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Back in 2008, Russia and North Korea reached agreement on an ambitious rail project that has largely flown underneath the media radar; you have to go to sources like Railway Gazette and Curtis Melvyn’s North Korea Economy Watch to track the story. It now appears that the project is reaching completion and that freight could ship this month.
The project grew out of the July 2000 Kim-Putin summit and the Joint Declaration framework that was designed to increase economic cooperation. The Russians don’t trade much with the North; Andrei Lankov offered a downbeat assessment following last year’s debt deal. But the Russians do have a longstanding interest in infrastructure including not only railroads but pipelines.
Despite obvious complementarities, the railway project took over seven years to negotiate. The dream at the time was that rebuilding the line from Rajin/Rason to the Russian border (Khasan/Tumangan) would be the first step in an ambitious Trans-Korean Main Line reconstruction. The project would create an Euro-Asian transport corridor that would cut delivery times from South Korea and Japan to Europe in half. In the interim, relaxed North-South relations would permit South Korean freight forwarders to route traffic by sea between Busan and the new container terminal at Rajin, from where they could make the journey to Europe. In 2007, North Korean freighters began regular service to Busan, although it dried up in the wake of the currency reform and post-Cheonan sanctions.
The initial €150m rail project was undertaken by a joint venture between North Korean Railway and Russian Railways; the JV was technically signed by Russian railway operator's business subsidiary RZD Trading and the Port of Rajin, with the Russians holding 70% of the shares. The rail project involved the reconstruction of 54 km of track, 10 stations, three tunnels and more than 40 bridges. According to a recent story in the Railway Gazette, the North Koreans and the Russians have now substantially finished this project and have signed a protocol to create a single control center for the entire North Korean rail network. The earlier vision of Rason as a transshipment center linking Asia to Europe is now hostage to North-South relations, but the Russians apparently have plans to use their Pier 3 at the port to export coal to the region.
The price tag on the larger railroad project has been estimated at $7 to 8 billion and would have required a consortium of investors from South Korea, Japan and Europe. The prospects of such a project are just another reminder of the incredible opportunity costs of North Korea’s isolation.
