Surfing in on the Russian Gravy Train
Start talking about economic development and one can discern two main camps of North Korea analyst. There are those who think that economic development is perennially possible in Northeast Asia’s contemporary basket case, and so keep eyes and ears open wide for any sign whatsoever that change might be coming. This group often over-reads relatively minor shifts. The other group is absurdly over-confident that the regime in Pyongyang is so fearful of an economically empowered populace that it wouldn’t dream of threatening its iron-fisted grip on power by embracing any meaningful policy alterations. This group tends to dismiss signs of change as irrelevant fluff.
Get into the nitty gritty of on-the-ground economic reality, however, and the waters start to muddy awfully quickly. What did these two seemingly divergent camps make of the recently completed railway between Russia and North Korea? What of the MoU on joint rail-freight development that was signed between Russia and South Korea in November last year? And, finally, what about the fact that, on February 10, South Korea’s main state broadcaster KBS broadcasted an exclusive interview with the executive director of POSCO Corporate Strategic Planning Dept. I, Jeon Woo-sik, wherein he explained when, where, why, who, and how an onsite inspection team made up of 18 staff from three major Korean firms is poised, literally and figuratively, to descend upon Rajin for a bit of a look around?
As far as this author knows, the two camps haven’t made anything of the interview. In case they haven’t yet read it in Korean, the text has been translated into English below.
Ha Joon-soo, “나진~하산 프로젝트 현장 실사단 내일 방북” [Rajin-Khasan Project onsite inspection team to visit North Korea tomorrow], KBS News, February 10, 2014.
Q: What is the makeup of the inspection team?
There are five people going from POSCO [포스코]: a ports expert, an investment expert, and staff. There are six from Korail [코레일], another five from Hyundai Merchant Marine [현대상선], and two from the inspection company [실사법인], which makes eighteen. Aside from that, twenty staff from Russian Railways [러시아 철도공사] will accompany [the group]. Meetings with the North Korean side will be conducted in English and Russian, so the Russian side will bring interpreters.
Q: What is an “inspection company”?
Jeon: There is the need for personnel to expertly verify accounting and tax documentation, so we incorporated a body [for that].
Q: There will be no [South Korean] government officials with the group?
Jeon: None. This is a purely private undertaking, and it was decided that if government officials were included it could have a negative impact. Therefore, we formed the entire team from the private sector, and the government accepted this position.
Q: What is the team’s schedule?
Jeon: We minimized it as far as possible. Given that experts from each sector will be doing the inspecting, we decided that three days would be sufficient. Today [February 10] they departed for Vladivostok in Russia, and tomorrow morning [February 11] they will set off by special train. After completing the border formalities at Khasan on the Russia-DPRK border, we expect them to arrive in Rajin at around 12. Construction at Rajin Port is currently underway, so they will conduct visual inspections of the state of the port, whether pier construction is being done properly, and what the state of the Rajin-Khasan railway is. It is also expected that they will get additional information from the Russian side.
Q: What was done in advance to facilitate this?
Jeon: We applied for the visit in the middle of January, and document checks took about three weeks. The North Korean government signed off on the visit on February 5, and [the South Korean] government approved it on February 7.
Q: Can you give a concrete breakdown of what the team is going to do?
Jeon: The port and railway inspections will be divided into areas of expertise. More concretely: they will check the state of the rail track bed, the width of the track and the spaces between the rails, as well as signaling systems and stations. In the Russian documentation it says that Pier 3 is 600m long, but this must be verified, along with the depth of the water, whether it freezes in winter, the state of the mobile port cranes, whether it will be possible to use the pier over the long term, its strength, and how much investment is likely needed for dredging. Once that has been done, we’ll be able to roughly assess the investment cost on the Russian side.
Q: Is it right that, according to the Russian side, construction at Pier 3 will be complete at around the end of 2013?
Jeon: Port construction progress is currently at 90 percent. It’s winter now so construction isn’t possible, but it should be 100 percent complete during the next quarter. We’ll check on the construction of the port distribution terminal during these inspections. As it stands, coal from Siberia is what is coming in, so as long as there is storage for coal it is enough.
Q: Why do you need to perform in-situ checks?
Jeon: As you will be aware, the “Rajin-Khasan Project” is a cooperative one between North Korea and Russia. It’s an integrated port and rail freight business, and is worth a total of $340,000,000. Of this, North Korea has invested 30 percent and Russia 70 percent.
However, around half the Russian stake is supposed to be supplied indirectly by this consortium of Korean firms; yet even last November when a MoU was adopted between Russia and Korea, decisions were made based on documents from the Russian side. We have never seen for real how the construction is proceeding. How much should be invested can only be decided once the precise reality has been seen.
Q: What will happen once the inspection has been completed?
Jeon: We need to know the results of the inspection before we can decide that. Investment sums will be decided within this calendar year.
Q: So, when can we expect boats loaded with coal to come from Rajin down to Pohang and Busan [in South Korea]?
Jeon: Russian Far East ports are at saturation point dealing with Russia’s natural resources. The best thing would be for the freight headed for South Korea to be taken out and sent through Rajin instead. However, for a South Korean vessel to come and go from Rajin Port requires an authorization process. This part is linked to the 5.24 Measures, meaning that it would become possible more rapidly if the 5.24 Measures were lifted.
Source: Ha Joon-soo, “나진~하산 프로젝트 현장 실사단 내일 방북” [Rajin-Khasan Project onsite inspection team to visit North Korea tomorrow], KBS News, February 10, 2014. Translation by Christopher Green.
 The “May 24th Measures” are a package of unilateral sanctions on inter-Korean business deals implemented following the sinking of the ROK Navy corvette “Cheonan” by a North Korean torpedo on March 26, 2010.