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#2 - JRL 6402
Financial Times (UK)
13 August 2002
Russia's wary Far East begins to open up to outsiders
By Andrew Jack
When Victor Larin, a university professor in Vladivostok in Russia's Far East, wrote a pamphlet in the late 1990s criticising the anti-Asian rhetoric of the local governor, he was demoted. After officials failed to ban its sale, they bought up all remaining copies.
Under Sergei Darkin, the new governor elected a year ago, Mr Larin has been reinstated as director of the institute of history, archaeology and ethnography of the peoples of the Far East.
It is one small sign that in a region bordering North Korea and China to the south, and Japan across the sea to the east, there may be the start of a tentative openness among policymakers towards outsiders after manipulation by the former governor, Yevgenny Nazdratenko, of the local fear of the "yellow peril".
Superficially, there are clear signs of Asian influence in Primoriya, the region which includes Vladivostok. In an old textile factory on the city outskirts, Kyung Jung is supervising the daily production of 5,500 sweat-shirts to be sold to the Gap clothing chain in the US.
His team of eight expatriate managers from the South Korean company Sunghan supervises 500 local workers. While he complains about labour shortages, restrictive legislation and working practices, the absence of Russian textile quotas with the US makes the city an attractive location for his operations.
There are Korean cars and buses in the streets; a Hyundai hotel overlooking the city; a mobile telephone operator; and some 25 textile producers. Two hours' drive inland, there is even a traditional village, built with donations from Korean construction companies. Local newspapers carry advertisments for Koreans - most from North Korea - willing to undertake house repairs and construction work.
There is also a strong Chinese presence. There are Chinese markets in Vladivostok and other centres such as Ussurisk; Chinese builders repairing the pavements; and a growing number of Chinese tourists.
The Chinese are also significant consumers of Russian timber, tiger skins and bones (for medicine), ginseng roots and bears, according to Sergei Biriznyuk, head of the Phoenix Fund, an ecological group.
This Asian presence - and proximity - has helped provoke periodic waves of hostility particularly against the Chinese, who always saw Primoriya as their own. In the 1970s, for example, when Beijing and Moscow fell out, Vladivostok changed a number of its street names that historically reflected the city's Chinese connections.
Today, "there is widespread fear of the Chinese", says Prof Larin. "It is because China is very large, heavily populated, and different. Plus there is instability on the Russian side. For the next 10 years, what China wants is a calm, profitable border. There is no reason to break relations with Russia through acts of aggression."
However, academic studies suggest that the Asian presence is modest. For example, there are only a few thousand Chinese present at any one time in the region, representing less than 2 per cent of the population.
Mr Darkin is sensitive to the concerns over Asian influence. Following the recent federal legislation permitting the sale of agricultural land, he says he will prevent Chinese purchases within 20km of the border.
But, in other respects, he has shown a new openness. He has travelled frequently in the region, and is discussing joint Sino-Russian projects, including oil exploration and the revival of long-standing proposals for trade zones at the border.
This recognition of the need to open up is also reflected in the arrival of a number of Moscow-based companies, including the steel producer Severstal, the pipeline operator Transneft, and the bank MDM. This is in sharp contrast to Mr Nazdratenko, who oversaw a region in which local business groups dominated.
Overseas investors remain more hesitant, however. "We had an image of a Russia that would be open to the world in the early 1990s," says Takamatsu Akira, the Japanese consul-general in Vladivostok. "Companies rushed in, but the expectations did not prove to be real, and they retreated."
The Japanese also have diplomatic representations in Sakhalin and Khabarovsk. Yet there is little business or expatriate presence to match. Some point to the unresolved political dispute over ownership of the Kurile Islands - called the Northern Territories by the Japanese, who claim them.
There are more concrete reasons for shying away. Like other foreign investors, the Japanese have been defrauded out of past investments and have found little redress through the courts.
Apart from a change in rhetoric, Mr Darkin's principal achievement so far - with considerable help from Moscow and the luck of a mild winter - has been to prevent the repetition of the winter energy crisis of 2000, which destabilised Mr Nazdratenko and led to Kremlin pressure for his departure.
As one local diplomat puts it: "Darkin has survived. Now he has got to achieve."
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