North Korean Economy Watch

Kim Jong Il’s Word
A U.N. agency yanks its cash and people from North Korea.
Wall Street Journal (Hat Tip One Free Korea)
3/5/2007

North Korean officials arrived in New York over the weekend for discussions on normalizing relations with the U.S. as part of the nuclear disarmament accord struck last month. Chief U.S. negotiator Christopher Hill is scheduled to meet today and tomorrow with his counterpart, Vice Foreign Minister Kim Kye Gwan.

May we suggest that, before he sits down, Mr. Hill take a look at the brief statement issued quietly Thursday by the United Nations Development Program (UNDP). There is no better guide to Kim Jong Il’s negotiating style, nor to the North Korean dictator’s habit of breaking his word. Nuclear negotiators, beware.

The agency announced, in an item on its Web site, that it is suspending all operations in North Korea because the “necessary conditions set out by the Executive Board on 25 January 2007 have not been met.” The UNDP’s 20 or so projects will be shut down, we’re told, and its eight international staffers will be pulled out of the country. The U.N. isn’t known for its tough love, and no one we’ve talked to can recall another example of the UNDP suspending operations in a country that refused to comply with the regulations.

The “necessary conditions” were imposed at the last board meeting in response to an outcry over the UNDP’s lack of oversight over its programs in North Korea. U.N. documents, produced reluctantly after prodding by the U.S. mission to the U.N., showed numerous irregularities dating back into the late 1990s. Tens of millions of dollars for programs that were supposed to help the poor appear instead to have been handed over to Kim’s dictatorship.

As the March 1 deadline for compliance approached, North Korea decided to throw a tantrum to see if it could get excused from its obligations. It deemed the conditions politically motivated–especially the one that limits aid to programs that directly help the people and bans assistance that could aid the government–and demanded a renegotiation.

Never mind that North Korea sits on the Executive Board and had agreed to abide by the terms thrashed out in January. To its credit, the UNDP refused to be bullied into extending the deadline and is holding Pyongyang to its commitments. The suspension applies to all existing projects; the board had already suspended new projects until an audit could be completed and better oversight provided.

The U.N. has another deadline fast approaching in North Korea. At the end of January, Secretary General Ban Ki Moon ordered a full investigation of all U.N. programs in North Korea, to be completed within three months. Those include Unicef, the World Food Program and the U.N. Population Fund. As the end-of-April deadline for that audit comes closer, it will be instructive to watch Pyongyang’s degree of cooperation.

Meanwhile, the talks on North Korea’s nuclear program are moving ahead, with the U.S., South Korea and Japan all holding bilateral meetings with Pyongyang this month toward the goal of normalizing relations. At the top of Japan’s agenda is the whereabouts of its citizens who were kidnapped by North Korean agents in the late 1970s and 1980s and forced to train North Korean spies. Negotiations with Pyongyang have so far yielded the return of only five abductees along with preposterous explanations for how the rest have supposedly died.

The preference in some diplomatic circles, including the U.S. State Department and perhaps now in the White House, is to dismiss the U.N. corruption in North Korea as well as the abductee and other human-rights violations as side-issues to the more vital objective of getting Kim to give up his nuclear program.

We’d argue that international focus on these issues is an essential part of keeping up the pressure on Kim’s regime. But even if you buy the argument that these are ancillary issues, there’s still an important lesson here: If Kim won’t abide by the pledges he made regarding UNDP aid to his country, how can he be expected to keep his promises on nuclear disarmament?

Former U.S. Ambassador to the U.N. John Bolton lays out the troubling case of changing American intelligence judgments toward North Korea in The Wall Street Journal today (article available here). His point about the need for an intrusive inspection and verification regime is especially important. Under the six-party agreement announced on February 13, North Korea has 60 days to account for all of its nuclear programs. If it doesn’t, or if Kim attempts to renegotiate the terms at the last minute, we’d like to think the U.S. would show at least as much fortitude as the United Nations, and tell Kim to take a hike.

Choson Ilbo
2/2/2007
 
Russia is trying to strengthen ties with North Korea, citing a “China threat” in Korea and the Far East. The Gudok, the daily newspaper of Russian Railways, said in an article Tuesday, “If China takes control of Najin port in North Korea, Russia may suffer huge losses in the project to link the TKR (Trans-Korea Railway) and the TSR (Trans-Siberian Railway).”

Gudok is published by Vladimir Yakunin, the president and CEO of Russian Railways and one of the closest allies of Russian president Vladimir Putin. Sources say the report can be viewed as Russia’s official position as it tries to expand its influence with Pyongyang.

“China has completed feasibility studies for Najin port and is now doing repairs and upgrades to wharfs and container unloading facilities,” the article said. It said that because the port lies at the start of the Najin-Hasan Railway and does not freeze throughout a year, Russia must take hold of it.

“China has already requested that the UNDP, or UN Development Program, give the Chinese the right of free passage in the UNDP-initiated Tumen river development project. What China aims to achieve is to establish its own port in North Korea as a foothold to advance into the Pacific Ocean,” the article said. The newspaper urged the Russian government to respond aggressively.

Sources with the Korean government said Thursday, “The Russian government suggested late last year that it would pursue a railway modernization plan on a 54km stretch of the Najin-Hasan line with its own money, without support from South Korea, if we expand container transportation on the route between Busan and Najin.”

Currently only North Korean trains are in service on that stretch of railway. Russia has been working on the line since July, converting its narrow gauge to the standard that supports container transportation.

North Korea, which has sent around 10,000 construction workers and loggers to the Far East region, is welcoming closer cooperation with Russia. When president Putin announced last Saturday that Russian would spend 100 billion rubles (W3.7 trillion) to hold the Asia Pacific Economic Cooperation summit in Vladivostok in Russia, North Korean consulate-general Shim Kuk-ryeong in Nachodka said, “North Korea is ready to join major construction projects as soon as Vladivostok’s infrastructure development project starts.”

Russia’s efforts to expand its influence with North Korea can be seen as falling within the context of Putin’s recent emphasis on the Far East. Late last year, Putin said, “Russia’s security is now being threatened with the illegal migration of Chinese into the Far East.”

Joong Ang Ilbo
1/27/2007

Washington said Thursday it will withhold all contributions to the United Nations Development Program (UNDP), an agency accused of mismanaging its North Korea activities that led to a large, steady influx of cash into a regime suspected of seeking nuclear weapons.

The United States would also consider proposing that the UN stop all programs in the North except those for humanitarian assistance, said Ambassador Alejandro Wolff, acting U.S. envoy to the United Nations. He said the U.S. was satisfied with UNDP’s announcement of steps to remedy the situation, including an audit and readjustment of its 2007-2009 North Korea program.

“In the meantime, until we get the results of that audit and the program is reviewed, we would defer approval of the new program for the DPRK.,” the envoy said. “The U.S. also withholds its contribution in part to UNDP to the DPRK program,” he said. DPRK stands for Democratic People’s Republic of Korea, North Korea’s official name.

Japan went further, its envoy suggesting the UN stop all programs in North Korea except for direct humanitarian aid. Mr. Wolff said the Japanese argument “is quite compelling” and added the U.S. will consider the proposal.

At the State Department, spokesman Sean McCormack denied that the UNDP probe is targeted at Pyongyang. “This is not a U.S.-North Korea issue,” Mr. McCormack told reporters. “This is not directed at North Korea. This is simply an issue of management and oversight of UN programs. The secretary-general and executive director of UNDP understand it as such.”

The UNDP has been accused by Washington of mismanaging its aid in North Korea, resulting in a massive cash flow into the Pyongyang regime through hard currency payments to the North Korean government and local employees and vendors.

Ban Ki-moon, the new UN leader, asked for an overall audit of all UN funds and programs, starting with the first report on North Korea to be completed within 90 days.

Pyongyang in a statement claimed strict conformity with UN regulations.

Yonhap
1/25/2007

The U.N. Development Program (UNDP), recently accused of unmonitored activities in Pyongyang that led to a large, unintended influx of cash to the regime there, announced Thursday that it will adjust the North Korea program and delay its implementation until approved.

But the US$17.91 million resource allocation made in the original 2007-2009 program will be maintained, it said.

Yonhap
1/25/2007

North Korea on Thursday rejected a U.S. allegation that it misused funds from the United Nations Development Program (UNDP), accusing Washington of conducting a smear campaign to increase pressure on Pyongyang.

The United Nations announced this week that an audit will be conducted of the UNDP operations in North Korea after Washington alleged it had funneled immense cash payments to Pyongyang.

The UNDP aid projects in North Korea “have been carried out strictly in conformity with the U.N. regulations and in a transparent way,” a spokesman for Pyongyang’s Foreign Ministry said in an answer to a question by the Korean Central News Agency, the North’s official media outlet.

U.S. deputy ambassador Mark Wallace alleged last week that the UNDP’s operation in the North had been run “in blatant violation of U.N. rules” for years and that millions of dollars ended up in the hands of North Korean leader Kim Jong-il. The UNDP denied the U.S. allegation, while U.N. Secretary General Ban Ki-moon, a South Korean, announced an external audit of U.N. programs on Monday.

“Nevertheless, the United States is kicking up another anti-DPRK racket over not much aid funds of the UNDP from the outset of the year to meet its dirty political aims,” the spokesman said.

North Korea said it will continue to develop its cooperative relations with the UNDP.

“However, it will not allow any attempt to politicize the aid project nor accept conditional or unjust aid at all. The U.S. will be wholly accountable for all consequences to be entailed by its ongoing reckless campaign against the DPRK,” the unidentified spokesman said.

Donga (Hat Tip DPRK Studies)
1/22/2007

It is expected that the government’s aid to North Korea will be affected as the international community has decided to investigate the general situation of aid projects using U.N. funding including the United Nations Development Program (UNDP). So far, the government and private groups supporting North Korea have often used international organizations as a means to give humanitarian aid to the North, as such aid through the World Health Organization (WHO), United Nations Children’s Fund (UNICEF), World Food Programme (WFP) and others are less influenced by the inter-Korean relations.

Last year, the government and private organizations didn’t provide previously planned corn aid to the North in the aftermath of North Korea’s missile and nuclear tests. However, they spent 5.912 billion won in malaria preventive measures and infant and child support.

In 2005, they sent products worth 25.773 billion won in food aid and quarantine measures against malaria. Besides, they provided goods worth 2.254 billion won in aid and preventive measures against malaria with the North in 2004, and offered North Korea goods worth 20.303 billion won in corn, malaria preventive measures, and vaccine and immunizing agents in 2003.

The total sum Korea spent on the North in humanitarian assistance over the last 10 years (from 1995 to 2004) amounts to $119.43 million, 7.99 percent of the total U.N. financial aid of $1.49 billion to North Korea. During the period, apart from world organizations, the government gave the North $1.16 billion in financial support.

A government official said, “The government’s support for North Korea through international groups is its obligation as a responsible member of the international community,” and added, “Assistance for North Korea through world organizations is for humanitarian purposes, and as far as I know, there is no possibility for misappropriating funds since the aid is being carried out based on a principle of providing 100 percent goods.”

However, contrary to the above government’s official statement, the government seems rather perplexed at the suspicion that its aid through world organizations was diverted to be used for the North’s nuclear development program. The government has used world organizations as an indirect route for its aid toward North Korea because it was worried about getting embroiled in accusations that it is being too lenient on North Korea.

Unification Minister Lee Jae-Jeong also said in his inaugural speech that even humanitarian aid should be divided into emergency aid, assistance in loan form and aid for development, and that emergency aid should continue under any circumstances in order to emphasize the continuation of government’s support for North Korea through world organizations.

Minister Lee has so far expressed regret to the WFP over the suspension of food aid to the North and emergency relief aid for North Korea’s catastrophic flood damage. Another government official stated, The “UNDP seems to have nothing to do with humanitarian aid since it is aid for the development of North Korea. Still, it will still affect the government’s humanitarian assistance program for the North in the future.”

Meanwhile, it was revealed that the government is investing in the Tumen River Area Development Programme (TRADP) the government has been participating in since 1995 under the auspices of the UNDP. An official at the Ministry of Finance and Economy noted, “This year, the government will pay $181,000 for the operating expenses of the TRADP office.”

Korea Times
1/21/2007

The United Nations Development Program (UNDP) said Friday that it would stop paying cash for its operations in North Korea and would start an independent audit. Suspicions have arisen that the U.N. agency funneled millions of dollars in cash to the Kim Jong-il regime.

The announcement came immediately after U.N. Secretary-General Ban Ki-moon called for an urgent investigation into the activities of U.N. agencies.

The U.N. move was in quick response to U.S. accusations that North Korea has diverted U.N. development aid with the complicity of the UNDP.

In a letter to UNDP Associate Administrator Ad Melkert, U.S. Ambassador Mark Wallace claimed that North Korea had “systematically perverted’’ the UNDP aid program since 1998 for the benefit of the Kim Jong-il regime, rather than the people of North Korea.

The Jan. 16 letter said the UNDP program for North Korea “has for years operated in blatant violation of U.N. rules, served as a steady and large source of hard currency and other resources for the DPRK government with minimal or no assurance that UNDP funds and resources are utilized for legitimate development activities.’’

DPRK is shorthand for the official name for North Korea. It stands for the Democratic People’s Republic of Korea.

On Friday Ban met with Melkert to discuss the North Korea issue.

“The secretary-general will call for an urgent, system-wide and external inquiry into all activities done around the globe by the U.N. funds and programs,’’ said U.N. spokesperson Michele Montas.

Ban’s decision indicated that he was determined to avoid a repetition of the scandal over the U.N. oil-for-food program in Iraq, which lingered for months before his predecessor, Kofi Annan, agreed to an independent probe.

In a press conference at the U.N. headquarters in New York, Melkert said his agency’s auditors had raised concerns about the North Korea program and its management.

He said the agency would end all payments in hard currency to the Pyongyang government, national partners, local staff and local vendors as of March 1.

The agency will propose a full, independent audit at next week’s UNDP executive board meeting to make sure everyone understands the nature of work in a country like North Korea, he said.

U.S. officials were quoted as saying that they first received indications that there might be some irregularities in UNDP’s development program in the North in the second half of 2006. They raised concerns that the cash might be misused, possibly for Pyongyang’s nuclear program.

The Associated Press quoted UNDP as saying that in the 10 years, from 1997 through 2006, the executive board authorized more than $59 million for North Korea but only $27.66 million was delivered.

North Korea is under U.N. sanctions imposed after its Oct. 9 nuclear test. It is still refusing to comply with international calls to end its nuclear weapons program.

There has been speculation that the communist country has converted humanitarian aid from South Korea and international agencies for military use.

From Fox News
George Russell
1/19/2007

U.S. State Department Reveals North Korea’s Misuse of U.N. Development Program Funds and Operations

Has North Korean leader Kim Jong Il subverted the United Nations Development Program, the $4 billion agency that is the U.N.’s main development arm, and possibly stolen tens of millions of dollars of hard currency in the process?

According to a top official of the U.S. State Department — using findings made by the U.N.’s own auditors — the answer appears to be a disturbing yes, so far as UNDP programs in North Korea itself are concerned.

And just as disturbingly, the U.N. aid agency bureaucracy has kept the scamming a secret since at least 1999 — while the North Korean dictator and his regime were ramping up their illegal nuclear weapons program and making highly publicized tests of intermediate range ballistic missiles.

Nothing was disclosed even to the UNDP Executive Board, which oversees its operations and is composed of representatives of 36 nations — including the United States and, this year, North Korea itself.

That fact is sure to be a bombshell at the Executive Board’s regular annual meeting, which begins Friday and extends through Jan. 26. Among the main items to be discussed is the $18 million, two-year UNDP budget in North Korea.

Moreover, the period of scandal and secrecy in the UNDP’s North Korean operations coincided in large measure with the tenure of Mark Malloch Brown, most recently Deputy Secretary General of the United Nations itself, as administrator of the UNDP.

[…edited…]

From at least 1999 to at least 2004, it appears the UNDP, and the U.N. itself, had no idea what Kim Jong Il did with the aid agency’s money, ostensibly intended for aid programs ranging from development of energy programs and small and medium sized businesses, and for environmental protection.

But the UNDP had plenty of warnings from auditors it had contracted to look at the program during that period, and who signaled loudly that something was badly awry.

In a letter sent to the UNDP on Jan. 16, Mark Wallace, the U.S. State Department ambassador at the U.N. for management and reform, wrote that the auditors’ testimony shows it is “impossible” for the U.N. aid agency to verify whether its funds “have actually been used for bona fide development purposes or if the DPRK [North Korea] has converted such funds for its own illicit purposes.”

Ironically enough, neither Wallace nor the U.S. government has been allowed to obtain copies of the audits, which are deemed “management tools” by UNDP bureaucrats and therefore not even available to governments that pay for the organization.

Their contents came to light only after Wallace and the U.S. demanded an opportunity to view the audits at UNDP headquarters, and took careful notes based on the documents. Wallace reiterated the contents in his letter, addressed to Ad Melkert, the UNDP’s No. 2 official.

The difficulties in finding out what the UNDP was doing in North Korea were apparently something that U.S. diplomats and UNDP auditors shared.

Wallace relates in his letter that whenever the auditors, contracted from the consulting firm KPMG, tried to discover what was going wrong, they were either limited in what they were allowed to investigate, or they were forced to accept “sham” audits done by the North Koreans themselves.

The picture painted by the auditors, according to Wallace, shows a U.N. agency that “operated in blatant violation of U.N. rules.”

The UNDP allowed members of Kim’s regime to “dominate” local UNDP staff, who were apparently first selected by the North Korean government itself, the auditors said, and added that Kim’s operatives even ran “core” financial and managerial functions directly.

The regime also demanded cash payments from the aid agency in violation of U.N. rules, and kept UNDP officials from visiting many of the sites where development projects were supposed to be underway.

On at least three occasions, in 1999, 2001 and 2004, the KPMG auditors filed reports that brought troubling aspects of the situation to the attention of UNDP headquarters, recommending “timely corrective action.” There is no evidence that any such action took place.

Just exactly how much money the UNDP funneled into North Korea in all those years is not revealed in Wallace’s letter. But he notes that in 1999 there were 29 ongoing UNDP projects in North Korea, with a total budget of $27.86 million. Two-thirds of the programs were so-called “National Execution programs” run by North Korea directly, using UNDP money. The other third was ostensibly run by UNDP itself.

But that may not have made a difference. The auditors complained that even UNDP-run programs paid for everything in cash, which is against UNDP policy, at prices set by the Kim regime, and to suppliers that the regime designated. There were not even any purchase orders involved. The regime provided no audits of the programs under its own direct control.

In his letter to Melkert, Wallace called for a “full independent and outside forensic audit” of UNDP’s programs in North Korea, going back to at least 1998.

Only “the bright light of real oversight” would allow the UNDP’s overseers to decide whether any or all of the programs should be continued, he said.

Official Web Page:

Northeast Asia can be considered the last major economic frontier on the Asian continent.  The region has enormous economic potential, but this potential can only be realised through dynamic cooperation and sharing of resources.

Recognising Northeast Asia’s considerable potential and geopolitical significance, UNDP in 1991 agreed to support the initiative of the countries in the region to establish an institutional mechanism for regional dialogue and further cooperation.   For the past twelve years, the Tumen River Area Development Programme has facilitated economic cooperation among the five member countries: China, the Democratic People’s Republic of Korea (DPRK), Mongolia, the Republic of Korea (ROK), and the Russian Federation.  The member countries are equally represented in the Consultative Commission for the Development of the Tumen River Economic Development Area and Northeast Asia, which meets annually at Vice Ministerial level.

The main objectives of the Tumen Programme are to:

• attain greater growth and sustainable development for the peoples and countries in Northeast Asia, and the Tumen Region in particular;
• identify common interests and opportunities for cooperation and sustainable development;
• increase mutual benefit and mutual understanding;
• strengthen economic, environmental and technical cooperation; and
  work to ensure that the Tumen Region is attractive for international investment, trade and business.

The first phase of the Tumen Programme involved extensive planning and background studies.  An interim phase focused on investment promotion and development initiatives designed to build momentum for the region as a growth triangle.  The second phase built on the institutional framework for regional cooperation created by the multilateral agreements concluded in 1995.  The third - and current - phase continues to address factors fundamental to regional economic cooperation and is designed to ensure the sustainability of this regional cooperation framework.

Why the Focus on the Tumen Region?
The Tumen Region has great potential as a major entrepot for international trade because of the strategic location of the Tumen transport corridor, the strong complementarities of the Tumen River Area, vast natural and human resources, and the area’s accessibility to the resources and markets of Northeast Asia.

Northeast China and Mongolia are landlocked and therefore have a strong interest in access to ports in DPRK and the Russian Far East.  Overseas shippers also have a stake in the Tumen transport corridor, for it offers a much shorter route to affluent and new markets, and facilitates transit trade to a number of destinations.

The local governments in the Tumen Region have been steadfast supporters of the Tumen Programme since its inception.  It appears that central governments in Northeast Asia are now re-emphasising the value of the Tumen Region, particularly its strategic transport corridor.  Northeast Asian governments are rapidly improving the Tumen Region’s infrastructure network and transport services.  They are also working to create legal and institutional mechanisms conducive to cross-border trade and transport.  The Tumen Programme is actively facilitating the creation of an enabling environment through “soft” infrastructure and human capacity building.

Why is Regional Cooperation so Important?
Regional cooperation is a vital part of the development process and a building block for effective participation in world trade and capital markets.  For the Tumen Region, which partly consists of small and remote areas of large countries, economic cooperation is an effective way to avoid marginalisation.  Cross-border cooperation also helps resolve environmental issues and facilitates the adoption of international environmental standards.  Most importantly, enhanced economic cooperation in Northeast Asia helps improve political relations and stability, in turn vital elements for investment and economic growth.

It is worth recalling how remote and closed the Tumen Region was just a dozen years ago, to appreciate the full significance of its role as a frontier for economic cooperation in Northeast Asia.  Much has been achieved during the Tumen Programme’s existence, particularly in terms of opening borders and increasing interaction in a region that was, until recently, tense and largely closed.  A new trade and transport corridor has been created, which will - in time - evolve into an economic corridor with a significant impact on poverty reduction and improved living standards in the region.

The Future of the Tumen Programme
The prevailing political and economic climate in the region has altered dramatically since the start of the Tumen Programme in 1991.  The Soviet Union has dissolved, China and ROK have established diplomatic relations and a major trading partnership, and there has been a degree of rapprochement between DPRK and ROK.  The transition to stronger economic systems in the countries that relied on the Soviet Comecon trading system has reinforced the logic of economic cooperation in the Tumen Region.  The increased participation of DPRK, Mongolia and the Russian Far East, combined with the rapid expansion of the Chinese economy, will help the Northeast Asian economy grow.

Dynamic cooperation has found increasing expression in Northeast Asia, and relations in the region continue to improve, helped by stronger economic links.  Despite major improvements in the geopolitical circumstances of the region, however, much remains to be done.  The Tumen Programme is the only initiative that brings the member countries together on a sub-regional basis, and its existing institutional structure and multilateral agreements should be utilised to maximum effect to help Northeast Asia achieve peace and prosperity.

Asia Times
(abridged)
11/30/2006

United Nations Security Council Resolution 1718 has had no impact on the economic activity in the remote northeastern corner of North Korea where Russians and Chinese are building transportation infrastructure for future industrial-development projects. As was planned before the nuclear test, the Russians began repairing a dilapidated railway line, while the Chinese continued with their highway-construction project.

There were no delays in the normal operations of the Kumgang (also transliterated Geumgang) project, a joint tourist venture on the border between two Koreas. Every day many hundreds of South Korean tourists travel about 20 kilometers into the North to visit the picturesque mountains and spend a few days there, leaving their currency in the accounts of the North Korean government. The project has always been a major money-earner for the cash-hungry North. The Americans tried to stop Kumgang operations, but the South Koreans refused, and business continued as usual.

It was reported this month that a number of the North Korean workers employed by South Korean companies in Gaesong industrial park exceeded the 10,000 mark. Gaesong industrial park is the largest cooperative venture between two Koreas. It is the place where South Korean capital and technology use cheap North Korean labor to produce internationally competitive stuff - or at least this is what is supposed to be going on there.

In spite of optimistic talk, so far the project has been a money-losing enterprise for the Southerners, and most companies stay in Gaesong only because their government is willing to back them financially.  Still, Seoul, even when it talked tough, did not do anything to slow down the project. On the contrary, the Gaesong project is growing fast, and so, one might suspect, are revenues it provides to the Pyongyang regime.

By now it has become patently clear. No international sanction regime against North Korea worthy of its name is in place, and there is no chance that such regime will emerge in future. China, Russia and, above all, South Korea do not want to punish North Korea for going nuclear.

China is not happy about a nuclear North Korea, but probably sees it a lesser evil than a unified Korea that is likely to be under US influence and will perhaps even have US military bases. Beijing does not want this. It also does not want a collapse of another state under communist rule - this might be a bad news for domestic propagandists.

And last but not least, in recent years Chinese companies have moved into North Korea, taking over mining and infrastructure, so such gains need be protected as well. At the same time, the North Korean nukes are not seen by Chinese strategists as an immediate problem: the Chinese assume (correctly, perhaps) that these weapons will never target China and will not be transferred to China’s enemies. So for China, keeping North Korea afloat is a strategic imperative.

Russia is not a major player in the Korean game nowadays, but it has some leverage as a potential “blockade breaker”. Without sincere cooperation from Russia, no efficient sanctions regime will be possible, and such cooperation seems unlikely. Moscow does not want the North Korean regime to collapse. The country’s leader Kim Jong-il is potentially useful for numerous diplomatic combinations, and also as a deterrent against the Americans, who are increasingly seen by President Vladimir Putin’s Moscow as dangerous global bullies.

However, it is South Korea whose policy is decisive in these issues. Indeed, in recent years North Korea was kept afloat by generous Southern aid, with some 500,000 tons of grain and a large amount of other supplies being sent north every year. This aid saved countless lives in the North, but it also contributed to keeping the regime in control.

It has been clear for a decade that South Korea, in spite of all the rhetoric, does not want unification to happen too fast or too soon. The German experience demonstrated how vastly expensive unification might become, and Koreans have good reasons to believe that their situation is much worse than that of Germany. After all, the per capita gross national product in East Germany was roughly half of the West German level, while in the case of North Korea, per capita GNP is less than one-tenth of the South Korean level.

Judging by the experience of the 1990s when the North Korean regime was more isolated than now, economic pressures alone will not necessarily lead to its collapse. During the great famine of the late 1990s, between a half-million and a million people starved to death without causing any inconvenience to the regime. There are no reasons to believe that sanctions would achieve much either, apart from producing another famine and many more deaths.

In contrast, the ongoing exchanges bring to North Korea information about the outside world, and this information is subversive by definition, making more and more people wonder whether something should be done about their country’s political and economic system, so clearly inefficient and anachronistic. Thus the current situation surrounding the so-called “sanctions” might be a rare case when the hypocrisy and duplicity of so-called “collective diplomacy” is doing more good than harm.

Early this month a market riot happened in the remote North Korean city of Hoeryong. Perhaps for the first time since 1945, a large group of North Koreans openly and vocally protested an unpopular decision of the local administration. This was a minor incident, but in the long run it might be more significant than all the meaningless invectives delivered by the well-dressed people in the UN Assembly Hall.