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May 5, 2017 | 12:06 GMT

11 mins read

Russia Seizes an Opportunity in North Korea

Russia, which shares a relatively short border but a long history with North Korea, is strengthening its economic and financial ties with its neighbor.
(GREG BAKER/AFP/Getty Images)
Forecast Highlights

  • Moscow will continue to expand its economic and financial cooperation with North Korea, which in recent years has included transportation networks, fuel supplies and employment.
  • Russia, which sees its growing ties with North Korea as another way to build leverage it can use in negotiations with the West, will not wield that influence just yet.
  • While it cannot replace China as North Korea’s primary partner, Russia is developing the capacity to play spoiler to many U.S. plans to increase pressure on North Korea.
 

As North Korea's relationship with China grows more difficult, Russia has increased its focus on the Korean Peninsula, ready to forge stronger ties with its isolated neighbor. Beijing is considering increasing pressure on North Korea to dial back its nuclear weapons program, and Russia stands ready to take advantage of the conflict. But though deepening its involvement with North Korea could equip the Kremlin with additional tools to use in its wider confrontation with the West, Russia could not hope to match Chinese influence in North Korea. Yet, Russia could still limit the pressure China is able to exert on North Korea.

North Korea and Russia, which share a scant 17 kilometers (11 miles) of border, have a long history of close relations. After the post-World War II division of the Korean Peninsula by the Soviet Union and the United States, an attempt at reunification in the late 1940s failed, and the Koreas became a prime proxy battleground pitting the communist North against the U.S.-aligned South. The Soviets helped to build up the military forces and security services of the new North Korean government, ensuring its stability and forging a governing style that remains in force. Soviet-era military equipment is still in use in North Korea today.

The cult of personality that surrounded Soviet leader Josef Stalin provided the model for the structure of North Korea's government, a model retained today under Supreme Leader Kim Jong Un. That legacy, and the fact that its own leader, Vladimir Putin, enjoys similar popular power, is one reason the Kremlin continues to back the leadership in Pyongyang.

Along with ideological legacies, North Korea and the Soviet Union shared strong economic links. The Soviet Union was a key North Korean economic partner during the Cold War and accounted for nearly half of North Korea's foreign trade in the 1970s and 1980s. In addition, the Soviet Union provided trade, credit and technical assistance to North Korea. Joint projects between the two supplied North Korea with 70 percent of its electricity, 50 percent of its chemical fertilizers and 40 percent of the ferrous metals its economy used. And as part of its debt payment to Moscow, Pyongyang sent North Korean prisoners to work in Siberia.

After the Soviet Union collapsed, Russian trade with North Korea crumbled, and all joint projects were halted. Moscow, caught in a firestorm of economic and financial issues in the 1990s, began to demand hard currency trade and the lines of credit the Soviets were able to extend to North Korea dried up. In the 25 years since the collapse of the Soviet Union, Russian trade shrank to 1 percent of North Korea's foreign trade. Into that breach stepped China, who accounts for 90 percent of North Korea's foreign trade.

When Putin came to power in 2000, he saw the strategic value of maintaining good relations with North Korea — as well as ways Russia could manipulate its position in the region to pressure the country. Just as China does not want to see North Korea's government destabilized, it is in Russia's interests to maintain North Korea as a buffer state between it and Western-allied South Korea and Japan.

Putin's government has criticized North Korea's nuclear weapons tests and ballistic missile programs. Russia participated in the six-party nuclear disarmament talks along with China, the United States, Japan and North and South Korea. In 2014, Russia joined in on levying sanctions — albeit limited — against North Korea under Western pressure, halting supplies of ships, helicopters and minerals in response to its continued nuclear tests. However, neither China nor Russia has cut their economic or military ties with North Korea or has hidden their violations of sanctions against the North. And both governments are aligned in opposing expanded sanctions on North Korea and seeking a military intervention or regime change there.

After Japan and the West levied sanctions on Russia for its involvement in the Ukraine conflict and its annexation of Crimea, Russia's view of North Korea shifted. Russia began quietly laying the groundwork that would strengthen its ties to North Korea, thus increasing its global political leverage should it need it. Russia can never replace China's influence over North Korea, but it could interfere with measures employed by China, the United States or their allies to try to pressure Pyongyang. Moscow's evolving position has won praise from Pyongyang, whose Korean Central News Agency has named Russia as the country friendliest to North Korea, supplanting China. This shows Pyongyang's interest in attracting increased Russian support at a time when Moscow needs as much political leverage as it can get.

Russia Smells Opportunity

Rhetorically, Russia and North Korea have long considered rekindling ties in several areas, and now the breakdown in relations between Russia and the West has created a favorable environment for this to happen. Over the past few years, Russia has increased its involvement in several strategic areas for North Korea, which could position Moscow as a minor, but crucial, partner for Pyongyang.

In 2014, Moscow officially settled North Korea's Soviet-era debt of $11 billion, writing off 90 percent of it and allowing North Korea to pay the rest over 20 years without interest. That same year, North Korea granted Russian business executives long-term multiple-entry visas for the first time. The next year, a business council was set up between the countries. Russia's direct trade to North Korea remains limited, at about $100 million of North Korea's total $7.6 billion in foreign trade. However, those figures are conservative, given one-third of China's exports to North Korea are goods, particularly fuel, that originated in Russia. In addition, Russia has provided millions of dollars worth of food aid to North Korea in recent years, including nearly half of the country's grain imports.

In Russia's biggest project with North Korea, it is building transportation infrastructure on both sides of the border to increase future trade. In 2013, Russia completed a renovation of the only rail line directly connecting the countries, adding to it bridges, tunnels and modern equipment.

Because there are no cross-border roads between the countries, plans to further upgrade the rail line and to create a universal freight terminal at the North Korean port of Rajin were accelerated in 2014. Russian firms are bankrolling the expansion of the port, which handled 100,000 tons of Russian coal exported through North Korea in 2014. In 2015, Russian Railways planned to move 1.5 million of coal through the port. Russia's Center for Korean Studies estimates that if South Korea used that transit route, it could save approximately 15 percent in coal import costs. But the elevated tensions on the peninsula have shelved plans for the rail line to be expanded to South Korea. In addition, a proposal for expanding a Russian natural gas pipeline running through North Korea to the South has also been put on hold. In January, Russian Railways proposed an even greater expansion of the rail lines connecting Rajin to Russia, including an agreement that would allow North Korean workers to receive training in Russian technical expertise.

Beyond rail, Russia plans to start regular cargo and passenger ferry service between Rajin and Vladivostok on May 8. The giant North Korean ferry Man Gyong Bong-92, which will be used on the route, previously sailed between North Korea and Japan, but Tokyo recently halted that service. When it ran to Japan, the ferry reportedly was used to spirit cash out of North Korea and skirt sanctions. In spite of Japan's cutoff, North Koreans wanting to scrub financial transactions would now be able to either transit on the ferry through Russia to Japan or deal with Russian banks directly.

A Financial Conduit

Financial ties between Russia and North Korea have changed in recent years. In 2014, Russia and North Korea agreed to denominate all bank transfers in rubles, as sanctions on both countries make it difficult to move money. But in mid-2016, responding to Western pressure, Russia's central bank blocked all financial transfers from North Korea, a policy it is already reconsidering. In recent years, Russia has created a financial transaction system that is increasingly independent from the Western-dominated SWIFT system. Technical agreements are in place to restore financial transactions between North Korea and Russia, though the Kremlin would need to grant permission to resume moving money, which can now be done electronically outside of Western notice.

When China recently threatened to cut off fuel exports to North Korea if it conducted its sixth nuclear weapons test, Russia hinted it could replace at least some of that supply. Most Russian fuel destined for North Korea ships from Siberian firms through China. On occasion, Russia has sent fuel directly from Vladivostok to Rajin. The value of Russian fuel exports to North Korea reportedly dropped from $18 million in 2015 to just more than $1 million last year. However, NK Pro, a North Korea watchdog agency, claims there was no decrease in the number of fuel tankers traveling between Russia and North Korea last year, leading to the possibility that Moscow underreported the amount. Future energy cooperation could include a natural gas pipeline project and electricity exports from Russia to North Korea.

North Korea relies on the income from its coal exports, which were recently targeted by a United Nations ban. However, exports of foreign coal through North Korean transit points are allowed. In 2013 and 2014, a subsidiary of Russian mining conglomerate Evraz delivered more than 170,000 tons of coal to North Korea for export, and Severstal, another big mining firm, added to the total in 2015 when the port at Rajin began to expand. The U.N. ban will add the opportunity for Russia to export North Korean coal under its flag if it chooses.

One of the most successful ways that the two countries have expanded their cooperation is through employing temporary North Korean workers in Russia. Nearly 50,000 North Koreans were granted Russian work permits in 2015, up 27 percent from the previous year. The North Koreans have helped fill jobs in Russia's Far East, where labor shortages have persisted despite numerous campaigns aimed at persuading Russians to migrate to the region. In April, the Russian parliament passed a bill allowing foreign workers from a handful of countries (including North Korea) to travel visa-free to Vladivostok. Russia estimates that North Korea receives $170 million in remittances from its workers in Russia, and in March, the two countries agreed to expand labor immigration.

All Is Not Rosy

Although Pyongyang and Moscow are moving toward closer alignment and Russia is building a foundation that will allow it to help ease the pressure on North Korea, Moscow in the past has acted cautiously when it comes to its small, eastern neighbor. As with the rest of the world, North Korea's nuclear proliferation concerns Russia, particularly since the North's nuclear weapons test site sits just 200 miles from Vladivostok. Moreover, Russia, which is tied to nuclear weapons reduction pacts with the United States, is increasingly preoccupied with nuclear proliferation around the world.

Russia, which has traditionally aligned its policies on North Korea with those of China, is loath to act outside of China's wishes. However, despite China's increasingly firm stance on North Korea, Russia's maneuvering to put itself in position to help ease the pressure on North Korea would not necessarily be a violation of Beijing's aims. Yet, if it props up North Korea too much, Russia's actions could be a lightning rod, drawing criticism away from China's failure to reel in the North.

Still, Russia will keep its options open as it deals with problems stemming from accusations of meddling in Western elections and media, its role in the Syria and Ukraine conflicts, and increasing domestic dissatisfaction. Its potential influence on the North Korean situation could give it limited leverage in negotiations over those other areas. Though Russia alone cannot solve the North Korean problem, it could move the dial just enough to either play spoiler or ally to any efforts by the West to solve it.

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