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How Japan Benefits from the Senkaku/Diaoyu Islands Dispute

Chapter 7

How Japan Benefits from the Senkaku/Diaoyu Islands Dispute

Krista E. Wiegand

Despite strong economic relations between China and Japan, bilateral relations between these two states have been tainted for several decades by a number of disputed issues rooted in historic events. The most tangible evidence of this ongoing tension is the disputed Senkaku/Diaoyu Islands in the East China Sea, occupied by Japan, claimed by China.1 This dispute flares up with enough regularity that there is significant concern among policy makers in the United States (US) about potential militarization of the dispute. The dispute has endured for more than 40 years, with no resolution in sight. Neither state has been willing to offer or agree to sovereignty negotiations involving some form of compromise and territorial concessions, instead “shelving” the dispute for decades at a time.2 This shelving of the dispute essentially means neither state is willing to pursue potential solutions at this time.

Japan’s position on the islands is that no actual dispute exists and the government is therefore unwilling to consider even discussing the dispute with China, let alone compromise and concessions. Despite the fact that Japan maintains effective control of the islands, resolution of the dispute would be in Japan’s favor, particularly since it is speculated that there are massive amounts of oil and natural gas resources in the waters surrounding the disputed islands. Without resolution, Japan has no secure access to these critical resources. Considering the vast oil and maritime resources in the waters surrounding the disputed islands and the vast economic gains both states could acquire through some arrangement of joint development, it is perplexing why both China and Japan refuse to consider such an option, especially since they maintain a relatively close relationship in terms of economic interdependence.

Why then do Japanese governments consistently maintain the same unchanging position regarding the dispute? In this chapter, in addition to discussing how the dispute started, who can claim ownership, and potential solutions to the dispute, the three general questions raised in the introductory chapter, I present an argument about Japan’s motivations regarding the dispute in particular. I argue and demonstrate that the motivation for Japan’s rigid position is not about the value of territory or domestic nationalism and domestic accountability to constituents who may care about the Senkaku Islands, but rather, a strategy of leverage against China and concern for reputation for resolve. By maintaining its rigid position, Japan is able to maintain leverage against China and to demonstrate resolve to other states in the region, particularly South Korea and Russia, with whom Japan also disputes territory.

Research on Dispute Strategies

The management of territorial dispute conflict as a topic of study has advanced in the past decade, mainly because scholars and analysts have realized that territorial disputes are highly pertinent in the stability of the international system since they are the number one cause of war (Huth 1996; Vasquez 1993), they creates dozen of flashpoints each year along borders or in maritime disputes surrounding islands, and they prevent the normalization of bilateral relations among dozens of states. The most predominant areas of research on territorial dispute management and strategies have been about the value of the disputed territory and the importance of domestic accountability.

Value of Territory

Disputed territory can have tangible or intangible value, or some combination of both. Tangible value generally refers to significant economic resources like oil and strategic value, as well as if the territory is mainland territory status compared to offshore islands, and if it has a permanent population. Territory has intangible value if there are ethnic links to mainland population, the territory is considered part of the homeland compared to having a dependency status, or symbolic, nationalist value based on lost autonomy or feelings of attachment to the territory.

In terms of tangible value, the Senkaku Islands are hundreds of miles from both Japan and China and are therefore clearly offshore islands. There is no permanent population on the islands and the islands are not particularly habitable. With regards to strategic value, there is limited benefit for Japan to hold the islands. Though the East China Sea overall holds strategic value for Japan, China, and the US (Valencia 2007), the Ryuku Island chain already dips far south into the East China Sea, providing Japan (and the US) with significant reach. There are no military posts on the islands either (nor room for any), so there really is no strategic value for the islands or for their surrounding waters. Since the islands lack any ethnic or strategic value, the dispute should be more likely to be resolved. Yet, there has been no attempt by Japan (or China) to resolve the dispute since it began in 1971, let alone any offers of territorial concessions or willingness to drop the claim.

Though there is limited strategic value, the disputed islands have enormous potential economic value, not on the islands themselves, since they are barren, rocky, and could not really support habitation, but because the surrounding waters allegedly have oil. The dispute itself could be said to have begun mainly because of suspected economic value, and this factor is a major aspect of the activation of the dispute in 1971. When Japan discovered massive oil deposits under and near the disputed islands in 1967, sudden interest in the East China Sea and other maritime areas increased. A May 1969 report publishing the findings of seismic surveys the year before reported that the continental shelf in that region may “have one of the most prolific oil and gas reservoirs in the world,” comparing it to the Persian Gulf area (Chiu 1999, p. 4). The report also specifically cited that the most favorable area was the 200,000 square kilometers surrounding the Senkaku/Diaoyu Islands. By May 1969, even before a planned Japanese government survey, there were already 4,000 applications for drilling rights filed with the regional Ryukyu government of Okinawa Prefecture and by September 1970, the number of applications was up to 25,000 (Suganuma 2000).

Prior to the discovery of oil under and near the islands, little interest in the islands was shown by Japan, China, or Taiwan. After the discovery of oil, two significant events occurred. First, Japan requested negotiations to revert sovereignty of the islands from US administration to Japanese control. Second, China and Taiwan both began showing interest in claiming the islands as their own. China’s official territorial claim for the islands did not occur until December 1971, six months after the reversion of the islands to Japan. The delay is not surprising, considering that détente with the US was just beginning and claiming the islands while under US administration would probably have been viewed negatively. Once China, as well as Taiwan, started to show signs of interest in claiming the islands, the Japanese government decided to suspend development of the oil deposits around the islands (Suganuma 2000). Though the dispute is rooted in ambiguities of the San Francisco Treaty and interpretations of other historic and legal documents, it is essentially the discovery of oil deposits in 1967 that activated China’s claim. Therefore, the dispute started in December 1971. In terms of who can lay claim to the islands, it depends on whether it is a historic or legal interpretation. As Paul Midford writes in his chapter, China has what appear to be legitimate historic claims, but Japan undoubtedly holds legal claim according to modern international law.

An early estimate of potential oil deposits was 7.5 billion barrels (Stuckey 1975), while a more recent estimate is about 100 billion barrels, enough to provide energy sources to either state for 50–80 years (Curtin 2005; Emmers 2010). Each or both states could gain an exceptional amount of profit from the oil fields. As one analyst notes: “For resource-poor Japan and now import-dependent China, the suspected oil and gas deposits in the contested area are critical to guarantee their respective energy security” (Emmers 2010, p. 57). Both states are only just starting to benefit from the exploitation of natural gas resources in the East China Sea, but not in the vicinity of the disputed islands. After two years and a dozen rounds of negotiations, in June 2008, China and Japan signed an agreement to jointly develop natural gas resources in areas that crossed the median line of the disputed waters, but did not involve any of the disputed waters near the islands. According to the terms of the agreement, Japan would be able to invest in and claim proportional profits from Chinese gas fields already set up. Up to this point, the agreement has only focused on joint development of natural gas resources in waters stretching across what Japan claims as the median line, and have not included any development of oil or gas resources in the disputed zone.

The exact location of joint development has yet to be agreed upon five years later, and the ratio of investment by each state and distribution of profits could lead to future economic disagreements (USA Today 2008). Until both states agree to either settle the dispute or agree to joint development of oil resources, neither state will be able to drill for oil on its own accord without provoking the other state. Even if both states agreed to delink the issue of sovereignty and oil resources, without clearly demarcated boundaries, petroleum companies would be hesitant to start drilling, only to discover later that they placed their rigs on the wrong side of the maritime border (Chung 1998, p. 160). Likewise, oil companies have little interest in drilling near the islands due to political uncertainty and doubts that reserves might exist at all (Downs and Saunders 1998, p. 124). The likelihood of de-linking the issue of sovereignty and joint development of resources is very low. Even if there were a common interest in joint development of oil resources and shared economic gains, “it would be exceedingly difficult for negotiators engaged in preliminary and exploratory talks to bring the subject into the open, let alone implement any such projects” due to “‘homogenous’ sovereignty positions” on each side (Chung 1998, p. 163).

Past research on territorial disputes would predict that strategic and ethnic value of the disputed territory makes it less likely for Japan to attempt resolution, while economic value makes it more likely for Japan to attempt settlement (Huth 1996; Huth and Allee 2002). Other research would predict that higher salience overall would make attempted settlement more likely (Hensel 2001). On the salience scale ranging from 1 to 12 with 12 being the most valuable, the Senkaku/Diaouyu Islands have a score of 7 (Hensel and Mitchell 2005). With a score of 7, this would mean that the value of the islands should make it just slightly more likely for Japan to attempt settlement of the dispute, but this has obviously not happened. Expected economic value should influence Japan to negotiate with China, rather than stand firm, as is its long standing strategy. If anything, economic value should make it more likely for Japan to consider some territorial concessions, not less likely. Therefore, the value of the territory cannot explain the dispute strategy of Japan.

Domestic Accountability

Another common argument about why decision makers persevere in territorial disputes is because of domestic accountability. The overall argument is that leaders will often avoid resolution attempts due to their fears that they could be punished by opposition groups, the selectorate (those who actually influence political decision making like the military and elite), or the public if the leaders offer to concede a territorial claim or ownership to the adversary. An abundance of literature confirms that foreign policy failure makes incumbent decision makers vulnerable to stronger opposition and removal from power, especially in democracies like Japan (Bueno de Mesquita, Morrow, Siverson, and Smith 2003; Fearon 1994; Gelpi and Grieco 2001). Assuming that decision makers seek to remain in power, decision makers have incentives to 1) pursue policies that will be supported by their power base, and 2) avoid risky policies that could lead to domestic punishment. Policy successes “may help deter political opposition, strengthen a leader’s hold on office, and increase the stock of political capital upon which leaders can draw to advance their broader policy agendas” (Huth and Allee 2002, p. 71).

Because of the salience of disputed territory, territorial disputes are believed to be a prominent concern of domestic constituents. For example, ruling political parties of the Japanese government have stood firm on their unwillingness to compromise with Russia on the disputed islands of the Northern Territories/Kurile Islands mainly due to fear of punishment by their constituents, as admitted in surveys and interviews of government ministers. Maintaining the Japanese claim for the Northern Territories/Kurile Islands has resulted in almost guaranteed domestic support for every Japanese governing political party since 1951, even at the cost of strained Russo-Japanese relations (Kimura and Welch 1998).

Policies that can lead to domestic punishment include offers of negotiations to resolve the dispute, and especially any offer of territorial concessions. Such policies would lead to domestic punishment because these policies involve some action that typically contradicts the longstanding position of the government, which in Japan’s case has emphasized unwillingness to compromise over any of its territorial disputes. Domestic punishment is likely to result because the domestic populace does not usually tolerate leaders that have a record of lacking credibility, therefore leading to domestic punishment, which can range from decreased public support to removal from office through forced resignation, a coup, or elections. Therefore, leaders who want to stay in power should be particularly concerned with their reputations based on credibility since constituents often use credibility or the potential for credibility as one of the bases for choosing a leader.

Leaders who want for themselves or their party to remain in power should therefore be particularly cautious about their policy decisions (Huth and Allee 2002). This means that leaders should be hesitant to engage in any policies that contradict government rhetoric about the territorial disputes, particularly resolution attempts since such actions would very likely damage their credibility, threaten their reputation, and more importantly, increase the likelihood of domestic punishment. Therefore, leaders should be sensitive to policy choices that could damage their political stability and avoid settlement options that contradict previously stated government discourse about the disputed territory.