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

Hostage Crisis Could Divide Japan Over Plans to Boost Military

Japanese Chief Cabinet Secretary Yoshihide Suga said Monday the government is working closely with the Jordanian government to secure the release of remaining Japanese hostage Kenji Goto More

Video Brussels Shaken as New Greek Leader Challenges Europe’s Austerity Drive

Country's youngest ever PM Alexis Tsipras, 40, sworn in Monday and says he will restore dignity to Greece by ending spending cuts More

Multimedia National Geographic Photo Camps Empower Youth

Annual mentoring program's mission is to give young people a voice to tell their own stories through photography More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Obama Urges Closer Economic Ties During Historic India Visiti
X
Aru Pande
January 26, 2015 9:33 PM
U.S. President Barack Obama says the United States and India must do better to capitalize on untapped potential in their economic relationship - by removing some of the roadblocks to greater trade and investment. As VOA correspondent Aru Pande reports from New Delhi, Obama spoke after participating in India’s Republic Day celebration.
Video

Video Obama Urges Closer Economic Ties During Historic India Visit

U.S. President Barack Obama says the United States and India must do better to capitalize on untapped potential in their economic relationship - by removing some of the roadblocks to greater trade and investment. As VOA correspondent Aru Pande reports from New Delhi, Obama spoke after participating in India’s Republic Day celebration.
Video

Video US, EU Threaten New Russia Sanctions Over Ukraine

U.S. President Barack Obama has blamed Russia for an attack by Ukrainian separatists that left dozens dead in the port of Mariupol and cast further doubt on the viability of last year’s cease-fire with the Kyiv government. VOA’s Michael Bowman reports from Washington.
Video

Video White House Grapples With Yemen Counterterrorism Strategy

Reports say the U.S. has carried out a drone strike on suspected militants in Yemen, the first after President Barack Obama offered reassurances the U.S. is continuing its counterterrorism operations in the country. The future of those operations has been in question following the collapse last week of Yemen’s government. VOA White House correspondent Luis Ramirez reports.
Video

Video Kerry Warns Against Violence in Nigeria Election

US Secretary of State John Kerry visited Nigeria Sunday in a show of the level of concern within the U.S. and the international community over next month’s presidential election. Chris Stein reports.
Video

Video Zoo Animals Show Their Artistic Sides

The pursuit of happiness is so important, America's founding fathers put it in the Declaration of Independence. Any zookeeper will tell you animals need enrichment, just like humans do. So painting, and even music, are part of the Smithsonian National Zoo's program to keep the animals happy. VOA’s June Soh met some animal artists at the zoo in Washington. Faith Lapidus narrates.
Video

Video Worldwide Photo Workshops Empower Youth

Last September, 20 young adults from South Sudan took part in a National Geographic Photo Camp. They are among hundreds of students from around the world who have learned how to use a camera to tell the stories of the people in their communities through the powerful medium of photography. Three camp participants talked about their experiences recently on a visit to Washington. VOA’s Julie Taboh reports.
Video

Video Saudi, Yemen Developments Are Sudden Complications for Obama

The death of Saudi Arabia's King Abdullah and the collapse of Yemen’s government have cast further uncertainty on U.S. efforts to fight militants in the Middle East and also contain Iran’s influence in the region. VOA White House correspondent Luis Ramirez reports on the new complications facing the Obama administration and its Middle East policy.
Video

Video Progress, Some Areas of Disagreement in Cuba Talks

U.S. and Cuban officials are reporting progress from initial talks in Havana on re-establishing diplomatic ties. U.S. Assistant Secretary of State (for Western Hemisphere Affairs) Roberta Jacobson said while there was agreement on a broad range of issues, there also are some “profound disagreements” between Washington and Havana. VOA State Department correspondent Pam Dockins has the story.
Video

Video US, Japan Offer Lessons as Eurozone Launches Huge Stimulus

The Euro currency has fallen sharply after the European Central Bank announced a bigger-than-expected $67 billion-a-month quantitative easing program Thursday - commonly seen as a form of printing new money. Henry Ridgwell reports for VOA from London on whether the move might rescue the eurozone economy -- and what lessons have been learned from similar programs around the world.
Video

Video Nigerian Elections Pose Concern of Potential Conflict in 'Middle Belt'

Nigeria’s north-central state of Kaduna has long been the site of fighting between Muslims and Christians as well as between people of different ethnic groups. As the February elections approach, community and religious leaders are making plans they hope will keep the streets calm after results are announced. Chris Stein reports from the state capital, Kaduna.
Video

Video As Viewership Drops, Obama Puts His Message on YouTube

Ratings reports show President Obama’s State of the Union address this week drew the lowest number of viewers for this annual speech in 15 years. White House officials anticipated this, and the president has decided to take a non-traditional approach to getting his message out. VOA White House correspondent Luis Ramirez reports.
Video

Video S. Korean Businesses Want to End Trade Restrictions With North

Business leaders in South Korea are calling for President Park Geun-hye to ease trade restrictions with North Korea that were put in place in 2010 after the sinking of a South Korean warship.Pro-business groups argue that expanding trade and investment is not only good for business, it is also good for long-term regional peace and security. VOA’s Brian Padden reports.

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More

All About America

AppleAndroid

World Currencies

EUR
USD
0.8893
JPY
USD
118.31
GBP
USD
0.6660
CAD
USD
1.2459
INR
USD
61.427

Rates may not be current.