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New US sanctions against North Korea may affect operators of Far-Eastern seaports — expert

May 16, 2017, 15:15 UTC+3 VLADIVOSTOK

American sanctions can complicate the operators' business extremely and inflict serious losses on them, the expert says

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VLADIVOSTOK, May 16. /TASS/. The toughening of US sanctions against the DPRK may complicate considerably the functioning of operators of Far-Eastern seaports but will not wield practically any impact on the operations of seaports as separate enterprises, Assistant Professor Artyom Lukin at Far-Eastern Federal University’s School for Regional and International Research, one of the leading Russian experts on the Koreas, told TASS.

Speaking of how the US could affect large operators, he said: "If they pass the bill, they will most likely select one or two showcase victims to make all others tremble."

Financial and economic damage may affect Summa Group (Commercial Port of Vladivostok), Kuzbassrazrezugol (Vostochny Port), Evraz (Nakhodka Trade Sea Port) and Vanino Sea Trade Port (Mechel Group is the core customer), he said.

"These are big companies with sizable volumes of operations abroad and assets in the West and they are tightly linked to the dollar-pegged banking system," Dr. Lukin said. "American sanctions can complicate their business extremely and inflict serious losses on them," he added.

He admitted that these companies may eventually face a tough choice between either maintaining contacts of their ports with North Korea or to lose access to the US banking system.

Meanwhile, Mechel’s Director of Public Relations Department Ekaterina Videman told TASS that the company does not export products to North Korea either via Trade Port Posiet (part of Mechel) or through Vanino Port. "The company does not have any trade and economic relations with representatives of North Korea," Videman said.

According to Lukin, the sanctions will not substantially affect operations of the ports as separate enterprises or their economic indicators. "The initiatives on sanctions create risks, first and foremost, for the international ports that service trade with the DPRK and have considerable amounts of haulage to and from the US at the same time," he said. "In practical terms, the bill puts these seaports in the face of a hard choice between cooperating with the DPRK or with the US"

For large Russian Far-Eastern ports, including Vanino, Vladivostok and Nakhodka, the US is not a priority destination at present, Dr. Lukin believes. "The main counterparts for them are the seaports in East Asia, and primarily in China, Japan and South Korea, the volumes of commerce between the Far-Eastern regions and the U.S. are not significant," he said. "That’s why whatever the damage, it won’t be critical for them."

Executives of companies doing direct business with the DPRK do not express concerns over the situation. For instance, Investstroitrest that launches regular cargo and passenger haulage between Vladivostok and the North Korean port of Rajin on May 18, believes the sanctions will not affect the transportation business in any way.

"We strictly comply with all the requirements arising in connection with resolutions of the UN Security Council and deliver only foodstuffs there and I don’t think the new sanctions will affect our work in any way," said Investstoitrest Deputy Director General Mikhail Khmel.

According to the data provided by Russian Federal Customs Service’s Far Eastern division, the trade turnover of the region with the DPRK amounted to $8.2 mln in 2016, with the biggest share taken by Primorsky Territory ($7 mln). However, the trade turnover between Russia’s Primorsky Territory and North Korea dropped 17% in 2016 compared with 2015. Exports plunged 42% to $3.9 mln, while imports increased 1.8-fold to $3.1 mln.

Exports declined mainly due to a 2.8-fold decrease in oil and oil products supplies from Russia’s Primorsky Territory to North Korea to $1.3 mln, and a 14% drop in deliveries of fish and sea food to $0.6 mln. Imports rose mainly due to an increase in frozen fish supplies (1.6-fold to $2.8 mln).

Artyom Lukin noted that a considerable share of trade between Russia and the DPRK goes through Chinese intermediate parties and is not reflected in the official customs statistics. "However, even taking into account this fact, the trade relations with the DPRK do not play a significant role for the economy of Far Eastern regions regarding either export or import. That is why from the viewpoint of foreign trade, potential American sanctions cannot seriously affect Russia and its Far East," the expert said.

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