Russia - South Korea: Political Rapprochement and Economic Activation?

On June 17, Russian Foreign Minister Sergey Lavrov met with his South Korean colleague Kang Kyung-hwa, who arrived in Moscow on a two-day visit.

A multilateral system of diplomatic discussion has been formed to address the resolution of the Korean Peninsula conflict, and bilateral Russian-South Korean contacts are playing an important role. Moscow welcomed the active role of the Moon Jae-in administration in establishing inter-Korean cooperation since the beginning of 2018 and president Moon’s contribution to the US-North Korean dialogue. At the same time, there is a certain disappointment today with the fact that in recent months, after the failure of the Hanoi summit, Seoul has seemed to take a backseat, clearly not without the influence of Washington. The agreement of the Republic of Korea on the recent joint military manoeuvres with the USA undoubtedly offended Pyongyang, who considered this a “betrayal.” Therefore, in Pyongyang, which believes Seoul should not “look back at Washington,” attention in its southern neighbour has clearly weakened. The recent Russian-North Korean summit left no doubts about this, although the South Koreans hoped that Russia would help intensify its contacts with the Northerners, including at the highest level.

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The latest result of the visit was another demonstration of the North Korean leader’s contractual capacity and his desire to pursue an active foreign policy, not limited to the American, Chinese or inter-Korean direction. Here Kim again demonstrated his charisma, and this author hopes that the next DPRK-Russia summit will be held earlier than after eight years.
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In turn, Moscow hopes that Seoul will play a more active role in the “peaceful, political settlement, working out reciprocal steps in this process.” The parties agreed that this remains “the only possible way to make progress in resolving the problems existing in the sub-region.” This is at odds with the official American position of the “big deal” – that is, everything must happen “all at once”, without gradual and mutual concessions. Of particular importance in this context was the Russian-South Korean discussion of a new Russian-Chinese initiative, which is developing a corresponding 2017 road map – an “action plan” for the comprehensive settlement of the Korean Peninsula problems.

Sergey Lavrov confirmed that “we have already introduced this project to all key countries and key partners, including our South Korean colleagues.” The reaction of the North Koreans is of particular importance – and, judging by the Minister’s statements, it was not negative, otherwise there was no sense in discussing this topic with the southerners. Now Russia has invited the South Koreans “to a joint elaboration of these ideas in the interests of bringing closer the positions of the negotiators, taking into account those initiatives that were put forward by Seoul regarding the Korean Peninsula problems.” Of course, in this context it will be necessary to resolve sanctions issues, offer security guarantees, and establish standards of behaviour in the region. The call for South Korea to resume its active role in this process was the main topic of the Lavrov-Kang Kyung-hwa meeting. Russia is promoting the idea of ​​a multilateral diplomatic process at all levels. Moscow once again plays the role of a “catalyst” of the negotiation process, proposing new ideas and solutions, and even if everyone claims victory, the main thing for Moscow is to get the settlement process off the ground.

The meeting also raised the issue of celebrating in 2020 the 30th anniversary of the establishment of diplomatic relations. The cabinet ministers decided “to celebrate this event with dignity, there is a whole series of events, including such a large-scale joint initiative as the cross-year of mutual exchanges.”

The volume of bilateral trade has been characterised by a positive trend for the second year in a row, after its sharp decline in 2014–2016, primarily due to the depreciation of the ruble against the dollar and the imposition of sanctions against Russia. In 2018, the growth rate of trade turnover was 31% and reached $25 billion. South Korea today buys by 60% more Russian gas than in 2013, when the absolute maximum of bilateral trade was reached, a record increase in Russian trade surplus up to $6 billion. Such growth cannot but cause concern for South Korea, where the economy is export-oriented and policymakers seek to maintain a positive trade balance. However, part of the reasons for the current state of trade (negative for Korea and positive for Russia) should be sought in Seoul. The last several years were not particularly successful for active Korean exporters, and the matter here is not only about the ruble and the appreciation of Korean products among Russian consumers, but also about saturating the Russian market with goods from South Korea. Also, one cannot disregard the competition of Chinese manufacturers, which have noticeably intensified exports to Russia during the period of sanctions, taking advantage of the strategic nature of the Russian-Chinese partnership. 

Of course, Seoul is interested in improving its access to the Russian market by reducing tariffs. Considering that both countries are members of the WTO and bilateral trade is covered by the most favoured nation treatment, a significant improvement in access to the commodity market could be achieved by signing a free trade agreement, which Seoul has been seeking for several years. However, Russia cannot offer preference to key Korean exports, since this would lead to unfair competition with other partners. Nevertheless, following the meeting, the parties recorded an interest in finding ways to conclude an agreement on trade in services. In cooperation with South Korea, Russia is interested in ensuring long-term supplies of Russian gas, and projects for the development of the Far East. However, there are external restrictions in the form of sanctions, and a strategic military alliance between Seoul and Washington. Despite the fact that South Korea has not joined the sanctions against Russia, by default, South Korean banks are not ready to issue funding to Korean companies to participate in projects in the Russian Far East, for fear of a negative US reaction.

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Even though no formal declarations were adopted at the end of the meeting, and no agreements were announced, the fact is that discussing them makes little sense while the sanctions are still there. However, it can be argued that apart from the denuclearization issue, economic cooperation was also on the agenda. It is worth noting that there were no formal statements on making the Korean Peninsula fully nuke-free, even though this may seem like an obvious topic. Perhaps there is not complete agreement on this issue either.
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Trilateral projects involving North Korea are of fundamental importance for Russia. The prospects (not very bright yet) for cooperation in the field of railway transit and the construction of gas pipelines and power lines were also discussed. The Russian side made it clear: “While these plans remain on paper, we are confident that they deserve practical attention, including the conditions for moving along the path of resolving the problems of the Korean Peninsula.” Here the moratorium can help; it was introduced by Seoul on a number of unilateral sanctions against the DPRK in connection with events unrelated to the nuclear issue.

The author thanks Irina Korgun, Senior Research fellow, Institute of Economics, Russian Academy of Sciences, for her assistance in the preparation of this article.

Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.