwo problems |

The Soviets may question whether they would really gain very much if ihey returned the dispuied islands. The Japanese mighteace treaty but refuse toore cooperative attiiudc toward ihe Soviet Union. As an object of Japanese friendship and cooperation. Ihe Sovici Union in any case would siill rank well below China, to say nothing of the United Slates. Soviet fear thai returning ihe islands would stimulate East European and Chinese appetites for

adiustrenis iii theirihSSR isihe most imrwrunt constraint inhibiting Ihe USSR fromove in :his direct ion. The Sonets also want to avoid losing the rich fishing grounds and ihe opening of the Sea of Okhotsk to foreign military, peiieiralionl

hift in Moscow's position on the Northern Territories is possible, if only becausepolicy entails such heavy costs for the Soviet Union ifl Japan. Some Japanese hope that the new Soviet leadership that will be in place by theight undertakehift. The likelihoodoviet initiative would increase if Moscow perceived an opportunity to make gains in other arenas. For example, if Sino-Japanese relations deteriorated,might calculate that an all-out peace offensive toward Japan one involving real concessions on the territorial issue and perhaps more advantageous trade terms for the Japanese, as well as acquiescence in current Japanese security policy might be successful. The Soviets might hope not only to clear the way for the signingeace treatyignificantin bilateral relalions. but also towoo Japan away from China and towardSSR

If cither of the two principal alternatives materialized (strained Sino-Japanese relations or improved Soviet-Japanesehe possibilityS-China-Japan entente might emerge would recede and Japan would returnosition more nearly equidistant between the two Communisi powers. This would tend tosome Soviet concerns and thus reduce thefor disruptive Soviet behavior I

If Sino-Japanese relations deteriorated bul Sovicl-Japancsc relations remained cool. Tokyo would have even greater incentives to build up the SDF and engage in more serious defense cooperation with the United Stai

If Soviet-Japanese relalions improved while Sino-Japanese relalions remained friendly, ihe impetusore positive approach lo defense issues presumably would be reduced. Tokyo might then permit allocations to defense to increaselower rate and display less interest in giving substance lo US-Japancsc defense cooperation I

Moscow decided to release all four of the disputed islands, Tokyo would immediately agree toeace treaty. Tokyo might even agteeettlement involving only two of the islands, although the political benefits for the So-iei* ofess generousuld not be as great. Coupledustained effort toore accommodating approach on other Issues, an acceptance of the political realities in Japan, and greater scntitivily to Japanese points of view, cither form of an islands-for-treaty exchange could leadubstantial improvement in Soviet-Japanese relations. Depending on developments on other fronts, it might fulfill Moscow's hopes of drawing Japan closerheSoviei Union and away from Chinaf^

Sec ret

Appendix A

Japan's Tradeith China and the l_

Japan's Trade Wilh China and Ihc USSR

I motet*

US S

or

Total Pirwii

CS5

Total Imr*.

)in;

SSR

dm*

SSR

in:

w.

1

<;?

14M

3.6

2.6

2.7

*

1.7

Japan's Imports of fuels From China and the USSR

Table-

Japanese Imports ofovd From ihv USSR

Japanese Exports of Machinery to China and the USSR

7

Million US 1

PVrCCMOt Toul

MMhincry lit pant

i.i

i

4

Japanese Exports of Sceel ir> China and the USSR

US**

of Toul Steel Eipom

5

0

SI:"-

>

Original document.

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