Page 1 of 3 Russia is key to North Korea's plight
By Leonid Petrov
The sharp rise of oil and gas prices has enabled Moscow to utilize its mammoth
energy reserves to achieve domestic and foreign policy goals. The new Russian
"power politics" have already been tested on the Baltic States, Belarus,
Ukraine and recently the Czech Republic. Russia's Far Eastern frontier is now
turning into the place where energy export becomes a political tool in shaping
the country's relations with regional neighbors.
China, the two Koreas and Japan are hungry for energy, natural resources and,
at the same time, strive for economic and political cooperation. In such
circumstances, the opportunities offered by trans-national railroads and
pipelines appear to be more powerful than weapons. Given this new leverage and
understanding, can
Russia exert its soft and hard power on North Korea in promoting the goals set
in the six-party talks on Pyongyang's nuclear program?
The second phase of North Korea's denuclearization process is officially
completed. Under the deal with China, South Korea, Russia, Japan and the United
States, in June this year Pyongyang filed its nuclear activity declaration and
even blew up a cooling tower of its defunct nuclear reactor in Yongbyon. For
its part, the US has officially pledged to remove the Democratic People's
Republic of Korea (DPRK) from the State Sponsors of Terrorism list and lifted
the application of the Trading with the Enemy Act. All five members of the
six-party talks are now expected to deliver to North Korea almost a million
tons of heavy fuel oil as compensation for lost energy production.
The general expectation is that these actions will solve the North Korean
nuclear dilemma by providing North Korea with the energy it is going to miss.
Nevertheless, the third stage of North Korea's denuclearization does not seem
to be off to a smooth start. The DPRK Foreign Ministry complains that it has
disabled 80% of its main nuclear complex, but has received only 40% of the
promised energy shipments. Pyongyang now threatens it will only move onto the
next phase of the denuclearization process - to abandon and dismantle its
nuclear weapons programs - only when it has been awarded all the energy aid and
political benefits promised under the deal.
The nervousness of Pyongyang, which has long championed the motto of a "strong
and prosperous nation", is understandable. In January it promised to focus on
the economy. Nevertheless, the skyrocketing international prices of fuel and
grain have already caused unprecedented hikes in food prices in North Korea.
The crop of the previous year was largely destroyed by a disastrous hurricane
that, in combination with the deportation of international aid agencies, has
created the danger of another famine. The new conservative administration in
Seoul, which from the outset has taken a hard line on inter-Korean agreements,
has further complicated the picture. Despite the apparent progress on the
international stage, the North Korean leadership is now likely to face a
serious domestic problem.
In the mid-1990s, despite universal predictions of imminent collapse, the DPRK
managed to survive. Even the landslide of the Asian financial crisis
(1997-1998) did not undermine the foundations of its centrally planned economy.
The country endured the "Arduous March" (better known abroad as the "Silent
Famine") which cost millions of North Korean lives. The leadership assumed that
one meal per day would keep the majority of the population weak but loyal, as
long as the state machinery and military-industrial complex had an ample supply
of energy. Fortunately for Pyongyang, the 1990s were marked by record low oil
prices, to which the secret of the DPRK's survival can be attributed.
Whether Dear Leader Kim Jong-il is able to rescue his nation again from the
looming catastrophe depends on his ability to quickly find access to relatively
cheap fuel and energy. In this connection, the role of Russia as the largest
depository of natural resources is difficult to underestimate. Russia holds one
third of the world's natural gas (48 trillion cubic meters), one of the world's
largest oil reserves (approximately 50-100 billion barrels), and produces 1
trillion kWh of electricity annually. In times of political collapse and
economic recession, these resources have provided Russia with confidence and
attracted foreign direct investment.
Recently, the sharp rise of oil and gas prices has enabled Moscow to utilize
its mammoth energy reserves to achieve domestic and foreign policy goals. The
nationalization of the largest Russian oil company Yukos in 2004, along with
the consolidation of state-owned Gazprom and RAO Unified Energy System in 2005,
have further empowered the Kremlin in making single-handed decisions on the
directions and length of new pipelines, high-voltage powerlines, and railways,
literally shaping the new geopolitical landscape in Northeast Asia.
Although the shortage of food is a pressing issue, an industrialized nation
like the DPRK would definitely benefit in the long run from access to
affordable energy resources, which only Russia can provide. In this light, the
nature of relations between Russia and North Korea will become key to an
ultimate solution for the regional security problem. However, can Russia help
North Korea become a "strong and prosperous nation" without itself entering
into conflict with the rest of the Northeast Asian community? The effectiveness
of Russia's new "power politics" in Northeast Asia is now being tested through
its relations with North Korea.
Besieged North Korea
No longer an "enemy" or "sponsor of terrorism" in the books of the US State
Department, North Korea remains subject to endless sanctions and restrictions
which leave little hope for its access to international markets or bank
credits. The recent removal of North Korea from the State Sponsors of Terrorism
list and the termination of president Harry Truman's 1950 imposition of Trading
with the Enemy Act (TWEA) are not really affecting any changes. Almost
simultaneously with lifting the TWEA, the White House issued an executive order
declaring a "national emergency", which, as stated in the order, necessitates
the continuance of certain restrictions on North Korea that would otherwise be
lifted.
Similarly, North Korea will not have restored access to the international
banking system, from which it was largely cut off in 2005 amid the Banco Delta
Asia money laundering and counterfeit allegations. Statements from the US
Treasury further explain that no substantive actions with regard to lifting
sanctions on North Korea have actually been taken. Sanctions aimed at ending
North Korean money laundering, illicit financing activities and weapons
proliferation will remain in effect, as well as sanctions that prohibit US
companies from owning, leasing, operating or insuring North Korean-flagged
shipping vessels, and from registering vessels in the DPRK.
Another pressing issue that is being addressed by the six-party talks partners
is the acute shortage of food in North Korea. The US has started the delivery
of 500,000 tonnes of food, while China has committed another 150,000 tonnes.
Three thousand tonnes of flour have already arrived from Russia. Generous
humanitarian aid from elsewhere has enabled the Pyongyang leadership to turn
down the modest offer of 50,000 tonnes of corn made by the new conservative
government of South Korea. This shows that the food situation in the North is
difficult but not catastrophic. The looming energy crisis is much more acute.
Given oil prices, the industrialized but impoverished DPRK economy is trapped.
All imports of crude and refined oil traditionally would come from Russia or
China at "friendly" prices. With the end of Cold War confrontation and the
development of inter-Korean dialogue, occasional oil shipments were offered to
Pyongyang by its sworn enemies, South Korea, Japan and the United States. The
continuing shortage of energy forced Kim Jong-il to trade his precious nuclear
program for crude oil in 1994 as part of the Framework Agreement with the US.
The new agreement reached through six-party talks in Beijing on February 13,
2007, promised 1 million tons of fuel oil to North Korea in exchange for its
nuclear programs. However, this amount will not be sufficient to cover the
North's needs in energy for longer than a couple of years. After that,
Pyongyang has to be prepared either to reduce the amount of imports or to
invest considerably more in fuel importation.
Currently, most of North Korea's oil is imported from China. This is the reason
why Pyongyang's trade deficit with this former communist patron is growing so
quickly. In 2007, the DPRK imported 523,000 tonnes of crude oil from China that
accounted for approximately 25% of its total imports, and North Korea's trade
deficit with China is steadily growing. How much of this oil is sold and how
much donated is a state secret, but given the poor economic standing of North
Korea it is clear that this trend cannot continue indefinitely without causing
tensions in relations between Beijing and Pyongyang.
The production of mineral fertilizer is also directly linked to the
availability of cheap energy. During the past 10 years, while South Korea was
governed by the liberal administrations that pursued the friendly "Sunshine"
policy towards the North, each spring Pyongyang would receive 300-400 thousand
tonnes of fertilizer free of charge. Generous cash and rice donations from
Seoul dried up in early 2008, when conservative President Lee Myung-bak was
elected. Developmental projects, inked at the second inter-Korean summit in
Pyongyang, were designed to renovate the North's dilapidated infrastructure,
but became summarily scrapped by the new government in the South.
North Korea has little to expect from Japan. The conservative Liberal
Democratic Party of Japan made its mission to upset any accord with Pyongyang
which does not lead to the immediate return of surviving or deceased Japanese
citizens kidnapped by overly zealous North Korean spies in the 1970s and 1980s.
Japan's prime ministers have been consistent in adopting the hardline approach
which included mentioning the abductees issue whenever possible and therefore
delaying the normalization of relations with the DPRK. While other parties
struggle to achieve a multilateral agreement, Japan assumes that sooner or
later it will get what it wants because without Japanese money no successful
conclusion of negotiations at the six-party talks is conceivable.
In other words, despite the official completion of the second phase of the
nuclear disarmament deal on June 26, the prospects for
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