Assessing the Strategic Implications of North Korea’s China-Russia Alignment on Emerging Market Geopolitical Risk and Commodity Exposure

The geopolitical realignment of China, Russia, and North Korea in 2025 has created a volatile axis that reshapes global power dynamics, particularly in critical mineral markets and defense sector investments. This alignment, formalized through a 2024 mutual defense treaty between Russia and North Korea and reinforced by China’s economic dominance over Pyongyang, has destabilized supply chains and intensified regional security risks. For investors, the implications are twofold: a reconfiguration of resource control and a surge in defense spending that could redefine emerging market opportunities and risks.

Geopolitical Realignment and Military-Centric Alliances

The August 2025 Beijing military parade, where North Korean leader Kim Jong Un stood alongside Chinese President Xi Jinping and Russian President Vladimir Putin, symbolized a strategic pivot against U.S.-led alliances [1]. This trilateral cooperation has been operationalized through clandestine networks like the Khasan-Rajin corridor, which facilitates the smuggling of lithium, cobalt, and rare earth elements from North Korea to Russia in exchange for oil and satellite technology [2]. Such arrangements not only circumvent Western sanctions but also enable North Korea to modernize its military capabilities, including ballistic missile programs, while Russia gains access to critical resources for its war in Ukraine [3].

The mutual defense treaty between Moscow and Pyongyang, signed in 2024, has further entrenched this alignment. North Korea has supplied Russia with 9 million artillery shells and 100 ballistic missiles, while Russia has provided advanced missile technology and satellite systems to Pyongyang [4]. China, though not a formal signatory, has enabled this partnership by maintaining 98% of North Korea’s foreign trade and shielding it from international pressure [5]. This trilateral dynamic has created a “force multiplier” effect, where each nation’s strategic assets—North Korea’s minerals, Russia’s military hardware, and China’s economic leverage—amplify their collective geopolitical influence [6].

Critical Minerals: A New Front in Geopolitical Competition

North Korea’s control over 30% of the world’s rare earth reserves has become a linchpin in this alignment. The regime leverages sophisticated trade-based money laundering to evade sanctions, funneling resources through intermediaries to obscure their origin [7]. China’s near-monopoly on gallium production (98%) and its export restrictions have exacerbated global supply chain vulnerabilities, particularly for Western defense and technology industries [8]. The U.S. response—pandemic-style support for domestic rare earth processing and partnerships with the Philippines and Myanmar—highlights the urgency of securing alternative sources [9].

The Khasan-Rajin corridor exemplifies how critical minerals are weaponized in this alignment. By smuggling lithium and cobalt to Russia, North Korea sustains Moscow’s war economy while gaining access to advanced technology. Conversely, China’s role as a middleman ensures its dominance in processing and refining these materials, further entrenching its strategic leverage [10]. For investors, this dynamic underscores the risks of supply chain disruptions and the opportunities in companies developing traceability systems or alternative mineral sources.

Defense Sector Investments and Regional Tensions

The trilateral alignment has triggered a regional arms race. South Korea and Japan have increased defense spending by 15% and 12%, respectively, to counter North Korea’s military modernization [11]. This has fueled demand for missile defense systems, benefiting firms like Hanwha Aerospace and Mitsubishi Heavy Industries. The U.S. and its allies are also investing in AI-driven command systems and space-based missile tracking, reflecting a shift toward technologically advanced deterrence [12].

Cybersecurity has emerged as another critical sector. North Korean cyberattacks on global financial systems have forced firms to prioritize threat intelligence and verification technologies [13]. Meanwhile, de-dollarization efforts—via yuan-ruble transactions and cryptocurrency schemes—complicate emerging market dynamics, prompting investors to hedge through gold, Treasuries, and sector ETFs [14].

Investment Implications and Strategic Risks

For emerging markets, the China-Russia-North Korea axis presents both challenges and opportunities. On one hand, the alignment threatens to fragment global supply chains and escalate nuclear proliferation risks. On the other, it creates openings in defense, cybersecurity, and critical minerals sectors. Investors should prioritize companies with diversified supply chains, geopolitical resilience, and exposure to alternative mineral sources.

However, the alignment’s fluidity—shaped by domestic priorities and external pressures—means that its trajectory remains uncertain. While the trilateral partnership has deepened, institutionalized alliances or joint military drills remain absent [15]. This ambiguity necessitates a cautious approach, balancing long-term strategic bets with short-term hedging against volatility.

Source:

[1] Kim Jong Un to meet with Xi and Putin at Chinese military parade [https://www.pbs.org/newshour/world/kim-jong-un-to-meet-with-xi-and-putin-at-chinese-military-parade]
[2] Strategic Risks and Opportunities in the North Korea-China-Russia Axis [https://www.ainvest.com/news/strategic-risks-opportunities-north-korea-china-russia-axis-implications-global-markets-2508/]
[3] The China–Russia–North Korea Nexus: Implications for Regional Security and the War in Ukraine [https://asiasociety.org/policy-institute/china-russia-north-korea-nexus-implications-regional-security-and-war-ukraine]
[4] Russia-China-North Korea Relations: Obstacles to a Trilateral Axis [https://www.fpri.org/article/2025/03/russia-china-north-korea-relations-obstacles-to-a-trilateral-axis/]
[5] China's Growing Threat to Gallium Supply Chains [https://www.csis.org/analysis/beyond-rare-earths-chinas-growing-threat-gallium-supply-chains]
[6] Assessing the Strategic and Economic Implications of the Russia-China-North Korea Alignment in a Post-Hegemony World [https://www.ainvest.com/news/assessing-strategic-economic-implications-russia-china-north-korea-alignment-post-hegemony-world-2508/]
[7] Breaking the Sanctions Trap: Reinventing Enforcement [https://www.yalejournal.org/publications/breaking-the-sanctions-trap-reinventing-enforcement]
[8] Critical Minerals Report (08.01.2025): The Race Intensifies... [https://investornews.com/critical-minerals-rare-earths/critical-minerals-report-08-01-2025-the-critical-minerals-race-intensifies-amid-price-floors-espionage-and-new-alliances/]
[9] Trade in Critical Supply Chains [https://www.csis.org/analysis/trade-critical-supply-chains]
[10] Strategic Risks and Opportunities in the North Korea-China-Russia Axis [https://www.ainvest.com/news/strategic-risks-opportunities-north-korea-china-russia-axis-implications-global-markets-2508/]
[11] Geopolitical Tensions and Defense Sector Opportunities [https://www.ainvest.com/news/geopolitical-tensions-defense-sector-opportunities-korean-peninsula-impact-global-security-investments-2508/]
[12] The Strategic and Economic Implications of the Russia-China-North Korea Alignment in a Post-Hegemony World [https://www.ainvest.com/news/assessing-strategic-economic-implications-russia-china-north-korea-alignment-post-hegemony-world-2508/]
[13] New Roundtable Report | The China-Russia-North Korea Nexus: Implications for Regional Security and the War in Ukraine [https://asiasociety.org/policy-institute/new-roundtable-report-china-russia-north-korea-nexus-implications-regional-security-and-war-ukraine]
[14] China, North Korea and Russia military cooperation raises concerns [https://apnews.com/article/pacific-russia-china-north-korea-weapons-ukraine-8ad7156898f1391557d5e53d5d09a02c]
[15] Russia-China-North Korea Relations: Obstacles to a Trilateral Axis [https://www.fpri.org/article/2025/03/russia-china-north-korea-relations-obstacles-to-a-trilateral-axis/]