North Korea and Russia are pushing ahead with a project to repair and improve the North's notoriously paltry power grid and build a transmission network, a source said Thursday.

Economic cooperation between the two countries is picking up as leader Kim Jong-un accepted an invitation to Moscow's 70th anniversary celebrations of its World War II victory in May.

"The North and Russia are discussing a plan whereby Russia will get rare earth metals from the North in exchange for assistance in improving the dilapidated power grid," the source in Beijing said. The project is estimated at US$20 to 30 billion. The two countries are also talking about ways to siphon off surplus electricity from Russia's Far East to the North.

North Korean Foreign Minister Ri Su-yong last October visited a hydroelectric power plant in Bureya, the largest in Asia, in October last year. The North then sent technicians to Russia early this month for training.

Some 60 to 70 percent of electricity is lost in transmission and distribution in the North because of the outdated equipment. The two countries are huddling closer together as both become more isolated in the international community. Russian exports of steel and copper to Europe have taken a hit from sanctions in the West in the wake of the Ukrainian conflict.

Russia apparently hopes to use the steel and copper stockpiles to modernize the North's railway lines and power grid. A Russian businessman who spearheaded a $25 billion project to modernize a railway between Pyongyang and Moscow in October was arrested on charges of delaying wage payments late last year, suggesting that Moscow is keen to get on.

Trade volume between the North and China amounted to $6.54 billion in 2013, but with Russia it is a mere $100 million, making it doubtful whether the pivot to Russia can work.