Russia matters to make new trade route viable

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Fri, September 1, 2017 | 11:57

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Russia matters to make new trade route viable

Posted : 2014-11-30 17:23

Updated : 2014-11-30 20:00

Siberian bituminous coal is loaded onto a Chinese cargo ship in the North Korean port of Rajin, in this photo taken Thursday. The ship carrying 40,500 tons of coal arrived in South Korea's port city of Pohang Saturday.
/ Yonhap

Unloading of Siberian coal to begin today

By Kang Hyun-kyung

How do we know that a new trade route established to aid the export of Russia's natural resources to South Korea and China via a North Korean port won't undergo the same fate of the Gaesong Industrial Park?

Since it was established in 2004, the industrial complex intended to create economic synergy by teaming up South Korean capital with cheap North Korean labor has been under constant threat of closure whenever things have gone badly because of the standoff over North Korea's nuclear program.

In South Korea, there is optimism regarding the cost-effective trade route which completed a test run last week by successfully shipping 40,500 tons of Siberian bituminous coal to the South via North Korea's Rajin Port.

Due to North Korea, analysts warn, risks lurk on the new trade route which consists of a 54-kilometer land route between Russia's Khasan and North Korea's Rajin and a sea route between the North Korean port to South Korea's coastal cities.

But they say there is a role that Russia can play to reduce such risks because the country is serious about exporting its resources overseas and using the trilateral partnership to revitalize the poverty-stricken Russian Far East.

Choi Kyung-soo, a director at the North Korean Resources Institute in Seoul, says that a trilateral partnership tends to be less risky than a bilateral project such as the Gaesong Industrial Complex.

"There is a possibility that the North may try to use the trade route as a means to put pressure on the South when things go badly for them. But I think Russia won't sit idle if its economic interests are affected," he said.

Because there is a role that a third party can play, Choi says, the shipment of Siberian coal to South Korea via the North Korean port will be less risky than the Gaesong Project.

Choi said that North Korea will benefit a lot if the new trade route involving the three countries is widely used because the cash-strapped country will be able to earn money from those who use the port or its facilities.

"Plus, jobs will be created as the loading of coal and other resources would require workers."

On Thursday night, a Chinese cargo ship carrying the Siberian coal departed Rajin and arrived in waters off the South Korean coastal city of Pohang early Saturday morning.

Optimism

It was the first shipment of Siberian coal to South Korea via North Korea, signaling the beginning of tripartite trade.

Optimism is running high in the South.

A South Korean consortium of POSCO, Hyundai Merchant Marine and KORAIL, which are involved in the import of the Russian coal, expects nearly a 10 to 15 percent logistics costs cut through the new trade route, compared with the traditional ones.

On Saturday, KORAIL official Ji Yong-tae said that North Korean officials were very cooperative and that port infrastructure was much better than it was previously thought to be.

Ji, along with several other officials from the South Korean consortium, returned to Seoul Saturday after wrapping up their field trip to Rajin to take a first-hand look at the port facilities.

It remains to be seen whether the first successful test run will lead to an official contract with Russia and North Korea.

Some experts raised the possibility that the North may use trilateral trade as a bargaining chip in the event of a political standoff, as it has previously done so.

Last year, the reclusive state banned cross-border trips of South Korean workers to the Gaesong Industrial Complex for weeks, following its third nuclear test despite international protests.

South Korean investors, mostly small-and medium-sized companies, suffered from business losses as a result of the suspension of business operations in the North.

In a conversation with a South Korean journalist weeks ago, a country manger of a multinational company based in Seoul said that he would never consider doing business with North Korea under any circumstances.

Operating a business in a country like North Korea is simply too risky for any businesses because the regime is unpredictable and no one can rule out the possibility of business closure or production suspension against the investors' wishes, he said, asking for anonymity.

"Why would I invest in a country like North Korea?" he asked.

hkang@koreatimes.co.kr