Jakarta Globe – Bloomberg, Ekaterina Shatalova & Nicholas Brautlecht, Oct 16,
2013
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| A train operated by OAO Russian Railways arrives for the opening ceremony of a reconstructed rail link between Khasan station in Russia to Rajin Port in North Korea on Sunday, Sept. 22, 2013. (Bloomberg Photo) |
Vladimir
Putin is inching closer to his goal of turning Russia into a major transit
route for trade between eastern Asia and Europe by prying open North Korea, a
nuclear-capable dictatorship isolated for half a century.
Russia last
month completed the first land link that North Korea’s Stalinist regime has
allowed to the outside world since 2003. Running between Khasan in Russia’s
southeastern corner and North Korea’s rebuilt port of Rajin, the 54-kilometer
rail link is part of a project President Putin is pushing that would reunite
the railway systems of the two Koreas and tie them to the Trans-Siberian
Railway.
That would
give Putin partial control over links to European train networks 8,000
kilometers away. The route is as much as three times faster than shipping via
Egypt’s Suez Canal, which handles 17,000 ships a year, accounts for about 8
percent of maritime trade — and is increasingly beset by pirates and political
instability in Egypt and Syria.
“Shipping
companies face higher costs to secure their cargo,” said Thomas Straubhaar,
director of the Hamburg Institute of International Economics, in an e-mailed
response to questions. “The rail route will get attractive if Russia increases
efforts to ensure a secure and reliable transport on the long stretch between
Asia and Europe. Customers don’t want their Porsche to be stolen along the
way.”
OAO Mechel,
Russia’s biggest supplier of steel-making coal, will be among the customers in
the first stage of the North Korea project, sending shipments eastward to Asian
consumers, according to Moscow-based Russian Railways. The Rajin facility also
can be refitted to move Asian goods westward to Europe. Mechel’s press service
in Moscow declined to comment.
Shipments
to and from western Europe and Rajin will be delivered in just 14 days,
compared with 45 days by ship, OAO Russian Railways Chief Executive Officer
Vladimir Yakunin told reporters in North Korea Sept. 22.
Getting the
two Koreas to work together on the railway and a long-stalled plan to build a
pipeline to supply both Koreas with Russian natural gas is fraught with
financial and political hurdles, said Fyodor Lukyanov, head of the Council on
Foreign and Defense Policy research group in Moscow. They stem from North
Korea’s nuclear weapons program and lingering animosity from the 1950-1953
Korean War.
“Russia’s
position is to get North Korea involved in profitable projects to make them
realize that cooperation is better than isolation,” Lukyanov said by phone from
the Russian capital.
Nuclear
development
North Korea
is under United Nations sanctions for its atomic program. Six-nation talks that
were designed to remove nuclear weapons from the peninsula were abandoned in
2009, when it detonated another device. The Koreas are technically still at
war, having ended their military conflict with an armistice rather than a
formal peace treaty. In 2003, the two countries opened a highway through their
demilitarized zone, one of the most heavily armed borders in the world.
“The Korean
project is strategically important for Russian Railways,” said Igor Golubev, an
analyst at OAO Promsvyazbank in Moscow. “But it shouldn’t expect fast returns
on its investment because at this point I doubt global companies are willing to
risk sending cargo via North Korea.”
While
Russian Railways says time savings will make up for the higher costs compared
with the Suez route, the services train operators already run between China and
Europe are too costly, said Michael Tasto, an economist at the German Institute
of Shipping Economics and Logistics. They thus lack the capacity to take major
market share from container-shipping companies such as A.P. Moeller-Maersk.
“The rail
route is faster but more expensive, so it will probably become a niche
product,” Tasto said by phone Oct. 7. “Cargo trains are not mass-transportation
vehicles like container ships.”
None of
that has stopped Russian Railways and its partners in the European Union and
China from developing new links between the world’s two largest exporters,
touting the routes as alternatives far removed from the political instability
in Egypt and the wider Middle East.
Far East
Land Bridge, a Russian Railways venture, opened a new service between Suzhou in
eastern China and Warsaw on Sept. 30. The first shipment, of “electronic and
technology items,” will make the 7,600-kilometer journey in 14 days, linking
with the Trans-Siberian via Mongolia and reaching Poland through Belarus, the
Vienna-based company said in a statement Oct. 7.
Direct link
Russian
Railways and its counterparts in China and Germany in August introduced a
direct link between Hamburg and Zhengzhou in north-central China that takes as
little as 15 days and travels through Kazakhstan, Russia, Belarus and Poland.
“Our goal
is a daily service,” Ruediger Grube, CEO of Deutsche Bahn, said after 51
shipping containers of goods from China arrived in Hamburg by train on Aug. 2.
The Russian
and German rail operators opened an 11,000-kilometer service between Chongqing
in southwest China and the German transport hub of Duisburg via Kazakhstan,
Russia, Belarus and Poland in 2011. The travel time varies from 16 days to 23
days, according DB Schenker, Deutsche Bahn’s cargo unit.
Major
customers include BMW, which ships auto parts west to factories in China, and
Hewlett-Packard, which transports computers the other way.
While the
Chongqing line is focused on shipments between Europe and China, the Korean link
caters to traffic between Europe and the rest of eastern Asia, Russian Railways
said. China, Japan and South Korea together account for about a quarter of the
global economy.
Korean
support
Putin has
urged South Korean President Park Geun Hye, who assumed office in February, to
work with North Korea on relinking their rail networks, most recently last
month at the Group of 20 summit in St. Petersburg. Park publicly affirmed her
commitment to reunifying the Trans-Korean when she met with officials in Busan,
South Korea’s largest port, in July.
Putin plans
to make his third state visit to Seoul for talks with Park in mid-November,
Chosun Ilbo reported Oct. 1, without saying where it got the information.
Dmitry Peskov, Putin’s spokesman, declined to comment on the report.
North and
South Korea resumed cross-border rail service in 2007 for the first time in 56
years amid a mood of detente, though North Korea closed it down after 18 months
and hasn’t reopened it since.
“I have
personally dreamed of a railway that starts at Busan and reaches Europe via
Russia,” Park told Putin at the summit, according to the website of her
presidential Blue House office. “It is an important agenda item for the new
government to strengthen Eurasia cooperation.”
Bloomberg
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