Japan, Russia aim to solve dispute, tighten ties

TOKYO, Feb 28 (Reuters) Japan and Russia agreed to bolster economic ties in energy and other industries today as they sought to resolve a territorial dispute that has weighed on diplomatic relations for decades.

The feud over the sparsely populated islands known as the Northern Territories in Japan and Southern Kuriles in Russia has prevented Moscow and Tokyo from signing a peace treaty more than 60 years after the end of World War Two.

But the two sides have been trying to deepen ties, with Russia keen for funds to develop its regions in the Far East and Japan eager to tap Russia's booming oil industry to reduce its reliance on the West Asia for its energy needs.

Russian Prime Minister Mikhail Fradkov, wrapping up a two-day visit to Tokyo, called on Japanese businesses to invest more in Russia, quelling concerns over issues such as administrative red tape.

''We are prepared to deal with and resolve various concerns,'' he told a news conference through an interpreter.

''We are working in line with plans to resolve issues of bureaucracy, corruption and lack of law enforcement,'' he said.

Trade between Russia and Japan totalled 13.7 billion dollars last year, just six percent of Japan's trade with China.

FLURRY OF DEALS Fradkov headed a large delegation of Russians, including several cabinet ministers and corporate executives, for discussions of a broad range of cooperation that led to a flurry of deals.

Japan agreed to provide guarantees on syndicated loans to build a new terminal at Moscow's Sheremetyevo international airport, while Japanese truck maker Isuzu Motors Ltd will consider forming a joint venture to produce and sell trucks in Russia.

Japanese Prime Minister Shinzo Abe, while stressing there was room to increase trade and investment, said the two sides should work to resolve their territorial dispute.

The islands, as close as 15 km to Hokkaido, Japan's northernmost main island, were seized by the Soviet Union after it declared war on Japan on August 8, 1945, just before the country surrendered, and Japan has been demanding their return.

''We confirmed that for Japan-Russia relations to work to their full potential, it will be important to resolve the territorial issue,'' he said.

''We agreed to further discuss ways to find a solution that is acceptable to both sides,'' he said.

Abe said Russia's First Deputy premiers Dmitry Medvedev and Sergei Ivanov would visit Japan, while Japan's Foreign Minister Taro Aso would go to Russia by mid-year.

Japanese media have also said Abe may visit Russia this year for talks on islands, which are near rich fishing grounds and close to Russian oil and gas production regions.

Abe said the two sides also agreed to begin talks for Russia to enrich uranium used at Japanese utilities and re-use it at Russian power plants.

Japan has the world's third-largest nuclear power generation capacity after the United States and France, but sends most of its used uranium to Britain and France as it only has experimental uranium enrichment facilities.

Japan's trade minister said yesterday that Russia's acceptance of inspections by the United Nations' nuclear watchdog and both countries' compliance with that body would be necessary, pointing out growing international concern over Iran's nuclear ambitions.

REUTERS BDP KP1729