Writing in Reuters, Lucy Hornby and Tom Miles point out that the DPRK faces greater economic uncertainty from falling commodity prices than from new sanctions. Below I have posted excerpts and charts:
Lower commodity prices may prove more painful to North Korea than the tightened sanctions, which will likely blacklist certain firms known to deal in military goods.
“Sanctions won’t have a big effect, they won’t change their actions,” said Shi Yinhong, a professor of international relations at Renmin University in Beijing.
“There will be no impact on trade with China, which is mostly grains and basic materials … Sanctions may have some influence on luxury goods, but only a weak effect on overall trade volume.”
The isolated country’s $2 billion annual trade with China, equal to about 10 percent of the North’s annual GDP, is its most important economic relationship.
North Korea profited from strong prices for minerals and ores over the last few years, ramping up exports of zinc, lead and iron ore to resource-hungry China.
Most of those exports have dropped again since last summer, in line with sharp decreases in metals prices buffeted by the global economic crisis.
The North’s mineral deposits could be worth $2 trillion, according to an estimate by the South’s Korea Resources Corporation. But dilapidated infrastructure and a broken power grid hinder mining and the transport of minerals out of the country.
The irregular pattern of North Korea’s alumina imports implies that its smelter only runs in fits and starts. Other ore exports are equally ragged, possibly indicating that North Koreans are only digging the easily accessible ores.
Chinese companies that have tried to invest in North Korean mines complain of constant changes in regulations and report that the North tries to tie mining access to commitments to build mills and other industrial projects.
“China and North Korea are friendly neighbors and we will continue to develop friendly cooperative relations with North Korea,” Chinese foreign ministry spokeswoman Jiang Yu said on Tuesday after the North’s withdrawal from the six-party talks.
Diplomats’ expectations that China might use trade to influence its prickly neighbor rose when China cut off crude oil shipments in September of 2006, as North Korea prepared to test a nuclear bomb. It had tested ballistic missiles that July.
In fact, energy trade data shows that China is reluctant to apply trade pressure. Increased oil products shipments offset the brief cut in crude supplies in 2006.
“The imposition of these sanctions (in 2006) has had no perceptible effect on North Korea’s trade with the country’s two largest partners, China and South Korea,” wrote Marcus Noland, of the Washington-based Peterson Institute for International Economics.
Data since early 2006 show that Chinese crude shipments have in fact been overwhelmingly consistent, at 50,000 tons a month.
North Korea has imported very little Chinese grain since the 2008 harvest, reflecting the better harvest. Flooding and a disastrous harvest in 2006 and 2007 required heavy imports of grains from China in those years.
Chinese corn shipments to North Korea since August have dropped to 2,670 tons, from 136,595 tons in the previous twelve months and 32,186 tons in the year before that.
Rice and soybean shipments show a similar pattern.
Read the full story below:
Little leverage left for North Korea sanctions
Reuters
4/14/2009
Lucy Hornby and Tom Miles
