A Case For Rajin Port: Economic Significance and Geopolitical Implications

Available Downloads

Voices of Visiting Fellows

EXECUTIVE SUMMARY 

Let us imagine that sometime in the future, a significant political shift occurs in North Korea such that sanctions are lifted, and full-scale foreign direct investment projects become feasible. In such an environment, which infrastructure projects might fundamentally shift the regional economic landscape? And how might those projects alter the geopolitical dynamics of Northeast Asia? Among a multitude of potential investment opportunities identified, Rajin Port emerges as a particularly compelling case.

The area in and around Rajin holds considerable economic value. Located within the Rason Special Economic Zone – one of North Korea’s tentative experiments with Chinese-style marketization – Rajin possesses the region’s northernmost ice-free port facility with three piers used year round and a cargo capacity of 3.5 million tons. For this reason, Rajin compares favorably to Russia’s Zarubino port to the north, which is comparatively small and is not completely ice-free, and to China’s Dalian port, which although a large and important economic hub, cannot adequately service the northeastern provinces of Heilongjiang and Jilin without considerable additional transport costs.

As a result, both Russia and China have jockeyed for access to Rajin as a means of critically necessary economic revival. Indeed, as part of larger regional development initiatives like China’s Chang-Ji-Tu plan or Russia’s Ministry for the Development of the Russian Far East and Arctic, both countries have sought to establish joint venture deals with North Korea to develop and gain operational rights to Rajin Port. However, due to Pyongyang’s continued political volatility, nuclear aggression, and resulting sanctions, neither country has yet realized the fruit of its efforts.

While the economic implications of Rajin’s development are clear cut, the de-sanctioned use of the port raises considerable political and security questions. If either China or Russia gains a significant stake in Rajin, their financial leverage could be used to assert dual use rights. For example, as witnessed in Djibouti, Sri Lanka, or Pakistan – China’s “string of pearls” ports in the Indian Sea – Rajin may serve as a strategic point from which the Chinese can exert military dominance over the region. Such a move in the East Sea poses security challenges for South Korea and Japan, while also limiting US military options in the Pacific.

Maximizing the utility of Rajin Port will require simultaneously building logistical capabilities while also preventing operational intervention by any one individual country. In the interest of depoliticization, a multilateral bank would be a good candidate to initiate Rajin’s infrastructure development. Institutions such as the World Bank or Asian Development Bank, are “less vulnerable to risks of moral hazard and politicization” (Haggard and Noland, 2017) and could provide a financing and governance structure for the region in a denuclearization scenario. They can also offer critical oversight, safeguards, and resources for capacity building to ensure the port is developed in a sustainable manner.

Although the political conditions surrounding North Korea’s economic future are impossible to predict, the persistent jockeying for access to Rajin suggests that it could become a harbinger of the region’s economic success. As a trilateral logistics hub, Rajin could invigorate the lagging economies of northeastern China, North Korea and Far East Russia. However, the immense transformative change required in North Korea for such investments to take place could also inflame existing tensions among neighboring states. Multilateral banks, by design, offer the best chance for peaceful mitigation in this context since they can both address Rajin’s development needs while still preserving geopolitical stability. As the port’s development poses such consequential implications, the international community should devise blueprints for Rajin’s future.

Minjung Chey is a senior strategic investment manager at SK hynix. She was formerly a visiting fellow at the Korea Chair of the Center for Strategic and International Studies, and a former ROK Navy Navigation and Electronic Warfare Officer.

Michelle Bigold is the Director of Government Affairs for Computek College of Business, Healthcare, and Technology. She is currently pursuing a Master of Arts degree in International Business and Policy from Georgetown University’s Walsh School of Foreign Service and McDonough School of Business. She holds an Honors degree in Political Science from the University of Manitoba, Canada. 

Duke Dukho Gim is an Investment Insurance Associate at the US International Development Finance Corporation (DFC). He underwrites Political Risk Insurance & Reinsurance within the Office of Structured Finance & Insurance. He’s currently pursuing a Master of Arts degree in International Business and Policy at Georgetown University’s Walsh School of Foreign Service and McDonough School of Business. He holds a Bachelor of Arts degree in Finance from the University of Houston, C.T. Bauer College of Business.

Minjung Chey

Michelle Bigold

Duke Dukho Gim