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Wednesday, October 5, 2011     GET REAL

North Korea leveraging its location to geopolitical, financial advantage

By Lee Jong-Heon, special from

North Korea is maximizing its geopolitical leverage to boost competitions among neighboring China, Russia and South Korea, which could provide massive economic benefits but threaten the fate of the isolated nation.


An aerial view of the East Siberian Pacific Ocean (ESPO) pipeline on Oct. 2, 2010.     Reuters/Jessica Bachman
North Korea, which occupies the northern half of the Korean peninsula, blocks all land routes to its arch rival and prosperous South Korea. Without passing the North's territory, the South could not reach the Trans-Siberian railway through which it could deliver products to Europe, the second-biggest market for Seoul, a route that avoids the piracy-plagued Straits of Malacca.

Russia has much interest in the South Korean market, especially when it comes to the sale of natural resources, but it has no way but to use a costly and time-consuming sea route unless the North opens a land route.

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China, which is launching a massive project to turn the vast northeastern inland region into a major industrial and logistics center, desperately needs a maritime outlet. That's why China has bought the right for exclusive use of a pier in the North's east port of Rajin, which gives China access to the Pacific dominated by the United States and Japan.

China's access to the Rajin port triggered geopolitical concerns in Russia because Chinese navy ships and vessels could sail near Vladivostok which houses the headquarters of Russia's Pacific naval base. This prompted Russia to buy the right for exclusive use of another pier in the Rajin port, which provided much need-cash for the North.

The North is now offering its geographic location in a much broader project for Russia to supply natural gas to the South though an overland pipeline across the communist nation.

Russia and the South are eager to extend the Siberian gas pipeline to the South through the North because it is "the most economically efficient route." According to South Korea's state-run gas monopoly Korea Gas Corporation (KOGAS), its joint research with Russia's Gazprom shows delivery costs of Siberian gas to South Korea through a pipeline via North Korea are just 33 percent of shipments in the form of liquefied natural gas (LNG).

In September 2008, KOGAS signed a memorandum of understanding with Gazprom to buy 10 billion cubic meters of gas annually for a 30-year period beginning as early as 2015. The deal was signed on the sidelines of the summit in Moscow between South Korean President Lee Myung-Bak and his Russian counterpart Dmitry Medvedev.

A cross-border pipeline would make South Korea the biggest gas market for Russia, which has been seeking new gas outlets in Asia and the Far East to globalize its gas trade and reduce dependence on sluggish European energy markets. South Korea is the second-largest LNG only after Japan, and the fifth biggest crude oil buyer.

But the PNG (pipeline natural gas) project remained stalled due to Pyongyang's reluctance and UN-mandate sanctions following its nuclear and long-range ballistic missile tests in 2008.

Eager for the PNG project, Medvedev sent his personal message this summer to North Korean leader Kim Jong-Il to propose a summit, according to a diplomatic source in Seoul. The Russian leader traveled more than 5,600 km from Moscow to meet Kim Jong-Il on Aug. 24 in the Siberian city of Ulan-Ude in which Kim agreed to the Russia-proposed PNG project.

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