3.2.1. Inter-Korean Relations and the Pipeline Project
As noted above, before North Korea’s fourth nuclear test in January 2016, detente in inter-Korean relations was the necessary condition for securing political support for the RNS gas pipeline project. That is, if inter-Korean relations were good, South Korea and Russia could make concrete moves to secure political support for the gas pipeline project. This was most clearly evidenced shortly after North Korea carried out its first nuclear test on October 9, 2006. Five days after this test, the UNSC unanimously adopted resolution 1718 imposing sanctions against North Korea (See
Table 6). These sanctions mostly focused on banning the trade of heavy weaponry and materials related to its nuclear and missile programs [
24]. Therefore, they did not contain any provision that could prevent South Korea and Russia from pursuing the implementation of the pipeline project. In fact, three days after the resolution, the South Korean government signed a framework agreement with the Russian government to build the RNS gas pipeline without concern for violating the sanctions [
10,
25].
This agreement was possible because inter-Korean relations did not deteriorate in spite of the North Korean nuclear test. Indeed, then progressive South Korean President Roh Moo-hyun did not abandon his predecessor’s “sunshine policy” of engagement with North Korea. For instance, South Korea did not suspend the Kaesong Industrial Complex (KIC), a crucial symbol of inter-Korean cooperation. More importantly, it refused to join the Proliferation Security Initiative (PSI) launched by the U.S. aimed at preventing the spread of weapons of mass destruction by saying that this move would create unnecessary tension with North Korea [
27]. At that time, North Korea warned that it would consider South Korea’s participation in the PSI as a declaration of war [
28]. President Roh’s policy obviously contributed to reducing tensions between the two Koreas, but had a negative impact on South Korea–U.S. relations [
29].
South Korea and Russia continued to make efforts to secure political support for the RNS gas pipeline project after Lee Myong-bak became president in February 2008. He and then-Russian President Dmitry Medvedev agreed to cooperate on implementing the pipeline project during the summit held in Moscow in September 2008. This agreement was followed by a legally non-binding memorandum of understanding (MOU) between South Korea’s state-run gas company Kogas and Russia’s state-run Gazprom. This MOU specified that Kogas would import 7.5 million tons (10.2 bcm) of Russian gas annually for a period of 30 years starting in 2015 [
10]. Thus, South Korea and Russia appeared to move a step closer to signing a trilateral intergovernmental agreement with North Korea to build the pipeline.
However, this possibility evaporated because inter-Korean relations were significantly strained in 2009. In May of that year, North Korea conducted its second nuclear test (
Table 6). The conservative Lee administration reacted differently to this test. Unlike the previous administration, it announced that South Korea would join the PSI [
30]. Inter-Korean relations deteriorated further in 2010. In March of that year, a North Korean submarine carried out a torpedo attack on the South Korean naval ship Cheonan, killing its 46 sailors. In response to this attack, the South Korean government announced that it would implement retaliatory measures against North Korea in May 2010. These measures included cutting nearly all trade with North Korea, resuming “psychological warfare” propaganda after a six-year suspension, and exerting diplomatic efforts to place tighter UN sanctions against North Korea [
31]. Around three months after these measures, the U.S. imposed additional sanctions on North Korea. These sanctions were targeted at the highest echelons of the North Korean government by blocking the flow of luxury goods into the country [
32].
These sanctions, however, did not tame North Korea. Pyongyang further increased the tension in the Korean peninsula in mid-November 2010. It invited a U.S. nuclear expert to the Yongbyon nuclear complex and then showed him a uranium enrichment facility with 2000 centrifuges that could “be readily converted to produce highly-enriched uranium (HEU) bomb fuel” [
33]. Shortly thereafter, North Korea carried out an artillery attack on a South Korean island in the Yellow Sea, Yeonpyeongdo, which killed two marines and two civilians. In response, South Korea fired 80 shells on North Korea [
10]. Under these circumstances, South Korea and Russia could not exert any efforts to secure political support for the RNS gas pipeline project.
However, heightened tensions in the Korean peninsula later began to show signs of thawing. At a press conference after his summit with German Chancellor Angela Merkel in Berlin in May 2011, President Lee said that if North Korea was committed to denuclearization, he would invite its leader Kim Jong-il to the Nuclear Security Summit to be held in Seoul in May 2012 [
34,
35]. These signs became more evident in late July 2011. During the Association of Southeast Asian Nations (ASEAN) Regional Forum in Indonesia in July 2011, chief negotiators of South Korea and North Korea to the six-party talks met to discuss denuclearization; this discussion was followed by a meeting between the Foreign Ministers of the two Koreas the next day [
36].
Amid this rapprochement, the possibility of securing political support for the RNS gas pipeline project greatly increased. As a matter of fact, shortly after the meeting, the three concerned states of South Korea, Russia, and North Korea began to intensify their political efforts to implement the pipeline project. After his negotiations with South Korean Foreign Minister Kim Sung-hwan in Moscow in early August 2011, Russian Foreign Minister Sergei Lavrov noted that consultation on the pipeline project was “fairly concrete” [
37]. Around two weeks later, North Korean leader Kim Jong-il visited Russia and held a summit meeting with then Russian President Medvedev. A crucial agenda of this summit was the RNS gas pipeline project and the North Korean leader exhibited great interest in its implementation [
10].
All these efforts created the most favorable environment for signing a trilateral intergovernmental agreement among the three concerned states to build the RNS pipeline. This largely explains why South Korean President Lee said in his interview with the Korean national broadcaster KBS in September 2011 that the gas pipeline project is “likely to progress faster than expected” [
38]. Indeed, shortly after this interview, Kogas and Gazprom signed a roadmap for the project. Under this roadmap, construction would begin in 2013 and be completed in 2016 [
10]. Gazprom also signed an MOU with North Korea to implement the pipeline project [
39]. Therefore, South Korea and Russia expected that they would soon conduct trilateral negotiations with North Korea [
10].
This expectation, however, was dashed especially in February 2013 when North Korea carried out its third nuclear test (See
Table 6). This test significantly chilled inter-Korean relations. Thus, Park Guen-hye, inaugurated as South Korean President approximately two weeks after the third nuclear test, could no longer make any efforts to secure political support for the RNS pipeline project, even though she pledged to implement it while she was a presidential candidate [
40].
Strained inter-Korean relations did not change much until at least August 2013. In fact, inter-Korean relations in the early stages of the Park administration deteriorated to the point that a military confrontation between the two countries was possible. In early April 2013, North Korea advised foreign embassies stationed in Pyongyang to evacuate their staff [
41]. Shortly thereafter, North Korea made another dramatic move by announcing that it would withdraw its workers from the KIC, the last link between the two Koreas, and temporarily suspended its operations. In response, the South Korean government also withdrew its workers from the KIC because it was concerned about their safety. Therefore, its operations completely halted in May 2013 for the first time since its opening in 2004. In the midst of these heightened tensions, South Korea stopped conducting bilateral negotiations with Russia regarding the RNS gas pipeline project. Accordingly, the project was thought to have been abandoned [
42].
The heightened tensions in the Korean peninsula, however, began to ease as the two Koreas began to seek ways to reopen the KIC. These efforts bore fruit in August 2013. Both sides agreed to ensure that political factors would not affect its operation. To accomplish this aim, they decided to take several measures such as guarantees not to limit employees’ access or withdraw workers unilaterally, the resumption of communication lines, and the creation of a joint North-South committee for overseeing the complex [
43]. A month after the agreement, the KIC reopened and began to operate again [
44].
These reduced tensions in inter-Korean relations created an environment for at least resuming talks on the RNS gas pipeline project. During a media briefing at the World Energy Congress held in South Korea in October 2013, Russian Energy Minister Alexander Novak commented that Gazprom and Kogas had begun to discuss the gas pipeline project [
42]. However, primarily due to the lingering North Korean nuclear problem, the attitude of the conservative Park administration toward the pipeline project was lukewarm. The joint declaration issued after the South Korea-Russia summit held in Seoul in November 2013 excellently illustrated this attitude. It stated that “[t]he decisions to supply Russian pipeline gas to South Korea in the mid-term and long-term perspective will take into account the availability of resources, economic viability and other preconditions necessary for the fulfillment of this [gas pipeline] project” [
45]. This statement indicated that even though South Korea would continue to pursue the RNS gas pipeline project, it would not consider it a priority. In other words, South Korea perceived that the project is likely to be realized in the mid-term perspective at best.
However, inter-Korean relations did not develop the way that the South Korean government had hoped in the mid-term perspective. In particular, North Korea conducted its fourth nuclear test in January 2016 and around a month later fired a long-range rocket. In response, the Park administration unilaterally shut down the KIC in February 2016 by announcing that its operations provided funds for North Korea’s nuclear and missile programs [
46].
Before the fourth nuclear test, several UN sanctions imposed against North Korea did not contain any provision that could prevent the implementation of the pipeline project. The sanctions focused on banning arms sales, and prohibiting trade in materials that could contribute to North Korea’s nuclear and missile programs [
47]. These sanctions obviously did not affect the implementation of the pipeline project. Indeed, as discussed above, when inter-Korean relations were good, South Korea and Russia exerted efforts to secure political support for the project without concern for violating the sanctions.
3.2.2. The U.S. Factor and the Pipeline Project
As hypothesized above, North Korea’s fourth nuclear test changed the dynamic of the RNS gas pipeline project. In particular, in March 2016, approximately two months after the nuclear test, the UNSC, prodded by the U.S., adopted resolution 2270 imposing severe sanctions on North Korea. From this moment, improvement in inter-Korean relations alone could not facilitate the political viability of the gas pipeline project. As will be discussed below, North Korea continued to take provocative military actions after its fourth nuclear test until November 2017. In response, the U.S. not only led the UNSC in imposing several sanctions against North Korea, but also placed its own sanctions on the country. These sanctions began to contain provisions that could prevent the implementation of the RNS pipeline project. In addition to these sanctions, the U.S. sanctions under CAATSA against Russia in 2017 also contained clauses that had the same effect. Therefore, unless the U.S. lifts or eases its own sanctions against North Korea and Russia as well as the UN sanctions against North Korea, Seoul and Moscow are unwilling to make concrete moves to secure political support for the RNS gas pipeline project.
For example, resolution 2270 contains provisions that ban existing and new financial channels to and from North Korea [
48]. To be sure, resolution 2094, adopted after North Korea’s third nuclear test, also contains similar provisions. However, these provisions do not include existing financial channels. More importantly, they start with the non-binding phrase “Calls upon States to take appropriate measures to prohibit” instead of the binding phrase “Decides that States shall prohibit” [
49]. Therefore, it became mandatory for all member states to prohibit existing and new financial channels to and from North Korea after the fourth nuclear test. Without these financial channels, it would be difficult to implement the trilateral gas pipeline project that goes through North Korea. For example, it will be difficult to pay North Korean workers who are likely to be employed in constructing the pipeline. Furthermore, North Korea cannot receive transit fees when the pipeline becomes operational. Naturally, these provisions make it difficult for South Korea and Russia to make any efforts to secure political support for the pipeline project.
The UN sanctions, however, did not deter North Korea from taking provocative military actions. North Korea fired a submarine-based ballistic missile and an intermediate-range missile in April and June 2016, respectively. North Korea fired another submarine-based ballistic missile in August 2016 that flew around 500 km in the direction of Japan. This missile test demonstrated North Korea’s improved missile technology [
45]. Around two weeks later, North Korea carried out its fifth nuclear test (See
Table 6).
In response, the UNSC adopted resolution 2321 sponsored by the U.S. that imposes even more severe sanctions against North Korea. This resolution contains a provision prohibiting public and private financial support for trade with North Korea. It specifies that all UN member states “shall prohibit public and private financial support from within their territories or by persons or entities subject to their jurisdiction for trade with the DPRK (including the granting of export credits, guarantees or insurance to their nationals or entities involved in such trade)” [
50]. This provision differs from a similar provision contained in resolution 2270 in one important respect. The previous provision is conditional in that prohibiting financial support is restricted to the area that could contribute to North Korea’s nuclear or ballistic missile programs, or other activities such as the trade of heavy weaponry [
48]. In contrast, the new provision erases this condition, and accordingly, member states should implement it except as approved in advance by the UN Sanctions Committee [
50]. The provision makes it more difficult for South Korea and Russia to take concrete actions to secure political support for the gas pipeline project.
In spite of the UN sanctions, however, North Korea continued to carry out missile tests. These tests became more frequent especially after Donald Trump’s presidential inauguration in January 2017. In fact, North Korea conducted six more missile tests until July 2017. Among these tests, the last two were intercontinental ballistic missiles (ICBMs) and this began to pose significant implications for U.S. security. In particular, the last test in late July 2017, according to several experts, demonstrated that North Korea is capable of striking the western part of the United States [
51]. This dramatically changed the country’s perception of the North Korean threat [
47].
Naturally, Washington led the UNSC to adopt the strongest resolution 2371 yet in August 2017. It contains a provision stating that all UN member states shall prohibit “the opening of new joint ventures or cooperative entities” with North Korea [
52]. Approximately one month after the resolution, North Korea conducted its sixth nuclear test (See
Table 6). In response, the UNSC adopted resolution 2375 initiated by the U.S. This resolution contains a provision that expands the previous one by adding existing ventures. It specifies that all UN member states shall prohibit “the opening, maintenance, and operation of all joint ventures or cooperative entities, new and existing, with DPRK entities and individuals… “[
53]. These two provisions make it almost impossible for South Korea and Russia to exert any efforts to secure political support for the RNS gas pipeline project because it requires forming joint ventures with North Korea.
In addition to leading efforts in imposing several UN sanctions against North Korea, the U.S. also imposed its own sanctions to place greater pressure on the country. CAATSA is a case in point. It must be stressed at this point that CAATSA primarily targets Russia because the U.S. Congress overwhelmingly passed this act in July 2017 as a response to Russia’s interference in the U.S. election and its aggression against Ukraine. However, the act includes sanctions that add several measures to the already existing U.S. sanctions on North Korea and Iran. President Trump signed it into law in early August 2017.
CAATSA could affect the implementation of the RNS gas pipeline project in two ways. With respect to North Korea, it contains a provision that prohibits conducting financial transactions with North Korea [
47]. This provision also makes it difficult for South Korea and Russia to secure political support for the RNS pipeline project. With respect to Russia, CAATSA gives the U.S. President the authority to impose secondary sanctions on foreign entities that knowingly make investments of more than
$5 million over a 12-month period that directly and significantly contributes to the enhancement of the ability of Russia to construct energy export pipelines [
54]. This provision implies that if South Korean companies are financially involved in building the RNS gas pipeline, they will face the risk of suffering U.S. sanctions. This possibility is very high because
$5 million is a very small sum for the multi-billion dollar gas pipeline project.
Therefore, unless the U.S. lifts or eases all of these sanctions, South Korea and Russia cannot show any willingness to take the risk of pursuing a trilateral intergovernmental agreement with North Korea to implement the pipeline project. This explains why even though inter-Korean relations significantly improved in 2018, South Korea and Russia no longer pursued the agreement. Inter-Korean relations began to improve in early 2018 when North Korea decided to participate in the Pyeongchang Winter Olympics held in South Korea. North Korea also sent a delegation including Kim Yo-jong, sister of the country’s leader Kim Jong-un, to attend its opening ceremony in February 2018. This was followed by the summit of the two Koreas in the southern part of the Joint Security Area in Panmunjom in April 2018. The two leaders singed the Panmunjom declaration, which promises to end the military conflict and implement the denuclearization of the Korean peninsula [
43]. This declaration significantly reduced tensions between the two Koreas. Approximately a month later, the leaders of the two Koreas held a second summit in the northern part of the Joint Security Area in Panmunjom.
These two summits paved the way for the historic U.S.-North Korea summit in Singapore in June 2018. The summit produced a joint statement in which U.S. President Trump “committed to provide security guarantees” to North Korea, and North Korean leader Kim “reaffirmed his firm and unwavering commitment to [the] complete denuclearization of the Korean peninsula” [
47]. The historic U.S.-North Korea summit also contributed to the further improvement of inter-Korean relations. In this context, South Korea and Russia made a symbolic gesture regarding the RNS gas pipeline project. During the South Korea-Russia summit in Moscow held two weeks after the historic summit, Moon and Putin agreed to conduct a joint study to assess the feasibility of the RNS pipeline project [
55].
However, South Korea and Russia did not take any concrete actions to secure political support for the project because of the international sanctions against North Korea. Indeed, less than a week after the agreement, Chung Seung-il, CEO of Kogas, noted that “…the denuclearization of the Korean Peninsula and also [the] lifting of international sanctions are the prerequisites to promote that [gas pipeline] project…. The conditions should be met before we talk about the project in detail” [
56]. Likewise, after her meeting with the North Korean leader Kim in Pyongyang in September 2018, Valentina Matviyenko, speaker of the Russian Federation Council, stated that “[w]e openly tell our North Korean partners that we cannot violate sanctions, cannot violate the sanctions regime in the areas sanctioned by the UN sanctions committee” [
57].
This concern about the sanctions was natural given that the U.S. did not lift or ease any sanctions against North Korea after the historic summit in June 2018. Both countries obviously disagreed on how to interpret the Singapore framework containing few details on implementing denuclearization. Washington insisted that it would not withdraw sanctions unless North Korea first abandons its nuclear program. In contrast, Pyongyang claimed that since it made several concessions such as the dismantling of the nuclear test site in Punggye-ri and returning some of the bones of dead American soldiers from the Korean War, the U.S. should lift some of its sanctions [
58]. Primarily because of this discord, the nuclear talks between the U.S. and North Korea did not make any progress, and thus, Washington did not show any sign of lifting or easing the sanctions against North Korea.
It was in this context that the U.S. issued a warning to South Korea about the potential violation of the UN sanctions. This warning was made as South Korean President Moon went to North Korea for the third summit with his North Korean counterpart Kim in September 2018, accompanied by a business delegation including top executives of South Korea’s four major conglomerates. When asked whether the South Korean plan to implement the RNS gas pipeline project with Russia’s Gazprom would be in violation of the UN sanctions, an official from the U.S. Department of State spokesperson’s office stated that “[a]ll UN Member States are required to implement UN Security Council sanctions resolutions and we expect them all to continue doing so” [
59,
60]. This was the first time that the U.S. made a public statement opposing the South Korean plan. In these conditions, South Korea and Russia were unwilling to take the risk of pursuing a trilateral intergovernmental agreement with North Korea to implement the RNS pipeline project.
The second U.S.-North Korea summit held in Hanoi in February 2019 could have changed this situation if the two leaders had made substantial progress in resolving the nuclear issue. However, the summit did not produce any agreement because the U.S. and North Korea staked out different positions. Washington demanded substantial denuclearization from North Korea in return for lifting the sanctions, whereas Pyongyang wanted substantial lifting of the sanctions from the U.S. in exchange for partial denuclearization [
61]. This disagreement is unlikely to be resolved in the near future. Thus, the sanctions will remain in place.
To make matters worse, South Korea faces another hurdle, namely, U.S. sanctions under CAATSA against Russia in implementing the RNS pipeline project. These sanctions will remain in force even if the North Korean nuclear problem is fully resolved and the U.S. consequently lifts its own as well as the UN sanctions against North Korea. As noted above, CAATSA allows the U.S. President to impose secondary sanctions against foreign entities that enhance Russia’s ability to construct energy export pipelines. To be sure, this provision is discretionary rather than mandatory, meaning that the President is not required to impose such sanctions. Moreover, the provision states that the President imposes sanctions “in coordination with allies of the United States” [
62]. Therefore, South Korea can hope for the best scenario, namely, that the U.S. consults South Korea on the issue of the RNS gas pipeline project and then decides not to impose any secondary sanctions against its companies involved in the project.
However, the possibility of this scenario is quite slim, largely because the U.S. seeks to increase its gas exports to South Korea. In fact, CAATSA contains a clause stating that “the United States Government should prioritize the export of United States energy resources in order to create American jobs…” [
62]. As discussed above, the U.S. is likely to greatly increase its LNG exports in the future. According to the EIA, it will increase from 76.5 bcm in 2020 to 145.5 bcm in 2040 [
63]. BP predicts that the U.S. and Qatar will dominate global LNG exports, accounting for almost half of these exports by 2040 [
64]. Naturally, Washington perceives South Korea as an important market [
65].
Thus, this has been a strong incentive to invoke the sanctions under CAATSA against Russia to prevent the implementation of the RNS gas pipeline project. The possibility of the U.S. making this move is quite high, especially given its policy toward Russia’s Nord Stream 2. The Nord Stream 2 is an underwater gas pipeline that directly connects Russia and Germany, bypassing countries such as Ukraine and Poland. Russia’s Gazprom together with five European energy companies—France’s ENGIE, Austria’s OMV, Anglo-Dutch Royal Dutch Shell, and Germany’s Uniper and Wintershall—sought to build this pipeline. These five energy companies agreed to provide long-term financing for 50% of the €9.5 billion project in April 2017 [
66].
Under these circumstances, the U.S. issued numerous warnings that it would impose secondary sanctions on these energy companies. For example, Francis Fannon, assistant secretary at the U.S. State Department Bureau of Energy Resources, stated in July 2018 that companies involved in the Nord Stream 2 would face the risk of U.S. sanctions [
67]. Likewise, U.S. National Security Advisor John Bolton noted in his interview with the Wall Street Journal in December 2018 that Washington would consider a range of option to stop the construction of the Nord Stream 2 [
68]. Richard Grenell, U.S. Ambassador to Germany, even sent letters to German companies involved in the Nord Stream 2, warning them of the risk of sanctions [
69]. The U.S. justified this by saying that the Nord Stream 2 will have a negative impact on EU energy security and Ukraine’s economy [
70,
71]. However, several observers have pointed out that this is not the primary reason why the U.S. opposes its construction. Rather, it has an ulterior motive to export its gas to Europe [
72,
73].
Thus, South Korea cannot rule out the possibility that if its companies are involved in implementing the RNS gas pipeline project, the U.S. will impose secondary sanctions on them. South Korean companies in the RNS pipeline will then be far more vulnerable to U.S. sanctions than the five European companies involved in the Nord Stream 2. In the case of the Nord Stream 2, these five European companies are based in diverse European countries, some of which are major powers such as Germany, France, and the U.K. Therefore, these countries have greater capabilities to protect their companies from U.S. sanctions. In the case of the RNS pipeline, however, only South Korean companies are likely to be involved in the project. South Korea is obviously less powerful than the five European countries combined. Naturally, if the U.S. imposes secondary sanctions on South Korean companies, Seoul will find it very difficult to protect them from U.S. sanctions.