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Among the more intriguing developments in the past year has been the apparent deterioration in diplomatic relations between North Korea and China, and the North’s concomitant tilt toward Russia. The dance continues with the announcement that Kim Jong Un will attend a military march commemorating the 70th anniversary of the allied victory in Moscow in May, marking his first ever foreign visit since coming to power. (No word yet as to whether Xi Jinping will be in attendance.) Is this a snub directed at China, where last year Mr. Xi made the unprecedented visit to South Korea before visiting the North, and appears to have warm personal relations with South Korean President Park Geun-hye, and a further sign of strengthening in Russia-DPRK relations?
We followed Russia’s rapprochement with North Korea closely last year, including a number of new business and investment proposals. Russia wrote down Soviet era North Korean debt and signaled willingness to invest in a number of projects in the extractives sector. Notably, this includes an agreement in which Russian investors refurbish North Korea’s dilapidated rail system, which could take 20 years and cost upwards of $25 bn, in exchange for access to the country’s coal and mineral reserves. Activity is also centered around the Rason ice-free port along the Russian border. In a recent pilot project 40 thousand tons of Russian coal was transported to Rason, and then shipped to South Korea. Russia plans to increase bilateral trade almost ten-fold to $1 billion by 2020.
Despite some interesting prospects, the benefits of these investments will take years to evaluate, and may not even materialize. For now, we see no expansions in the bilateral trade data: in fact total recorded Russia-DPRK trade in January – September 2014 was down 10 percent from the same period in 2013. In contrast, China-DRPK bilateral trade appears roughly the same in 2014 despite a significant retreat in the traded prices of coal and metal ores. Indeed, if you ignore trade with South Korea (as South Korean reporting sources do) North Korean trade dependence on China is at an all-time high.
But its not necessarily how much trade and investment results from improved Russia-DPRK relations, but what kind of trade and investment. Take, for example, that North Korea wants to buy Russia’s advanced Sukhoi Su-35 fighter jets which would be a big step up from their current Soviet-era models. Kim Jong Il tried the same thing during the 2001 – 2002 summits, so it is not clear if this time things will work. But even with rapidly diminishing resources at his disposal it suggests that Mr. Putin can still play the spoiler role in the international security calculus of the region if he so desires. What better moment to announce a jet fighter deal than at a military celebration?
