MOSCOW (BLOOMBERG) - In retrospect, said Vladimir Bogdanov, it was not the best time to start the first passenger-ship service between Russia and North Korea shortly before Kim Jong Un shocked the world by announcing he has successfully tested a missile capable of striking the US mainland.
"We were in a hurry, thinking we'd be too late. We should have slowed down," said Bogdanov, who has organised nine trips since May between Russia's far east port of Vladivostok and Rajin in North Korea's Rason special economic zone.
"Still, there's no turning back" for the service, which is loss-making so far after filling at best a quarter of its 193 places each time, he said.
Economic ties between Russia and North Korea, which share a narrow land border, are similarly beleaguered, with trade down for a third year to just US$77 million (S$105 million) in 2016, according to the Russian customs service.
While the volume is small, it is becoming a point of tension between Russian President Vladimir Putin and his US counterpart Donald Trump, who is pressing Russia and other powers to ramp up opposition to the communist regime's nuclear-missile programme. Russia regards the trade relationship as a means to safeguard its position with Kim in diplomacy to try to defuse the crisis on the Korean peninsula.
"We can't afford to argue with North Korea because it will completely cast Russia to the sidelines," said Georgy Toloraya, head of the Russian Academy of Science's Center for Asian Strategy. "Our interests will not be considered" if North Korea sees Russia siding with the US, he said.
Just as with Iran, when Russia maintained ties amid US and European Union pressure on Teheran over its nuclear ambitions, Putin is unwilling to isolate North Korea completely. He opposes tougher sanctions because he believes they would not affect the North Korean leadership, said two senior Kremlin officials, who asked not to be identified discussing internal policy.
The US is pressing Russia to end a programme for taking 30,000 to 50,000 North Korean migrant workers, in order to "deprive Kim Jong Un of all his money", Toloraya said.
"This is what they demand from Russia right now, very actively."
Any country that hosts North Korean workers "is aiding and abetting a dangerous regime" that is "a global threat", US Secretary of State Rex Tillerson said after Kim announced the successful missile test on July 4. Some US officials say it could conduct another missile test to mark the July 27 anniversary of the end of Korean War.
"Russia has never been a supporter of dialogue by sanctions" which is a "futile approach", Kremlin spokesman Dmitry Peskov told reporters in April. That position has not changed after Putin and Trump met at this month's Group of 20 summit, he said.
While Trump and Putin had "a pretty good exchange on North Korea", they differ in tactics and pace for dealing with the threat, Tillerson said after the Hamburg talks.
Russia and China, which is North Korea's closest ally and accounted for nearly 90 per cent of its US$6 billion trade last year, urged restraint and renewed dialogue in a joint statement after the missile test. Kim boasted he would send more "gifts" to the US, which held joint drills with South Korea in response.
Russia and China blocked US-led efforts to expand penalties against North Korea in a draft United Nations Security Council resolution condemning the missile test. While Trump has accused China of doing too little to pressure its neighbour, officials in Beijing said they have been "strictly abiding" by UN sanctions and that imports from North Korea fell 13.2 per cent to US$880 million in the first six months of 2017 compared with a year earlier.
"No one has any real leverage on North Korea to convince them to give up nuclear weapons, including the Chinese," said Alexander Gabuev of the Moscow Carnegie Center. Kim's regime may earn US$30 million to US$50 million a year from the migrant workers, who labour in remote Russian forest camps or on construction sites, he said.
Russian imports from North Korea slumped to just US$421,000 in the first quarter of 2017 from the same period last year, while exports, mainly of foodstuffs and fuel, more than doubled to US$31.4 million, according to customs service data. Nobody knows the real level of trade since many goods go via third countries, though it may be worth $500 million, according to Toloraya.
Migrant workers take the boat between Vladivostok and Rajin alongside Russian and Chinese visitors, according to Bogdanov, who said his business was contracted to run the route by a Hong Kong-registered company through an entity in North Korea that he did not identify. The service may break even in a few months and will continue even amid the US demands for isolating North Korea, he said.
"We're not afraid of Trump," said Bogdanov. "We see the unanimity of Russia and China in pursuing the route to peace. And our poorly-painted little ship is also a path of peace."