News / Economy

    S. Korea, Russia Agree on Backdoor Investment in North

    South Korean President Park Geun-hye (R) shakes hands with Russian President Vladimir Putin (L) during their meeting at the presidential Blue House in Seoul, Nov. 13, 2013.
    South Korean President Park Geun-hye (R) shakes hands with Russian President Vladimir Putin (L) during their meeting at the presidential Blue House in Seoul, Nov. 13, 2013.
    Daniel Schearf
    A deal reached with Russia this week will allow South Korean investors to take part in a railway and port project in North Korea, circumventing Seoul's limits on direct investment. Russia plans to improve the North Korean port Rajin to ship goods to and from Europe.

    South Korean President Park Geun-hye and Russian President Vladimir Putin signed a memorandum of understanding (MOU) effectively granting South Koreans investment into North Korea, which Seoul currently restricts.

    The MOU, signed Wednesday in Seoul during Putin's one-day visit, allows South Korean firms to get around those limits by purchasing shares in a Russian-led project in North Korea.

    A consortium of South Korean companies have the option to buy a stake in the $340 million Rajin to Khasan railway and port project in North Korea's Rason Special Economic Zone.

    The joint venture, “RasonKonTrans”, aims to connect North Korea's Rajin to Russia's trans-Siberian railway.

    Russia owns 70 percent of the project and North Korea owns 30 percent. South Korean media say steel maker Posco, state-owned Korean Railway, and Hyundai Merchant Marine are expected to buy about half of Russia's shares.

    At a joint press conference, South Korean President Park Geun-hye hailed the agreement.

    She said the project will promote cooperation between South Korean and Russian companies in the future.

    Spokespersons for the three South Korean companies were not available or declined to comment.

    Seoul banned South Korean firms from all trade and investment with North Korea in 2010, when it blamed Pyongyang for sinking a South Korean warship.

    South Korea's Ministry of Unification told the Yonhap news agency the railway and port project does not break the sanctions as it is about indirect investment.

    South Korea does allow investment in the North through the inter-Korean Kaesong Industrial Complex just inside North Korea.  The decade-old joint venture ran relatively smoothly through periods of tension until April when Pyongyang pulled its 55,000 workers citing hostility from South Korea.

    Factory operations resumed in September after months of slow negotiations.

    Cho Bong-hyun is with the Economic Research Institute of the Industrial Bank of Korea. He said the railway and port is less vulnerable to political tensions because of Russia's involvement.

    He said if it was a project between the two Koreas, it could be halted by politics as was seen in the case of the Kaesong Industrial Complex. But this project, he said, is a cooperation among three countries including Russia, so North Korea cannot unilaterally ignore Moscow.

    Nonetheless, Cho said the possibility that North Korea could suddenly stop the project cannot be excluded as North Korea sometimes does not cooperate for diplomatic or military reasons.

    Russian President Putin brushed aside those concerns, adding that the Russian position is that the three-way cooperation should not be based on political factors. He said it should be a unifying force.

    The Rajin-Khasan railway was first proposed in the 1990s but faced delays, including tensions over North Korea's nuclear weapons program. It was completed in September but the port phase of the project, the third wharf, is still under construction.

    The South Korean and Russian Presidents hope to one day link the North Korea to Russia line with an inter-Korean railroad. Such a network would stretch from the South's Busan port all the way to Europe.

    Moscow and Seoul also plan to build a pipeline across the peninsula to feed natural gas to energy hungry South Korea.

    The plans are ambitious, but economic researcher Cho said the timetable for them remains uncertain.

    He said more time is needed on the Rajin port investment and the gas pipeline project, because the countries must first solve outstanding issues including inter-Korean relations and international sanctions on North Korea.

    Rail traffic between the two Koreas was resumed in 2007 for the first time in 56 years. But, Pyongyang severed the line, amid tensions, in 2008 after only one year in service.

    In a bid to encourage other forms of South Korean investment in Russian markets, banks from the two sides signed financing MOUs worth $3 billion.

    South Korea's Ministry of Strategy and Finance indicated that support could include the North Korea railroad and port project.

    In a press release Thursday, it said the agreements aim to encourage Korean investment in energy, infrastructure, and natural resources, including projects such as electricity and railways across Eurasia.

    Aside from the railway project, the South Korean and Russian presidents also agreed to mutual 60-day visa free travel. The relaxed rules, taking effect next year, aim to encourage visitors from their countries as well as lucrative tourist dollars.

    VOA Seoul producer Youmi Kim contributed to this report.

    You May Like

    Video Pop Icon Prince Quietly Helped Afghan Orphans for Years

    He sent thousands of dollars to help an aid group rebuild a training center for orphan boy and girl scouts in Kabul, but kept his involvement secret

    Mali, a Way Station for Syrians Headed to Europe

    Another door may be closing for Syrians fleeing the conflict in their country, this time in Africa

    Britain’s Muslims See London Mayor Race as Victory

    Mere running of 45-year-old former government minister and son of Pakistani immigrants Sadiq Khan seen by many as turning point

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Donations Rescue Afghan Parents, Children From Forced Labori
    X
    May 05, 2016 6:44 PM
    A Facebook campaign organized by a VOA radio host raised 150,000 Afghan rupees to rescue a family from forced labor at a brick kiln in Nangarhar province – the result of the father’s unpaid debt. Video by a VOA reporter in Jalalabad went viral this week and triggered the Facebook campaign.
    Video

    Video Donations Rescue Afghan Parents, Children From Forced Labor

    A Facebook campaign organized by a VOA radio host raised 150,000 Afghan rupees to rescue a family from forced labor at a brick kiln in Nangarhar province – the result of the father’s unpaid debt. Video by a VOA reporter in Jalalabad went viral this week and triggered the Facebook campaign.
    Video

    Video Kurdish Troops Recount Firefight Which Killed US Navy SEAL

    A U.S. Navy SEAL killed Tuesday, when Islamic State fighters punched through Kurdish lines in northern Iraq, was part of a quick reaction force sent to extract other U.S. troops trapped by the surprise offensive. VOA's Kawa Omar spoke with Kurdish troops in the town of Telskuf -- the scene of what U.S. officials called a "dynamic firefight."
    Video

    Video British Lawmakers Warn EU Exit Talks Could Last A Decade

    Leaving the European Union would mean difficult negotiations that could take years to complete, according to a bipartisan group of British lawmakers. While the group did not recommend a vote either way, the lawmakers noted trade deals between the EU and non-EU states take between four and nine years on average. Henry Ridgwell reports on the mounting debate over whether Britain should stay or exit the EU as the June vote approaches.
    Video

    Video NASA Astronauts Train for Commercial Space Flights

    Since the last Shuttle flight in 2011, the United States has been relying on Russian rockets to launch fresh crews to the International Space Station. But that may change in the next few years. NASA and several private space companies are developing advanced capsules capable of taking humans into low orbit and beyond. As VOA's George Putic reports, astronauts are already training for commercial spacecraft in flight simulators.
    Video

    Video US Worried Political Chaos in Iraq Will Hurt IS Fight

    The White House is expressing concern about rising political chaos in Iraq and the impact it could have on the fight against the Islamic State. The U.S. says Iraq needs a stable, central government to help push back the group. But some say Baghdad may not have a unified government any time soon. VOA's White House correspondent Mary Alice Salinas reports.
    Video

    Video Press Freedom in Myanmar Fragile, Limited

    As Myanmar begins a new era with a democratically elected government, many issues of the past confront the new leadership. Among them is press freedom in a country where journalists have been routinely harassed or jailed.
    Video

    Video Taliban Threats Force Messi Fan to Leave Afghanistan

    A young Afghan boy, who recently received autographed shirts and a football from his soccer hero Lionel Messi, has fled his country due to safety concerns. He and his family are now taking refuge in neighboring Pakistan. VOA's Ayaz Gul reports from Islamabad.
    Video

    Video Major Rubbish Burning Experiment Captures Destructive Greenhouse Gases

    The world’s first test to capture environmentally harmful carbon dioxide gases from the fumes of burning rubbish took place recently in Oslo, Norway. The successful experiment at the city's main incinerator plant, showcased a method for capturing most of the carbon dioxide. VOA’s Deborah Block has more.
    Video

    Video EU Visa Block Threatens To Derail EU-Turkey Migrant Deal

    Turkish citizens could soon benefit from visa-free travel to Europe as part of the recent deal between the EU and Ankara to stem the flow of refugees. In return, Turkey has pledged to keep the migrants on Turkish soil and crack down on those who are smuggling them. Brussels is set to publish its latest progress report Wednesday — but as Henry Ridgwell reports from London, many EU lawmakers are threatening to veto the deal over human rights concerns.
    Video

    Video Tensions Rising Ahead of South China Sea Ruling

    As the Philippines awaits an international arbitration ruling on a challenge to China's claims to nearly all of the South China Sea, it is already becoming clear that regardless of which way the decision goes, the dispute is intensifying. VOA’s Bill Ide has more from Beijing.
    Video

    Video Painting Captures President Lincoln Assassination Aftermath

    A newly restored painting captures the moments following President Abraham Lincoln’s assassination in 1865. It was recently unveiled at Ford’s Theatre in Washington, where America’s 16th president was shot. It is the only known painting by an eyewitness that captures the horror of that fateful night. VOA’s Julie Taboh tells us more about the painting and what it took to restore it to its original condition.
    Video

    Video Displaced By War, Syrian Artist Finds Inspiration Abroad

    Saudi-born Syrian painter Mohammad Zaza is among the millions who fled their home for an uncertain future after Syria's civil war broke out. Since fleeing Syria, Zaza has lived in Lebanon, Egypt, Jordan and now Turkey where his latest exhibition, “Earth is Blue like an Orange,” opened in Istanbul. He spoke with VOA about how being displaced by the Syrian civil war has affected the country's artists.

    Special Report

    Adrift The Invisible African Diaspora

    World Currencies

    EUR
    USD
    0.8742
    JPY
    USD
    107.09
    GBP
    USD
    0.6893
    CAD
    USD
    1.2820
    INR
    USD
    66.504

    Rates may not be current.