Libmonster ID: MD-941
Author(s) of the publication: O. V. KIRYANOV
Educational Institution \ Organization: ISAA MSU, Rossiyskaya Gazeta in the Republic of Korea

Keywords: Russia's cooperation with North and South Korea, international sanctions, prospects for unification of the "two Koreas"

Recently, cooperation between Russia and the DPRK in various fields has intensified. After a long period of oblivion, the possibility of implementing a number of large-scale projects with the participation of the Russian Federation, North Korea and, possibly, South Korea began to be discussed again1. Against this background, the Khasan-Rajin logistics project implemented by the Russian Federation and the DPRK is of particular importance2. In the near future, the project is expected to turn into a trilateral project due to the accession of the Republic of Korea to it, which will have great economic and political significance both for all participants and for the situation in the region as a whole.

In many ways, 2014 can be called the "year of Russia"for North Korea. Perhaps, such activity of bilateral contacts and ties in relations between the Russian Federation and the DPRK has not been observed since 1991, when the Soviet Union collapsed. The plans and agreements between the Russian Federation and the DPRK announced after numerous meetings look very impressive.3

At the same time, it should be noted that all these major projects and serious plans are at best at the initial stage. There are also experts who question their realism.4

"HASAN-RAJIN" AND ITS HISTORY

Against this background, attention is drawn to the joint Russian-North Korean project, which has already reached the stage of full operation. We are talking about the Hasan-Rajin project.

On December 1, 2014, a Chinese bulk carrier with a cargo of 40 thousand 500 tons of Russian coal arrived in Pohang, South Korea, from the port of Rajin.5 This delivery was the first in history when the cargo was brought from the Russian Federation, passed through the territory of the DPRK and then delivered by sea to South Korea. A second similar delivery, but already three times the volume of cargo (approx. 140 thousand tons of coal), took place in late April-early May 2015.6

The essence of the project is the modernization of the previously created single-gauge railway from Russia to the North Korean port of Rajin and the construction of a comprehensive transport terminal in the port itself. The decision to implement the Khasan-Rajin project was made in 2000 during a meeting between Russian President Vladimir Putin and North Korean leader Kim Jong Il.

TEMPORARY POSTPONEMENT AND ITS REASONS

However, geopolitical realities made adjustments to the original plans, and the Hasan-Rajin project was launched only in 2008. For its implementation, a joint venture RasonKonTrans was established, established by a subsidiary of Russian Railways (RZD) - JSC Russian Railways Trading House and the port of Rajin (in shares of 70/30). North Korea contributed its share by granting the rights to lease Pier No. 3 of Rajin Port and part of the surrounding area for a period of 49 years. However, the start of the project coincided with the global financial and economic crisis.

As a result, active work within the framework of the project was started only in the second half of 2010. On September 22, 2013, a ceremony was held to put into operation the reconstructed section of the railway from Khasan station in Russia to Rajin port. On July 18, 2014, a universal transshipment terminal was opened in the port of Rajin. The total investment in the project is 10.6 billion rubles. 7 rubles.

On November 13, 2013, in Seoul, a Memorandum of Understanding was signed between Russian Railways and a consortium of South Korean companies - steel giant POSCO, Korail railway Holding, and Hyundai Merchant Marine cargo transportation company - to work out the issues of participation of South Korean partners in the Khasan-Rajin project. According to preliminary estimates, Southerners ' investments may amount to $150-200 million and will be implemented by buying out a 49% Russian stake in RasonKonTrans8.

POLITICAL ASPECT OF THE BUSINESS PROJECT

Some experts call the Hasan-Rajin project "political". Indeed, almost any project of cooperation with the DPRK in one or another form or another will be implemented.

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to some extent, for objective reasons, they always have a political component. All economic structures in the DPRK are under state control.

But it's not just about the DPRK itself. South Koreans can't do without politics either. According to the laws of the Republic of Korea, its citizens cannot visit the DPRK without obtaining special permission from Seoul in advance.

In addition, the Government of the Republic of Korea imposed sanctions against the DPRK after the events of March 2010, prohibiting any cooperation with the North, except for the operation of the inter-Korean technology park in Kaesong. Seoul made a "special exception" for the Hasan-Rajin project.9

On the other hand, "Hasan-Rajin" is, at its core, an ordinary business project based on the need to make a profit. This is not a project of unilateral economic support for the DPRK by Russia, and therefore it is unlikely to last long if it is unprofitable.

ISSUES THAT NEED TO BE ADDRESSED

There are enough skeptical statements about the prospects of the Hasan-Rajin project. Indeed, it has enough problems that need to be addressed.

One of the difficulties is related to the complexity of the Hasan-Rajin project. It implies clear coordination of actions and mutual understanding between representatives of different spheres: logistics, railway transport, port structures, etc.

Currently, two countries are participating in the project-Russia and North Korea; there is a high probability that a third country - South Korea-will join. In this way, specialists representing three different business cultures - Russian, North Korean, and South Korean-come together with different traditions and work patterns.

Many difficulties arose due to the poor condition of various infrastructure facilities in North Korea, problems with electricity, unsatisfactory condition of roads, lack of materials, etc.

WHAT ARE THE OBSTACLES TO SANCTIONS?

Among the factors that hinder the implementation of the Khasan-Rajin project, sanctions imposed against the DPRK by both individual States and the international community are not the least important. In practical terms, this often means that many shipowners refuse to work with North Korea. Banks are also reluctant to take on North Korea-related projects.

Recently, the issue of sanctions has begun to play a negative role in relation not only to the DPRK, but also to Russia. South Korea, although it has not formally joined the anti-Russian sanctions, nevertheless cannot ignore the position of its main military and political ally, the United States.

There are also purely economic problems that no project is immune from.

In particular, we are concerned about the recent steady decline in world prices for many minerals, including coal, which is currently being handled at the Rajina terminal. In addition, China - one of the main potential customers-has increased duties on coal imports into the country10.

THE "NORTH KOREA FACTOR"

Many foreign investors have concerns about the unpredictability of any cooperation with the DPRK, as another complication of the situation around the Korean Peninsula may lead to the freezing of all projects with North Korea. South Koreans have very strong concerns that the DPRK may use joint projects for political purposes as a means of putting pressure on Seoul.

The media periodically receive reports and stories of foreign businessmen about how difficult it is to do business in the DPRK. There are many problems: imperfection of legislation, problems with infrastructure, corruption, etc. 11

There is also a very specific work culture in the DPRK, where a lot of working time is spent on holding party meetings and other socio-political events.

Even if the above points are somewhat exaggerated by the media and the "North Korean factor" does not play such a big role as it is said, it should still be recognized that business in the DPRK has a number of special features.-


* On March 26, 2010, the South Korean Navy ship Cheonan was sunk in the Yellow Sea near Pyeongdong Island, killing 46 soldiers. According to Seoul, the ship sank after being attacked by a North Korean submarine. Pyongyang has categorically denied any involvement in the incident. This episode provoked a serious deterioration in inter-Korean relations. author's note).

page 66

challenges that are not always easy for representatives of other countries to accept.

RUSSIAN INTERESTS ARE GREAT...

As you can see, the Hasan-Rajin project has enough factors that complicate its implementation. Despite this, the project itself is beneficial for all its current participants, as well as possible new ones in the future, which makes it possible to speak about the prospects of this type of cooperation in general. Thanks to the implementation of the Khasan-Rajin project, Russia gets an active business project that allows it to use its logistics capacities more actively, as well as make a profit over time. The port of Rajin itself is preferable to the Far Eastern ports of the Russian Federation*by a number of objective characteristics. In the future, the flow of cargo between South Korea and Europe will increase, which will lead to greater demand for this direction.

Political dividends for Russia should also not be discounted. This project will increase the international prestige of Moscow, as it will reduce the potential for conflict in this part of the world. To a certain extent, this is also Russia's contribution to the normalization of inter-Korean relations.12

...AND NORTH KOREAN-NO LESS

North Korea's benefits from the project are also complex. First, the ownership of shares in JV RasonKonTrans guarantees a corresponding share in the profit. The DPRK receives 600,000 euros a year only for leasing the land on which the new railway track now lies, regardless of how things are going with the implementation of the project 13.

Secondly, Pyongyang received a new operating infrastructure facility with a railway and a port terminal on its territory.

The RasonKonTrans joint venture employs about 90 North Korean specialists, who receive, by local standards, a good salary. We should not forget about the indirect economic effect for Rajin as a whole. This ultimately leads to the development of the city, an increase in the standard of living, and an improvement in the economic situation.

The normal operation of the complex will also contribute to changing the approach that many foreign investors have developed towards the DPRK. If Hasan-Rajin is successful, it will become known in other countries. All this, in the end, will lead to an improvement in the country's image as an object for investment.

We also note the factor of reducing the unilateral economic dependence of the DPRK on neighboring China.14 It is clear that Khasan-Rajin alone is unlikely to significantly change the situation with Beijing's dominance in the country's foreign trade, but this will be a step in this direction.

SOUTH KOREA IS ALSO NOT BAD

Although South Korea has not yet made a final decision on joining the project, but the probability of this is high. For South Korean coal consumers, the new Hasan-Rajin logistics chain saves about 10 to 15% of the delivery time and transportation costs 15.

In the future, it will be possible to send containers along the same line, but in the opposite direction: from South Korea through the DPRK, all of Russia and to Western Europe.

"Hasan-Rajin "will allow the South to improve relations with the DPRK, create conditions for working together in the framework of another project, in addition to the Kaesong technology Park.

It is also worth recalling the "Euro-Asian Initiative" announced by the current President of South Korea, Park Geun-hye, as one of the main directions of his foreign policy strategy. The Hasan Rajin project can be the first real step towards achieving this goal.16

It can also be said that the possibility of reducing the DPRK's trade and economic dependence on China is also of great importance for South Korea. In the South, experts and politicians constantly express concerns about the adverse consequences that the PRC may have a great influence on North Korea.17

CONTRIBUTION TO REGIONAL DEVELOPMENT

Having described the benefits and interests of the project for specific participants, it should be noted that the effect of it will be felt on a regional scale. This can help reduce tensions where conflict situations regularly occur. From an economic point of view, a new trans will appear in the region-


* The port of Rajin, unlike the harbors of the Russian Far East, does not freeze all year round (approx. author's note).

page 67

tailor's terminal, which will also have a positive impact on the development of this part of the world.

Another positive effect of the Hasan-Rajin project is also important. Representatives of various countries repeatedly tell us about Pyongyang's consumer approach, which "constantly asks for help." 18 Khasan-Rajin is valuable because it teaches Pyongyang to earn money in modern conditions, in the realities of international competition, and taking into account the interests of other partners.

AND THEN WHAT?

Judging by the reaction of South Korean officials, experts and the media, they were satisfied with the pilot delivery of coal in November 2014. Experts of the South positively characterized the quality and condition of the infrastructure of project 19. In other words, we can talk at least about a successful start of the project.

Now purely economic tasks - attracting cargo volumes and signing new contracts-are becoming of paramount importance for the development of the project. Representatives of the Russian side do not hide the fact that they are interested in the participation of South Koreans both as investors in the RasonKonTrans joint venture and as customers of cargo that will pass through the Rajin port 20. On the other hand, the "southerners "are by no means the" last hope " of the project. It can also include companies from other countries 21.

The next step is now business negotiations on the terms of the South Korean consortium's entry into the project and other technical details. At the same time, it is significant that South Korean officials almost every time they talk about relations with the DPRK and inter-Korean cooperation, they constantly mention Hasan Rajin as one of the promising and promising projects.22


1 The Renaissance in Russia-North Korea Relations // The Diplomat. 22.11.2014.

2 See for example: Zakharova L. V. Ekonomicheskie otnosheniya Rossii i KNDR v XXI veke [Economic relations between Russia and the DPRK in the XXI century]. 2015, N 5. (Zakharova L.V. 2015. Ekonomicheskie otnosheniya Rossii i KNDR // Aziya i Afrika Segodnya. N 5) ( in Russian)

3 Alexander Galushka: The Russian Federation and the DPRK agreed on a common model of relations under the Victory project / / TASS. 29.11.2014.

4 "There is not and will not be such a project." Russia will invest $25 billion. to the railways of the DPRK // Газета.ги. 26.01.2015.

5 Puk Nachjinhan kenyu rosiasan sokthan, pohang yaphan hayek sijak (Russian coal arrived in Pohang via the North Korean port of Rajin, unloading started) / / Money Today News. 02.12.2014.

6 Russiasan yuenthan 14manthon, Nachjin-Hasan phyrojekthiro hidal kunnero (140 thousand tons of Russian coal will be delivered to our country this month through the Nachjin-Hasan project) / / Gyeongyang Sinmun. 15.04.2015.

7 Ibid.

8 Rosiasan soktah pohan tochhak... Nachjin-Hasan phyrojekthi thallek patylkka? (Russian coal has arrived in Pohang... Whether the Nachjin - Hasan project will get a new impulse / / Chosun Ilbo. 01.12.2014.

9 Pak taetheonnen - phuthin cheonsanhwedam... yurasiainisethiby noni (Summit between Presidents Park and Putin... Discussions of the "Euro-Asian Initiative" / / Hanguk News. 13.11.2013 - http://newshankuk.com/news/content.asp7fs-1&ss=1&news_idx=201311131735491810

10 Coal hit again as China resumes import tariffs // The Sidney Morning Herald. 09.10.2014.

11 Mi jeongmunga " Chungug kyopdul nookhanne saophwangye khyn pullman "(American expert: "Chinese companies strongly complain about working conditions inside North Korea") / / Voice of America. 26.01.2015 - http://www.voakorea.com/content/nk-china-116756624/1339345.html

Tolorayn Georgiy. 12 The two Koreas, coming to terms with Russian assistance - www.nknews.org 23.07.2014: http://www.nknews.org/2014/07/the-two-koreas-coming-to-terms-with-russian-assistance/

13 Russia returns to Rajin, uniting the two Koreas // Rossiyskaya gazeta. 03.12.2014.

14 According to the South Korean state agency KOTRA, China's share in North Korea's foreign trade was 89.1% in 2013 (2()13nendo pukhan muen tonhyap (North Korea's Foreign Trade Trends in 2013). Seoul, KOTRA, 2014. p. 3). However, the South Korean agency does not take into account inter-Korean trade in these data. If we take it into account, the real share of China in the DPRK's foreign trade, at the end of 2013, was about 77%.

15 Roena yuenthanhaekyongzhak... Ponkeyak hepean chinhen (Russian coal unloading started ... "Contract negotiations are underway" / / YTNNews. 01.12.2014.

Kim Tae-Shik. 16 Op. cit. P. 16 - 17; Russian Coal Shipment to Arrive in Korea as Part of Najin-Hasan Project // The Korea Economic Daily. 18.11.2014.

Choi Soo Yong. 17 Puk-chun gyeongjeokwangewa hwaktawa taeunianan (North Korean-Chinese economic ties ' activation and reaction). Seoul. KINU, 2007. pp. 77-83.

18 N.Korea's Speakers Ask Britain For Food Aid // Хангёре Синмун. 04.11.2011.

19 Pukkoche kunneon sokthan... Hanburno hemnek chhotkelsin (Who came to us via North Korea)... The first fruit of cooperation between South, North Korea and Russia) / / Channel A - ichannela.com. 29.11.2014.

20 S.Korean Firms Invited to Invest in N.Korea-Russia Railway // Chosun Ilbo. 11.12.2014.

21 Russia returns ...

22 Wee Sung Nak: "Rosia thoilsn consoljok yekhal kaneung" (Wee Sung Nak: "In the case of unification, Russia has the opportunity to play a constructive role") - http://www.christiandaily.co.kr (16.01.2015), etc.


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