Monday, June 5, 2017

As China pulls trade from North Korea, Russia gets cozy with Kim Jong Un

As China responds to President Trump's call to pressure North Korea to curb its rogue weapons programs, Russia has stepped in to help the hermit nation stay connected to the rest of the world.
Trade between Russia and North Korea increased by 73% during the first two months of 2017 compared to the same period the year before, boosted mostly by increased coal deliveries from Russia, according to Russian state-owned news site Sputnik.

China, North Korea's chief political and economic benefactor, said it had curbed coal deliveries to North Korea and taken other steps aimed at persuading North Korean leader Kim Jong Un to halt his nuclear and ballistic missile development programs.

In addition to a boost in coal shipments, other moves by Russia to expand commerce with North Korea include:

• A Russian company, Investstroytrest, opened a new ferry line in May connecting the Russian port city of Vladivostok to the North Korean city of Rajin. Mikhail Khmel, the company’s deputy director, told Reuters the ferry is aimed at Chinese tourists seeking to visit Vladivostok by sea.• Russian railway officials in January visited North Korea to discuss upgrades to the Rajin-Hasan railway, which links Russia to the Korean peninsula, according to Russia’s state news agency TASS.

• Russia and North Korea have reached a labor immigration agreement to expand a program that already employs 40,000 North Korean laborers in Russia’s timber and construction industries, a major source of foreign currency for Kim Jong Un’s government, according to the Japanese newspaper Nihon Keizai.

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These moves come despite Russia's signing onto recent sanctions by the United Nations Security Council, which call for reducing trade with North Korea in retaliation for two nuclear detonations last year and ongoing tests of ballistic missiles that the North says are aimed at developing a nuclear delivery system that can reach the U.S. mainland.


The Security Council issued a unanimous statement on  May 21 that vowed to impose new sanctions on North Korea after it tested yet another long-range missile.

Trump is pressing China to use its $6.6 billion in annual trade with North Korea as leverage to crack down on North Korea's weapons development, as China handles 90% of the North's business with the rest of the world. But a larger Russian trade relationship with North Korea could negate some of what China may do, several analysts said.

The Russian trade activity fits into Russia's thinking about North Korea, said James Brown, an associate professor at Temple University’s Tokyo campus.

“They don’t want to isolate North Korea. They want to enable North Korea to be able to continue to conduct activities with the rest of the world,” Brown said. “They’re against the North Korean nuclear program. ... But the Russians also are more sympathetic toward North Korea.”

Russian President Vladimir Putin said on May 1  that North Korea's recent missile launch was "dangerous,” and that Russia is “categorically against the expansion of the club of nuclear states,” according to Sputnik. But he also appeared to criticize U.S. policy toward North Korea, marked by U.S. military exercises near the Korean peninsula and belligerent threats from both Trump and Kim.

“We need to return to dialogue with the Democratic People's Republic of Korea, stop intimidating it and find ways to solve these problems peacefully,” Putin said.Putin believes North Korea takes provocative steps, “but that it’s forced to act in that way because of aggressive actions by South Korea and the United States, by having exercises and military drills and sending the aircraft carrier and those type of things,” Brown said.

Chinese officials have warned they would consider halting crude oil deliveries to North Korea if it engages in more nuclear or long-range missile tests, according to China’s state-run Huanqiu newspaper.

Regular oil tanker ship traffic between Russia and North Korea, and the rail line that is being repaired, are evidence that Russia could replace some Chinese oil supplies, but it’s unclear if they could replace all of it, said Anthony Ruggiero, an analyst at the Foundation for Defense of Democracies, a Washington think tank.

“If the Chinese really crack down, would the Russians be able to completely backfill? I’m not sure that they would,” Ruggiero said.

While Chinese coal imports have fallen to multiyear lows since the imposition of new sanctions by the U.N. Security Council, China’s imports of North Korean iron ore rose in April to the highest level since August 2014 and 10% higher than in March, according to the South China Morning Post.

The data on China-North Korea trade is sparse and results in a fuzzy picture of the impact of official sanctions, said Marcus Noland, director of studies at the Peterson Institute for International Economics.

North Korean prices for food and fuel have spiked recently, but it’s unclear why, Noland said. He ticked off a number of possible reasons — that supply is down because of sanctions, or it’s being diverted to the military, the population could be hoarding in fear of a war, or people could be more prosperous and buying more rice.

But two things are clear: The North Korean currency, the yuan, has been stable so “whatever is going on is not having a big effect,” Noland said.

And while Russia’s trade with North Korea appears to be rising, at $130 million annually it is still tiny compared to China’s $6.6 billion in annual trade, Noland said.

Even so, Russia could cause mischief in North Korea for the U.S. and its northeast Asian allies South Korea and Japan, Noland said. “Yes, it is plausible that Russia will try to increase trade to increase its geopolitical influence.”

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