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Wednesday, March 21, 2018

Japanese investors can breathe new life into the Kuril Islands

Fisheries, tourism, infrastructure and alternative energy – that’s what Russia invites Japan to jointly develop the South Kuril Islands. Interested in whether investors in the region and why it is still natural and economic potential of the Islands has evolved so poorly?

A package of Russian proposals on cooperation with Japan development of the Kuril Islands includes cooperation in the fishing industry, medicine, tourism, said the Director of the third Asian Department of the Russian foreign Ministry Lyudmila Vorobyeva.

“The essence of the proposals is to give opportunity for Japanese companies to invest in the development of the Kuril Islands, beating this political moment”

According to her, now make intensive preparations for the meeting of Deputy foreign Ministers of Russia and Japan, which is scheduled for March. “We are working on a package of proposals concerning the most promising areas from the point of view of socio-economic development of the South Kuril Islands. It is primarily a fish farming, fish processing, improvement of infrastructure, geothermal energy, tourism, medicine and a number of others,” she said in an interview with RIA “Novosti”.

Agreement to discuss the possibility of joint economic activities on Southern Kuriles was reached in December during a visit to Japan by Russian leader Vladimir Putin.

In addition, now considering the visit to Russia of Prime Minister Shinzo Abe – it can be held in the first half of the year.


Russia is not the first year tries to invest in socio-economic development of the Kuril Islands with the help of government programs. Now being implemented is the third such programme for 2015-2025. the First was started in 1994.

However serious impulse to development of region has not received. First, the allocations are small. Thus, the development of the Kuril Islands in 2016-2025 is planned to spend about 70 billion rubles. Is less than 10% of the costs inherent in the program of development of Crimea and Sevastopol until 2020. Although, of course, difficult to compare the Crimea, where 27 thousand square meters is home to about 2 million people, and the Kuril Islands, where on 9 thousand square meters has about 20 thousand people (of the economically active population of 8.2 million).

Secondly, the level of expenditures under the state program was and remains low. The implementation of the Federal program on 1994-2005 allowed only partially solve the problems in the region, as funding was barely over 18% of the planned volumes. According to the Federal Treasury, in January–September of 2016, the level of execution of expenditures amounted to only 9.6% of the annual target. That is mastered less than 10% of the allocated funds.

In the end, a large natural resource potential Smoked mastered still quite weak. In this respect, the arrival of Japanese investors would be the perfect solution for the region. There really could have gone the Japanese money. The interest of Japanese business in the development of the region is and was. Another thing is that now to invest in the disputed Islands the Japanese can’t.

“If Japanese companies come to the Kuril Islands, then they need to register as a foreign entity in a foreign country, thus, they seem to recognize that the Kuril Islands is a territory of Russia. From a political point of view, it is unacceptable for them,” – said the newspaper VIEW of the Deputy chief of Department of analytical researches ICSI Vera Kononova.

The essence of the proposals is to give the opportunity to Japanese companies to invest in the development of the Kuril Islands, beating this political moment.

“What legal mechanism will be proposed, to overcome this political obstacle, it is difficult to say. But the point is to offer Japanese investors to work in the Kuril Islands without the need to create in Russia a separate structure. If this mechanism is adopted at the highest level, it will be the impetus for the coming of Japanese investors to the Islands,” says the source.

Japanese investors can be interesting all the announced areas of development cooperation. The untapped potential of the Islands is great.

Centres of permanent population and of economic activities are the four Islands – Iturup, Kunashir, Shikotan, Urup, and Paramushir. The most developed are the two largest Islands – Iturup and Kunashir. 40% of the population of the Kuril Islands lives in urban-type settlement of Yuzhno-Kurilsk, located on the island of Kunashir.

Water resources

The main activity of the Islands is a fisherman. More than 70% shipped local products from the Islands accounted for processed and canned fish products. Another 15.1 per cent on the products of fisheries (data for 2015). However, the scale of the country and the Islands provide a bit of fish products. It produces only 1% of the total Russian volumes. For comparison: in the entire Sakhalin region, which includes the Kuril Islands, is 13.5% of Russia’s total fish and fish products. There are fish factories that produce products made of cod, mackerel and salmon.

“If you look at the structure of the economy of the Kuril Islands, which now exists – it’s tiny. Its main share connected with fishing and fish processing. And there are opportunities for expansion due to the natural water resources. Besides a number of very large Japanese market,” says Kononov.

The southern Kuril Islands have favourable hydrobiological conditions for fish reproduction. In the Kuril Islands is concentrated one-fifth of possible annual catch resources of the territorial sea, continental shelf and exclusive economic zone of Russia.

A feature of the number of Islands is the presence of natural spawning of salmonids, e.g., salmon of Iturup island.

In the Kuriles, especially the Islands of Kunashir, Iturup and the small Kuril ridge, has unique water and conditions for growing scallop, sea urchin, sea cucumber and kelp. That is a huge potential for development of mariculture, which is in great demand in Japan and generally in Asia Pacific. According to the Institute of marine biology of Far Eastern studies, to conduct intensive mariculture off the coast of Sakhalin and the Kurils fit 1.3 million hectares of coastal waters where they can grow more than 2 million tons.

On the Islands there is also the potential for the growth of catch mackerel and tuna, saury, octopus, sea bass and salmon.

Tourism potential

“Investors’ interest can also be to the development of tourism, particularly medical tourism. The Islands are a unique thermal springs. If they develop, the potential is huge. But it also raises the issue of the availability of natural resources, but the lack of infrastructure. A tourist trip to the Kuril Islands is expensive. Moreover, it is uncomfortable. Judging by what is written by those who have been there as a tourist, there polyextremophile conditions. There are no hotels of your desired class, transport is also for civilians,” says Kononov.

As Russia and Japan shared area (click to enlarge)With the sights on the Kuril Islands is no problem. Here you can see the volcanoes and fumarole fields, and beautiful bays, cliffs, and waterfalls, and a variety of animals. Here the unique nature, balneology and historical objects. For example, you may find the remains of the Japanese home Islands.

But tourists do literally nowhere to take. On Kunashir three modest hotels on the island of Iturup – five. The prices there start from 3.5 thousand rubles per day. Tourists often stay overnight in tents.

Delivery of tourists to the island – another headache. Yes, and in the territory of the Islands to reach the natural attractions we have to walk (sometimes up to half way, the other half for four-wheel KAMAZ). Thermal springs are not something that is not equipped, but not to all road. The cost of the tour to the Kuril Islands begins from 80 thousand roubles per person, not including the cost of the plane and Board.

Meanwhile, interest in the Islands show not only Russian tourists but also foreigners. In a group of 10 people, as a rule, always have a couple of foreigners. Only, of course, now it’s not Japanese, but mostly Europeans. Loving to travel, the Japanese will be the private guests of the island only after there will be appropriate infrastructure and facilities. But the construction here is expensive, both because of logistics and because of the short summer (increasing the payback period of tourist facilities).


Southern Kuril Islands of interest to investors for its natural resources. In particular, on the island of Iturup is the only in Russia the Deposit of metal rhenium with quite large deposits that are due to volcanic emissions are rising. On the island of Kunashir are substantial reserves of gold and silver. According to the Ministry of natural resources, inferred resources deposits of North-Kunashirskogo ore unit are 475 tons of gold and 2160 tons of silver, and Europskog ore unit 370 tons of gold and 2540 tons of silver. On the Islands there are also reserves of polymetallic ores. Finally, the shelf areas are rich in oil and gas.

“We can assume that a particular interest is in the minerals of the Kuril Islands. Here, for example, there are deposits of rare metals. But whether made by foreign investors to them is the big question. Because there are deposits of a strategic nature, which according to Russian law, foreign investors do not allow”, – says Vera Kononova of the ICSI.


However, the development of all three areas of the economy of the Islands is impossible without the development of associated infrastructure. For example, to mine gold on the island of Urup, it is necessary to build a dock and multiple helicopter pads.

Of course, in recent years much has been done. Appeared ports and airports. But more is needed.

In the Federal target programme for socio-economic development of the Kuril Islands in the 2015-2025 call key tasks. You must build the helicopters and cargo and passenger vessels in order to ensure continuous air and sea connections between the Kuril Islands and Sakhalin island, the mainland and the Kamchatka Peninsula. Territorial fragmentation will prevent the development of the region.

You need to build and reconstruct road infrastructure and to improve communication by building a unified network of relations with Russia. Finally, it is necessary to create a modern system of evaluation and warning about emergency situations of natural character.

The plans also include housing and utilities, schools and hospitals, as well as modernization of energy infrastructure. In the Kuril Islands have already begun to move away from power generation based on diesel and coal. They have started to develop unconventional geothermal energy. Small hydro power plants built on the island of Paramushir, there is one geothermal power plants on the Islands of Kunashir and Iturup.

So, Mendeleyevskaya GeoPP island provides heat and electricity due to the energy of the volcano. Geothermal energy on the Islands a very profitable business, because to bring traditional energy sources is very expensive.


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