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Economic cooperation between Russia and North Korea: New goals and new approaches

Authors:
  • Institute of China and Contemporary Asia of the Russian Academy of Sciences

Abstract

For many years the Soviet Union was the key economic partner of North Korea. After the USSR broke up, Russia has not played such an important role in the DPRK's economic development. In 2013, its share in the foreign trade of North Korea accounted for a mere 1%. However, in the second decade of the 21st century bilateral, contacts have intensified significantly. Judging by the recent developments, the Russian leadership has made a political decision to expand economic cooperation with North Korea and stimulate Russia's business interests with the DPRK. Russia has set a goal of growing the volume of its trade with North Korea by a factor of ten by 2020. Moreover, Moscow is currently developing a number of investment projects in the DPRK and Russian companies are also looking at developing more of them. Another important aim for Russia is the implementation of big infrastructure projects with both Koreas. The article examines the current position and future prospects for economic cooperation between Russia and North Korea and analyses main forms and potential opportunities for developing bilateral economic relations. Particular attention is paid to the expanding cooperation mechanisms and joint economic projects between Russia and the DPRK and also the potential participation of the Republic of Korea.
Economic cooperation between Russia and North Korea: New
goals and new approaches
Liudmila Zakharova
Center for Korean Studies, Institute of Far Eastern Studies, Russian Academy of Sciences, 32 Nakhimovsky Prospect, Moscow 117997, Russia
ARTICLE INFO
Article history:
Received 2 June 2015
Accepted 20 April 2016
Available online 4 May 2016
Keywords:
Russia
North Korea
Trade
Cooperation
Projects
South Korea
ABSTRACT
For many years the Soviet Union was the key economic partner of North Korea. After the
USSR broke up, Russia has not played such an important role in the DPRK’s economic de-
velopment. In 2013, its share in the foreign trade of North Korea accounted for a mere 1%.
However, in the second decade of the 21st century bilateral, contacts have intensified sig-
nificantly. Judging by the recent developments, the Russian leadership has made a political
decision to expand economic cooperation with North Korea and stimulate Russia’s busi-
ness interests with the DPRK. Russia has set a goal of growing the volume of its trade with
North Korea by a factor of ten by 2020. Moreover, Moscow is currently developing a number
of investment projects in the DPRK and Russian companies are also looking at developing
more of them. Another important aim for Russia is the implementation of big infrastruc-
ture projects with both Koreas. The article examines the current position and future prospects
for economic cooperation between Russia and North Korea and analyses main forms and
potential opportunities for developing bilateral economic relations. Particular attention is
paid to the expanding cooperation mechanisms and joint economic projects between Russia
and the DPRK and also the potential participation of the Republic of Korea.
Copyright © 2016 Production and hosting by Elsevier Ltd on behalf of Asia-Pacific
Research Center, Hanyang University. This is an open access article under the CC BY-NC-
ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).
1. Introduction
Unlike China–North Korea and inter-Korean economic re-
lations, the subject of economic cooperation between Russia
and North Korea in the 21st century is relatively unex-
plored in the broad academic community. The main reason
for this is the small volume of bilateral trade, as well as the
problems with the availability of data. In the early 21st
century, Russian experts in Korean studies have now pre-
pared a number of articles devoted to the subject of Russian–
North Korean economic cooperation1. Some aspects of
bilateral economic relations have been covered in mono-
graphs and articles dedicated to the Russian policy on the
Institute of Far Eastern Studies, Russian Academy of Sciences, 32
Nakhimovsky Prospect, Moscow 117997, Russia.
E-mail address: ludmila_hph@rambler.ru.
The paper was written before the UN Security Council adopted Reso-
lution 2270 with a new set of economic sanctions against the DPRK and does
not analyse their impact on Russia–North Korea economic cooperation.
1Leshakov, P.S. (2005). Russia’s Role in the Policy of Economic Engage-
ment of the DPRK. Korea: New Horizons. Moscow: IFES RAS. 201–208.
Leshakov, P.S. (2012). Economic Challenges to the New Political Leader-
ship of the DPRK and Prospects of the Russian-North Korean Relations. The
Korean Peninsula: on the Eve of Changes. Moscow: IFES RAS. 43–53.
Suslina, S.S. (2006) Russia’s Economic Impact on the ROK and the DPRK
in the Context of Integration Processes in the NEA. Korean Peninsula and
the Challenges of Globalization. Moscow: IFES RAS. 114–126.
Trigubenko, M.E. (2006). Russia’s Trade and Economic Relations with the
ROK and the DPRK. Korean Peninsula and the Challenges of Globalization.
Moscow: IFES RAS. 127–133.
Zabrovskaya, L.V. (2010). A New Tendency in Russian-North Korean Re-
gional Economic Contacts. The Korean Peninsula: History’s Lessons. Moscow:
IFES RAS. 293–299.
http://dx.doi.org/10.1016/j.euras.2016.04.003
1879-3665/Copyright © 2016 Production and hosting by Elsevier Ltd on behalf of Asia-Pacific Research Center, Hanyang University. This is an open
access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).
Journal of Eurasian Studies 7 (2016) 151–161
Contents lists available at ScienceDirect
Journal of Eurasian Studies
journal homepage: www.elsevier.com/locate/euras
Korean peninsula2. Economic cooperation between Russia
and the DPRK has also been studied as part of the re-
search on external economic relations of North Korea3and
Russian–North Korean relations in general4.
The purpose of this study is to present an overview of
the information available on the subject, explore the phe-
nomenon of the development of Russian–North Korean
economic relations in the 21st century, and identify the main
features and trends.
The methodology of studying economic relations
between Russia and the DPRK is based on the systems ap-
proach. The author investigates basic components of the
system structure (cooperation mechanisms, trade, invest-
ment, interregional cooperation, etc.), its features, functions,
internal ties and interaction with the international envi-
ronment. Due to the nature of the research subject special
importance is attached to exploring the strategic posi-
tions of the two countries’ governments which currently
determine the development of bilateral economic rela-
tions. The comparative method was used to identify major
common points and differences in the stances of the Russian
and North Korean authorities.
The main information sources are official documents and
press releases of the Russian government bodies and com-
panies that are doing business with the DPRK, as well as
the author’s conversations with Russian representatives from
different spheres who have practical experience of working
with North Koreans. Statistical data have been sourced from
the Federal Customs Service of Russia and related companies.
2. The political and economic background of Russian–
North Korean economic relations
During the Cold War, the Soviet Union was an
important economic partner for North Korea. In the 1970–
1980s, its share in the DPRK’s foreign trade accounted for
25–50%. In 1990, it reached 53.3% or $2.2 billion5. At that
time, economic relations between the two countries were
largely based on favourable prices and credit. The Soviet
Union also provided North Korea with preferential techni-
cal assistance. By the early 1990s, the facilities built in the
DPRK with Soviet help produced up to 70% of electricity,
50% of chemical fertilisers, and about 40% of ferrous metals.
The aluminium industry was created entirely by Soviet spe-
cialists. Approximately, 70 large industrial enterprises in
North Korea were built with the assistance of the USSR6.
After the Soviet Union broke up, the new Russian lead-
ership decided to prioritise economic cooperation with South
Korea over formerly brotherly relations with North Korea.
This radical turn in the early 1990s led to an almost com-
plete freeze in the relations with the DPRK and a decline
in bilateral economic ties. Implementation of joint proj-
ects was interrupted. The new system of account settlement
in hard currency caused a sharp reduction in trade between
the two countries. In 1995, the bilateral trade turnover
amounted to mere $83 million7.
Within a few years, Moscow realised that equidistance
diplomacy towards the two Koreas works best for the in-
terests of Russia8. The beginning of the 21st century brought
an improvement to Russian–North Korean relations. A new
intergovernmental Treaty on Friendship, Good Neighborly
Relations and Cooperation was signed in February 2000. The
parties agreed to create favourable legal, financial and eco-
nomic conditions to actively promote the development of
trade, economic, scientific, and technical relations between
them. Russian President Vladimir Putin visited Pyongyang
in July 2000. And North Korean leader Kim Jong II paid two
visits to Russia – in 2001 and 2002. The new treaty laid legal
basis of modern relationship between Russia and North
Korea, and the agreements signed at the summits out-
lined priority areas of future cooperation. In particular, the
Moscow Declaration of the Russian Federation and the DPRK
signed on the 4th of August 2001 mentioned such spheres
of economic cooperation as “reconstruction of enterprises
built by joint efforts particularly in electric energy indus-
try” and “the project of creating a railway transport corridor
linking the North and the South of the Korean Peninsula with
Russia and Europe”.
The current Russian policy is generally assessed as
characterised by a high degree of pragmatism and lack of
ideological approach9. In February 2013, the Russian Pres-
ident approved a new Foreign Policy Strategy for the Russian
Federation. According to this document, Russia aims to main-
tain friendly relations with the DPRK and the ROK based on
the principles of mutually beneficial cooperation. Russia
Zabrovskaya,L.V. (2006). Economic Contacts b etweenthe DRPK and the
Russian Far East:1992–2005. International Journal of Korean Unification Studies,
15, 2: 95–111.
2Korean Settlement and Russia’s Interests. (2008) // Edited by V.I. Denisov
and A.Z. Zhebin. Moscow: IFES RAS, “Russian Panorama”. 189–220.
Toloraya, G. (2014a).Russia-North Korea Economic Ties Gain Traction.6No-
vember 2014. http://38north.org/2014/11/toloraya110614/ Accessed on
12 May 2015.
Vorontsov, A. (2014).Is Russia-North Korea Cooperation at a New Stage? 8
May 2014. http://38north.org/2014/05/avorontsov050814/ Accessed on 12
May 2015.
Lankov, A. (2011).Russia-N. Korea Trade. 2011-09-25. http://www
.koreatimes.co.kr/www/news/nation/2011/09/304_95434.html Ac-
cessed on 30 December 2015.
Lankov, A. (2014).N Korea and Russia: A step towards a worldwide anti-
hegemonic front? 22 Jun 2014. http://www.aljazeera.com/indepth/
opinion/2014/06/n-korea-russia-step-toward-worl-
201462253320470677.html Accessed on 30 December 2015.
3Haggard, S., Noland, M. (2007).North Korea’s External Economic Rela-
tions. Peterson Institute for International Economics. Working Paper Series.
August 2007.
Nanto, D.K., Chanlett-Avery, E. (2009).North Korea: Economic Leverage and
Policy Analysis. Congressional Research Service. August 14, 2009.
Nicolas, F. (2010).Coming in from the Cold? An Update on North Korean Ex-
ternal Economic Relations. April 2010. IFRI.
4Buszynski, L. (2009). Russia and North Korea: Dilemmas and Inter-
ests. Asian Survey. Vol. 49, No. 5 (September/October 2009). 809–830.
Kim, D.J. (2012). Russian Influence on North Korea: Views of Former South
Korean Ambassadors to Russia. The Korean Journal of Defense Analysis. Vol.
24, No. 3, September 2012. 391–404.
York, R. (2015).Russia Craves Balance on the Korean Peninsula. To main-
tain an influence in North and South Korea, Moscow must ‘stand on both
legs’: Experts. http://www.nknews.org/2015/11/russia-craves-balance
-on-the-korean-peninsula/ Accessed on 30 December 2015.
5Leshakov, P.S. (2005). 201.
6Korean Settlement and Russia’s Interests. (2008). 84.
7Leshakov, P.S. (2005). 202.
8Kim, D.J. (2012). 395.
9York, R. (2015).
152 L. Zakharova / Journal of Eurasian Studies 7 (2016) 151–161
wants to use the potential of these relations to accelerate
regional development, support inter-Korean political dia-
logue, and economic cooperation, as an essential condition
of maintaining peace, stability and security in the region10.
According to Russian experts, the significance of the
Korean peninsula in implementing the Russian policy of
«turning to the East» has been underestimated. Northeast
Asia is the window to the Asia-Pacific region for Russia, and
the Korean peninsula is the key to Northeast Asia. The issue
of the Korean settlement has an international dimension and
is regularly discussed when Russian representatives meet
their counterparts from other “great powers” 11.
Russia’s position has two different sides. On the one hand,
Moscow condemns the breaches of global nuclear non-
proliferation regime committed by North Korea. On the other
hand, Russia is opposed to any military action in the region
and the strategy of ‘regime change’ in North Korea that is
pursued by some countries. Moscow fully supports the eco-
nomic growth and engagement of the DPRK in the regional
integration processes, it is in Russia’s national interest to
maintain stability on the Korean peninsula, and prevent pos-
sible military escalation of China–US (allies of North and
South Korea, respectively) relations in the region.
Besides security reasons, Russia has important econom-
ic goals, the achievement of which could be facilitated
through cooperation with the two Koreas. For many years,
Russia has been promoting plans to implement several large-
scale projects involving both countries of the Korean
Peninsula. The biggest of these includes connecting the
Trans-Korean and Trans-Siberian railways, constructing a
gas pipeline to South Korea through North Korea, and sup-
plying Russian electricity to the Korean peninsula. These
initiatives are regularly discussed at high-level talks between
Russia and the DPRK, as well as between Russia and the ROK.
However, none of the three projects mentioned above has
reached the stage of implementation in trilateral format yet.
The tense situation on the Korean peninsula due to the
DPRK’s nuclear programme and the deterioration of inter-
Korean relations since 2008 has been among the main
reasons for this.
Despite the improvement of political relations between
Russia and North Korea in the first decade of the 21st
century, the two countries could not achieve a break-
through in bilateral trade. In 2010, the volume of trade
between the Russian Federation and the DPRK was less than
$100 million. Serious measures were required to restore bi-
lateral trade and economic ties. Judging by the recent
developments, which are described in detail below, the
Russian leadership has made a political decision to expand
economic cooperation with North Korea and stimulate Rus-
sia’s business interests with the DPRK.
Under Kim John Un, North Korea has been pursuing an
active policy aimed at diversifying external trade relations
and attracting foreign investment into the country. In his
New Year Address on 1 January 2015, Kim Jong Un said that
the DPRK should foster external economic relations in a mul-
tilateral way and acceleratethe planne d projects for economic
development zones12. Currently, China is the main econom-
ic partner for North Korea with $6363 billion trade turnover
in 2014. The PRC’s share in the DPRK’s foreign trade is es-
timated at almost 90% (if inter-Korean trade is not included).
Therefore, the North Korean leadership needs to reduce its
economic dependence on China and one of its most attrac-
tive options is to boost economic ties with Russia13.
3. Intensified economic contacts: activating old
mechanisms and creating new ones
Economic relations between Russia and the DPRK have
been significantly influenced by the current international
political and economic environment. The failure to settle
the North Korean nuclear issue, regular escalations of the
tense military situation on the Korean peninsula, and Amer-
ican and international sanctions against the DPRK, negatively
affect the prospects of bilateral cooperation. At the same
time, the current complex relationship between Russia and
the West, anti-Russian sanctions, and the proclaimed
strengthening of the ‘eastern vector’ of Russian policy create
a much more favourable environment for economic coop-
eration between Moscow and Pyongyang.
A clear sign of the Russian interest in developing eco-
nomic ties with North Korea was the settlement of the
DPRK’s debt to Russia inherited from the Soviet Union times.
This problem was considered to be one of the main ob-
stacles to the expansion of economic cooperation between
the two countries14, and the negotiations to solve it con-
tinued for many years. On the 17th of September 2012,
Russia and North Korea signed an Agreement on settle-
ment of the DPRK’s debt to the Russian Federation on loans
previously granted by the former Soviet Union. A federal law
ratifying the agreement was signed by the Russian Presi-
dent on the 5th of May 2014. According to the document,
the debt was estimated at $11 billion including the inter-
est and based on the Soviet-era exchange rate of 67 kopecks
to the dollar. Russia agreed to write off 90% of North Korea’s
debt and the remaining amount ($1.09 billion) should be
repaid by North Korea in equal semi-annual tranches over
a period of 20 years to an interest-free account opened by
Russia’s state Vnesheconombank in North Korea’s Foreign
Trade Bank15. The agreement suggests that this residue can
be used to finance joint Russian–North Korean projects in
humanitarian (education, health care) and energy fields.
Thus, a special fund was created for future Russian invest-
ment in the DPRK. According to Russian officials, the
remainder of the debt can be used to support trilateral gas
and railway projects.
10 Foreign Policy Strategy of the Russian Federation. (2013).
http://archive.mid.ru/brp_4.nsf/0/6D84DDEDEDBF7DA644257B160051BF7F
Accessed on 11 May 2015.
11 Torkunov, A. (2014).What Is the Meaning of the Korean Problem for
Russia? 3 April 2014. http://russiancouncil.ru/inner/index.php?id
_4=3447#top Accessed on 12 May 2015.
12 KCNA. (2015).Kim Jong Un’s New Year Address. 1 January 2015.
13 Toloraya G. (2012).North Korea Is the Key to Asia-Pacific Region. 25 Sep-
tember 2012. http://russiancouncil.ru/inner/?id_4=859#top Accessed on
30 December 2015.
14 Kim, D.J. (2012). 394.
15 See “A Bill Signed Ratifying the Intergovernmental Agreement on the
Settlement of the DPRK’s Debt to the Russian Federation on Loans Previ-
ously Granted by the Former Soviet Union’. 5 May 2014. Available online
at http://www.kremlin.ru/acts/20916 Accessed on 11 May 2015.
153L. Zakharova / Journal of Eurasian Studies 7 (2016) 151–161
Following the political will of the Russian leadership, the
Russian Embassy in North Korea, in close cooperation with
Russian and Korean economic agencies and commercial
organisations, has actively worked on improving trade and
economic relations between the two countries. Since the
beginning of 2014, Russia and the DPRK have greatly ex-
panded bilateral contacts in the economic field both at
governmental and regional levels. Moreover, in 2014 Russia
announced the delivery of 50,000 t of wheat in the form
of humanitarian aid to North Korea16.
The main Russian government body pushing for ex-
panded economic ties with the DPRK is currently the Far
East Development Ministry which was established in 2012.
Russia’s Far East Development Minister Alexander Galushka
is the chairman of the Russian side of the Intergovernmen-
tal Commission on Trade, Economic, Scientific and Technical
Cooperation between Russia and North Korea (Korean part
of the Commission is headed by the Minister of External Eco-
nomic Relations Ri Ryong Nam). Some experts maintain that
this young Russian minister has set a personal goal of im-
proving economic ties with the DPRK and is devoting a lot
of effort to achieve it17.
A. Galushka visited North Korea in March 2014 to discuss
various joint projects and ways to boost bilateral trade and
economic cooperation with his North Korean counter-
parts. At those meetings, they declared a goal to bring trade
relations between the two countries to a new level and in-
crease the annual direct turnover to $1 billion by 2020. In
the 21st century, the volume of direct trade between Russia
and the DPRK did not exceed $250 million per year, and in
2013, it was just a bit over $100 million. It is clear that sub-
stantial expansion of economic cooperation will be required
to increase bilateral trade by 10 times in less than 10 years.
According to the Russian Far East Development Minister, this
result will be achieved due to the projects of such compa-
nies as “Russian Railways”, “Mostovik”, “Severnye Priisky”,
“Basic Element”, “Altay Mills” and “Farmasyntez”18.
In April 2014, a 40-strong Russian delegation headed
by Deputy Prime Minister and Presidential Envoy in the Far
Eastern Federal District Yuri Trutnev visited the DPRK and
held talks with Kim Yong Nam, the Chairman of the Pre-
sidium of the Supreme People’s Assembly, Pak Pong Ju,
Premier of the Cabinet of the DPRK, and other senior offi-
cials of the country. The Russian delegation included the
Governor of the Primorsky Territory V. Miklushevsky, Gov-
ernor of Khabarovsk Territory V. Shport and Amur Region
Governor O. Kozhumyaka who confirmed their interest in
further development of regional economic cooperation with
the DPRK. In addition, the Governor of the Amur Region
and the Minister of Foreign Trade of North Korea signed
an agreement on trade and economic cooperation and
agreed to develop cooperation in agriculture, forestry and
construction19. During the visit, Russia donated 50 fire
engines to North Korea (Matsegora, 2015).
Another high-level Russian official who got involved in
economic talks with North Korea at the request of the federal
government was Rustam Minnikhanov, President of the Re-
public of Tatarstan. He headed a large delegation that visited
North Korea in March 2014 and was accompanied by rep-
resentatives of the Tatarstan Ministry of Industry and Trade,
Ministry of Agriculture, Chamber of Commerce and Indus-
try, JSC “Tatneftekhiminvest Holding”, JSC “TAIF” and Kazan
University20. Before the visit, the Republic of Tatarstan had
almost no economic contacts with North Korea. However,
the talks revealed a lot of areas of common interest. Dis-
cussions focused on cooperation in the oil industry,
construction, agriculture and other fields. The first result of
the visit was an agreement to establish a joint working group
on cooperation between Tatarstan and the DPRK and expand
bilateral trade.
After a three-year break in June 2014 the 6th meeting
of the Intergovernmental Commission (IGC) on Trade, Eco-
nomic, Scientific and Technical Cooperation was held in
Vladivostok where the parties discussed potential condi-
tions and projects to intensify economic cooperation
between Russia and the DPRK. Existing international and
American economic sanctions against North Korea make
bank transfers to the country and from it very difficult. To
solve the problem, the Russian Federation and the DPRK
agreed to account settlements in rubles in all trade trans-
actions between the two countries. The first contracts on
opening of North Korean accounts at Russian banks were
signed in June 2014 between Russian AKB “Regional De-
velopment Bank” and “Foreign Trade Bank of the DPRK” and
“Korean Bank of Unification and Development”. The first
settlements in rubles between the assigned banks were con-
ducted in October 201421.
During the IGC meeting, the North Korean participants
made a presentation of special economic zones of the DPRK.
The parties outlined priorities for the expansion of bilat-
eral cooperation in trade, energy and natural resources
sectors. Exploration of oil and gas in North Korea, partici-
pation in the development of mineral deposits, including
non-ferrous and rare metals, cooperation in gold mining,
manufacturing of goods in North Korea, joint agricultural
projects and others can be mentioned among the regular-
ly discussed areas of mutually beneficial cooperation.
In 2014, North Korea demonstrated an unprecedented
level of openness and willingness to cooperate in negotia-
tions with the Russians. The DPRK authorities expressed their
willingness to create improved business conditions for
Russian companies. In particular, they agreed to facilitate
issuing of multiple-entry visas, provide Russian investors
16 See “About the Delivery of the First Batch of the Russian Humanitar-
ian Assistance to the DPRK”. 7 October 2014. Available online at http://www
.mid.ru/brp_4.nsf/newsline/F539FFB9F1956DDE44257D6A0057CED2 Ac-
cessed on 11 May 2015.
17 Toloraya, G. (2014a).Russia-North Korea Economic Ties Gain Traction.
6 November 2014. http://38north.org/2014/11/toloraya110614/ Ac-
cessed on 12 May 2015.
18 See the remarks by Russia’s Far East Development Minister at
http://minvostokrazvitia.ru/press-center/news_minvostok/?ELEMENT_ID
=2265&sphrase_id=10627 Accessed on 11 May 2015.
19 Vorontsov, A. (2014).Is Russia-North Korea Cooperation at a New Stage?
8 May 2014. http://38north.org/2014/05/avorontsov050814/ Accessed on
12 May 2015.
20 See “The President of Tatarstan Goes to the DPRK to Develop Econom-
ic Cooperation”. 21 March 2014. Available online at http://rt.rbc.ru/tatarstan
_topnews/21/03/2014/912657.shtml Accessed on 11 May 2015.
21 See “First Payments in Rubles Were Conducted between Russia and the
DPRK”. 20 October 2014. Available online at http://minvostokrazvitia.ru/
press-center/news_minvostok/?ELEMENT_ID=2370 Accessed on 11 May 2015.
154 L. Zakharova / Journal of Eurasian Studies 7 (2016) 151–161
with modern communication systems (mobile phone and
Internet) and provide easier access to information on leg-
islation in the DPRK. In the second half of 2014, twelve
Russian businessmen received long-term multiple-entry
visas to the DPRK for the first time22.
In September–October 2014, North Korean Foreign Min-
ister Ri Su Yong held a 10-day visit to Russia. He visited
Moscow and a number of Far Eastern regions of Russia
(Sakhalin and Amur Regions, Primorsky Territory). Special
attention at the meetings with Russian officials was given
to the projects of economic cooperation between the two
countries, especially in the agricultural sector. North Korea
is interested in developing long-term bilateral agricultur-
al projects with Far Eastern regions of Russia23.A
memorandum of understanding between the two coun-
tries’ Agriculture Ministries was signed during the visit.
In February–March 2015, a DPRK government econom-
ic delegation led by Ri Ryong Nam, Minister of External
Economic Relations, visited several Russian cities – Moscow,
Khabarovsk and Vladivostok, as well as Kaluga, Lipetsk and
Kazan. In Kaluga and Kazan, the North Korean delegation
explored the experience of these Russian regions in attract-
ing foreign investment. At the talks with Russian Minister
A. Galushka, the parties agreed to consider creating areas
of advanced economic development in the Far East of Russia
and in the DPRK in a trilateral format with the participa-
tion of the Russian Federation, North Korea, and South
Korea24.
Another visit of the Russian business delegation to North
Korea headed by Minister A. Galushka took place in October
2014. The two countries’ authorities agreed to establish a
Business Council comprised of the businessmen inter-
ested in developing economic ties between Russia and the
DPRK. Russian delegation visited Kaesong industrial complex,
which is currently the only functioning inter-Korean coop-
eration project, in which the North and the South would like
to attract investors from third countries. Some Russian busi-
nesses, especially from the agricultural sector, showed their
interest in Kaesong. During the visit, A. Galushka said that
the issue of introducing a visa-free regime between Russia
and North Korea was put on the agenda for future
negotiations.
At the beginning of 2015, Russia and North Korea set up
Russia-DPRK Business Council at the Chamber of Com-
merce of the Russian Federation (Kazimirko-Kirillova, 2015).
Its main goal is to assist businessmen and companies of the
two countries in searching and establishing business rela-
tions to ensure effective development of trade and economic
relations between Russia and North Korea (Survillo, 2015).
The first meeting of the Business Council took place on the
25th of February and lasted for more than five hours. Among
the participants were senior officials of both countries as
well as Russian companies’ representatives interested in
dealing with North Korea. According to the Russian offi-
cials, the new mechanism will play a coordinating role for
Russian companies, consider their business projects, and
submit them to the level of intergovernmental discussion25.
So, in the period of 2012–2014, Russia and the DPRK
completed important preparatory work to boost bilateral
economic ties. They resolved the debt problem, intensi-
fied economic contacts, facilitated bank transactions, created
new bodies, and favourable conditions were provided to
Russian businessmen in North Korea – all this can become
a solid base for the future expansion of business coopera-
tion between the two countries. Russia’s Far East
Development Ministry set up a special working group to
closely monitor projects of Russian companies in North
Korea. Its first meeting was held in September 2014 with
the participation of North Korean representatives. Russian
officials also expect the DPRK to establish a special gov-
ernment body responsible for economic cooperation with
Russia.
To sum up, it can be said that Russia is now trying and
developing a new mechanism of long-term economic co-
operation with the DPRK in which on the Russian side, both
government and private business are actively involved. It
is a new model of interaction with North Korea com-
pletely different from the Soviet period. The core of it is
mutual benefit and economic pragmatism with support of
specific projects.
This approach was confirmed at the 7th meeting of the
Intergovernmental Commission on Trade, Economic, Sci-
entific and Technical Cooperation which was held in
Pyongyang in April 2015. In the final protocol, more com-
mercial projects were mentioned in transport, energy,
industrial, agricultural spheres as well as in exploring mineral
resources. For example, Russia’s Gazprom International
showed its interest in cooperation with North Korea in the
exploration and development of natural gas. Another Russian
company RAO Energy Systems of East is exploring a pos-
sibility of constructing a 20 MW wind farm in North Korea.
The parties also agreed to set up a new working group to
analyse the feasibility of revitalising North Korea’s hydro and
coal fired power plants by Russian companies.
The DPRK offers different kinds of its mineral deposits
as the main source of finance for these projects and payment
for the Russian goods. However, the Russian companies need
to have accurate information on the potential of develop-
ing the North Korean mineral deposits. For this purpose,
Russia needs to compile a catalogue of the mineral re-
source base of North Korea, and sees this as a critical task
for the near future26.
22 See “DPRK Issues Long-Term Multiple-Entry Visas to Russian Citi-
zens for the First Time”. 08 September 2014. Available online at
http://minvostokrazvitia.ru/press-center/news_minvostok/?ELEMENT_ID
=2150&sphrase_id=10023 Accessed on 11 May 2015.
23 Macdonald, H. (2014).North Korean FM Wraps up “Successful” Trip to
Russia. 13.10.2014. http://www.nknews.org/2014/10/north-korean-fm
-wraps-up-successful-trip-to-russia/ Accessed on 12 May 2015.
24 See “A.Galushka: We Are Interested in Cooperation with the DPRK both
in the Far East and on the Korean Peninsula”. 23 March 2015. Available
online at http://minvostokrazvitia.ru/press-center/news_minvostok/
?ELEMENT_ID=3052 Accessed on 30 December 2015.
25 See “Business Cooperation between Russia and DPRK was Discussed
in Moscow. 26 February 2015. Available online at http://minvostokrazvitia
.ru/press-center/news_minvostok/?ELEMENT_ID=2988 Accessed on 11 May
2015.
26 See “Intergovernmental Commission Russia-DPRK: the Main Princi-
ple is Equality and Realization of Economically Viable Projects”. 27 April
2015. Available online at http://minvostokrazvitia.ru/press-center/
news_minvostok/?ELEMENT_ID=3131 Accessed on 11 May 2015.
155L. Zakharova / Journal of Eurasian Studies 7 (2016) 151–161
4. The present state of bilateral trade: urgent
measures required
In the first 5 years of the 21st century, Russia’s trade with
the DPRK increased from $105 million in 2000 to $233
million in 2005. However, in 2006 the trend reversed and
with the global financial crisis the bilateral turnover reduced
to $49 million in 2009. As a result of the subsequent partial
recovery trade between the Russian Federation and North
Korea grew to $112.7 million in 2013. So, in the middle of
the first decade of the 21st century, Russia’s share in the
foreign trade of North Korea was more than 5% but after
2009, it fell below 2% on the backdrop of growing North
Korean economic exchanges with other countries. At the be-
ginning of the 2010s, the trade turnover between Russia and
the DPRK was almost 50 times less than the volume of trade
between China and North Korea and 15 times less than the
turnover of inter-Korean trade.
Among the reasons for such a small turnover between
Russia and North Korea, some experts identified econom-
ic stagnation, a narrow range of export products from the
DPRK, low solvency of North Korean companies, and dis-
trust in them by Russian firms, a lack of modern
infrastructure, and difficulties with financial transactions
due to international sanctions imposed against the DPRK27.
Table 1 shows that bilateral trade is mostly based on
exports from Russia to the DPRK. Imports from North
Korea remain insignificant. As a result, in economic rela-
tions with Russia, North Korea has a chronic trade deficit
which reduced from $219.5 million in 2005 to $94.1
million in 2013 primarily due to the decrease in the total
trade volume.
Russia and North Korea will have to work hard to in-
crease and diversify commodity supplies for the expansion
of bilateral trade. However, there are some good opportu-
nities for it. Over the past three years, several large Russian
companies have expressed interest in cooperation with
North Korea. For example, at the end of 2012, coal company
Raspadskaya (part of Evraz holding) signed a contract to
supply coking coal to the DPRK and in 2013 delivered more
than 170,000 tons of coal worth about $19.9 million to North
Korea28. In 2014, coal deliveries continued. In 2015, the
Russian SEVER group of companies started to supply coal
to the DPRK in exchange for cast iron29.
According to the Russian Embassy in the DPRK, Rus-
sia’s main exports to North Korea in 2013 were: coking coal,
diesel fuel, metals, metal products, machinery, equip-
ment, vehicles, foodstuffs, and agricultural raw materials.
Russia’s imports from North Korea in 2013 included tex-
tiles and footwear, chemicals, mineral fuels, metals and metal
products30. More than 90% of bilateral trade was repre-
sented by Russian exports. To improve this situation, North
Korean officials are actively trying to offer export goods and
services from North Korea to Russian partners. For example,
in summer 2014, the DPRK embassy in Russia offered
Russian IT companies the opportunity to hire several dozen
North Korean programmers. However, as for now all these
offers find little interest at the Russian market.
Despite all the efforts of the two countries’ authorities
and the declared goal of achieving $1 billion turnover by
2020, in 2014 bilateral trade fell again – to $92.8 million.
However, Russian officials believe that the situation will
improve considerably after the successful implementa-
tion of several projects which are being discussed between
Russian and North Korean companies. At the same time, the
actual volume of trade between Russia and North Korea is
likely to be higher than the official statistics. Some Russian
companies have been supplying their products to the DPRK
for several years through intermediaries in China. Steps
should therefore be taken to convert trade through third
countries into direct trade between Russia and the DPRK.
This would reduce transaction costs for the participants and
significantly improve bilateral cooperation. The main ob-
stacle to this is the mutual lack of trust between the Russian
and North Korean companies involved.
At the 7th meeting of Intergovernmental Commission in
April 2015, Russia and North Korea signed 16 veterinary cer-
tificates for live animals and animal products for export from
the Russian Federation to the DPRK. Expanding coopera-
tion in agriculture can contribute to increasing the bilateral
turnover. In particular, North Korea expressed interest in im-
porting pork and poultry from Russia31.
To boost trade cooperation between Russia and North
Korea, it is also important to improve logistics between them.
The two countries do not share a land border, so all trade
between them is conducted by sea, or by rail across a single
27 Leshakov, P.S. (2012). 43-53.
28 According to the data of Russia’s Federal Customs Service.
29 See “DPRK Delegation to Participate in Eastern Economic Forum”. 22
August 2015. Available online at http://minvostokrazvitia.ru/press-center/
news_minvostok/?ELEMENT_ID=3566 Accessed on 30 December 2015.
30 Embassy of Russia to the DPRK. (2015).Trade and Economic Coopera-
tion.http://rusembdprk.ru/ru/rossiya-i-kndr/torgovo-ekonomicheskoe
-sotrudnichestvo Accessed on 11 May 2015.
31 See “Intergovernmental Commission Russia-DPRK: the Main Princi-
ple is Equality and Realization of Economically Viable Projects”. 27 April
2015. Available online at http://minvostokrazvitia.ru/press-center/
news_minvostok/?ELEMENT_ID=3131 Accessed on 11 May 2015.
Table 1
Trade turnover between Russia and the DPRK in 2001–2013 (million $).
2001 2003 2005 2007 2009 2011 2013
Total trade volume 114.3 113.7 233.2 159.8 49.4 113.7 112.7
Export from Russia to the DPRK 70.8 11.7 226.3 126.1 41.6 99.2 103.4
Import to Russia from the DPRK 43.5 3.0 6.9 33.7 7.8 14.5 9.3
Source: Russia’s Federal Customs Service.
156 L. Zakharova / Journal of Eurasian Studies 7 (2016) 151–161
bridge. However, the North Korean side has long been asking
for the construction of a road bridge. In March 2014, the
two sides agreed to speed up the preparation of an inter-
governmental agreement on international road transport.
And in April 2015, such an agreement was signed in Moscow
(Kiryanov, 2015a), which gives hope for the start of prac-
tical work in this field in the near future. The prospect of
building a floating road bridge between Russia and North
Korea at the Khasan border crossing is currently being dis-
cussed by the Business Council, and has the support of both
the Russian government and the authorities of the Primorsky
Territory32. The main task now is to find a funding source
for it.
5. The present state of investment cooperation: a
mutually beneficial model to be implemented
The biggest investment project pursued by Russia to date
within the DPRK was launched in 2008 and is called the
Khasan-Rajin railroad project. It involves the renovation and
operation of a 54-kilometer double-track stretch of railway
from the border station of Khasan (Russia) to the port of
Rajin (the DPRK), and the construction of a universal freight
terminal in Rajin port for transit transportation and access
to the Trans-Siberian Railway. The Russian side of this project
is represented by OJSC Russian Railways which has already
invested 10.6 billion roubles (about $300 million) in con-
structing the infrastructure in North Korea. In September
2013, the renovated section of the railway was officially re-
opened, and in July 2014, the universal freight terminal in
the port of Rajin went into operation33.
In 2006 Russia, the ROK and the DPRK declared this
project to be the first stage of the entire Trans-Korean
Railway reconstruction (its eastern route), but since 2008
inter-Korean relations have deteriorated and South Korea
suspended its participation in the project. According to the
original business plan, the infrastructure in Rajin was to be
used for handling containerised cargo from South Korea (and
other countries of the Asia-Pacific region) and transport-
ing it to the network of Russian railways. However, with the
suspension of South Korean participation in the project, and
the lack of a confirmed freight base, Russia and North Korea
have had to change the configuration of the terminal to
handle bulk cargo. At this initial stage, the plan is for the
terminal to export up to 5 million tons of Russian coal an-
nually to the Asia-Pacific34.
In April 2014, OJSC Russian Railways successfully carried
out a trial operation moving two freight trains with coal from
Russian Kuzbass region to the port of Rajin. After that, the
terminal has been mainly used for shipments of coal from
Russia to China. In 2014, more than 100,000 tons of coal was
shipped through the port of Rajin35. In 2015, it was already
almost 1,200,000 billion tons of cargo36.
At the same time, Russia does not lose hope in the even-
tual implementation of the trilateral model of the project.
During the visit of Russian President Vladimir Putin to Seoul
in November 2013, Russia and the ROK signed a memoran-
dum of understanding according to which a consortium of
South Korean companies including POSCO, Hyundai Mer-
chant Marine Co. and Korail Corp. would consider an
opportunity to join the Khasan-Rajin logistics project (RIA
Novosti, 2014). On the 24th of May 2010, the South Korean
government imposed trade and economic sanctions against
the DPRK prohibiting any investment cooperation between
the two countries. Therefore, South Korean businesses can
enter this project only through cooperation with Russia, for
example, by acquiring part of the Russian share in the joint
venture of Russia and the DPRK called RasonKonTrans, which
operates the created infrastructure. Currently, 30% of the shares
in the joint venture are owned by the North Korean side and
70% of the shares belong to the Russian OJSC Russian Rail-
ways Trading House (a subsidiary of OJSC Russian Railways).
Part of this 70% can be sold to South Korean companies37.
Russia and the DPRK welcome participation of South
Korean companies in the Khasan-Rajin logistics project. In
2014 representatives of POSCO, Hyundai Merchant Marine
Co. and Korail Corp. visited Rajin twice and inspected the
port infrastructure, railways and other objects. After these
visits, they decided to carry out trial transportation of coal
from Russia to South Korea through Rajin port. The first pilot
shipment took place in late November 2014. A Chinese ship
carrying 40,500 tons of coal from West Siberia departed Rajin
port on 27 November and arrived in the South Korean port
of Pohang on 29 November (Kiryanov, 2014) . The new trans-
portation route allows South Korean coal buyers to save
about 10–15% of delivery time and shipping costs38. The
second trial shipment was carried out in late April–May
2015 (Kiryanov, 2015).
Another ambitious undertaking by Russian companies
in the DPRK was officially launched in October 2014. Project
‘Pobeda’ (which means Victory) involves modernising the
transport infrastructure and mining industry in North Korea
with the participation of the Russian Scientific and Produc-
tion Association, Mostovik. This company is particularly
famous for designing and constructing the bridge to the
Russky Island in Vladivostok for the APEC summit and
several Olympic facilities in Sochi.
Unlike the Khasan-Rajin railroad project which was
carried out by Russian Railways at their own expense with
the hope of the funds’ subsequent return, the Pobeda project
32 See “Expansion of Cooperation between Russia and the DPRK Was Dis-
cussed at the Eastern Economic Forum”. 3 September 2015. Available online
at http://minvostokrazvitia.ru/press-center/news_minvostok/?ELEMENT
_ID=3590 Accessed on 30 December 2015.
33 Kiryanov, O.V. (2015b). Russia-DPRK: Khasan-Rajin Project. // Asia and
Africa Today. 2015, N6. 65-68. KCNA. (2014).
34 Zakharova, L. (2013). North Korea’s International Economic Ties in the
21st Century and Prospects for Their Development under Kim Jong Un. //
Far Eastern Affairs, 3, 2013. 128-148.
35 See “Russia Transports 432,000 Tons of Freight to North Korea’s Rajin
Port in 1Q2015”. 27 May 2015. Available online at http://eng.rzd.ru/newse/
public/en?STRUCTURE_ID=15&layer_id=4839&id=106602 Accessed on 30
December 2015.
36 See “Freight Turnover between Russia and APR Countries through Land
Border Crossings Grew 22% in 2015”. 12 January 2016. Available
online at http://www.rzd-partner.ru/news/transportnaia-logistika/rost
-gruzooborota-so-stranami-atr-cherez-sukhoputnye-pogranperekhody-
vyros-v-2015-godu-na-22/ Accessed on 14 January 2016.
37 Kiryanov, O.V.(2015b). 65.
38 Kiryanov, O.V. (2014a). South Korea Receives Russian Coal.
http://www.rg.ru/2014/12/03/ugol-site.htmlAccessed on 30 December 2015.
157L. Zakharova / Journal of Eurasian Studies 7 (2016) 151–161
will be implemented on a “money first – investment later”
basis. In particular, as Russian Minister A. Galushka ex-
plained, expenses of Russian companies will be covered by
access to the mineral resources of North Korea including rare
earth metals and coal 39. It means that Russian companies
will develop the natural resources of North Korea, sell them,
and the DPRK government will invest the received funds in
the modernisation of its railways.
Mostovik plans to set up a joint venture with North Korea
in which technology, equipment and specialists will be pro-
vided by the Russian side and workers by the Korean side.
The plan involves modernisation of 3,500 km of railways
(or half of the DPRK’s railways network) as well as tunnels,
bridges and station roads. The section Jaedong-Kangdong-
Nampho was selected as the first part of the first stage of
this infrastructure project. The whole plan for the recon-
struction of North Korea’s railways is divided into 10 stages
and will require an investment of approximately $25 billion40.
If the Pobeda project is successfully implemented, it will
become a real example of a mutually beneficial model of
trade and economic cooperation between the two coun-
tries, where participation of Russian companies in
infrastructure and other projects takes place in exchange
for access to the North Korean mineral resources.
However, it is insufficient to only modernise the trans-
port infrastructure as a way of resolving the urgent problems
of the North Korean economy. Improving the country’s elec-
tricity supply is also on the agenda. Russia and the DPRK
have been discussing the organisation of electricity sup-
plies from Russia to North Korea. In the past, Russian energy
holding OJSC RusHydro carried out a feasibility study for
this project, and as Minister A. Galushka said in October
2014, the project turned out to be commercially attractive
and would be considered for further discussions. To study
options for energy supply from Russia to the North Korean
trade and economic zone Rason, it is planned to establish
a joint working group of RusHydro and the People’s Com-
mittee of Rason41. A feasibility study for this project is being
prepared by Russian company RAO Energy Systems of East.
Russia also held talks with potential participants from the
Republic of Korea. As a result in January 2015, RusHydro
signed a memorandum of understanding with the South
Korean company K-water where they agreed to start pre-
paring a feasibility study for creating an energy bridge from
Russia to the Republic of Korea through the territory of the
DPRK42.
Russian companies are also looking to invest in some
other areas of the North Korean economy43. The principle
challenge facing them is that they need to be confident that
these projects will be profitable, and that they will then be
able to get these profits out of the DPRK. The case of Egyp-
tian company Orascom’s investment within the telecom
sector of North Korea has often been cited as the most suc-
cessful example of foreign investment in the DPRK44.
However, because of international sanctions, and after years
of profitable operation, Orascom are now experiencing
severe difficulty in exchanging its income from local cur-
rency into dollars, and with getting these funds out of North
Korea45. This high profile example could seriously discour-
age potential private Russian investors who have not yet
gained enough confidence to invest in the DPRK.
6. Interregional economic ties: more potential exists
More than 40 Russian regions currently pursue econom-
ic cooperation with the DPRK in various fields, including
construction, forestry, agriculture, fishing industry, health
care and the garment industry. In 2013, the biggest trade
volume with North Korea among Russian regions was dem-
onstrated by Primorsky Territory ($23.4 million), St.
Petersburg ($23.1 million) and Kemerovo Region ($19.4
million). According to the results of recent negotiations, such
regions as Tatarstan, Chuvashia, Yakutia, Sakhalin and Uly-
anovsk Region are also interested in cooperation with the
DPRK in various fields, especially in supplying their goods
to North Korea.
Traditionally an important form of bilateral economic re-
lations is cooperation between North Korea and the Far
Eastern regions of the Russian Federation, the most active
of which are Amur Region, Primorsky and Khabarovsk Ter-
ritories. In Khabarovsk Territory, for example, there were
15 enterprises with investment from the DPRK, including
6 companies with 100% of North Korean capital, 1 joint
venture with Russian capital, as well as 8 representative
offices of North Korean companies at the beginning of 2014.
The most dynamic area of interregional cooperation is
attracting North Korean labour for temporary work in the
territory of the Russian Federation46. Implementation of
federal and regional programmes in the development of the
Russian Far East has led to a significant increase in the
number of workers from the DPRK. In 2010 about 21,000
North Korean citizens worked in Russia in such spheres as
construction, agriculture, forestry, health care, fishing and
light industry. In 2013, Russia increased the permits quota
for foreign workers from North Korea to 35,000. This area
of cooperation is highly beneficial both for Russia (disci-
plined, law-abiding and inexpensive workers help alleviate
39 See “Russia’s Far East Development Minister Speaks about the Results
of His Visit to the DPRK”. 28 October 2014. Available online at
http://minvostokrazvitia.ru/press-center/news_minvostok/?ELEMENT_ID=2530
Accessed on 12 May 2015.
40 Labykin, A. (2014). Russian “Victory” in North Korea. Expert. 22 October
2014. http://expert.ru/2014/10/22/rossijskaya-pobeda-v-kndr/ Accessed on
12 May 2015.
41 See “Russia and North Korea Will Work on Abolishing Visas”. 6 Feb-
ruary 2015. Available online at http://www.interfax.ru/404369 Accessed
on 12 May 2015.
42 See “Russia-DPRK: New Cooperation Horizons and Prospects of Tri-
lateral Projects”. 4 March 2015. Available online at http://minvostokrazvitia
.ru/press-center/news_minvostok/?ELEMENT_ID=2999 Accessed on 12 May
2015.
43 See “DPRK Delegation to Participate in Eastern Economic Forum”. 22
August 2015. Available online at http://minvostokrazvitia.ru/press-center/
news_minvostok/?ELEMENT_ID=3566 Accessed on 30 December 2015.
44 Zakharova, L. (2013). 128–148.
45 Williams, M. (2015).How a Telecom Investment in North Korea Went
Horribly Wrong. 17 November 2015. http://www.pcworld.com/article/
3005838/how-a-telecom-investment-in-north-korea-went-horribly-
wrong.html Accessed on 30 December 2015.
46 Matsegora, A.I. (2013). Korean peninsula in Russia’s policy. Korea: history
lessons and modern challenges. Moscow: IFES RAS. 14.
158 L. Zakharova / Journal of Eurasian Studies 7 (2016) 151–161
labour shortages in Siberia and the Far East) and North Korea,
which receives significant currency earnings. As a result of
increased cooperation between North Korea and the Russian
Federation passenger traffic of the North Korean aviation
company Air Koryo between Vladivostok and Pyongyang
grew by 22% in the first half of 201447. In 2015, the amount
of North Korean workers in Russia increased to 47,364
people, which is 27% more than in the previous year. As a
consequence, the DPRK became the 3rd most significant
foreign country, after China and Turkey, in terms of the
number of work permits issued in Russia48.
North Koreans have recently shown an increased inter-
est in the implementation of agricultural projects in the
Russian Far East. Since 2011, various options for coopera-
tion with Amur region including joint projects for setting
up dairy and beef farms, as well as cultivation of grain and
soybeans have been discussed. In mid-2013, the Consul
General of the DPRK in Nakhodka at a meeting with the Gov-
ernor of Primorsky Territory said that North Korea plans to
invest $1 million in processing corn and soybeans as well
as to consider joint projects in cattle breeding in Primorye49.
North Koreans currently have experimental agricultural en-
terprise in the Dalnerechensk district of Primorsky
Territory50.
In 2014, the DPRK officials announced they were inter-
ested in renting 10,000 hectares of land in Khabarovsk region
to grow vegetables, breed cattle and set up processing en-
terprises using Korean labour and equipment. There were
reports of possible involvement of investors from the Middle
East in the financing of these projects. Most of the prod-
ucts produced in Russia at North Korean agricultural
enterprises would then be exported to the DPRK to improve
the food situation51.
7. The future of economic cooperation between Russia
and North Korea: problems and prospects
The most profitable model of cooperation between Russia
and North Korea also involves the participation of South
Korea. However, despite all of the potential benefits, in the
second decade of the 21st century, there are still a number
of barriers to inter-Korean economic dialogue, and trilat-
eral cooperation. The most important of these barriers are
military and political factors such as the nuclear issue on
the Korean peninsula and the unsettled bilateral relations
between South and North Korea. Nevertheless, Russian pro-
posals on trilateral cooperation seem to have good potential
for long-term strengthening of South Korean relation-
ships with North Korea and the DPRK’s participation in the
regional integration process. The multilateral format will help
alleviate Pyongyang’s concerns about excessive depen-
dence on Seoul, lessen Seoul’s financial burden of the DPRK
economic recovery, and also give impetus to the develop-
ment of inter-Korean economic relations. So, when the two
Korean states manage to reach a compromise, and contin-
ue their economic dialogue, multilateral cooperation with
Russia is likely to be high on the agenda.
South Korean companies have already successfully tried
to use the transport infrastructure built by Russia and North
Korea, and now they are considering the most appropri-
ate form of participation in the Khasan-Rajin logistics project.
If this project works, an important precedent will be created
for other “big” trilateral initiatives. If the ROK companies
join the Russian–North Korean logistics project and proceed
with reconstructing North Korean railways from Rajin to the
border with South Korea, it will be possible to restore the
whole Trans-Korean railway in its east direction. This will
enable it to launch cargo rail services from Busan to Europe
via the Trans-Siberian Railway, making the entire Korean
peninsula an important logistics hub, and bringing Russia
considerable transit profit.
The project of supplying Russian gas to South Korea
through North Korea has been discussed for more than 20
years. After the construction of the “Sakhalin-Khabarovsk-
Vladivostok” main gas pipeline was completed in 2011, the
infrastructure for building an extension to the Korean pen-
insula was ready. North Korea for its part, agreed to provide
land for the construction of a gas pipeline52, and Russia and
South Korea came close to discussing commercial gas supply
contracts. However, in 2012, the parties were unable to agree
on the price of gas. After that, the communication on this
subject was frozen but neither side said that it was buried
forever.
Regarding the electric energy project, little progress on
it has been reached. However, building a power line from
Russia through North Korea to South Korea is strategically
important for energy-intensive railway and pipeline proj-
ects and is inextricably linked with them. Recent renewed
interest within South Korea to energy cooperation with
Russia gets all three parties back to discussing the project
of building an energy bridge from Russia to the Republic
of Korea. If this project is implemented it will become a great
contribution to developing economic ties of Russia and North
Korea.
The Russian government is gradually coming to realise
that it cannot expect quick implementation of trilateral proj-
ects with the participation of South Korea. And therefore,
it is necessary to expand bilateral economic relations with
the DPRK to strengthen Russia’s position on the Korean Pen-
insula, as well as in the dialogue with the Republic of Korea.
At the same time, Moscow will most probably keep pushing
for progress with the long-discussed infrastructure proj-
ects on the Korean peninsula in anticipation of better times
in the inter-Korean dialogue. In bilateral talks with the
47 See the website of Vladivostok airport. http://vvo.aero/press-center/
news/mezhdunarodnyy-aeroport-vladivostok-podvel-itogi-raboty-v
-pervom-polugodii-2014-goda.html Accessed on 12 May 2015.
48 Napalkova, A., Opalev, S. (2015) Where Do Foreign Workers Work in
Russia. 22 April 2015. http://rbcdaily.ru/industry/562949994889031 Ac-
cessed on 12 May 2015.
49 See “V. Miklushevsky meets new Consul General of DPRK to Nakhodka”.
20 June 2013. Available online at http://miklushevskiy.ru/news/1660.html
Accessed on 12 May 2015.
50 See “Primorye and North Korea Discuss Common Plans in Agricul-
ture”. 26 November 2014. Available online at http://primorsky.ru/
news/common/77640/ Accessed on 30 December 2015.
51 Land for Work: DPRK Wants to Rent 10 Thousand Hectares. 14 No-
vember 2014. Available online at http://realty.newsru.com/article/
14nov2014/kndr_habarovsk Accessed on 30 December 2015.
52 Matsegora, A.I. (2013). Korean Peninsula in Russia’s Policy. Korea: History
Lessons and Modern Challenges. Moscow: IFES RAS. 16.
159L. Zakharova / Journal of Eurasian Studies 7 (2016) 151–161
Russian representatives the leadership of both the Repub-
lic of Korea and the DPRK strongly support the trilateral
format of economic cooperation.
Russia and North Korea are currently at the stage of
testing new principles and models of economic coopera-
tion. A lot of work has already been done to remove obstacles
and create favourable conditions on both sides. What is
needed now is a successful result in boosting trade and in-
vestment cooperation. Russian officials hope that the aim
of one-billion-dollar turnover by 2020 will be achieved by
implementing several significant projects with private
Russian companies, as well as joint development of the
special economic zones in the two countries.
Some researchers claim that to boost the trade volume
between Russia and the DPRK the Russian government will
need to provide subsidies from the Russian budget to the
businesses involved in cooperation projects. There is a high
probability that Pyongyang is counting on that, but the
current state of the Russian economy means that this is un-
likely to happen in the foreseeable future53.
It is important to emphasise that at the current stage,
Russia is ready to expand economic relations with the DPRK
on the terms of mutual benefit and economic pragmatism
with support for commercially viable projects. It is not pos-
sible to return to the Soviet-period model of the bilateral
relations, although the North Koreans are still trying to offer
cooperation “on credit”. Despite the decisive role currently
played by the Russian government to boost economic co-
operation with North Korea, after the necessary institutional
mechanisms are created and certain business experience is
accumulated, the initiative should be passed into the hands
of private companies. To make it happen, North Korea needs
to increase its efficiency in the negotiations, create special
bodies, and define specific people responsible for interac-
tion with Russian companies, as well as provide complete
and accurate information on the mineral deposits that will
be offered in exchange for Russian investment and the supply
of goods. The two parties also need to urgently agree on the
sources of finance for the joint initiatives.
Russian private business interest in North Korea is grad-
ually increasing, and Russian ministries and agencies are
providing the interested companies with full support, but
the DPRK needs to provide an appropriate level of infor-
mation and organisational cooperation with their Russian
partners so that the investment projects which are being
actively discussed can be implemented.
8. Concluding remarks
In the second decade of the 21st century, Russia and
North Korea have been very active in finding new forms and
creating appropriate conditions for revitalising their eco-
nomic cooperation. The interests of the two governments
coincided; Russia is seeking to increase its influence in Asia
and activate regional mechanisms to boost the develop-
ment of the Russian Far East, and North Korea needs to
improve its economic situation and reduce the unilateral
dependence on China in terms of trade and investment. The
new model of cooperation which can be described as
“Russian investment in exchange for North Korean mineral
resources” still has to prove its viability. If the rumours of
abundant mineral deposits in the DPRK are confirmed, and
Russian companies get access to them, the two countries
have a real chance of growing trade and investment volumes.
Expanding cooperation between Russia and North Korea
also gives South Korea a good opportunity to achieve the Eur-
asian initiative declared by President Park Geun-hye in 2013.
With the big railroad project completed, it will be possible
to “build the Silk Road Express, which will run from Busan
all the way to Europe via North Korea, Russia, China and Central
Asia, by connecting the northeastern part of Eurasia with rail-
ways and roads to establish a multi-purpose logistics network,
which would eventually be extended to Europe”. Energy co-
operation of Russia, North Korea and South Korea is also crucial
for creating an energy network in Northeast Asia and further
in Eurasia. So, the countries need to go ahead with “con-
necting energy infrastructures, including electric power
networks and gas and oil pipelines”54.
At the same time, it is difficult to imagine how the two
Korean states can be engaged in any joint economic project
in the region without first settling their bilateral relations
and removing the existing obstacles in the form of eco-
nomic sanctions. Therefore, progress in economic
cooperation between Russia and North Korea also re-
quires improvement of inter-Korean ties. Russia’s influence
over the entire Korean peninsula has been underused due
to political and military reasons. Russia could become a bal-
ancer and a faithful mediator between the two Koreas55.If
necessary, Moscow is ready to help the ROK and the DPRK
to revitalise their relations, starting with the aforemen-
tioned multilateral projects.
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