North Korean Economy Watch

In the old days, the DPRK nurtured its independence by alternating its allegiance between China and Russia, playing the big boys off each other.  Today, China clearly holds more influence in the DPRK in terms of trade and direct political influence.  In fact, China and the DPRK are involved in several hydro-power projects on the Yalu river.  Perhaps energy subsidies are a way for Russia to regain a foothold in the DPRK and protect its direct link to Pyongyang and potential land links to Seoul. 

On an economic note, this kind of behavior is typically called “dumping” in the west and it is not allowed under WTO rules.  But both parties are clearly better off if the deal goes through.  This should tell us something about our Anti-dumping trade rules in the west as well. 

But this is all just silly speculation on my part.  Here is the article from the Joong Ang:

July 04, 2006
KHABAROVSK, Russia ― Russia has been in discussions with North Korea to supply it with surplus electricity, Russian officials at a state-owned electric power company recently told the JoongAng Ilbo. In return, North Korea would provide Russia with natural resources.

“We have been discussing exporting surplus electricity from the far eastern district of the country to North Korea,” Victor Minakov, president of Vostokenergo, the far eastern branch of the United Energy System of Russia, said in an interview last week in Khabarovsk.

“The fastest and most efficient way to resolve North Korea’s electricity problem is to supply electricity from Russia,” Mr. Minakov said.

According to Mr. Minakov, negotiations have been delayed because Russia initially asked North Korea to pay cash for the electricity, and then asked it to cover the expenses for building power transmission lines, neither of which the North could afford.

However, the negotiations resumed after Pyongyang offered to pay for the electricity with natural mineral resources. “Representatives from the Russian energy company will visit Pyongyang at the end of this month for further discussions on detailed matters,” Mr. Minakov said.

The far eastern area of Russia, reportedly has around 300,000 kilowatts of surplus electricity, and the government plans to further improve productivity there by building more power plants. Russia and North Korea has been negotiating on the supply of electricity since 2001.

Russia plans to build a 370-kilometer (229-mile) power transmission line between Vladivostok, Russia, and Chongjin, North Korea, to supply 300,000 to 500,000 kilowatts of electricity. Building power transmission lines and converters would take three years, and cost at least $200 million.

“It costs much less to supply electricity from Russia to North Korea than from South Korea to the North or through the programs of the Korean Peninsula Energy Development Organization,” Pavel Korovko, vice president of Vostokenergo, said on June 27 at a seminar in Khabarovsk.

The Korean Peninsula Energy Development Organization was dissolved recently after failing to build light water reactors in North Korea under the terms of a 1994 agreement between North Korea and the United States.