Russia's North Korea Conundrum

 
 

This article was first published at 38 North, a blog of the U.S.-Korea Institute at Johns Hopkins SAIS. It is republished with kind permission.

The international community’s relationship with North Korea has reached a bifurcation point that may have far-reaching consequences for the strategic positions of key national players. Specifically, the latest UN sanctions against the DPRK appear likely to substantially harm Russian economic and security interests on the Korean peninsula.

Since the early 2000s, Russia has grown used to managing North Korea’s cycle of provocations, which has raised and eased regional tensions as reliably as seasons change. Yet the international community’s strong unanimous reaction to the DPRK’s latest nuclear test and rocket launch, reflected in the particularly robust international sanctions passed on March 2, may mean the tide has turned against Moscow.

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Moscow’s Grievances

Russian-North Korean relations appeared, until recently, to be trending in a positive direction, but Kim Jong-un has now even exhausted the patience of friendly countries, which see his most recent provocations as a threat to their interests in the region. North Korea’s latest nuclear test and satellite launch caught Russia in a double-bind; even as they harmed the DPRK’s reputation among Russia’s leaders and public, Moscow remained unwilling to significantly distance itself from Pyongyang. Lacking China’s level of leverage over North Korea, Russia would only guarantee a reduced role for itself in any future Korean settlement by curbing its ties with the DPRK.

Therefore, Russia found itself in a precarious position in late February, when the United States submitted a draft UN Security Council Resolution (UNSCR) containing measures that were detrimental to vital Russian economic interests. Russia fell prey to a decade-old arrangement in which it has supported—often with some reluctance—measures on North Korea agreed upon by China and the United States. This practice backfired in the latest round, as no one had consulted with Moscow on proposals that clearly ran against its interests. The final UNSCR contains a number of amendments introduced by Moscow, but it still will have an overall negative impact on Russian economic projects in the DPRK and on Russia’s role in addressing the North Korean nuclear problem.

The resolution’s financial restrictions will probably lead to a ban on ruble-based transactions between Russia and North Korea, a significant practice the sides had recently instituted in support of bilateral trade. The UNSCR may also obstruct plans for a new financial clearing house to facilitate transactions between the Russia and North Korea. In this scenario, Russian banks would stop dealing with North Korean counterparts, including those engaged in humanitarian cooperation.

Yet the implementation of Russian projects in North Korea is where the new resolution could prove most devastating. Its severe restrictions on North Korean mineral exports will undermine the DPRK’s only means to compensate Russia for investments and deliveries, given the DPRK’s scarce financial resources. This model was foundational to North Korea’s economic relationship with Russia, and it constituted the basis for potential Russian projects in North Korea such as the construction of electric power stations and metallurgic plants.

Russia had planned to re-export North Korean coal and iron, and it was interested in precisely the rare earth and non-ferrous metals targeted by the new resolution. China is likely to stringently enforce this export ban, given its interest in maintaining its current monopoly in the market for these minerals. The transit of coal also promised a return on a Russian Railways investment of more than $300 million in a rebuilt rail link between North Korea’s Rajin port and Khasan in Russia. Though an eleventh-hour UNSC compromise will allow the rail line to remain in operation, its use will probably decrease as a result of new logistical difficulties. Moreover, South Korea’s refusal to receive coal through that channel undermines the rationale for this trilateral logistics project, making its continuation doubtful.

The resolution’s requirement for all cargo entering and leaving North Korea to undergo inspection is bound to slow transportation, despite the vague definition of what constitutes an “inspection.” This mandate also may increase costs from possible corruption, given on-the-ground realities in Russia. The UNSCR’s impact on North Korean trade will largely depend on how the sanctions are implemented, especially by China. North Korea may well feel tempted to use Russia as a transit point, since the sea border between the two countries is still more or less open. A new pontoon bridge is under construction, although the prospects of its completion are no longer clear.

This analysis estimates that Russia’s losses will amount to several hundred million dollars, based on an assumption that the value of its trade with North Korea now stands at roughly $1 billion (accounting for trade through third countries). The sanctions may preclude further opportunities for projects and trade. The limits and outright bans on North Korean exports of coal, iron and iron ore, gold, titanium, vanadium, and rare earth minerals are likely to negatively affect the country’s stated priority of economic revitalization. Subsequent delays in economic development will slow possible North Korean implementation of market-oriented reforms, decrease production and demand in its economy, and undermine any possibilities for Russian companies to enter the North Korean market as normal traders.

China’s Position

Russia is also concerned with China’s new, tougher stance toward North Korea. Beijing initially responded with restraint to Washington’s proposed sanctions, denouncing Pyongyang while expressing readiness only to support sanctions that specifically targeted North Korea’s nuclear and missile activities.

Why did China’s position evolve so greatly over several weeks of negotiations with the United States? Some experts believe that China hoped Washington would agree to resume negotiations, potentially offering North Korea a peace treaty in exchange for satisfactory resolution of the nuclear issue. One also cannot dismiss the possible influence of the official start to U.S.-ROK talks on potential deployment of the Terminal High Altitude Area Defense (THAAD) system in the South. Beijing likely saw an opportunity to prevent or at least delay the deployment of a U.S. missile defense system on the Korean peninsula by demonstrating more flexibility on sanctions against the North. It might have chosen this option despite the fact that it could be viewed as a weakness.

After meeting with Chinese Foreign Minister Wang Yi on February 23, U.S. Secretary of State John Kerry claimed that “if we can get to denuclearization, there’s no need to deploy THAAD.” This possible U.S.-Chinese understanding is relevant to Russia, which fears that fielding THAAD in South Korea would kick off the creation of a full-fledged anti-missile shield in the Pacific, ultimately undermining Russia’s missile capability. The recent U.S.-China compromise does not preclude such an in outcome in the long term. At recent foreign policy consultations, Russia and China noted the danger of an increasing arms race, especially missiles, as a result of the current developments.

The changes in China’s position demonstrate some success of a U.S. policy that aims to use China in efforts to effect North Korean regime change. China is thought to desire a North Korean government more willing to comply with international demands. Washington hopes to gain Beijing’s assistance in changing North Korea’s leadership, if not its political system, assuming that efforts to unify the Korean peninsula under South Korean rule prove unsuccessful. A pro-Chinese government in Pyongyang would have little incentive to be close to Russia. In addition, Washington does not rule out seeking additional Chinese cooperation by pressuring Beijing on some sensitive issues, potentially doing harm to Russian interests. The precedent for such U.S. tactics is in place with the adoption of the latest UNSCR.

A Possible North Korean Reaction to Sanctions

North Korea’s reaction to UNSCR 2270 may be harsh, especially on the threshold of the 7th Congress of the Workers’ Party of Korea (WPK). High-ranking North Koreans recently told this author that North Korean authorities may respond with “benign neglect”—essentially ignoring the new sanctions under the pretext that the DPRK has been surviving under such measures for years—but Kim Jong-un may react forcefully to avoid the risk of backlash from conservative forces in Pyongyang. Therefore, it is possible to expect new provocations, even some that may lead to limited military clashes on the Korean peninsula. North Korea’s decision to launch several short-range missiles within hours of the UNSCR’s adoption gives credibility to such assumptions.

Pyongyang has some untraditional measures at its disposal, such as expelling diplomats who represent “guilty” countries. Cyberattacks are also possible, and such strikes may not even be traced back to North Korea. In this latest change of political seasons on the Korean peninsula, the “winter” of tension may be unprecedentedly long and severe. Pyongyang could go so far as to freeze its UN membership, which would let it ignore any other measures by the UNSC.

A rise in tension and possible provocations during U.S.-ROK joint exercises on the Korean peninsula could easily lead to another crisis for Moscow to deal with. Additional nuclear tests and missile launches could also begin to affect security of Russia’s Far East. However, any further countermeasures would further undermine Russia’s economic interests in the region. This would strain its relations with North Korean leadership as well, decreasing the possibility for dialogue.

Conclusion

By allowing the adoption of a UNSC Resolution that buries Russia’s largest and most important projects in the DPRK, Moscow appears to have shot itself in the foot. And unlike China, Russia will receive no political compensation for its economic losses. The sanctions may erode Russian relations not only with the DPRK, but also with South Korea, due to Russia’s initial reluctance to fall behind the latest resolution.

These measures will not speed up the resolution of the nuclear problem, which appears more intractable than ever. Yet if the current crisis eventually leads to nuclear discussions with North Korea, Russia could find itself in a weaker position at resumed Six Party Talks—or even face outright exclusion from a new negotiation format.

Dr. Georgy D. Toloraya is the Director of Korean Programs at the Institute of Economy at the Russian Academy of Science. 

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