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Russia and the DPRK are close, but not together
Relations between Russia and the DPRK have become a protracted prelude - joint projects are bogged down in a quagmire where risks, sanctions, ambitions and a pandemic are heavily mixed. The ties that were supposed to be close turned into symbolic ones.
The shortest section of the state border of the Russian Federation is the section between the RF and the DPRK. It all goes by water - by river and by sea, and in total does not exceed 40 kilometers. Such a short length of mutual contact today has become a reflection of bilateral ties between neighboring countries.
PARTNERSHIP WITH HISTORY
The development of bilateral trade and economic cooperation between Russia and the DPRK began in 1949, when the Agreement on Economic and Cultural Cooperation between the USSR and the DPRK was signed. However, after the collapse of the USSR in 1991, there was a sharp decline in Russian-North Korean interaction; the intensification of relations took place in 2000. The legal basis of modern relations between Russia and the DPRK is the Moscow and Pyongyang Declarations, signed in the early 2000s. The main instrument of interaction between Russia and the DPRK in the economy is the Intergovernmental Commission on Trade, Economic, Scientific and Technical Cooperation, established in 1991. As a result of the commission's activities, an intergovernmental agreement on cooperation in the electric power industry was signed, the work of the subcommittee on the timber industry and the subcommittee on scientific -technical cooperation.
In September 2012, a bilateral agreement between Russia and the DPRK on the development of economic cooperation was signed. The agreement settled the DPRK's debt to the Federation on loans (ratified in May 2014). A number of experts believed that after this the intensification of bilateral cooperation would begin, since the source of tension in the face of unbearable debts would disappear, but there was no noticeable increase and this made it possible to state that these debts to the Russian Federation were not a factor of tension in relations between the two countries.
After the Crimean Spring and the imposition of Western sanctions against the Russian Federation, Moscow made a pivot to the East, increasing interaction with Asian countries. In this regard, there was a surge in Russia's diplomatic activity towards the DPRK, which allowed journalists and a number of experts to talk about Russia's return to North Korea. In 2014-2015, a number of visits of Russian high-ranking delegations to the DPRK took place: the plenipotentiary of the President in the Far Eastern Federal District visited Pyongyang Yuri Trutnev, President of Tatarstan Rustam Minnikhanov, as well as the governors of the Primorsky and Khabarovsk territories. Drew particular attention statement Alexander Galushka, then Minister for the Development of the Far East and Chairman of the Russian part of the Intergovernmental Commission on Trade, Economic, Scientific and Technical Cooperation between the Russian Federation and the DPRK. In 2014, during a regular session of this commission, Galushka said that by 2020 the volume of trade between Russia and the DPRK should be increased to $ 1 billion. Since until 2014 the trade turnover between the Russian Federation and the DPRK had fluctuated at the level of $ 100-150 million for ten years, the promised billion meant an almost tenfold increase in the volume of trade. In addition, the countries agreed to introduce ruble settlements for export-import operations. A major investment project was the RZD Logistics service for unloading the ports of the Far East and directing cargo turnover along the Transsib highway.
However, the information noise around the "return of Moscow to Pyongyang" by the end of 2015 subsided, and there were reasons for this silence: there was no return, and instead of the promised tenfold increase in trade, on the contrary, decreased. The main reason for this was international sanctions against the DPRK, as well as illegitimate unilateral restrictions imposed by some countries, which seriously complicated the further development of bilateral economic relations. In 2017, Russian-North Korean trade turnover amounted to 77,9 million dollars... At the end of 2018, trade between Russia and the DPRK amounted to $ 34,065 million, a decrease of 56,26% compared to 2017. The volume of Russian exports to the DPRK amounted to $ 32,082 million, imports - $ 1,983 million. At the end of 2019, trade between Russia and the DPRK increased by more than 40% and amounted to $ 48 million. It is clarified that the DPRK imported goods from Russia for $ 44,9 million, of which $ 27,2 million falls on oil products. At the same time, exports from North Korea to Russia amounted to $ 3 million, of which $ 1,6 million were musical instruments. The DPRK's share in Russia's foreign trade turnover amounted to 0,0072%.
At this stage, Russia is a traditional trade and economic partner of the DPRK. The bulk of Russian exports are mineral products and food products, as well as agricultural raw materials. Import represented by musical instruments, machines, equipment and vehicles, chemical products. The Intergovernmental Commission on Trade, Economic, Scientific and Technical Cooperation is working. In March 2019 held its ninth meeting... Russia regularly provides the DPRK with humanitarian aid, both on a bilateral basis and through international organizations. The dynamics of trade between Russia and the DPRK is characterized by high volatility. In view of the insignificant volume of cooperation, its dynamics are influenced by both economic factors - the lack of stable demand for non-primary goods, weak production ties, lack of experience in cooperation in market conditions, and political factors. According to official data for 2019, the Russian Federation has become the main supplier of petroleum products to the DPRK, which indicates the importance of trade relations with Russia for Pyongyang. Prior to the entry into force of the UN Security Council's ban on the export of labor from the DPRK, cooperation was actively developing in attracting North Korean labor migrants to work in Russia.
LABOR FORCE - MIGRANTS
One of the mutually beneficial areas of bilateral economic cooperation is the use of the DPRK labor force to cover the shortage of labor resources in a number of Russian regions, mainly in Siberia and the Far East.
The implementation of investment projects in Russia is associated with the attraction of labor migrants from the DPRK. Cooperation in this area is one of the most successful and mutually beneficial forms of relationship: for Russia, this means a contribution to solving the problem of a shortage of labor resources in the Far East and Siberia, for the DPRK, an opportunity to provide foreign exchange earnings to the country. The number of issued invitations to enter Russia for the Korean labor force is growing, in 2015-2016. more than 40 thousand temporary labor migrants from the DPRK worked in Russia. Although for Russia as a whole, this number of migrants was not so high, the availability of a highly disciplined and cheap labor force had a positive effect on deepening bilateral ties between Russia and North Korea. The flows of immigrants from the DPRK can be divided into two types: 1) transit, for the purpose of processing documents at the Embassy of the Republic of Korea for permission to enter this country for reunification with relatives, as well as for other private purposes; 2) labor post-crisis. Legitimate labor migrants arrived in the Russian territory of the Far East in the interests of implementing the 2012–2014 agrarian reform program in the DPRK to combat hunger. The DPRK government solved the problem of employment of the population, attracted foreign exchange funds from their labor activities to the budget. Russia's financial and investment projects with the DPRK have been frozen since March 2016, when the Federation supported UN Security Council sanctions in connection with the DPRK's nuclear tests. In pursuance of UN Security Council Resolution No. 2397, Russia took measures to return North Korean workers to their homeland by December 22, 2019. And although not everyone managed to leave by the established deadline for logistical reasons, the Russian Foreign Ministry insists that Moscow will fulfill its international obligations as soon as possible in full. It is worth noting that, despite the adoption of sanctions against North Korean migrant workers, they still came to work in the Russian Federation, but their number decreased several times, for example, in 2018, only 700 North Korean workers were issued permits. This was explained by the fact that contracts for the provision of labor were concluded before the introduction of international sanctions, respectively, these workers did not fall under the sanctions. Simultaneously with the reduction in cooperation in the field of hiring labor, judging by the statistics of the migration registration of the Ministry of Internal Affairs of Russia, in 2019 the number of North Korean tourists and students in the country increased significantly. It can be judged that one of the promising and working areas of relations between the Russian Federation and the DPRK was limited by international sanctions. They will expire in 2021, but most likely they will be extended, which will prevent Russia from resuming cooperation with North Korea in this direction.
An important area of bilateral relations was the provision of humanitarian aid to the DPRK from Russia. This assistance is carried out both on a bilateral basis and through international organizations (in particular through the World Food Program and the United Nations Children's Fund). Assistance is activated in emergency situations (Typhoon Lionrock or the coronavirus pandemic) and is timed to coincide with important events in bilateral relations.
In particular, the contributions of the Russian Federation to the work of the World Food Program (WFP) in the DPRK amounted to $ 3 million in 2016 and 2017, $ 4 million in 2018 and 2019, $ 3 million in 2020; to the work of the United Nations Children's Fund in the DPRK - $ 4,8 million in 2019 Russian donations to the WFP went mainly to the purchase of Russian-made grain or flour, which were supplied to North Korea for the manufacture of fortified mixtures and cookies for children, pregnant women and nursing women. In 2019, Russia turned out to be one of the main donors of humanitarian aid to North Korea through the channels of UN organizations. According to statistics released by the UN Office for the Coordination of Humanitarian Affairs, $ 7,4 million was donated through the UN for the procurement of humanitarian aid for the DPRK, of which $ 4 million, or 54% of the total amount, was contributed by Russia.
Also in 2019, the DPRK asked the Russian side to supply 50 thousand tons of wheat free of charge to eliminate damage caused by natural disasters in 2018. In February 2020, Russia sent 1,5 thousand rapid laboratory diagnostic test systems to the DPRK coronavirus, and in May 2020 supplied a consignment of Russian wheat of 25 thousand tons as humanitarian aid. Compared to other countries, the volume of humanitarian aid provided by Russia is quite high, which has a positive effect on the attitude of the North Korean state towards Russia. International restrictions imposed by the UN Security Council also hampered the activities of international humanitarian organizations that provide assistance to vulnerable groups of the North Korean population. Restrictions in the banking sector made it almost impossible to transfer funds necessary for the operation of their representative offices in the DPRK. For the implementation of most projects, it is necessary to obtain a separate permission from the UN Security Council Sanctions Committee 1718 in order to supply the necessary goods.
An important bilateral project is the joint operation of the Hasan (Russia) - Rajin (DPRK) railway section and the third pier of the Rajin port, reconstructed by the efforts of the Rasoncontrans JV (a subsidiary of Russian Railways). Currently, Russian Railways continues to work on attracting Russian and foreign transport and logistics companies to the project to form a cargo base.
This enterprise, employing several dozen Russians and over a hundred North Koreans, is the main and most active project of mutually beneficial cooperation between the Russian Federation and the DPRK. But the role of this enterprise, as is often the case with the DPRK, goes far beyond the economy. This is a kind of "corner of Russia" on the territory of the DPRK, where representatives of the two countries work side by side. Another goal of this project was to join South Korea. It would turn out that the Hasan-Rajin project and the RasonConTrans joint venture will contribute to the unification of the two Koreas, as well as to the establishment of cooperation between Russia and both parts of the Korean Peninsula. The terminal in the port of Rajin opened in July 2014, two years later, as part of a pilot project, Russian coal was shipped from Rajin to South Korea by sea. After the introduction of new international sanctions, the port's activities were under threat. Russian diplomacy had to make a lot of efforts to remove this project from international sanctions, but the potential threat to fall under sanctions led to the fact that South Korea decided not to join this project on an ongoing basis. In this regard, the project has actually been frozen since 2018. Russia, for its part, through Russian Foreign Minister Sergei Lavrov, is actively calling on South Korea to join the project on a full-fledged basis, since it is economically beneficial to all parties.
The impact of the sanctions on North Korea in general and on North Korean-Russian relations in particular cannot be underestimated. There are many points of contact between the two countries that have a positive effect on economic rapprochement, but the imposition of international sanctions in connection with the DPRK's nuclear tests seriously undermines bilateral relations with Russia. Both existing economic projects and potential ones were under the sanctions, which led to a significant decrease in the trade turnover of the two countries, as well as to the freezing of potential projects in which both countries are interested.
Since 2006 (after the first successful test of North Korean nuclear weapons), the DPRK has been under international sanctions. Over time, the number of sanctions and their scope only increased, which led to the almost complete isolation of North Korea from the outside world. Russia, which has been under Western sanctions since 2014, does not seek to support the DPRK in violating international sanctions, since the DPRK is unable to offer agreements that would mitigate the possible risks of international sanctions for violating restrictive measures. Therefore, Russia also continues to implement restrictive measures: in 2016–2017. after the nuclear tests and missile launches of Pyongyang, Russia supported the UN Security Council resolutions imposing tough economic sanctions against the DPRK. International restrictions put an end to Russia's attempts to expand trade and investment cooperation with Pyongyang on the principle of "access to North Korean mineral resources in exchange for Russian investments, goods and technologies." In March 2017, for example, the DPRK air carrier Air Koryo, which was included in the sanctions list, stopped selling tickets for flights of the Russian company Aeroflot on the Beijing-Moscow and Vladivostok-Moscow routes. For the Russians working in the DPRK, this situation has led to the problems of returning foreign currency funds for paying for air tickets. Since January 1, 2018, the UN has limited the volume of supplies of oil products to the DPRK at 500 thousand barrels per year, oil - 4 million barrels per year. These volumes correspond to about a quarter of the consumption level before the imposition of the sanctions.
In accordance with UN Security Council Resolutions No. 2094, 2270, 2321, 2345, 2356, 2371, 2375, 2397, 2407, 2464 and 2515, sanctions were imposed on remittances entering the DPRK from the international financial system, a complete ban on the creation of joint ventures with the participation of North Korean capital, export from the DPRK of its main export goods (coal, iron, copper, nickel, zinc, lead, textiles, gas condensate and seafood), restrictions on the import of petroleum products and the use of North Korean labor abroad. The imposed sanctions are valid until April 30, 2021. All these sanctions have led to a serious drop in trade between countries and a reduction in areas of interaction, such as cheap North Korean labor or complication due to bureaucratization of humanitarian aid to the DPRK.
Of the possible North Korean resources, Russia is interested in the country's geographical position (the possibility of transit through the DPRK to the large-scale markets of the Republic of Korea and China) and labor resources.
One of the potential areas of interaction between Russia and the DPRK are infrastructure projects, presented to date by three projects:
1. Construction of the Trans-Korean railway connected with the Trans-Siberian Railway;
2. Gasket a gas pipeline across North Korea that would allow Russia to supply natural gas to the South Korean market;
3. Laying through North Korean territory power lines - also for the supply of electricity to South Korea from Russia.
In all these infrastructure projects, North Korea does not act as an active partner - it serves only as a transit territory through which one can quickly and inexpensively get to the South Korean market, which is actually of interest to the Russian side. All participants are interested in these projects: for Russia, this is primarily the expansion of energy exports, including the occupation of product niches in new markets, the strengthening of the political role in the region; for the Republic of Korea - diversification of supplies and reduction of costs for energy imports; for the DPRK - an additional source of financing (as transit fees), improvement of the country's energy infrastructure and reduction of energy deficit.
However, conversations about these projects date back to the 1990s and still have not moved off the ground, despite the potential interest of all parties. First of all, the implementation of projects is difficult due to the unpredictability of the political regime in North Korea, its eccentricity and radicalism, which does not allow Russian business structures to consider these projects as safe investments, the risk of losing their own funds due to the next North Korean crisis is too great. Added to this is the problem of legal regulation of these objects. The creation of a consortium is difficult, since in the DPRK there is only a state form of ownership. In addition, there is no legislation in this area: Russia and the DPRK do not have an agreement on cooperation in the gas sector, Russia has no leverage over the DPRK, which would ensure uninterrupted supplies through the DPRK. The small scale of the market and the lack of funding sources do not allow considering the DPRK as a full-fledged potential market for Russian energy resources.
From the point of view of Russian companies, all infrastructure projects can be implemented only if one of three conditions is met.
1. If such projects are financed not by Russia, but by some other interested parties (for example, the South Korean government). In other words, Russian companies are ready to work on infrastructure projects, but they are not ready to pay for them, because they consider them too risky.
2. If the period of stability on the Korean Peninsula is long enough.
3. If the Russian project participants receive reliable guarantees that their possible (and highly probable) losses will be compensated - for example, by the Russian government.
Today, any of the three conditions are unlikely to be realized. Therefore, talk about infrastructure projects will continue to appear in the media, but the implementation of these projects is unlikely to happen in the near future. Russian companies will show interest in these plans, sponsor all kinds of conferences and ceremonies, and from time to time carry out design and survey work. However, the matter will be limited to this. It should also not be forgotten that the project of interstate transmission lines is economically effective only within the framework of the general energy interconnection of the NEA countries, and its implementation presupposes high interdependence of the participating countries and trusting relations in the region. There are many unresolved issues between the NEA countries, not only with respect to the DPRK and the Republic of Korea. Accordingly, the preconditions for such close integration, which is required for the implementation of these projects, have not been created in the region. Discussion of projects is rather of a controversial nature; in the near future, their implementation is hampered, primarily due to the unresolved transit risks.
RESULTS AND PROSPECTS
Economic relations between Russia and North Korea have been at an extremely low level in recent years. North Korea has little to offer Russia, but those spheres where interaction has been established have been reduced or completely suspended due to the introduction of international sanctions. The DPRK's share in the Russian economy is too small to consider the DPRK as an important economic partner. In addition, one should not forget that in relations with the DPRK, the economy has never been decisive, it was more about politics, or rather about geopolitics, and the situation remains unchanged today.
Russia's relations with the DPRK largely depend on the external environment: whether it is the introduction of new international sanctions through the UN, limiting the few spheres of interaction between Russia and the DPRK, or aggressive actions of North Korea itself towards South Korea or other countries, which inevitably closes the opportunity for infrastructure projects requiring close cooperation and mutual trust between the parties.
International sanctions and the pandemic were superimposed on each other, multiplying the negative effect, says Lyudmila Zakharova, Ph.D. in Economics, senior researcher at the Institute of Far Eastern Studies of the Russian Academy of Sciences, economist-Korean studies.
“Unfortunately, among the factors that play“ against ”the development of our relations in the economy are a pandemic (the DPRK has tightly closed the border), international sanctions against the DPRK (a serious blow to the entire range of foreign economic relations of North Korea), unsettled inter-Korean relations (which means the cross on trilateral projects that could be beneficial to us) and, in general, the low interest of Russian companies in the DPRK economy (after all, even before the sanctions-pandemic, much progress was not achieved). From what remained outside the sanctions - the insignificant volume of trade (which almost came to naught due to the closure of the DPRK border), humanitarian aid, which North Korea really needs in the current conditions, the Rasoncontrans joint venture, which is unable to sufficiently load our joint the Hasan-Rajin project for a number of factors. Due to the current state of the DPRK economy, the main potential for the development of economic relations, I'm afraid, lies in the sphere of multilateral projects. But under the conditions of sanctions it is difficult to talk about them. "
It is not possible to build up economic cooperation, since the Russian and Korean economies are different from each other, and Russia does not intend to subsidize the DPRK economy. This is of no particular value, since it will require large investments, and if there is any return, it seems extremely low. This is due to the fact that at this stage Russia does not have leverage on the DPRK, as China does, which can lead to colossal losses in the event of another aggravation on the peninsula, moreover, active intervention in the DPRK can provoke a conflict of interest with China, which in fact is the main sponsor of the North Korean regime. In view of the above reasons, Russia prefers not to pursue an active policy in the North Korean direction, in solidarity with the PRC, which has its own interests in the DPRK and has been pursuing an active policy in the North Korean direction in recent years.