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 Analysts: Beijing Parade a 'Bazaar' of Stolen Technology

Show commemorating victory over Japan in World War II involved long, medium and short range missiles, a range of tanks and 200 fighter aircraft More

Bernie Sanders Surge Reflects US Shift on Socialism

Although most analysts say it is unlikely he will get the Democratic nomination, Sanders' campaign opens up questions and issues that are otherwise marginalized More

Video On IS Frontline, Kurdish Fighters Ready for Offensive

Peshmerga soldiers say although they need more heavy artillery, they are poised to take the fight to the Islamic State extremists on their turf More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Drowned Migrant Toddler Photo Triggers European Outragei
X
Henry Ridgwell
September 04, 2015 11:36 AM
The harrowing picture of a drowned three-year-old Syrian boy washed up on a Turkish beach appears to have galvanized Europe’s leaders into doing more to address the refugee crisis. France, Germany and Italy issued a joint call Thursday for compulsory quotas of refugees for all EU states. But there were chaotic scenes in Hungary as police tried to force migrants off a train heading for Austria. Henry Ridgwell has more. And a caution, some of the images in this report may be disturbing.
Video

Video Drowned Migrant Toddler Photo Triggers European Outrage

The harrowing picture of a drowned three-year-old Syrian boy washed up on a Turkish beach appears to have galvanized Europe’s leaders into doing more to address the refugee crisis. France, Germany and Italy issued a joint call Thursday for compulsory quotas of refugees for all EU states. But there were chaotic scenes in Hungary as police tried to force migrants off a train heading for Austria. Henry Ridgwell has more. And a caution, some of the images in this report may be disturbing.
Video

Video Russians Observe 11th Anniversary of Beslan School Attack

This week, Russians have been observing the 11th anniversary of the attack by Islamic militants on a school in Russia's North Caucasus region that killed more than 330 hostages, including 186 children. The three-day siege and massacre that started on September 1, 2004 took place in Beslan, a town in the republic of North Ossetia, and is one of the bloodiest terrorist acts ever in Russia. VOA's Mike Richman reports.
Video

Video Native Americans Debate: Father Serra, Saint or Sinner?

Pope Francis will canonize an 18th century missionary to Spanish California during a papal visit to the United States this month.  But some Native Americans have criticized the elevation to sainthood of the missionary priest, Junipero Serra. VOA's Mike O’Sullivan has more from Los Angeles.
Video

Video Calais School Offers Another Face of Europe’s Migrant Crisis

Europe is facing mounting criticism over how it’s handling its biggest migration crisis since World War II. But not all Europeans believe building walls or passing repressive policies are the answer. A school for migrants in the French port city of Calais, is opening doors and building bonds across nationalities. VOA's Lisa Bryant reports.
Video

Video Kurdish Fighters on IS Frontline Ready for Offensive

Finger on the trigger, the Kurdish Peshmerga soldier stared across the dust at a village taken over by Islamic State extremists. The Kurdistan’s Khazir frontline, just 45 minutes from the Islamic State stronghold of Mosul. And at this point, the militants were less than two kilometers away. VOA's Sharon Behn reports.
Video

Video China Announces Troop Cuts at WWII Parade

Chinese President Xi Jinping Thursday announced plans to cut the world’s largest military force by 300,000 troops. The announcement was made during a massive military parade to commemorate victory over Japan in World War II. The event was shunned by most Western leaders and for some is raising fresh concerns about China’s military ambitions. VOA’s Bill Ide has more from Beijing.
Video

Video Russia-Japan Relations Cool as Putin Visits China for WWII Anniversary

Russian President Vladimir Putin is in Beijing for commemorations of the 70th anniversary of China's WWII victory over Japan. Putin is expected to visit Japan later this year, but tensions between Tokyo and Moscow over islands disputed since the war, and sanctions over Ukraine, could pour cold water on the plan. VOA's Daniel Schearf reports.
Video

Video Yemen ‘on Brink of Disaster’ as Medical Shortages Soar

Aid agencies warn Yemen is on the brink of humanitarian disaster – with up to half a million children facing severe malnutrition, and hospitals running out of basic medicines. There are fears Yemen's civil war could escalate as the coalition led by Saudi Arabia tries to drive back Houthi rebels, who seized control of much of the country earlier this year. Henry Ridgwell reports.
Video

Video Apps Helping Kenyan Businesses Stay Ahead of Counterfeiters

Counterfeit goods in Kenya cost the government as much as $1 billion each year in lost tax revenues. The fake goods also hurt entrepreneurs who find it hard to carve out a niche in the market and retain customers. But as Lenny Ruvaga reports from Nairobi, information technology is being used to try to beat the problem.
Video

Video Nobel Prize Winner Malala Talks to VOA

Nobel Peace Prize winner Malala Yousafzai met with VOA's Deewa service in Washington Sunday to talk about women’s rights and unveil a trailer for her new documentary. VOA's Katherine Gypson has more.
Video

Video War, Drought Threaten Iraq's Marshlands

Iraq's southern wetlands are in crisis. These areas are the spawning ground for Gulf fisheries, a resting place for migrating wildfowl, and source of livelihood for fishermen and herders. Faith Lapidus has more.
Video

Video Colombians Flee Venezuela as Border Crisis Escalates

Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Rebuilding New Orleans' Music Scene

Ten years after Hurricane Katrina inundated New Orleans, threatening to wash away its vibrant musical heritage along with its neighborhoods, the beat goes on. As Bronwyn Benito and Faith Lapidus report, a Musicians' Village is preserving the city's unique sound.
Video

Video In Russia, Auto Industry in Tailspin

Industry insiders say country relies too heavily on imports as inflation cuts too many consumers out of the market. Daniel Schearf has more from Moscow.
Video

Video Scientist Calls Use of Fetal Tissue in Medical Research Essential

An anti-abortion group responsible for secret recordings of workers at a women's health care organization claims the workers shown are offering baby parts for sale, a charge the organization strongly denies. While the selling of fetal tissue is against the law in the United States, abortion and the use of donated fetal tissue for medical research are both legal. VOA’s Julie Taboh reports.

VOA Blogs

World Currencies

EUR
USD
0.8978
JPY
USD
119.24
GBP
USD
0.6567
CAD
USD
1.3230
INR
USD
66.495

Rates may not be current.