North Korean Economy Watch

According to Reuters:

Commercial ventures planned between Russia and North Korea three years ago are not being implemented because of Pyongyang’s missile testing program, the Minister for the Development of the Russian Far East, Alexander Galushka, said.

Russia has been under international scrutiny over North Korea because it has taken a more doveish approach to Pyongyang than Washington, and Russian trade with North Korea increased sharply at the start of this year.

The United States government earlier this month imposed new North Korea-related sanctions that targeted Russian firms and individuals for, it alleged, supporting Pyongyang’s weapons programs and providing oil.

However Galushka, in an interview with Reuters, said Moscow was faithfully implementing the international sanctions regime on North Korea, and held up the stalled bilateral projects as an indication that Pyongyang was paying an economic price for its weapons program.

“Russia has not violated, does not violate and will not work outside the framework (of the resolution) that was accepted by the U.N. Security Council,” said Galushka, who also heads a Russia-North Korean Intergovernmental Commission.

Russian businesses discussed a number of projects with North Korea in 2014. But then North Korea conducted military tests, including some involving nuclear weapons, and the projects became difficult to implement, Galushka said.

One such project, called “Pobeda”, or “Victory,” would have involved Russian investments and supplies that could be exchanged for access to Korean natural resources.

“We told our North Korean partners more than once … that it hampers a lot, makes it impossible, it restricts things, it causes fear,” Galushka said, referring to the weapons testing.

Another joint project between the two countries is a railway link with North Korea, from the Russian eastern border town of Khasan to Korea’s Rajin.

It is operating but below its potential. The link could work at a capacity of 4 million tonnes a year, officials have said previously, but now it only carries around 1.5 million tonnes of coal per year, according to Galushka.

UN sanctions also prohibit countries from increasing the current numbers of North Korean laborers working in their territories.

According to Galushka, around 40,000 employees from North Korea worked in Russia. Mainly they are engaged in timber processing and construction.

Russian business is interested in access to the North Korea workforce, Galushka said, but the numbers will stay in line with what the sanctions permit.

He said 40,000 workers from North Korea “is a balance formed in the economy, neither more nor less.”

Bilateral trade between the two countries has been decreasing for the last four years, from $112.7 million in 2013 to $76.9 million in 2016, according to Russian Federal Customs Service statistics.

But it more than doubled to $31.4 million in the first quarter of 2017 in year-on-year terms. Most of Russia’s exports to North Korea are oil, coal and refined products.

Asked to explain why trade was rising if political issues were hurting commercial projects, a spokeswoman for Galushka’s ministry said in an email: “According to the latest data, there was an objective increase due to exports to North Korea, primarily oil products. But the export of oil does not violate the agreements of the UN countries in any way.”

The interview with Galushka took place before the U.S. imposed the sanctions targeting Russian entities and individuals for trading with North Korea.

Galushka’s ministry referred questions about the new sanctions to the Russian foreign ministry.

Maria Zakharova, a foreign ministry spokeswoman, told reporters Washington’s unilateral sanctions worsened tensions on the Korean peninsula, and that Russia is fulfilling its international obligations in full.

You can read more about the Russian investment projects in this former post.

Read the full story here:
Russian-North Korea projects foundering because of missile tests: minister
Polina Nikolskaya and Katya Golubkova
Reuters
2017-8-28

According to the People’s Daily:

China on Friday banned Democratic People’s Republic of Korea (DPRK) individuals and enterprises from setting up new business in China, following through on new UN sanctions which were imposed in response to DPRK’s missile tests last month.

New joint ventures, new wholly-owned businesses and any new investment in current entities involving DPRK individuals or companies are prohibited in China, according to a notice released on the Ministry of Commerce’s website late on Friday.

Applications for new or expanded investment in the DPRK by Chinese companies would not be approved, the ministry added. The new measures take effect immediately.

The UN approved sanctions against Pyongyang earlier this month that could cost the country one billion US dollars a year in revenue, according to the figures provided to the Security Council by the US delegation.

China pledged to fully enforce the sanctions. Last Monday, China imposed import bans on iron, iron ore, coal and seafood from the DPRK.

Read the full story here:
China bans new business with DPRK in line with UN sanctions
People’s Daily
2017-8-26

By Benjamin Katzeff Silberstein

The July numbers for China-North Korea trade are out. Reuters:

The world’s second-largest economy imported and exported goods worth $456 million in July, down from $489 million in June, according to data from China’s General Administration of Customs.

It was up from $426 million in July last year, according to data on the customs website.

Year-to-date, trade was up 10.2 percent at $3.01 billion.

The data indicates that China’s move to halt North Korean coal imports in February has crimped Pyongyang’s ability to raise hard currency through exports.

Iron ore arrivals from North Korea in July also sank to their weakest since February, while China’s gasoline exports to the isolated state hit their lowest since January 2016.

China’s imports from North Korea were $156 million, down 3 percent from last month and a third lower than a year ago, based on data on the customs website. For January-July, imports were $1.04 billion, down 16.3 percent.

Exports were $300 million, down from $327 million in June, but up from $194 million in July last year. Year-to-date, they were up a third at $1.97 billion.

On Aug. 6, the United Nations Security Council unanimously imposed new sanctions on North Korea banning exports of coal, iron, iron ore, lead, lead ore and seafood, in a bid to choke off a third of Pyongyang’s $3 billion in annual export revenue.

The crackdown on major commodity exports was aimed as punishment for intercontinental ballistic missile (ICBM) tests in July and is due to take effect in early September.

Last week, Beijing issued an official ban on the imports effective from Aug. 15 as it moved to implement the sanctions.

Sources told Reuters China was also pressuring its iron ore traders to stop buying the commodity from North Korea, tightening the screws on Pyongyang even before sanctions.

The data also comes after state-owned China National Petroleum Corp suspended sales of fuel to North Korea in June over concerns it wouldn’t get paid, cutting off crucial supplies. The suspension is still in place.

Full article:
China July trade with North Korea slows from June as coal ban bites
Josephine Mason
Reuters
2017-08-23

And here:

* July gasoline exports down 97 pct vs year ago
    * Just 120 tonnes shipped to North Korea in July
    * CNPC stopped sales over payment fears - sources
    * Iron ore imports in July lowest since Feb

 (Recasts to lead with gasoline, adds details, changes slug)
    By Chen Aizhu
    BEIJING, Aug 23 (Reuters) - China's gasoline exports to
North Korea evaporated to a dribble in July, according to
customs data, the strongest sign yet that the suspension of
sales of the fuel by state oil major CNPC has cut critical
supplies to its isolated neighbour.
    Beijing's General Administration of Customs said on
Wednesday Chinese shipments of gasoline dropped 97 percent from
a year ago to just 120 tonnes of the fuel - worth little more
than $100,000. The number was down from 8,262 tonnes in June.
    Monthly fluctuations in the data are not unusual, but this
was the fourth-lowest volume on Reuters' records of customs data
going back to January 2010.
    Customs data also showed China's trade with North Korea fell
last month as a ban on coal purchases from its isolated
neighbour slowed imports amid growing pressure from the United
States to rein in Pyongyang's missile programme.
    A prolonged supply cut would threaten critical supplies of
fuel and could force North Korea to find alternatives to its
main supplier amid international pressure on Pyongyang to curb
its nuclear and missile programmes. 
    At the end of June, Reuters reported China National
Petroleum Corp (CNPC) suspended sales of gasoline and fuel to
North Korea over concerns CNPC would not get paid for its goods.
Fuel prices in the country surged following the cut and the
measure is still in place, people familiar with the matter say.
 
    "This confirms that CNPC has truly stopped supplies," said
one Beijing-based trading source familiar with China's oil
transactions with North Korea. "The amount is so small, it's
what would typically be lost during transportation."    
    Gasoline typically accounts for the bulk of fuel exports to
North Korea, but July data showed the biofuel, ethanol, took the
top spot with shipments of 4,137 cubic metres, worth $1.9
million.
    Meanwhile China's iron ore imports from North Korea fell
sharply in July, the month before the United Nations passed a
vote to impose tougher sanctions on Pyongyang. The United
Nations Security Council unanimously imposed new sanctions on
North Korea targeting its exports of coal, iron ore, lead, lead
ore and seafood in sanctions to take effect in early September.
    Arrivals of iron ore fell 24.5 percent in July from the same
month a year earlier to 175,980 tonnes. That's down 21 percent
from June and the lowest since February, according to customs'
records.
    Beijing had pressed traders to stop buying from the country
even before the United Nations Security Council vote on further
sanctions to rein in Pyongyang's missile and nuclear programme,
a sign of China tightening the screws on Pyongyang.
    In July, China bought no coal from North Korea, the fifth
month after Beijing halted coal shipments in February. 
    The table below gives a breakdown of imports and exports of
major commodities between the two nations:
        
                July      June 2017  yr-on-yr  Jan-July   % change
                2017                 % change  2017       
 Imports                                                  
 Coal           0         0          -         2,678,131  -78.6
 Iron ore       175,980   224,059    -24.5     1,510,761  41.7
 lead ore &     13,090    13,218     29.1      77,407     45.15
 concentrates                                             
 Exports                                                  
 Ethanol        4,137     4,126      509       19,734     319.7
 Gasoline       120       8,262      -96.5     45,889     -8.8
 Diesel         1,162     367        11,515    10,847     -64
 Jet fuel       153       140        278.6     1,103      47.4
 Other fuel     596       298        -97.2     19,250     -65.26
 oil                                                      
 Fuel No. 5-7   275       844        -41.4     3,953      -8.9
 LPG            79        107        302.8     553        75.4
 In tonnes except for ethanol in cubic metres

Full article:

China July gasoline exports to North Korea almost wiped out -customs
Josephine Mason
Reuters
2017-08-23

A few thoughts on this:

First, overall trade is up between the countries from the same month one year ago, by ten percent. The North Korean economy may be under pressure from China at the moment, but it is not isolated. Moreover, Chinese imports are down by one third but one has to wonder why China would let North Korea run a trade deficit if it weren’t expecting compensation in the future by more imports.

Second, gasoline exports to North Korea are down by 97. This number strikes me as almost conspicuously high and reminiscent of Saddam Hussein’s electoral victory figures (in North Korea, the united front controlled by the Worker’s Party always gets a full 100% of the votes). China has a strong interest at the moment in making it seem like it is being tough on North Korea and a figure like 97 percent certainly makes for good optics. Diesel and petrol prices have remained relatively consistent in Pyongyang through the spring and summer, not changing in July, but it is only now that Chinese customs are reporting a 97 percent drop.

Third and relatedly, we don’t know what (if anything) has happened with the crude oil deliveries, which to my knowledge is largely a form of donation from China to North Korea of some 520,000 tonnes per year. This is roughly twice the quantity of the diesel exports from China to North Korea per year, though these amounts are difficult to compare. It is easy to imagine a scenario where these increase to offset the losses from the lowered gasoline exports.  And of course there’s the smuggling. Meanwhile, diesel exports actually rose over the past month.

Fourth, to really get a grasp of trading figures, I would argue it is necessary to look at full years. Surely there are ways to, for example, date contracts in order to make it look like deliveries and receptions of goods reach certain levels at certain times, or by simply postponing some exports and imports to a later date. Perhaps we will see trading figures later on after the bluster has really settled that compensate for shortfalls at this moment.

By Benjamin Katzeff Silberstein

Beijing’s Commerce Ministry has issued an order for companies in the country to comply with UN sanctions, and cease imports of coal, iron ore, sea food and other items on the sanctions list, Reuters reports:

China’s Commerce Ministry issued on Monday an order banning imports of coal, iron ore, lead concentrates and ore, lead and sea food from North Korea, effective from Tuesday, as Beijing moved to implement United Nations sanctions announced earlier this month.

The UN sanctions must be implemented 30 days after the resolution was approved in a vote on Aug. 6.

Full article:
China issues order to implement U.N. sanctions on North Korea
Reuters
2017-08-14

Washington Post also reports on the iron ore and seafood import ban:

The ban will take effect from Tuesday, the Ministry of Commerce announced.

But at the same time, Beijing warned the Trump administration not to split the international coalition over North Korea by provoking a trade war between China and the United States.

The warning comes as President Trump is expected to sign an executive memorandum Monday afternoon instructing his top trade negotiator to launch an investigation into Chinese intellectual property violations, a move that could eventually result in severe trade penalties,

In China, these proposed measures were seen as an attempt to put pressure on Beijing to act more strongly against North Korea, and at the same time an attempt to shift the blame for the world’s failure to rein in Pyongyang’s nuclear and missile programs onto China alone.

“It is obviously improper to use one thing as a tool to imposing pressure on another thing,” Foreign Ministry spokeswoman Hua Chunying told a regular news conference Monday. “There will be no winner from a trade war, it will be lose-lose.”

[…]

China accounts for roughly 90 percent of North Korean trade but moved earlier in February to suspend North Korea’s coal imports until the end of the year. Coal normally accounts for about half of North Korea’s exports, but despite the coal ban, overall trade between the two countries remained healthy.

Last month China announced that imports from North Korea fell to $880 million in the six months that ended in June, down 13 percent from a year earlier. Notably, China’s coal imports from North Korea dropped precipitously, with only 2.7 million tons being shipped in the first half of 2017, down 75 percent from 2016.

But a 29 percent spike in Chinese exports to North Korea — North Korea bought $1.67 billion worth of Chinese products in the first six months of the year — helped push total trade between the two countries up 10 percent between January and June, compared with the same period last year.

The latest move to stem imports of iron, iron ore, lead and lead ore, and seafood products will put significantly more pressure on Pyongyang. But it is unlikely to be enough to convince Pyongyang to abandon its nuclear program, which it sees as essential to its own survival, experts say.

Full article:

Three things are worth noting:

First, this sort of order seems to be a general routine in China’s process of complying with UN sanctions, regardless of how strict controls and enforcement actually turns out to be later on. For example, China ordered coal trade to cease in April 2016, to comply with UN sanctions on North Korea, but the trade continued, with the “humanitarian exemption” clause as the excuse. The order itself, in other words, does not seem to be anything out of the ordinary. Whether or not it is enforced in the weeks, months or even years ahead will be the real test.

Second, Chinese imports of iron ore increased quite drastically over the past few months. It is only speculation, but perhaps Chinese authorities, businesses or other entities involved here sensed that UN sanctions on the horizon would target North Korea’s iron ore exports, and decided to “backload” its imports to compensate for an anticipated shortfall later on. Chinese iron ore imports from North Korea in April 2017 were two and a half times higher than in April 2016. We’d need to see actual numbers by the end of the year to really evaluate the impact of this iron ore import ban on North Korea’s foreign currency earnings, but the higher levels of imports in the preceding months will certainly cushion some of the impact from this ban.

Third, enforcement is tricky. To state the obvious, China is a huge country. Its border to North Korea is long and traders in both countries have years of experience in sanctions evasion. The flow of goods between the two countries — much of it through one single point between Sinuiju and Dandong — is difficult to monitor. Even after China’s import suspension of North Korean coal this past winter, some of the trade continued, and perhaps still does today under the radar.

In sum, as always, only time will tell what this actually comes to mean for North Korea.

By Benjamin Katzeff Silberstein

On Saturday August 5th, the UN Security Council passed yet another resolution, 2371, following North Korea’s missile tests. Like resolution 2270 that was passed in March 2016, 2371 also takes aim at North Korea’s mineral exports. The new resolution also bans imports of seafood products from North Korea, and bans member states from hiring new North Korean laborers, but they do not need to fire ones already hired, so it is questionable whether this source of income will decrease and/or disappear, or merely stop increasing.

Unlike 2270 last year, it does not appear to contain a humanitarian exemption or any other loophole for mineral imports. In sum, the new resolution appears much more holistic than its predecessors in fully cutting off North Korea’s most central export revenues.

But while the content of the resolution is different, the tools remain the same. Its efficacy still hinges upon implementation by UN member states, and of course, above all, by China, and it is difficult to see why such implementation would be more likely this time. Both President Trump and the US ambassador to the UN, Nikki Haley, have made a big number of China’s and Russia’s vote in favor of the resolution. WSJ reports:

U.S. Ambassador Nikki Haley praised the council�s solidarity, saying more days like this one were needed at the United Nations. She also personally thanked China for helping move the resolution from talk to action. The U.S., which had drafted and put forward the resolution, negotiated for more than a month with China over the text and final measures targeting Pyongyang.

�This resolution is the single largest economic sanctions package ever leveled against the North Korean regime,� said Ms. Haley, adding the council had put the country and its leadership �on notice� and �what happens next is up to North Korea.�

President Donald Trump�said on Twitter, �The United Nations Security Council just voted 15-0 to sanction North Korea. China and Russia voted with us. Very big financial impact!�

However,�both China and Russia voted in favor of UNSC 2270 as well, and there are still abundantly clear signs that China did little to implement the ban on imports of North Korean minerals. Had UNSC 2270 been implemented in full, North Korea’s export revenues would already have been badly hit.

Meanwhile, South Korea’s Bank of Korea announced a few weeks ago its estimate that the North Korean economy grew by close to four percent last year. One should read those numbers with a very,�very�hefty dose of skepticism, given the difficulty in estimating anything relating to the North Korean economy, but at the very least, we can safely conclude that the North Korean economy is not in dire straits. Its foreign trade increased by close to five percent last year, according to KOTRA. Though there have been several reports suggesting difficulties for companies involved in cross-border trade between China and North Korea over the past year, there are no indications that China has implemented the near-blanket-ban in minerals trade that the UNSC resolution from March last year mandates.

So why would this time be any different? My guess is that it won’t be. It is very difficult to imagine that China would have voted in favor of a resolution that would hit North Korea’s economy so badly if it would really have believed that such a resolution would be fully implemented. The basic political dynamics remain: China does not want North Korea to crumble, and China craves geopolitical stability above everything else.

As always, only time will tell. But those who applaud this resolution as a new and radical turn on the global stage in the North Korea issue may want to look back at historical precedent, and moderate their expectations.

Benjamin Katzeff Silberstein:�

On Saturday August 5th, the United Nations Security Council approved a resolution banning member states from importing North Korean export goods such as minerals and seafood products, and from hiring North Korean laborers. Wall Street Journal:

U.S. Ambassador Nikki Haley praised the council�s solidarity, saying more days like this one were needed at the United Nations. She also personally thanked China for helping move the resolution from talk to action. The U.S., which had drafted and put forward the resolution, negotiated for more than a month with China over the text and final measures targeting Pyongyang.

�This resolution is the single largest economic sanctions package ever leveled against the North Korean regime,� said Ms. Haley, adding the council had put the country and its leadership �on notice� and �what happens next is up to North Korea.�

President Donald Trump�said on Twitter, �The United Nations Security Council just voted 15-0 to sanction North Korea. China and Russia voted with us. Very big financial impact!�

Both China and Russia urged a return to talks with North Korea and told the Security Council that the U.S. must abandon�its military exercises with South Korea�and dismantle�the missile-defense system in South Korea known as Thaad�because North Korea perceived that as a threat and it undermined the security of the region.

�We stress that additional restrictions cannot be an end to themselves, they need to be a tool to engage in dialogue,� said Russia�s new ambassador to the U.N., Vassily Nebenzia.

The nine-page resolution steps up trade restrictions with Pyongyang by aiming to cut off a third of its $3 billion annual export revenue. It bans North Korea from trading coal, iron, lead, iron and lead ore, and seafood.

The resolution also prohibits countries from hiring North Korean laborers and bans countries from entering or investing into new joint ventures with Pyongyang.

Diplomats and sanctions experts have long warned that export revenues, even remittances from foreign workers, are cycled back to North Korea�s military and nuclear programs.

A Security Council diplomat offered this estimate on North Korea�s foreign revenue earnings in 2017: $295 million from seafood; $251 million from iron and iron ore, and $400 million from coal trade.

North Koreans work in China, Russia and the Arab countries in the Persian Gulf in a variety of businesses ranging from factories to restaurants and nightclubs and are estimated to send home several billion dollars in revenue, a large portion of which the government claims, according to U.N. sanctions experts.

The new resolution restricts North Korea�s technology trade and tightens enforcement of sanctions on North Korean vessels by banning violators from entering ports around the world.

Under the resolution, North Korea�s Foreign Trade Bank, which handles foreign exchange, will be added the U.N.�s sanctions list that freezes the assets of targeted entities.

It remains to be seen whether the new sanctions will deter North Korea�s pursuit of advanced ballistic missiles and nuclear weapons or bring its leader Kim Jong Un to the negotiating table.

North Korea�s economy has managed to stay afloat largely because China, its main trade partner, and Russia and some African nations haven�t fully enforced existing U.N. sanctions. The U.S. Treasury in June sanctioned Chinese entities�primarily banks and shipping companies�and individuals for violating sanctions and conducting trade that contributed to North Korea�s military and nuclear program.

China�s Ambassador Liu Jieyi said his country denounced unilateral sanctions by the U.S. and said action against North Korea must be through the U.N. mechanism. Mr. Liu told the council he welcomed the U.S. position that it wasn�t�seeking regime change in North Korea.

�China has always been firmly opposed to chaos and conflict in the [Korean] peninsula,� Mr. Liu said.

Although China and Russia have pushed for a resumption of the six-party talks with North Korea, disagreement remains on how to bring Washington and Pyongyang to the table. China and Russia have called for a freeze-for-freeze plan under which North Korea would halt any more military or nuclear action and the U.S. would end its military exercises with South Korea.

Full article here:
North Korea Hit by $1 Billion Sanctions After Missile
Farnaz Fassihi
Wall Street Journal
2017-08-5

The UN summary of the resolution reads as follows:

The Security Council today further strengthened its sanctions regime against the Democratic People�s Republic of Korea, condemning in the strongest terms that country�s ballistic missile launches and reaffirming its decision that Pyongyang shall abandon all nuclear weapons and existing nuclear programmes in a complete, verifiable and irreversible manner.

Unanimously adopting resolution�2371�(2017) under Article�41, Chapter�VII of the United Nations Charter, the 15-nation Council decided that the Democratic People�s Republic of Korea shall not supply, sell or transfer coal, iron, iron ore, seafood, lead and lead ore to other countries.

Expressing concern that Democratic People�s Republic of Korea nationals working abroad were generating foreign export earnings to support the country�s nuclear and ballistic missile programmes, it also decided that all Member States shall not increase the total number of work authorizations for such persons in their jurisdictions, unless approved by the Security Council Committee established pursuant to resolution�1718�(2006).

Through the text, the Council decided that States shall prohibit the opening of new joint ventures or cooperative entities with the Democratic People�s Republic of Korea entities and individuals, or expand existing joint ventures through additional investments.� In addition, it decided that Pyongyang shall not deploy or use chemical weapons and urgently called for it to accede to the Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and Their Destruction.

Also through the resolution, the Council named nine individuals and four entities to be subject to a travel ban and asset freeze already in place, as well as to request that the International Criminal Police Organization (INTERPOL) issue special notices with respect to designated individuals.

In addition, it reaffirmed that its provisions were not intended to have adverse humanitarian consequences for the civilian population of the Democratic People�s Republic of Korea, and that the Security Council Committee established pursuant to resolution�1718 (2006), on a case-by-case basis, exempt from sanctions those activities that would facilitate the work of international and non?governmental organizations engaged in assistance and relief activities for civilian benefit.

Furthermore, through the text, the Council called for the resumption of the Six-Party Talks between China, Democratic People�s Republic of Korea, Japan, Republic of Korea, Russian Federation and the United States towards the goal of a verifiable and peaceful denuclearization of the Korean Peninsula.

Speaking after the resolution�s adoption, the representative of the United States said the Council had put the Democratic People�s Republic of Korea�s dictator on notice by increasing the penalty of its ballistic missile activity to a whole new level.� All Member States must do more to put more pressure on that country, she said, adding that the United States would take defensive measures to protect itself and its allies, including through joint military exercises.

China�s representative said that, while today�s resolution had imposed further sanctions, it did not intend to negatively impact such non-military goods as food and humanitarian aid.� Calling on all parties to implement the resolution�s provisions fully and earnestly, he recalled that China and the Russian Federation on 4�July had put forward a road map to resolve the issue through two parallel tracks � denuclearization and the establishment of a peace mechanism.� Recalling that the United States had recently indicated that it was not pushing for regime change or for the Korean Peninsula�s reunification, he said an escalation of military activities would be detrimental to all countries of the region.

Japan�s delegate said the sheer number and frequency of the Democratic People�s Republic of Korea�s nuclear and ballistic missile tests �show how unprecedented and unacceptable these provocations are�.� Not only was the quantity outrageous, but the qualitative advancements were alarming.� Noting that today�s resolution would reduce the Democratic People�s Republic of Korea�s revenue by approximately $1�billion, he said all Member States must demonstrate renewed commitment to implement the Council�s decisions.

The Russian Federation�s representative, while calling on the Democratic People�s Republic of Korea to end its banned programmes, said progress would be difficult so long as it perceived a direct threat to its security. �Emphasizing that military misadventures risked creating a disaster, he said sanctions must be a tool for engaging Pyongyang in constructive talks rather than to seek the country�s economic asphyxiation.

The Republic of Korea�s delegate said that Pyongyang�s missile provocations on 4�and 28�July, together with its nuclear programme, posed a grave threat to international peace and security.� Indeed, such reckless acts of defiance should be met with stronger measures, he said, adding that additional sanctions contained in resolution�2371�(2017) would significantly cut off the inflow of hard currency that would otherwise have been diverted to illicit weapons programmes.

Full article:
Security Council Toughens Sanctions Against Democratic People�s Republic of Korea,�Unanimously Adopting Resolution 2371 (2017)
United Nations Meetings Coverage
2017-08-05

Benjamin Katzeff Silberstein�

In 2010, North Korean and Chinese authorities decided to build a new bridge across the Yalu River, which is currently estimated to carry 70 percent of all trade between the countries. I recently spoke with a diplomat who was previously based in North Korea, who told me that the current bridge is rather decrepit, and particularly so on the North Korean half. The new bridge was partially built due to an expectation that trade would increase between the two countries, an expectation that seems to have been true for the past few years, including 2016 when North Korea was supposedly under harsh sanctions by the international community.

North Korea, however, has not yet constructed roads to cities on its side of the bridge, making it largely useless. Now, a Chinese businessman has decided to invest in the project — unclear if this is for any expectations of financial gain. Daily NK reports:

Anticipation for the opening of the new Amrok (Yalu) River Bridge connecting Dandong (Liaoning Province, China) with Sinuiju (North Pyongan Province, North Korea) has risen after a Chinese businessman decided to invest money in the project�s infrastructure.

The construction of the new Yalu River Bridge was initiated in December 2010 with the expectation that it will bring an expansion of the trade volume between China and North Korea. The bridge was completed in 2014 after overcoming significant issues. However, the construction of roads on the North Korean side slowed to a halt, delaying further progress.

Recently, a Chinese businessman has announced his decision to invest in North Korea’s road construction efforts, which have remained the biggest obstacle to the opening of the bridge.

A source familiar with North Korean affairs in China told Daily NK on July 24 that according to North Korean traders in Sinuiju, a Chinese businessman has committed 300 million RMB (about US$44.7 million) to the road construction project.

The construction of the new bridge was first proposed due to safety concerns regarding the existing Sino-Korean Friendship Bridge, which although derelict, has been responsible for more than 70% of bilateral trade. The bridge was repaired twice last year alone, highlighting its significant structural issues.

Aware of the situation, China sponsored the construction of a two-way (four-lane) road in the area, paying for the entire construction expenses totaling 2.2 billion RMB (approx US$327 million).

However, the source noted that North Korea suspended the construction of roads between the bridge and North Korean cities, demanding further investment from China.

“North Korea has been continuously demanding investment from Chinese businessmen, threatening them with a suspension of trade unless they invest. It seems that these efforts have produced results,” he said.

But actual construction has yet to start. When asked about this, the source said it is presumably due to the tense bilateral relations between China and North Korea, as well as international sanctions and overall political climate.

Chinese investment breathes new life into new Yalu River Bridge
Daily NK
2017-08-02

Benjamin Katzeff Silberstein

Yonhap reports:

The estimated expansion of the gross domestic product (GDP) represents a sharp turnaround from 2015 when the economy of one of the world’s most isolated countries shrank 1.1 percent due mainly to a drought.

Last year’s growth is the highest since 1999 when North Korea’s economy expanded 6.1 percent, according to the Bank of Korea (BOK).

North Korea’s economy expanded 1.2 percent on average between 2012 and 2016, a sign that its economy is mired in low growth.

There are no indications that the North’s economy has suddenly improved since late 2011 when North Korean leader Kim Jong-un took power on the sudden death of his father and long-time leader Kim Jong-il, an official said.

“North Korea’s economic structure is very fragile and is not really set up for high growth,” the official spoke on the condition of anonymity.

The BOK estimated North Korea’s gross national income (GNI) stood at 36.4 trillion won (US$32.4 billion) in 2016. South Korea’s per-capita GNI stood at 31.98 million won, which is 22.1 times larger than the North’s 1.46 million won.

Related to last year’s growth, the central bank said North Korea’s mining industry grew 8.4 percent, the highest since 1999 when it expanded 14.2 percent.

North Korea’s trade volume came to $6.55 in 2016, up 4.6 percent from a year earlier, the BOK said. The increase came despite tightened U.N. sanctions imposed on North Korea over its repeated nuclear tests and its long-range rocket launches.

The sanctions call for, among other things, a ban on the country’s exports of coal and other mineral resources to cut off North Korea’s access to hard currency.

Still, the provision will not apply if transactions are determined to be exclusively for livelihood purposes and unrelated to generating revenue for North Korea’s nuclear or ballistic missile programs or other activities prohibited by previous U.N. resolutions.

China accounts for nearly 90 percent of North Korea’s foreign trade, and mineral resources are a key part of their bilateral trade.

Full article:

N. Korea’s economy grew 3.9 pct in 2016: BOK

Yonhap News

2017-07-21

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

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: