The Emerging Alliance of the Aggrieved – Russia and North Korea
Alliance of Convenience | Russia/North Korea quid pro quo | Chinese Interests
Dear BWR Subscribers,
“Barbershop Whispers….Russia” begins with “My Takeaways” on the main topic, followed by the main topic discussion. The last two sections of “Barbershop Whispers…Russia” are “Follow-ups” regarding previous publications and “Quick Bites” briefly addressing emerging events.
In last week’s BWR, I discussed Gazprom's financial struggles. It reported a record $6.8B loss, the first in nearly 25 years. Why, and what are the options for recovery?
In this week’s BWR, I discuss the flowering alliance of convenience between Russia and North Korea.
Takeaways:
ALLIANCE OF CONVENIENCE: Putin needs matériel for his war on Ukraine, and Jong Un needs acceptance from global leaders—food and heating oil is secondary to Jong Un. Putin is building alliances with other Western-sanctioned countries—Iran, Cuba, and Venezuela—based on grievances against the West to win his war against Ukraine. Putin has a sympathetic audience, but is the quid pro quo compelling? It is for Jong Un.
GLOBAL ACCEPTANCE: Both Putin and Jong Un crave Western acceptance and feel aggrieved by the West in its absence. Putin, more so for many reasons, starting with the fact that he was once an accepted member—G7 to G8—now G7.
RESOURCE LIMITATIONS: Putin realizes Russia’s resource limitations, e.g., production, financial markets, etc. An extraction economy does not equal a global economic and military power. It remains to be seen if he understands his dependence on China and its ultimate cost. China influences North Korea by virtue of its control over the economy, not Russia.
Russia’s relationship with North Korea dates back to 1945 when Stalin appointed Kim Il-sung, Kim Jong Un’s grandfather, as the leader of the Northern partitioned Korean peninsula, which later in 1948 became the Democratic People’s Republic of Korea (DPRK)—North Korea. The Korean peninsula was partitioned by the US and the Soviet Union after the Japanese surrender in 1945. The US and the Soviet Union agreed to a temporary partition of the peninsula at the 38th parallel. The Korean War and subsequent armistice evolved into a “permanent” 38th parallel that exists today. North Korea and South Korea are still at war.
Despite decades of Soviet military and financial support, e.g., MiGs, pilots, money, etc., during and after the Korean War and up until the collapse of the Soviet Union, the bilateral relationship between North Korea and the Soviet Union was distant and transactional.
In 2000, Vladimir Putin was the first Russian president to visit North Korea. In 2001, Jong Un’s father, Kim Jong-il, reciprocated Putin's visit by traveling by train to Moscow and again to Vladivostok in 2002.
This past week was Putin’s first visit to North Korea in 24 years. According to South Korea’s Unification Ministry, and as reported by Reuters, Putin’s visit was preceded by more than two dozen high-level government delegation exchanges—including 18 in 2024 alone and two trips to Russia—by Jong Un.
As the Russia/North Korea relationship of convenience blossoms, it is also essential to understand the region's trade dynamics. China represents 97% of North Korea’s trade, essentially a monopoly. In 2022, North Korean exports to China totaled $134M—57% of which were wigs, false beards, eyebrows, and lashes, representing 86% of China’s imports of these products. This contrasts with $1.4B in exports from China to North Korea. In the meantime, South Korea has become more economically significant for Russia and China. In 2022, Russia’s trade with South Korea (mainly energy exports) totaled $21B, while China’s trade with South Korea reached $310B.
During his one-day visit to North Korea, Putin and Jong-Un signed the “Treaty on Comprehensive Strategic Partnership”, which included economic and military cooperation. Most importantly, clause 4 of the agreement pledges “mutual aid” in the event of aggression. Putin’s press statement from Pyongyang this past week read:
“The Treaty on Comprehensive Partnership signed today contemplates, among other things, mutual assistance in the event of aggression against one of the parties thereto.”
The “Strategic Partnership” may open the door for North Korean “volunteers” in the Ukrainian theater and North Korean migrant workers in Russia. This would alleviate the need for another Russian mobilization and further insulate the Russian public from Putin’s war. Secondly, North Korean migrant workers may help resolve the Central Asian migrant worker and labor shortage in general. There are already migrant workers in Russian-occupied Donbas, and there has been a steady flow of North Korean migrant workers in the Far East.
It should be noted that Putin had promised Jong Un a visit in September 2023. Putin allegedly planned to stop in Pyongyang—North Korean capital—last month after he visited with Chairman Xi Jinping in Beijing but was advised not to by the Chinese. Xi is careful not to be seen to coordinate with or provide overt support for the rogues—Putin and Jong Un—given the current weak state of the Chinese economy and risk his ambition to supplant the US as the largest global economy. China, arguably the second-largest economy in the world, will not achieve global economic dominance with the support of two lagging economies—Russia and North Korea. On the contrary, Xi will need economic cooperation and integration of global economic leaders such as South Korea and Japan. Xi casts a wary eye toward the Putin-Jong Un relationship for this and other reasons and is watching it closely.
By the same token, Putin’s alliance with Jong Un threatens Russia’s economic relationship with South Korea. However, Putin does not seem to care about his economic relationship with South Korea, given his stern warning in his press statement from Pyongyang to South Korea about providing matériel to Ukraine.
“I would like to draw your attention to the statement from the United States and other NATO countries about the supply of long-range weapons…for delivering strikes at Russian territory…the Russian Federation does not rule out developing military and technical cooperation with the Democratic People’s Republic of Korea…Our Korean friends take objective and balanced stance on Ukraine settlement and understand the true original causes of this crisis. The DPRK leadership’s course once again confirms that the DPRK truly pursues independence, autonomy and sovereignty.”
South Korea estimates Jong Un has sent 6,700 containers of old artillery ammunition and short-range rockets to Russia. This translates into approximately 3M rounds of 152mm artillery shells or 500,000 rounds of 122mm artillery shells, filling the Russian production shortage. In exchange, North Korea is receiving food, oil, and work for North Koreans. More importantly for Jong Un, he receives global attention and recognition as a “global leader,” albeit in the rogue and aggrieved dictator category.
For both Putin and Jong Un, there is also the knowledge transfer of Western sanctions evasion techniques and methodologies. This knowledge transfer is not limited to Russia and North Korea; Iran, Cuba, and Venezuela also contribute. However, the knowledge transfer and its collective application into an emerging parallel global economy for the sanctioned is a separate discussion for a future BWR publication.
Additonal Reading(s)
Putin and Kim’s New Friendship Shouldn’t Be a Surprise, (Carnegie Endowment, 20 June 2024)
North Korea Sends Workers to Russia-Occupied Territory in Eastern Ukraine, (The Diplomat, 22 December 2023)
A Tale of Three Triangles: The Complicated Geopolitics of Northeast Asia, (The Peninsula, 20 June 2024)
The Significance of the Putin-Kim Summit, (Council on Foreign Relations, 17 June 2024)
Follow-ups & Quick Bites
Follow-ups
No follow-ups this week.
Quick Bites
Saudi Arabia Lets Petrodollar Agreement Expire
Saudi Arabia did not renew its 80-year-old petrodollar deal with the United States, which expired on 9 June 2024 and was a cornerstone of the US's global economic dominance.
The crucial decision not to renew the contract enables Saudi Arabia to sell oil and other goods in multiple currencies, including the RMB, EUR, and RUB. In a more recent move, Saudi Arabia has announced its involvement in Project mBridge, a project exploring a multi-central bank digital currency (CBDC) platform shared among participating central banks and commercial banks. It is built on distributed ledger technology (DLT) to enable instant cross-border payment settlements and foreign exchange transactions.
Given the Kremlin’s intentional shift away from USD, will the Saudis accept RUB settlement? Unlikely because RUB lacks a global presence, convertibility, and liquidity. RMB has a better chance of acceptance, and that is happening now.
Additonal Reading(s):
Project mBridge Reaches Minimum Viable Product Stage and Invites Further International Participation (Bank for International Settlements, 4 June 2024)
Vol 2, No 29 - BWR 23.06.2024
Thank you for reading “Barbershop Whispers....Russia” written by Adam A Blanco! “Barbershop Whispers…Russia” is a product of e8Q Technologies, a consultancy with insights on all things Eurasia. Subscribe for free to receive new posts.