Beijing welcomed the new Fukuda government and Japan’s new prime minister made clear his commitment to improving Japan’s relations with its Asian neighbors and building the strategic relationship with China. However, the new government in Tokyo soon became preoccupied with the passage of a new antiterrorism special measures law to reauthorize Japan’s refueling operations in support of UN operations in Afghanistan, Defense Ministry scandals, and the continuing pension fund imbroglio.

Despite repeated commitments by political leadership in Tokyo and Beijing to joint development of the oil and natural gas resources in the East China Sea, there is no tangible resolution of the issue in sight.  At the end of the year, joint development remained an aspiration. Even as the prime minister prepared for his late December visit to China, government and diplomatic sources were downplaying expectations that the visit would produce agreement on the issue. Meanwhile, as underscored by the first meeting of the Japan-China High Level Economic Dialogue, economic and business ties continued to strengthen the foundation of the bilateral relationship.

The final quarter of 2007 was eventful and left observers in both Japan and South Korea cautiously optimistic about bilateral relations. Both Japan and South Korea chose new chief executives this fall, and both of them promised to search for more collaboration and to begin repairing relations between the two countries. Halting progress on North Korean denuclearization through the Six-Party Talks led to hope that momentum could be sustained, although Japan for the time being has chosen to be supportive but skeptical of North Korea’s promise to denuclearize, and continued its sanctions against the DPRK. Indeed, North Korea’s missed deadline for declaring its nuclear programs was a reminder that progress in relations with North Korea is never straightforward or easy. Although no country has decided to forego the process, it is unclear how relations between North Korea and other states in the region will evolve in 2008.

Succession politics preoccupied both Moscow and Beijing in the last quarter of 2007. The 17^th Congress of the Chinese Communist Party in October – which positioned China’s fifth generation of leadership, particularly Xi Jinping and Li Keqiang, for the post-Hu Jintao China five years from now – paled in comparison to Putin’s surprising posturing in early December to shape Russian politics beyond 2008. If his “Operation Successor” is implemented, Deputy Prime Minister Dmitri Medvedev would be elected Russian president in March 2008 and Putin would be prime minister for the next four to eight years. Then, Beijing may well live with Putin’s leadership rather than his legacy for the next 16 years as he would be eligible to “succeed” Medvedev as Russian president after Medvedev’s first or second term.

Russia and China, meanwhile, continued to interact at global, regional, and bilateral levels in various issues areas. The third Russia-China-India trilateral foreign ministerial meeting was held in late October in China’s northeastern city of Harbin. This was followed by the sixth annual prime ministerial meeting of the Shanghai Cooperation Organization (SCO) in early November in Tashkent, Uzbekistan. A few days later, Chinese Premier Wen Jiabao traveled to Moscow for the 12^th Sino-Russian prime ministerial annual meeting. By the end of year, bilateral trade volume reached an unprecedented $47 billion after nine consecutive years of growth from 1999 when Putin began his tenure in the Kremlin. Nevertheless, Putin’s presidency has also kept the long-expected Russian oil pipeline from extending to China.

India’s relations with countries in the Asia-Pacific region during 2007 were wide-ranging as New Delhi sought to consolidate and expand ties with both small and large countries from Singapore to Australia to South Korea. With the U.S., India was on the verge of a landmark agreement on civil nuclear energy cooperation. But in India’s relations with both Asia and the U.S. there was unfinished business. In the case of Southeast Asia for example, the failure to conclude an FTA agreement despite long, complex and sometimes quite testy negotiations blunted what has generally been a positive if incremental trajectory in India-Southeast Asia relations. With China, India’s relations crawl forward year by year with little progress on fundamental issues such as the border/territorial dispute. With Japan, for all the excitement of the Abe-Aso tenure with India, the facts on the ground, especially on economic relations, remain limited. There are some more interesting openings for India in the region such as relations with Australia and South Korea, but they too are somewhat unusual rather than an established pattern. What is undeniable is that India is now a thread in the fabric of Asia. Similarly, despite the failure of the U.S. and India to conclude the civilian nuclear energy deal in 2007, the thickness of U.S.-India relations is unlikely to be diluted, even if it will take a lot of work from both Washington and New Delhi to keep them going.

Multilateralism was the order of the day in the Asia-Pacific this quarter. Two sessions of the Six-Party Talks and a number of associated bilateral and multilateral working group sessions were held, culminating in a “breakthrough” at quarter’s end, at least in terms of the disablement of North Korea’s nuclear facilities at Yongbyon. The ASEAN Regional Forum (ARF) and associated 10+X ministerial meetings took place amid reports of steady progress on the development of ASEAN’s first Charter. The annual Asia Pacific Economic Cooperation (APEC) Leaders Meeting resulted in rhetorical commitments to combat global warming and move the Doha round of trade talks forward, while President George W. Bush met for the third time in a summit with assembled ASEAN leaders along the APEC sidelines. The failure of Secretary of State Condeleezza Rice to attend the ARF meeting (her second miss in three attempts) and the cancellation of Bush’s follow-on visit to Singapore (for what would have been his first full summit meeting with ASEAN leaders) renewed concerns about the U.S. commitment to the region, despite the deepening of the U.S.-ASEAN Enhanced Partnership. Multilateral military cooperation included major exercises in the Indian Ocean and Central Asia by what some portray (inaccurately?) as emerging rival blocs. Democracy watchers continued to keep a close eye on Bangkok’s slow return to democracy and election dynamics in Seoul and Taipei, even while expressing revulsion over the latest giant step backward taken by the military junta in Rangoon.

The Liberal Democratic Party (LDP) was defeated in the July 29 Upper House election and lost its majority to a coalition led by the Democratic Party of Japan (DPJ).  Abe Shinzo vowed to stay on as prime minister despite calls for his resignation, reshuffling his Cabinet in late August and then continuing diplomatic initiatives in meetings with President George W. Bush and others at the APEC summit in Sydney.  However, presented with news from his doctors that his ulcer-related health problems were now chronic and facing intractable opposition from DPJ leader Ozawa Ichiro to an extension of the government’s counterterrorism law in support of Operation Enduring Freedom, Abe suddenly resigned a week after the Sydney summit.  The quarter came to a close with Fukuda Yasuo succeeding Abe and vowing to forge ahead with economic reforms and strong support in the war against terror.  But Fukuda only has three months to win back public support as the Diet could deadlock during contentious budget negotiations early next year, forcing an election for the more powerful Lower House by the spring.  Such a showdown seems likely, given Ozawa’s pledge of a no-holds-barred fight to destroy the LDP.

Continued recalls of Chinese-made products prompted actions by both the U.S. and China to shore up consumer confidence and enhance bilateral cooperation on food and product safety. Presidents George Bush and Hu Jintao discussed a broad range of economic and security issues on the sidelines of the APEC leaders meeting in Sydney.  Treasury Secretary Henry Paulson traveled to China at the end of July to prepare for the third round of the Strategic Economic Dialogue (SED) scheduled for December amid attempts by Congress to pass legislation that would punish China if it does not revalue its currency.  U.S. Chief of Naval Operations and Chairman of the Joint Chiefs of Staff- designate Adm. Mike Mullen made a six-day visit to China during which he was given unprecedented access to China’s navy.

In an historic breakthrough at the Six-Party Talks, North Korea committed to disabling its Yongbyon nuclear facilities and declaring all its nuclear programs by Dec. 31, 2007. It also pledged not to transfer nuclear materials, technology, or know-how.  In exchange, the U.S. agreed to move toward normalizing relations with Pyongyang by fulfilling its commitment to take North Korea off the list of state sponsors of terrorism and end the application of the U.S. Trading with the Enemy Act as Pyongyang fulfills its denuclearization commitments.

North Korea’s agreement in the nuclear negotiations created a positive atmosphere for a successful North-South summit, held Oct. 3-4 in Pyongyang.  In their summit declaration, signed by President Roh Moo-hyun and Chairman Kim Jong-il, the two Koreas pledged to work together on security, economic and humanitarian issues while making only passing reference to smoothly implementing the Six-Party Talks agreement. Significantly, the declaration also explicitly acknowledged that “the South and the North both recognize the need to end the current armistice regime and build a permanent peace regime.” According to U.S. Ambassador to South Korea Alexander Vershbow, Washington and Seoul “have already begun consultations…in order to develop a common approach” to this issue.

As the ratification process for the Korea-U.S. Free Trade Agreement (FTA) moved ahead, Seoul resumed imports and inspections of U.S. beef.  South Korea seemed to take seriously the warning of U.S. Secretary of Agriculture Mike Johanns that the Congress would not ratify the FTA as long as restrictions on U.S. beef remain in effect.  In early September, the South Korean government submitted the FTA to the National Assembly for ratification.

Finally, in a change long sought by South Korea, President Bush signed into law in early August a measure that will allow South Koreans to visit the U.S. without a visa, for a period of up to 90 days.  The change is set to go into effect in July 2008, at the time the Korean government is expected to issue biometric “e-passports” to its citizens.

Despite the progress made on several fronts, there was also an undercurrent of tension that marked the relationship between both Koreas and the U.S. throughout the quarter. Nevertheless, each time the tension bubbled to the surface both sides seemed intent on smoothing over the differences and moving on with the issue at hand.

Any casual observer of the U.S. and Russia recognizes the deterioration of relations since the beginning of the war in Iraq in 2003.  Until recently, this entailed diplomatic lectures, energy nationalism, spying, Great Game politics in Central Asia, and a worsening opinion of one another among the general publics of both nations.  This past quarter saw the re-emergence of something not seen since the days of the Cold War: military posturing.  This has taken the form of military exercises, increased military expenditures, a re-emphasis on arms exports, a race to claim territory, and actual “meetings” of armed personnel in the skies and in the sea lanes around the Eurasian periphery.  The primary points of contention that have existed since 2003 continue to harm relations (Iraq, Iran, the former Yugoslavia, and missile defense, among others), but now Moscow has taken the next step in reasserting itself as a global power: bolstering its long-beleaguered defense establishment.

Asia’s largest multilateral naval exercise in decades took place in the eastern Indian Ocean Sept. 4-9, involving ships and aircraft from the U.S., India, Japan, Australia, and Singapore.  Extensive combat, antiterrorism, and humanitarian assistance scenarios were included. President Bush condemned the Burmese junta for its brutal suppression of anti-regime demonstrations. Secretary of State Condoleezza Rice bypassed the annual ASEAN Regional Forum gathering for the second time in three years while President Bush postponed the U.S.-ASEAN summit originally scheduled for September and left the Sydney APEC summit a day early, demonstrating that Asia’s importance continues to take second place to Washington’s Middle East tribulations. Antiterrorist support dominated U.S.-Philippine relations this quarter. The Indochinese states were featured in several U.S. statements on trade and human rights in Vietnam, Hmong refugees from Laos, and counterterrorism training for Cambodia. Washington continued to press for the restoration of democracy in Thailand, looking forward to elections in December.