North Korean Economy Watch

By Benjamin Katzeff Silberstein

Daily NK just released their market price index for May 29th. With that, we get a pretty clear picture of the market situation for the full month of May.

So, what’s new? Not much, and that is newsworthy in its own right. Throughout the period of so-called “maximum pressure” in economic sanctions pushed by the Trump administration, North Korean market prices have, save for some months of a shaky diesel market, remained remarkably stabile. This trend continued in May.

Overall, average rice prices for May, in three North Korean cities, was 5041 won per kg. The average USD-exchange rate for the same period was 8061 won for $1. For a simple point of comparison, the average three-city rice price for late April 2017 was 4900 won/kg, and for USD, 8057 won/$1. For early June, rice cost 5228/kg, and for USD, 8026 won/$1. That prices are climbing is fully natural given that we’re approaching the so-called “lean season”, when North Korea is at the furthest point from the last harvest, and closest to the coming one.

How these relatively stabile prices are maintained is still very much a mystery. I maintain that if “maximum pressure” was truly all-encompassing, it would be very unlikely for at least foreign currency prices not to be impacted. The government may be keeping market prices stabile by adding to the supply of food and foreign exchange from their own coffers, and in the case of the foreign exchange rate, by contracting the supply of won by drawing down on credit supply to state enterprises, for example. But news of economic management at this scale would likely have been reported by at least one of the many outlets that regularly publish economic news from North Korea sourced from people inside the country. As things stand right now, there’s much we don’t know, but if the North Korean economy is truly in a crisis mode, market prices aren’t reflecting such a state of affairs.

By Benjamin Katzeff Silberstein

On April 11th, 2018, North Korea’s rubber-stamp parliament held a session in Pyongyang. Some news media has focused on Kim Jong-un’s absence from the session, but some interesting reporting on the economic situation came out of the session as well. Here are the key points on the economy (from KCNA on April 12th, with my annotation and emphasis added):

Deputy Pak Pong Ju, premier of the Cabinet, delivered a report on the fulfillment of the work of the Cabinet for Juche 106 (2017) for carrying out the five-year strategy for national economic development and its tasks for Juche 107 (2018) at the Sixth Session of the 13th Supreme People’s Assembly held on Wednesday.

Last year was a year of great victory in which a great progress had been made in carrying out the five-year strategy for the national economic development under the outstanding and seasoned guidance of the respected Supreme Leader Kim Jong Un, repelling unprecedentedly grave challenges stemming our advance, the reporter said.

According to the report, last year the Cabinet organized a drive for putting the nation’s overall economy on a higher stage with a main emphasis put on revitalizing the production by locally producing equipment, raw and other materials on the principle of self-support and self-sufficiency while focusing the state efforts on augmenting the foundation for electricity production, rounding off the system of Juche iron production and realizing the independence of chemical industry in line with the five-year strategy for national economic development set forth by the Party.

Note the emphasis here on local production, the expansion of which has been a key policy under Kim Jong-un.

The achievements made last year, a year of crucial importance in carrying out the five-year strategy for national economic development, proved once again that no desperate sanctions and pressure moves of the U.S. and its vassal forces to destroy the sovereignty of the DPRK and its rights to existence and development can ever check the progress of the Korean people dynamically advancing with firm faith in the validity of their cause and its final victory under the wise guidance of the Party and that the cause of building a powerful socialist country is sure to be accomplished.

Saying that this year we are faced with the tasks to make a breakthrough of revitalization in the economic front as a whole while frustrating the challenges of the hostile forces, who are making last-ditch efforts, through all-people offensive under the militant slogan of “Let us launch a revolutionary general offensive to achieve fresh victory on all fronts of building a powerful socialist country!”, the reporter specified them.

The fighting goals for the third year of the five-year strategy for national economic development should be attained without fail with a firm hold on the key tasks of strengthening the independence and Juche character of the national economy and improving the standard of people’s living.

The power industrial sector should put defective generating equipment into good shape and reinforce them, take scientific and technological measures for lowering the standard of coal consumption at thermal power plants and put the operation of generating equipment additionally installed at the Pukchang Thermal Power Complex on a normal track and thus increase the electricity production with the use of thermal power source onto a high stage.

The emphasis on independent electricity consumption makes a lot of sense, particularly as North Korea’s oil and fuel imports are being squeezed. But it’s a problem going back much, much further than the past year’s sanctions.

The coal industrial field should attain the monthly and quarterly coal production goals and create more coal fields so as to fully meet the demand for coal increasing in different sectors of the national economy.

Note: the national economy. The dependence on revenues from coal exports has been a problem, and one side-effect of sanctions may be that domestic industries get access to more and cheaper coal.

In the field of metal industry, Korean-style Juche-based iron making production system should be further perfected by the use of oxygen heat blast furnace and efforts be put into improving the quality of steel and diversifying the kinds of steels through introduction of advanced technologies so as to fully meet the demand for iron and steel of the national economy.

Again, national economy. Diversification is also an important and long-standing goal, and North Korea has long sought to not just export raw materials, but manufacture and sell more of end-products as well.

The field of chemical industry should unconditionally hit the fertilizer production target to timely provide nitrogenous fertilizer to the agricultural field ahead of farming processes. The production at the February 8 Vinalon Complex should be invigorated to fully supply various chemical products including vinalon, caustic soda and vinyl chloride to various sectors of the national economy.

Vinalon…Good luck.

Along with the establishment of various catalyst production bases, the construction of main production processes should be pushed forward at the Sunchon Phosphate Fertilizer Factory and the process for production of carbonate of soda with glauberite as starting raw material should be renovated and perfected.

The machine industrial sector has to step up the modernization of machine factories, unconditionally hit the target for production of tractors and trucks and put the quality of machinery on the world level.

Advanced mining methods should be widely introduced to increase the production of minerals and nonferrous metal.

The railway transport sector should ensure in a responsible manner the transportation of materials necessary for various sectors of the national economy and capital construction projects.

The Cabinet will bring about a remarkable turn in improving the standard of people’s living through production surge in the fields of light industry, agriculture and fisheries this year.

Equipment and production processes should be rearranged on a manpower-saving and electricity-saving basis, diverse and quality light industrial goods produced on a larger quantity with locally available raw and other materials, and local economy should be developed in a peculiar way with reliance on the domestic resources.

High-yielding farming methods should be positively introduced and the proportion of farm work done by machines should be drastically increased to attain the grain production goal for this year without fail.

The fisheries field should unconditionally hit the fish production target and at the same time finish the construction of projects for consolidating the material and technical foundation of fisheries ahead of schedule.

Big efforts should be directed to sprucing up Samjiyon County into a standard and model county under socialism and the construction of the Wonsan-Kalma coastal tourist area should be finished within specified date. And such capital construction projects as the Tanchon Power Station and the second-phase waterway project in South Hwanghae Province should be pushed forward.

The rate of rooting of saplings should be ensured at more than 90 percent through efficient tree planting and meticulous cultivation of planted trees and the appearance of the country be bettered through the technical renovation and repairing of highways and tourist roads in a qualitative way and the rearrangement of key rivers and streams based on an all-people movement.

All the sectors and units should solve the sci-tech problems arising in completing the domestic production of materials and equipment and the structure of self-supporting economy with firm reliance on science and technology.

The reporter stressed that the Cabinet and other state economic guidance organs would work out in a practical way an operation plan for hitting this year’s targets and push forward its implementation in a responsible manner through skillful operation and command to successfully attain the fighting goals set forth by the Party and thus fully discharge their responsibility and duty in glorifying this year marking the 70th anniversary of the DPRK as a year of victory to be specially recorded in the history of the country.

I don’t have time to add more commentary right now, but will hopefully be able to return to this later. Below is KCNA’s rendition of the state budget report on last year and this year and there’s lots of interesting stuff to discuss here:

Deputy Ki Kwang Ho, minister of Finance, made a report on the fulfillment of state budget for Juche 106 (2017) and on the state budget for Juche 107 (2018) of the DPRK at the 6th Session of the 13th Supreme People’s Assembly held on Wednesday.

According to the report, last year the state budgetary revenue plan was over-fulfilled by 1.7 percent or 4.9 percent increase from the previous year.

The local budgetary revenue plan was carried out at 100.5 percent.

Last year the state budgetary expenditure plan was carried out at 99.8 percent.

15.8 percent of the total expenditure was earmarked for the increasing of the military capabilities of the country and 47.7 percent for the development of the national economy.

Investment in the field of science and technology increased 8.5 percent as over the previous year, thus contributing to settling the scientific and technological problems arising in the economic development and to accomplishing the tasks for studying ultra-modern field.

5.2 percent more fund was allocated to key sectors of the national economy and for the improvement of people’s livelihood than the previous year, thus actively promoting the drive for putting power, coal, metal, chemical, machinery and light industrial fields on a Juche basis and updating their production processes. In particular, it helped build a Korean-style oxygen heat blast furnace at the Kim Chaek Iron and Steel Complex and attain the goal of producing new type tractors and trucks.

2.6 percent more investment was made for the construction field than the previous year, while 36.3 percent of the total expenditure was directed to facilitating the building of a highly-civilized socialist power, thus contributing to the implementation of the Party’s policies of prioritizing the education and health care and to the development of sports and literature and arts.

According to the report, the state budgetary revenue and expenditure for this year have been shaped in such a way as to carry out the five-year strategy for the national economic development.

The state budgetary revenue envisages 3.2 percent increase over last year, of which the transaction tax, key item of the budgetary revenue, is expected to swell 2.5 percent while the profits from state enterprises is expected to grow 3.6 percent, to hold 85.3 percent of the total revenue.

The income from cooperative organizations is expected to grow 0.9 percent, the real estate rent 1.8 percent, the social insurance fee 1.2 percent, while the revenue from property sales and price differences is to grow 0.5 percent and other revenue 0.8 percent. The revenue from economic trade zones is expected to increase 2.5 percent.

The central budgetary revenue out of the state budgetary revenue stands at 73.9 percent which means that the revenue from the central economy holds an overwhelming proportion. Provinces, cities and counties are expected to balance expenditure with their own revenue and contribute lots of funds to the central budget.

The state budgetary expenditure is to grow 5.1 percent over last year’s.

An investment in strengthening the independence and Juche character of the national economy and improving the standard of people’s living will increase 4.9 percent as against last year and thus relevant fund will go to 47.6 percent of the total expenditure.

An investment in the field of science and technology will increase 7.3 percent.

Expenditure for the overall national economy including power, metal, coal, chemical and machine industries, railway transport, light industry, agriculture and fisheries will increase 5.5 percent.

The financing necessary for actively promoting the capital construction and further expanding the achievements of forest restoration campaign will swell 4.9 percent.

5.9 percent more fund will go to the education field, 6 percent more fund to public health, 5.1 percent more to sports field and 3 percent more to literature and art.

15.9 percent of the total expenditure will go to increasing the military capabilities for self-defence.

This year also, lots of educational aid fund and stipends will be sent for the children of Koreans in Japan.

The reporter said that the state budget for this year will be successfully carried out through meticulous organization of economic operation and command and thus financially back the building of a powerful socialist country.

(UPDATE 4-15-2018: Korean original for the budget report added below, date fixed above):

지난해 국가예산집행의 결산과 올해 국가예산에 대한 보고

(평양 4월 12일발 조선중앙통신)

11일에 진행된 최고인민회의 제13기 제6차회의에서 조선민주주의인민공화국 주체106(2017)년 국가예산집행의 결산과 주체107(2018)년 국가예산에 대한 재정상 기광호대의원의 보고가 있었다.

보고에 의하면 지난해 국가예산수입계획은 101.7%로 수행되였으며 전해에 비하여 104.9%로 장성하였다.

지방예산수입계획은 100.5%로 수행되였다.

지난해 국가예산지출계획은 99.8%로 집행되였다.

나라의 군력강화에 지출총액의 15.8%를 돌렸으며 인민경제발전에 지출총액의 47.7%를 돌리였다.

과학기술부문에 대한 투자를 전해에 비하여 108.5%로 늘여 경제발전에서 제기되는 과학기술적문제들을 해결하고 첨단분야의 연구과제를 완성하는데 기여하였다.

인민경제의 중요부문과 인민생활향상에 전해에 비하여 105.2%로 늘어난 자금을 지출하여 전력,석탄,금속,화학,기계,경공업부문의 주체화와 생산공정의 현대화를 적극 추동하였으며 특히 김책제철련합기업소에 우리 식의 산소열법용광로를 건설하고 새형의 뜨락또르와 화물자동차생산목표를 점령하는데 이바지하였다.

건설부문에 전해에 비하여 102.6%로 투자를 늘이였다.

사회주의문명강국건설을 앞당기는데 지출총액의 36.3%를 돌려 당의 교육중시,보건중시정책을 관철하고 체육과 문학예술을 발전시키는데 이바지하였다.

보고에 의하면 올해 국가예산은 국가경제발전 5개년전략수행의 요구에 맞게 국가예산수입과 지출을 편성하였다.

국가예산수입은 지난해보다 103.2%로 장성할것으로 예견하였으며 그가운데서 예산수입의 기본항목인 거래수입금은 102.5%로,국가기업리익금은 103.6%로 늘어나 수입총액의 85.3%를 차지할것으로 보았다.

협동단체리익금은 100.9%,부동산사용료는 101.8%,사회보험료는 101.2%,재산판매 및 가격편차수입은 100.5%,기타수입은 100.8%,경제무역지대수입은 102.5%로 늘어나게 된다.

국가예산수입에서 중앙예산수입은 73.9%로서 중앙경제에 의한 수입이 압도적비중을 이루며 도,시,군들에서 자체의 수입으로 지출을 맞추고 많은 자금을 중앙예산에 들여놓을것으로 예견하였다.

국가예산지출은 지난해에 비하여 105.1%로 장성하게 된다.

인민경제의 자립성과 주체성을 강화하고 인민생활을 개선향상시키기 위한 투자를 지난해에 비하여 104.9%로 장성시켜 지출총액의 47.6%에 해당한 자금을 돌리게 된다.

과학기술부문에 대한 투자를 107.3%로 늘인다.

전력,금속,석탄,화학,기계공업과 철도운수,경공업,농업,수산업을 비롯한 인민경제전반에 대한 지출을 105.5%로 늘인다.

중요대상건설을 적극 추진하고 산림복구전투의 성과를 더욱 확대해나가는데 필요한 자금보장을 104.9%로 늘이게 된다.

교육부문에 105.9%,보건부문에 106%,체육부문에 105.1%,문학예술부문에 103%로 투자를 늘인다.

자위적국방력을 강화하는데 지출총액의 15.9%를 돌리게 된다.

올해에도 재일동포자녀들을 위하여 많은 교육원조비와 장학금을 보내준다.

보고자는 경제작전과 지휘를 빈틈없이 짜고들어 올해 국가예산을 성과적으로 집행함으로써 사회주의강국건설을 재정적으로 안받침해나갈것이라고 강조하였다. (끝)

One of the most striking differences between North and South Korea on satellite imagery is the observable difference in forest coverage. By the end of the Korean War, the entire peninsula had experienced severe deforestation. To repair the damage to the environment, South Korea launched a massive re-forestation campaign in the 1960s and 1970s (check out this South Korean propaganda video that looks like it was made in North Korea).

In the DPRK, “Tree Planting Day” was reportedly established on March 2, 1946 (KCNA made a note of it a couple of weeks ago, as it does every year). But although lip service has always been paid to reforestation, implementation seems to have always taken a back seat to other priorities (both official and unofficial) such as food self-sufficiency, mitigating famine, mitigating a shortage of heating fuel, and the need for hard currency (exported timber).

Kim Jong-il’s record on forestation seems rather limited. Despite “Tree Planting Day” and numerous annual campaigns to spruce up parks and revolutionary sites, he only visited the Central Tree Nursery twice of which I am aware (2009-10-2 and 2011-10-9) towards the end of his life. The nursery, however, did see some growth in the last years of his leadership:

The day after KJI’s visit to the tree farm in 2011, KCNA reported that work was being done at provincial level to promote reforestation (2011-2-10):

Provincial tree nurseries are being updated into bases for the mass production of saplings of good species.

The nursery in Pyongyang built a room for disseminating science and technology and the production process of the paper humus-pot equipped with modern facilities.

The nursery of South Phyongan Province newly made tall sapling production base covering at least 100 hectares and built the humus-pot production base. It is cultivating more than 800,000 saplings of dozens of species.

The nursery of North Phyongan Province completed nine construction projects including the 100-odd square meter grinding and mixing ground.

Jagang Province is pushing ahead with the construction of the nursery of the province with a humus-pot factory of hundreds of square meters, greenhouse, hostel and other public service facilities at the final stage.

The advanced sapling production technology has been introduced to cities and counties across the country.

Hundreds of millions of trees were planted in mountains of the country during the period of national mobilization for improving land administration in spring this year.

Kim Jong-un, however, has placed a high priority on reforestation. Here is an article from the March 2018 issue of Korea Magazine:

I have identified nearly 400 new tree farms and forest management stations that have been built in the DPRK since Kim Jong-un took over as leader. These facilities have been regularly featured in the official media. The effort appears to be driven by the Forestry Bureau (산림총국) under the Ministry of Land and Environmental Protection (국토환경보호성), however, the military is playing a significant role as well. The largest tree farms of which I am aware are the Central Tree Nursery (pictured above), Kangwon Provincial Tree Farm, and the Tree Nursery 122 of the KPA.

Despite the obvious proliferation of tree farms and tree planting, I could not remember coming across any significant satellite imagery showing successful reforestation projects taking root (pun intended)—until now. Pictured below is a satellite image of the area south of the town of Singye in North Hwanghae Province that contains evidence of at least five reforestation sites:

Site 1 (38.480039°, 126.524338°): Image date (Top): 2014-3-20, Image date (Bottom): 2017-11-29

Area 2 (38.477669°, 126.537321°): Image date (Top): 2007-10-4, Image date (Bottom): 2017-11-29

Area 3 (38.487852°, 126.541397°): Image date (Top): 2015-8-16, Image date (Bottom): 2017-11-29

Area 4 (38.495523°, 126.554775°): Image date (Top): 2012-11-8, Image Date (Bottom): 2017-11-29

Area 5 (38.493341°, 126.541830°): Image date (Top): 2007-10-4, Image date (Bottom): 2017-11-29

Some analysis and implications: These reforestation projects are probably not the only ones in the area, they just met the minimum standard of proof to show there was an active reforestation project going on in Singye. There are no doubt many more like this throughout the country, though I have not looked to see how other areas compare. This is the first time I remember noticing on Google Earth that forest cover was growing in North Korea in any significant way (They have also been planting trees along the railroad tracks for several years, but that is not reforestation).

All of these projects are on hills, and this makes sense from a forestry perspective (keep the mountains from eroding into the riverbeds). However, in North Korea many of the hillsides are being used for agriculture. In the images above it is unclear if the hillside plots are under the purview of cooperative farm production quotas, or if they are one of several kinds of “private plots” that farmers use to supplement their diets/income. Either way, the growth of forest cover means a reduction in farm-able land, and this is likely going to have some significant effects on land allocation politics at the local level.

As forest cover grows under the national plan, cooperative farms will have to reallocate a smaller number of land parcels among a fixed number of workers. If the forests grow to reclaim land from private plots, farmers who had grown accustomed to their hillside property will have to figure out how to share remaining land with their neighbors, or move to another location. I imagine both of these processes can get messy, and perhaps the reforestation project is receiving mixed reviews at the local level (depending on its effects on individual farmers).

This forestation policy also raises questions with regards to food supply and the growth of the informal economy in North Korea, but these questions are beyond the scope of this humble blog post. Maybe later…

NOTE: I have published some of the blog post below in Radio Free Asia (in Korean) here. The RFA article contains additional reporting that is not part of this blog post, and some of the information in this blog post may not be in the RFA article.

By Benjamin Katzeff Silberstein

With the news today about a summit between Kim Jong-un and Donald Trump tentatively planned for the end of May, there has been much debate about the role of the US policy of “maximum pressure” through economic sanctions.

The efficacy of the policy is difficult to evaluate, particularly since it often takes many months or even years for the full effect of sanctions to play out. Whether the policy has been effective or not depends on, well, how you judge success or failure. There is little doubt that North Korea’s exports have taken a significant hit not primarily from the sanctions themselves, but from China’s enforcement of them. This is the single biggest difference between how sanctions have hit the North Korean economy during the past year, versus previous years. It seems fairly indisputable that sectors of the economy have suffered, with export industries taking the biggest hit.

But what has been the impact on the economy as a whole? It’s difficult to say, but we have two important indicators: prices of rice and foreign currency on North Korean markets. The data on these two indicators is far from perfect, and it is difficult, if not impossible, to draw firm conclusions from it. (For an explanation of this data, and the rationale for using rice prices in lieu of the formal goods basket used to measure inflation in other countries, see this article, for example). Nevertheless, neither of the two indicators suggest a situation out of the ordinary on North Korean markets during the period that “maximum pressure” has been applied.

First, a look at rice prices. If sanctions were truly devastating the North Korean economy, there is a whole host of reasons why one should expect rice prices to increase.

One of them is expectations of worse times to come as importing inputs for agriculture as well as food becomes increasingly difficult. Another is that if importing food products in general* becomes more difficult, perhaps because Chinese traders anticipate that their North Korean counterparts won’t be able to pay, consumers would be expected to switch more of their consumption to domestically sourced goods, increasing demand and thus prices. In general, anxiety about worsening times often leads to inflation.

This does not seem to have happened. In fact, rice prices have been remarkably stable over the past year (if the graph looks strange, click for full image):

There may well be other forces at work, too. Increased smuggling of cheaper Chinese rice, for example, may well have contributed to the price stability. But this is in itself a sign of the resiliency of the North Korean economy; when some supply decreases, there are ways of compensating through other means.

Exchange rates are another important metric. If the inflow of foreign currency (in this case US dollars) decreases, its price – the exchange rate – should go up. Expectations matter here, too: if the market expects that foreign currency supply will dry up in the future, it tends to act in the present and make purchases today to hedge for tomorrow. As with rice prices, exchange rates have been remarkably stable over the past year (again, click for better image):

In sum, we have little or no hard evidence that the North Korean economy, on the whole, has suffered significantly and harshly from sanctions thus far. That may itself not be an argument against sanctions, since again, it may take much longer than just a year for their full impact to play out. But it does call into question the claims that “maximum pressure” is the chief reason for Kim Jong-un’s outreach to Donald Trump.

*This likely holds true regardless of the level of self-sufficiency in North Korea’s agricultural production.

Posted by Benjamin Katzeff Silberstein

Analysis at Daily NK:

In 2017 alone, the United Nations Security Council passed four major sanctions resolutions against North Korea: Resolutions 2356, 2371, 2375, and 2397. Under the measures, the North’s crude oil imports were restricted, and coal and mineral exports were banned. Additionally, the North was prohibited from sending its laborers to work abroad – one of the key ways in which the regime earns foreign currency.

“One cannot say that, on a macro level, sanctions against North Korea have been ineffective,” said Lee Seok Ki, a senior researcher at the Korea Institute for Industrial Economics and Trade (KIET). “Since around August or September of 2017, the North’s exports have dropped significantly, and we have seen a major impact from sanctions on their industrial output. The country’s anthracite (coal) exports are down 66% compared to the previous year, which is a devastating hit to their mining sector, and the trend is expected to continue.”

Lee added that while most indicators point to declining imports, it remains difficult to conclude that sanctions have had the same effect on the North Korean manufacturing sector. Despite this, Lee noted that “sanctions are having an effect on the trade sector and we will continue to see both quantitative and qualitative effects in the long term.”

Other experts support the opinion that sanctions are working against the North’s overall trade. “North Korea’s exports to China are down 37%, which has led to a further 1.8% drop in growth for the North’s economy over the last year,” said Kim Byung Yeon, a professor at the Department of Economics at Seoul National University.

“If the North is unable to get sanctions lifted, the growth rate for their economy could drop to as low as minus 5% in the next year,” Kim added, explaining that the effects on economic growth will be significant due to the structure of the North’s economy and the relatively high proportion that exports contribute to it.

Kim said that citizens working in the trade sector have been most affected by sanctions, though he points to the government as taking the most damage. “Most trade has been conducted by state-owned and party- or military-run companies, meaning that the elite class and government officials take a big hit from sanctions,” Kim said. “Kim Jong Un relies heavily on trade as a source of income (for his regime), which means that the person most impacted by sanctions is none other than Kim Jong Un.”

But while sanctions appear to be having a significant effect on the North’s trade and industry, experts are noting that the local markets in the country have not been affected as heavily.

“When you look at the price of rice or the exchange rate over time, it’s hard to see any major effect of sanctions (on local markets),” KIET researcher Lee said.

Daily NK’s own research has come to the same conclusion, finding that the price of rice in North Korea’s markets has remained steady at around 4,000 to 5,000 KPW per kg since the beginning of the recent surge in international sanctions.

“People have been relying on themselves, actively participating in the markets and smuggling since the end of the Arduous March (great famine of the 1990s), which means that sanctions do not yet seem to be having an effect on the markets,” said a source in North Hamgyong Province, pointing to the steady availability of consumer goods as evidence.

“Kim Jong Un has instituted improvements in the quality of domestic-made goods, leading to these products in many cases pushing out Chinese versions from the markets,” said Lee Geun Young, Professor at the Yanbian University Department of Political and Public Administration. “There are now fewer items being brought in from China, so these products are having less influence on market prices.”

However, experts also believe that the damage inflicted by sanctions will inevitably reach the markets. “It’s not easy to precisely predict when the effect of sanctions will reach the markets,” Professor Kim said. “But one thing is clear: because many items rely on some form of importation, the long-term effects of a continuing decline in trade will inevitably lead to a reduction in the volume of available goods and a decrease in consumer purchasing power.”

Institute for Far Eastern Studies (IFES)

North Korea’s grain imports from China last year showed a threefold increase over the same period of the previous year. Having analyzed a set of data released by the Chinese General Administration of Customs, Tae-jin Kwon, a South Korean expert on North Korean agriculture and the head of the Center for North Korea and North East Asia Studies of the GS & J Institute, disclosed this analysis to the Voice of America on February 14.

This means North Korean grain imports have more than tripled from 54,683 metric tons imported in 2016—the amount of imports totals $67.33 million, a 2.3-fold increase from $27.91 million in the previous year.

Wheat flour (81, 654 tons) made up 46 percent of the total North Korean imports, accounting for the largest part of the imports. This is followed by corn (57,887 tons) and rice (36,408 tons), along with starch and soybeans. In particular, corn imports grew more than 16 times compared to 3,125 tons the year before, and flour imports, which stood at 7,000 tons in the previous year (about twelvefold).

During December 2017, North Korea’s grain imports from China grew more than four times the amount it imported in the same period a year before. In particular, imports of flour increased to 25,000 tons, more than 22 times from the same period last year.

Last year, as the crackdown on the DPRK-China border tightened due to the international sanctions on North Korea, formal grain imports seem to have increased while the informal imports were restricted.

Although North Korea’s grain production in 2017 seems to have declined slightly from the previous year, its grain imports from China are expected to remain at the same level.

In the most recent issue of Kumsugangsan, the North Koreans highlighted the renovation work of Poman-ri (one of the eight scenic vistas of the songun era).

Here is the article:

A quick check with the imagery on Planet Labs does indicate that there was a new health complex built (normal at the town level, but only specially allocated at the village level), new apartment buildings constructed, and a school appears to have been renovated (also very common in North Korea these days).

Pictured above (Top): Poman-ri as seen on Google Earth in 2015-8-26 (Bottom): Planet imagery from 2018-2-3 showing renovated area.

This is not the first farm to be “renovated” in the Kim Jong-un era. It is also not the largest village to be renovated (so far it appears to be one of the smallest). So what is going on here? North Korea appears to be in the process of constructing new “model farms” in the KJU era. Previous “model farms,” such as Chongsan-ri in Nampho, are primarily associated with revolutionary works of Kim Il-sung or Kim Jong-il. These new farms, however, are intended to spearhead Sci-Tech achievements under Kim Jong-un which can be replicated across the country.

Jangchon-ri  (AKA “DPRK-Libya Friendship Jangchon Co-op Farm”) on the outskirts of Pyongyang appears to have been the first of Kim Jong-un’s new model farms. Consequently, it has received the most attention in the official media; it has been visited at least twice by Kim Jong-un; and it receives regular foreign tourists, journalists, and even foreign NGOs.

Images via Google Earth. Top dated 2014-3-13 (before). The bottom is dated 2015-5-20 (after)

KCNA reports from Kim Jong-un’s first visit to the farm after it was renovated (2015-6-30):

Kim Jong Un, first secretary of the Workers’ Party of Korea, first chairman of the DPRK National Defence Commission and supreme commander of the Korean People’s Army, gave field guidance to the Jangchon Vegetable Co-op Farm in Sadong District, Pyongyang City, whose looks have undergone a radical change to be a model and a standard of the socialist rural cultural construction.

He set forth a task to build the farm into an exemplary farm and icon of greenhouse vegetable production when providing field guidance to the farm associated with the immortal history of leadership given by President Kim Il Sung and leader Kim Jong Il in June last year. He guided the layout for the construction of Jangchon area several times and took benevolent measures for settling the issues arising in it.

He went round the mosaic depicting smiling Kim Il Sung, a monument to the revolutionary activities of Kim Il Sung and Kim Jong Il, the room for the education in the revolutionary history and the room dedicated to the history of the farm.

He recalled that the farm developed into a dependable producer of vegetables under the warm and meticulous care of Kim Il Sung and Kim Jong Il who made indefatigable efforts to the last moments of their lives to provide the Pyongyang citizens with fresh vegetables all the year round.

He went round the hall of culture, science and technology disseminating center, Jangchon health complex, modern dwelling houses and other places to learn about the construction in detail.

He praised the farm for building the hall of culture as well as a national art theatre so that the farmers may fully enjoy a cultural and emotional life and constructing a nice park and a leisure ground having a volleyball court, a swimming pool, a roller-skate ring and a fishpond.

He was satisfied to see the library, e-reading room and technology study room in the science and technology disseminating center and modern equipment in the soil analysis room and the room for examining damage done by insects.

Appreciating the successful construction of modern dwelling houses, in particular, he was pleased that the farm carried out the party’s policy of making an effective use of natural energy and turning the village into an orchard by equipping each house with solar water heater, solar cells and a methane gas supply system and planting fruit trees around each house.

He went round mud-walled plastic sheet greenhouses and arch-style chain greenhouses to learn in detail about the vegetable production and management of the farm.

He enjoyed a bird’s-eye view of the farm from the observation deck.

He praised the Pyongyang City for working an eye-opening miracle in the socialist rural cultural construction as required by the party and being able to proudly greet the grand festival in October.

He extended thanks in the name of the Party Central Committee to farmers of the farm and officials and other working people in Pyongyang City for making a positive contribution to turning the Jangchon area into a spectacular farm reminiscent of a rural city as required by the party.

It is the resolution and will of the party to bring about a radical turn in the rural cultural construction with this farm as an example and torch, he said, giving Pyongyang City an instruction to push ahead under a plan with the work to spruce up well the farms on the outskirts of the city on the basis of the successes and experience already gained.

He expressed expectation and belief that Pyongyang City would take the lead in the drive to implement the behests of the leaders and uphold the party policies in the future as a political, economic and cultural hub of socialist Korea having the mission to hold aloft the banner of the three revolutions-ideological, technical and cultural.

He was accompanied by Hwang Pyong So, Choe Ryong Hae and Ri Jae Il.

The words in bold above indicate the types of facilities that are to be constructed at all of the new model farms. These types of facilities are already common at the city- and town-level, but still relatively rare at the village level. It would also be interesting to know if this farm (and other similar model farms) operate under different agriculture policies–such as de-facto family plots, or perhaps some flexibility to make agricultural decisions on the spot. Time will tell.

These types of projects are typically rolled out at the provincial level, so other than Jangchon-ri (Pyongyang) and Poman-ri (North Hwanghae), what other model farms can we point to that are being renovated under this policy?

1. Thaesong-ri (Nampho): This farm was featured on KCTV on 2017-9-21, and miraculously it has not been deleted by YouTube). KCTV described the village as a model village with new facilities that are pleasure to live and work in.

I have previously mentioned this village in Radio Free Asia.

2. Sokha-ri (North Phyongan): This farm was featured on KCTV on 2018-1-9, but YouTube has since deleted the material. Shame on them.

3. Sinchang-ri (South Hwanghae): This farm was featured on KCTV on 2017-9-20. This village has actually undergone at least two rounds of renovations. I believe the first round was done because the village is next to a popular road artery (North Korea has long been cleaning up villages long the main roads). The second round of renovations is due to the new model farm policy under Kim Jong-un.

Pictured above (Top): 2006-12-25 (Middle): 2014-3-20–showing completed first renovation (Bottom): 2016-10-23–showing completed second renovation in the new model farm style.

4. Jikha-ri (North Hamgyong):  This was also featured on KCTV on 2017-11-5, but has also been deleted by YouTube. I previously pointed it out to RFA on 2016-6-22.

Image above (Top): 2015-9-20 (Bottom): 2016-5-7–showing that the village is under renovation.

5. Phyongsu-dong (South Hamgyong): According to imagery on Planet.com, renovation of this farm has been completed, but I have not see it appear in the North Korean media to date. I previously mentioned it in RFA here.

6. Songchon-dong (Kangwon): This farm renovation has yet to appear in the official media (as far as I am aware). I previously reported in RFA that is sits just outside the security perimeter of Kim Jong-un’s Wonsan compound:

Image dates (Top): 2016-2-26 (Middle): 2017-2-14 (Bottom): Planet image from 2018 showing construction continues to progress.

This is not the only village to be renovated in Kangwon. However, I believe it is the only renovation project in the province related to this new series of model farms. Another village in south Kangwon Province, Thaebek-ri (38.574028°, 127.673046°), has also been renovated in the last few years, and several other farms in Kangwon were renovated as part of the Sepho Tableland Project.

Below is the information that remains TBD.

1. Manbok-dong (Rason): This area in Sonbong was formerly named Paekhak-ri, and it was the site where the North Korean government constructed new housing following floods in the summer of 2015. I could be wrong, but I believe that the post-flood housing is being pragmatically named as the new model farm in the city. However, I could be wrong. I searched for other village renovation in Rason on Planet Labs imagery and Google Earth, but did not find anything significant.

2. South Phyongan: I am still unsure which village in South Phyongan will be designated as the model farm to be built in this new style. I reported in RFA that lots of housing around Pyongyang Airport was being renovated back in May 2017, some of which is in South Phyongan, but none of these housing projects seem to match the new model farm design. According to a later KCTV report on 2017-11-20 (before it was deleted by Youtube), the Ministry of Coal Mining (석탄공업성), Ministry of Forestry (림업성), National Tourism Bureau (국가관광총국), and the Korea Oceanic Company (조선대양총회사) built new housing in the Pyongyang International Airport District. 1,000 homes were built earlier than scheduled and work was continuing on the remaining houses. However, it is possible that construction on the province’s new model farm has not yet begun in this province.

3. Jagang Province: I have searched the North Korean media, Google Earth imagery, and Planet imagery, but have not seen where construction on a new model farm has begun.

4. Ryanggang Province:  I have searched the North Korean media, Google Earth imagery, and Planet imagery, but have not seen where construction on a new model farm has begun.

Below I have posted the economic section of Kim Jong-un’s 2018 new year speech in English and Korean:

Comrades,

동지들！

This year we will mark the 70th anniversary of the founding of the glorious Democratic People’s Republic of Korea. To mark the 70th anniversary of their state with splendour is of real significance for the great people, who have raised with dignity the status of their socialist country, the greatest patriotic legacy of the great Comrades Kim Il Sung and Kim Jong Il, to that of a strategic state recognized by the world. [Translation note: In the Korean version below, Kim Il-sung and Kim Jong-il are not mentioned by name, only by title]

올해에 우리는 영광스러운 조선민주주의인민공화국창건 일흔돐을 맞이하게 됩니다.위대한 수령님과 위대한 장군님의 최대의 애국유산인 사회주의 우리 국가를 세계가 공인하는 전략국가의 지위에 당당히 올려세운 위대한 인민이 자기 국가의 창건 일흔돐을 성대히 기념하게 되는것은 참으로 의의깊은 일입니다.

We should make constant innovations and continued progress until we win the final victory of the revolution by carrying on the tradition of heroic struggle and collective innovation which adorned the founding and course of development of Juche Korea. A revolutionary general offensive should be launched to achieve fresh victory on all fronts of building a powerful socialist country by taking the historic victory in the building of the DPRK’s nuclear forces as a springboard for fresh progress.

우리는 주체조선의 건국과 발전행로에 빛나는 영웅적투쟁과 집단적혁신의 전통을 이어 혁명의 최후승리를 이룩할 때까지 계속혁신,계속전진해나가야 합니다.공화국핵무력건설에서 이룩한 력사적승리를 새로운 발전의 도약대로 삼고 사회주의강국건설의 모든 전선에서 새로운 승리를 쟁취하기 위한 혁명적인 총공세를 벌려나가야 합니다.

“Let us launch a revolutionary general offensive to achieve fresh victory on all fronts of building a powerful socialist country!” This is the revolutionary slogan we should uphold. All officials, Party members and other working people should launch an all-people general offensive to frustrate the challenges of the hostile forces who are making last-ditch efforts and raise the overall strength of our Republic to a new stage of development as they brought about a great upsurge in socialist construction overcoming all difficulties through the great Chollima upswing after the war.

《혁명적인 총공세로 사회주의강국건설의 모든 전선에서 새로운 승리를 쟁취하자！》 이것이 우리가 들고나가야 할 혁명적구호입니다.모든 일군들과 당원들과 근로자들은 전후 천리마대고조로 난국을 뚫고 사회주의건설에서 일대 앙양을 일으킨것처럼 전인민적인 총공세를 벌려 최후발악하는 적대세력들의 도전을 짓부시고 공화국의 전반적국력을 새로운 발전단계에 올려세워야 합니다.

A breakthrough should be made in reenergizing the overall economic front this year, the third year of implementing the five-year strategy for national economic development.

국가경제발전 5개년전략수행의 세번째 해인 올해에 경제전선전반에서 활성화의 돌파구를 열어제껴야 하겠습니다.

The central task facing socialist economic construction this year is to enhance the independence and Juche character of the national economy and improve the people’s standard of living as required by the revolutionary counter-strategy put forward by the Second Plenary Meeting of the Seventh Central Committee of the Party.

올해 사회주의경제건설에서 나서는 중심과업은 당중앙위원회 제7기 제2차전원회의가 제시한 혁명적대응전략의 요구대로 인민경제의 자립성과 주체성을 강화하고 인민생활을 개선향상시키는것입니다.

We should concentrate all efforts on consolidating the independence and Juche character of the national economy.

인민경제의 자립성과 주체성을 강화하는데 총력을 집중하여야 합니다.

The electric-power industry should maintain and reinforce the self-supporting power generation bases, and direct a great deal of efforts to developing new power sources. A dynamic campaign should be conducted to drastically increase thermal power generation, and lower the loss of electric power and increase its production as much as possible by maintaining and reinforcing imperfect generating facilitates. Provinces should build power generation bases to suit their local features and put power generation at the existing medium and small-sized power stations on a normal footing to satisfy the needs of electric power for local industry by themselves. Alternated production should be organized scrupulously throughout the country, and a vigorous struggle waged against the practices of wasting electric power to make effective use of generated electric power.

전력공업부문에서는 자립적동력기지들을 정비보강하고 새로운 동력자원개발에 큰 힘을 넣어야 합니다.화력에 의한 전력생산을 결정적으로 늘이며 불비한 발전설비들을 정비보강하여 전력손실을 줄이고 최대한 증산하기 위한 투쟁을 힘있게 벌려야 합니다.도들에서 자기 지방의 특성에 맞는 전력생산기지들을 일떠세우며 이미 건설된 중소형수력발전소들에서 전력생산을 정상화하여 지방공업부문의 전력을 자체로 보장하도록 하여야 합니다.전국가적인 교차생산조직을 짜고들며 전력랑비현상과의 투쟁을 힘있게 벌려 생산된 전력을 효과적으로 리용하기 위한 된바람을 일으키도록 하여야 합니다.

The metallurgical industry should further improve the Juche-oriented iron- and steel-making technologies, increase the iron production capacity and drastically raise the quality of metallic materials in order to satisfy the needs of the national economy for iron and steel. It is necessary to ensure a preferential, planned and timely supply of electricity, concentrated iron ore, anthracite, lignite, freight wagons, locomotives and funds for the metallurgical industry. By doing so, we can fulfil next year’s iron and steel production plans and make the industry Juche-oriented without fail.

금속공업부문에서는 주체적인 제철,제강기술을 더욱 완성하고 철생산능력을 확장하며 금속재료의 질을 결정적으로 높여 인민경제의 철강재수요를 충족시켜야 합니다.금속공업부문에 필요한 전력,철정광,무연탄,갈탄,화차와 기관차,자금을 다른 부문에 앞세워 계획대로 어김없이 보장하여 다음해 철강재생산목표를 무조건 수행하며 금속공업의 주체화를 기어이 완성하도록 하여야 하겠습니다.

The chemical industry should step up the establishment of the C1 chemical industry, push the projects for catalyst production base and phosphatic fertilizer factory as scheduled, and renovate and perfect the sodium carbonate production line whose starting material is glauberite.

화학공업부문에서 탄소하나화학공업창설을 다그치고 촉매생산기지와 린비료공장건설을 계획대로 추진하며 회망초를 출발원료로 하는 탄산소다생산공정을 개건완비하여야 합니다.

The machine-building industry should modernize the Kumsong Tractor Factory, Sungri Motor Complex and other factories to develop and produce world-level machinery in our style.

기계공업부문에서는 금성뜨락또르공장과 승리자동차련합기업소를 비롯한 기계공장들을 현대화하고 세계적수준의 기계제품들을 우리 식으로 개발생산하여야 합니다.

The coal and mineral production and rail transport sectors should make concerted efforts to make the country’s self-reliant economic foundations prove their effectiveness.

나라의 자립적경제토대가 은을 낼수 있게 석탄과 광물생산,철도수송에서 련대적혁신을 일으켜야 합니다.

Notably, the rail transport sector should make the best use of the existing transport capacity by making transport organization and control more scientific and rational, and maintain discipline and order in the railways as rigid as in the army, so as to ensure an accident-free, on-schedule rail traffic.

특히 철도운수부문에서 수송조직과 지휘를 과학화,합리화하여 현존수송능력을 최대한 효과있게 리용하며 철도에 군대와 같은 강한 규률과 질서를 세워 렬차의 무사고정시운행을 보장하도록 하여야 합니다.

A turn should be brought about this year in improving the people’s standard of living.

올해에 인민생활향상에서 전환을 가져와야 합니다.

Light-industry factories need to transform their equipment and production lines into labour- and electricity-saving ones and produce and supply more diversified and quality consumer goods with domestic raw and other materials, and provinces, cities and counties should develop the local economy in a characteristic way by relying on their own raw material resources.

경공업공장들의 설비와 생산공정을 로력절약형,전기절약형으로 개조하고 국내원료와 자재로 다양하고 질좋은 소비품들을 더 많이 생산공급하며 도,시,군들에서 자체의 원료원천에 의거하여 지방경제를 특색있게 발전시켜야 합니다.

The agricultural and fishing fronts should effect an upswing. We should introduce seeds of superior strains, high-yield farming methods and high-performance farm machines on an extensive scale, do farming scientifically and technologically so as to fulfil the cereals production plan without fail, and boost the production of livestock products, fruits, greenhouse vegetables and mushrooms. We should enhance our ship building and repair capacities, launch scientific fishing campaigns, and reenergize aquatic farming.

농업과 수산전선에서 앙양을 일으켜야 하겠습니다.우량종자와 다수확농법,능률적인 농기계들을 대대적으로 받아들이고 농사를 과학기술적으로 지어 알곡생산목표를 반드시 점령하며 축산물과 과일,온실남새와 버섯생산을 늘여야 합니다.배무이와 배수리능력을 높이고 과학적인 어로전을 전개하며 양어와 양식을 활성화하여야 하겠습니다.

This year the service personnel and people should join efforts to complete the construction of the Wonsan-Kalma coastal tourist area in the shortest period of time, push ahead with major construction projects including the renovation of Samjiyon County, the construction of the Tanchon Power Station and the second-stage waterway project of South Hwanghae Province, and channel steady efforts into the construction of houses.

올해에 군민이 힘을 합쳐 원산갈마해안관광지구건설을 최단기간내에 완공하고 삼지연군꾸리기와 단천발전소건설,황해남도물길 2단계 공사를 비롯한 중요대상건설을 다그치며 살림집건설에 계속 힘을 넣어야 합니다.

Building on the success we achieved in the forest restoration campaign, we should properly protect and manage the forests that have already been created, improve the technical conditions of roads, conduct river improvement on a regular basis, and protect environment in a scientific and responsible manner.

산림복구전투성과를 더욱 확대하면서 이미 조성된 산림에 대한 보호관리를 잘하는것과 함께 도로의 기술상태를 개선하고 강하천정리를 정상화하며 환경보호사업을 과학적으로,책임적으로 하여야 합니다.

Every sector and every unit of the national economy should enlist their own technical forces and economic potential to the maximum and launch a dynamic struggle to increase production and practise economy, so as to create a greater amount of material wealth.

인민경제 모든 부문과 단위들에서 자체의 기술력량과 경제적잠재력을 총동원하고 증산절약투쟁을 힘있게 벌려 더 많은 물질적재부를 창조하여야 합니다.

A shortcut to developing the self-sufficient economy is to give precedence to science and technology and make innovations in economic planning and guidance.

자립경제발전의 지름길은 과학기술을 앞세우고 경제작전과 지휘를 혁신하는데 있습니다.

The scientific research sector should solve on a preferential basis the scientific and technological problems arising in establishing Juche-oriented production lines of our own style, ensuring domestic production of raw and other materials and equipment, and perfecting the structure of the self-supporting economy. Every sector and every unit of the national economy should make a contribution to achieving production growth by intensifying the dissemination of science and technology and waging a brisk technological innovation drive.

과학연구부문에서는 우리 식의 주체적인 생산공정들을 확립하고 원료와 자재,설비를 국산화하며 자립적경제구조를 완비하는데서 제기되는 과학기술적문제들을 우선적으로 풀어나가야 합니다.인민경제 모든 부문과 단위들에서 과학기술보급사업을 강화하며 기술혁신운동을 활발히 벌려 생산장성에 이바지하여야 하겠습니다.

The Cabinet and other economic guidance organs should work out a realistic operational plan to carry out the national economic plan for this year and push forward the work for its implementation responsibly and persistently. Positive measures should be taken by the state to ensure that the socialist system of responsible business operation proves its worth in factories, enterprises and cooperative organizations.

내각을 비롯한 경제지도기관들은 올해 인민경제계획을 수행하기 위한 작전안을 현실성있게 세우며 그 집행을 위한 사업을 책임적으로 완강하게 내밀어야 합니다.국가적으로 사회주의기업책임관리제가 공장,기업소,협동단체들에서 실지 은을 낼수 있도록 적극적인 대책을 세워야 합니다.

By Benjamin Katzeff Silberstein

Many of the steps in the additional sanctions added by the UN Security Council resolution 2379 on December 22nd, 2017, were expected. Targeting oil and petroleum, export incomes, as well as revenues from foreign workers, are all natural steps if the international community wants to pressure North Korea. It’s still rather unclear what the end-goal is, but if sanctions are intended to make things more difficult for the North Korean economy, they can certainly have an impact to that end. These are the main points:

• Exports of refined petroleum products will be capped at 500,000 barrels per year.
• Crude oil transfers will be limited to 4 million barrels/year.
• Within two years, UN member states are to have expelled all North Korean workers and managers.

When analyzing how this will impact North Korea, there are two sides to the story. On the one hand, as with all sanctions against North Korea, China (and to some extent, Russia) would likely not have agreed to them if they had believed that they created a real risk of severe social instability in North Korea that would risk spilling over its own borders. At the same time, it seems like the US intention is to create economic difficulties so severe that the North Korean regime will crack and agree to negotiate the existence of its nuclear deterrent, at least according to the official, outward line. These two objectives appear to be mutually exclusive in the long run.

Moreover, China and Russia appear to have extracted some significant concessions in negotiating the resolution. North Korean workers are to be expelled no later than within two years, which is not an insignificant time frame. Perhaps by then, things will have changed enough for sanctions to be renegotiated. The cap of 4 million barrels is close to what China is commonly estimated to be transferring in terms of crude oil per year to North Korea (3.64 million). So North Korea will hardly be fully starved of oil. Fuel has never been in abundant supply in the country.

Last but not least, smuggling routes are already well-established. Recall Ri Jong-ho’s claims that North Korea buys 300,000 tonnes of fuel products from Russia each year through brokers abroad, largely under the radar. Such transfers are not impossible, but very difficult, to track and stop. Both Russia and China can claim with some truth that they cannot control all sanctions breaches by entities within its borders, particularly enterprises who aren’t all too law-abiding in normal times. Particularly given the poor state of relations between the US and Russia, and the US and China, it is unlikely that either of the two countries will dedicated significant resources to fully track and prevent sanctions breaches, beyond normal procedure. Also, North Korea has been under various forms of sanctions since at least 2006, and even before that, was never an integrated part of established and open world trade. They’ve existed under harsh conditions long enough to learn and adapt their strategies.

On the other hand, North Korea is not immune to sanctions pressure. No country is. Even if smuggling and other ways of getting around sanctions can compensate for some of the losses, transaction costs likely increase. In other words, those who still choose to sell items like fuel to North Korea now have space to demand a higher mark-up for the additional risk. There are also presumably added transaction costs liquefying coal to generate oil.

The government has the resources and the know-how to largely get what they need, but North Korean businesses at the mid- or lower levels will find it much more difficult to keep up with the added costs and effort needed. This is has been true for each sanctions round through this year and last.

Ordinary North Koreans have been impacted by sanctions for long — this did not start with the sanctions that target goods such as oil and fuel. The opportunity cost of what could have been without them was still present. Of course, one can reasonably argue that the fault lies with the regime, for continuing its development of nuclear weapons and missiles, and not with the international community. But that sanctions would somehow not effect North Korean society while hitting against the regime seems implausible.

Lastly, we can note that both exchange rates and rice prices on North Korean markets have decreased over the past few weeks. There may be additional stress present among some spheres of society, but it seems like no major sense of crisis is at hand.

By Benjamin Katzeff Silberstein

While some Pyongyangites started off the week by checking out plasma-screen TV’s at a consumer goods fair, Daily NK published an ominous story that reminds the reader of the dark 1990s. Rumors are now circulating of a starvation death in Hyesan:

An increasing number of North Koreans are suffering from the effects of food insecurity and malnutrition, according to inside sources who spoke with Daily NK. A rumor is circulating in Ryanggang and North Hamgyong provinces that the body of someone who starved to death has been seen near the train station in Hyesan City.

“More than a handful of people have come forward and said that they saw the body of someone who starved to death near the Hyesan train station. The food situation was relatively good for the past few years, so it’s such a shame that we’ve returned to dire circumstances so suddenly,” a source in Ryanggang Province told Daily NK.

A source from North Hamgyong Province similarly reported that “a rumor is swirling around the market that a starved body was discovered. There are so many people talking about it that it’s being viewed as a fact.”

The source added that the credibility of the rumors is high, saying, “There was a severe drought at the beginning of the year in North and South Hamgyong provinces and Ryanggang Province. The corn and rice harvest did not meet its targets, amounting to approximately half the volume produced last year.”

As crude as it may sound, one cannot draw sharp conclusions from one unconfirmed death by starvation in a North Korean city. But the fact that people think conditions bad enough to believe such rumors to be true says something about the instability of food supply in North Korea right now.

For several years, the supply of food in North Korea has looked remarkably stabile compared to the 1990s. A combination of more freedom for the markets to operate, more leeway for farmers in how they operate, produce and sell their goods (and procure inputs such as fertilizer), larger and more consistent imports from China – these are all factors that have led to better food security overall in North Korea. Market prices have sent a clear message on this.

But perhaps “stabile” was the wrong way to describe food supply. “Consistent” may have been a better way of looking at it. A system is hardly stabile when a combination of relatively usual events for the country – bad weather and changing geopolitical conditions – can shake its core.

As usual with these dynamics, it would be wrong to attribute the changes to one single factor. That is, we cannot say that sanctions –> starvation in some automatic fashion. Rather, several trends have coincided and caused the dire situation:

First, North Korea has experienced a very troubling drought early on in the farming season. As Andy Dinville shows at 38North, using satellite data, weather conditions have been particularly bad this year, significantly harming this year’s harvest.

In any normal year since the early 2000s, when market mechanisms seriously became a routinized part of North Korea’s agricultural economic system, it seems that the effects of a drought could have been offset at least in part by increased imports from China, or other sorts of shifts.

Which brings us to a second factor, namely sanctions and the current tensions, and China’s enforcement of economic pressure on North Korea. Not only does this mean that overall trading conditions are difficult, and that Chinese sellers are wary of trusting that they’ll actually receive payments from North Korean buyers. It also means that goods such as fertilizer for farming are more difficult to acquire. Like the Daily NK article notes:

“Last year, North and South Hamgyong and Ryanggang provinces endured a flood of epic proportions and this year there was a drought, so the agricultural situation in both regions is poor. Additionally, because of the sanctions, it has been harder to procure different kinds of fertilizer necessary for farming, so this has exacerbated the damage.” he continued.

It really doesn’t look like there is much difference between positive and negative trends, particularly if you just look at the end of August. And his [Dinville] data compares the 2017 harvest with the 2016 harvest, which was probably the best harvest in 30 years. So even if 2017 is a bit lower than 2016, it will still be a relatively stable year and much, much better than 2001. There were no major disasters in the country, as well, aside from the drought and the effects of the flooding from last fall in a few counties in the northeast. My takeaway from his [Dinville’s] data is that there were a few fields (the red “strongly negative” portion) that couldn’t be irrigated sufficiently but we shouldn’t extrapolate to the entire country harvest. Kitchen gardens have also expanded in the country and can help to mitigate a poor harvest, at least for some families.