Daily Management Review

North Korea's Special Economic Zone Is About To Rebound In New Commerce With Russia


North Korea's Special Economic Zone Is About To Rebound In New Commerce With Russia
The Rason Special Economic Zone, which was once a test of limited capitalism in North Korea, seems to be the hub of the isolated nation's expanding cooperation with Russia, experts believe, possibly involving the transfer of weapons for the conflict in Ukraine.
Before tighter sanctions took effect and pandemic-era border closures choked off nearly all trade and tourism, the Rason Special Economic Zone (SEZ), established in the 1990s on the border with China and Russia, was a dream destination for many North Koreans, according to two experts who study Rason. It featured apartment blocks and booming markets flooded with imported goods.
Ships have started docked at the location for the first time since 2018, and satellite data indicates that trade from the port and a rail line to Russia has increased. These developments are strong indicators that the area is ready for a rebirth.
While China's far larger economy and closer historical ties to North Korea may seem like the logical catalyst for Rason's resurgence, experts believe that China's growing cooperation with Russia may have a more immediate effect.
"Now that North Korea and Russia are becoming very close against the backdrop of the Ukraine war, Russia might send more tourists to North Korea, which can reinvigorate tourism (in Rason)," said Jeong Eunlee, a North Korea economy expert at South Korea’s government-run Korea Institute for National Unification.
According to Jeong, if more North Korean labourers are permitted to cross the border, they may bring Russian goods and medication home for family members to resell. Russia can also sell coal, oil, and grain through Rason.
It was announced by the Russian Federal Customs Service that it has "temporarily suspended the publication of foreign trade statistics".
The Korea commerce Investment Promotion Agency (KOTRA) of South Korea reports that 97% of North Korea's total commerce in 2022 came from China.
However, Russia started selling refined petroleum to North Korea again in December 2022, and by April, 67,300 barrels had been shipped there, according to United Nations data—the first such exports since 2020.
Rason, a town of roughly 200,000 people, is a hub for the resale of Russian wood cut by North Korean loggers to China, according to Lee Chan-woo, a specialist on North Korea's economy at Teikyo University in Tokyo.
Russian sway in Rason is expected to increase, according to Cho Sung-chan of Hananuri, a South Korean organisation that has funded a food processing plant there.
"Assuming North Korea and Russia's honeymoon period becomes a long one, North Korea could get Russian support on food, energy and infrastructure through Rason," Cho said.
Following a November meeting with North Korean officials in Pyongyang, Alexander Kozlov, Russia's minister of natural resources, stated on his Telegram channel that the two nations discussed extending commerce and testing the delivery of meat products next year.
Russian ships connected to that nation's military supply chain have been calling at Rason's port since August, according to claims from Western experts using satellite images as well as statements from South Korean and American authorities.
According to the reports, those ships are thought to be carrying military supplies from North Korea to Russia. Such shipments have been disputed by the Kremlin.
According to South Korean military officials, North Korea has delivered Russia an estimated 2,000 containers thought to be carrying artillery rounds and perhaps short-range missiles from Rason's port.
Rason's Tumangang station, which has rail connections to Russia, has been the subject of activity since late 2022, according to Chung Songhak, a senior researcher at the Korea Institute for Security Strategy who examines satellite photos of the area.
Citing satellite data, Chung stated that additional train carriages were observed following the July visit of the Russian minister of defence to Pyongyang. She also added that potential new cargo facilities appeared in May.
According to Kozlov, when leader Kim Jong Un visited Russia in September, they talked about resuming a joint logistics project that had been put on hold in Rason, as well as constructing a new road bridge that would connect it to Russia and supply more grain.
North Korean officials have attempted to draw investment to Rason ever since Kim's grandfather, Kim Il Sung, declared it a special zone in 1991 following the fall of the Soviet Union and as China opened up more.
North Korea has 29 economic development zones, the largest and oldest of which is Rason. Its efforts to draw in international investment have been crucial.
According to analysts and official North Korean publications, it contains one of the country's oldest and largest markets, housed the nation's first mobile network, and is the only location where buying and selling real estate was made legal in 2018.
The National Institute for Unification Education in South Korea claims that weak infrastructure and international sanctions have caused the other zones to perform poorly.
Pastor Abraham Choi, a Korean American who works on religious relations with North Korea, reported seeing both Chinese and Russian tourists in Rason in 2015.
According to reports in the South Korean media, vehicles were beginning to enter Rason once it reopened in January 2023. According to Choi, there hasn't been any indication of significant international visitor groups to Rason yet.
According to Lee from Teikyo University, after years of crippling limitations, North Koreans may find hope in the special economic zone, regardless of which foreign nation assisted in reviving it.
"Rason took a harder hit than other places in North Korea because it used to be on the front lines of the opening," Lee said. "Now many businesses have collapsed there, but as soon as the border fully reopens, North Koreans might think that the paradise can come back."