North Korean Economy Watch

According to Reuters:

While Beijing has not made clear whether the test would disrupt its investment plans for the Rason economic zone, an official at the zone’s joint management office told Reuters that all previously announced Chinese projects for the zone remain on track, including a power line from China to ease acute electricity shortages there.

“All the people of the management office are still here working as usual… If there is any major impact (from the nuclear test), do you think we would still be here?” he said by phone from Rason, which lies near where North Korea, China and Russia converge. “All works are proceeding as planned.”

There are about 60 Chinese and North Korean people working at the management office, and the number may grow with the launch of more projects, said the official, who declined to be identified as he was not authorized to speak to the media.

China and North Korea jointly set up the Rason management committee in October to handle the planning, construction and development of the zone, also known as Ranjin-Songbong, one of the country’s highest profile economic projects.

…

“China has normal relations with North Korea. We will conduct normal trade and economic exchanges with North Korea,” Hua Chunying, China’s foreign ministry spokeswoman, said when asked whether China would continue to work with North Korea to develop its special economic zones after the nuclear test.

…

Led by China’s commerce ministry, Chinese firms, including State Grid Corp, Jilin Yatai (Group) and China Railway Construction Group and other state enterprises, have indicated interest in investing in power, building materials, transport and agriculture projects in the zone.

Yatai, a Shanghai-listed cement and coal producer, signed a framework agreement last year with the North Korean government to construct a 500,000-square-metre building materials industrial park, including a cement plant, in Rason.

State Grid finished the final review of the feasibility study of the 97.8-kilometre power line early this year, but has not started construction as it has not yet won all approvals, the official and a source close to the plan said.

The planned line would cut through a Siberian tiger natural reserve, and State Grid is awaiting a green light from China’s National Development and Reform Commission and coordinating with various other authorities, the source told Reuters.

There is no timetable for the project as State Grid is unsure when it would receive government approvals, he added. State Grid was not immediately available for comment.

Jilin Yatai may delay its cement project in Rason — which is critical to the construction of other projects such as the railway there — due to “issues on the North Korean side,” said an official at Yatai’s securities office.

But the likely delay of the project was not related to the nuclear test, the official said by phone from Changchun, capital city of Northeast China’s Jilin province, which borders North Korea. He declined further comment.

In a filing with the Shanghai bourse in August, Yatai said it planned to complete the construction of its first cement plant in North Korea by September this year only if there is sufficient power capacity available.

Read the full story here:
China moves ahead with North Korea trade zone despite nuclear test
Reuters
2013-2-28

Pictured above (Google Earth): The new Taedonggang Fruit Processing Factory Railway Line (in yellow). I previously blogged about this railway line here.

On August 31, KCNA announced “Railway line of Taedonggang Combined Fruit Processing Factory goes operational” and that the opening ceremony was attended by staff from the Ministry of People’s Security (MPS) and Korean People’s Internal Security Forces (KPISF). The KPISF is part of the MPS.

The presence of so many security personnel might seem odd for the opening of a railway line that is intended to provide fruit products to North Korean consumers. However, because this very same railway line connects the Kim family compound in Kangdong with the city of Phyongsong by rail (See above map), the heavy security presence seems understandable.  This railway line will be heavily watched.

The interesting (and speculative) takeaway is that it might be the case that security for the Kim family is now under the portfolio of the KPISF and not the State Security Department (SSD, Ministry of State Security, anjon-bowibu), KPA, or Military Security Command.

To learn more about the North Korean security services, check out: Coercion, Control, Surveillance, and Punishment: An Examination of the North Korean Police State by Ken E. Gause.

Below is the complete report featured in KCNA:

Railway Line of Taedonggang Combined Fruit Processing Factory Goes Operational

Pyongyang, August 31 (KCNA) — A new railway line branching into the Taedonggang Combined Fruit Processing Factory went operational with due ceremony on Friday.

The operation of the railway line helps satisfactorily carry fruits and processed goods produced by the Taedonggang Combined Fruit Farm and factories in this area and materials necessary for their management and operation.

Present at the ceremony were officials of the Ministry of People’s Security, servicepersons of the Korean People’s Internal Security Forces, officials concerned, builders and employees of the factory.

At the end of the ceremony the first train carrying fruits to be supplied to Pyongyang citizens left the factory.

UPDATE 2 (2012-4-12): North Korea and China attracting investors for Rajin Port development (IFES):

China is currently actively recruiting investors to build additional wharfs in Rajin Port.

China’s Dandong City Industrial and Information Association (丹东市信息协会) announced that it is seeking investments for the construction of tanker wharf under 10,000 ton and affiliated facilities. This organization has received 45 year usage rights from the Rason City People’s Committee and stated that it needed 330 million CNY (52 million USD) to cover the construction cost. According to the association, the investment is attractive because of its geographic location, reduced transit time and costs, and tax-free benefits, for which a special permit was obtained from the North Korean authorities granting trade goods coming from Jilin Province at the Hunchun Port to be allowed entry tax-free. In addition, cargo will be permitted to be sent from Rajin Port to other ports in China.

Meanwhile, North Korea is also planning to build a new port in the Rajin-Sonbong area with a state-of-the-art container distribution capacity. According to the “Rajin New Port Development Plan,” Rajin port development will undergo major transformation as an international hub port, similar to Busan Harbor, unlike the previous small-scale renovations of Piers 1, 2, and 3. This new port is expected to be built across from the current Rajin Port.

Rajin Port development was initially considered as a remodeling project to update the existing wharfs. In 2003, China began to implement construction of Piers 1, 2, and 3. However, the piers began to deteriorate and for the lack of railway and road infrastructure in the area, it delayed the transportation and distribution and could not perform its full function. As a solution, in 2008, North Korea transferred the usage right of Pier 1 to China and Pier 3 to Russia. At that time, Pier 1 was developed to primarily transport chemical fertilizers but it was recently updated as a transportation dock for coal. Russia, in addition to the port, also carried out a modernization project of the Rajin-Hassan railway system to improve the transport of containers.

The new port development plan as suggested by North Korea indicates Jian Group of China as the responsible party for developing the new port into a container port. However, considering that North Korea’s industry does not call for container ports, it is more likely that North Korea is expanding the port to make it a hub port to ship cargo to China, Russia, and Europe. Considering Rajin Port’s geographical advantage, it is likely that North Korea is striving to make it into an international hub port that connects the Pacific with Northeast Asia.

China’s recent advertisement of investment is also considered to be linked with the new port development in Rajin Port.

UPDATE 1 (2012-3-1): Accoridng to Stratfor, the Chinese have denied they plan to make this investment.

The Chinese Foreign Ministry denied allegations made in a Feb. 16 South Korean media report regarding its agreement with North Korea to jointly develop the Rajin-Sonbong Special Economic Zone (SEZ), a port area in northeast North Korea commonly referred to as the Rason Special Economic Zone.

According to the Yonhap news agency, Beijing agreed in late 2011 to invest about 19 billion yuan ($3 billion) into Rason, for which it would receive the lease of three piers for 50 years. Under the agreement, Beijing would also build an airfield, a thermal power plant and a 55-kilometer (34-mile) railway track connecting Rason to Tumen, China. The Chinese Foreign Ministry claimed that the specific details of the report are untrue and that China and North Korea had agreed only in principle to develop the zone.

China has long exerted its economic influence in North Korea and has an interest in the strategically important Rason Special Economic Zone. Chinese involvement in Rason dates back to the 1990s, though Beijing increased its involvement considerably in 2005 when it secured the rights to one of the port’s piers. Beijing has been particularly involved over the past few years. While the details of the deal remain unknown, it is clear that Beijing has arranged to help Pyongyang develop Rason, possibly by connecting the remote port to northwest China. Such a development would revitalize the zone — to the benefit of both countries.

ORIGINAL POST (2012-2-15): China has committed to infrastructure projects in Rason. According to Yonhap:

China has secured the rights to build three new piers in a special economic zone in North Korea’s northeast and use them for 50 years, sources said Wednesday.

China will also build an airfield and a thermal power plant in the special economic zone known as Rason, as well as a 55-kilometer railway track between China’s northeastern city of Tumen and Rason.

North Korea and China reached an agreement late last year to build infrastructure in Rason with Chinese investment of about US$3 billion, according to the sources in Seoul and Beijing.

The Daily NK offers some more data:

China has agreed to dig out dock 4 at Rasun to make it possible for 70,000 ton vessels to dock and to construct a runway long enough to accommodate passenger and cargo aircraft within the SEZ; the railroad is due to be complete by 2020, while the development of dock 5 and 6 will follow that of dock 4, Yonhap sources claim.

This agreement was reportedly signed quietly by North Korea’s Joint Ventures Committee and the Chinese government shortly before Kim Jong Il’s death.

The North Koreans have sought the construction of an airport and expansion of the port  for some time.

KITC published the image above in 1995 (Source here).  If you look carefully on the right side of the picture you will see the site of a proposed airport.

Above is a more recent map of Rason published by the DPRK. In the middle of the above map you can see a small airplane which represents the desired location of a future airfield. It is in the same location as shown on the KITC map.

Here is the approximate location on Google Earth (42.397884°, 130.592084°):

If you look at the left side of the KITC photo you can also see that there are many piers, however today there are only three.  I suspect that the new piers will be constructed south of the current piers and will look something like this:

The railway and power plant projects are intereting as well.  There is already a thermal power plant in Sonbong, so I expect that the Chinese are simply renovating it so that it generates more power or is simply more reliable (Google Earth:  42.327275°, 130.382585°):

At a presentation at the Korea Economic Institute in Washington, DC, Andray Abrahamian reported that increased electricity supplies for the Rason Zone could come from China.

As for the Tumen (China) – Rason railway line…this already exists as well.  The DPRK’s Hambuk Line (함북선) runs from Chongjin to Namyang (border with Tumen) to Rason:

The Tumen to Rason leg of this railway line, however, is approximately 156km (according to Google Earth) and likely runs pretty slowly.  The proposed new Chinese-built Tumen-Rason line is intended to be just 1/3 the distance!

Additional Information:

1. The Russians built a railway line from their border to the Rajin Port. Learn more here.

2. The Chinese and Russians have already rented two of Rajin’s three ports.

Read the full stories here:
China secures right to use 3 piers to be built on N. Korean port for 50 years
Yonhap
2012-2-15

China Reportedly Grabs 3 Docks and More
Daily NK
2012-2-15

Andray Abrahamin and John Kim worte a comprehensive summary of the current state of Rason. The article appears in The Diplomat:

In 1991, the North Korean government dubbed Rajin-Sonbong (Rason) a free trade zone to attract foreign capital. However, less than a decade later, the zone lost its free trade status. According to local businessmen, the party secretary of Rason, a relative of the late Kim Jong-il himself, was charged with corruption and eventually executed, a harbinger for the long period of isolation ahead. Since the end of 2009, signs of renewed commitment to Rason have sprouted. While it may be too early to say whether the region will succeed in drawing investment and reform, our recent trips to Rason lead us to believe that developments on the ground may eventually warrant a shift in foreign policy by governments around the globe.

China has long eyed Rason as a potential import/export center for the landlocked provinces of Jilin and Heilongjiang. However, from Rason’s inception, the Middle Kingdom held little influence or interest in the region’s success. In 2002, North Korea establishedanother special economic zone in Shinuiju and instated businessman Yang Bin, then China’s second richest man, as the SEZ’s Chief Executive. The Chinese authorities promptly placed Yang Bin under house arrest. Perhaps as a lesson learned from this episode, the North Koreans have made the Chinese government a major stakeholder in Rason’s development.

The Chinese have moved 80,000 metric tons of coal this year through a pier they leased at the Rajin port.They are also reportedly sending regular delegations of senior officials, including the Chairman of the China Development Bank, and they have invested $30 million to repave the road from the border town of Wonjong to the Rajin Port. This road was 60 percent paved during a visit in October, and recent reports from businessmen inside the region confirm that the road is now 95 percent paved, allowing for large trucks to pass through. The Chinese have also constructed a new road on their side of the border, part of the support this area has received after the Chinese central government designated it “The Changjitu Development Region” in November of 2009.Officials from the North explained that the Chinese will have a say in everything from zoning of real estate to port customs and investment policies.

Though Russia’s involvement doesn’t run as deep, it also maintains a keen interest in Rason’s ice-free port and has pledged an investment of $200 million to refurbish a railway from the border town of Khasan and to upgrade pier three at the Rajin port, which it has leased for 49 years. Rason’s third port at Oongsang was once a major exporter of lumber from the Soviet Union, and though Oongsang looks far from reviving the Soviet involvement of its heyday, Russia clearly has an interest in Rason’s success as well.

In addition to neighboring countries’ newfound interest in the zone’s success, the North Korean leadership has also shown a renewed desire in luring investment into the region. In December 2009, Kim Jong-il made a visit to the area, sent his former trade minister to run the region as party secretary, and reinstated Rason’s status as a special city, wresting it out of provincial control. Any potential investor who visits the SEZ would experience the thirst of the local government to develop the region, as reflected by the words of an official with the Rason Economic Cooperation Bureau, Rhee Sung Hye: “The future of my career depends on how much investment I can bring.”

At the national level there are also signs that the regime is increasing its focus on economic development as a source of legitimacy. In 2009, the Joint Venture Investment Commission was formed as a one stop shop for foreign investors, while the Taepung Group and State Development Bank were created to attract foreign investment. In the first half of 2011, Kim Jong-il made more appearances related to the economy and less related to defense than in prior years, and a focus on improving lives through focus on light industry and agriculture was emphasized in joint editorials that signaled policy direction at the beginning of 2010 and 2011.

The alignment of simultaneous commitment from North Korea, China, and Russia sets the scene for a North Korean special economic zone with higher chances of success than perhaps ever before. However, interest and desire may not necessarily translate into results without knowledge of markets and how to create a stable investment environment. After a recent tour of his 200MW fuel oil powered generation facility, the President of Songbong Power, Rhee Kang Chul, expressed that the reason for his plant’s inactivity and the subsequent blackouts in the region was the rise in feedstock costs. When asked about mechanisms for electricity pricing, Rhee responded that the government had set power prices at 6.5 euro cents/kwh, but he couldn’t provide further details on how the number was arrived at and when it might change again. Though Rhee was clearly an expert on the technical aspects of power generation, he hadn’t had the chance to consider that potential investors, after getting comfortable with country risk, would have little clarity on the revenue side of their equation. When this was expressed to the Vice Mayor of Rason, he replied, “We can change the price of electricity here. Rason is not under the same restrictions as the rest of the country.”

North Korea could theoretically piggyback off the market knowledge that their Chinese partners have gained over the last 30 years, but Rason’s neighbors are only likely to share when it suits their interests. In the case of Sonbong Power, Kang told us that every Chinese official who has visited stated that the most effective solution would be to pipe in power from the Chinese grid. “We plan to have a power line installed from the border by the end of 2013.” As power is as strategic asset like food or water, dependence on Chinese power clearly leaves the North Koreans in a vulnerable position.

China is clearly North Korea’s closest ally, but their relationship has a thorny history and Pyongyang is acutely aware of its reliance on big brother Beijing. With China’s rise, many other countries in the region are increasingly dependent on trade but increasingly cautious of dependence, welcoming a stronger presence from the United States, which is in the midst of a strategic pivot towards Asia.

In December 2009, the Asia Society and the Institute on Global Conflict and Cooperation published a report arguing that economic engagement of Pyongyang by the United States would result in creation of vested interests in continued reform, a changed perception of self-interest and a less confrontational foreign policy from North Korea. Against the backdrop of a more uncertain domestic environment after the death of Kim Jong-il, and the shifting dynamics in Asia generally, a North Korea that trades more and engages with the outside world may necessitate a change in foreign policy of governments around the world, most specifically the United States, South Korea, and Japan.

The Rajin-Sonbong SEZ has a checkered past and it would be naïve to say that North Korea is embarking on late 1970’s style Chinese economic reforms. However, we believe that the unprecedented alignment of interests in the region make it a likely starting point for any lasting directional change, which is why the world should watch Rason.

Read the full story here:
Why World Should Watch Rason
The Diplomat
John Kim & Andray Abrahamian
2011-12-22

Institute for Far Eastern Studies (IFES)
2011-9-14

At the seventh China Jilin and Northeast Asia Investment and Trade Expo (NEASIAEXPO), the North Korean delegation actively promoted the Rajin-Sonbong (Rajin) Economic and Trade Zone to attract investment.

During the expo, the DPRK’s Ministry of Trade and China’s Ministry of Commerce and People’s Government of Jilin Province co-sponsored the “(North) Korean Business Day and China-DPRK Trade and Investment Session” at the Changchun International Conference and Exhibition Center on September 7. Hwang Chol-nam, the vice mayor of Rason City, briefed the attendees on the current situation, advantages, and special benefits of his city.

According to Hwang, “The spacious 470 square-kilometer Rason Economic and Trade Zone is one of the largest economic trade zones,” and advertised the geographic and economic advantages of Rason as the “transportation hub of Northeast Asia that connects China and Russia via Tumen River and with Japan across the East Sea.”

He also introduced the three ports in the region. “Rajin Port is equipped with the annual loading capacity of 3 million ton and Sonbong Harbor is able to transport 2 to 3 million ton of oil while Ungsang Harbor is able to handle up to 600,000 cubic-meter of lumber annually.” He also boasted the ports to be deep enough where it does not freeze during the winter.

Rason was also introduced to have received the “special city” designation in 2010 and will grow to have a population of one million. The recently amended “Law on the Rason Economic and Trade Zone” was revised and supplement with over 50 articles.

Hwang also elaborated on the eight preferential policies providing special tax benefits to foreign investors. He asserted, “The government of North Korea will guarantee the investment of the foreign investors by not nationalizing or demanding requisitions. For inevitable cases where such demands occur, proper compensation will be provided.”

The income tax is also at 14 percent, which is 11 percent lower than other areas in North Korea. For companies with business plans over ten years, foreign capital companies will receive three years of tax-free benefit starting from the profit earning year and two years thereon after will receive 50 percent tax-free benefits. According to Hwang, over 100 foreign companies and offices are operating businesses currently in the special economic zone.

He also announced that the current highway construction project connecting Rajin with Wonjung is expected to be completed in October, and that the Tumen-Rajin port railway system is to be upgraded to a broad gauge railway next month.

Specifically, Russian Railways reached an agreement with North Korea to repair the Hasan-Rajin Railway and improve the Rajin port facilities, especially focusing on Pier 3. The plans include upgrading Rajin as a container harbor to be capable of transporting twenty-foot equivalent units annually. Russia and the DPRK have already conducted measurement and geological surveys and reached the process design phase.

However, Seo Gil-bok, the DPRK’s vice minister of commerce, stated in a speech that North Korea would “actively work hard to make the Rason region a successful collaboration between the DPRK and China,” saying further that they would “pull out all the stops to realize the goals agreed by the best leaders from both nations.”

Many foreign media and correspondents were present at the event to cover the “Korean Business Day.” At the event, North Korea actively promoted the Rason Economic and Trade Zone by also presenting a promotional video of the zone.

Below is some short, light North Korea fare for the holiday weekend (in the USA).

1. Kim Jong-il’s Train

The title “First peek into Kim Jong-il’s train” in a recent JoongAng-Ilbo article (later picked up by the Choson Ilbo) kind of irked me since I posted pictures and video (viewed over 8,000 times) of Kim Jong-il’s train back in May. The article claims such glimpses are rare, but this is not the case.  The train has been prominently featured in all the documentaries of Kim Jong-il’s trips for decades.  I have uploaded six different videos of Kim Jong-il’s train to YouTube which have been released over the years.  You can see them all: here, here, here, here, here and here.

2. Ultimate Frisbee

Pictured above: Taesongsan Park–site of the DPRK’s first ultimate frisbee tourney

Koryo Tours, which sponsored the DPRK’s first cricket match (2008) and first golf tournament (2005), recently wrapped up the country’s first ultimate frisbee tournament. Pictures available on Facebook.

3. Picture Guessing Game

What is in this box behind Kim Jong-il?

What is inside the sleeve of this security agent guarding Kim Jong-il?

4. Early Korea in Film

A reader sent me an hour-long documentary of Korea shot by German monks in the early 1900s. Fantastic footage.  You can watch the whole piece here.

Pictured above (Left) a screenshot from video footage shot in Korea in the early 1900s. The building is the Jangan Temple (장안사) in Kumgangsan. On the right is a Google Earth satellite image of where the temple used to stand before it was destroyed in the Korean War.

5. North Koreans frolicking by the pool

Since the summer has officially come to an end, I thought I would cap it off with this video of North Koreans playing in the water.

38 North
Andray Abrahamian
2011-8-29

A bus bumps and bruises its way along the unpaved road, carrying would-be investors to Rason’s First Rason International Trade Exhibition which ran from August 21-25, 2011, in Sonbong. The windows are open, until a crimson humvee barrels past, its powerful suspension dancing on the road, leaving behind a plume of beige dust. The bus windows snap shut, the still air quickly gets hot and more than one of the passengers wishes we were Chinese high-rollers, being whisked to the Emperor Casino and Hotel, which sits beautifully on Korea’s East Sea, overlooking Bipa Island and flanked by lush green mountains and crystal waters.

The passengers of the humvee-part of the casino’s fleet-will long be checked in and gambling their fortunes away by the time we complete our two and a half hour journey. However, it won’t always be this way. Rason’s 50km road to the border is finally being upgraded. Indeed, the 2.5 hour journey took 3.5 hours in June. Since then, the road has been widened, the first stage of the construction plan, allowing for traffic to flow both directions more easily and smaller passenger vehicles to overtake the more cumbersome truckers who ply the road.

Its construction is an important sign in the development of the Rason Special Economic Zone. Rason, an amalgamation of the names of the area’s two biggest cities, Rajin and Sonbong, could theoretically be a vibrant hub for both logistics and manufacturing. It is located in the far Northeast of the Democratic People’s Republic of Korea, bordering Russia and China. It has abundant, cheap labor and the region’s northernmost ice-free port. It has been a legal entity since the early 1991, but has struggled to reach its potential in the face of ambivalence from Pyongyang and difficult geopolitical circumstances.

Local administrators have bold plans for this experiment in economic opening-up and to develop as the Rason Municipal People’s Committee has imagined, an efficient road link with China’s Northeastern provinces is vital. For about a decade, improvements to the road have been “under discussion” and “coming soon,” but it is now undeniably underway. Work began in May of this year…READ MORE HERE

According to Yonhap:

North Korea unveiled Sunday its business plans to redevelop a troubled mountain resort in the isolated country, after seizing South Korean properties in the complex once considered a symbol of inter-Korean reconciliation.

The move is expected to further deepen the dispute over the resort at Mount Kumgang, with South Korea vowing to take all possible measures, including legal action with an international tribunal, against the North’s decision to “legally dispose” of Seoul-owned assets there.

The business plans were presented to Yonhap News Agency by Park Chol-su, head of Daepung International Investment Group, which serves as a window to North Korea to attract foreign capital.

Daepung invited this week a group of foreign business executives and journalists to the resort to explain the business plans. During the four-day trip beginning Sunday, the group will visit Mount Kumgang via ship after departing from the northeastern port city of Rason.

The plans call for North Korea to redevelop the resort into an international tourist and business zone by building golf courses and hosting casinos from China and Western nations.

Using a railway linking Beijing to Pyongyang and the resort, North Korea plans to attract tourists from the United States, Japan, China and Hong Kong, Park said.

The North is also seeking to run tours linking Rason and Mount Kumgang by ferry, with an eye to woo Chinese tourists.

Under the first-stage plan, the North’s state agency will build energy and electricity facilities at an area of 60 square meters in the resort and let foreign business partners develop part of the area with their own projects, Park said.

North Korea plans to collect taxes from foreign partners to operate their facilities, according to Park. The area will be open to foreigners, but remain off-limits to ordinary North Koreans.

Additional Information:

1. According to the JoongAng Ilbo, the ship that will be used to ferry travelers from Rason to Kosong (Changjon) is the Mangyongbong 92. The ship will have to use a dock built by Hyundai-Asan. Hyundai is known to have spent around 170 billion won ($157,000) on the pier and the roads linking the pier to the resort.

2. The Daily NK adds a few additional details on the investment zone.

3. A timeline of Kumgang events, from the shooting until today, can be found here.

Read the full story here:
N. Korea unveils business plans for troubled mountain resort
Yonhap
2011-8-28

Institute for Far Eastern Studies (IFES)
2011-8-24

Kim Jong Il’s visit to Moscow on August 20 is sparking interest for the future of economic cooperation between the two countries.

According to the KCNA, Russian President Dmitry Medvedev expressed interest to increase trilateral cooperation between the ROK-DPRK-Russia in the gas, energy, and railroad sectors. In the message sent from Medvedev to mark the 66th anniversary of independence from Japanese colonial rule, “plans to expand cooperation with the DPRK and the ROK in gas, energy, and railroad industry” were emphasized.

The cooperation projects are evaluated to have “great economic and political significance contributing to the stability in Northeast Asia and denuclearization of the Korean peninsula.”

In July 4, the KCNA reported that the delegates from the Russian energy giant Gazprom headed by Chairman Alekhsandr Ananenkov visited Pyongyang to discuss energy cooperation, although details of the visit was not elaborated. Ananenkov was reported to have met with North Korean officials in gas and oil industriesto discuss bilateral cooperation in these areas.

Russia has also expressed interest in linking gas pipelines to export natural gas to South Korea via inter-Korean railroad system.

A spokesperson of the foreign ministry of the DPRK reported on the recent visit from the vice-foreign minister and chief representative of Russia on Six-Party Talks, Aleksei Borodavkin, this past March. In the statement, the Russian government expressed concerns for improving inter-Korean relations and stressed prospects of the tripartite economic cooperation projects with North and South Korea including the construction of railways, gas pipeline, and a transmission line linking the three countries. The DPRK also expressed support for the upcoming economic cooperation projects.

In result, the main agenda in the bilateral economic cooperation between Russia and North Korea entails railway, gas pipeline, and transmission line construction.

President Lee Myung-bak has met with the Russian president Medvedev in September 2008 in Moscow. At the summit, the two presidents reached an agreement to pursue projects to export Russian PNG or pipeline natural gas to South Korea through a pipeline via North Korea from 2015.

Immediately following the summit, South Korea’s Korea Gas Corporation (KOGAS) and Russia’s Gazprom signed a memorandum of understanding (MOU) to jointly study the possibilities of constructing a long-distance pipeline running from Vladivostok. Under the contract, Russia will send at least 7.5 million tons of natural gas annually for a period of 30 years through a pipeline to South Korea via North Korea.

This joint study between ROK-Russia is expected to serve as a momentum in bringing diverse economic cooperation between North and South Korea as well.

While it is still premature to judge the long-term outlook for such trilateral economic cooperation, its effects are anticipated to contribute to stability and peace in the Northeast Asian region.

Additional Information: here is a summary of the recent Kim Jong-il — Medvedev summit.

Pictured above (Google Earth): The Musan Mine, the DPRK’s largest.  See in Google Maps here.

According to the JoongAng Daily:

During his surprise May visit to China, North Korean leader Kim Jong-il secured free fertilizer and discounted food to help alleviate the impoverished country’s chronic food shortages.

A source in Beijing who monitors North Korea-China relations told the JoongAng Ilbo on Monday that Chinese officials agreed to provide 200,000 tons of fertilizer free of charge as well as 500,000 tons of corn at a discount in exchange for rights to North Korea’s abundant natural resources.

“When 200,000 tons of fertilizer is planted on North Korean soil, it can bring about a three-fold increase in the harvest,” the source said. “This can be the equivalent of giving 600,000 tons of food.”

The source added that China agreed to sell the 500,000 tons of corn for half of the international rate, which would be $30 per ton.

The corn, the source said, had already crossed the border into North Korea from northeastern China.

In exchange, Kim will allow China access to his country’s natural resources.

“The two parties agreed to participate in the extraction of buried rare earth minerals in Musan in Hamgyong Province,” the source said. “It’s quite a profit for China as it is thirsty for materials.”

North Korea is estimated to have around 20 million tons of rare earth minerals, which are vital in the production of high-tech goods.

The Beijing-based source said the agreement gives China the responsibility for the cost of building roads to transport the natural resources as well as lending equipment.

In exchange, North Korea will hand over 50 percent of the extracted rare earth minerals free of charge to China, with the rest to be sold to China at international market rates.

Meanwhile, other sources said that Kim also received a health checkup during his stay in China.

“When Kim Jong-il was visiting Yangzhou, he received a special examination from an oriental medicine doctor that the highest Chinese elite have gone to over the years,” a source familiar with North Korean issues said

The source added: “Kim Jong-il has never trusted China’s Western medicine. I heard from a Chinese official that Kim received an oriental medicine diagnosis by taking his pulse and that it did not involve drawing blood.”

Additional Information:

1. Here is a post linking to all the major DPRK food stories this year.

2. The media has reported on other DPRK food barter deals with Cambodia and Myanmar.

3. The role of the Musan Mine in DPRK-PRC relations has been quite interesting.  Here are previous posts on the mine.

Read the full story here:
North got fertilizer on Kim’s trip to China
JoongAng Daily
Chang Se-jeong
2011-8-19