Russia and North Korea: The 2023/24 Trade and Investment Dynamics
Bilateral trade shows signs of returning to growth after several years of stagnation
By Michael Barantschik
North Korea (DPRK) holds unique geopolitical importance for Russia, considering its pivotal position in North-East Asia and small yet strategic shared border. Not only does it serve as a buffer between Russia and influential South Korea, but it also lies in proximity to Japan and China, all three pivotal players in the region.
For many years, trade between Russia and the DPRK was subdued due to international sanctions and North Korea’s domestic policies. However, recent years have witnessed a shift in dynamics, highlighting North Korea’s evolving international economic strategy and Russia’s pursuit of alternative trade partners in Asia, paving the way for increased bilateral cooperation.
Vladimir Putin is also expected to meet with the North Korean leader Kim Jong-Un in Vladivostok next week. Both are attending the Far East Economic Forum.
While both nations have maintained cordial relations, the evolving geopolitical landscape is pushing them to explore deeper trade and strategic partnerships. And in the face of Western sanctions, both nations are seeking to diversify their economic relations. The past two years have shown a clear upward trend.
While exact figures remain hard to obtain, bilateral trade last year reportedly reached US$120 million, marking a substantial increase from the past years. Yet, when contrasted with North Korea’s trade volumes with China, this figure might seem modest. Nevertheless, the growing trajectory is undeniable.
Composition of Bilateral Trade
Historically, Russia has exported crude oil, petroleum products, coal, machinery, and logging products to North Korea. In return, the DPRK has primarily exported raw materials such and labor (North Korean workers abroad).
Thousands of North Korean workers, known for their discipline and work ethic, have found employment in Russia’s timber and construction sectors. This not only serves as a vital source of revenue for Pyongyang but also acts as a diplomatic bridge, further solidifying ties between the two nations. There have been at least discussions, and probably deployment concerning utilizing North Korean workers in the Donbass region, currently under Russian administration following years of fighting with Ukraine.
Russian firms have shown interest in North Korea’s mining sector, particularly its vast reserves of rare earth metals. Simultaneously, DPRK products, including agricultural produce and traditional medicines, have found a growing market in Russia.
Beyond trade, investment dynamics are gradually evolving. Investment between the two nations, while limited, shows signs of potential growth. Russia’s investment in North Korea’s Special Economic Zones, particularly in the Rason Economic Zone, stands testament to its long-term vision for the relationship. These zones, designed to attract foreign investments, offer lucrative opportunities for Russian enterprises, from manufacturing to logistics.
Key areas of interest include energy, infrastructure, and mining. Russia, with its rich experience in infrastructure development in challenging terrains, sees North Korea’s need for rail, road, and port development as a significant opportunity. North Korea’s infrastructure needs are vast. The country’s rail, road, and port development necessities align well with Russia’s capabilities in infrastructure development and Russian corporations have expressed interest in these sectors, sensing the immense growth potential.
In terms of aid, Russia has always provided North Korea with humanitarian assistance, especially during periods when North Korea faced food shortages. This “aid” has often taken the form of discounted essential goods, primarily energy resources like coal and oil. Additionally, there have been instances of debt relief and restructuring by Russia for North Korea, reflecting the economic dependency and political closeness of the two nations.
Strategic and Political Interplay
The economic narrative is closely intertwined with the strategic. The DPRK’s recent emphasis on modernizing its economy and focus on scientific advancements, coupled with Russia’s “Look East” policy, might pave the way for strengthened ties and heralds promising prospects.
North Korea, in Russia’s view, serves as a counter to the expanding US influence in the region. Russia has been advocating for North Korea’s voice in multilateral Asian forums, sensing a convergence of strategic interests. With the DPRK’s increasing involvement in regional multilateral forums and Russia’s willingness to engage, the upcoming years might witness a more robust economic and strategic partnership between these two historically linked nations.
Moreover, North Korea’s military capabilities, particularly its nuclear program, while a concern for many, are seen by some in Russia as a strategic counterbalance in the region. Moscow, while advocating for denuclearization, understands the security concerns that drive Pyongyang’s nuclear ambitions.
Regional Forums and Cooperation Platforms
Both nations cooperate in several regional platforms and forums to discuss and further their economic, political, and strategic interests.
The Six-Party Talks
Initiated to address North Korea’s nuclear program, these talks involve North Korea, South Korea, Japan, Russia, China, and the United States. Although they have been stalled for several years, Russia and North Korea have historically used this platform to further their bilateral and multilateral interests.
The Shanghai Cooperation Organization (SCO)
While North Korea is not a member, Russia has often used the SCO as a platform to discuss Northeast Asian security, including issues pertaining to the Korean Peninsula.
ASEAN Regional Forum (ARF)
North Korea and Russia both participate in the ARF, which addresses security issues in the Asia-Pacific region.
East Asia Summit (EAS)
This is a regional forum held annually by leaders of 18 countries in the East Asian, Southeast Asian, and South Asian regions. Russia is a member, and while North Korea isn’t, discussions often revolve around the Korean Peninsula’s stability.
Northeast Asia Cooperation Dialogue (NEACD)
This unofficial multilateral dialogue, sometimes termed a “Track II” diplomatic initiative, involves scholars and occasionally government officials in an unofficial capacity. Subjects include political, security, and economic issues, with the North Korean situation often at the forefront.
The United Nations (UN)
Both countries are members of the UN, and its associated forums and bodies offer numerous opportunities for interaction, negotiation, and cooperation, particularly in committees or discussions focused on regional peace, security, and development.
North Korea has at times participated in the UNDP Greater Tumen Initiative, which also included Russia’s Primorskie Krai region, China’s Jilin Province, and Mongolia.
Beyond multilateral forums, there are numerous official and unofficial bilateral meetings, delegations, and working groups where the two countries interact.
In these forums and others, Russia and North Korea often find themselves aligned against what they perceive as Western or US hegemony, further fostering cooperation and mutual understanding.
In a display of solidarity and support, both Russia and China have further extended their diplomatic gestures towards North Korea. They have sent high-profile delegations to Pyongyang, aiming to commemorate specific anniversaries, signalling their unwavering support for Kim’s leadership.
The Road Ahead: Challenges and Opportunities
The road to robust bilateral investment isn’t free of obstacles. International sanctions on North Korea have complicated the banking and transaction processes, making business ventures challenging. Additionally, the lack of transparent, detailed data from North Korea makes it tough for potential Russian investors to make informed decisions.
Despite challenges posed by sanctions and North Korea’s traditional isolationism, which may hinder swift progress, the foundation for future growth has been laid.
There’s potential for more student exchange programs, cultural interactions, and scientific collaborations, as both nations have a rich history of academic and scientific prowess. Joint ventures in technology and innovation could be the next frontier.
The Ukraine war, while a pivotal event in its own right, served as a catalyst for larger shifts in the global order. As Russia reoriented its strategies and priorities, its relationship with North Korea emerged as a partial silver lining amidst the clouds of geopolitical uncertainty. An example of this was the DPRK recently opening six trade offices in Russia.
The growing collaboration between Russia and the DPRK reflects a strategic adjustment to the realities of Northeast Asian geopolitics. Both nations are clearly navigating their interests based on current regional and global circumstances.
During these uncertain times, we must stress that our firm does not approve of the Ukraine conflict. We do not entertain business with sanctioned Russian companies or individuals. However, we are well aware of the new emerging supply chains, can advise on strategic analysis and new logistics corridors, and may assist in non-sanctioned areas. We can help, for example, Russian companies develop operations throughout Asia, including banking advisory services, and trade compliance issues, and have done since 1992.
We also provide financial and sanctions compliance services to foreign companies wishing to access Russia. Additionally, we offer market research and advisory services to foreign exporters interested in accessing Russia as the economy looks to replace Western-sourced products. For assistance, please email email@example.com or visit www.dezshira.com