FAO warns of worst North Korean drought since 2001

July 20th, 2017

Benjamin Katzeff Silberstein

FAO sounds the alarm bells yet again this year about drought in North Korea:

20 July 2017, Rome – DPR Korea’s crop production for 2017, including staple rice, maize, potatoes and soybean, has been severely damaged by prolonged dry weather conditions, threatening food security for a large part of its population, according to a new FAO update prepared in collaboration with the European Commission’s Joint Research Centre.

Rainfall from April to June in key crop producing areas in Democratic People’s Republic of Korea were well below the long-term average, severely disrupting planting activities and damaging the 2017 main season crops.

“So far, seasonal rainfall in main cereal producing areas have been below the level of 2001, when cereal production dropped to the unprecedented level of only two million tonnes, causing a sharp deterioration in food security conditions of a large part of the population,” said Vincent Martin, FAO Representative in China and DPR Korea.

Food shortages during ongoing lean season

The severe dry spell also affected the 2016/17 early season crops which were harvested in June and include wheat, barley and potatoes. According to FAO’s latest estimates, production of 2017 early season crops has plunged by over 30 percent, from the previous year’s level of 450 000 tonnes to 310 000 tonnes.

Despite the fact that the early season harvest accounts for only 10 percent of the total annual cereal production, these crops are an important source of food during the lean season from May to September.

Concerns over the 2017 main season crops 

Although rains in the first half of July provided some relief, they were generally too late to allow normal planting and development of the 2017 main season crops, to be harvested in October-November.

The lack of rain is expected to have a serious impact on main season crops in the major cereal producing areas, including the provinces of South and North Pyongan, South and North Hwanghae and Nampo City, which normally account for close to two-thirds of overall main season cereal production.

With forecasts of reduced production of the 2017 main season crop, the food security situation is expected to further deteriorate during the 2017/18 marketing year and cereal import requirements are likely to increase.

Immediate interventions

“Immediate interventions are needed to support affected farmers and prevent undesirable coping strategies for the most vulnerable, such as reducing daily food intakes,” said Martin. “It is critical now that farmers receive appropriate and timely agricultural assistance, including irrigation equipment and machinery.”

According to the report, it is also essential to immediately start rehabilitating and upgrading irrigation schemes to reduce water losses and increase water availability.

Increased food imports, commercial or through food aid, would be required during the next three months at the peak of the lean season, ensuring adequate food supply for the most vulnerable, including children and elders.

Full article:
DPR Korea’s food production hit by the worst drought since 2001
Food and Agriculture Organization of the United Nations
2017-07-20

It is worth noting that many question marks exist on the FAO’s overall methodology. I’ve written about some of these issues before, here and here. Surely, market prices appear to be pointing up in North Korea this summer, but not toward any unprecedented levels. I see no reason to doubt what FAO says about weather conditions, but the consequences for North Korea’s food supply are less clearly outlined, especially since WFP and FAO, for political reasons, often are not able to fully take the market sector into account in their assessments.

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China-North Korea trade up in the first half of 2017

July 14th, 2017

Benjamin Katzeff Silberstein

‘Tis the season yet again for Chinese customs data. Imports are down, but exports are up even more. Reuters:

China’s trade with isolated North Korea rose more than 10 percent in the January-June period from a year earlier, a Chinese official said on Thursday, amid pressure from the United States for Beijing to pressurize its troublesome neighbor.

Last week U.S. President Donald Trump denounced China’s trade with North Korea, saying it had grown almost 40 percent in the first quarter, and cast doubt on whether Beijing was helping to counter the threat from North Korea.

China has repeatedly said it is fully enforcing United Nations sanctions on nuclear-armed North Korea and there is nothing wrong with what it terms “normal” trade with Pyongyang, referring to areas not covered by sanctions.

Chinese customs spokesman Huang Songping told a briefing on China’s overall trade figures that total trade with North Korea expanded by 10.5 percent to $2.55 billion in the first six months of the year.

While China’s imports from North Korea dropped 13.2 percent to $880 million in the period from January to June, exports to North Korea rose 29.1 percent to $1.67 billion, he said.

The exports were largely driven by textile products and other traditional labor-intensive goods not included on the United Nations embargo list, Huang added.

“As neighbors, China and North Korea maintain normal business and trade exchanges,” he said, adding that goods for ordinary people and those used for humanitarian reasons are not subject to sanctions.

Overall trade growth with North Korea slowed in June, compared with previous second-quarter months.

Trade in dollar terms with North Korea rose about 12 percent in June from a month earlier to $499 million, according to Reuters calculations based on previously released data.

The calculations do not reflect revisions to earlier figures that may not have been announced.

In May, trade with North Korea gained 14.5 percent from April to $443.5 million, previously released customs data show.

Numbers showing an increase are not evidence that China is failing to enforce U.N. resolutions, with imports from North Korea falling every month since March, Huang added.

China suspended imports of North Korean coal in February, while imports of iron ore accord with relevant U.N. resolutions, he said.

“China customs have all along fully, accurately, conscientiously and strictly enforced relevant Security Council resolutions.”

Full article:
China trade with sanctions-struck North Korea up 10.5 percent in first half
Fang Cheng and Ben Blanchard
Reuters
2017-07-13

As Washington Post reports (citing Kent Boydston’s data), this makes for one massive trade deficit for North Korea. Something seems to be odd with the data, which itself isn’t that odd in this context. A Chinese spokesperson explained the trend as follows:

Monthly figures were more representative of the trend, he said, and China’s imports from North Korea had been “falling sharply for four consecutive months since March,” including by 36 percent in March and 42 percent in April.

“The trade growth between China and North Korea in the first half of the year was mainly driven by exports,” Huang said, adding that the exports were mainly labor-intensive products such as textiles, which are not banned under U.N. resolutions.

Letting North Korea run a trade deficit of this magnitude sure would be awfully selfless of China, unless North Korea is somehow borrowing to make up for it, which seems highly unlikely.

Wall Street Journal also reported the trade data:

The rise in trade was driven by a 29.1% increase in exports from a year earlier, while imports fell 13.2%, said Huang Songping, spokesman for the General Administration of Customs, at a briefing Thursday. He said China was abiding by U.N. sanctions “comprehensively, carefully, accurately and seriously” and that the first-half data doesn’t reflect Beijing’s current stance on its neighbor.

He said imports from North Korea have fallen for the past four months and all coal imports were made in the first two months of the year, before China suspended coal purchases from Pyongyang. He said coal imports were down 74.5% for the full first half from a year earlier.

Goods exported to North Korea were largely items such as textile products not covered by sanctions, Mr. Huang said.

China is by far North Korea’s biggest trading partner, accounting for more than 80% of the hermit state’s external trade for the past five years. After North Korea’s successful launch of an intercontinental ballistic missile on July 4, U.S. President Donald Trump in a tweet cited a rise in China’s trade with Pyongyang in the first quarter, questioning Beijing’s willingness to ratchet up pressure on its neighbor.

The U.S. has since stepped up its rhetoric, moving toward unilaterally tightening sanctions, targeting Chinese companies and banks the U.S. says are funneling cash into Pyongyang’s weapons program.

Beijing has resisted suggestions it isn’t doing enough to pressure North Korea, countering that Washington must directly engage Pyongyang to dissuade its nuclear ambitions. China backed tougher U.N. sanctions last year on North Korea’s coal exports, while ensuring an exemption for “humanitarian” needs. Chinese officials say the February suspension of imports of North Korean coal for the rest of this year was part of efforts to enforce those sanctions.

China’s Foreign Ministry says Beijing has played an “indispensable” role in trying to denuclearize the Korean Peninsula. On Thursday, a ministry spokesman said Chinese imports of iron ore in the first half were allowed under the U.N. sanctions as they are for “civilian use” and generate no income for North Korea’s nuclear-weapons program.

The data on the customs agency’s website didn’t break out iron-ore imports from North Korea in the first half.

China’s imports of the steelmaking material from all countries jumped 16% from a year earlier in June and rose 9.4% for the first half, customs data showed, as a lasting property boom has spurred demand from the construction sector.

The Foreign Ministry spokesman, Geng Shuang, also reaffirmed Beijing’s commitment to the U.N. sanctions. “China is implementing the [North Korea]-related resolutions in a full and strict manner,” he said.

In the first quarter, total trade between China and North Korea grew 29.2% from a year earlier, according to Chinese customs data. Both the first-quarter and first-half increases were in dollar terms.

Full article:
China Defends Its Growing Trade With Sanctioned North Korea
Liyan Qi and Chun Han Wong
Wall Street Journal
2017-07-13

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Washington Post interviews Ri Jong Ho

July 14th, 2017

Benjamin Katzeff Silberstein

A little over a week after the Kyodo News interview, Washington Post has also talked to Ri Jong Ho, the former official from Bureau 39 who now lives in Washington DC. The main takeaway from the interview I think, from an economic point of view, is just how far the North Korean economy has gone in its adaptation to its international environment. Rigidity through flexibility, one could call it:

“We were never in pain or hurting in our trade business because of the sanctions. Instead, we conducted our first nuclear test in 2006,” Ri said in an interview near Tysons Corner.

The 59-year-old, whose job had been to raise money for the North Korean regime, and his family live in Northern Virginia, having defected to South Korea at the end of 2014 and moved to the United States last year.

“I used to be sanctioned, as a North Korean who led trade at the front line, but I never felt any pain from the sanctions. The sanctions were perfunctory,” Ri said.

He described being able to send millions of U.S. dollars to North Korea simply by handing a bag of cash to the captain of a ship leaving from the Chinese port city of Dalian, where he was based, to the North Korean port of Nampo, or by giving it to someone to take on the train across the border.

In first the nine months of 2014 — he defected in October that year — Ri said he sent about $10 million to Pyongyang this way.

[…]

“Unless China, Russia and the United States cooperate fully to sanction North Korea, it will be impossible to hurt them,” Ri said.

China’s interest in North Korea is well known, but Russia’s role in supporting the former Soviet client state is often overlooked. Amid calls for China to limit oil exports to North Korea, Russia has dramatically increased the amount of oil it has sent — some reports suggest exports have quadrupled — to North Korea this year.

North Korea’s financial networks, moreover, are  intentionally murky. The U.S. Treasury has sanctioned more and more North Koreans and North Korean companies by name to try to cut them off from the American financial system, but few, if any, have any exposure to the United States.

For this reason, Ri’s insights are widely sought after in Washington, where successive administrations have been trying to find North Korea’s pressure points.

[…]

Ri said he worked as president of a shipping company and was chairman of Korea Kumgang Group, a company that formed a venture with Sam Pa, a Chinese businessman, to start a taxi company in Pyongyang. Ri suppled a photo of him and Pa aboard a jet to Pyongyang.

He was awarded the title “hero of labor” in 2002 for his efforts, and said he lived the good life in Pyongyang, with a color TV and a car. “I was very loyal to Kim Jong Il, so I was rewarded by him,” he said. “I was rich.”

His last position was running the Dalian branch of Daeheung, a trading company involved in shipping, coal and seafood exports, and oil imports. The company was given targets to meet in terms of profits, he said, declining to go into details.

But in 2014, Ri grew increasingly disillusioned after Kim Jong Un suddenly denounced his uncle, Jang Song Thaek, as a “traitor for all ages” and had him executed at the end of 2013.

Jang had been leading economic cooperation efforts with China, and dozens of people who worked for him were also purged at the time, Ri said. He worried that his family would be next. They escaped to South Korea before moving to the United States, where his two children, now in their 20s, plan to go to college.

[…]

Ri said North Korea has repeatedly found ways to circumvent whatever sanctions are imposed on it.

“North Korea is a 100 percent state enterprise, so these companies just change their names the day after they’re sanctioned,” he said. “That way the company continues, but with a different name than the one on the sanctions list.”

Ri’s Chinese counterparts weren’t bothered, either, he said.

“My partners in China also want to make a profit, so they don’t care much about sanctions,” he said. “When the Chinese government orders them to stop, they stop for a few days and then start up again.”

Growing impatient with Beijing, Washington is increasingly targeting Chinese companies that help North Korea with what are called “secondary sanctions.” At the end of last month, the Trump administration blacklisted the Bank of Dandong, located on the border between the two countries, for its dealings with North Korea.

But without knowing how to really hurt North Korea and teaming up to do it, it will be “impossible” to change Pyongyang’s calculus on the nuclear program, Ri said.

Full article:

He ran North Korea’s secret moneymaking operation. Now he lives in Virginia.
Anna Fifield
Washington Post
2017-07-13
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What about the Chinese companies that depend on trade with North Korea?

July 9th, 2017

Benjamin Katzeff Silberstein

Domestic conditions within China are often underestimated as a factor when it comes to the country’s enforcement of sanctions against North Korea. In the grand scheme of things, they may not be a major constituency, but it is difficult to imagine that for a government that values economic growth and social stability as much as China does, it would not factor in the sentiments and demands of domestic businesses who depend on trade with North Korea.

Indeed, when one travels to Dandong, the border town most central to trade between China and North Korea, one can begin to appreciate the magnitude of the trade ties between local businesses and their neighbors on the other side of the Yalu river. I have posted some pictures here. Parts of the city are almost wholly dominated by businesses and stores that cater to North Korean customers, some that are clearly tailored for private and large-scale buyers of goods like cars, machinery, kitchen items such as refrigerators, et cetera. Many companies along the border deal in export-import with North Korea. Southern China Morning Post has an interesting story out today about some of these businesses, often an underestimated constituency in the sanctions analyses:

Su Nan, a trader along the China-North Korea border, used to be a busy man. He used to wake early in the morning, fill his schedule with endless phone calls, and in a good year close deals worth millions of US dollars. But now, all of that has gone.

“We have no revenue so far this year,” Su told This Week in Asia. “In fact, we have been struggling since 2016, with fewer and fewer orders coming.”

Although his company hasn’t lowered his salary or laid off workers, Su said he can’t help but worry. After all, “we just sit in the office and do nothing”, he said.

Su works at Dandong Sevsuns Trading, an export firm located in Dandong, a stone’s throw from North Korea. China’s 1,420km-long border with North Korea has fostered many cross-border businesses – Dandong alone hosts 600 such firms by some estimates.

[…]

Since attempts to halt North Korea’s nuclear tests through diplomacy have fallen flat and Beijing doesn’t want a war near its soil, “curbing North Korea’s nuclear ambition through tougher economic sanctions has become the only choice”, Cheng said.

But that worries the many Chinese whose livelihoods rely on trade with North Korea. For Su, the trader in Dandong, such a move could be “a killer blow”.

Su’s firm helps international organisations purchase and deliver supplies of humanitarian aid to North Korea. International relief to North Korea has almost dried up in recent months, and Su said his company had likewise been struggling to stay in business.

“If China suspends more trade activities, then we will have no choice but to shut down,” he said.

Other Chinese traders share his concern.

“Selling fruit to North Korea is the only source of income for my family. What shall we do for a living if China will no longer trade with North Korea?” said Wu Xiuhua, a middle-aged Chinese woman in Tumen, a border city an hour’s drive from North Korea.

Like other traders, Wu used to drive her produce straight over the Tumen River; now all must apply for permits to take their goods across the border.

Since the summer months are traditionally a low season for fruit sales, Wu is able to cope with the financial losses – for now. But other Tumen traders recently took to the street, she said, angry about the costly and time-consuming change.

The local authority in Tumen declined to comment.

It is unclear how many Chinese traders living along the border have been, or will be, affected by the sanctions, but Wu is not optimistic.

“Many people here are running cross-border businesses,” she said, adding that some of her friends had even invested in North Korea, building warehouses equipped with industrial cooling systems to store imported seafood.

“All these investments will go down the drain if China cuts off economic ties with North Korea,” she said.

Besides traders, any business that deals with North Korea, however indirectly, is also at risk.

At a garment factory in Fengcheng, another city near Dandong, an executive told This Week in Asia that although his company did not sell to North Korea, it had hired at least 100 North Korean workers to make clothes – ironically – for customers in Europe and the US.

“If Beijing expands its sanctions to include the hiring of North Korean workers, that would have a negative impact on our business,” said the executive.

“North Koreans work for a lower salary,” he said. “It is also hard to find enough Chinese workers, as Fengcheng, like many cities in China, faces a labour shortage.”

Labour exports are considered a major source of income for North Korea.

Nearly 80,000 North Korean working overseas send up to US$2.3 billion back home annually, according to a report by the North Korean Strategy Centre, a defector group. The report said more than half of them work in China and Russia.

The factory has yet to receive any official notices that restrict hiring, but some residents say changes are already underway. “A restaurant here used to have a lot of North Korean waitresses, but many have disappeared in the past few months. Nobody knows why they left or where they went,” said one resident.

The only businesses that remain unaffected, and at least in some respects optimistic about the future, are Chinese companies that arrange cross-border trips to North Korea.

In fact, an agent at Dandong China International Travel Service said their business had been going so well that the company now ran the tour daily.

“Many Chinese are curious about North Korea,” said the travel agent, who gave only her surname, Wang. “We now send more than 30 tourists to North Korea every day, with some clients coming all the way from Hong Kong and Macau.”

Full article:
SANCTIONS ARE FINE, BUT WHAT ABOUT THE CHINESE WHO DEPEND ON TRADE WITH NORTH KOREA?
Coco Liu
South China Morning Post
2017-07-09

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US government seizes millions from big banks though to have dealt with North Korea

July 6th, 2017

Benjamin Katzeff Silberstein 

Reuters reports:

U.S. authorities have tried to seize millions of dollars associated with several companies that deal with North Korea, including the country’s military, from eight large international banks, according to court filings made public on Thursday.

The effort was revealed two days after North Korea tested a long-range missile capable of reaching Alaska, ratcheting up tensions with the United States and adding to worries about North Korea leader Kim Jong-un’s nuclear weapons plans.

Thursday’s filings show that Chief Judge Beryl Howell of the federal court in Washington, D.C. on May 22 granted U.S. prosecutors’ applications for “damming” seizure warrants against Bank of America Corp (BAC.N), Bank of New York Mellon Corp (BK.N), Citigroup Inc (C.N), Deutsche Bank AG (DBKGn.DE), HSBC Holdings Plc (HSBA.L), JPMorgan Chase & Co (JPM.N), Standard Chartered Plc (STAN.L) and Wells Fargo & Co (WFC.N).

Prosecutors believe the banks have processed more than $700 million of “prohibited” transactions on behalf of entities tied to North Korea since 2009, including the period after Donald Trump was elected U.S. president, the filings show.

Some of the transactions were processed for Dandong Zhicheng Metallic Material Co and four affiliated “front” companies that prosecutors said tried to evade sanctions through transactions that would benefit North Korean entities, “including the North Korea military and North Korea weapons programs,” according to the filings.

The filings did not say any of the banks knowingly violated sanctions against North Korea.

In her decision, Howell authorized warrants requiring the eight banks to accept incoming transactions but not allow outgoing transactions involving the five companies for 14 days, and thereafter to seize what they collected.

Full article:
U.S. seeks funds tied to North Korea from eight big banks
Jonathan Stempel
Reuters
2017-07-06

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North Korea’s ICBM-test, Byungjin and the economic logic

July 4th, 2017

By Benjamin Katzeff Silberstein

At 3:30PM GMT+9 on Tuesday July 4th, North Korean television announced that the country had successfully tested an intercontinental ballistic missile earlier in the day. Wall Street Journal

The missile, identified as the Hwasong-14, was launched at a steep trajectory and flew 933 kilometers (580 miles), reaching an altitude of 2,802 kilometers, according to North Korean state television. The numbers are in line with analyses from U.S., South Korean and Japanese military authorities.

US Secretary of State, Rex Tillerson, later confirmed that the launched missile was an intercontinental ballistic one.

Here in Seoul, things seemed to continue on as usual, which tends to be the case in this city more than used to its fair share of similar news. The biggest strategic consequence, of course, is that for the US. A successful intercontinental ballistic missile of this sort could potentially strike anywhere in Alaska.

With the latest launch, North Korea takes one step further along the nuclear side of the Byungjin line of parallel development of nuclear weapons and the national economy, and arguably, one step back on the economic side of the dual-track policy. In the formulation of the Byungjin line, of course, both are interrelated. Missile launches are often described as evidence of progress in industry and science, ultimately benefitting economic progress. This launch was no exception. From KCNA:s statement yesterday, July 4th 2017 (my emphasis):

The success in the test-fire of inter-continental ballistic rocket Hwasong-14, final gate to rounding off the state nuclear force, at just one go is a powerful manifestation of the invincible state might and the tremendous capability of the self-reliant national defence industry of Juche Korea that has advanced at a remarkably rapid pace under the great Workers’ Party of Korea’s new line on the simultaneous development of the two fronts, and a great auspicious event to be specially recorded in the history of the DPRK which has long craved for powerful defence capabilities.

This launch happened in a context where North Korea is already under sanctions designed to strike at its coal exports, one of its most important sources of income, and where the US has just signaled its resolve to go after North Korea’s financial channels through secondary sanctions of Chinese entities. At the same time, Kim Jong-un’s tenure has very much come to be associated with some economic progress (albeit from a low level, and primarily benefitting the relatively privileged classes), symbolized by projects such as the recently opened Ryomyong street.

It is not yet clear what the consequences will be. The US will likely try to add more sanctions targeted against specific entities and persons that help North Korea evade sanctions, and acquire equipment for its nuclear and missile programs.

The US will probably also call for international sanctions, but as Chad O’Carroll points out, the US may have a hard time getting such measures through in a quick manner given its currently tense relationships with both Moscow and Beijing. The US may also further push Beijing to implement the already existing sanctions against North Korea, but nothing appears to have changed with the claimed ICBM-test that would fundamentally alter China’s strategic calculations in the region. In other words, it continues to regard North Korea as a buffer between itself and US forces in the region, and as a geopolitical asset.

Whatever happens, it is safe to assume that it will not be good news for North Korea’s international ties in diplomacy, trade, finance, you name it. It would be easy to assume that economic progress and nuclear weapons development are mutually exclusive, since the second leads to further international isolation and economic sanctions, and therefore hampers the first.

In reality, that may be true. The North Korean Byungjin narrative, that weapons development helps economic progress, is difficult to swallow, especially when one considers the opportunity cost that the weapons programs carry, both in terms of domestic resource dedication and the cost in international isolation.

But there is another way to look at it. Whatever the actual consequences will turn out to be, North Korea is making a strategic calculation that the gains from the test, and from overall nuclear weapons and missiles development, will be greater than the potential costs and downsides. Consider the following two factors:

First, North Korea has made economic progress in the past few years, and particularly since Kim Jong-un came to power, even under years of severe sanctions.  North Korea has been under various forms of UN Security Council sanctions since its first nuclear test in 2006. During these years, its economic development has been impacted far more by domestic policy decisions than by international developments.

Again, we are absolutely not talking about any growth miracle, and some probably exaggerate the degree of the wealth increase in North Korea over the past few years. But without a doubt, North Korea is far better off now than it was eleven years ago, and worlds apart from the famine of the 1990s. Food insecurity prevails in North Korea but the country has not seen widespread starvation since the late 1990s, and largely thanks to better economic frameworks (or rather less predatory), and increased space for private production and trade within the economic system, things are looking much better today than in many years.

Just look at this video recently published by the Daily NK, from Chongjin, one of North Korea’s largest cities in its northeast. Is this long-term, sustainable growth that will eventually lead North Koreans to enjoy the same prosperity as their counterparts in South Korea or even China? Probably not. But at least it’s something.

Second, and relatedly, North Korea likely has a significant amount of channels for trade and various transactions that are not commonly known, but that play highly significant roles for the economy. For example, consider the information that Ri Jong Ho, a former official in North Korea’s Office 39, supplied in a recent interview with Kyodo News. Ri claims that North Korea procures up to 300,000 tons of fuel and various oil products from Russia each year, through dealers based in Singapore. As a point of comparison, a commonly cited figure for crude oil supplies from China is 520,ooo tons per year. Proportionately, then, 300,000 tons is not close to a majority, but still a significant amount for North Korea. While intelligence services or others with access to classified information may have known this already, Ri’s claims, if true (they have not and in all likelihood cannot be fully corroborated),

The point here is that North Korea has gotten so used to going through back channels and unconventional means to acquire highly significant amounts of supplies required for its society to function. It is an economic system where unconventional (and often illicit) channels of trade are not exceptions, but core parts of the economic management toolbox. This is not to argue that sanctions do not or cannot work. Rather, it shows the extent to which unconventional methods are institutionalized within economic management in North Korea.

The North Korean government is no monolith, and there are almost certainly some parts of the governing apparatus that are more and less pleased with the ICBM-test. But in the higher echelons of the leadership, the strategic calculation is probably that even with the added sanctions that are very likely to come, North Korea will be able to continue along roughly the same economic strategies as it has thus far. Perhaps we can call it North Korea’s own “strategic patience”: continuing with patchwork strategies for international economic relations, with little concern for the impact of lack of sustainable growth on people’s livelihoods, while banking on eventual recognition as a nuclear power. Only time will tell whether targeted secondary sanctions will change that calculation.

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KCNA statement on North Korea’s ICBM-launch

July 4th, 2017

Benjamin Katzeff Silberstein

From KCNA:

Pyongyang, July 4 (KCNA) — The Academy of Defence Science of the Democratic People’s Republic of Korea released the following report Tuesday:

Scientists and technicians of the DPRK Academy of Defence Science successfully carried out the test-fire of inter-continental ballistic rocket Hwasong-14, newly researched and developed by them under the strategic decision of Kim Jong Un, chairman of the Workers’ Party of Korea, chairman of the State Affairs Commission of the DPRK and supreme commander of the Korean People’s Army.

The rocket blasted off from the northwestern part of the DPRK at 9:00, July 4, Juche 106 (2017) to make 39 minute flight along its pre-set trajectory before accurately hitting the target waters in the open sea in the East Sea of Korea.

The test-launch was carried out at the maximum angle launch system and had no adverse effect on the security of neighboring countries.

The rocket flew 933km, reaching an altitude of 2, 802km.

Kim Jong Un, Supreme Leader of our party, state and the army, personally observed the process of the test-launch in field and solemnly declared before the world its shining success.

The success in the test-fire of inter-continental ballistic rocket Hwasong-14, final gate to rounding off the state nuclear force, at just one go is a powerful manifestation of the invincible state might and the tremendous capability of the self-reliant national defence industry of Juche Korea that has advanced at a remarkably rapid pace under the great Workers’ Party of Korea’s new line on the simultaneous development of the two fronts, and a great auspicious event to be specially recorded in the history of the DPRK which has long craved for powerful defence capabilities.

As a full-fledged nuclear power that has been possessed of the most powerful inter-continental ballistic rocket capable of hitting any part of the world, along with nuclear weapons, the DPRK will fundamentally put an end to the U.S. nuclear war threat and blackmail and reliably defend the peace and stability of the Korean peninsula and the region. -0-

Original statement can be found on the KCNA website:
Report of DPRK Academy of Defence Science
Korean Central News Agency
2017-07-04

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North Koreans suffering under drought

July 3rd, 2017

Benjamin Katzeff Silberstein

From Daily NK:

Previously we reported that many residents of North Hamgyong Province were more worried about flood than drought due to traumatic memories of the widespread flooding last year. But in other regions, farmers are deeply concerned about the ongoing drought.
People are saying that it will be difficult to farm in most regions due to the lack of water. According to sources in Taehongdan County and Paekam County in Ryanggang Province, the underground water sources that were once used for drinking water have dried up due to an unprecedented and severe drought.
Ryanggang Province is famous for being the location of Mt Paektu. But Taehongdan County and Paekam County are notorious for water supply issues, as a majority of the land is contains large volumes of sand. Due to this environment, underground water sources have diminished quickly this year, and the valley streams are said to be filled with residents collecting water from early dawn.
The regions near Mt Paektu suffer from a lack of water every year, but is this year worse than normal?
Yes, the water shortages are a chronic problem, so residents resort to underground water, using a manual pump. But now the underground water supplies have dried up. Residents are deeply concerned, wondering when they can finally live without having to worry about basic necessities. When one thing improves, like the food security issue, something else goes wrong. People know that farming will be very difficult if the drought continues.
Ryanggang Province is not the only region suffering from drought. According to Daily NK’s sources, rice planting has generally started at a later date than last year in most regions. People are said to be digging wells under the scorching summer sun in their desperate search for new sources of water.
It seems that not only farmers, but also ordinary people are suffering from the drought. Can you provide more details?
According to a resident in Taehongdan County, Ryanggang Province, the drought has been severe since early spring this year and the furrows are all covered with dust. The farmers have no specific measures to cope with the situation, as the pumping facility is dilapidated and there are not many places to draw water from.
The 10.18 Collective Farm in Undok is also suffering under the drought. Residents have to walk tens of kilometers to draw water, as the village streams are parched.
Some merchants are purchasing drinking water in large volumes and selling it at a slightly cheaper price. The drinking water is said to be selling like hotcakes in the markets. So the solution to the urgent need for drinking water has come through the markets and private vendors.
That is good to hear. The merchants are adapting quickly to the changing environments.
Yes. Merchants are most aware of the needs of the rest of the population, as they survive off good trading decisions.
This is actually helpful for the residents as they can purchase drinking water at an affordable price. So it’s a win-win situation.
However, a constant supply of water from the markets is not possible, so some residents are said be installing water pumps from place to place to draw underground water.
Residents in rural areas must find it difficult to constantly purchase water with their limited budgets. How much does drinking water cost?
Mineral water was originally purchased mostly by people traveling by train or merchants going on long-distance business trips using servicha (transportation and delivery services). Also, some of the donju purchased mineral water, thinking that local tap water might be contaminated. However, most residents have been using water from wells, spring water, or underground water drawn by pump and because the underground water all dried up so fast, people have no choice but to purchase mineral water.
The bottled mineral water brands currently available in North Korea include Paektu Spring Water, which is jointly produced by a North Korean company and a foreign company, Ryongak Spring Water, which is produced in Pyongyang, and Sindok Spring Water, produced in Onchon County, South Pyongan Province. Of these three, Sindok Spring Water is said to be the most popular.
Sindok Spring Water is claimed to be high quality and is supplied to Kim Jong Un’s family and high-ranking officials. Merchants are selling the water at 500-550 KPW per bottle, which is 100 KPW lower than usual.
Full article:
North Korean residents suffering under severe drought
Unification Media Group/Kang Mi Jin
Daily NK
2017-07-03
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Ri Jong Ho, high-level defector and former official in Office 39, says North Korea gets much more oil from Russia than previously known

July 1st, 2017

Benjamin Katzeff Silberstein

In a fascinating interview by Kyodo News’s Tomotaro Inoue, Ri Jong Ho, a former high-level official in Office 39 of the Korean Worker’s Party, makes several fascinating claims about the supply of fuel to North Korea:

North Korea secures up to 300,000 tons of oil products from Russia each year through Singapore-based dealers, a defector who formerly managed funds for the leadership has told Kyodo News, posing a challenge for the United States as it seeks to isolate Pyongyang.

“North Korea has procured Russia-produced fuel from Singapore brokers and others since the 1990s…It is mostly diesel oil and partly gasoline,” Ri Jong Ho, 59, a former senior official of Office 39 of the Workers’ Party of Korea, said recently in the U.S. capital in his first interview with media under his own name.

Ri also said North Korea relies more on Russia than China for fuel to keep its economy moving, indicating that the U.S. drive for Beijing to restrict oil supplies over Pyongyang’s nuclear and missile programs will only have a limited effect.

“It is a wrong perception that North Korea is completely dependent on China,” he said.

Petroleum products have been shipped to North Korea by tankers leaving Vladivostok and Nakhodka, both in the Russian Far East, with the fuel widely used for cars, ships and trains, helping to support the North’s economy, Ri said.

Other sources familiar with the fuel deals said the petroleum products ending up in North Korea are often purchased by brokers who claim they are destined for China, with the items procured using forged paperwork.

Ri, who defected to South Korea with his family in October 2014, provided details of the activities of Office 39.

The secretive entity, said to have been established by former North Korean leader Kim Jong Il in May 1974, is subject to international sanctions as the United States and other Western countries believe it is engaged in illicit economic activities and the management of slush funds for the leadership.

He said North Korea has been trying to reduce its economic reliance on China, Pyongyang’s most important benefactor, since leader Kim Jong Un issued an order to expand trade with Russia and Southeast Asian countries in August 2014.

The order followed Chinese President Xi Jinping’s visit to South Korea a month earlier, during which he and then South Korean President Park Geun Hye expressed opposition to North Korea’s nuclear weapons development. It was the first time for a Chinese president to visit South Korea before traveling to the North.

Ri said the North Korean leader was “infuriated” by the visit, going so far as to call China an “enemy state,” and began taking measures to boost trade with Russia.

According to Ri, Office 39 has five central groups and systematically acquires foreign currency by sending laborers overseas as well as through gold mining and exports.

“It is an organization that manages the supreme leader’s coffers and the party’s funds to rule the country. It also leads trade activities to earn foreign currency,” Ri said. The office has enormous power as it is directly linked to the leadership and is independent of other government organs, he added.

Ri admitted that Office 39 has evaded U.N. sanctions by asking Chinese and Russian contacts to allow the use of their names for the opening of bank accounts for trade settlement.

The activities of Office 39 require the involvement of hundreds of thousands of people, including those in rural areas who produce items for export. Ri said the bureau is now headed by Chon Il Chun, first vice department director of the party’s Central Committee and a former classmate of Kim Jong Il, the current leader’s father.

A native of Wonsan on North Korea’s east coast, Ri was told to work in Pyongyang by the Central Committee in the mid-1980s. He operated a shipping company at Office 39’s Daehung group and later headed a trade control section in the group between 1998 and 2004.

The Daehung group earns revenue through farm exports and shipping operations, among other means. With exclusive rights to trade “matsutake” mushrooms and snow crabs, it was actively shipping those products to Japan before Tokyo imposed a total ban on trade with the North about 10 years ago.

The four other central groups are Kumgang, which dominates gold export activities, Daesong, involved in the shipment of processed products and intermediate trade overseas, Daesong Bank, in charge of the office’s banking operations, and a group dispatching workers to other countries.

Asked about the possibility that the foreign currency earned by North Korea is being used for its nuclear and missile development programs, Ri only said, “It is up to the supreme leader how to use the funds.”

North Korea receives 500,000 tons of crude oil each year through a pipeline from China, resulting in around 70,000 to 100,000 tons of gasoline and about 100,000 tons of diesel oil after refining, but the oil products are exclusively used by the North Korean army and are not good enough for cars that carry the elite, Ri said.

He also said crude oil purchased from other countries is refined by foreign companies based in China, leading to the importation into North Korea of an additional 50,000 to 100,000 tons of gasoline.

Full article here:

N. Korea procuring Russian fuel via Singapore dealers: defector

Tomotaro Inoue

Kyodo News

 

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US sanctions of Chinese entities over transactions with North Korea

June 30th, 2017

Benjamin Katzeff Silberstein

Reuters reports:

The United States imposed sanctions on two Chinese citizens and a shipping company on Thursday for helping North Korea’s nuclear and missile programs and accused a Chinese bank of laundering money for Pyongyang.

U.S. Treasury Secretary Steve Mnuchin said the actions were designed to cut off funds that North Korea uses to build its weapons programs in defiance of U.N. Security Council and unilateral sanctions.

“We will follow the money and cut off the money,” he told a news conference.

A Treasury statement identified the bank as the Bank of Dandong and the firm as Dalian Global Unity Shipping Co Ltd. It identified the two individuals as Sun Wei and Li Hong Ri.

The sanctions imposed on the two Chinese citizens and the shipping company blacklists them from doing business with U.S.-tied companies and people.

Bank of Dandong did not respond immediately to a request for comment. A staff member at Dalian Global Unity would not comment on the sanctions and subsequent calls to the firm’s office in Dalian went unanswered.

Mnuchin said U.S. officials were continuing to look at other companies that may be helping North Korea and may roll out additional sanctions.

U.S. foreign policy experts say Chinese companies have long had a key role in financing Pyongyang. However, Mnuchin said the action was not being taken to send China a message. “This wasn’t aimed at China. We continue to work with them,” he said.

China did not respond favorably:

Asked about the U.S. sanctions on Friday, Chinese Foreign Ministry Spokesman Lu Kang said that China consistently opposes unilateral sanctions imposed outside the U.N. framework.

“We strongly urge the United States to immediately correct its relevant wrong moves to avoid affecting bilateral cooperation on the relevant issue,” he said, without elaborating.

China’s ambassador to the United States, Cui Tiankai, said China opposed the United States using domestic laws to impose “long-arm jurisdiction” on Chinese companies or individuals, the official Xinhua news agency reported on Friday.

“If a Chinese company or individual has acted in a way that violates United Nations Security Council resolutions, then China will investigate and handle the issue in accordance with Chinese law,” he told an event in Washington on Thursday evening.

Full article here:
U.S. targets Chinese bank, company, two individuals over North Korea
Joel Schectman and David Brunnstrom
Reuters
2017-06-30

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An affiliate of 38 North