South Korea to Acquire 34% Stake in Moscow-Pyeonyang Railway Project

South Korea and Russia are going to sign a memorandum of understanding for comprehensive transportation cooperation to utilize the Trans-Siberian Railway (TSR). 

According to an industry source on November 6, as a test project to implement the MOU, a private Korean consortium will enter into North Korea’s Rajin port development. Moscow is known to be considering that Seoul will acquire a maximum 34.3 percent stake in the “Joint Venture for Rajin-Khasan Project,” in which Russia and North Korea invested in at a ratio of 70 percent and 30 percent. If such an arrangement is made due to the advancement of an inter-Korean relationship, Russia would hold a 35.7 percent stake and North Korea 30 percent for the project.

The MOU ultimately aims at securing an Eurasian railway logistics system by connecting Moscow, Bladivostok, Rajin, and Busan. According to the MOU, Busan port will be connected to Rajin via sea route and then connected to Moscow in railway. However, Seoul and Moscow agreed to start the Rajin-Khasan railway project at first, considering the variable of North Korea. Because of the “5-24 Measures,” which prohibit direct investments in the North, Seoul is seeking a way of indirect investment by driving South Korean private sector acquisition of the stakes. POSCO, Korail, and Hyundai Maritime are considered as the candidates. 

In September, Russia re-opened a 54-kilometer track linking the Russian eastern border town of Khasan to the North’s port of Rajin, after a five-year renovation. 

The MOU will be signed officially next week when President Putin visits Seoul. President Putin will arrive in South Korea on November 12 for a two-day visit and hold a summit with President Park Geun-hye. Next week’s summit will mark the second meeting between the two leaders since President Park took office in February. In September, the two leaders met in Moscow at the G20 meeting. During September’s meeting, the two leaders talked about economic cooperation, North Korean denuclearization, and the possibility of the long-discussed ambitious project to link the railways of the two countries via North Korea through to Europe.

Actually, discussions of the project to connect the Trans-Siberian Railway (TSR) with the Trans-Korean Railway (TKR) have been under way for more than a decade, but they have made little progress mainly owing to North Korea's provocations. 
Meanwhile, Anatoly Torkunov, head of Russia's diplomatic school (MGIMO), said in an op-ed piece for China's state newspaper Global Times on November 6, "A railroad route from Busan to Moscow will not only provide a cheap, fast and secure way to transport goods and people across Eurasia, but also ease inter-Korean tensions, thus strengthening security and stability in the entire region," adding, “The renovated Rajin-Khasan link to become a ‘steppingstone for the large-scale modernization of the North Korean railroad network.’"

He went on to say, “Seoul has yet to take practical steps to make this dream a reality though it is demonstrating renewed interest in the railroad project.”