Archive for the ‘Sea shipping’ Category

The 2015 UNSC Panel of Experts report published

Monday, February 23rd, 2015

The report is dated February 23, 2015 and you can download the PDF here.

Andrea Berger commented on the report in this article at 38 North.

Media coverage of the report has focused on two aspects: 1. North Korea has changed the name of the ships in its commercial fleet to avoid sanctions enforcement. 2. North Korean spies managed to infiltrate the UN World Food Program and UNESCO.

Here is Reuters on the report:

Exclusive: Sanctioned North Korea shipping firm still active, renamed ships – U.N. panel

A U.N.-blacklisted North Korean shipping company has renamed most of its vessels in a bid to disguise their origin and continues its illicit shipments in violation of United Nations sanctions, according to a U.N. experts report seen by Reuters on Wednesday.

The U.N. Security Council’s Panel of Experts on North Korea, which monitors implementation of sanctions on Pyongyang, also said in the 76-page report that North Korea “continued to defy Security Council resolutions by persisting with its nuclear and ballistic missile programs.”

North Korea is under United Nations sanctions because of its nuclear tests and missile launches. In addition to arms, Pyongyang is banned from importing and exporting nuclear and missile technology and is not allowed to import luxury goods.

The experts’ report also said the sanctions have not curbed food or humanitarian aid to the impoverished hermit state, but it recommended that the U.N. spell out which items for such use are exempt.

The council last July blacklisted shipping company Ocean Maritime Management Company (OMM) for arranging an illegal shipment on the Chong Chon Gang ship, which was seized in Panama and found to be carrying arms, including two MiG-21 jet fighters, hidden under thousands of tonnes of Cuban sugar.

“Following the designation of OMM … (North) Korea acted in order to evade sanctions by changing the registration and ownership of vessels controlled by the company,” the report said.

“Thus far, 13 of the 14 vessels controlled by OMM have been renamed, their ownership transferred to other single ship owner companies (with names derived from the ship’s new names) and vessel management transferred to two main companies,” it added.

The report said OMM worked with individuals and entities based in countries such as Brazil, China, Egypt, Greece, Japan, Malaysia, Peru, Russia, Singapore and Thailand.

The panel recommended that the council’s sanctions committee blacklist 34 OMM entities (shell companies), including Chongchongang Shipping Co, Amnokgang Shipping and Biryugang Shipping. It also recommended sanctioning OMM Vice President Choe Chol Ho, Chongchongang Shipping President Kim Ryong Chol and three Chongchongang directors.

It said that North Korean diplomats, officials and trade representatives played key roles in illegal weapons and missile deals. They often were involved in illegal funds transfers.

The panel also said North Korean intelligence agents aided the movement of money believed to be linked to weapons transactions.

The report said agents of the Reconnaissance General Bureau (RGB), North Korea’s main intelligence agency, had worked at international organizations and were using those positions to support activities aimed at skirting sanctions.

It cited as an example the French government’s decision to freeze assets of Kim Yong Nam, an RGB officer working under cover as an employee at UNESCO, the U.N. cultural and scientific organization in Paris, and his son and daughter. His son Kim Su Gwang, also an RGB officer, was working at the U.N. World Food Program.

The panel said Kim Young Nam’s daughter, Kim Su Gyong of the Korean United Development Bank, “was engaged in financial activities under false pretences in order to conceal the involvement of her country.”

The panel also opened its first inquiry into the use of drones. Between October 2013 and March 2014, South Korea found wreckage of three drones it determined were from North Korea and had been spying on military facilities.

The Security Council has banned the supply, sale or transfer of complete armed or surveillance drones with a range of at least 300 km (186 miles). The panel said it was unclear if the recovered drones were acquired abroad or made in North Korea.

EXEMPTIONS

The experts found “no incidents where bans imposed by the (U.N.) resolutions directly resulted in shortages of foodstuffs or other humanitarian aid.”

“National legislative or procedural steps taken by (U.N.) member states or private sector industry have been reported as prohibiting or delaying the passage of certain goods to (North Korea),” the report said. “It is sometimes difficult to distinguish these measures from United Nations sanctions.”

The U.N. Security Council says the sanctions are not intended to harm North Korean civilians, but there is no exemption mechanism. For that reason, the experts recommended that exemptions be proposed “provided that such items are confirmed to be solely for food, agricultural, medical or other humanitarian purposes.”

North Korea has said the sanctions are illegal and aimed at toppling the country’s reclusive government. A U.N. inquiry last year reported systematic torture, starvation and killings by the country’s leaders that are comparable to Nazi-era atrocities.

In the Associated Press:

UN: North Korean company renames ships to evade sanctions

A North Korean shipping company that famously tried to hide fighter jets under a cargo of sugar later sought to evade U.N. sanctions by renaming most of its vessels, a new report says.

The effort by Pyongyang-headquartered Ocean Maritime Management Company, Ltd. is detailed in the report by a panel of experts that monitors sanctions on North Korea. The report, obtained by The Associated Press, makes clear the challenge of keeping banned arms and luxury goods from a nuclear-armed country with a history of using front companies to duck detection.

The U.N. Security Council holds consultations Thursday on the report, which also says North Korea’s government persists with its nuclear and missile programs in defiance of council resolutions.

North Korea’s mission to the U.N. did not respond to a request for comment.

The council last year imposed sanctions on OMM after Panama in 2013 seized a ship it operated that carried undeclared military equipment from Cuba. Panamanian authorities found two Cuban fighter jets, missiles and live munitions beneath the Chong Chon Gang’s cargo of sugar.

The council’s sanctions committee said that violated a U.N. arms embargo imposed in response to North Korea’s nuclear and missile programs. At the time, U.S. Ambassador Samantha Power said that imposing a global asset freeze on OMM meant that the company would no longer be able to operate internationally.

But the new report says that in the months after the sanctions were imposed, 13 of the 14 ships controlled by OMM changed their owners and managers, “effectively erasing” the company from a database kept by the International Maritime Organization. Twelve of the ships “reportedly stayed, visited or were sighted near ports in foreign countries,” and none were frozen by member states as the panel of experts recommends.

The new report explores the shipping company’s global reach, using people and entities operating in at least 10 countries: Brazil, China, Egypt, Greece, Japan, Malaysia, Peru, Russia, Singapore and Thailand. The report recommends updating the sanctions list with 34 OMM entities and says all 14 vessels should be subject to sanctions.

No interdictions of the kind that Panama made in 2013 were reported in the period between Feb. 8 of last year and Feb. 5 of this year. But the new report warns that the panel of experts sees no evidence that North Korea “intends to cease prohibited activities.”

The report also says diplomats, officials and trade representatives of North Korea continue to “play key roles in facilitating the trade of prohibited items, including arms and related materiel and ballistic missile-related items.”

The panel of experts warns that some U.N. member states still are not implementing the council resolutions that are meant to keep North Korea from further violations.

North Korea also faces an embargo on luxury goods, but the report found that it managed to bring in luxury goods from multiple countries, including with the help of its diplomatic missions. Some items were for the country’s Masik Pass luxury ski report, which opened in 2013. China told the panel of experts that the ski lift equipment it provided was acceptable because “skiing is a popular sport for people” and that ski items are not specifically prohibited.

In another case, a yacht seen alongside leader Kim Jong Un in 2013 was sourced by the panel of experts to a British manufacturer, Princess Yachts International, which the panel said did not reply to a request for more information.

The panel also said it has opened its first investigation into a case involving North Korean drones after the wreckage of three drones was found in South Korea in late 2013 and 2014. The report says the drones had been used for reconnaissance over South Korean military facilities and that the drones contained components “sourced from at least six foreign countries.”

North Korea protests that the U.N. sanctions are harmful to its citizens, but the report says it has found no incidents where they “directly resulted in shortages of … humanitarian aid.” It does recommend that the sanctions committee propose exemptions for purely food, medical or other humanitarian needs.

Here is more in the Telegraph.

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Rason Port gets competition from Zarubino Port

Thursday, September 11th, 2014

Zarubino-port

Pictured above (Google Earth) the relative locations of Rason and Zarubino Ports

According to Port Technology International:

China and Russia are to join forces and morph Russia’s Zarubino Port into one of the biggest ports in northeast Asia, according to the Chinese People’s Daily.

Zarubino Port is at the far south-eastern tip of Russia and a stones throw from North Korea, and only 18km from China.

North-east China’s Jilin province and Russia’s Summa Group reportedly signed a joint-agreement concerning the rejuvenation of the port at the fourth Conference on Interaction and Confidence-Building Measures in Asia (CICA), in Shanghai in May, 2014.

It is planned that the Zarubino Port will have the ability to handle 60 million tonnes of cargo once construction is completed.

ECNS, an English-language Chinese news source, reported a Summa deputy president as stating the planned port will be multifunctional, and is intended to “hugely benefit China and Russia”.

The port will be used to serve as a key port in ensuring the security of food provisions.

Read more at Voice of America.

Zarubina port is only 80km (directly) north-east of Rason. It will be interesting to see what kind of effect this project will have on development at Rason.

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Rajin (Rason) port 3 open for business

Friday, July 18th, 2014

According to KCNA:

Wharf No. 3 of Rajin Port Goes Operational

Rason, July 18, 2014 20:13 KST (KCNA) — Wharf No. 3 of Rajin Port has been built with success in the DPRK.

The building of the wharf pursuant to the plan for cooperation between the DPRK and Russia provided another foundation for making a positive contribution to boosting the friendly and cooperative relations between the two countries and economic and trade relations among countries of Europe and Northeast Asia.

An inaugural ceremony took place in Rason City Friday.

Present there were Jon Kil Su, minister of Railways, officials concerned and working people in the city.

Also present there were Vladimir Yakunin, president of the Russian Railways Company, Yury Viktorovich Bochkarev, consul general of the Russian Federation in Chongjin, those concerned of railways and other Russian guests and staff members of foreign embassies in the DPRK.

Vladimir Yakunin in a speech said he was pleased with the completion of the wharf.

The wharf is capable of loading and unloading millions of tons of coal, he said, expressing belief that such joint work would not only develop the bilateral cooperation but promote friendship and mutual understanding between the two countries.

Jon Kil Su said in his speech that the successful reconstruction of the Rajin-Khasan railway section and the completion of Wharf No. 3 of Rajin Port are precious products of the vitality of the Moscow Declaration signed by leader Kim Jong Il and President V. V. Putin. He noted that the transport channel newly provided in the spirit of friendship and cooperation between the two peoples would satisfactorily play the role of a friendship bridge linking Europe and Northeast Asia and, through this, the international position of the Rason Economic and Trade Zone would be further enhanced.

Then followed congratulatory speeches.

A reception was given on the same day.

According to ITAR-TASS:

A new Russian-North Korean terminal was commissioned on Friday in Rajin, which is the major seaport of the North Korean Rason trade and economic zone located in the northeast of the republic. Thus, the pilot part of the project aimed at the reconstruction of the Trans-Korean railway from Russia’s Hasan to the seaport of Rajinis over. Relevant agreement of the heads of Russian, North and South Korean railway authorities was signed in Russia’s Siberian city of Irkutsk in 2006.

Russian Railways’ (RZD) subsidiary, RZD Trade House, and the Rajin port had established the joint venture Rason Con Trans in order to carry out the modernization process. The cargo traffic capacity of the new high-tech multi-purpose facility is about five million tonnes a year. The initial stage of the terminal operation envisions supplies of coal and other bulky goods towards the port. Alongside with cargo transshipment and storage, the terminal makes it possible to organize coal magnetic cleaning and coal separating.

“Today, we are eyeing the loading of the first ship with Russia-mined coal,” RZD President Vladimir Yakunin told the terminal commissioning ceremony. “We are interested in bigger amounts of cargoes in the terminal and higher number of vessels, which will represent the whole world. The launching of the terminal is expected to be fruitful and beneficial not only for the economy of North Korea, but also business communities of neighbor states.”

Jointly with representatives from Russia and North Korea, businessmen from South Korea were also attending the ceremony.

This Russian source had a good summary of events leading up to the opening (Translated by Google):

The official ceremony is scheduled for July 18 in Rajin, which is considered the main port of the SRE. Investment in the project is mainly carried out by the Russian side.The volume of transshipment terminal at the first stage is planned at 4-5 million tons, according to ITAR-TASS.

Initially, the terminal was planned for container transport, but in agreement with the leadership of North Korea until it will be used for the carriage of the Russian coal. In the future, is expected to increase traffic and expand the range of goods.

Agreement to begin the reconstruction of the railway line from the Russian station to Hassan and the port of Rajin as a pilot project to restore the Trans-Korean Railway was reached in 2006. The project started in October 2008, when an agreement was signed between the “Russian Railways” and the Ministry of Railway Transport of the DPRK to cooperate in its implementation. The project is implemented by the joint venture “RasonKonTrans”, created in the same year, with the share of JSC “RZD Trading House” (70%) and the port of Rajin (30%).

In October 2011, a team of machinists Far Eastern Railways of Russia led a demonstration container train in Rajin, opening cargo traffic between the two countries. To control the movement of trains on the line Hasan – Rajin, a special control center with the participation of specialists “RasonKonTrans” and North Korean shipping company “Donghae”.

34 specialists from the DPRK have been trained in the training centers of the Far Eastern Railway.

In the future, when the message will be set up all over trnskoreyskoy magitrali – from the South Korean port of Pusan ​​through Korea to Russia, will be able to refocus on the Russian Trans-Siberian significant portion of goods that are currently going by sea from South Korea to Europe.

According to experts, these advantages have Rajin – ice-free port on the eastern coast of North Korea with the developed infrastructure, which uses Russian standard gauge with a high degree of security for shippers and benefits for entrepreneurs.

Additional information:

1. The Russia-Rason Railway that services the port was opened in September 2013.

2. South Korea is also interested in the Rajin port.

3. There has been some confusion on the legal status of the various piers at Rajin. I help shed some light on the confusion here.

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Who uses Rason’s ports? Lease confusion explored (UPDATED)

Wednesday, May 7th, 2014

UPDATE 2 (2014-5-7): The exact legal status of some of the ports remains a mystery. I have attempted to clarify and point out some of the remaining areas of confusion below.

Rason-port-9-2013

Pictured above (Google Earth): A 2013-9-14 satellite image of Rason Piers 1 and 2. Pier 1 (Top) is used by the Chinese. The Royale Star is docked at Pier 2.

When Jang Song-thaek was purged, among the laundry list of offenses he was alleged to have committed against the regime was this:

Jang made no scruple of committing such act of treachery in May last as selling off the land of the Rason economic and trade zone to a foreign country for a period of five decades under the pretext of paying those debts.

This phrase had Pyongyang watchers abuzz over whether Chinese contracts in Rason were in any danger of being violated by the North Korean government. Of course it was immediately unclear what enterprise(s) would be affected since we are all unaware of any significant deals reached in May of 2013.

A recent statement by a  North Korean official in the Hong Kong media has, however, raised the issue of contract credibility in the DPRK yet again.

According to Yonhap:

Chinese companies have not leased piers at a port of North Korea’s free trade zone, a Pyongyang official has told Hong Kong media, raising speculation that the shock execution of the North Korean leader’s uncle might have soured business ties with its key ally.

China reportedly agreed to invest about US$3 billion in developing the free trade zone in North Korea’s northern tip of Rason, formerly known as Rajin and Sonbong, in late 2011. The special trade zone sits across the border from China’s northeastern Jilin province.

There have been media reports that Chinese companies have leased two piers at the Rason port, but Kim Chun-il, a division chief of the port’s foreign business bureau, denied such reports during an interview with Hong Kong-based Phoenix TV.

Asked by a Phoenix TV journalist whether China won the right to exclusively use two piers at the port, Kim replied in Korean, “There are no piers that are specially used by the Chinese side.”

“They (Chinese people) have said so, but we have never formally rented out Pier 1 and Pier 2 to them,” Kim said.

The interview was made during a 72-minute special TV program on the Rason trade zone, which was aired on April 19. The program’s video footage can be seen on the website of Phoenix TV.

Kim said that Russia leased the Pier 3 at the port, adding that North Korea plans to modernize the two piers on its own.

The Chinese media did indeed claim at least once (see here) that they were “using” Piers 1 and 2. And Dr. Bernhard Seliger told us back in September 2012 that the Chinese were using the port, although no lease was signed [see below].

However, it is not true that the North Koreans have never announced an agreement on Pier 1 at Rason. I posted an article (back in March of this year) in which Choe Hyon Chol, section chief of the new State economic Development Commission, stated the following:

The Rajin Port, a transit trade port, is the hub of international cargo transit transportation and transport of exports and imports of entrepreneurs who invested in the zone.

The port has assignments to transport marine products for export from the East Sea of Korea and every kind of cargoes from and to northeast area of China and Far East Region of Russia.

The Rajin Port consists of three wharves; wharf No. 1 is designed to be renovated and operated by China Dalian Chuang Li Co., Ltd. and wharf No.3 by Rason International Container Transport J. V. Company to be set up according to the contract with Russian Rail Trade Co., Ltd.

I cannot imagine that a Chinese company is going to renovate and operate the pier without a clear contract. Of course the status of that contract is now called into question. Has the Chinese firm pulled out?  Have the North Koreans canceled the contract? Are North Korean individuals from different agencies just not on the same page? Who knows?

Still no word on Pier No. 2.

Great recent photos of Rason port by Ray Cunningham here.

You can read the Yonhap story here:
N. Korean official says no piers for China at special trade zone
Yonhap
2014-5-2

UPDATE 1 (2012-9-5): It appears the information in the original post is out-of-date now. So here is an update:

Pictured Above (Google Earth): Rajin Port

Dr. Bernhard Seliger of the Hanns Seidel Foundation writes in with an update on the Rajin Port:

The 80 year old port has three piers, of which the No. 3 pier is used by the Russians. They have a long-term lease (50 years starting in 2008) and while they are currently doing some work there, it is not being used for exports.

China is interested in using Pier No.1 (where it rents a warehouse to store coal) and Pier No. 2 (currently in use by the Koreans). Plans have also been expressed (now cancelled) to build 2 new piers (No. 4 and 5) (See here). For many years the Chinese and North Korean governments have negotiated a pier rental agreement, but for now there is no concrete result–though at numerous times it has been maintained that China already rented the port. What exactly the problems are is not known. For now China uses the port to bring coal from the northernmost Heilongang Province to southern China via a sea route, an event which took place twice this year.

Theoretically, the port as a handling capacity of 3 million sq. tons, however the maximum real handling was 800.000 tons in 1979, while last year it was 200.000 tons. The depth of the harbor is 9 m.

In a report from Xinhua (2012-8-28), the Chinese assert they are using ports 1 and 2.

China […] was using No. 1 and 2 piers, while Russia had leased No. 3 pier, said an official in charge of foreign affairs of the port.

So there is some discrepancy between the Chinese account and Dr. Seliger.

ORIGINAL POST (2010-5-23): What are the three piers at Rason used for? 

rajin-ports-thumb.jpg

The City of Rajin (Rason) has three ports (pictured above–click for large version).  According to a 1998 UNDP report, Pier No. 1 (on the right) was known as the “Russian-Japanese Bulk Fertilizer Terminal. It has now been leased by the Chinese. Port No. 3 (left) was formerly known as the Rajin Alumina Terminal.  This is now leased by the Russians (see here). A fellow North Korea-watcher tells me that Pier No. 2 is reserved for the North Koreans.

KBS recently ran a video on recent changes in Rason. I have uploaded the segment to YouTube (Apologies to readers in China).  You can see the video here.

On a side note, if anyone in China has the time and savvy to rip videos from my YouTube account and re-post them on Youku please go for it.

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Russia and DPRK discuss economic opportunities

Saturday, March 29th, 2014

What are the opportunities? Rason port, Iron Silk Road (Rail), Kaesong Industrial Complex, gas pipeline.

According to RIA Novosti:

Russia and North Korea have signed a new protocol to transition to using the ruble for payments between the two countries as part of an effort to boost annual bilateral trade to $1 billion by 2020, Russia’s Far East Development Ministry said Friday.

The announcement came as Russian officials have expressed a desire to explore new markets for the country’s businesses, following the introduction of sanctions by the West in reaction to Moscow’s stance over Crimea. Russian leaders have simultaneously reassured international investors the country remains open for business, and there are no plans to restrict international commerce.

The protocol announced Friday came following a visit of a Russian delegation to the Asian country for a meeting of a standing bilateral commission, timed to mark the 65th anniversary of a cooperation agreement between the Soviet Union and North Korea.

The parties agreed to move towards settling payments in rubles as well as adopting further measures to boost bilateral trade, including easing visa procedures and providing for Russian access to proposed special economic zones in the country, the ministry’s statement said.

The ministry reaffirmed the countries’ mutual interest in joint projects with South Korea, including international connections for railways [Iron Silk Road], gas pipelines and power lines.

The Russian delegation also proposed the entry of Russian businesses into the Kaesong Industrial Park, a special economic zone in North Korea just north of Seoul where South Korean companies are allowed to employ northern workers.

The two sides identified areas for further cooperation, including a transshipment complex at the port of Rason and technical cooperation for the modernization of North Korea’s mining sector, automobile industry and electric power plants.

According to the statement, during the talks Russian Far East Development Minister Alexander Galushka emphasized that achieving such goals would only be possible if stability is maintained on the Korean peninsula.

The next meeting of the bilateral commission is scheduled for June in Russia’s far eastern Vladivostok.

Here is what Yonhap reports:

North Korea and Russia have agreed to boost economic ties by pushing for trilateral projects involving South Korea, including a plan to support Russian companies’ entry into an inter-Korean industrial complex, a media report said Saturday.

The agreement between the two was made earlier this week when Russia’s Far East Development Minister Alexander Galushka visited the North for a five-day run until Friday to explore ways to boost bilateral economic cooperation, according to the Russian news agency RIA Novosti.

“The Russian delegation proposed the entry of Russian businesses into the Kaesong Industrial Park, a special economic zone in North Korea just north of Seoul where South Korean companies are allowed to employ northern workers,” the RIA Novosti reported, citing the ministry.

Officials of Seoul’s unification ministry, which handles inter-Korean affairs, welcomed the agreement between the North and Russia, while stressing the importance of Russia’s prior consultation with the South.

“Russian companies’ making inroads into the Kaesong park is desirable in terms of the internationalization of the complex … It would also prevent the North from unilaterally reversing its agreement with Seoul over the Kaeesong operation,” the ministry official said, requesting anonymity.

Internationalization of the enclave, a symbol of inter-Korean detente, is one of the key topics for inter-Korean meetings aimed at ensuring its normal operations and further invigorating the complex. The Kaesong park resumed operations in September, more than five months after the North unilaterally closed it in anger over Seoul-Washington joint military exercises.

“But it is crucial for Russia to discuss the matter with our side first as it is basically operated by the South Korean authorities,” he added.

A handful of companies from China, Australia and Germany have so far expressed interests in making an investment in the Kaesong complex, prompting the Seoul government to review holding joint presentation sessions with the North to lure investors from overseas, according to another ministry official.

Here is additional information from Yonhap on recent shipments from Russia to the DPRK:

Russia exported US$21.16 million’s worth of jib cranes, machinery used mostly for cargo handling at ports, to North Korea last year, accounting for nearly 22 percent of its total exports to the North, according to the report by the Korea Trade-Investment Promotion Agency (KOTRA). The amount surpasses that of Russia’s traditional export goods such as coal, petroleum and bituminous oil.

There were no records of the machines being exported to North Korea the year before, with the 2011 amount standing at $139,000.

North Korea and Russia maintain economic relations that include a project that would make North Korea’s northeastern port city of Rajin a logistics hub by connecting it to Russia’s Trans-Siberian Railway. North Korea is said to have agreed to a long-term lease of the No. 3 dock at Rajin port to Russia and that it is modernizing facilities there. The cranes may be for such modernization efforts, the KOTRA report said.

Also noteworthy is Russia’s exports of ambulances to the North, amounting to approximately 10.1 billion won ($9.45 million), the fourth largest in terms of value. Ambulances are a relatively new product on the trade list.

KCNA’s reporting of the meeting was much more muted:

DPRK Premier Meets Minister of Development of Far East of Russia

Pyongyang, March 26 (KCNA) — Pak Pong Ju, premier of the DPRK Cabinet, met Alexandr Galushka, minister of the Development of Far East of Russia who is chairman of the Russian side to the Inter-governmental Committee for Cooperation in Trade, Economy, Science and Technology between the DPRK and Russia, and his party.

He had a friendly talk with them who paid a courtesy call on him at the Mansudae Assembly Hall on Wednesday.

Minutes of Talks between Governments of DPRK, Russia Signed

Pyongyang, March 26 (KCNA) — Minutes of talks on cooperation in trade, economy, science and technology between the governments of the DPRK and Russia were signed here Wednesday.

Present at the signing ceremony were Ri Ryong Nam, minister of Foreign Trade who is chairman of the DPRK side to the Inter-governmental Committee for Cooperation in Trade, Economy, Science and Technology between the DPRK and Russia, and officials concerned, Alexandr Galushka, minister for the Development of Far East who is chairman of the Russian side to the Inter-governmental Committee, and his party and Alexandr Timonin, Russian ambassador to the DPRK.

Ri Ryong Nam and Alexandr Galushka signed the minutes of the talks.

Read the full story here:
Russia, North Korea Agree to Settle Payments in Rubles in Trade Pact
RIA Novosti
2014-3-28

N. Korea, Russia to discuss supporting Moscow firms’ advance into Kaesong park
Yonhap
2014-3-29

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Choe Hyon Chol on Rason development

Wednesday, March 26th, 2014

According to Naenara, Choe Hyon Chol is the section chief of the State Economic Development Commission (SEDC). He has previously been identified as a director of the Korean Association of Economic Development. In a recent interview with Naenara, he discusses the benefits of investing in the Rason Economic and Trade Zone.

Before getting to the interview, however, it is worth noting that the Rason Economic and Trade Zone was set up before the creation of the State Economic Development Commission and it was “controlled” by Jang Song-thaek. Since Jang’s purge, it appears that Rason (and probably Hwanggumphyong) have been moved to the SEDC’s portfolio–that is, under the control of the cabinet.

Here is the interview:

Reporter: Would you please give me a briefing on the Rason Economic and Trade Zone that is now under development.

Choe: As you know, northeast Asia becomes one of the global development regions with a great potentiality, for the countries in this region have comparative advantages in respect of availability of production factors such as economic conditions, natural resources and economic and trade relations.

The Rason Economic and Trade Zone, situated on the western shore of the lower Tuman River in the northeastern part of Korea, borders on China and Russia, and Japan with the sea on the east. Its geographical location offers immense economic and traffic advantages as a transportation hub as well as a bridgehead of the continent.

Occupying an area of 470 km2, it has Rajin Port with an annual handling capacity of 3 million tons of cargoes, Sonbong Port with a handling capacity of 2 million tons of oil and Ungsang Port with a handling capacity of 600 000 m3 of timbre. The sea off the ports is deep and not frozen even in winter.

Rajin Port, in particular, has favourable conditions for creating cargo handling capacity of over 100 million tons without building a breakwater thanks to the Taecho and Socho islands in front of it.

The zone has also advantageous traffic connections with neighbouring countries.

Rajin-Wonjong class-B road (51 km), Rajin Port-Tumen railway (158 km) and Rajin Port-Khasan railway (51 km) are under construction or nearing completion.

The Rason Economic and Trade Zone is endowed with abundant tourist resources such as beautiful seascape, lake and bathing resorts, and 20-odd islands including Pipha, Taecho, Socho and Al islands.

In view of these favourable geopolitical and economic conditions, the DPRK government declared Rason city as an economic and trade zone on December 28, 1991 and held an international investment seminar with participation of entrepreneurs from 27 countries under the sponsorship of the UNDP and UNIDO in September 1996. It also raised Rason city to the status of special city on January 4, 2010 and agreed with China on the issue of joint development and management of Rason Economic and Trade Zone and Hwanggumphyong-Wihwado Economic Zone in May 2010.

In November 2010 the DPRK and the Chinese governments signed the Agreement on Joint Development and Management of Rason Economic and Trade Zone and Hwanggumphyong-Wihwado Economic Zone and organized the DPRK-China Joint Guidance Committee. The second session of the committee was held in June 2011 in Yanji, Jilin Province, China and its third session in August 2012 in Beijing. Besides, both governments concluded the agreement on establishment and operation of management committee for Rason Economic and Trade Zone, the master plan for DPRK-China joint development of the zone, the framework agreements on investment in ports, industrial districts and power transmission within the zone and investment and cooperation for construction of a new border bridge between Wonjong and Quanhe, the agreements on investment and cooperation for a high-efficiency agricultural model district and investment and cooperation for building-materials industry and the master plans for Sonbong-Paekhak industrial district and Rajin port industrial district.

The development of the zone in which a hundred and scores of businesses from different countries of the world are now active is in its initial stage but the number of potential investors with exceptional interests in the zone is increasing as days go by.

Reporter: How is the present state and prospect of the zone?

Choe: I shall begin with the progress of city construction.

The city is divided into residential quarters, industrial district and traffic junction district. The residential quarters consist of economic and trade area and peripheral area; the economic and trade area is subdivided into Rajin, Sonbong, Ungsang, Kulpho-Uam and Chonghak areas and the peripheral area into Tumangang, Hongui, Wonjong and Huchang areas. The industrial area embraces Changphyong, Yokjon, Chonggye, Sinhung, Tongmyong, Namsan and Andong areas.

The traffic junction district includes Rajin, Sonbong and Ungsang ports, Rajin, Ungra and Sonbong railway stations and Chongjin-Wonjong and Chongjin-Tuman River roads.

The Rajin Port, a transit trade port, is the hub of international cargo transit transportation and transport of exports and imports of entrepreneurs who invested in the zone.

The port has assignments to transport marine products for export from the East Sea of Korea and every kind of cargoes from and to northeast area of China and Far East Region of Russia.

The Rajin Port consists of three wharves; wharf No. 1 is designed to be renovated and operated by China Dalian Chuang Li Co., Ltd. and wharf No.3 by Rason International Container Transport J. V. Company to be set up according to the contract with Russian Rail Trade Co., Ltd.

The project of Rajin-Wonjong road started in April 2011 and completed in October 2012, and the power transmission project is now under way.

Currently, three railways run through Rason.

In the whole section of the Pyongyang-Tumangang line, standard gauge track

(1,435 mm) is laid from Pyongyang to Rajin and combined-gauge track with standard gauge and broad gauge (1 520 mm) from Rajin Railway Station to Tumangang Railway Staion, leading to Khasan Railway Station.

The updating project of Rajin-Namyang railway has been agreed with China in October 2012 and the construction of Sonbong-Paekhak industrial district, building materials industrial district, high-efficiency agricultural model district and Wonjong-Quanhe border bridge is in full swing.

When the construction projects of power line, railways, ports and border bridge are brought to completion, the Rason Economic and Trade Zone will be turned into a promising economic and trade zone of the world standard.

Next, tourism is booming in this zone.

Rason has eight bays and 21 islands, big and small.

There are Pipha, Chujin and Kalum Headland tourist attractions furnished with hotels, restaurants and sea bathing grounds along the coast.

Rason abounds in natural monuments, mineral water, spring water and marine products, and sea birds and coastal scenery strike tourists with admiration.

As mentioned above, the Rason Economic and Trade Zone is a special economic zone equipped with all conditions favourable for preferential trade and investment, transit transportation, tourism and financial and service businesses.

The DPRK government is constantly encouraging foreign investors to invest in intermediate trade, industry, agriculture, construction, transport, communications, science and technology, tourism, service and finance.

Today the development prospect of the zone is optimistic.

We are looking forward to an active investment in development projects of the zone, promising high profit with small investment.

Reporter: Thank you for kind explanation.

State Economic Development Commission of the DPRK

PDF of the interview here.

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North Korean oil tanker in Lybia (UPDATED)

Thursday, March 13th, 2014

UPDATE 4 (2014-3-17): US Navy Seals have boarded the Morning Glory.According to the BBC:

The raid by Navy Seals took place in international waters south of Cyprus, said spokesman Rear Adm John Kirby.

The Morning Glory’s evasion of a naval blockade at the eastern port of Sidra prompted Libya’s parliament to sack Prime Minister Ali Zeidan last week.

The oil terminal has been under the control of militia wanting autonomy for eastern Libya since July 2013.

Meanwhile, there has been a deadly attack on the barracks in the main eastern city of Benghazi.

This was their first attempt to export oil from rebel-held areas. It is not clear where the tanker was headed.

Adm Kirby said the operation had been authorised by President Barack Obama and that no-one had been hurt.

“The Morning Glory is carrying a cargo of oil owned by the Libyan government National Oil Company. The ship and its cargo were illicitly obtained,” he said, adding that it would now be returned to a Libyan port.

The vessel was flagged in North Korea but officials in Pyongyang said it had been deregistered because of the incident.

It was said to have been operated by an Egyptian company.

More in the Washington Post here.

See Marcus Noland’s comments here.

UPDATE 3 (2014-3-13): Morning Glory is on the run! According to The Diplomat:

…The Libyan government didn’t take kindly to this and threatened to attack the tanker, threatening airstrikes against it. Eventually, the tanker was intercepted and taken to Misrata where it was held by Libyan warships.

Remarkably, the North Korean tanker managed to escape its capture by the Libyan fleet in the middle of the night. It made its escape when the weather forced the smaller Libyan warships and patrol boats to sail close to the coast, leaving a gap in the convoy guarding the tanker. The Morning Glory made a run for the open seas and is now confirmed to be back in international waters according to Mohammad Hitab a spokesman for Libya’s al-Waha Oil Company, the state-run company running the Es Sider port.

It remains unknown the extent to which North Korea is communicating with Libya’s federalist rebels. In the case of the oil sale, the rebels were looking for buyers willing to purchase risky oil at rates far below the asking market price. Given North Korea’s energy situation, it appeared to be one of the few buyers interested in the deal. A report from the Libya Herald earlier this week noted that members of the federalist rebels were spotted on board the Morning Glory prior to its attempted departure from Es Sider port.

The tanker’s escape resulted in a no confidence vote on Prime Minister Ali Zeidan’s leadership in Libya. Zeidan lost the vote and had his travel barred. Libyan Defense Minister Abdallah al-Thinni was sworn in on Tuesday evening, according to Reuters.

The United States Department of State issued a statement where it said it was “deeply concerned by reports that a vessel sailing under the name Morning Glory is loading a cargo of illicitly obtained oil at the Libyan port of As-Sidra.” The statement does not mention North Korea but notes that the Morning Glory‘s ”action is counter to law and amounts to theft from the Libyan people.” The Italian Navy had reportedly assisted the Libyans in intercepting the Morning Glory but has since withdrawn from attempting to prevent the ship from leaving the Mediterranean.

UPDATE 2 (2014-3-12): Here is the full statement from KCNA on the tanker:

Spokesman for Maritime Administration of DPRK on “Oil Tanker Incident” in Libya

Pyongyang, March 12 (KCNA) — A spokesman for the Maritime Administration of the DPRK Wednesday gave the following answer to the question raised by KCNA in connection with the recent DPRK-flagged “oil tanker incident” which occurred in Libya:

On March 8 the government of Libya informed the DPRK of the fact that the DPRK-flagged oil tanker Morning Glory made an oil contract with an individual armed group in Libya and illegally entered a port under the control of the group in the eastern part of Libya, and urged the DPRK to take a necessary measure for settling it through a formal channel.

As far as the oil tanker is concerned, it is a ship run by the Golden East Logistics Company in Alexandria, Egypt and is allowed to temporarily use the DPRK flag for six months in accordance with the contract made by the company with the DPRK at the end of February.

Right after being informed of the fact by the Libyan side, the DPRK strongly blamed the company side for the violation of the contract and demanded it let the ship leave the port at once without loading oil.

In addition to it, the DPRK formally notified the Libyan government and the International Maritime Organization that it cancelled and deleted the ship’s DPRK registry and invalidated all the certificates as the ship violated the DPRK’s law on the registry of ships and the contract that prohibited it from transporting contraband cargo and entering the warring, dispute-torn or natural disaster-affected areas.

Therefore, the ship has nothing to do with the DPRK at present and it has no responsibility whatsoever as regards the ship.

What matters is that some foreign media are making much fuss, deliberately linking the case with the DPRK, claiming that “the north Korean ship tried to purchase oil from Libya in an illegal manner” and “the government force of Libya opened fire on the north Korean flagged oil tanker.”

Some forces are misleading the public opinion, persistently linking the issue with the DPRK. This is obviously aimed at achieving a sinister political purpose to tarnish its image.

They should clearly know that with neither false propaganda nor mud-slinging can they damage the image of the dignified DPRK.

The AP reports on proof the DPRK provided to the western media to back up its claims:

North Korea offers its flag to foreign-owned ships in the same way as a number of other countries do.

Jon provided a document he said was the official deletion of the Morning Glory from the Maritime Administration’s registry. He also showed email correspondence he said was from IHS Maritime in London, a company that manages shipping information, that purportedly acknowledged the deletion of a vessel from the North Korean registry.

UPDATE 1 (2014-3-12): The DPRK has denied it owns the ship. According to the Wall Street Journal:

North Korea denied on Thursday it was illegally exporting oil from rebel-controlled eastern Libya, claiming that an Egyptian company was operating a North Korean flagged oil tanker in the center of an armed standoff since Saturday.

North Korea said it had revoked the registry of the tanker, named “Morning Glory,” and demanded that Alexandria-based Golden East Logistics Company leave al-Sidra port without loading oil.

The tanker, carrying at least 234,000 barrels of crude oil, sailed from a rebel-controlled port into international waters on Tuesday.

A contract signed by North Korea with the Egyptian company prohibits the tanker from transporting contraband cargo and entering war or disaster zones, North Korea said through a report in its state media.

“The ship has nothing to do with the DPRK at present and it (North Korea) has no responsibility whatsoever as regards the ship,” the report said, using the abbreviation of country’s official name Democratic People’s Republic of Korea.

The Golden East Logistics Company couldn’t be immediately reached for comment.

The presence of a North Korean-flagged vessel in the Mediterranean is very unusual, although the country has been involved in trading arms in the region. Cheong Seong-chang, a senior analyst at Seoul-based think tank Sejong Institute, said the rebels may have offered oil to North Korea at a fraction of market prices.

ORIGINAL POST (2014-3-6): According to IBT:

A North Korean oil tanker has tried to dock at Libya’s Es-Sider port which has been seized by armed protesters, Reuters reports.

It has not yet been confirmed whether the tanker wanted to take oil from the protesters, who have threatened to sell it independently unless they get political autonomy from Tripoli and a greater share of oil revenues, according to Libyan officials.

“The tanker came to Es-Sider but did not load oil,” said an official at the state-owned Waha Oil Co, which operates the port and connecting oilfields.

An official at National Oil Corp (NOC), which owns Waha, said he did not know whether the protesters, led by former militia leader Ibrahim Jathran, had tried to attract buyers with the tanker but said: “We know they have been trying to sell oil.”

It is extremely unusual for a North Korean-flagged oil tanker to operate in the Mediterranean region, shipping sources said.

Jathran’s group seized three oil ports which accounted for 600,000 barrels per day of export, before the protests started in 2013.

The Libyan government has tried to end the protests but little progress has been made so far.

Libya’s defence minister held talks with protesters blocking the 340,000-bpd El Sharara oilfield in the south, but NOC has not confirmed whether it will reopen in the near future.

The strikers are also demanding national identity cards and a local council; the ministers have promised to meet the requests.

Jathran’s group declined to comment.

The Libyan navy fired on a Maltese-flagged tanker which allegedly tried to load oil from the protesters in the port in January.

Libya’s oil output has fallen to little over 200,000 bpd from 1.4 million bpd in July when protests started across the country.

“The financial situation of the government is difficult,” Culture Minister Habib al-Amin, who acts as a government spokesman, said in February.

“Some ministries have been unable to pay for expenditures due to a lack of budget and liquidity.”

Read the full story here:
Libya: North Korea Oil Tanker Tries to Dock at Seized Es-Sider Oil Port
International Business Times
Ludovica Iaccino
2014-3-6

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DPRK as e-waste conduit

Thursday, March 6th, 2014

According to Bloomberg:

How did North Korea become the conduit by which thousands of tons of old junk moved from the developed world into China’s bustling e-waste recycling industry?

As with any smuggling story, the tale starts with a prohibition. In this case, Chinese laws and regulations prohibit e-waste — most commonly understood as old, non-working electronics like laptops, monitors and mobile phones — from being imported into the country. The reasons are several, including a government interest in keeping used foreign goods from competing against new ones, and environmental concerns about how some of those goods are recycled. Nevertheless, China’s national-level environmental and customs authorities have long struggled to maintain those prohibitions against local ports and authorities — especially in south China — who view e-waste recycling as a good source of jobs, tax revenue, and used components to drive local industry. Of the several conduits through which e-waste has traditionally been smuggled, the most common and long-standing was over the Hong Kong-China border.

That all changed in February 2013 when — for reasons that are still unclear — Beijing announced “Green Fence,” a high-level crackdown on the import of prohibited waste and recycling exports, including old electronics. Nonetheless, here and there, imported old electronics still turned up in Chinese recycling facilities (I personally saw them).

The likely means, as described in state media after the North Korea bust, was convoluted. A Hong Kong “gang” allegedly received containers of used electronics from abroad. They arranged for them to be placed them on smaller ships bound for a “country in Northeast Asia.” The culprit’s identity is clear from the awkward phrasing. Criticism of North Korea in the Chinese press is exceedingly rare and -– needless to say — connecting the country to an e-waste smuggling ring qualifies as criticism. Were the country Japan, or even South Korea, it would have been named.

In fact, North Korea has long been rumored to be an e-waste recycling center. Since January 2008 a Chinese company based in Liaoning Province along the border has advertised for scrap to feed its e-waste recycling operations in North Korea itself. The facilities are located, according to the ad, in the port of Nanpo, and “take advantage of North Korea’s environmental policies and inexpensive labor resources.” There, the ad promises, prohibited e-waste can be dismantled and transformed into a product acceptable for export to China.

The smuggling ring was allegedly doing something similar, although its “transformed” e-waste clearly did not meet environmental standards. In North Korea the bulky e-waste was dismantled (steel cases would be removed from old desktop PCs, for example), segregated into marketable components like computer chips for re-use, and then sent to Dandong, a Chinese city and port on the Yalu River, directly across from North Korea. From there, the goods were trucked south, to recycling and re-use centers in Guangdong Province, a straight-line distance of roughly 1,800 miles.

Read the full story here:
Did North Korea Recycle Your Laptop?
Bloomberg
Adam Minter
2014-3-6

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Iron Silk Road: South Korean involvement in Rason (UPDATED 2014)

Wednesday, March 5th, 2014

UPDATE 16 (2014-12-7): According to Yonhap, KEPCO is mulling participation in the Rajin-Khasan project:

The five KEPCO units, led by Korea Midland Power Corp., are reviewing the economic feasibility of the project. “But it is hard to say we will participate in the project as nothing has yet been decided,” said an official at KEPCO.

Last month, a group of officials from the units, along with government officials, visited the North’s Rajin port to assess the viability of importing Russian coal, industry sources said.

South Korea’s leading steelmaker POSCO, a major shipper Hyundai Merchant Marine Co., and the state-run rail operator Korea Railroad are already taking part.

UPDATE 15 (2014-12-1): Seoul offers support to Rajin-Khasan transport project. According to Yonhap:

The South Korean government vowed full support Monday for the nascent Rajin-Khasan project, saying it would help spur the “Eurasia Initiative” proposed by President Park Geun-hye.

The unification ministry described the logistics program, which is on a test run, as the “starting point” for economic cooperation among the two Koreas and Russia.

“It is meaningful as a project to lay the foundation for realizing the Eurasia Initiative, peace in Northeast Asia and the renovation of our economy,” ministry spokesman Lim Byeong-cheol said at a press briefing.

He was referring to South Korea’s plan to bring Russian coal through the North’s port of Rajin.

In the landmark pilot operation, 40,500 tons of Russian coal arrived in the South on a Chinese-flagged ship over the weekend from Rajin. The coal was transported from the Russian town of Khasan to Rajin on a 54-kilometer railway that was re-connected last year.

South Korea’s top steelmaker POSCO began unloading the coal from the ship at its iron mill in Pohang on Monday.

Lim said his government will provide every necessary support for the tripartite project in an effort to achieve the Eurasia Project.

Another ministry official said the South’s consortium, also involving Hyundai Merchant Marine Co. and Korail Corp., is expected to ink a formal contract with Russia next year.

It plans to purchase a stake from RasonKonTrans, a joint venture in charge of the Rajin-Khasan scheme, he told reporters on background.

RasonKonTrans was established in 2008 by Russia’s RZD Trading House and the port of Rajin, with 70 percent controlled by Russia and 30 percent by North Korea.

The South’s consortium is seeking to buy some of Russia’s stake.

“If necessary, I think there could be one more round of pilot operation (before signing the deal),” the official said.

Last year, President Park suggested linking energy and logistics infrastructure in the Far East and Europe.

But Seoul is not yet considering any other measure such as the modernization of the North’s Rajin port, he added.

UPDATE 14 (2014-12-1): Here is coverage of the coal shipment from the Institute for Far Eastern Studies (IFES):

As South Korean companies have recently been showing interest in the Rajin-Khasan Project currently ongoing between North Korea and Russia, the first ever shipment of 45 thousand tons of Russian coal is set to depart from Rajin harbor (DPRK) on November 28, 2014 and arrive in the South Korean port city of Pohang the following night.

According to the Ministry of Unification, the South Korean delegation will work in conjunction with a Russian railroad construction company while visiting North Korea to do a comprehensive technical inspection of Rajin harbor. The inspection will cover the loading and shipment of coal, entrances and exits for transport ships, railway-to-port connectivity and other complex logistical processes, and will take place from November 24th to the 28th.

Accordingly, a total of 12 representatives from South Korean companies including POSCO, Hyundai Merchant Marine Co. and KORAIL, plus one representative from the Ministry of Unification are slated to take a train from the Russian settlement of Khasan to the North Korean port at Rajin on November 24th. The consortium is visiting North Korea in order to oversee a pilot demonstration of the Rajin-Khasan Project, which will bring coal from Russia into Rajin harbor, where it would then be transported to Pohang harbor in South Korea. This visit is expected to mark the South Korean consortium’s full-fledged participation in the Rajin-Khasan Project.

The pilot project will cover the shipment and transportation of 45 thousand tons of coal mined from the West Siberian region in Russia to the South Korean port of Pohang. After the coal is mined and transported to Rajin, North Korea via railroad, it will be loaded onto a Chinese national freighter (capable of holding 56 thousand tons) which is expected to depart Rajin harbor at 10 A.M. on November 28th and arrive in Pohang the following evening at approximately 10 P.M.

Specifically, this marks the first use of the direct maritime route connecting Rajin harbor to Pohang harbor, which passes over the Northern Limit Line in the East Sea, since the implementation of the May 24 Measures. This direct route, which takes approximately 36 hours, has been calculated to save up to 15 percent in both time and fuel costs. It is expected that this cost-cutting effect would become even greater if the South Korean companies involved in the Rajin-Khasan Project are able to sign into a long-term contract.

The total scale of the pilot project is said to be approximately 4 million USD (approx. 4.45 billion KRW), with around 10 percent of the total being provided by a joint DPRK-Russian corporation known as RasonKon Trans. In relation to this, the Ministry of Unification has stated that the majority of this money is being paid to Russian mining companies, with a small portion being given to North Korea for port dues and other costs, and that there appear to be no problems or abnormalities in this international trade project.

It appears that POSCO, Hyundai Merchant Marine, KORAIL and other South Korean firms have been examining a possible stake in Russian railroad construction companies, and will proceed with establishing a corporate body in Russia to invest in RasonKon Trans. The equity structure of RasonKon Trans currently stands at 7:3, with the Russians holding the larger share. South Korean firms are currently reviewing investing in a stake of the Russian share, and formal contracts are not expected until 2015.

The goal of this pilot project is to test how much supply the project can technically handle, and to use that figure as a base for calculating profitability. The South Korean representatives are planning to hold negotiations with Russia; however, it appears that it will be difficult to conclude these talks within the year. In July, an inspection team was dispatched to Rajin harbor as part of the “Rajin-Khasan Logistics Project,” where they concluded that the port was capable of transporting 4 million tons per year.

The coal mined in West Siberia is transported via the 54 kilometer Rajin-Khasan railroad and takes merely one hour to reach Rajin, where it is then transported to the harbor and distributed to as many as three piers equipped to handle shipment.

UPDATE 13 (2014-11-30): So now that the trial run is over, what is to stop North Korea from demanding more revenue once the transportation route is formalized? Russia–according to this piece in the Korea Times:

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.

UPDATE 12 (2014-11-21): Russia and South Korea launch pilot project to ship coal via Rason. According to Yonhap:

Under the envisioned program, South Korea’s top steelmaker POSCO will bring in Russian coal via the North Korean port of Rajin. Two other South Korean firms — Hyundai Merchant Marine Co. and Korail Corp. — are joining the project.

“Since it is a normal international commercial trade, it’s my understanding that there is no problem with the U.N. sanctions,” the official told reporters on background.

It is also a “special case” as far as Seoul’s bilateral sanctions on Pyongyang are concerned, he added.

The South maintains the May 24th Measure, effectively blocking all inter-Korean economic projects except for the Kaesong Industrial Complex. The sanctions were imposed for the North’s deadly torpedo attack on a South Korean warship in 2010.

Once the trilateral program is formally launched, he admitted, the North will be able to secure a stable supply of cash.

The three countries are poised for the first test run of the project next week, in which POSCO will import 40,500 tons of coal from a Russian mine in the West Siberian region.

The 54-kilometer railway between the North Korean city of Rajin and Russia’s Khasan will be used and then a Chinese-flagged 56,000-ton ship will carry the coal to the South’s port in Pohang.

The ship is scheduled to depart Rajin on Nov. 27 for about a 36-hour voyage.

If the project proves cost-effective, the South Korean consortium will hold further talks with the Russian side for a formal contract. It would be hard to ink the deal within this year, though, given the time needed for the relevant process, said the official.

POSCO brings in some 2 million tons of Russian coal every year by way of Vladivostok.

The Rajin-Khasan project is expected to cut shipment costs by 10-15 percent in the long term, according to the ministry official.

“But the stability (of its operation) is the key to its success,” he said, citing the possibility of political setbacks amid Pyongyang’s unpredictable behavior.

Meanwhile, a team of 13 South Korean delegates plans to visit Rajin and Khasan next week to monitor the pilot run worth US$4 million. The delegation is composed of a unification ministry official and a dozen related company officials.

The ministry said it approved their trip to the North earlier Friday.

South Korea has an ambition of linking its railway network with that of Europe through North Korea.

Here is coverage in the Korea Times.

The Wall Street Journal also included this information:

Based on current coal prices, the shipment is valued at around $4 million. North Korea is receiving an undisclosed sum, which a Unification Ministry official called “very small.” A spokesman for the Russian Railways said North Korea receives 30% of the usage fee for about 50 kilometers (31 miles) of railroad from the Russian border to Rajin but couldn’t provide details about the payment. A spokesman for Posco declined to comment on the cargo value or the payment structure.

A Unification Ministry official said that since the structure of the deal involves payment via a third country it isn’t subject to Seoul’s sanctions against Pyongyang. The official, who requested customary anonymity, said the exception was also made to promote South Korean President Park Geun-hye’s “Eurasian Initiative,” which aims to link Europe and East Asia with energy and transport networks.

According to the JoongAng Ilbo, the ship was sipposed to depart Rason on Nov 28, but because the loading went smoothly, the vessel left port on Thursday, Nov 27. It arrived in South Korea on the following Saturday.

UPDATE 11 (2014-7-24):  North Korea apparently willing to allow South Korean investment Rason railway project. According to Yonhap:

North Korea is willing to host South Korean firms’ investment in the country’s railway project with Russia, a South Korean government official said Thursday after a recent on-site inspection visit to the North.

A group of 38 government officials and representatives from South Korean rail operator KORAIL, steelmaker POSCO and shipping company Hyundai Merchant Marine Co. returned on Tuesday from their one-week visit to the North’s Rajin port near the country’s northeastern border with Russia.

It was the three-firm consortium’s second visit to the North, intended to conduct a feasibility study on their plan to join the so-called Rajin-Khasan logistics project, linking the North Korean port city to Russia’s Trans-Siberian railway.

“(The North) basically said they are pleased with South Korean investment and reacted with a hope that this (deal) could help South-North Korean relations advance,” a South Korean government official who joined the recent North Korean tour said on condition of anonymity.

The official said based on the recent on-site inspection, the local business consortium may finalize the review of its plan to join the project, adding that it is likely to strike a deal with the Russian side later this year or early next year.

During their summit meeting in Seoul in November, South Korean President Park Geun-hye and her Russian counterpart, Vladimir Putin, agreed to help the South Korean firms join the project, which would let them invest indirectly in the North.

The local consortium is reportedly planning to test-run a transportation route within this year to move Russian coal to the North Korean port and then to ship it to South Korea’s eastern port of Pohang.

The official said the North Korean port of Rajin is now fully ready for such coal transportation.

“(Transportation) seemed to be possible at any time,” the official said, referring to the Rajin port’s third pier, which has been completed recently and launched last week. The local consortium is seeking to use the new pier if it enters into the North Korean-Russian project.

The new pier is capable of handling 4 million tons of coal annually, the official added.

Under the bilateral logistics project, North Korea and Russia reopened in November a 54-kilometer stretch of railroad track linking the North Korean port to the eastern border Russian city of Khasan after a five-year renovation.

The South Korean official also said the cross-border railroad was being well operated as of recently.

If the local consortium finally decides to join the project, it reportedly may so do by acquiring half of Russia’s share in the project.

The South Korean government has been promoting South Korean firms’ participation in the logistics project, which it views as closely linked to President Park Guen-hye’s “Eurasian Initiative,” a vision that calls for building more infrastructure and freeing up trade between Eurasian nations to create what could become a large single market rivaling the European Union.

The unification ministry earlier said that a formal deal between the consortium and its Russian counterpart for the project will be signed in the second half of the year.

UPDATE 10 (2014-6-11): According to Russian media:

Russian Minister for Far East Development Alexander Galushka announced plans to extend the Trans-Siberian Railroad into North and South Korea during a Russian-Korean trade meeting in Vladivostok on Thursday.

The expansion program calls for a collaborative railway construction project between Russia, North Korea and South Korea. Russian officials hope the expansion will not only triple the speed at which goods are shipped between Europe and Korea, but also restore peace between North and South Korea, RT.com reports.

“We have agreed to launch trilateral projects between Russia, DPRK and South Korea with a focus on the railroad project,” Galushka said, according to RT.com. “It’s important to extend the Trans-Siberian Railroad to the Korean peninsula. It will service to stabilize and improve the situation on the Korean peninsula as a whole.”

Mechel, Russia’s largest steelmaking company, has agreed to supply the steel required for the first phase of the expansion. South Korea’s Hyundai Construction has been identified as a likely commercial partner in the project.

North Korean officials have been reluctant to participate in any collaborative infrastructure program despite the poor conditions of its rail system. Members of the North Korean government began to express interest in a railway development project last September after Russia re-opened a 33-mile expanse of track to Khasan, the last Russian city before the North Korean border, according to RT.com.

UPDATE 9 (2014-4-29): The Choson Ilbo reports that Ms. Choi has returned from the DPRK:

The Organisation for Co-Operation between Railways (OSJD) has decided to hold two major meetings, the Commission on Freight Traffic in 2015 and Conference of General Directors in 2019, in Seoul.

KORAIL president Choi Yeon-hye made the announcement at Gimpo Airport on Monday after returning from an OSJD meeting in Pyongyang. It is unprecedented for an associate rather than full member to host the conference.

The OSJD is an organization of 27 former and current communist countries, including Russia, China and North Korea.

“We don’t know yet whether the North will attend the meetings in 2015 and 2019, but the participants unanimously decided to hold them here, and the North didn’t oppose it, so we expect them to come,” she added.

The annual conference of general directors alternatively takes place in Asia and Europe, but exceptionally the 2019 meeting will also be held in Asia following the 2018 meeting in Vietnam.

The government here is keen to work with the railway body to link South Korea to Eurasia via North Korea.

Here is coverage in Yonhap.

UPDATE 8 (2014-4-22): The Choson Ilbo reports that the head of Korail has left for the DPRK:

KORAIL president Choi Yeon-hye is appropriately on her way to North Korea by train.

Choi left for Pyongyang on a train from Beijing on Monday afternoon to attend a meeting of the Organisation for Co-Operation between Railways (OSJD), KORAIL said Monday.

The OSJD is an organization of 27 former and current communist countries, including Russia, China and North Korea.

The government approved Choi’s request to visit to the North on Sunday after the North sent her a letter of invitation. She got a visa from the North Korean Embassy in Beijing the same day.

The train runs from Beijing to the North Korean border city of Sinuiju in 24 hours, where she switches trains for the 225 km stretch to Pyongyang.

A KORAIL executive said, “Choi’s visit is the North’s first approval of a South Korean official’s visit” since the South imposed sanctions against North Korea in 2010.

She is the first senior South Korean figure to visit Pyongyang since the inter-Korean summit in 2007.

President Park Geun-hye is keen to connect South Korea to Eurasia by railway, which requires cooperation from the OSJD.

Here is coverage in Yonhap.

UPDATE 7 (2014-4-18): The DPRK has “sort of” invited the head of Korail to a conference in Pyongyang. According to Yonhap:

North Korea has invited the head of South Korea’s rail operator to an international conference to be held in Pyongyang next week, a source with knowledge of the matter said Friday.

However, the North made the invitation verbally, which is preventing Choi Yeon-hye, president and CEO of the Korea Railroad Corp., from formally applying for the trip to Pyongyang, the source said.

The rail conference in Pyongyang, scheduled for April 24-28, is meant to boost international cooperation between railway operators, the source said, adding that it is expected to bring together top rail officials from China, Russia and 25 other member states of the Organization for Cooperation of Railways.

South Korea’s Unification Ministry, which handles inter-Korean affairs, said no decision has been made yet on whether to allow Choi to travel to the North for the conference.

UPDATE 6 (2014-3-29): Russia and North Korea held talks on entry of the Russian firms into the Kaesong Industrial Complex and the railway project. According to Yonhap:

Also on the table in the Pyongyang-Moscow talks was how to boost cooperation among the two Koreas and Russia, with Pyongyang and Moscow making it clear that the two “share mutual interest” in the trilateral cooperative projects, according to the report.

“The (Russian) ministry reaffirmed the countries’ mutual interest in joint projects with South Korea, including international connections for railways, gas pipelines and power lines,” it said, adding that the minister stressed stability on the Korean Peninsula is key to achieving the goal.

Discussions of the project to connect the Trans-Siberian Railway (TSR) with the Trans-Korean Railway (TKR), dubbed the “Iron Silk Road,” have been under way for more than a decade, but geopolitical obstacles have hindered it, particularly given North Korea’s nuclear ambitions.

South Korea and Russia have also been in discussions to push for a project to build a gas pipeline linking the two via North Korea.

The next meeting of the bilateral commission is scheduled for June in Russia’s far eastern city of Vladivostok, according to the ministry.

You can read more about the gas pipeline here.

UPDATE 5 (2014-3-24): South Korea to import coal through Rajin by next year. According to Korea IT Times (note-I changed the South Korean “Najin” to the North Korea “Rajin”):

A pilot program to carry coal from the port of Rajin in North Korea to Pohang in the south is expected to bear fruit within the year. A high-ranking official at the Ministry of Oceans and Fisheries said on March 23, “We have finalized a plan to ship coal between Rajin and Pohang before the year’s end as part of the Eurasia Initiative.”

Once the coal shipment from Siberia arrives in Rajin through the Hasan train station on the Russian side, South Korean ships will move the cargo to POSCO in Pohang from the No. 3 wharf in Rajin.

The ministry official added, “In a visit to Rajin in February we found that the port facility is capable of handling coal load up to 4 million tons a year. We will send a due diligence team again within the first half to find out the depth of the water near the port.”

The pilot coal shipment program is undertaken as part of the Rajin-Hasan railway project. The 54-kilometer railway link is critical to connecting the rail lines in the south to Busan and the trans-Siberian railway to European destination. Earlier in 2000, Russian President Vladimir Putin and then-ruler of North Korea Kim Jong-il agreed to build the line at the cost of US$340 million.

Rajin is a port city located at the northernmost corner of North Korea bordering Russia. The Russian government has since 2010 been working on building berths capable of holding 70,000-ton vessels in Rajin’s No. 3 wharf. The Chinese government is also in talks with North Korean authorities over building container unloading facility as well as expanding the wharves No. 4 to 6. The problem, however, is the Russian side has not found coal mines big enough to supply the volume demanded by Korean companies including POSCO.

UPDATE 4 (2014-3-24): South Korea has joined the Organization for Cooperation Between Railways (OSJD) in Warsaw. According to the Choson Ilbo:

Korea has taken the first step toward connecting its railways to the Eurasian continent. The Korea Railroad Corporation on Sunday said it became an associate member of the Organization for Cooperation Between Railways (OSJD) in Warsaw, Poland.

In order to connect Korean railways from Busan to Europe, it is essential for KORAIL to register to the OSJD, which makes the rules on the Eurasian continent and overseas treaties amongst member states.

This makes a more realistic prospect of a planned “Silk Road” railway connecting the Korean Peninsula to Europe that lies at the core of President Park Geun-hye’s “Eurasia Initiative.”

The initiative, which was announced in October last year, aims to strengthen Eurasian economic cooperation and prompt an opening of North Korea to lay the groundwork for reunification with the South.

The OSJD invited KORAIL to a meeting of the heads of member states’ railways in Pyongyang next month.

UPDATE 3 (2014-3-5): South Korean companies could be operating out of Rason by next year. According to Yonhap:

South Korea may be able to use the North Korean port city of Rason for logistical purposes as early as early next year, the unification ministry said Wednesday.

“The flow of goods through the Rason region may become possible around next spring if things go smoothly,” Unification Minister Ryoo Kihl-jae said in a lecture to a group of former lawmakers.

“In early February, South Korean companies paid an on-site visit to the Rason area and if this (cooperation project) goes smoothly, major progress would take place around September this year,” the minister said of Seoul’s push to join the Rajin-Khasan development project between Pyongyang and Moscow.

The project is designed to develop Rajin, the northeastern North Korean port city now reintegrated into Rason, into a logistics center linked to Russia’s Trans-Siberian Railway.

The government is planning to link the North Korean port to two major South Korean southern ports of Pohang and Busan.

UPDATE 2 (2014-2-6): According to the Wall Street Journal:

…Seoul’s Unification Ministry said on Sunday that an 18-strong Southern business team will visit Rajin in North Korea’s northeast, near Russia and China, on Feb. 11-13. Three firms are going: steelmaker Posco; Hyundai Merchant Marine011200.SE -6.55%, a shipper; and state-owned monopoly Korail. The government isn’t sending anyone.

This follows a deal signed during Russian President Vladimir Putin’s one-day visit to Seoul in November. The plan is for the South Korean trio to acquire up to half of Russian Railways’ 70% stake in RasonKonTrans, a $340 million project which last fall, five years late, finished upgrading 54 kilometers of track from Russia’s border at Khasan down to Rajin, Asia’s most northerly all-year ice-free port. Harbor facilities are also to be modernised.

I was skeptical at the time. The companies sounded non-committal, and two big political reefs loomed. Had anyone asked North Korea, whose railways ministry owns the other 30% of RasonKonTrans? And wouldn’t this breach the ban Seoul imposed in 2010 on all trade and investments in North Korea, outside the Kaesong Industrial Complex? The Southern government says no.

This is just an inspection tour, but North Korea appears to have raised no objection – which is interesting, if scarcely consistent. Pyongyang plays politics with family reunions: a sadistic heartbreaker for elderly Koreans yearning to see their long-lost kin, if only once and briefly.

According to Xinhua (2014-2-9):

A group of South Korean company officials will visit the Democratic People’s Republic of Korea ( DPRK) to carry out field study for joining in Rajin-Khasan railway and port development project between Pyongyang and Moscow, South Korea’s unification ministry said on Sunday.

A total of 18 officials from South Korea’s state-run Korea Railroad Corp. (KORAIL), steelmaker POSCO and shipper Hyundai Merchant Marine are scheduled to visit DPRK’s northeastern port city of Rajin from Tuesday to Thursday.

The ministry said they will meet their Russian counterparts in Vladivostok and then departed for the DPRK.

South Korean President Park Geun-hye and Russian President Vladimir Putin agreed to cooperate in the Russian-led project during their summit in Seoul last November.

The Rajin-Khasan project aims to refurbish DPRK’s Rajin port and a railroad connecting it to the nearby Russian town of Khasan, paving the way for the Trans-Korean Railway and the Trans-Siberian Railroad reaching Europe.

A double-track railway between Rajin and Khasan reopened last September after years of renovation. It is reported that if the trilateral program runs smoothly, the Rajin port will become a logistics center for South Korean and Russian firms.

The project is part of Park’s plan for building the “Silk Road Express” by linking roads and railways running from South Korea to Europe via the DPRK, Russia, China and other Eurasian nations.

According to Yonhap (2014-2-9):

Officials from South Korean companies set to participate in an economic project between Pyongyang and Moscow will visit North Korea this week for an on-site inspection, the government said Sunday.

The unification ministry said 18 officials from three South Korean firms will visit North Korea’s northeastern port of Rajin from Tuesday to Thursday. The companies are state-run Korea Railroad Corp. (KORAIL), top steelmaker POSCO and No. 2 shipper Hyundai Merchant Marine. No government official will join the trip, the ministry said.

Their inspection is part of South Korea’s participation in the Rajin-Khasan development project, the Russian-led rail and port development venture in North Korea.

It’s designed to develop Rajin into a logistics center linked to Russia’s Trans-Siberian Railway. Last September, a double-track railway reopened between Rajin and Khasan, the nearby Russian town, after years of renovation.

In their summit meeting in Seoul last November, South Korean President Park Geun-hye and Russian President Vladimir Putin agreed to help South Korean firms join the Rajin-Khasan project.

Also last year, Park unveiled her plan to expand economic cooperation with Eurasian nations, dubbed the Eurasian Initiative. The policy is built on the idea that exchanges between South Korea and Eurasian nations, in particular Russia, could help induce the reclusive North Korea to open up and alleviate tensions on the Korean Peninsula.

Chris Green of the Daily NK has translated an  interview with the executive director of POSCO Corporate Strategic Planning Dept, Jeon Woo-sik, wherein he offered details about the delegation visiting Rason?

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?

Jeon: 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[1], meaning that it would become possible more rapidly if the 5.24 Measures were lifted.

According to the Hankyoreh (2014-2-11):

Explaining that the Rajin-Hasan Project is a “special case” that is going ahead despite the May 24 measures, Unification Minister Ryoo Kihl-jae said that North Korea would have to take meaningful steps before the May 24 measures could be revoked.

During a plenary session at the National Assembly on Feb. 10 on issues related to diplomacy, unification, and national defense, the minister said that the May 24 punitive measures against North Korea would not be lifted until the North took action showing its remorse for the sinking of the Cheonan warship.

The May 24 measures, instituted after the Cheonan was sunk in 2010, constitute a complete ban on economic activity, exchange, and cooperation with North Korea.

But when asked about the Rajin-Hasan project, in which POSCO, Korail, and other South Korean companies have recently received permission to invest, Ryoo said that the project is moving ahead because it has particular significance for South Korea’s national interest regarding relations with Russia. If the project makes progress in the future and material starts to move, Ryoo predicted, various discussions will take place. That is to say, South Korea is moving forward with the Rajin-Hasan project as an exception to the May 24 measures.

On Monday, South Korean Prime Minister Chung Hong-won also said that the Rajin-Hasan issue is a special case.

“What happened to the principles that President Park Geun-hye was talking about?” complained one businessman involved in economic cooperation with North Korea. “If you’re going to relax the restrictions, you should relax them for everyone. It‘s not fair just to relax them for large companies,” the businessman said on condition of anonymity.

Read the full stories here:
North Korea’s Rajin as Rotterdam? A Little Less Crazy Now
Wall Street Journal
Aidan Foster-Carter
2014-2-6

S. Korean firm officials to visit DPRK for Rajin-Khasan joint project
Xinhua
2014-2-9

S. Korean corporate officials to visit N. Korea as part of Pyongyang-Moscow venture
Yonhap
2014-2-9

Rajin-Hasan Project going ahead as a “special case”
Hankyoreh
Choi Hyun-june
2014-2-11

UPDATE 1 (2014-1-16): South Korea launches task force on railway and other projects. According to Yonhap:

South Korea is set to launch a task force on economic cooperation projects with North Korea and Russia, including a long-discussed plan for a trilateral rail link, Seoul officials said Thursday.

The move is the first follow-up step after President Park Geun-hye announced late last year her plan to expand economic cooperation with Eurasian countries for more trade opportunities.

Called the Eurasian Initiative, the policy is centered on the idea that exchanges between South Korea and Eurasian nations, especially Russia, will help induce an opening up in the reclusive North, which lies in between, thus allaying the long-running military and diplomatic tensions on the Korean Peninsula.

The task force, tentatively named the Trilateral South, North Korea, Russia Cooperation Task Force, will be launched as soon as February under the wing of the foreign ministry’s Europe division, according to the officials.

Under the task force, about five government officials will be charged with reviewing the feasibilities of various economic project ideas among the three nations, including much-discussed plans to link a railroad, gas and oil pipes, and electrical grids between South Korea and Russia through North Korea, according to them.

“All the issues concerning the trilateral cooperation among South and North Korea, and Russia can be subject to the task force’s reviews,” a foreign ministry official said. “Specific details about the projects will be known after the task force goes into operations.”

Discussions of the project to connect the Trans-Siberian Railway (TSR) with the Trans-Korean Railway (TKR), dubbed the “Iron Silk Road,” have been under way for more than a decade, but geopolitical obstacles have hindered it, particularly given North Korea’s nuclear and missile ambitions.

In a summit meeting held in Seoul last November, South Korean President Park and Russian President Vladimir Putin signed a memorandum of understanding to help South Korean companies join the Rajin-Khasan development project in North Korea, the Pyongyang-Moscow project to link their railways for better logistics.

ORIGINAL POST (2013-11-13): The Russians and South Koreans recently discussed and signed a MOU on investment in the Rajin-Russia railway link and port. According to Yonhap:

South Korea agreed Wednesday to take part in a Russian-led rail and port development project in North Korea that could help reduce tensions with Pyongyang and open up a new logistics link between East Asia and Europe in line with President Park Geun-hye’s “Eurasian initiative.”

The memorandum of understanding was the most tangible outcome from Park’s summit with Russian President Vladimir Putin. It calls for steel giant POSCO, Hyundai Merchant Marine Co. and Korea Railroad Corp. to participate in the Rajin-Khasan development project.

The project was designed to develop North Korea’s ice-free northeastern port of Rajin into a logistics hub connected to Russia’s Trans Siberian Railway. In September, a 54-kilometer, double-track rail link reopened between Rajin and the nearby Russian town of Khasan after years of renovation.

Once the project to modernize the port of Rajin is completed, the rail-connected port can be used as a hub for sending cargo by rail from East Asia to as far as Europe. South Korean firms can also ship exports first to Rajin and transport them elsewhere via Russian railways.

North Korea and Russia launched the US$340 million project in 2008.

“The two sides agreed to encourage the rail and port cooperation project that companies of the two sides are pushing for so that it can move smoothly forward,” said a joint statement issued after the summit.

The project fits into Park’s “Eurasian initiative,” which calls for binding Eurasian nations closely together by linking roads and railways to realize what she called the “Silk Road Express” running from South Korea to Europe via North Korea, Russia and China.

Wednesday’s agreement was seen as a first step toward the ambitious vision.

“We, the two leaders, agreed to combine South Korea’s policy of strengthening Eurasian cooperation and Russia’s policy of highly regarding the Asia-Pacific region to realize our mutual potential at the maximum level and move relations between the two countries forward,” Park said during a joint press conference.

“South Korea and Russia will join hands to build a new Eurasian era for the future,” she said.

The Korean consortium plans to buy a stake in RasonKonTrans, the Russian-North Korean joint venture carrying out the rail and port renovation project. A final decision on the planned purchase will be made after a due diligence study in the first half of next year, officials said.

State monopoly Russian Railways has a 70 percent stake in the joint venture, with the North holding the remaining 30 percent. News reports have said that the Korean consortium plans to buy about half the Russian stake.

The purchase could be in conflict with Seoul’s ban on new investments in North Korea, though it is an indirect investment via Russia. The ban is part of sanctions Seoul imposed on Pyongyang after the North torpedoed and sank a South Korean warship near their Yellow Sea border in 2010.

The project could pave the way for similar indirect investments in the North and help reduce tensions on the divided peninsula. Inter-Korean relations, which had shown signs of a thaw following months of high tensions, chilled again after Pyongyang unilaterally canceled reunions for separated families in September.

Putin arrived in South Korea from Vietnam earlier Wednesday on a one-day visit for his second summit with Park. They first met in September on the sidelines of a Group of 20 major economies meeting in Russia’s second-largest city of Saint Petersburg.

In Wednesday’s summit, the two leaders also signed an MOU to enhance cooperation in shipbuilding. Officials said the deal laid the groundwork for South Korea to win orders of at least 13 liquefied natural gas tankers from Russia on the condition of technology transfer.

Also discussed was a long-discussed project to link railways of the two countries via North Korea and through to Europe. The two sides signed an MOU on rail cooperation and agreed to study the project as a long-term venture. The rail project has been talked about for many years, but little headway has been made due to security tensions.

Other projects the two sides agreed to cooperate on as long-term ventures included building a natural gas pipeline linking Russia and South Korea via the North and developing Arctic shipping routes to reduce shipping distances and time between Asia and Europe.

In total, the summit produced 17 cooperation agreement, including a visa-exemption pact calling for allowing Koreans and Russians to visit each other’s nation without a visa for up to 60 days, as well as an accord to set up cultural centers in each other’s nation.

Other topics for the meeting included regional and global security issues, such as the North Korean nuclear standoff. Russia is a member of the six-party talks aimed at ending Pyongyang’s nuclear program and is also one of the five permanent members of the United Nations Security Council.

“The two sides confirmed they cannot accept Pyongyang’s policy of building independent nuclear and missile capabilities … and stressed that North Korea cannot have the status of a nuclear state,” the joint statement said.

They also emphasized the North should abide by international denuclearization obligations and commitments, and agreed to work together to create the right conditions for restarting the long-stalled six-party talks on ending Pyongyang’s nuclear program, the statement said.

In an apparent swipe at Japan, the statement said that the sides shared a concern that the strong cooperation potential in Northeast Asia has not been realized due to obstacles created by recent “retrograde acts and words on history.”

Putin’s visit to Seoul is the first by a leader from the four major powers that also includes the United States, Japan and China since Park came into office. The Russian president is also the sixth foreign leader to visit South Korea under the Park administration.

Yonhap also published this related but separate report:

The ministry, in charge of all inter-Korean relations, said plans by a South Korean consortium to buy a stake in RasonKonTrans, the Russian-North Korean joint venture, can strengthen ties between South Korea and Russia and create greater opportunities for all sides. The project, first launched in 2008, cost Pyongyang and Moscow US$340 million.

It said the memorandum of understanding, signed on the sidelines of summit meeting between South Korean President Park Geun-hye and Russian President Vladimir Putin earlier in the day, did not mean Seoul was abandoning its so-called May 24 blanket ban that prohibits all economic and personnel exchanges with the North.

The ban has been in place since 2010, after Seoul accused Pyongyang of sinking one of its warships near the sea border in the Yellow Sea. Seoul at present only permits humanitarian assistance exempt from the sanctions rule.

“This project is special, and efforts will be made to assist visits by South Koreans who have to go to the North to carry out due diligence,” said a ministry official who declined to be identified.

He added that while an investment does conflict to some extent with Seoul’s ban, it is slightly different, since companies will be buying stakes in the Russian company.

“It will be an indirect form of investment and not the direct kind that has been banned so far,” the source said. However, he conceded the move marks the first time that investments into a North Korean project have been authorized.

South Korean businessmen from steelmaker POSCO, Hyundai Merchant Marine Co. and Korea Railroad Corp. are expected to go on fact-finding missions to Rajin and check the rail line linking the port city with the Russian town of Khasan.

Under the project, aimed at utilizing North Korea’s ice-free port, Russia aims to transform Rajin into a logistics base linked to its Trans Siberian Railway (TSR). If the project makes headway, Rajin can be used by South Korean companies to send cargo by rail to Europe using the TSR.

On the controversy that may arise from “bending” the rules, the ministry official said the government is willing to review other indirect forms of investments involving other countries if proposed.

“If a proposal is submitted, it will be judged in terms of the nature of the project, the effect it will have on cross-border relations and North Korean attitude,” he stressed.

Additional Information:
1. Read more about the Russia-Rajin rail link here.

2. Read more about the Russia – South Korea gas pipeline here.

3. Read previous posts on the Rason SEZ here.

Read the full stories here:
S. Korea to participate in Russian-led rail, port development project in N. Korea
Yonhap
Chang Jae-soon
2013-11-13

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China acts to curb DPRK oil imports

Sunday, October 20th, 2013

According to the Asahi Shimbun:

China is holding petroleum that was heading to North Korea from Iran in an apparent attempt by Beijing to maintain its control over Pyongyang, sources said.

According to Chinese sources, the petroleum was part of North Korea’s contract to import about 500,000 tons of condensate, a light oil, from Iran. North Korea, seeking to diversify its energy sources, started discussions on the deal last year.

The agreement was reached with the cooperation of a major Chinese state-run petroleum company.

The condensate is believed to have been shipped from Iran over a number of occasions on tankers registered to a third nation. But Chinese authorities ordered the tankers to stop when they reached the Chinese coast in the Yellow Sea this spring.

The ships were then towed to ports in Dalian, Liaoning province, and Qingdao, Shandong province. Sources said the condensate remains in those ports, which have restricted access to outsiders.

China is believed to have asked North Korea to pay about $2 million (about 196 million yen) for storage expenses.

“Once China realized that North Korea was beginning to depend on Iran for petroleum, China began using various measures to remain engaged so it can maintain its influence over North Korea,” a diplomatic source knowledgeable about relations between China and North Korea said.

Under the North Korea-Iran contract, Pyongyang is to pay Tehran for the condensate, but the condensate itself must be first sent to a Chinese state-run petroleum company.

“Because North Korea does not have the most advanced refineries, it had to ask China to refine the condensate,” a source in the petroleum industry said.

It is unclear what legal basis China is using for holding up the shipments because condensate and other petroleum products needed for daily living are not banned under U.N. economic sanctions imposed against North Korea.

However, one source involved in the transaction said, “As part of the economic sanctions that were imposed against military actions taken by North Korea, inspections were carried out by Chinese authorities, which asked that the petroleum be kept at the port.”

Until now, China is said to have provided about 80 percent of the petroleum used in North Korea. The main means of transport were through a pipeline that runs along the Yalu River between the border of the two nations as well as by ship.

According to Chinese customs statistics, the export volume was about 520,000 tons a year.

“Not only has a ban on petroleum export shipments been imposed by China, but the total import volume through the pipeline has also been reduced to one-third the level of the same period of the previous year,” a source involved in trade between China and North Korea was told by a North Korean government source in September.

China remains North Korea’s biggest backer, even with the contract with Iran.

Read the full story here:
China holding up shipment of Iranian petroleum to North Korea
Asahi Shimbun
Koichiro Ishida
2013-10-20

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