In 1855 Sakhalin was under joint Russian - Japanese control till its full transition to Russia in 1875. What are your present relations with Japan and other Asian countries? How do you seek to improve these relations?
Unfortunately in the world there always have been and there always will be war, and this is not a unique case for Far East. After the World War II in 1945 many borderlines shifted in Europe: the border between France and Germany, Poland and Germany. I would rather not focus on the fact that part of Sakhalin and the Kuril islands once belonged to Japan. Historically it is inevitable that territories are redistributed as a result of conflict, although this is viewed as something negative rather than positive, it is still simply inevitable. Japan was the aggressor, and after surrendering, refused its rights to all territories including Manchuria in China.
Regarding present relations, they are quite positive. We have concluded a mini Peace Treaty between Sakhalin Oblast and Hokkaido; we call it a mini treaty because it has already stood for four years. It was signed by the two Governors and is called the Treaty of Friendship and Economic Development, and has the form of an agreement. The neighbouring territories, which are Sakhalin, Oblast and Hokkaido, are in good terms. We have long standing relations, regular air and waterways. We have a developed transportation infrastructure that carries people and cargo backwards and forwards. We are certain that it would be highly beneficial if our relations at a regional level grew into state policies.
With the purpose to attract foreign investments, the Island Government declared it a free trade zone in 1990. How did this step help attract foreign investment into the island?
This measure did not help. In the early '90s there were 17 free trade zones in Russia. However, there was no essential legal framework. Of course, there was a resolution of the Supreme Council of RSFSR of the Sakhalin free trade zone. But in order for this to work, certain laws needed to be adopted, and they were not. That was the reason why it was nothing more than a mere declaration, as was the case with other Russian free trade zones. What was far more efficient were the adoption of the so-called SRP (Production Sharing Agreement) in 1995, and a number of amendments in the Federal Laws, which were correspondent to the basic SRP law.
What is the current status of Sakhalin I and II projects and how will these projects change the economic potential of the Sakhalin Island?
I believe that our projects are a real Russian innovation and the economic base here is production sharing. It is only us who has this system; it has not yet been a success anywhere else. In 1999 the foreign investment volume exceeded one billion USD, then there was a decrease and last year another increase - almost 400 million USD. This year, we expect this figure to grow twofold. Thanks to these foreign investments new jobs and an infrastructure were created; we now need to develop the oil deposits. While 6-7 years ago we were among the Far East leaders in unemployment, now we occupy the best positions, the unemployment level is much lower than that of our neighbours. Our projects are attractive for foreign investment inflow, and these in turn allow the creation of new jobs, and improve the labour market situation.
Do you seek to diversify the economy in order to secure independence of the economy from oil and gas industry?
We want all areas of the economy to develop simultaneously. But we will hardly be able to remove completely the dependence on oil. And there is no sense in it. Today a quarter of the Oblast's revenue derive from the oil and gas industry. By having additional income from the oil industry we are able to direct the funds to other industries and develop for instance coal industry. Our economy will always be - to a great extent - based on the oil and gas industry. It is important to develop other industries as well. For example, the return from forestry is not competitive compared to the oil industry. Sakhalin has never been Russia's industrial centre; we have always lived on islands and the state has never sought to create an industrial centre in Sakhalin, neither a high technology industry nor did we even have military industrial complexes. And we do not plan to start automobile production as they did in Toliati, nor TV sets as in Minsk, because we do not have an appropriate industrial base. There is no use in setting unrealistic tasks.
Sakhalin is rich in fauna and flora. Do you believe environmental protection is an important concern at government level?
Despite developing our oil and gas projects, the ecological situation in the Oblast is quite satisfactory because our operators are companies such as Shell, Exxon, that use state of the art technologies and their approach to environmental protection is very serious and respectful. We have yet to teach Russian companies to reach these standards.
As for the Government, its attitude to the issue is very caring. But I believe that within the Government this service has to be made more independent. This will do only good. But the situation has significantly improved lately. Several pulp plants were closed which threw poisonous waste into rivers and a number of other issues have been solved.
What would be your final message to our readers bearing in mind that they are potential investors in the region's economy?
We have elaborated a specific system of collaborating with investors. We are a developing and progressing Far Eastern region. We do want and we will find our place and position in the Asian Pacific Region. We will integrate into the Asian Pacific economy.
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