Page 3 of 3 Russia is key to North Korea's plight
By Leonid Petrov
the North. At the time of North Korea's nuclear test in October 2006, Russia's
trade statistics showed that exports of petroleum had dropped 91.1% compared to
the same period of the previous year.
The pragmatic mood in bilateral relations prevails, and these days Russia
delivers oil and food to North Korea only in accordance with its obligations
associated with progress at the six-party talks. This year, Russia has already
delivered 100,000 tonnes of fuel oil to the DPRK in two batches and, according
to Russian Deputy Foreign Minister Alexei Borodavkin, a top Russian envoy to
the six-party talks, will deliver another 100,000 tonnes by October 2008. In
June, the Russian government announced it would provide 2,860 tonnes of flour
to the DPRK. According to an
official KCNA news agency report, this food aid arrived at the border city of
Sinuiju in the DPRK's northern Pyongan province in early July.
Recently, for the first time in the post-Soviet era, North Korea saw a major
Russian investment. In the city of Pyeongseong, the Russian auto plant KamAZ
opened its first assembly line, specializing in the production of medium-size
trucks named "Taebaeksan-96". Although less than 50 trucks were assembled in
2007, this cooperation became an important milestone in the development of
bilateral relations. While the project doesn't violate United Nations sanctions
on North Korea, it shows Moscow's drive to expand its influence in the country.
Ironically, the more trucks assembled the heavier North Korea's dependence on
imported fuel, engine oils and other petrochemical products.
The importance of the DPRK's Rajin-Seonbong special economic zone to Russia's
national interests continues to grow. The state-run monopoly OAO Russian
Railways is currently upgrading its railway connections with North Korea in
Khasan-Tumangang, investing at least 1.75 billion roubles (US$72 million) into
this project, and plans to participate in an ambitious plan to rebuild a
trans-Korean railway. By connecting Rajin (and the rest of northern Korea) to
its Trans-Siberian railroad, Russia hopes to benefit form the transit of South
Korean and Japanese cargo which could be sent via its territory to Central
Asian and European markets. Pyongyang seems to endorse these plans and other
Russian initiatives, but does not commit any financial resources.
Eighty percent of overall bilateral economic trade between Russia and North
Korea consists of cooperation, barter and investment-in-kind between the
regional areas. The most active Russian regions trading with the DPRK are
Eastern Siberia and the Far East. Maritime province (Primorsky Krai) itself
exports to North Korea more than $4 million worth of refined oil per year.
There are no oil fields in Maritime province and oil has to be borrowed through
a chain of federal bureaucratic structures from the oil-rich areas of Eastern
Siberia. Instead of money, the local governments agree to receive the labor of
North Korean workers.
North Korean laborers in Siberia and the Far East were common under the Soviet
system and they are still visibly present. In 2004, the Russian Federal
Immigration Service issued 14,000 visas for foreign laborers, of whom North
Koreans numbered 3,320 in 2005 and 5,000 in 2006. Since the DPRK has no other
way to pay in goods or services, its government started paying for oil imported
from Russia by dispatching thousands of laborers at zero cost. Following strong
demand from local companies, just in 2006 regional authorities of Primorsky
Krai agreed to issue an extra 5,000 working visas to North Koreans. This
openness is contrary to local government policy that normally restricts the
entry of labor from China.
DPRK citizens are sent to Russia to work as woodcutters and builders but some
have also managed to find work in the agricultural and marine industry. Through
the presence of these laborers, Russia has enjoyed a partial repayment of the
DPRK's post-Soviet debt through North Korean workers being contracted to work
in mines and lumber mills in Russia's Far East.
The wages they are able to make in Russia are far greater than what they would
make at home. However, the foreign worker quota is set not by provincial
governments but by Moscow, which often tries to put a stop to these programs
due to the complexity of the matter. Part of this opposition stems from the
fact that the North Korean workers in Russia still fall under DPRK laws and,
therefore, are subject to intrusive supervision.
Among the most difficult but negotiable issues in the way of Russia-North Korea
cooperation remains the problem of external debt. During the Soviet era, the
DPRK incurred a debt of approximately $8 billion, which Pyongyang still owes to
Moscow but cannot repay. This debt remains a stumbling block in most
negotiations on new aid and development programs. However, this debt can
potentially make trilateral Russian-Korean relations closer and stronger.
In January 1991, soon after the opening of diplomatic relations with South
Korea, Moscow received $3 billion from Seoul in the form of a three-year loan.
The collapse of the Soviet Union left this loan largely unpaid. The new Russian
government in the 1990s provided South Korea with armaments worth $150 million
to be counted as payment in kind for the remaining debt. In 2003, after
bilateral negotiations on this issue were completed, part of this Russian debt
was canceled and the remainder was rescheduled to be paid over the next 23
years.
Taking into account its own debts to the South, Russia could easily write off a
significant portion of North Korean debt. To resolve this question, a certain
agreement between all three parties is needed. To engage in a mutual and
reciprocal round of debt cancelation, Russia might choose to see the North and
the South as one country. Such an agreement would have unblocked the road for
broader cooperation between Russia and the two Koreas, and simplified Russia's
energy cooperation with China and Japan.
Conclusions
In the 1990s, the DPRK leadership must have hoped that Russia's assistance
would help the country restore its economy in the same fashion as it used to in
Soviet times. However, the new market economy in Russia provides little room
for Soviet-type sponsorship, leaving North Korea in an energy and
transportation crisis. Lack of interest from the Russian private sector in
cooperation with North Korean companies has compounded this difficult
situation.
Available statistics reflecting bilateral trade in the 2000s still show the
sluggishness of Russia-North Korea economic links. Barter and trade in kind
continue to play important roles in bilateral trade, while the possibility of
workforce exports remains vital for the DPRK. The current system of exchange
between North Korea and Russia is that the former exports labor and
agricultural goods and the latter exports electrical energy, oil and raw
materials.
As it was in the previous century, rail remains a symbol of Russia's power in
the region. By extending its transportation network and pipeline
infrastructure, Russia is trying to get back into the grand game in Northeast
Asia, which it was forced to leave with the collapse of the Soviet Union. The
only difference between then and now is that the main motivating factor these
days is profit-making and economic reasoning, not ideological considerations.
For the communist North Korea, whose reclusive leadership is bogged down in
Cold War mentality, this is a novel concept. This disparity in attitudes often
creates misunderstanding and results in missed opportunities. Even the railway,
which is Russia's most feasible infrastructure project in North Korea, may be
endangered by the unpredictability of the current leadership in Pyongyang. The
risks are too high to start any other major capital investment without a
serious change in the regime's attitude.
Indeed, the position of a reformed North Korea in the newly emerging map of
economic interests can be surprisingly strong. The DPRK is located at the very
center of the world's most vibrant and dynamically developing region. By
playing his cards shrewdly, Kim Jong-il might create conditions for
socio-economic revitalization of the North that will be a positive contribution
to the eventual unification of the Korean Peninsula.
Moscow is learning its lesson too. Russian strategists already realize that
North Korea might play an important role as a regional balancer if it manages
to reconcile with its ideological enemies and rivals. The contiguous powers
would probably agree with this as long as the balancer was genuinely neutral
and independent. Such a pivotal role would perfectly satisfy the ambitious DPRK
that already claims the status of a nuclear power.
However, in building regional security, the potential of Russian influence on
North Korea must not be exaggerated. In fact, Russia's ability to project its
economic power, especially through oil and gas pipelines, would be greatly
enhanced if political tensions between the two Koreas declined and they finally
moved to unification. Cooperation between Russia, North and South Korea in oil,
gas and railway construction and exploitation projects can be a good start for
reconciliation. No progress in Russian-DPRK relations is possible without close
Russia-South Korea cooperation.
The concept of three-party cooperation means the combination of Russian energy
and resources, North Korean territory and labor, and South Korean capital and
technology. The objectives of this policy - to revive and modernize the North
Korean economy, to create income sources and to promote inter-Korean
cooperation and the economic ties of both Koreas with Russia - would lead to
the creation of economically integrated system in Northeast Asia.
In this light, Russian-Korean relations can be seen as based on a solid footing
and replete with opportunities that can benefit each of them. The new
administrations in the Kremlin and Seoul's presidential Blue House, together
with the new generation of leaders in Pyongyang, can radically change the
political climate in the region. A simple strengthening of economic
relationships between the three countries will contribute to the peaceful
solution of the "Korean nuclear problem" and prepare the basis for durable
peace and prosperity in Northeast Asia.
Dr Leonid Petrov, Research School of Pacific and Asian Studies,
Australian National University.
(Copyright 2008 Asia Times Online (Holdings) Ltd. All rights reserved. Please
contact us about
sales, syndication and
republishing.)
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
