Casting off the bear's shackles: Terry McCarthy on Vladivostok's struggle to break free of Moscow's economic dominance

THERE is a plaque on platform one of Vladivostok railway station, marking the eastern terminus of the Trans-Siberian Railway, which says Moscow is 9,288km away - geographically, San Francisco is closer. The distances across the Russian continent are huge, but for Russian residents of the far East, they are not far enough. Most wish Moscow, which is usually referred to simply as 'the centre', were on the other side of the galaxy.

During 70 years of Communist rule, Vladivostok was a closed city to foreigners and other Russians. Its main purpose was to serve as a base for the former Soviet Union's Pacific fleet. Most industrial development was designed to cater for the military.

The surrounding region, stretching out into the vast open spaces of Siberia, is full of natural resources, but a large part of the timber and minerals was extracted and sent back to Russia's industrial heartland on the other side of the continent.

Now that the Communist system is being dismantled, the Pacific fleet rarely leaves port for lack of fuel and Vladivostok has been opened to foreigners since the beginning of this year, the locals are desperate to break away from Moscow's economic stranglehold. They would like to see Vladivostok return to its old role as Russia's Pacific seaport opening to Asia. And they would like to have more freedom to develop and exploit eastern Siberia's resources for themselves.

Vladivostok was founded in 1860, and by the turn of the century it had become a flourishing free port, doing business with surrounding nations in East Asia. By the time the Trans-Siberian railway was completed in 1916, providing a direct link by land to Paris, the city had attracted a large number of European traders. But the city's prosperity was short-lived, as the Bolsheviks came to power and slammed the door shut on foreign trade. Now Vladivostok is again looking eastwards - and away from Moscow - for its future development.

'Moscow must realise it cannot develop the country's economy by its old centralised methods,' said Alexander Korobeev, a law professor at Vladivostok University. Mr Korobeev, along with other local academics and businessmen, is working on a plan that would give the regional government more control over the exploitation of local resources and the power to guarantee the interests of potential foreign investors.

But it is an uphill battle. Moscow is reluctant to give any measure of economic autonomy to the far East. President Boris Yeltsin's advisers fear any special concessions could become a precedent for other regions within the Russian Federation, and they also do not want to give away the supplies of natural resources that have been flowing from the region for decades.

'Moscow now has no power to take, but it does not yet want to give,' Mr Korobeev said.

The prizes are enormous. According to Edouard Saubolle, a Franco-Russian businessman who represents the economic interests of the Russian far East in Tokyo, the mineral wealth of eastern Siberia has barely been touched by former Soviet enterprises. Mr Saubolle said the far East has 30 per cent of the entire coal deposits of the old Soviet Union, 40 per cent of the fish, 30 per cent of the timber, 90 per cent of the diamonds, and an uncharted amount of oil, marble and diverse minerals that the new Russia has neither the will nor the means to exploit.

The wealth of the Russian far East has brought a lot of businessmen from Japan, South Korea, China, Australia and the US to visit the region. In June, when Mr Yeltsin visited Washington, the US announced it would reopen its consulate in Vladivostok.

Two agencies of the United Nations are also competing to attract funds to the area. The United Nations Industrial Development Organisation has drawn up a plan for a Greater Vladivostok free economic zone with concessionary tariffs and tax rates for new industries. Not to be outdone, the United Nations Development Programme has concocted an even more ambitious scheme to link the Russian far East with north-eastern China, Mongolia, the two Koreas and Japan in a dollars 30bn development of the Tumen river delta.

But no one has any idea where the money for these schemes would come from. So far, with the political uncertainty and economic chaos, few foreign businessmen have made any lasting investments - most are doing quick trading deals or mapping out feasibility studies for the future.

Japanese companies are further hindered by the continuing dispute between Tokyo and Moscow over the ownership of the southern Kurile islands. The Japanese government has quietly told its businessmen to refrain from any large development projects in Russia until the dispute is resolved. But Japanese companies are already conducting their own private surveys of the region's resources, which they are eager to exploit in the future to feed the ever-growing demand for raw materials from Japanese industry.

'The people of Vladivostok were in a state of euphoria when the city first opened,' said Alexander Latkin, an economist who used to belong to the prestigious USSR Academy of Sciences and now heads a private economic think tank. 'They were expecting a flood of foreign money. But foreign businessmen need to be sure about the future, and they need infrastructure. In the far East this infrastructure is almost entirely non-existent,' Mr Latkin added.

The tensions between Moscow and the far East are already holding up a large oil exploration project on the east coast of Sakhalin Island. An international tender to explore and develop the area's oil and gas reserves was initially won by a joint Japanese-US consortium of Mitsui, Marathon Oil and McDermott International Inc. But the Russian government has since suggested that other oil companies may also be allowed to take part in the project, after some heavy lobbying in Sakhalin by firms that lost the original tender. According to Mitsui there are an estimated 100 million tons of oil and 400 billion cubic metres of gas off the Sakhalin coast.

For the time being, the only thriving business in Vladivostok is in second-hand Japanese cars, brought across the Sea of Japan by Russian sailors and distributed throughout Russia by a range of shady gangster syndicates. Crime is a growing problem, and the whole region has a rough, frontier-like atmosphere.

The economic potential is there, but even the locals are starting to realise that development is not simply a matter of granting visas to a few foreign businessmen.

(Photograph omitted)