South Korea is considering a cooperative energy project with Russia that could result in developing a power grid between the two countries with connecting transmission lines running through North Korea.

The plan comes amid increased energy demand in South Korea coupled with the difficulty of finding new sites for power facilities and growing public opposition to the construction of new energy infrastructure in that country, said ZhongXiang Zhang, a fellow at the Honolulu-based East-West Centre, a leading US think tank.

While the project is yet to be officially endorsed by the South Korean government, it indicates growing interest in energy cooperation in Northeast Asia, a region that includes China, Japan, Mongolia, North Korea, the Russian Federation and South Korea. 

Zhang, an energy and environmental economist, noted the benefits of regional energy cooperation had been demonstrated in Europe, Southeast Asia, Africa and South America and hold tremendous potential for Northeast Asian nations seeking new sources of energy supply. 

Despite a variety of technical and political obstacles that must be addressed before the proposed energy project can be undertaken, the greatest challenge is financing. 

Russia and South Korea have to develop their internal capital markets to create confidence among international investors, Zhang said.

"On the energy side, this will involve defining a clear energy policy to be implemented by independent regulators, establishing a fair and transparent means for resolving disputes, and hastening the reform process for restructuring the electric power industry and markets," he said.

Zhang also identified the lack of an institutional framework as a major hurdle to energy cooperation in the region. 

The creation of such a framework is of great importance to energy cooperation because of the absence of trade agreements or conventions binding all six Northeast Asian nations, he said.

Zhang noted that while other connecting routes between the Russian Far East and South Korea have been considered, alternatives to North Korea would be more expensive due to the distance and technical challenge of constructing submarine cables.

"North Korea has a crucial role to play in moving this project forward," Zhang said. 

"The project would provide the country with revenues to offset the depressed state of its domestic economy, but it won't happen so long as the North Korean nuclear crisis is unresolved."