Aid Linked to 4 Islands, Japan Will Tell Soviets : Diplomacy: When Gorbachev visits, Tokyo will insist that Moscow recognize its sovereignty.

Japan will accept nothing less than Soviet recognition of its sovereignty over all four northern islands seized by Moscow after World War II as the price for economic aid and better relations when President Mikhail S. Gorbachev visits this month, a senior Japanese Foreign Ministry official said Wednesday night.

If Gorbachev is prepared to recognize Japan’s sovereignty over the islands, “there is room for both sides to exercise their wisdom and work out a variety of options” for their eventual reversion to Japan, he said. Japan, he added, will not insist on their immediate return.

The disputed islands--Etorofu, Kunashiri, Shikotan and Habomai--are off Japan’s northernmost main island of Hokkaido, at the southern end of the Kuril Island chain.

The official, speaking on condition of anonymity, indicated that Japan would help the Soviet Union win a more prominent position in Asia if Gorbachev proves forthcoming on the territorial issue.

The diplomat, however, denied Japanese media reports that the government is prepared to offer a specific amount of aid--as much as $28 billion--in exchange for Soviet recognition of Japanese claims to the islands. No consultations either within the government or within the ruling Liberal Democratic Party have been conducted on any aid figure, he insisted.

Nonetheless, a Soviet agreement on sovereignty would induce the Japanese government to provide “financial assistance” and “to pave the way for a more secure climate for (Japanese) investment” in the Soviet Union.

Gorbachev, who will be here from April 16 to 19, is the first Soviet leader ever to visit Japan. He is believed to be in search of Japanese economic aid as well as a platform from which to project a new Soviet role in Asia, a region the Soviet president described to Foreign Minister Taro Nakayama last January as “the most dynamic in the world.”

The Japanese diplomat said he expects Gorbachev, “aiming at an Asian-Pacific audience,” to elaborate upon his earlier proposals for new pan-Asian security arrangements. Prime Minister Toshiki Kaifu and President Bush, in their meeting today in Newport Beach, are expected to discuss how to deal with the Soviet Union’s new moves into Asia, the diplomat said.

Moscow’s interest in Asia, the diplomat said, could make Gorbachev more amenable to compromise with Japan over the thorny territorial issue, which has prevented the two nations from signing a peace treaty ending World War II between them.

“The Soviet Union wants to play an active role in Asia and the Pacific and become the beneficiary of the region’s dynamism. (As a result), the Soviets understand that they cannot ignore Japan politically or economically (and) must build a solid base for stable relations with Japan,” he said.

Japan, he indicated, could help Moscow gain membership in Asian and Pacific institutions and “clubs,” such as the 12-nation Asia and Pacific Economic Cooperation (APEC) grouping that was launched in 1989.

A visit here last week by Soviet Foreign Minister Alexander A. Bessmertnykh left Japanese officials feeling that “Gorbachev hasn’t made up his mind--and probably won’t do so until shortly before his departure” on what package he will offer on the territorial issue, the diplomat said.

A breakthrough on the territorial issue, the diplomat said, would melt icy Japanese sentiment toward the Soviet Union. But he predicted that public opinion would not change so much that Japanese would no longer want their security alliance with the United States.

“Many people think that the core of our diplomacy is strong relations with the United States. Although arrogant young Japanese businessmen are trying to be proud of Japan as an economic superpower, if relations with the United States were cut off, could Japan really survive?

“The Soviet Union, obviously, can’t be a substitute. And as long as the Soviet military power remains strong, Japan needs a nuclear umbrella,” the diplomat said. “That is our fundamental security policy.”

The diplomat disclosed that Foreign Minister Nakayama confirmed with both former Foreign Minister Eduard A. Shevardnadze and with Bessmertnykh, his replacement, that the Soviet Union regards Japan’s security alliance with the United States as compatible with a Soviet-Japan peace treaty. Previously, Moscow had insisted that American troops be withdrawn from Japan for any concessions on the northern islands dispute.