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Korea Foots the Bill, but Russia Reaps Benefits?

Posted May. 04, 2007 03:20,   


“The Korean government should either directly invest in modernizing the antiquated train tracks of the North or persuade Korean companies to do so.”

This is the gist of what Russia asked the Korean government to do about the reconstruction of the North’s railways, which will be linked to the Trans Siberia Railway (TSR).

After a visit by North Korean leader Kim Jong Il in July 2001, Russia has been putting efforts into connecting the TSR with the train tracks of the North. Vladimir Yakunin, president of Russian Railways, met with N. Korean Railway Minister Kim Yong Saam and agreed to put “the linking of the two railways at the discretion of Russia.” They signed an MOU last March to build a freight terminal at the North Korean port city of Najin.

Russia is already conducting the construction of a double-track line between Ussuriysk and Hasan in Russia, taking the reconstruction of the N. Korean side of railway block as a given. When this is complete, Russia is planning to modernize the tracks between Hasan and Najin of North Korea in earnest. Russia needs the railways between Russia and North Korea to be re-linked and reconstructed not just to transport its oil produced from the Far Eastern areas and Siberia, but also to secure its strategic interests.

If Russia’s oil and liquefied gas can be carried all the way to Najin in the North, Russia will be able to diversify its Europe-concentrated export channels. An official from Russian Railways said, “Russia will gain another export route for its oil if the re-linking of railways succeeds. When that happens, Russia will earn a bargaining chip in negotiating prices with its European clients.”

Indeed, a correspondent of this newspaper confirmed that in Hasan, crude oil from Siberia was being transported using the TSR in March. Government officials of Primorskii Krai said, “Since the construction of railways and roads began, the unemployment rate went down a lot and the area’s population decline stopped. The linkage with the North’s railways will bring even more benefits to us.” Russia seems to want Korea, Japan and China to participate in the modernization project to share the financial burden and to diversify risks.

The Russian Railways has been struggling with an annual deficit of more than 2 billion USD for a long time. For this reason, the Kremlin urged oil companies such as its state-run Rosneft to finance the modernization. North Korea, while signing the modernization MOU, asked Russia to build electricity, water, and roads infrastructure to support the new railway, which will make the total cost for the whole project rise astronomically.