The issue of which environmental laws apply to foreign investors came to the fore recently when Svetlaya, a $60 million timber joint venture in the Far East, was targeted by the environmental group Greenpeace.


Russian authorities have removed the protesters who on Thursday blockaded the shipping terminal of the joint venture, which is backed by the Korean industrial giant Hyundai. But the company is still confronted with a complicated ecological, financial and political mess that threatens to turn its project into a disaster.


Greenpeace's protests seem to have been little more than a nuisance, designed more to attract publicity to the general plight of Russian forests than to anything specifically wrong with Hyundai's forestry techniques.


But a more thorny problem for Hyundai is the threat the project poses to the hunting grounds of the 700 local Udege tribespeople. Unfortunately, the real problems of the tribespeople seem to have been rolled into a political brawl between competing local authorities.


The project was initially approved with a 30-year license by the Soviet Union in August 1990 following a feasibility study by the Timber Ministry's Leningrad Forestry Institute.


But after the 1991 coup, Hyundai had to seek a second approval from the new Russian government. Svetlaya finally won a timber license from the Russian environment ministry on June 24 this year. Soon after, it signed a deal with the Governor of the Primorsk region, granting it the right to cut 1. 5 million cubic meters of timber for the next 5 years.


But the regional soviet which has been seeking its share of the "entry fee" of $3 per cubic meter paid by Svetlaya to the Primorsk government then decided to oppose the deal. The concerns of the Udege are now a stick which the regional soviet can use to beat the governor.


Hyundai's Moscow director, Lee Sei Hwan, is having second thoughts about his company's venture into the Russian timber industry.


He says the company's ecological policy has always been to follow the advice of its Russian partners. "We are like children in Russia. We looked to our joint venture partner to secure environmental approval and negotiate with local people", he said.


The ecological debate is only part of Hyundai's problem. Hyndai is already struggling to find a way out of a series of extra charges that have been loaded onto the project since it started operation last year.


Hyundai has petitioned the government for an exemption from the export duty on timber. Several oil companies have received exemptions from the $6 a barrel duty that has been applied since July this year but Hyundai says no exemptions have been granted for timber. Basic pulp timber with a world market price of $24 a cubic meter attracts an export duty of $17. 50 a cubic meter.


"Hyundai took a risk in starting this project", says Lee Sei Hwan. "But we think we have a right to expect some support from the Russian government".