North Korea’s new leadership supports an agreement on the proposed extension of a Russian pipeline into North and South Korea.
Kim Jong-un, North Korea’s recently appointed 29-year-old “supreme leader of the party, state and army” is looking favorably to gas pipeline construction from Russia that would run across the Korean Peninsula, Russian Ambassador in Pyongyang Valery Sukhinin told reporters last Friday.
“Talks between Russia’s state-run Gazprom and the oil industry ministry from the North Korean side are taking place,” he said.
Russia wants to construct a pipeline that would carry as much as 10 billion cubic meters of gas a year to South Korea via the North, which would earn transit revenues. Russia may also build a power grid along the route. According to estimations, the pipeline would cost US$3.4 billion to construct.
Talk of building a pipeline that would deliver Russian natural gas to South Korea by way of North has been going on for decades. Korea Gas Corporation, the world’s biggest importer of liquefied natural gas, and Gazprom have been trying to identify a supply route since at least 2003, when they signed a cooperation accord.
But the project gained new momentum when Kim Jong-un’s father, Kim Jong-il (who died on December 17 last year), agreed to the gas pipeline at a meeting with Russian President Dmitry Medvedev near the Siberian city of Ulan-Ude last August.
Following that meeting, officials in South Korea’s energy sector made it clear that they too want to see the pipeline finally built. The president of South Korea’s state-run Korea Gas Corp. met with representatives of Gazprom last September.
In November 2011, North Korea’s Deputy Oil Industry Minister Jeong Cheol Yong visited Moscow to hold the first meeting of the so-called joint working group with Gazprom charged with the project. The second meeting of the group expects to be held in Moscow alongside North Korean envoy Lim Sung Nam’s official visit to Russia scheduled for next week.
“Moscow is willing to pay North Korea for facilitating Russia’s economic link with the South, and that is all. This project is indeed acceptable to the North, since it will mean easy money for transit, it is favorable to Russia, and it will be good for the general situation since it will bind Russia, North and South Korea closer,” Russia native Andrei Lankov, a North Korea analyst at Seoul’s Kookmin University, writes in his column at eastasiaforum.org.
Meanwhile, trade volume between Russia and North Korea was a mere US$110 million in 2010. As international trade goes, this volume is tiny. By comparison, in the same year North Korea’s trade with China was around US$3.4 billion, some 30 times larger than its trade with Russia.
Meanwhile, South Korean gas demands continue to grow.
“Most of the gas is from the shipping from Europe and West Asia. Those options are very costly. When we can get gas from Russia through North Korea, it’s more cost competitive,” said Hee-chan, energy analyst at the Samsung Economic Research Institute in Seoul.
Russia has also proposed its Trans-Siberian Railroad to South Korea via the North, opening up an “Iron Silk Road” that would cut shipping costs of South Korean companies to Europe.
However, some observers say that considering current tensions on the Korean Peninsula, savings might not outweigh the risks of dealing with the communist state.