OREANDA-NEWS. November 09, 2010. QUESTION: Mr President, 20 years have gone by now since the Republic of Korea and Russia established diplomatic relations. Over this time fruitful contacts have developed between the South Korean and Russian governments, thanks to the personal friendship between our countries’ leaders. But relations in the private sector, including cooperation between companies, have not succeeded in reaching the level of our intergovernmental relations. Mr President, could you give an assessment of Russian-South Korean relations over the last 20 years and tell us about the new development areas that our countries should focus on in the future? 

PRESIDENT OF RUSSIA DMITRY MEDVEDEV: Over the last two decades, since we established diplomatic relations, our countries have made big strides in all cooperation areas and are now moving confidently towards the goal of achieving the strategic partnership that our countries’ leaders set in 2008.

Russia and South Korea have active political, economic, and cultural cooperation and work together closely on the international stage too. The number of our people travelling to each other’s countries is growing all the time. This reflects our peoples’ growing interest in each other and development of the ties between us.

I do not think that our business cooperation lags behind our political relations. We are successfully implementing a number of big joint projects. South Korean investment in the Russian economy came to around USD 600 million in the first half of 2010. Our bilateral trade was up by 82.2 percent in value terms over the first eight months of 2010 compared to 2009, and was close to USD 11 billion. We hope that our bilateral trade will top USD 17 billion for the year as a whole.

I agree that our achievements are in large part the fruit of our regular top-level contacts. The Russian and South Korean presidents have met more than 20 times since our countries established diplomatic relations. This shows that our political dialogue has a stable foundation not tied to the circumstances of the moment, and that our leaders see each other as reliable partners for the future.

My cooperation with President Lee Myung-bak is no exception. South Korean President’s official visit to Moscow in September 2008 saw us adopt an extensive joint declaration that we consider a basic long-term document. 

President Lee Myung-bak took part in the Global Policy Forum in Yaroslavl this year. The main result of our meeting on that occasion was an agreement to intensify our cooperation in all areas related to modernisation and put the emphasis on the innovation component in our countries’ economies.

I will make an official visit to Seoul very soon, during which we will sign a number of documents that I hope will strengthen our cooperation at all levels and in a broad range of areas.

QUESTION: Mr President, what do you think are the components for a successful Group of Twenty summit?

DMITRY MEDVEDEV: The G20 has become a unique global-scale anti-crisis centre. Its summits in 2008-2010 drew up programmes for coordinated action by the leading economies and the international financial institutions to take us out of the crisis and reform the world’s financial and economic system. The Pittsburgh Declaration and the decisions that came out of the Toronto summit have created a common platform for action between countries with different economic models. The growing convergence in countries’ approaches towards resolving the key global economic and financial issues is also thanks to the G20.

I think the main task for the G20 summit in Seoul on November 11-12, 2010, will be to preserve the spirit of unity and readiness for joint effort that has helped the G20 to make progress in overcoming the crisis. We now need to consolidate the gains made in the global economy’s post-crisis recovery. The main thing in this context is to draw up and implement policies that reflect the balance of interests on all sides.

The consolidating role of the G20 was the basis for the optimistic global economic development outlook that the IMF presented at the Toronto summit. Implementing this development outlook requires us to carry out measures ensuring sustainable and balanced global growth in the medium term. The Seoul summit is set to adopt the G20’s action plan for the next 3-5 years, which contains individual macroeconomic policy recommendations for the different countries. The G20 countries’ coordinated action in this area is the guarantee against a repeat of crises in the future.  

The G20 must continue its work on reforming the global financial system. Considerable progress has already been made here. Voting power in the World Bank has been substantially redistributed in favour of the developing countries and countries in transition. The same now needs to happen in the IMF. The reform plan approved by the G20 finance ministers’ meeting in Gyeongju on October 22-23, 2010, is the result of a compromise and will unquestionably help to raise the IMF’s legitimacy in the short term, though it does not resolve the main issue, that of giving the developing countries a greater say in the IMF decision-making process. Reform of the IMF must continue.

South Korea’s presidency of the G20 is playing an important part in implementing these policies. This is the first time that a country not part of the G8 has set the agenda for the G20 summit. South Korea has done a lot of organisational work, come up with a number of interesting initiatives adding specific substance to the summit’s agenda, made much effort to keep countries not in the G20 informed, ensured the G20’s cooperation with international organisations, and developed partnership relations with the business community, getting it involved in carrying out programmes to overcome the crisis. We place great importance on the South Korean presidency’s new initiative to facilitate international development. There can be no discussing development issues in today’s world after all without the ‘new donors’ – the big developing countries – taking part. 

All of this gives us reason to expect that the Seoul summit will be an important international event that confirms the G20’s role as a guarantor of sustainable global economic development.

QUESTION: The Republic of Korea seeks cooperation with Russia in a wide variety of areas. Mr President, which areas do you think have the most potential for our bilateral cooperation? Some experts think that Russia could draw on South Korea’s experience as a country that has undergone rapid economic growth. How do you view South Korea as an economic partner?

DMITRY MEDVEDEV: As I said, Russian-South Korean economic relations are showing confident development. As for the most promising cooperation areas, President Lee Myung-bak and I agreed that they should be related to our modernisation goals and raising our countries’ innovation potential. I think all of the conditions are in place for achieving this quality shift in our relations.

The Republic of Korea is a country with a modern and fast-growing economy, Russia’s third-biggest partner in the Asia-Pacific region after China and Japan, and this explains our obvious interest in cooperation with your country.

It is enough to take a look at our foreign trade figures to see what potential our trade and economic cooperation have. Our bilateral trade underwent a more than 8-fold increase in 2002-2008. Unfortunately, the crisis caused a drop in bilateral trade, but judging by this year’s figures we are gradually returning to the pre-crisis level.

Investment cooperation is an important part of our economic ties. South Korean companies show considerable interest in joint projects and invested around USD 1.3 billion in the Russian economy last year, almost USD 500 million of this as direct investment.

It is pleasing to see that South Korean investment is expanding into new areas in Russia, coming not just to Moscow now but to other regions too. To give a few examples, Hyundai Motors has invested in a car assembly plant producing 100,000 cars a year in St Petersburg and a 500-Mwt capacity electricity power station in Kemerovo Region, while LG Electronics and Samsung Electronics have invested in household appliances and electronics production projects in the Moscow and Kaluga Regions.

We are interested above all in attracting investment to the Russian Far East and in developing joint enterprises in sectors such as the automotive sector, gas processing, information technology, construction, natural resources development, electricity, forestry, agriculture and fishing.

The Republic of Korea is a large consumer market for Russian energy resources, on a par with China and Japan, and this is also one of the main areas for our cooperation, as is clearly reflected in the partnership between Gazprom and Kogaz, and the Sakhalin-1 and Sakhalin-2 projects.

Cooperation to develop the Trans-Siberian Railway’s transit potential and that of the Russian Far East ports for transporting South Korean goods to Europe is also an area offering big opportunities.

Russia is building modernisation partnerships with individual countries and with groups of countries. We have set five priority modernisation areas: computer, telecommunications, and nuclear technology, medical technology and the space sector, and creation of an energy-efficient economy. We are therefore interested in the experience of South Korea’s innovation and technology cluster known as Daedeok Innopolis located in Daejeon, which we could draw on in developing our Skolkovo innovation centre and the new university campus on Russky Island.

QUESTION: Despite the efforts made by the countries concerned, North Korea continues to carry out its nuclear programme and threaten the Korean Peninsula’s stability.

Mr President, do you think that the six-party talks are the only way to resolve the North Korean nuclear problem? If you take this view, could you tell us what Russia is doing now to get these talks going again, and also, what part can Russia play in persuading North Korea to renounce its nuclear programme and resolve the problems on the Korean Peninsula in general?

DMITRY MEDVEDEV: First of all, this issue represents a challenge to the entire international nuclear non-proliferation regime. Iran has been the main focus of attention, but I want to point out that Tehran, unlike Pyongyang, has not proclaimed itself a nuclear state, and has not tested nuclear weapons, and all the more so has not threatened to use them.

Of course we are worried about the military and political tension that North Korea’s nuclear ambitions are causing so close to Russia’s eastern borders, not to mention the fact that North Korea’s nuclear test site is located just a little more than 100 kilometres from our territory.

But we continue to take the view that this problem must be resolved exclusively through political and diplomatic means, as part of the effort to strengthen the nuclear non-proliferation regime. This is also the aim of the UN Security Council resolutions that call directly for a resumption of the six-party talks. It is pleasing to see the efforts underway now to resume the negotiating process. I note in particular the efforts made by China, chairing the process, and also the proposals made by our South Korean and American colleagues. Russia is not standing idle of course. We are working actively with our partners in the talks and chair the Working Group on forming a regional peace and security mechanism.

QUESTION: The sinking of the South Korean corvette Cheonan in the Yellow Sea in March this year had a negative impact on the complex geopolitical situation in northeast Asia. Russia’s negative reaction to the conclusions of the South Korean official investigation into the sinking was a source of regret for many people in the Republic of Korea.

Mr President, what efforts do you think the countries directly connected to the incident and the international community in general should make now to overcome the negative consequences the ship’s sinking has had? Also, will Russia make public the conclusions reached by Russian military specialists?

DMITRY MEDVEDEV: We are concerned by the developments on the Korean Peninsula and the confrontational and tense atmosphere that remains there.

You raise the sinking of the South Korean naval corvette Cheonan in March, and its consequences. The Chairman of the UN Security Council approved what we think was a balanced and objective statement on this incident on July 9.

As for the Russian experts’ conclusions, they have not been officially published anywhere, and nor could they be published, for they were intended for our internal analysis in reaching a decision on the Cheonan incident in the UN Security Council.

This naval vessel’s sinking with the resulting death of 46 sailors was unquestionably a tragedy, with which we sympathise, and which will not be so easily forgotten. But we need now to look to the future and think about how to avoid full-scale military and political crisis on the Korean Peninsula.

QUESTION: We know that the Russian government is making great efforts to develop Eastern Siberia and the Far East as part of its long-term development strategy. To have the Republic of Korea take part in this development would benefit both countries. But in reality South Korean government and business are not yet playing as active a part in this work as they could. Mr President, what is your view on this situation?

DMITRY MEDVEDEV: We do indeed hope that South Korean business will take an active part in the projects we are carrying out within the programme to develop the Eastern Siberian and Far East regions until 2025, as well as in other projects of interest to South Korean business.

We are steadily improving our investment climate and creating a favourable environment for investors. This is a key factor in our national economic modernisation. Amendments to our immigration laws came into force in July this year, abolishing quotas on hiring highly qualified foreign specialists. The programme to privatise state-owned assets also offers attractive opportunities for potential investors. We are continuing our consistent efforts to de-bureaucratise the economy. We have drafted and sent to the parliament a package of draft laws introducing tax breaks for investment in high technology and social services. Russia established the post of investment ombudsman in August 2010, and appointed First Deputy Prime Minister Igor Shuvalov to this post.

We are set to sign a bilateral intergovernmental agreement on temporary employment for our citizens in each other’s countries during my upcoming visit to Seoul. This will simplify the immigration formalities for our citizens in each other’s countries and facilitate joint projects. 

Developing Siberia and the Far East is indeed one of our state policy priorities. Investment in the Far East’s economy has risen more than 16-fold over the last 9 years. The region has received 250 billion rubles [more than USD 8 billion] in 2010, and we plan to invest a further 2 trillion rubles over the next five years. 

But we make no secret of the fact that without full-fledged cooperation with our foreign partners and an inflow of foreign investment and technology it will be difficult to achieve the region’s rapid development. We already have successful examples of cooperation in the region, such as construction of the Eastern Siberia-Pacific Ocean oil pipeline, the Sakhalin-Khabarovsk-Vladivostok gas pipeline, the construction of an oil refinery, a gas-chemical plant, and LNG [liquefied natural gas] and mineral fertiliser production plant. 

We are also carrying out big projects to develop shipbuilding and repairs in the region. Work began in November 2009 on the modern Russian-South Korean Zvezda-D.S.M.E. and Russian-Singaporean Vostok-Raffles shipyards, which have USD 5 billion worth in shipbuilding contracts. Another big step in developing sea transport was the opening in the middle of last year of an international freight and passenger ferry link between Sakaiminato (Japan), Donghae (Republic of Korea), and Vladivostok, which has given tourism a big boost.

Of course, we also welcome South Korean investment in building the facilities for the 2012 APEC summit. One of these projects, the Far East Federal University, is set to become the leading university and research centre for the Primorye Territory and the entire Russian Far East.

QUESTION: South Korean Government hopes to achieve successful tripartite collaboration between South Korea, Russia and North Korea in the development of Eastern Siberia and the Russian Far East. That includes projects aimed at developing Russia’s rich natural resources with the participation of Korean technology, capital and labour, which North Korea can provide.

Mr President, how do you assess the chances of success for such trilateral cooperation?

DMITRY MEDVEDEV: We have always supported broad international cooperation, including in the trilateral format, for the implementation of economic projects not only in Russia but also on the Korean peninsula. Major cross-border projects can be realised only through joint efforts. Among such projects we include, in particular, the construction of the pipeline and power lines, as well as a railway line linking the Trans-Siberian Railway with the Trans-Korean Railway.

Other promising areas of cooperation include the development of natural resources and infrastructure modernisation in the Russian Far East, such as the construction projects for the APEC summit in Vladivostok, the implementation of environmental initiatives in the Lake Baikal and Kamchatka regions. Proposals have been made regarding the possible involvement of Russian companies in Kaesong inter-Korean business dialogue and the Kumgangsan tourism project.

I am confident that these projects will bring more than just economic dividends to Russia, the Republic of Korea and the Democratic People’s Republic of Korea. They will help normalise the situation on the Korean Peninsula, address North Korea’s economic problems and increase its involvement in regional economic relations in Northeast Asia.

At the same time the implementation of such projects is possible only if tension on the Korean peninsula is reduced and the two Koreas move towards reconciliation. Russia has consistently supported inter-Korean dialogue. We are ready to continue to contribute to this process in any way we can.

QUESTION: South Korea has high hopes for cooperation with Russia in the energy sphere, including participation in developing oil and gas fields in Eastern Siberia and the [Russian] Far East, and the import of oil and gas produced in those regions. But, despite South Korea’s great expectations, there has been no significant progress in this area.

In particular, because of the North Korean nuclear issue, there has been no movement forward in the implementation of the plan to build a natural gas pipeline connecting South Korea to the Russian Far East via North Korea. In addition, there are a number of controversial issues with Russian gas supplies to the Republic of Korea.

Mr President, what steps do you think should be taken to address these issues? Does the Russian Government plan to act more actively to change North Korea’s stand?

DMITRY MEDVEDEV: I agree that our energy cooperation has great potential, and it is not limited to oil and gas projects, but also includes coal mining, power generation and power plant engineering. We are also interested in developing cooperation in these areas in the trilateral format, with the involvement of North Korea, as I mentioned earlier.

At present, in particular, negotiations are being held regarding the organisation of mutual supplies of electricity between Russia and South Korea through the territory of North Korea. Russian companies INTER RAO UES, IDGC Holding and Rosenergo are discussing opportunities for cooperation with South Korean partners in the modernisation of Russian electricity distribution networks. They are analysing South Korea’s experience in developing and applying advanced technology to improve energy efficiency, energy conservation and the use of renewable energy.

Mechel is actively cooperating with Hyundai Steel on the supply of coking coal. In the oil and gas industry, Gazprom is collaborating with Korean companies KOGAS and the Korea National Oil Corporation (KNOC). In addition, such projects as Sakhalin-1 and Sakhalin-2 have been developing actively.