Dmitry Magonya explains to "Vedomosti" why South Korea intensified its economic relations with Russia
Seul is ready for up to $ 2 billion joint projects with Russia and twice more trade
At the September Eastern Economic Forum, President of South Korea Mun Jain announced a new economic initiative - "Nine Bridges of Development", according to which in the next three years they will invest up to $ 2 billion in joint projects with Russia. And at the end of November, the Republic's Ambassador in Moscow Wu Yong Geung mentioned the intention to increase trade with Russia by up to $ 30 billion by 2020. What is behind the initiatives of South Korea?
Calm neighbour and the love of fish
Back in 2012, South Korea and Russia announced large-scale joint economic projects, but since then the geopolitical situation has changed. And although South Korea did not directly join the US and EU sanctions, the projects were frozen. Five years later, relations between the two countries get better again.
It was a result of several factors. One of the main ones is North Korea, that needs to be calmed down instead of threatened in the opinion of South Korea. Therefore, South Korea is interested in building a Trans-Korean railway, energy bridge across the territory of North Korea (it will provide electricity from Russia) and other similar projects. For South Korea, this is the same security issue as the presence of an American military base in Seoul. Another factor is the peculiarities of the Korean economy. The domestic market has long been full, South Korea is one of the world's leading exporters. After several years of inaction in its projects with Russia, the country wants to engage with its large and powerful neighbor. Of course, for South Korea this is not a matter of survival, but it is rather active development.
The peculiarities of consumption and, in particular, Korean cuisine play a role, strangely enough. Koreans are very fond of seafood, that is also caught in Russian territorial waters. But such activity, frankly speaking, was conducted on the verge of poaching. Now the market is becoming more civilized, and the Koreans are ready to pay for the right to fish in our waters, investing in the development of the fish processing cluster in the Far East (in April the Korean side prepared an investment project for the fishery complex, and Rosrybolovstvo confirmed that it could allocate an additional 3000 tons pollock).
Great way
The Nine Bridges project includes a number of directions: the gas industry, the development of railways, the creation of port infrastructure, electricity, the Northern Sea Route, shipbuilding, agricultural production, fisheries and the creation of new jobs. For each item, both countries have something to offer. Forexample, Koreaneedstodiversifyitsgassupplies.Now it is receiving gas mainly from the Middle East, which is a very unstable region. Russia (along with the US and, probably, in the near future - with Australia) could become a major supplier of LNG to Korea. The share of Gazprom in the South Korean market in 2016 was only 7%, or 1.9 million tons of LNG. A long-term contract will increase the supply by 2-5 times. Also, both sides are interested in the development of rail transportation - both transit through Russia to Samsung plants in Eastern Europe, as well as container shipments of Samsung cargoes to Vorsino station in the Kaluga region, where the main capacities of the Korean company are located.
But one of the most interesting and promising projects is the development of the Northern Sea Route and the creation of a port infrastructure, which is very poorly developed in the Russian Far East. Now Korea is interested in the construction of the Far Eastern grain terminal in the port of Zarubino (Primorsk) - this is one of the priority projects of the United Grain Company. And for the development of the Northern Sea Route, which reduces the distance for cargo transportation from East to West by 30-40% (the route from Vladivostok to St. Petersburg is about 14 000 km, and through the Suez Canal - 23 000 km), an atomic icebreaker fleet is required. Rosatom can provide power plants, and Korea, on its side,the ships (two of the three largest shipbuilding companies in the world are Korean). Hyundai Heavy Industries, Daewoo Shipbuilding & Marine Engineering, Samsung Heavy Industries are interested in the project. The latter were already building shuttle tankers of the ice class Arc7 on behalf of Sovcomflot, and in September 2017 signed the basic conditions for the creation of a joint venture to manage the construction of Arctic shuttle tankers with the shipbuilding complex Zvezda. On the Russian side, Gazprom, Rosneft and Novatek are also interested in such projects, which need to expand the tanker fleet. Plus, it is necessary to develop the port infrastructure of the Northern Sea Route. After its creation, container transportation through the Arctic Ocean should become as commonplace as courier delivery in Moscow.
Stepping on the same rake
Russia is a regional leader and guarantor of regional security. While betting on Russia and China, which support the idea of a peaceful solution to the North Korean problem, South Korea largely balances American methods of solution with the use of force (varying from with sanctions to military operations). However, the paradox of Russian-Korean relations is that the political part of the dialogue has traditionally not been coordinated with the economic one. And where Russia could benefit, at best, it did not receive anything. History may well repeat itself.
Russian territories with advanced development in the Far East, as well as the regime of the free port of Vladivostok, were created in the conditions of a highly competitive environment of the Asia-Pacific region. The Korean investor has a rich choice of preferential regimes in the special economic zones of China, Vietnam, and Korea itself. Yes, Russia has done a lot to turn the Far East into a "territory of special investment rules," which received a "special model of control and supervision activities." But, according to Koreans, the main obstacles to investment activity continue to remain bureaucracy, corruption, underdeveloped infrastructure and disrespect for the right of private property. So far, there are very few South Korean investors in the regio: only nine organizations with a share of less than 5% of total investment in the Russian Far East. Therefore, the Korean initiatives require a comprehensive and balanced development.
Original of publication.
