A massive bridge and tunnel project linking the countries is a signal that the process has begun
Paul Goncharoff, an American who has been working in financial services, mining and energy in Russia and Japan for over 40 years joins the program.
This is a highly complex engineering project, and contains two projects: a bridge and tunnel from the Russian mainland to Sakhalin, and another bridge between Sakhalin and Japan. Paul nevertheless feels that it will happen.
"…It melds very well with the ‘One Bridge One Road' concept. This bridge and tunnel project will create a much tighter link with the Japanese market, and China is interested in that as well,… the mainland link between Russia and Sakhalin is already happening."
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The project involved huge infrastructure work. Russian railways, for example, will be laying hundreds of kilometers of track. Paul comments: "Russian Railways is no stranger to massive projects if you look at the territory of Russia. They have been sharpening their expertise as well, with high-speed rail link projects to China. The whole One Belt One Road project is largely rail…"
Host John Harrison brings up the subject of the absence of a WWII peace treaty between Russia and Japan. Japan and Russia are still technically at war. Paul replies:
"This is because of the dispute over the Kuril Islands. In fact, all of Japan's major companies have been doing business in Russia since the Soviet days, so there is politics and there is business.
I believe that President Putin and Prime Minister Abe are seeking to find a compromise. How that will be packaged — I don't now, but the Japanese are practical people, the Russians are practical people, both are pragmatic. It's difficult for Japan, because let's face it, even in this era of gradual de-dollarization,
Japan is essentially a suburb of the USA. It's the aircraft carrier for the USA in the Pacific…. However, you have to go with the flow. We have seen over the centuries various changes in alliances and preferences. The Japanese are practical and pragmatic and they can read the writing on the wall. China and Russia are their neighbors. America is over the pond. The Pacific is not a small lake, it is a very large body of water. One can project all kinds of scenarios, but it makes good business sense to join the region and its neighboring opportunities."
The United States has been the major contributor to major infrastructure projects in the Asia Pacific region, however despite America's great works, this seems to be changing. "This trend has been going on since the mid to late 1970s." Paul comments. "The post-war years and the huge investment into Japan was really to allow for Korea and the American involvement in Korea, hence ‘aircraft carrier' Japan.
That required a very quick turnaround from the American attitude of the immediate post-war years and the whole war mentality to saying, Ah-Ha! Japan now is like our best ally in the Pacific so let's go forward. So, Japan benefitted from a kind of Marshall plan on steroids. If you recall the ‘Japanese miracle' that happened in the 1970s and the early 1980s.
We saw the huge and incredibly rapid expansion of Japanese industry, trade, you name it. They were financing everything. I remember when they bought the Rockefeller Centre in the middle of Manhattan, and everyone was up in arms… For them it is just business."
Paul sees the money for this new project been raised collectively for a group of countries, including Russia, Japan, China and quite possibly Korea. This is a game changer with South Korea as this is in their interests as well. This all could be seen as a sign of the formation of a new consciousness within Asia that we can group together and pull off major projects.
"Getting back to practicalities and pragmatics — they are neighbors. When you are talking about America you are talking about projecting power economically and militarily from a very long distance. And here we are, it's a neighborhood, and I mean that in every sense of the word….At long last it makes sense to get down to the business table and do business."
When this project happens, it could generate a boom in investment into Sakhalin and Hokkaido islands, not to mention the Vladivostok area. Could this be the new destination for investment and pension funds? Paul comments: "Definitely yes, but don't forget the always questionable buggy-bear — the Kuril Islands. How that will end I don't know. There is even talk of potential joint governance.
I have no doubt that it will be resolved….For Russia, this project does open up trade channels with Japan, for two-way trade. Japan is a huge market for Russian energy, resources, materials, ores, metals, you name it. Japan has an incredible technology base, systems and expertise base as well as a consumer base…. Japan will benefit from a rail link directly through Russia into Europe as well which will be cheaper than sea routes even if the Northern Sea Route opens…. It's a win-win situation…"
There will undoubtedly be opposition to this project, however, as Paul says:
"The project has certain inertia, it is inevitable. Time wise, it won't be tomorrow, but the trend is very clear. We HAVE to go to a multi polar world, economically, politically and geographically….20 years ago, when Russia was on its needs, this could not have been done. Now a lot has changed and these countries are now able to seriously consider the possibility of building these bridges, in many more ways than one.