Expert Speak Raisina Debates
Published on Jun 15, 2020
The positions of Russia and South Korea on regional affairs — given their respective relations with the China and US — will have a bearing on how their geopolitical goals align in the coming years.
Russia-South Korea relations: Prospects and challenges

The year 2020 marks the 30th year of establishment of diplomatic relations between Russia and South Korea. In recent years, policy decisions by both sides have seen an enhanced focus on increasing cooperation. In 2012, Russia turned its attention to ‘pivot to the East’ and in 2016 announced its intention to set up the Greater Eurasian initiative. The 2017 election of President Moon Jae-in saw South Korea announce its New Northern Policy (NNP), to improve ties with northern neighbours, in which Russia is a ‘key partner.’

The Russian pivot to East was envisaged to develop the Russian Far East, to better integrate into the developing economies Asia-Pacific region as well as to increase Moscow’s strategic presence in Asia. The Greater Eurasian initiative is a broader foreign policy vision encompassing a vast region from the Atlantic to the Pacific. To fulfil its vision, Russia wants to extend cooperation of the Eurasian Economic Union (EAEU) with other ‘interested’ parties. After the less than effective implementation of South Korea’s Eurasian Initiative announced in 2013, President Moon has once again turned attention to the region. These policy decisions have since set the stage for interaction between Moscow and Seoul for the coming years.

The leadership in Moscow sees South Korea as an important investor and economic partner, especially for the economically underdeveloped Russian Far East.

In 2018, for the first time in two decades, the South Korean president went on a state visit to Russia. As part of regular consultations, strategic dialogue takes place between deputy foreign ministers. The ROK-Russia Far East and Siberia Subcommittee seeks to find ways to improve cooperation between the two countries in the region. Apart from this, South Korea is also a regular participant at the Eastern Economic Forum (EEF), where in fact, the NNP was announced in 2017. The EEF was set up in 2015 to attract investment into the Russian Far East (RFE) for its economic development and to promote Russian economic relations with the Asia-Pacific, a year after crippling Western economic sanctions were imposed on it following the Ukrainian crisis.

The leadership in Moscow sees South Korea as an important investor and economic partner, especially for the economically underdeveloped RFE. It is the seventh largest trade partner of Russia. Economic ties in the 2000s entered a ‘full-blown growth stage,’ as South Korea invested both capital and technology in the post-Soviet state. Both the countries also realise the value of each other in the evolving geo-strategic situation in Northeast Asia. This makes the future development of bilateral ties of particular importance to both countries.

A largely unchanged trade structure — of Russia supplying natural resources and importing finished products — makes the volumes vulnerable to price fluctuations.

The bilateral trade has shown an upward trend with the goal to reach $30 billion trade by 2020 — a figure that looked achievable given the recent trajectory — until the pandemic hit. But with a largely unchanged trade structure — of Russia supplying natural resources and importing finished products — it makes the volumes vulnerable to price fluctuations. The COVID-19 pandemic, which has led to a crash in commodity prices will have an adverse impact on trade figures.

Russia South Korea Bilateral Trade (USD billion)

Source: UN Comtrade

As part of NNP, South Korea proposed the 9-bridges strategy for cooperation with Russia, listing the areas of focus to include “gas, railways, seaports, electricity, Arctic shipping routes, shipbuilding, industrial complexes, agriculture and fisheries.” The idea is to use these bridges to enhance connectivity and infrastructure from South Korea to the wider Eurasia. Russia too has expressed willingness to cooperate in these sectors, looking forward to investment and technology from South Korea, especially with a focus on RFE. However, Seoul’s investments in the region remain at a low level, despite efforts by the former to encourage its businesses to invest in the region.

The western sanctions have meant a reduction of cooperation in critical areas for Russia — energy, investment and advanced technology.

Overall, South Korea’s investment in Russia stood at a cumulative level of $2.7 billion in 2019. Looking at the yearly distribution as well, FDI levels have been low. This has been attributed to factors including stagnation in Russian growth and risks associated with Western sanctions, even though Seoul has not directly imposed sanctions on Russia. When it comes to the RFE in particular, in addition to these factors, the high production costs, lack of infrastructure, outmigration, small market size have also contributed to the problem. The western sanctions have meant a reduction of cooperation in critical areas for Russia — energy, investment and advanced technology.

FDI in Russia by South Korea (USD million)

2019 (till Q3) 34
2018 110
2017 59
2016 83
2015 116
2014 130
2013 71
2012 119
2011 -270
2010 318

Source: Bank of Russia

Russia remains an important oil and gas supplier to a country that imports 98% of its energy needs, though one of many and far from being the dominant player. In 2019, Seoul’s top three oil suppliers were Saudi Arabia, Kuwait and the US, with a steady rise in imports from the US. Key LNG suppliers include Qatar, Australia, Indonesia, Oman, Nigeria, and Russia. Given the rich natural resources of RFE, potential exists to further improve the bilateral energy trade.

Talks regarding an EAEU-South Korea FTA are ongoing and so are those related to Russia-South Korea FTA in the service and investment sector. Experts argue that signing of an FTA will have a positive impact on the trade and investment levels. But Russia remains concerned about the ability of EAEU countries to increase their exports to Seoul as compared to the opposite scenario, wanting to see a rise in investment before making more commitments. The Arctic has become a close area of cooperation, with the first Korea-Russia Arctic Consultation being held in 2017. This includes discussion over ‘Arctic routes, gas development and shipbuilding.’

The Arctic has become a close area of cooperation, with the first Korea-Russia Arctic Consultation being held in 2017.

Meanwhile, as the discussion on economic issues continues between the two countries, geopolitical situation in Northeast Asia poses its own challenges. Both Russia and China oppose the placement of THAAD missile system in South Korea. The two strategic partners, who have become increasingly closer as their relations with the US have suffered, in 2019 led first-ever joint air patrol over East China Sea. During this patrol, South Korea accused Russian planes of entering its air defence identification zone, leading to suggestion about setting up a military hotline to avoid any unintended escalation.

For Russia, its proximity to the Korean peninsula makes the issue of peace and stability an important security matter. As a member of the UNSC, it is also involved in the North Korean nuclear issue. Its influence in recent years on the matter has seen a relative decline, particularly since the six-party talks stalled in 2009. Current policy of Russia has focused on coordinating its actions with China — even coming up with a joint initiative that was discussed with South Korea — even as it has become increasingly closer to the rising power.

Both Russia and China oppose the placement of THAAD missile system in South Korea.

The 2018 Panmunjom Declaration calls for a quadrilateral meeting involving US and China but does not mention Russia. Moscow would prefer a broader multilateral framework, which hasn’t materialised as yet, and continues to make efforts to talk to both the Koreas on this issue. Meanwhile, the trilateral projects envisaged between Russia and the two Koreas in areas of gas pipeline, electricity and railway remain stalled due to UN sanctions.

In a positive development, South Korea did not join the US sanctions against the former superpower despite being an American treaty ally, instead focusing on using Russia’s focus on its Far East to further its own Eurasian initiative. For Russia, this is an opportunity to diversify its relations in the strategically critical Northeast Asia instead of being over-dependent on China. For Seoul, apart from the economic dimension of NNP, it is also a mean to boost its presence as a middle power in Asia in helping it “shape the regional geopolitics.” This has raised hopes for giving an impetus to Russia-South Korea relations, as they seek to find convergences in their economic and geopolitical goals.

It must be noted that this will not be an easy task, given that the relations are yet to reach a new qualitative level. In the economic domain, this would entail envisioning specific projects with a pre-determined timeline, forward movement on FTA, enhanced energy trade and investment, improving business situation in RFE to name a few.

The North Korean issue, East China Sea, Taiwan — all threaten to upset the peace in Northeast Asia.

The geopolitical dimension would be even more complicated in a pandemic-stricken world, as the regional order undergoes a change, with heightened rivalry between the established and the rising power. The North Korean issue, East China Sea, Taiwan — all threaten to upset the peace in Northeast Asia. As neither Russia nor South Korea find themselves to be rule-setters in the prevailing order, they will need to build diversified ties across the region. The positions of Russia and South Korea on regional affairs — given their respective relations with the China and US — will also have a bearing on how their geopolitical goals align in the coming years.

As of now, their relations are “neither very close nor deep” even though intent has been shown by both sides to rectify the situation. In the 30th year of establishment of diplomatic relations, much remains to be done to make the relations truly strategic in nature.

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Contributor

Nivedita Kapoor

Nivedita Kapoor

Nivedita Kapoor is a Post-doctoral Fellow at the International Laboratory on World Order Studies and the New Regionalism Faculty of World Economy and International Affairs ...

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