[Analysis] New sanctions on North Korea sound a death knell for Rajin-Hasan economic project 

Posted on : 2016-03-09 17:36 KST Modified on : 2016-03-09 17:36 KST
Relations with Russia could be harmed by the South’s additional measures to cut off NK’s sources of foreign currency
Trucks cross a bridge from Dandong
Trucks cross a bridge from Dandong

The maritime controls, which are one of the additional sanctions that South Korea announced it would take against North Korea on Mar. 8, constitute a death sentence for the Rajin-Hasan Project. The project was a trilateral logistics venture among South Korea, North Korea and Russia that was initiated by an agreement between the leaders of South Korea and Russia.

South Korea’s relations with China have already cooled because of the possible deployment of the THAAD (Terminal High Altitude Air Defense) missile defense system on the Korean Peninsula, and now ties with Russia are starting to fray as well.

On Tuesday, Seoul announced a set of punitive measures against North Korea that include financial sanctions, maritime controls, import and export controls and a campaign to boycott North Korean businesses. The majority of these measures are simply a stricter enforcement of the May 24 Measures, sanctions which have been in effect since 2010, or are unlikely to be effective, many analysts say.

The financial sanctions will not have any bite since the North Korean individuals and organizations that they blacklist do not have any assets inside South Korea.

The controls on importing and exporting North Korean goods are already in effect as part of the May 24 Measures, while the boycott on North Korean restaurants in China and other countries had already been recommended by the South Korean government immediately after North Korea’s fourth nuclear test.

The sanctions that might get some results, however, are the maritime controls. If South Korea blocks vessels from third countries that have called at North Korean ports from entering South Korean ports, the Rajin-Hasan Project cannot go forward.

The logistics project involves transporting bituminous coal mined in Russia by rail to the North Korean port of Rajin and then by ship to the South Korean ports of Pohang or Busan.

In a summit in Seoul in 2013, Russian President Vladimir Putin and South Korean President Park Geun-hye agreed to go ahead with the project. Shortly afterward, South Korean companies POSCO, Korail and Hyundai Merchant Marine signed an MOU to take part. As of the end of 2015, three test shipments had taken place.

Concerned that the project would not be profitable, the three South Korean firms involved in have repeatedly asked the government for assistance from its inter-Korean cooperation fund. Since the project undergirds President Park’s Eurasia Initiative, the government has continued to review the possibility of investing money from the fund into it.

The problem is a potential backlash from Russia. Just as Park’s remarks about deploying THAAD provoked China, pulling out of the Rajin-Hasan project is expected to have considerable consequences for South Korea-Russia relations.

Park reconfirmed her support for the project when she met Putin in Paris in Dec. 2015, and Russia has been prioritizing the project for strategic reasons, as a key component of its new policy for East Asia. Russia even pushed back the schedule for adopting the sanctions resolution against North Korea at the UN Security Council in order to salvage this project.

But by categorically stating that any ship from a third country that has been to a North Korean port will not be permitted to enter a South Korean port for 180 days, Seoul has sounded the death knell for the Rajin-Hasan Project.

“We have already provided affected countries - including the US, Japan, Russia and China - with an explanation of our measures,” said South Korean Foreign Ministry spokesperson Cho June-hyuck during the regular press briefing on Tuesday, suggesting that Russia received advance notification of the additional sanctions.

There is also a possibility of more diplomatic friction with China. The vessels that will be subject to the maritime controls are vessels from third countries that call at North Korean ports before visiting South Korean ports. According to government figures, 66 vessels from other countries stopped at North Korean ports before entering a South Korean port on 104 occasions last year, with most of them transporting steel and miscellaneous goods. The majority of these vessels were flying the Chinese flag.

The controls on imports and exports to North Korea will be taking place through strict enforcement of the May 24 Measures.

The plan is to completely shut down the secret importing of North Korean goods into South Korea - transported indirectly through China and other countries - that has taken place since the May 24 Measures were implemented.

The government announced that it had detected North Korean products being smuggled into South Korea on 71 occasions from the time the May 24 Measures took effect through Oct. 2015.

These controls are neither new nor significant in scale.

The South Korean government also urged its citizens to refrain from patronizing North Korean restaurants and other for-profit establishments that are being operated in China and other foreign countries.

This is the second time that Seoul has made this recommendation since North Korea’s fourth nuclear test in order to prevent North Korea from earning foreign currency.

It is not illegal [for South Koreans] to eat at North Korean restaurants.

By Kim Jin-cheol and Kim Ji-eun, staff reporters

Please direct questions or comments to [english@hani.co.kr]

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