BLOOMBERG: Japan's Aso Says a Project May Resolve Island Dispute (Update2): Monday 21 November 2005

Nov. 21 (Bloomberg) -- Japan and Russia could take a step forward in resolving a dispute over four islands should the two countries work together on a project, Japan's Minister of Foreign Affairs Taro Aso said.

``One step forward may be to take a new approach with the suggestion of a project, in which we can see tangible results in the improvement of the islanders' lives,'' Aso said in an interview with Bloomberg in Tokyo. ``If such a project takes place, mutual trust could grow between the two countries as something said becomes a reality. But this isn't something that has been officially suggested'' to Russia, Aso said.

Deeper economic ties with Russia have been restrained due to a dispute over the ownership of four islands off northern Japan. Russia took possession of the islands, known by the Russians as part of the Kurils and in Japan as the Northern Territories, at the end of World War II. Aso said the dispute isn't something that can be solved easily.

The dispute has blocked the signing of a peace treaty between the two countries since the war and slowed investment by Japan, the world's second-largest economy, in Russia, the second-biggest oil exporter.

Russian President Vladimir Putin arrived in Tokyo yesterday in his first visit in five years, and is meeting with Japan's Prime Minister Junichiro Koizumi today. They are expected to discuss the possibility of a pipeline to bring fuel supplies to Japan, Asia's second-largest consumer of oil.

A crude oil pipeline to the Pacific ``opens large possibilities'' for Japan to help develop fields in the Russian Far East and Siberia, Putin told a Russian and Japanese economic forum today in Tokyo.

Stronger Ties

Putin will seek stronger economic and security ties this week during his first visit to Japan in five years, as a path to solving the dispute over the four islands.

Russia, which now sells most of its oil in Europe, is negotiating with Japan and China on the direction of the pipeline to export Siberian oil. Japan is lobbying for a 4,100- kilometer (2,563 mile) link to Perevoznaya on Russia's Pacific coast while China wants a 2,400-kilometer pipeline to Daqing in northern China.

Japan seeks Russian oil to reduce its dependence on supplies from the Middle East. Japan's government has said joint development of oilfields in Russia could help resolve the dispute over the islands.

Oil Ventures

In Sakhalin, Japanese companies are investing in at least two of five oil and gas projects that may spend $50 billion to supply Northeast Asia and the U.S. Exxon Mobil Corp., BP Plc and Royal Dutch Shell Plc, the biggest publicly traded oil companies, lead three of the ventures.

The Japanese government and companies have a 30 percent stake in the so-called Sakhalin-1 projects. Oil production will rise to 250,000 barrels a day in late 2006 from an initial 50,000 barrels and an export gas pipeline to China may be built within five years, according to Stephen Terni, president of operator of the project Exxon Neftgas Ltd.

Aso, 65, today said he will make an ``appropriate decision'' over his visits to Yasukuni Shrine in Tokyo should he be appointed as prime minister after Koizumi steps down next September. Aso is one of three politicians which local newspapers have tipped to be Koizumi's possible successor.

War Criminals

Koizumi's Oct. 17 visit to the Yasukuni Shrine, which has memorials of Class A war criminals, sparked criticism from South Korea and China, prompting both countries to cancel planned meetings, including a December summit between President Roh Moo- Hyun and Koizumi.

Aso said relations between Japan and its two neighbors should not only focus on Koizumi's visits to the shrine.

Japan occupied South Korea from 1910 to 1945 and other Asian nations during World War II, committing atrocities that many Asians say the country hasn't fully atoned for.

Koizumi has maintained that his visits to the shrine are conducted in a private capacity.

Aso, who has served as internal affairs minister, education minister, comes from a family of politicians. He is the grandson of Shigeru Yoshida, who served as Prime Minister after World War II.

Prior to his first election success in 1979, Aso was president of his family's business, Aso Cement, and competed in the 1976 Olympic Games in Montreal in the shooting competitions. He speaks English and has studied overseas at Stanford University and the University of London.  

To contact the reporter on this story:

Lindsay Whipp in Tokyo at lwhipp1@bloomberg.net

Last Updated: November 21, 2005 02:08 EST 

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