The Russian and Japanese coastguard cutters shadowed each other through the steely waters of the north Pacific in a carefully choreographed routine played out along the last active fault-line of the the Second World War.

On a clear day the closest of the Kurile islands, seized and occupied by Russia off the tip of northeastern Japan, look close enough to touch. Russian fishermen dive for valuable sea urchins or haul giant Kamchatka crabs on to their boats. Russian military radar keeps watch for intruders. Workmen put the finishing touches to a Russian Orthodox church, complete with a gleaming golden onion dome.

On the Japanese shore the elderly former inhabitants look on in frustration. Sixty years after they were expelled by Soviet forces, they seethe with anger over what they regard as one of Stalin’s greatest crimes and one that is being perpetuated to this day.

“I think about my home, the island and the ordeal we suffered every day,” said Hiroshi Tokuno, 73, who remembers the invasion of his island of Shikotan at the end of the Second World War. For two years he and the other 17,000 islanders lived under occupation until they were removed at gunpoint and deported to Japan.

“It was a terrible experience. Many people died, including my two-year-old niece. I am still waiting for justice all these years later but nothing happens,” said the fisherman, who has taken his campaign to Tokyo and even the United Nations.

His views are shared by most of the 8,000 surviving islanders, now scattered across Japan. Their cause has won the sympathy of many Japanese, and successive governments have vowed to reclaim what they call the “Northern Territories”. But so far, decades of negotiations and hundreds of hours of diplomacy have failed to resolve the dispute, which has blocked the formal signing of a peace treaty ending hostilities between Moscow and Tokyo. Japanese officials insist that there is still hope of clinching a deal with the Kremlin, not with President Putin but with his successor, who will be elected early next year.

The Japanese are hosting the 2008 G8 summit in Hokkaido, the Japanese mainland closest to the disputed islands, and plan on making a resolution of the dispute a focus of the talks with the new Kremlin leader.

They also hope that improving trade relations with Russia may help to unlock the elusive agreement. Toyota has opened a factory in St Petersburg recently and will soon be followed by other big Japanese car-makers. The Japanese are also involved in gas and oil projects in the Russian Far East and have been approached by the Russians to modernise the Trans-Siberian Railway, the longest line in the world.

But any talk of the Russians relinquishing sovereignty is dismissed as wishful thinking by those living closest to them. Last year a Japanese fisherman was killed by Russian guards, who fired on his boat and arrested his colleagues for allegedly straying a few metres into Russian waters. The Russians are also investing millions in the infrastructure on the two largest islands, Kunashiri and Etorofu.

Kinku Fujiyoshi, who owns the Japanese ferry that visits the islands during the summer months, said that the changes were dramatic. “We used to have to take the Russians basic humanitarian supplies like powdered milk and soap. They had nothing. Today living standards have shot up. When they come here on shopping trips they often have $6,000 (£3,000) in cash to spend,” he said. “If you ask me, they do not need to return the islands. They are doing very well out of the present situation.”

That view is shared by Minoru Tamba, a former Japanese Ambassador to Moscow. He believes that Japan had the chance of a deal with the Kremlin during Boris Yeltsin’s presidency, when Russia was weaker and poorer. At a summit in the Siberian city of Krasnoyarsk in 1997, Mr Yeltsin agreed with his Japanese counterpart of the time that they would reach a deal by 2000.

“Yeltsin got sick, the Russian government position hardened and the moment was lost,” Mr Tamba said. “In seven years of Putin the issue has not advanced one millimetre. It is time for us to be patient. We have waited 50 years; we should be prepared to wait for another 50 before the islands are returned.”

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