The Kremlin has certainly not been subtle in opining on what is at stake on the Korean Peninsula, stating earlier this month that a military conflict there could make Chernobyl "seem like a child's fairy tale." The characterization serves to highlight what is at stake for Pyongyang and Seoul, but also the impact the outcome of the conflict could have on Moscow. While Russia's influence on the People's Democratic Republic of Korea (the DPRK) is unquestionably limited -- as is that of every other country in the region, even China -- it shares China's desire to limit the amount of influence the U.S. may derive from a strengthened South Korea in the process. What happens next could have a larger impact on Russian/U.S. relations, which have once again turned frosty as a result of an escalation of the tit-for-tat diplomatic tussle resulting from the Magnitsky affair. The Kremlin's ties with the DPRK leadership date back to the Japanese occupation of Korea, when Joseph Stalin offered Korean guerrilla units sanctuary in the USSR. In fact, Kim Il-sung received his administrative and military education in the USSR and Stalin chose him as a potential leader of Korea. During the Korean War, the Soviet air force provided North Korea with air defense capability and the USSR was Pyongyang's main trading partner and sponsor throughout the Cold War. Almost one hundred factories were built in North Korea with Moscow's technical assistance and hundreds of thousands of DPRK citizens received their education in the Soviet Union. In the 1980s, Moscow's partnership with Pyongyang began to erode as a result of Gorbachev's decision to convert trade with the DPRK to hard currency. This also coincided with China's rise as a regional power. Under Yeltsin, Russia sought to join the club of western democracies and deepen trade relations with South Korea -- two moves that froze relations between Pyongyang and Moscow. In addition, during the late 1990s Russia's 'experiment' with democratic romanticism came to an end and the Kremlin's foreign policy vis-à-vis the DPRK grew increasingly realpolitik in nature. The shift was based on the conclusion that the Western powers' influence over the Korean Peninsula offered Russia little, while a partnership with the DPRK was in Russia's national interest. Yet despite improved political ties under Putin, Russian-DPRK trade levels remained low, with bilateral trade totaling just $80 million in 1999 -- just a fraction of the $2.8 billion level of 1988. As China's economic clout grew over the past two decades throughout the region and Pyongyang grew increasingly isolated, Beijing replaced Moscow as the DPRK's primary benefactor and closest ally. Bilateral trade nearly tripled between 1995 and 2005, and tripled again over the past six years, reaching $5.6 billion in 2011. That year Chinese-DPRK trade exceeded that of Russia more than 200-fold and currently accounts for nearly 90 percent of North Korea's total trade. China's political influence in North Korea is a natural outgrowth of its unrivaled economic relationship, but remains limited by the nature of the Kim dynasty's bellicosity and unpredictability. Although far less influential today than it was 25 years ago, Pyongyang continues to value its partnership with Moscow, given the geostrategic issues at stake, and undoubtedly wishes to use its relationship with Russia for its own benefit. Kim Jong-un, and his handlers, surely recognize that Moscow is uniquely positioned to lubricate the process of resuming six party talks, given its potential leverage with China -- something neither Japan, South Korea or the U.S has, and which may prove rather valuable in the future. The DPRK has other reasons to reach out to Russia. Apart from sharing a small border with Moscow, the cash-strapped country derives revenue from indentured North Korean workers in Siberia. And in exchange for the cancellation of $11 billion of national debt, last fall Moscow proposed a Russia/DPRK/South Korea pipeline that would transfer Russia's natural gas to the South. The North would obviously yield benefits from serving as the transit point between Russia and the South, but Seoul has reservations about being so reliant on the North for such an important economic input. For Russia, the stakes of the ongoing escalation between Pyongyang and Seoul are higher than many may recognize. If war were to break out, the presumed influx of refugees into Russia could create a humanitarian crisis and a burdensome price tag for the Kremlin -- just as it would for China. Russia is similarly vulnerable to any radiation that may blow from the peninsula on to Russian territory. Any economic, political or military impact between the DPRK and Russia clearly also has implications for China, which Russia is anxious to remain on favorable terms. For all these reasons, Moscow surely wishes to contribute to a de-escalation of tension on the Korean Peninsula. As is the case with Beijing, Moscow views cooperative ties with Pyongyang as necessary for greater Russian economic influence throughout Northeast Asia. The idea of a greater U.S. military presence on Russia's doorstep in Northeast Asia is not welcome news either to Moscow or Beijing, but China and Russia share America's interest in a Korean Peninsula free of nuclear weapons. Russia's support for numerous United Nations Security Council resolutions demonstrate Moscow's position that conflict resolution in Korea must be achieved with all parties via mutual respect for the Nuclear Non-Proliferation Treaty. As is the case vis-à-vis Iran, while Moscow does not want North Korea to be armed with nuclear weapons, it is similarly opposed to any unilateral military action being taken against Pyongyang. If the U.S. were to take any pre-emptive measures against North Korea, additional complications will surely arise in the Obama Administration's relationship with Putin's Russia. Regrettably, neither side seems particularly interested in improving bilateral relations at this time. While China wields most of the influence over the DPRK, the Kremlin's growing aspirations to become more influential in Northeast Asia make it an important player in the standoff on the Korean Peninsula -- something many analysts have not fully considered. Given Russia's proven ability to influence the direction of the Syrian crisis, impact the West's ability to impose sanctions at will over Iran, and its warming relations with China, Russia should be considered a force to be reckoned with in the Korean equation. While discussions with Russia may indeed be going on behind the scenes vis-à-vis the DPRK, such dialogue does not appear to be acknowledged as part of the solution to the problem. Perhaps it should be. Daniel Wagner is CEO of Country Risk Solutions, a cross-border risk advisory firm, and author of the book "Managing Country Risk". Giorgio Cafiero is a research analyst with CRS based in Washington.
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