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. Last Updated: 07/27/2016

Fadeyev Hails Korea Rail Link, Experts Unsure

For MTThe Friendship Bridge linking North Korea and Russia. The Railways Ministry is touting a plan to create a rail link to South Korea.
VLADIVOSTOK, Far East — As North Korean leader Kim Jong Il continued his tour of the Far East on Thursday, the Railways Ministry was hailing a $3.3 billion project to upgrade North Korea's rail system to link the Trans-Siberian Railroad with South Korea.

The ministry, a $10 billion a year operation often called a country unto itself, has thrown its weight behind the project, as has the Kremlin. On Thursday, Railways Minister Gennady Fadeyev called the linking of the Trans-Siberian and Trans-Korean railroads the most promising project in the Far East. "We shall soon talk about the implementation of this project," Fadeyev said in Vladivostok, news agencies reported.

But skeptics doubt whether the link is worth the investment.

"I don't understand why the Russian Railways Ministry is so interested in it," said Hisako Tsuji, a senior economist at Japan's Economic Research Institute for Northeast Asia, or ERINA.

"Almost all Japanese business people who are involved in the Trans-Siberian shipment service are skeptical about the attractiveness of the project. The same goes for Korean business people," she said on the sidelines of a recent conference on the subject in Vladivostok.

The project would begin by recreating the railroad system torn apart when the Korean civil war divided the peninsula more than five decades ago. A virtual island, South Korea now relies exclusively on sea routes around Asia or through the Suez Canal to ship the massive exports that underpin its economy.

The new route would connect South Korea to Europe via the Trans-Siberian. To reach the Trans-Siberian now, goods must be shipped by sea from the port of Pusan to Vostochny in the Far East. The route is rarely used because of high costs.

Fadeyev said his ministry had already conducted feasibility studies and considered possible routes by which to make the link. A group of railroad specialists visited North Korea earlier this year to study its rail network.

Railway officials have said the Trans-Siberian has several advantages over the sea route. It is faster, delivering cargo in a couple of weeks on average compared with more than a month by sea. The climate changes along the route are more temperate, sparing cargo from sharp drops and rises in temperature or humidity. It also allows shipment of a relatively small number of containers.

Officials say that joining the Trans-Siberian with the Trans-Korean would enhance these advantages, creating, at 14,000 kilometers, the world's longest railroad, making it more competitive.

But some experts question this optimism. They say the link may not be as cost-effective as the ministry hopes.

The Russian estimates are based on "overly optimistic figures," Tsuji said.

She said an ongoing decrease in the cost of sea transport has nearly wiped out any advantage of the shorter train journey. She also said the cost of sending cargo from Pusan to Finland by ship is $2,100 per 12-meter container, much lower than the $2,800 by rail.

The ministry has also said that the link would slash transport costs by two-thirds and cut transit times in half. It estimates it would boost use of the shorter, but underused, Trans-Siberian route. Currently, only 5 percent of the shipments between Asia-Pacific and Europe traverse the Trans-Siberian.

The ministry has said annual capacity of the extended line could reach 500,000 containers and bring Russia upward of $1 billion in transit fees each year. The Trans-Siberian transported less than a quarter of that figure from east to west last year, officials said.

But officials at the Vostochny port disagreed, saying a competing rail link would not take away much of their cargo. "It's simply impossible in the near future," said Vladimir Kashtanov at the Vostochny container service. "Unless oil prices rise sharply, making shipping by sea unprofitable."

Yury Solozobov of SVT Vostochny Ltd., an agent for South Korean forwarding firms, said an extended Trans-Siberian would take only a small bite of his company's business. "At the start it would not be a competitor, but later on it would slowly chip away a little of the cargo traffic," he said.

These modest estimates counter the ministry's optimistic estimates that the project would increase Trans-Siberian traffic tenfold.

Tsuji said that neither of the two possible routes through the Koreas would bear up under close scrutiny.

The first route envisages South and North Korea reconnecting their rail tracks along the east coast from the southern hub of Pusan to the Russian border near Khasan. Tsuji doubted whether it would reduce costs. She said cargo would have to travel 500 kilometers within South Korea, where rail rates are more expensive than sea rates.

She also questioned whether the route would be faster. Cargo would have to be transferred onto different train cars in Russia because Russia's tracks are wider than Korea's. "Transshipment is usually a big problem," she said.

The project carries a big price tag. The ministry has estimated it could cost about 103 billion rubles ($3.26 billion), which would include upgrading the North Korean tracks and computerizing signal systems.

Tsuji said the railroad runs through a mountainous region and the tracks are in disrepair. "They basically have to construct a new line," she said.

Seoul has already reconstructed its rail line up to the border, following an agreement signed between the North and the South in 2000. But according to South Korean officials, the North has done next to no work on its side, possibly because of a lack of materials and rails.

Tsuji criticized the alternative route, as well. This would link Russia and Korea using China's rail system. South and North Korea would link up their west coast railroads and connect them to the Chinese system. Cargo could then travel across northeastern China to Russia, providing an even more direct route to Europe than the first plan.

Tsuji said the congested Chinese rail system couldn't handle the transit flow. She said China's Shanghai Railways had opened a sea route to the Vostochny port for easier access to the Trans-Siberian. Besides, she said, Chinese tracks, like Korean, are narrower than Russian tracks, and transshipment would cause delays.

Furthermore, she said potential cargo shipments from South Korea may decrease sharply in the next several years. Many Korean businesses are looking to move to China and Southeast Asia to lower production costs. If they do, sea routes to Europe will be more competitive than the Trans-Siberian, she said.

Fadeyev, however, insists on a safety net. "Russia must take part in the railway modernization on the basis of an obligatory guarantee that the Trans-Siberian will be used for freight," he said Thursday.

Other observers, while acknowledging the plan's shortcomings, say it is inevitable in light of the improving relations of the two Koreas. At the first-ever inter-Korean summit in 2000, the leaders of the two nations agreed to reconnect the rail systems across their heavily armed border as part of reconciliation and unification efforts.

"The Korean railroad will be reconnected sooner or later and it will have a link with the Trans-Siberian," said Yaroslav Semenikhin, director of the Far Eastern Research Institute for Marine Fleets, who has studied the project. "The latest developments show that the people of Korea are gravitating toward communication and joint projects," he said. "The first joint project is the reconnection of the railroad. How will the South help the North without no roads?"

He said the choice for Russia is not deciding whether there will be a rail route between Pusan and the Russian border, but deciding whether to help fund the construction.

President Vladimir Putin appears to have made his choice, calling the project "important and promising."

"Once carried out, this project will create new possibilities for business cooperation and economic integration on the Eurasian continent and will also help strengthen trust, peace and security in the Asia-Pacific region," Putin said at the end of July, in a message to a group of South Koreans on the Friendship Express, a mission meant in part to promote the rail link, when they arrived in Moscow by train after crossing Siberia.

According to Semenikhin, Russia is likely to carry out most of the modernization of the North Korean section because they were built by Soviet engineers. The work could serve as repayment of Russia's $1.95 billion debt to South Korea, while creating jobs for the army of skilled workers left unemployed when Russia completed the Baikal-Amur Railroad, a Far Eastern branch of the Trans-Siberian, several years ago.

The starting date for the project, however, remains up in the air.

Tsuji said much depends on the outcome of this year's presidential elections in South Korea. She predicted the defeat of incumbent President Kim Dae-jung and said his successor may be less willing to fund such work in North Korea. "Kim Dae-jung will disappear from politics after the elections, and no one knows what new scenarios there will be," she said.

Some Russian scientists present at the recent Trans-Siberian conference in Vladivostok said Korean unification should come first.

"This project is unrealistic unless the political regime in North Korea ceases to exist," said Andrei Dikarev, a historian at the Moscow-based Oriental Studies Institute of the Russian Academy of Sciences.

Railways Ministry spokesman Gennady Vedernikov dismissed all criticism. "The caravan will proceed regardless of barking dogs," he said.