As economic partners, Japan and Russia are made for each other because each has what the other lacks. Russia's natural wealth could compensate for Japan's lack of mineral resources, and Japanese investment could assist cash-starved Russia.

But the territorial dispute over the Kurile Islands blocks potential opportunities. For 40 years, the Soviet Union didn't even recognize that there was a dispute. Mikhail Gorbachev admitted that the issue existed; Boris Yeltsin hinted that a solution could eventually be found. The Japanese were expecting Vladimir Putin to take the next step, but his visit to Japan dashed these hopes.

The Japanese know everything there is to know about the Kuriles, which they call the Northern Territories. From the coast of Hokkaido, you can see the Habomai cliffs and Kunashir volcanoes.

But most Russians have only vague knowledge of the islands. Some even think they are just a useless collection of rocks, though the largest island, Iturup, is more than 200 km in length. Others say that the fish and mineral resources of the South Kuriles and their waters are worth $300 billion, though it's not clear why Russians are still so poor if they have such wealth.

Russian sailors were indeed the first to discover the Kuriles – the first Europeans, that is. The Japanese knew of the neighboring islands long before. As for legal arguments, the first bilateral treaty, the 1855 Simodsky agreement, drew the border between the islands of Iturup and Urup; that is, Russia recognized that the South Kurile Islands belonged to Japan.

Subsequent treaties saw the Kuriles and Sakhalin change hands repeatedly, but at no point were the South Kuriles – Iturup, Kunashir, Shikotan and the Habomai archipelago – ever in Russia's possession.

It was the 1945 Yalta conference that decided to hand Russia possession of all of Sakhalin and the Kuriles. Japan, of course, was not present at that conference. Recognition of the Yalta conference agreements was one of the conditions of the San Francisco peace treaty signed by Japan in 1951. But a fatal mistake on Stalin's part meant the Soviet Union didn't sign the treaty, making it look like both sides renounced the Kuriles. Japan's argument is that the four islands it claims are not part of the Kuriles group. This is why Japan always refers to them as the Northern Territories.

But this has done nothing to help return the islands, occupied by the Soviet Union after the war against Japan had ended. For three years, they were seen as temporarily occupied territories, and only in 1948 did the Soviet Union annex them and deport the local Japanese population.

In 1956, Nikita Khrushchev approved a declaration returning Shikotan and Habomai to Japan, and promising further negotiations on Iturup and Kunashir. But as the Cold War was intensifying in 1960, the Soviet government backed out of its promises.

Then, during preparation for Yeltsin's 1992 visit to Japan, the Kremlin planned to return to the 1956 declaration, but the ongoing battle with parliament made this impossible.

Surveys showed that three-quarters of Russians were opposed to returning "Russian land in the East" to Japan. This was the natural reaction of a public still reeling from the collapse of their empire and loss of European allies. No one wanted to hear of concessions. In the end, Yeltsin's visit was cancelled the day before he was due to leave.

Today, it is on mainland Russia, where little is known about the Kuriles, that there is still opposition to returning them. Islanders themselves are not averse to the idea of becoming Japanese and have even tried to organize referendums on handing over the territory.

This change in mood came after a 1993 earthquake that convinced islanders that Moscow was in no position to help them, while Japan could. Another factor was visa-free travel in the border region, which gave the Kurile residents a chance to see how much better people lived in northern Hokkaido – one of the poorest parts of Japan.

Economists know that the talk of the region's natural resources is not a real argument for hanging on to the islands. And is it right to talk about the natural wealth when the legal issues still remain? If the islands are not ours by right, then no matter what their resources, we have to give them back.

No amount of natural resources on the Kuriles could replace the potential wealth Russia would gain if Japanese investment were to start flowing in. But what dominates the issue at the moment is neither a sober calculation of Russia's real interests, nor a legal approach. What dominates are imperial emotions and political intrigue, playing on the wounded national feelings of a country going through a strategic crisis.