Pavel Cherkashin: Current russian-north korean relations and prospects of their development

The last 2014 was rich in events, substantially changed international situation in the world. This also applies to russian-north korean relations, which has been given new impulse. It is illustrated by intensification of visits to Russia the DPRK`s high-ranking delegations. Particularly, since last year`s February the DPRK Supreme People's Assembly Presidium Chairman Kim Yong-Nam[1], North Korea's Minister of Foreign Trade Lee Ren-Nam[2], the DPRK Foreign Minister Lee Soo-Young[3], north korean leader`s special envoy – Korea Worker`s Party Central Committee Politbureau Presidium member Choe Ryong Hae[4] , Supreme People`s Assembly Chairman Choi Thae Baek and the other officials visited Russia.

Interest in development of bilateral cooperation is mutual, as evidenced by the Russian Federation Minister of Far East Development Alexander Galushka and Deputy Prime-Minister - Presidential Envoy in the Far Eastern Federal District Yuri Trutnev`s working visits to North Korea in March, April and October 2014[5][6]. Moreover, current 2015 was officially declared as the Year of Friendship between Russia and the DPRK[7].

Objectively speaking, the political component is dominating in the two countries relations at current moment - both states are opposed to Washington's foreign policy and suffer the influence of West`s sanctions. Pyongyang, in contrast to the Republic of Korea, positioning itself as Russia`s strategic partner, regularly supports Moscow`s position on a wide range of issues on international stage, in particular, at the United Nations meetings (the last obvious example - the Crimea referendum recognition). By it`s turn, the Russian Federation also defends the interests of North Korea outside, as evidenced by Moscow`s position about adoption in UN Security Council the resolution, condemning human rights situation in the DPRK. In December 2014 Russia, so as China, voted against USA initiated document.

By the author`s opinion, politically by strengthening ties with Russia, Pyongyang is seeking opportunity to exit from international isolation and justify the regime`s right for existence as a full-fledged member of international community while maintaining the policy for parallel development of economy and nuclear program. In addition, further expansion of contacts with Russia allows North Korea to move away from excessive dependence on China.

As for economic component of the DPRK`s motivation, it is likely, that Pyongyang recognizes the actual need for foreign economic relations development for building an independent and strong in terms of economy country. On taking a sample of China and Vietnam, that achieved the economic growth through creation of special economic zones, in middle 2014 Pyongyang has increased the number of SEZs on its territory to 19[8]. And now it seeks to attract foreign investment to them, including from Russia.

Starting point for activation of bilateral economic cooperation was the russian authorities decision, taken in last May, to write off 90% of Pyongyang`s debt to the Soviet Union, which amounted to 10.9 billion of dollars, and to direct remaining 10% (about 1 billion dollars) as investment in bilateral cooperation in the DPRK`s territory, and in the first place in infrastructure development[9].

Here, first of all, we must mention the high-profile "Victory" project, within frame of which it is planned to modernize network of inland north korean railways with total length of 3.5 thousand km in exchange for russian companies access to the DPRK`s mineral resources mining and processing[10]. However, it should be understood, that besides direct investments in production a potential investors will have to incur additional costs on exploration, purchase of machinery, equipment, reconstruction and building of infrastructure, roads, as well as ensuring a stable supply of electricity (probably through investment in modernization of termal power-station facilities, that adjacent to the deposits). Announced project cost about 25 billion dollars (even for 20 years) in current realities of russian economy per se can cause questions about its feasibility in the nearest perspectives.

Two countries leaderships announce ambitious plans in ​​trade area. It is planned to increase the bilateral trade from current 92.3 million to 1 billion dollars a year by 2020[11]. Agreements on cooperation establishment between russian and north korean banks, reached in 2014, should considerably assist in real increase of trade volumes[12]. The readiness of north korean commercial organizations for gradual transition to payments on foreign trade operations in rubles, which is aimed to bring bilateral trade from "gray zones" and lead to usage of modern payment system, also should be taken in a positive way. Proper implementation of these measures will enable to avoid taking place in present time undue financial losses and give a significant boost to major economic projects – first of all, that are being implemented by JSC "Russian Railways" in the territory of the DPRK.

The "Khasan-Rajin" project is a landmark, as north korean side links just with it possible in future mass arrival of russian business to the DPRK. The greatest expectations are connected with the beginning of Hasan-Tumen-Rajin railway section operation and perspectives of intermodal transshipment complex in north korean Rajin port employment, including the possibility of bringing to the project on a tripartite basis companies from the Republic of Korea (POSCO, Hyundai Merchant Marine, Korail)[13]. The positive experience of three countries cooperation already exists. The pilot shipment of russian coal in 40.000 tons, that was delivered to Rajin by “Hasan-Tumen” railroad transition, was carried out to south korean port Pohang in November 2014[14]. Since  April 16 till May 9 2015 there was the second test shipping (ports of Dangjin, Gwangyang, Boren) about 140.000 tons of coal for the needs of POSCO corporation steel production and South Korea`s electricity generation facilities. It is declaring the readiness to sign an agreement about implementation of such operations on the regular basis, if south korean side will be satisfied with test supplies results. We can see, that all this demonstrates the consecutive positive dynamics.

Summarizing all above mentioned, we should recognize that in current circumstances economic cooperation between Russia and the DPRK in the nearest future still remain limited. Moreover, in this situation it will be extremely difficult to implement two countries major economic projects, such as the "Victory", without the involvement of foreign investment, but it`s inflow to Russia has fallen sharply in recent years as a consequence of the Ukrainian crisis. South korean investments contribution would be the most optimal solution of this problem, but there are political nature questions, including the level of inter-korean relations and significant impact of the US on the ROK`s foreign policy. The "Victory" project, in particular, taking into account designated in the beginning of this article moments, is a long-term one and start of its full-scale implementation could be expected only after reception of reliable information about Russia interested resource fields and their volumes. At the same time potential benefits from its realization for Russia are undeniable - strengthening political weight, authority and credibility of Moscow foreign policy in Northeast Asia, gaining access to new sources of raw materials, including strategic ones, creating conditions and prerequisites for increasing Russia`s export opportunities at Asian markets, development of transport and logistic capacities, etc.

With regard to the purpose of increasing trade turnover between Russia and North Korea to 1 billion dollars till 2020, in the author’s opinion, it could be achieved only by using subsidies from russian budget. We can assume with the high level of probability that Pyongyang is counting exactly on that, but in present conditions of the russian economic situation it seems unlikely to be realized. However, in case of economy improvement, widening of russian companies possibilities to invest and create enterprises in the DPRK`s free economic zones can be more discussable. Opening of correspondent accounts in the banks of two countries, transition to payments in rubles, refusing from dollar usage in foreign operations – all this measures should facilitate business operations with North Korea and lead the bilateral trade to a new, higher stage of development.

The "Khasan-Rajin" project, being a good example of successful cooperation between Russia and the DPRK, will continue to play significant role in the economic cooperation between two countries. Given the political and economic interest of the Republic of Korea to participate in it, if not to take into account the factor of the USA pressure on Seoul, there are chances for successful cooperation in trilateral format. In political terms, it would greatly contribute to normalization of inter-korean relations and possibly would shape the conditions for the resumption of dialogue between two korean states. Moreover, it also would strengthen the Moscow's role in the Korean Peninsula and, in general, in Northeast Asia, and have a positive impact on the settlement of security issues in the region.

Further development of the "Khasan-Rajin" railway project, which is a pilot part of one of the three "mega-projects" in the Korean Peninsula - Trans-Siberian and Trans-Korean railways connection will give a new impulse to the other two projects implementation - laying of Trans-Korean gas pipeline and electric grids. Moreover, there are some improvements in the last project. According to available information, at present time russian companies actively pursue opportunities, including technical, of laying high-voltage electric power lines till russian settlement Khasan and further to the north korean FEZ of Rason[15].

It appears that the above mentioned information demonstrates the scale and thoroughness of cooperation plans between Russia and the DPRK, and their significant prospects, but how they will be implemented in the difficult realities of the current international situation - only time can show.

Author: Cherkashin Pavel, researcher, Laboratory of Asia-Pacific International Institutions and Multilateral Cooperation, Oriental Institute - School of Regional and International Studies FEFU; reporter, News Agency “DEITA”