Russia’s economic engagement with the DPRK has been much smaller than China’s. As of 2013, Russia was North Korea’s third biggest trade partner, with the bilateral trade standing at approximately $104.2 million accord-ing to KOTRA. However, economic engagement has become more active in recent years, even after the third nuclear test. Russia’s exports to North Korea increased by 48.6 percent in 2013 from the previous year according to KOTRA, and further expansion seems likely. The Russian government has been pushing for strengthening its economic ties with Northeast Asian countries to stimulate the economy of its underdeveloped Far Eastern region and thereby revitalize the national economy.10 Moscow has been eager to expand trade with countries in the region and turn Russia into a major trade route between Northeast Asia and Europe.11 As can be seen from the establishment of the Ministry for Development of the Russian Far East in May 2012, this has been more conspicuous particularly after the onset of the global financial crisis in 2007 that resulted in a decline in Russian exports of natural resources to Europe, and after the start of large-scale production of shale gas particularly by the United States, which has weakened Russia’s price-setting power vis-à-vis the present and prospective importers of its gas.
Economic Engagement with North Korea 77 Russia has already discussed various projects with the two Koreas and has gained their support, including the connection of Russian railways, gas pipelines, and power grids to South Korea’s through North Korea. All three parties can benefit from these projects. President Medvedev agreed to promote the gas pipelines project with President Lee in September 2008.
He made a similar agreement with General Secretary Kim Jong Il in August 2011 during Kim’s first visit to Russia since 2002, while also agreeing to resolve the issue of North Korea’s outstanding debt to Russia. Although these trilateral projects have not made much progress due to the volatile relations between the two Koreas, Russia has not lost its willingness to push them forward even after North Korea’s third nuclear test. Also, it has explored other ways to profit from its economic engagement with North Korea.
Russia’s determination to pursue its economic interests by strengthening economic ties with North Korea can be seen from its decision in September 2012 to write off 90 percent of Pyongyang’s Soviet-era $11 billion debt to Moscow, which was ratified by the State Duma lower house in April 2014.
The remaining $1.09 billion is to be paid back in equal installments every six months over the next twenty years.12 Apparently, the debt deal was Russia’s strategic move to advance its economic interests vis-à-vis North Korea, in particular to make Pyongyang more committed to the trilateral projects that Russia has pursued and to help its mining industry operate in North Korea. This is evident in remarks in April 2014 by Russia’s Deputy Finance Minister Sergei Storchak to the effect that the money could be used to fund mutual projects in North Korea, including a proposed gas pipeline and a railway to South Korea.13
Also in April 2014, Russia and the DPRK signed an economic devel-opment protocol pertaining to cooperation in trade, investment, transport, energy and natural resources, employment, and interregional cooperation at their meeting in Rason. At the meeting, they agreed to aim at expanding their annual bilateral trade to $1 billion by the year 2020.14 The Russian Ministry of Far East Development expressed its eagerness to complete a trans-Siberian railway connection to South Korea that could facilitate its supply of gas and electricity to the South through the North.15 Also, the Russian delegation to the meeting expressed Russia’s interest in establishing
trilateral economic ties and its intentions to invest in the KIC,16 which would reduce the perceived risks of investing in North Korea and promote further investment by South Korean companies.
In June 2014 Russia and North Korea held another meeting in Vladi-vostok and reached an agreement on over a dozen trade and economic development projects, including Russia’s participation in gold mine develop-ment in North Korea in exchange for its provision of secondhand Tu-204 aircrafts, and conclusion of conventions pertaining to their joint project of building a gas station network in North Korea led by Russia’s TAIF petro-chemical company.17 At the meeting, North Korea expressed its expectation of the participation of Russian firms in exploration of minerals, including copper, quartzite, vanadium anhydride, and ultra-anthracite deposits,18 indi-cating its desire to reduce North Korea’s excessive dependence on Chinese companies. Aside from this agreement, in March 2014 the President of the Russian Republic of Tatarstan, Rustam Minnikhanov, visited Pyongyang to discuss joint exploration and development of petroleum gas fields in North Korea.19
To facilitate Russian investment, North Korea agreed to simplify pro-cedures for Russians to obtain and use multiple-entry visas for business purposes and to allow them to use the Internet and mobile phones in North Korea.20 On the series of agreements reached at the June meeting, Alexander Galushka, the Russian Far East Development Minister, told the media that
“the North Korean Government has allowed this agreement exclusively for Russian entrepreneurs and that overseas investors, including those from China, have not enjoyed such benefits to date.”21
Besides these agreements, in a manner similar to China, Russia has attempted to use Rajin as its logistics hub. In fact, in 2008 Russia and North Korea started renovating No. 3 wharf of the Rajin port and upgrading the fifty-four-kilometer railway between Rajin and Khasan (in Russia), which was originally agreed in 2001. For the joint project, in 2008 a joint venture, RasonKonTrans, was established with Russian Railways contributing 70 percent of its capital and the Rason Port Authority, 30 percent. Russian Railways invested 9 billion rubles ($250 million) to upgrade the wharf and the railways.22 In December 2011 Pyongyang enacted an international railroad cargo law, the first of its kind, apparently in preparation for its transactions with Russia and China.23
Economic Engagement with North Korea 79 Russia and North Korea held an official opening ceremony in Septem-ber 2013 upon completion of renovation of the wharf and the railway. The new multipurpose facility at the terminal in the Rajin port has a cargo traffic capacity of about five million tons a year and the capacity for coal magnetic cleaning and coal separating.24 For political and economic rea-sons, completion of trilateral train connections between Russia and South Korea via North Korea would take many years. For the time being, Russia can use the Rajin port as a gateway to other counties, particularly China, and possibly South Korea and Japan, supplementary to the existing ports in the Russian Far East such as Vladivostok, which face congestion.25 In fact, Russia has already begun its use of the Rajin port, sending out its first shipment of a total of 9,000 metric tons of coal at the end of March 2014 to the final destinations of Shanghai, Lianyungang, and Guangzhou in China via the port.26
Considering possible further decline in Russia’s gas and other exports to Europe due to its confrontation with the European Union and the United States over its annexation of Crimea and its involvement in the conflict in Ukraine, Russia may well make greater efforts to expand its economic engagement with North Korea in order to expand its exports, to profit from its investment in North Korea, and to use North Korea as a logistics hub.