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Viewing cable 09VLADIVOSTOK48, OVERVIEW OF JAPANESE BUSINESS ON SAKHALIN

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Reference ID Created Released Classification Origin
09VLADIVOSTOK48 2009-04-13 07:34 2011-08-24 01:00 UNCLASSIFIED Consulate Vladivostok
VZCZCXRO8149
RR RUEHCHI RUEHDBU RUEHFK RUEHHM RUEHKSO RUEHLN RUEHNAG RUEHPB RUEHPOD
RUEHYG
DE RUEHVK #0048 1030734
ZNR UUUUU ZZH
R 130734Z APR 09
FM AMCONSUL VLADIVOSTOK
TO RUEHC/SECSTATE WASHDC 1121
INFO RUEHXD/MOSCOW POLITICAL COLLECTIVE
RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION COLLECTIVE
RUEHKSO/AMCONSUL SAPPORO 0063
RUEHVK/AMCONSUL VLADIVOSTOK 1224
UNCLAS VLADIVOSTOK 000048 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON RS
SUBJECT: OVERVIEW OF JAPANESE BUSINESS ON SAKHALIN 
 
1.  Summary.  Vladivostok Political Officer met with members of 
the Japanese community on Sakhalin to discuss the region from 
the Japanese perspective.  Though the number of Japanese 
citizens living on the island has dwindled in recent years, many 
remain as part of the Sakhalin II oil and gas project.  The 
presence of a Japanese Broadcasting Corporation bureau in the 
city shows that there is a certain level of interest in the 
region, and Hokkaido-based businesses are involved in some local 
construction projects. 
 
2.  During his recent trip to Sakhalin, Vladivostok Political 
Officer met with Mr. Kobayashi, Consul for Political and 
Economic Affairs at the Japanese Consulate in Yuzhno-Sakhalinsk 
to discuss Japanese economic activity on the island.  He said 
that the number of Japanese citizens on the island has decreased 
from over 300 two years ago to 173 today.  Most of those 
remaining are related to the oil and gas industry.  There are 
still about 100 ethnic Japanese who continued to live on the 
island after the end of World War II. 
 
3.  Kobayashi acknowledged that apart from Mitsui and 
Mitsubishi, which are partners in the Sakhalin II project, there 
is very little Japanese investment on the island.  He mentioned 
that Korean investors are significantly more active there. 
Kobayashi suggested that the "incident with the Santa Resort 
Hotel" is the likely reason for this.  That hotel is considered 
the first world-class hotel on Sakhalin, and was constructed 
about ten years ago by a group of Japanese investors.  The 
original owners were eventually pressured -- both through the 
courts and "face to face" -- to sell the hotel to a 
locally-owned holding company.  The hostile takeover made a 
strong impression on Japanese investors who, according to 
Kobayashi, have been left with a negative impression of property 
rights for foreign investors in the region. 
 
4.  Though there has been little Japanese direct investment in 
recent years, there are some Russo-Japanese partnerships.  Two 
Japanese companies have signed deals with local companies to 
license specialized cold-weather equipment and materials for use 
in residential and road construction.  Many new high-end 
apartments and houses built in the region now use insulation and 
other materials from a Hokkaido-based company.  Another Hokkaido 
company is involved with weather-proofing roads and parking 
lots.  A lumber company was also reportedly looking into 
harvesting spruce trees -- a material used in residential 
construction on that island -- but the project was deemed 
unprofitable because of the high cost of accessing the remote 
spruce forests. 
 
5.  At least one local business is counting on Japanese oil 
workers and visitors to make up a large part of its clientele. 
Poloff talked to the Russian manager of a newly-opened indoor 
golf driving range who said the investors had opened the 
facility specifically with Asian businessmen in mind. 
 
6.  Poloff also met with a reporter with the Japan Broadcasting 
Corporation (NHK) whose office is situated above the Japanese 
Consulate.  He stated that there is significant demand for news 
about Sakhalin in Hokkaido, where his stories are broadcast.  He 
attributes this not only to geographical proximity and 
historical ties, but also to interest in the Ainu people of 
Sakhalin, an indigenous ethnic group that also populates 
Hokkaido and the Kuril Islands. 
 
Comment 
 
7.  The Sakhalin II oil and gas project remains the focal point 
for Japanese business on Sakhalin.  There is very little other 
direct investment from Japan, as Japanese investors may still 
view the hostile takeover of a Japanese-owned hotel as an 
indication of insufficient legal protection.  The presence of 
the NHK bureau on Sakhalin may indicate general historical and 
cultural interest in the island, though it may also serve as a 
way to remind Japanese constituents about the Kuril Islands 
issue. 
 
KOVACSICS