A Little Sushi, A Little Vodka

Hawkers and street peddlers in the Sakhalin capital of Yuzhno-Sakhalinsk no longer gather beside the towering statue of Lenin in the central square. Instead, they work the opposite side of the plaza, where flashy Toyota minivans and Mitsubishis are parked bumper-to-bumper outside the Mayor's resplendent glass-and-steel offices.

The formerly closed Sakhalin, once a penal colony under the czars and visited by the young writer Anton Chekhov, is a long, thin island the size of Florida butting against the northern edge of Japan. Technically a region of Russia, Sakhalin opened itself to trade and tourism in 1992. In the past five years, the Japanese presence in the area has grown rapidly. For many Japanese, traveling to Sakhalin is a little like coming home. Japan ruled the southern half of this island from 1906 until the Russians grabbed it after the end of World War II. Now, Japan wants it back and is demanding its return.

These days, peddlers hawk soba noodles and instant miso soup in the square, while the rich dine in the island's many hidden sushi bars that serve fresh crab and tuna harvested from the teeming seas around Sakhalin. Locals drive used Japanese cars--the old Russian clunkers are barely in sight--blasting sushi pop music broadcast from Japan.

Japanese businessmen in snug navy- blue suits are everywhere. Blue-chip Japanese companies, such as Mitsui, Mitsubishi, and Itochu have set up shop in the gleaming Sakhin Business Center, with direct satellite hookups to Japan. Real estate developers are transforming the town's landscape with the gleaming $45 million Santa Hotel and the $15 million Sakhalin Sapporo. Even the mayor's office building was remodeled recently with Japanese money.

Much of the growing Japa-nese business presence is linked to giant offshore oil projects, headed by such companies as Exxon Corp., that seek to recover some of the 2.5 billion barrels of oil that lie under the waters around Sakhalin. It's a crucial source of energy for resource-hungry Japan.

Other entrepreneurs are attracted by the island's rich natural resources--fish, timber, and coal. More than a hundred joint ventures in fisheries and forestry have been signed in the past few years, with total exports to Japan reaching $110 million in 1995, half of Sakhalin's exports.

LONG HOURS. "This island is so rich in fish. We pack three tons of salmon a day," boasts Yukio Endo, first deputy director of the trading firm Dong Ju. A wiry, ruddy-faced man in a white smock who moves with a nervous energy, Endo paces about the fish-stripping room of Pilinga Goda, a packing plant in Sakhalin's southern port of Korsakov. In 1994, Dong Ju invested about $250,000 in Pilinga, which was spent mostly for refrigeration equipment. Now, the plant, which had operated in the red, makes a profit of some $250,000 a year. It sells fish to the Japanese as well as to Russians such as trader Sergei Bova, who wants to ship a ton of salmon to Siberia. "Their competitors' fish spoils in a few days. It would never make the trip," says Bova.

Japanese reps such as Endo spend long hours overseeing investments but still find time to meet for a lunch of sashimi and Sapporo beer in a cozy sushi house. At a bar hidden behind the railway station, Russian women in blue printed kimonos hover about. Ryoichi Nozaki, general manager of Itochu Corp.'s Sakhalin office, points at a television screen showing footage of President Boris Yeltsin arriving at the Kremlin. "We sell that [to Sakhalinites]," he says, indicating the set. "And Mazdas and Toyotas, too. And then, we're involved in fisheries, coal, timber, and oil. Everything, basically." He stops and says in a low voice: "But no money in Sakhalin." When someone titters, Nozaki silences him. "We can make even more if not for taxes and bureaucracy. Moscow better." A colleague from Mitsui interrupts: "At least here, we're closer to home."

Many reminders of Japanese rule survive. Once the official residence of the Japanese governor, the Sakhalin History Museum, with its graceful pagoda-like arches, dominates the eastern half of Yuzhno- Sakhalinsk. Elsewhere, there are remnants of once elegant Japanese gardens--symmetrical pathways and carefully tended bushes--now choked with weeds and supplanted by hardy birch and oak. The outskirts are dotted with small paper factories that were built by the Japanese in the 1920s, when the island accounted for 70% of Japan's cellulose production. Midway across the island, the narrow train tracks, built for Japanese railcars, give way to broader Russian tracks. And, as in Japan, the island lies on a major earthquake fault: More than 2,000 people died in a quake in May, 1995.

LOTS TO LEARN. "This town was once called Little Sapporo because of its resemblance to Hokkaido's capital," says Kataro Wakasuki, director of the newly opened Japan Center in Yuzhno-Sakhalinsk. He sits cross-legged, sipping green tea in his office, while outside, Russian-speaking local students check in for their daily Japanese lesson. The soothing melody of a shakuhachi flute sounds in the background. "We two peoples have much to learn from each other," says Wakasuki.

Shin Yamada, Sakhalin correspondent for Hokkaido Shimbun, Hokkaido's largest daily, agrees: "I had no idea Russians were so warm and hospitable." Unshaven and dressed American-style, in jeans and a baseball cap, Yamada lives in a suite in the Japa-nese-built Sakhalin Sapporo Hotel downtown. He likes ice-fishing at the shores of the Sea of Okhotsk and says the island is "more unspoiled than Japan." But he also enjoys hanging out at the city's nightspots, especially the Japanese-style bar in the Sapporo Hotel, where young Russian hostesses drink sake and dance with visiting businessmen. "Japanese men love blond women," he says. "And here, there is no shortage of beautiful blond women."

Sakhalinites, most of whom consider themselves Russians, could not be more different from the Japanese. Many of the island's 700,000 inhabitants are transplants, a hodgepodge of peoples from the former Soviet Union. They were resettled here by Stalin after World War II with promises of higher wages and better living conditions. With the collapse of communism, more than 100,000 of them have returned to their mother countries. Those who remain are employed in fisheries or coal and oil operations, some owned by Russian companies. But many local people pin their hopes for jobs on the Japanese.

Sakhalinites travel to Japan on the cheap summer ferries that began running in 1995. They stock up on inexpensive electronic goods. "It's almost like paradise, so clean and orderly," says Yamada's Sakhalinite driver, Sergei Alexandrov. Yet the Sakhalinites resent the Japanese, too. "They come here and just want to steal our natural resources. They don't care about the people," complains a local fisherman. Nationalistic Russians are riled by Japan's demands to return South Sakhalin and the disputed Kuril islands. "We'll never return them," insists Alexandrov.


POTHOLES. The Japanese have complaints, too. They say business ventures have been torpedoed by bureaucracy. "Laws change so often that the Japanese can't make any profit," says Yamada. And there have been problems with local partners. One popular Japanese restaurant was closed after its Russian landlords raised the rent. And the Japanese management of a Yuzhno-Sakhalinsk hotel was dispensed with after a dispute with joint-venture partners. The Japanese also complain about poor infrastructure--faulty telephone lines, potholed roads, and power failures. Mine strikes in the north and a drop in onshore oil production have left Yuzhno-Sakhalinsk dark, like wartime cities at night. "It's hard doing business here," says Nozaki. "You've got to have perseverance." But with a new Japanese consulate announced for Yuzhno-Sakhalinsk and scores of hotels and sushi bars opening, nobody in Sakhalin doubts that the Japanese will persevere.