North Korea–Russia Relations - Economic Relations

Economic Relations

After the Korean War, the Soviet Union emerged as the main trading partner and sponsor of North Korea. Ninety three North Korean factories were built with Russian technical assistance, forging the country's heavy-industrial backbone. Soviet aid to the DPRK indeed expanded from 1965 to 1968, especially after Sino-North Korean relations soured during the Chinese Cultural Revolution.

In 1988, at the peak of the bilateral relationship, about 60% of North Korea's trade was with the Soviet Union. Much of the trade was in raw materials and petroleum that Moscow provided to Pyongyang at concessional prices. The economic reforms in Russia and the end of the Cold War greatly reduced the priority of the DPRK in the strategy of Russian foreign policy. Relations between the two cooled seriously in the 1990s as Russia recognized South Korea, announced that trade with North Korea was to be conducted in hard currencies, and opted out of its bilateral defense agreement. Trade turnover between the two states had dropped from US$1 billion, during the peak of the Soviet-DPRK trade in the late 1980s, to $1.97 billion in 1990 and to $0.58 billion in 1991; in 1993, export levels had declined to a mere 10% of its previous contributions. By 1999 the number stood at US$80 million. In 1989, 830,000 tons of freight passed through the border from Russia (Khasan) to North Korea (Tumangang). By 1998 this number stood at 150,000 tons.

Major Russian exports to the DPRK include mineral fuels, wood and pulp, fertilizers, ships/boats, and iron/steel. The large increase in 2003 came mostly in refined oil (total exports of mineral fuel oil jumped from $20 million in 2002 to $96 million in 2003). Pyongyang had to turn to Russia for petroleum, as supplies of fuel oil from the United States, Japan, and South Korea were curtailed as the six-party talks bogged down. During 2000–2005, trade grew from US$105 million to US$172.3 million, an increase of 64%. The value of Russian exports for the first nine months of 2005 reached US$168.7 million, while imports were estimated at US$3.6 million. Russia's main export items were, oil products (63%), ferrous metal and steel production (8%), and machinery and equipment (8%). Major Russian imports from North Korea include machinery, electrical machinery, tools/cutlery, and railroad equipment. Russian exports of grains to North Korea was no more than 890 tons in 2002, but increased to 1,070 tons (mainly wheat) in 2003, and to 34,716 tons ($5.31 million) in 2004. In 2005, however, there were no Russian grain export to the North again. The Kremlin's approval of international sanctions against the former communist ally was accompanied by the curtailment of trade with the North. At the time of North Korea's nuclear test in October 2006, Russia published trade statistics only from January to March 2006, and Russia's exports of petroleum products to the North, compared to the same period of the previous year, drastically decreased by 91.1 percent (6,092 tons), while exports of food grains remained zero. Because of the nuclear test, Russia's total exports to the North are likely to sharply decline.

In response to the famine stricken North Korea in the mid-1990s, Russia delivered humanitarian aid to North Korea twice in 1997: food and medicine, worth 4.5 billion "old" Rubles, in the fall, and 370 tones of sugar, canned meat, fish and milk worth 3.5 billion rubles, in December.

In 2008, Russia delivered oil and food to North Korea only in accordance with its obligations associated with the progress at the Six-Party Talks.

In 2007, for the first time in the post-Soviet era, North Korea saw a major Russian investment: In the city of Pyongsong the Russian auto plant Kamaz opened its first assembly line, specialising in the production of medium-size trucks named "Tebaeksan-96". Although less than 50 trucks were assembled in 2007 this cooperation became an important milestone in the development of bilateral relations. While the project doesn't violate United Nations sanctions on North Korea, it shows Moscow's drive to expand its influence in the country.

On 19.8.2011 ahead of Kim Jong il visit to Russia, the Kremlin said that it was providing food assistance, including some 50,000 tons of wheat. Few days after Kim's visit the presidential envoy to Russia's Far East Viktor Ishayev, said wheat deliveries will begin via the town border of Khasan in September.

A week later A Russian economic delegation, led by Minister of Regional Development Viktor Basargin, was in North Korea to sign "a protocol of the 5th Meeting of the North Korea-Russia Intergovernmental Committee for Cooperation in Trade, Economy, Science and Technology" Also on same day, Also on Friday, the North's premier, Choe Yong-rim, met with the Russian economic delegation at the Mansudae Assembly Hall in Pyongyang.

On early September 2011 it was reported that North Korea was planning to rent several hundred thousand hectares of land in the Amur Oblast, which has about 200,000 hectares of idle land in regional, municipal or private ownership.

On 2 February Interfax report, further quoted the Russian ambassador to North Korea Sukhinin as saying that Russia "did not rule out" the possibility of sending more humanitarian aid to North Korea, "depending on the situation there and taking into account our capabilities". Sukhinin went on to say that in 2011 Russia had provided North Korea with 50,000 ton of grain on a bilateral basis, as well as with 5m dollars worth of flour as part of a World Food Organization programme. In addition, 10,000 ton of grain was dispatched to North Korea by Gazprom.

However, of the overall bilateral economic trade between Russia and North Korea, 80% consists of cooperation and investment between North Korea and Russian regional areas. The most active regions are Siberia and the Far East, mainly the Kemerovo, Magadan and Primorski regions.