Russian – North Korea Bilateral Trade Triples
Op/Ed by Chris Devonshire-Ellis
Small signs of reintegration as North Korean Belt & Road participation remains a regional goal
North Korea may only be a small player in terms of its global trade, and this also hold true with Russia. However the two countries share a common border, and Moscow, along with Beijing have largely been responsible for at least maintaining the sovereignty of the country while Pyongyang remains under extreme United States pressure.
We discussed the potential for an increase in North Korean trade with Russia back in April this year, when US President Trump was intent on ratcheting up trade difficulties for Pyongyang following the failed summit in Singapore. At the time we said Russia-North Korea Trade To Increase As Kim Visits Putin.
As it turns out, this is exactly what has happened. The Korea Herald has reported that: “North Korea’s trade with Russia’s Far Eastern region nearly tripled in the first quarter from a year earlier, data showed on Tuesday, amid intensifying efforts by the two neighbors to strengthen bilateral relations. According to the data by South Korea’s Consulate General in Vladivostok, the trade between the North and Russia’s Far Eastern region totaled US$10.69 million during the Jan.-March period, up from US$3.72 million tallied a year earlier.”
While US$11 million is not a huge amount, it still represents a sizable sum in the DPRK, and is understood to have been mainly high energy, low cost consumer goods. The report states the trade data is with the Russian Far East, although this probably refers to Russia as a whole. The North Korean border is with the Russian Far East Province of Primorsky Krai.
Russia has long called for North Korea to be “economically rehabilitated” and we discussed the implications of that when it was placed on the agenda of the Far Eastern Economic Forum two years ago.
There have been some small developments. Russia’s border with North Korea is just 18 miles, following a small section of the Tumen River which serves as the dividing line. It is underdeveloped, has no customs area and consequently, most bilateral trade passes via China, which increases costs. Both sides wish to correct that by building a second bridge between them. The existing, an currently only infrastructure connection between Russia and North Korea is the so-called “Friendship Bridge”, essentially a rail track using a dual gauge because the Russian railroad system uses a track gauge of 1,520mm while the North Korean system uses 1,435 mm. The bridge is served by the Khasan station in Russia and the Tumangang station on the North Korean side of the river. It also carries the second, back up fiber optic system leading into North-Korea with a connection to the global Internet via Russia’s TransTelekom provider, itself a subsidiary of the Russian national railway operator Russian Railways. This was put in place after North Korea’s primary internet connection through China Unicom, running over the Sino-Korean Friendship Bridge was targetted by a DDoS attack in 2017. Cross-border infrastructure development then is likely to focus on a second Tumen River bridge, and this is apparently under discussion.
Meanwhile, South Korea has also expressed interest in reconnecting its railway lines with the North Korean network, severed in the 1950’s. The respective leaders of North and South Korea, Kim Jong Un and Moon Jae-in, have agreed to reconnect severed rails and roads across the border, according to a joint statement signed in September last year. “South and North have agreed that works to reconnect the railways and roads in the east and west should begin within a year,” the document reads. According to earlier reports, the project’s ultimate goal is to ensure access to Russia’s Trans-Siberian Rail for prompt deliveries of South Korean cargo to Europe.
But what can North Korea offer as part of this connectivity? Of interest to China is that the DPRK will require massive infrastructure development. Hardly any major infrastructure has been put in place since the 1950’s. China and its SOE’s, and long border with North Korea, will be more than willing to assist and would in many respects be an ideal partner. Russia too, with its rail links reaching down from the North will also be able to help develop North Korean infrastructure, while the South would be keen to get involved and supply IT and services support.
In terms of commodities and in-the-ground wealth, North Korea sits on the richest part of the Korean Peninsula. It possesses considerable mineral reserves, including precious metals and rare earths, and has reasonable textiles, agricultural, and fishery industries and products. Estimates of mineral wealth vary from between US$6 trillion to US$10 trillion in reserves. China, as we have explored recently in our series on building up their gold reserves, will be very interested to get access to these. The reserves can also be used as collateral to pay for mining and extraction as well as to develop North Korean sovereign wealth. That would be a boon to South Korea, itself leery of the sheer cost of reunification. It may suit both Beijing and Seoul for North Korea to remain independent, yet open to investment on sustainable terms. It would also help Kim Jong-Un evolve himself from North Korean despot to regional savior. Its not beyond the realms of fantasy – Kim was educated in Switzerland and knows perfectly well how life is like in the West.
North Korea also has Pacific Ocean access, the Raijin-Sonberg Port would be useful for both China and Russia, as it offers warm water access, and has in the past been utilized extensively by South Korean manufacturers. Sanctions have placed it largely in mothballs; however, upgrading it, should relations start to improve, will offer China’s north-eastern, yet landlocked provinces of Jilin and Heilongjiang access to a nearby port close to South Korea, Japan, and facing the West coast of the United States. It is a strategically important location, and just one of several ports that could be redeveloped along the DPRK’s western and eastern seaboards.
It is the little seeds that often count. While North Korea’s future remains intrinsically linked with a powerful nation many thousands of miles away, it is the likes of small steps such as an increase of trade with Russia that may yet bring North Korea in from the cold.
Russia Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors in Russia and Russian investors in Asia, and maintains partner offices in Moscow and St,Petersburg, and full professional service offices throughout China, ASEAN and India. Please contact us at firstname.lastname@example.org for assistance or visit our website at www.dezshira.com