The performance of young South Korean athletes in the 2012 London Olympics, which put the country fifth in the gold medal standings, added to South Koreans’ sense of pride about what they have achieved since liberation from Japan’s colonial rule 67 years ago today.

Looking at the area surrounding the nation, however, it hardly seems within our reach to fulfill what Koreans dreamed of when they gained independence ― a prosperous united country at peace with its neighbors.

In fact, a longstanding territorial dispute with Japan cast a shadow over the joyous scene of South Korea beating Japan 2-0 in an Olympic football match last Friday. A South Korean footballer held up a sign laying claim to Dokdo, a group of rocky islets in the waters between the two countries.

Hours earlier, President Lee Myung-bak made the first visit by a South Korean head of state to Dokdo, prompting protests from Tokyo. Lee said it was Japan’s continuous denial of its past wrongdoings that had led him to travel to South Korea’s easternmost islets, which are also claimed by Tokyo.

Japanese media interpreted Lee’s move as an attempt to improve on his lame-duck status by making a nationalistic gesture. But Japan’s mainstream politicians have also sought to shift their country to the right by highlighting the threat of Chinese and Russian claims to islands the Japanese regard their own, as well as the nuclear danger posed by North Korea.

The North, which has shown signs of moving toward economic reform, still remains hostile toward the South. It virtually rejected a recent proposal from Seoul to resume the reunion of families separated in the 1950-53 Korean War by making it a prerequisite for South Korea to lift all sanctions taken for North Korea’s provocative acts. It was inappropriate for Pyongyang to attach conditions to the humanitarian program. The resumption of the family reunion might have opened the way for Seoul to ease restrictions on inter-Korean economic cooperation.

South Korea has also seen its relationship with China sour in recent months over Beijing’s detention of South Korean activists engaged in helping North Korean defectors and allegations made by one of them after release that he was tortured during interrogation. China has turned a deaf ear to South Korea’s demand for a thorough investigation and apology.

Seoul finds it increasingly difficult to cope with an increasingly assertive China, which often falls short of international standards in human rights and other issues.

Former U.S. National Security Adviser Zbigniew Brzezinski recently wrote that South Korea would face a painful choice between China and Japan when U.S. power recedes from the region.

Strained relations with both of them, which might give North Korea more room for maneuver, would be the worst scenario for South Korea. It is somewhat worrisome that Seoul now appears to be heading in that direction.

Domestic political considerations in Japan and China are expected to further harden their stance on historical and territorial issues with South Korea, as well as between them.

In handling these complicated situations, South Korea needs exquisite diplomatic skills based on cool-headed perception and firm adherence to principles that should and could not be conceded.

This difficult job of matching realistic diplomacy with basic principles requires a sophisticated strategy backed by the whole nation. In this vein, it is of no help that rival political camps have differed over how to deal with North Korea and manage relationships with neighboring powers.

The 67th Liberation Day should serve as an occasion for all South Koreans to reflect on the tough situation surrounding them and how to get through it to achieve a regional security that guarantees its continued prosperity and helps open the way for national unification.