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Korean Economic Interests and Russia

Iam majoring in the economy of South Korea and its economic ties with Russia. Thanks to the Korea Foundation, I have been given a great opportunity to work on my research on "The Economic Interests of the Republic of Korea Towards the Russian Far East," while staying in Korea.

My research involves the investigation of opinions of South Korean scholars and businessmen about the present state and the future of economic relations between South Korea and Russia. For this research, my reference materials include Korean monographs, articles, and reports. I have also interviewed Korean and Russian businessmen about the current economic situation and recent cooperation between Russia and Korea.

Economic Situations of Korea and Russia
South Korea is not endowed with abundant natural resources. On the other hand, Russia is rich in natural resources, especially in the Far East, which is in close proximity to South Korea. The most important of these resources are oil and natural gas. Most Korean businessmen are very interested in the cooperative development of natural resource industries in Russian territory. Thus far, Middle Eastern countries have been the main exporters of oil and gas to Korea. The Korean government and Korea's business leaders see cooperation with Russia's Far East as a means of diversifying their sources of energy.

South Korea has depended on exports for its economic growth, but the recent economic slowdown has forced Korea to search for new export markets. Russia, despite Its social and economic problems, still remains a promising market for Korean goods.

Over the past several decades, wages in Korea have increased significantly, forcing some labor-intensive industries to move abroad, including the eastern territories of Russia.

Continuous efforts to develop economic cooperation between North and South Korea have been a significant factor affecting the relationship between Russia and South Korea. Since Russia's Far East is the closest region for both the North and South (except China), three-party economic cooperation is taking on added relevance. In particular, three-party cooperation is essential to specific projects that have been actively discussed for years.

Development of Energy Resources
With the globalization of the world economy, the most promising forms of cooperation between Russia and South Korea lie in the implementation of joint investment projects related to the development of oil and gas reserves and gas and electricity transmission systems.

Eastern regions of Russia, while rich in potential resources and boasting a favorable geopolitical location, have problems attracting foreign investors and the technology required for the development of raw materials and minerals. The solution to these problems will help to promote the social-economic stabilization of Russia and South Korea, the elimination of regional disparity in Russia, the development of a transport and energy infrastructure, and enhancement of the competitiveness of eastern Russia.

There are three main projects being discussed in Korea regarding the Eastern Russian territories of Sakha, Irkutsk and Sakhalin. Sakhalin has become more and more important during recent years not only for Korea, but for other Asia-Pacific Rim (APR) countries as well. Sakhalin's vast resources are estimated to include 1 billion tons of oil and 3.5 billion tons of gas. It is a small wonder why Korean, Japanese, and American investors are interested in developing this area.

It's clear that, in the case of developing oil and natural gas in Eastern Russia, there must be a means of transporting these resources to East Asia. While there are a number of projects in development for the construction of a pipeline, almost all of them plan to go through North Korea, which will require Pyeongyang's cooperation.

Trans-Siberian and Trans-Korean Railways
Many countries are interested in connecting the Trans-Siberian Railway (TSR) and the Trans-Korean Railway (TKR), especially South Korea, which would stand to gain much through the more economical transportation of export goods to Europe. This single railway would be able to carry cargo from Busan to Germany with virtually no transshipment in only 15 days. At present, the traditional route by sea takes 45 days. The entire route will be electrified, with fiber optic communications being installed for handling all logistical services, including cargo-tracing systems.

The main problem in connecting the TSR and the TKR is not only political, but economic as well. In order to connect the two railways, the TKR must be reconstructed. The North Korean railway must be upgraded in order to connect the Russian and South Korean lines, which will require large-scale investment. Current political uncertainty, in particular concerning North Korea's nuclear weapons development, makes the future of this promising project hard to predict.

Economic cooperation between South Korea and Russia's Far East, then, seems to depend on South Korea's ability to secure the cooperation of North Korea.

Technology is another important field that could benefit from economic cooperation between Russia and South Korea. Russian excels in the fundamental sciences while Korea has a wide range of experiences in the practical application of scientific knowledge in industry. Cooperation in science and technology will enable Korea's fundamental science and technology and Russia's industrial technology to advance simultaneously.

Of course, there are other potential fields of economic cooperation between the two countries, such as trade, investment, and finance, but according to Korean scholars and businessmen, there are not many projects in these fields under discussion for mutual cooperation.

Korean Understanding of the Russian Economy
Most Koreans don't know much about the Russian economy. When I first came here three months ago, I was somewhat surprised to hear many Koreans complaining about the recent state of the Korean economy. Although I was aware of an economic slowdown, I never thought that the situation was that problematic. Sometimes, I even heard that Russia's economic situation was much better than Korea's, because Russia's recent economic growth has resulted from development of its natural resources. Although some economic indexes in Russia are rather optimistic, observers of the Russian economy must consider the following.

The most important thing to remember in understanding Russia's economic situation is the vastness of Russia's territory. Economic, political, and social situations vary in different regions of the country. While in Korea, I've been asked many questions by Koreans and foreigners about Russia and Russians: its weather, climate, habits, the problems of common people. It is not easy for me to give simple answers, as there may be a plethora of responses for one question from the points of view of different regions. Korean businessmen and economists should understand such regional characteristics of Russia when dealing with the Russian economy.

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