Prospects of Russia-South Korea Cooperation

Russian-South Korean relations are currently on standby in three respects. First, on September 30, 2020 the two countries will observe the 30th anniversary of their diplomatic relations. Second, they are waiting for new major investment projects – Korean business investment in Russia and bilateral projects in the Russian Far East. Third, there is an expectation of a breakthrough in trilateral relations between Moscow, Seoul and Pyongyang, which has already become permanent. Importantly, for South Korea the development of steady dialogue with North Korea is an existential issue that will always be a top priority for Seoul no matter whether it is relevant at this particular moment or not. Even on the eve of the EEF 2019, the South Korean media were more concerned over the possibility of brief greetings between the heads of the North and South Korean delegations on the sidelines of the summit than its agenda. The issue of North Korea, which requires comprehensive economic development, can hardly be settled without the participation of the Russian Far East. For this reason, South Korea is likely to preserve its interest in this region that is also attractive owing to its rich energy resources and convenient logistics routes.

As follows from the speech by Lee Jae-Young at the 5th EEF, South Korea has a good idea of this region’s potential. A major expert on Russia and other CIS countries, Lee Jae-Young heads the Korea Institute for International Economic Policy (KIEP), one of Seoul’s largest think tanks that makes recommendations to the government. His report about the potentialities of developing the Russian Far East under trilateral projects reflects the role that South Korea could play there. However, the projects discussed, for instance, the construction of a gas pipeline, the linking of the Tran-Siberian and Trans-Korean railways, and the formation of the Arctic Route, require much time and strong political will from all participants. Although attention is usually paid to Pyongyang’s unpredictable moves, South Korea is also prone to foreign policy maneuvering because of its strategic alliance with the US. Hence, these projects are designed for a more remote future.

South Korean business is not yet ready to actively invest in Russian projects. In the 1990s, Korean companies made a number of independent attempts to invest in the Far East, in particular, in the Primorye Territory but not all of them were successful. So they are aware of the risks. High production costs and low capacity of the market compared to Central Russia are also serious restrictions. This is why Korean business avoids broad involvement in the region even despite the encouragement from the South Korean government that has the Nine Bridges foreign economic program aimed at stepping up cooperation with Russia. Another reason is a tangible change in the mechanism of cooperation between the state and business in South Korea in the past 20 years. The period when they carried out projects at home and abroad in tandem is over. In conditions of a more open economy, Korean companies have become more independent in their decision-making on conquering foreign markets.

North-East Asia: Hopes and Anxieties
Anton Bespalov
The world has long got used to the cyclical nature of tensions around the Korean peninsula. Aggravation of the situation has been repeatedly followed by détente, while bellicose rhetoric has been replaced by peaceful gestures. But the recent two years’ developments raise eyebrows even among seasoned observers; launches of North Korean missiles and large-scale US-South Korea military exercises are only several months away from the unprecedented summit meetings between Kim Jong-un and leaders of the great powers. Valdai Club experts explain where the young North Korean leader is taking his country and what its neighbours should be prepared for.        

Korean business is not ready to invest in a project if it does not promise obvious profits. This applies to all projects abroad, not only in Russia. They may go for an alternative, such as high government guarantees or benefits in other areas, which would be commensurate with potential risks. But this option is not easy to implement in South Korea because the public often protests against the market practices of major companies. The presence of major Korean companies in the Russian market has narrowed the opportunities for invigorating cooperation with big business.

There is the possibility of making bilateral relations more dynamic by methodically resolving technical issues, improving the environment for medium-sized companies and creating financial opportunities for bilateral projects. This is more realistic and urgent under the current sanctions that affect the funding of projects because Korean business often resorts to US banks. Final adjustments regarding the technical issues of bilateral cooperation are also required for the free trade area that is currently under discussion. In addition, it is necessary to promote bilateral ties by diversifying economic cooperation. Trade in services is limited, and it is also possible to expand cultural, scientific and technical cooperation. At the EEF 2019, Seoul showed its willingness to work in these areas by appointing Minister of Economy and Finance Hong Nam-ki to head the Korean delegation at the forum. However, the absence of the Korean president at the forum may be interpreted as a signal that there is a deficiency in the agenda of bilateral cooperation and it needs to be updated on the eve of the 30th anniversary of diplomatic relations.

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