BOFIT Viikkokatsaus / BOFIT Weekly 2019/18

On April 25, Vladimir Putin hosted North Korea’s leader Kim Jong-un in Vladivostok. He then continued to Beijing to participate in the Belt and Road Forum which is a meeting of countries who participate in the initiative led by China.

Putin discussed security issues and economic relations with Kim, although compliance with international sanction policy against North Korea restricts cooperation between the two countries. Even so, a large number of North Koreans are reportedly already employed in the Russian Far East, especially at constructions sites. In addition, by controlling a piece of land between its neighbours, North Korea has some regional economic leverage. Possible rail and gas pipeline connections between Vladivostok and South Korea would have to cross its territory. Natural gas is already shipped by sea from Russia’s Sakhalin Island to South Korea, but this requires liquefaction and regasification and is more expensive. However, pipes or tracks are unlikely to be built in the near future.

In connection with the Beijing forum, the Russian energy company Novatek announced that two Chinese state-owned oil companies, CNODC and CNOOC, would each be taking a 10 % stake in its planned Arctic LNG 2 gas liquefaction facility. The French energy company Total also committed earlier this year to a 10 % stake. According to the current plan, the facility would be built on the coast of the Gulf of Ob at the Arctic Sea and begin production in 2023. Novatek’s new Yamal LNG facility has already started production on the opposite side of the gulf.