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Islands disputed with Japan feel Russia's boom

KURILISK, Kuril Islands -- Russia's economic boom has spread to its Far East islands claimed by Japan, leading islanders to turn their backs on Tokyo's trump card of financial aid in a deadlocked territorial row.

"Of course I feel our economy is picking up," said Roman Kazachikov, a 27-year-old bus driver in Iturup, or Etorofu, the biggest of the four disputed Kuril islands, known in Japan as the Northern Territories.

"All of my colleagues got a salary hike the other day, although prices are also rising," Kazachikov said with a shrug but a smile on his face.

Irina Sypkina, a 40-year-old banker, said: "People's savings are now increasing in accordance with the improvement of the national budget. But there is still room for further progress."

Soviet troops seized the islands days after Japan's surrender in World War II. Russians who migrated here found an impoverished backwater with few industries other than fishing.

But construction workers are now working vigorously to build a pier and a breakwater in Kitovy Bay, central Iturup, where barges are still a major means of transport sailing between the cove and ships anchored offshore.

A new road has been carved through the woods near Kurilisk, the island's biggest village, going to the site of an airport scheduled to open in 2010 at a cost of 1.26 billion rubles (US$44 million).

"People's trust in the government is rising because infrastructure projects have been carried out as planned, which did not happen before," said Alexei Sakunoff, a local newspaper reporter.

As the job environment has seen progress, life is also growing less harsh for the 16,800 residents of the windswept islands in the northern Pacific Ocean.

At a sports and leisure complex, residents in their teens and 20s were playing billiards and working out at a gym. People at the complex can also enjoy tennis and — a Japanese sport — judo.

"Life appears to be getting better," said Vitari Pereboev, a 58-year-old dairy farmer.

"If you want a job, you can find a decent one. People can have decent lives now," he said.

Pereboev said he used to expect that the economic future would lie with Japan as Russia plunged into the economic doldrums following the collapse of the Soviet Union.

But Russia's economy is now rapidly growing, buoyed by record high oil and gas prices, increasing the confidence not only of Moscow but of the islanders.

"We had expected Japanese support for our agriculture, but that didn't come true," he said. "I don't expect anything now."

Japan, the world's second largest economy, has limited assistance to humanitarian gestures in times of need, while repeatedly suggesting full-fledged aid if Moscow returned the islands.

Moscow and Tokyo have never formally ended World War II due to the dispute. Russia expelled all 17,291 Japanese islanders and replaced them with Russians who live within sight of Japan's main northern island of Hokkaido.

The strength of the islands' economy lies in fish — of which Japan is an avid consumer.

Gidrostroy, the Kurils' biggest business group with interests in fishing as well as construction and real estate, built its second fish processing factory on Iturup island last year, introducing a state-of-the-art conveyor system.

Wearing working coats and white caps, more than 100 workers, mostly women, processed trout and salmon brought through huge vacuum pipes coming straight from fishing vessels at the port.

"Demand for our products is growing rapidly," said a senior official at the factory, which can process 400 tons of fish a year.

The firm is shipping fish products to Russia as well as Japan, China and South Korea, the official said, adding that it had already recovered its investment in the new factory although he declined to disclose figures.

The local government is also upgrading a state-run geothermal power plant at Mount Baransky, an active volcano, where steam and hot water were erupting right and left.

"The government's expectations of our power plant are really high as demand for electricity is increasing rapidly," said Vasili Lebedev, head of the geothermal power plant.

Japanese, paying a rare visit here through an exchange program for former islanders, admitted they saw economic progress.

"I used to think that the islands were far behind the times," said Yoshinori Shimamoto, a Japanese education official who was on the two-day visit in mid-August.

"Rather than providing economic assistance, we may need to take the view of considering economic engagement with the islands," Shimamoto said.

Yutaka Naiki, a Japanese teacher who was also part of the delegation, said: "I sensed their strong confidence in the economy. I'm afraid that it could affect territorial negotiations and ways to provide support in the future."

Late Russian President Boris Yeltsin agreed after the Soviet Union's collapse to negotiate with Japan over the dispute, but talks have fizzled out.

His successor Vladimir Putin has recently pursued a more muscular diplomacy, emboldened by Russia's growing economy.

In a bid to revive momentum in talks, Japanese Prime Minister Shinzo Abe in June unveiled a plan to help develop Russia's Far East including technical support for the energy sector, the environment, telecommunications and infrastructure.

But Sergei Luzyanin of the Moscow State Institute of International Relations said that compared with the 1990s, "there's not a sharp necessity" for Russia to discuss the islands.

"It is true that Russia is taking a hard line on the territorial dispute after it gained confidence through its energy boom," said Shigeki Hakamada, an expert on Japan-Russia relations at Tokyo's Aoyama University.

"Some Russian people say, 'We don't need Japan because we have money'," Hakamada said.

However, Japan has also seen its confidence grow and then slide when its "bubble economy" of soaring growth collapsed in the early 1990s.

"This may be a Russian version of the bubble economy. There is no guarantee of continued expansion," said Hiroshi Kimura, an emeritus professor of Japan-Russia affairs at Hokkaido University.

"What Japan can do is, for instance, provide technological support for energy-saving," Kimura said. "Russia's final goal is to get out of an energy-dependent economy."

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