North Korea, Russia Benefit from Potential Natural Gas, Railway Deals

Courtesy of STRATFOR (subscription required), an interesting report on North Korean leader Kim Jong Il’s visit with Russian leaders where they will likely discuss a railway project and a natural gas pipeline project, which, if implemented, would give Russia greater influence in the Korean Peninsula while allowing North Korea to wean itself off Chinese influence.  As the article notes:

“…North Korean leader Kim Jong Il’s private train on Aug. 23 arrived in Ulan-Ude, the capital of the Republic of Buryatia in eastern Siberia — his first trip to Russia in nine years. Kim is set to hold summit talks with Russian President Dmitri Medvedev on Aug. 24. The tour was thought to be primarily focused on economic issues, but the two leaders will likely address two specific projects that have been discussed for years: a railway system connecting North Korea’s Rajin port to Russia’s Khasan border, and a natural gas pipeline from Russia to South Korea through North Korea. The trip comes less than a month after Pyongyang unexpectedly resumed diplomatic negotiations with South Korea, the United States and others following its signal of unwillingness to return to multilateral talks last year.

North Korea: Preparing for Succession

As North Korea is preparing for the 100th anniversary of the birth of Kim Il Sung — and Kim Jong Il, in accordance with his succession plan, prepares to fully hand over power in 2012 — Pyongyang is aiming to reduce international sanctions and isolation by changing its behavior and reshaping international perceptions. In addition, the regime hopes to create a strong and prosperous state (“kangsong taeguk”) by 2012 in which it will further enhance its military capability and pursue a stronger economic performance to facilitate the leadership transition. These goals will be difficult for the regime to achieve on its own — and in such a short amount of time — so Pyongyang may take advantage of the railway and pipeline projects to get Moscow to assist with its strategy.

During the Cold War, Russia and North Korea were allies, with North Korea being the beneficiary of Russian military and economic support. But as North Korea has grown increasingly dependent on China politically and economically since the 1990s, Pyongyang has sought the assistance of other states to reduce its reliance on Beijing. This provides room for Russia to capitalize on any potential rift between Pyongyang and Beijing and play a larger role in Korean and regional affairs.

Pyongyang’s Role in Negotiations

The railway system and natural gas pipeline project present just the opportunity both countries need to achieve these goals. Plans over the railway system and the pipeline began in the 2000s, and the latest negotiations appeared to have endowed North Korea with a greater role in tripartite discussions with South Korea and Russia.

Negotiations over the pipeline initially were launched exclusively between South Korea and Russia, with the idea being to export 10 billion cubic meters of natural gas from Siberia to South Korea every year for 30 years beginning in 2015. But in early 2011, both sides began including North Korea in the negotiations. For Russia, this was done because Moscow is looking to diversify its energy consumers and, in particular, seeking alternative ways to boost South Korean natural gas consumption from sources other than liquefied natural gas (LNG) from the Sakhalin project. The construction of a pipeline from Russia to South Korea via North Korea represents an opportunity to achieve these goals. Pyongyang has been receptive to the idea; it sees the potential to satisfy domestic energy demand and gain considerable cash revenues from the pipeline project, which will help strengthen its economy ahead of 2012.

Meanwhile, negotiations over a proposed 52-kilometer (32-mile) railway system, connecting North Korea’s Rajin port — the strategic border of North Korea and Russia where Pyongyang is hoping to create a free economic zone — have also resumed. In fact, the renovation work on a 12.8-kilometer section of the railway was completed in May, and both sides hope to begin construction on a container terminal at the Rajin port. Pyongyang signed an agreement in 2007 to open Rajin to foreign trade, and it has granted China exclusive access to Pier 1 until 2028. To lessen its dependence on Beijing, Pyongyang leased another pier to Russia for 50 years. The benefit to Russia is that an extension of the railway system to Rajin would enhance Moscow’s presence at ice-free ports in the Pacific Ocean, securing crucial transport routes for the Asia-Pacific region.

Russia and South Korea

All these projects fall into Russia’s broader strategy to refocus on and regain influence in the Asia-Pacific region. It perceives South Korea as one of the larger and more strategic partners to facilitate the plan, and, as such, it has given serious consideration to accessing South Korea through energy and transportation networks. From Moscow’s point of view, South Korea remains a major consumer of Russian energy and a major investor in the Russian economy through its technology and wealth, but it brings the benefit of not meddling politically in Russia and its sphere of influence. Moscow therefore sees Seoul as an important partner not only in its regional strategy but also in its modernization and privatization programs. Politically, Russia knows such infrastructure would allow North Korea to meet the demand for raw materials and energy and give Pyongyang a source of revenue, allowing Russia to gain political influence in the country and balance China’s existing leverage.

Seoul’s participation in these projects may be guided by political considerations rather than by commercial interests. The pipeline could provide more than just LNG to South Korea, and although it is certain to be very expensive, it brings political benefits that will likely outweigh the economic drawbacks. And railway construction, which would eventually link with South Korea, would give Seoul alternative routes to export goods to European markets. Meanwhile, both projects would help South Korea to attract Russian interest and increase the South’s influence in North Korea, potentially balancing Beijing’s primacy there and reducing the threat of a North Korean provocation. Ultimately, both sides see the potential benefits of a unified Korean Peninsula in the long run, especially if infrastructure projects help stabilize or even improve inter-Korean relations.

Of course, such infrastructure would be at risk of North Korean disruptions. Transport through the North gives Pyongyang potential control over the railway and considerable leverage on the supply chain of crucial commodities to the South. But in the long run, Seoul sees some constraints to Pyongyang’s ability to interfere frequently, as that would not only reduce the flow of money to North Korea in the form of transit fees, but also disrupt Pyongyang’s relations with Moscow, which has an interest in keeping infrastructure in place. All of this further undermines the North’s ongoing efforts to reduce dependence on China

This entry was posted on Tuesday, August 23rd, 2011 at 9:21 pm and is filed under North Korea, Russia.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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