Archive for the ‘International trade’ Category

Sanctions, and the weakness of North Korean food security

Wednesday, October 18th, 2017

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.”
Full article:
Food insecurity riles North Korea’s poorest provinces
Kim Chung Yeol
Daily NK
2017-10-18

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.
Third, the geopolitical instability naturally makes for a nervous market overall. The price of corn, for example, is up by 47 percent compared to last year. It is important to note that this sort of change in market prices has not been observable during the many instances in the past when international aid organizations have warned of food shortages in North Korea. Hoarding is a natural behavior on any market when actors believe a shortage is looming in the near future. It is a stark sign of the shift in China’s behavior from previous rounds of sanctions that North Korean markets now seem to confirm that China is putting real and heavy economic pressure on the country. The loopholes may still be there but they are much more narrow than usual.
As winter approaches, things aren’t likely to get any easier. Fuel shortages will make heating more difficult and expensive than usual for average North Koreans, particularly as the state soaks up oil and fuel from the market, raising prices further. Things may well get much worse before they get any better.
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Despite chinese sanctions enforcement, goods still crossing North Korea border

Friday, September 29th, 2017

Benjamin Katzeff Silberstein

Yes, the idea of a close North Korea-China friendship is fundamentally flawed and deeply simplified. Yes, China is currently making life very difficult for those among its own citizens who are involved in business with North Korea, and for North Koreans at the other side of the business deals. And yes, China’s enforcement of sanctions against North Korea is hurting the country’s economy and the general public.

But that by no means that all ties have been cut. China’s policy on North Korea and sanctions is not a binary question of either or.

On September 26, 2017, Wall Street Journal reported that coal imports from North Korea, which went down to zero in February this year (at least in terms of what Chinese customs data reported), again went up to levels in August that looks fairly average and regular for the past year or so:

China had suspended purchases of North Korean coal in February, in response to a U.N.-set cap on Pyongyang’s coal trade set last November, part of sanctions to curb North Korea’s nuclear ambitions.

Chinese coal imports from its neighbor this year remained below those limits after last month’s shipments.

Chinese customs data released Tuesday shows China accepted about 1.64 million tons of North Korean coal worth some $138.1 million in August, when the U.N. Security Council expanded sanctions to a complete halt on coal shipments and banned Pyongyang from exporting iron, lead and seafood.

China has been the sole importer of North Korean coal. Tuesday’s data shows Pyongyang earned more coal-export income in August than in either January or February, when China imported about $122.5 million and $98.1 million worth of North Korean coal, respectively.

China’s customs agency reported no North Korean coal imports between March and July.

The latest coal shipments preceded a Sept. 5 deadline for U.N. members to implement the August sanctions. Beijing said on Aug. 14 it would comply with those sanctions while continuing to process imports of banned goods until the deadline if those shipments had already reached Chinese territory.

Full article:
Before U.N. Deadline, China Again Buys North Korean Coal
Chun Han Wong
Wall Street Journal
2017-09-26

 

The August 2017 numbers don’t necessarily reflect a drastic change of policy on the side of China. But one can speculate that perhaps now that tensions have lingered at a high pitch for quite some time, letting shipments through prior to the September 5th enforcement deadline is seen as less problematic.

In the trade data, we also see that China’s export of food to North Korea has surged in July. We’re currently in the so-called “lean season” when food is particularly scarce in North Korea, and with economic anxiety following the tensions of the spring and summer, the price instability on the markets has surely made access to food less certain. Wall Street Journal:

China’s agricultural exports to North Korea rose sharply in July and August, amid rising geopolitical tensions and at a time of year when the food supply in the isolated nation is usually at its lowest.

In July and August, China corn exports jumped to a total of 34,964 metric tons, nearly 100 times the levels seen in the year-earlier period. Rice exports increased 79% to 17,875 metric tons, while exports of wheat flour surged more than elevenfold to 8,383 metric tons, according to China’s Customs data.

Full article:
China’s Food Exports to North Korea Surge
Lucy Craymer
Wall Street Journal
2017-09-27

Again, this does not necessarily imply a stark change of policy on the side of China. Rather, it is one indication among many that hopes are naive that Chinese pressure on North Korea would mean a complete cutoff of North Korea by China from the rest of the world. At the end of the day, the same old truth still holds: China desires a degree of social stability in North Korea in order to maintain peace and calm along its border and in the region overall. Food is certainly an important factor in such peace and calm, particularly in the long run.

Now, how (or if) North Korea is paying for these imports is less clear…

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Market prices in North Korea rise sharply after sanctions and tensions

Tuesday, September 19th, 2017

By Benjamin Katzeff Silberstein

Historically, market prices in North Korea (as reported by Daily NK) have tended to remain surprisingly stabile throughout many periods of tension and crisis. At times, while the rest of the world has seemed to be running for the bomb shelters, market prices in North Korea have barely moved, suggesting a lack of belief within North Korea that sanctions will be implemented or that imports will get restricted as a result of the tensions.

This time, it’s different.

While DailyNK’s market price database has not been updated since August 4th, news reports from inside North Korea suggest prices are much higher than they normally would be, as a result of news of added sanctions and an embargo on fuel sales to the country. Corn prices, for example, are reported to be 42 percent higher than what is normal at this time of year. The story here is that news of China’s participation in the sanctions regime give cause for worry on the ground, as is the bad harvest season:

According to inside sources, the cost of one kilogram of rice was about KPW 5,800 at the end of last month in Pyongyang, South Pyongan Province Sinuiju City, and Ryanggang Province Hyesan City. On September 5th, the prices passed the KPW 6,000 mark and have continued to slowly rise. After the North’s nuclear test, gasoline prices rose sharply around the country. Rice and other grains followed suit in due course.
Insiders located in the border regions near China – which have long served as hubs of trade and smuggling – are also sensing the climbing prices. A source from Ryanggang Province explained to Daily NK on September 11, “When we heard about economic sanctions in the past, there were merely slight increases in the cost of rice, but now we are seeing a different kind of effect.”
She continued, “Even though we are currently at the height of the corn harvest season, corn is nonetheless selling for KPW 2,700 per kilogram, [it sold for just KPW 1,900 per kg at the end of August]. Merchants haven’t been overly concerned until now, but now that we see corn prices increasing during the harvest season, it seems clear that the economic situation will continue to deteriorate.”
Witnessing the cost of diesel and gasoline spike upwards, some merchants have predicted that this will cause the price of other products to raise as well, and have therefore responded by reducing the number of products available for sale. By doing so, they hope to be able to sell at a higher price later. This reduced supply, in turn, has itself pushed prices up.
Also, as reports and rumors from the outside world penetrate further into North Korea, more and more people are coming to realize that North Korea’s closest friends, especially China, are meaningfully participating in the sanctions. This information also helps to push prices up.
A poor yield of corn this year is also playing a role. Severe droughts in the spring have hurt bottom line harvests of grains such as corn.
This should not come as a surprise. As external income sources are increasingly getting strangled by Chinese sanctions enforcement, the North Korean economy as a whole is feeling the pinch. Again, this is not at all a strange development. On the contrary, the remarkable resilience of North Korean market prices in past periods of tensions is the really peculiar story. Most likely, past rounds of the same –tensions followed by sanctions followed by tensions followed by eventual deescalation — has lacked a credible belief among North Koreans that China would really tighten the screws enough for the domestic economy to really take a hit.
It is still far too early to say anything about how long China will keep up the pressure, or how well the North Korean economy can adapt by, for example, switching over to fuels that are more abundantly available, such as liquified coal. It’s also important to remember that oil and fuel has never been cheap in North Korea, and that many residents prefer solar panels instead of diesel-powered generators to cover their needs during the frequent power outages in the country. But none of these adaptions are cheap or easy. These things take time and effort, and real costs as well as opportunity costs are likely to be large.
To be sure, the regime very likely expected and planned for this outcome. The increase in gasoline prices over the past few months suggests that the state has been siphoning off fuel from the markets for quite a while, to fill up their own stockpiles. The climb in gas prices is not limited to Pyongyang, but extends to other regions as well. The pattern of nuclear- and missiles tests this year, as many have noted, also seem to be a signal of defiance toward China. Moreover, if regime survival is the ultimate goal of Pyongyang, it’s important to remember that only a few years ago, North Korea’s trade was a third of what it is today, and regime collapse wasn’t exactly on the radar. And again, sanctions pressure from China likely won’t last forever.
But the price trend in late August and early September is a reminder that the North Korean economy, after all, works according to the laws of supply and demand. Unlike at many previous occasions, China is — at least for now — clamping down on trade with North Korea, and its residents are feeling it.
Will sanctions be strongly enforced enough to cripple North Korea’s economy? Probably not. But there is a very wide range of states between crippled and unaffected, and while North Korea’s domestic economy may be very resilient, it is not beyond the reach of international tensions.
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The impact of sanctions (2017) on the North Korean economy

Thursday, September 14th, 2017

Benjamin Katzeff Silberstein

I’ll try to gather some of the many stories on the impact of sanctions on the North Korean economy in this post, starting with the one below from Reuters (with my annotation in brackets, [BKS]):

DANDONG, China (Reuters) – The United Nations may have failed to slow North Korea’s weapons programs, but the country’s economy is already showing signs it is feeling the squeeze from the ongoing clampdown on trade, including a curb on fuel sales by China.

The latest sanctions agreed on Monday by the UN Security Council ban the export of textiles from North Korea, one of its few substantial foreign currency earners. They also capped imports of oil and refined products, without imposing the full ban the United States had sought.

Chinese traders along the border with North Korea and some regular visitors to the isolated country said scarcer and costlier fuel, as well as earlier UN sanctions banning the export of commodities such as seafood and coal, are now taking a toll.

“Our factory in North Korea is about to go bankrupt,” said an ethnically-Korean Chinese businessman in Dandong who sells cars refurbished at a factory in North Korea. He declined to be identified due to the sensitivity of the situation.

[My emphasis: Sanctions may target the regime first and foremost, but civilians certainly do not go untouched by them./BKS]

“If they can’t pay us, we’re not going to give them goods for free,” he said, referring to his North Korean customers.

A trader at another auto-related businesses in Dandong said cross-border trade had been hurt over the past few years, which he attributed to sanctions and less access to petrol. Several Chinese traders told Reuters the sanctions had stymied North Korean businesses’ ability to raise hard currency to trade.

“Last month sales were really bad, I only sold a couple of vehicles,” said the Chinese trader who sells new trucks, vans and minibuses to North Korea. “In August last year, I sold tens of vehicles and I thought that was bad.”

On top of the sanctions, some traders said Chinese officials have stepped up efforts to curb smuggling across the border, a key source of fuel in the northern parts of North Korea.

[Question is: for how long will these efforts last? /BKS]

And Chinese bank branches in the northeast have curtailed doing business with North Koreans, according to branch staff [BKS emphasis].

FUEL PRICES SURGE

Still, North Korea has made strides in increasing its economic independence and not all traders or observers agreed the international pressure was having a major economic impact.

Many residents, long accustomed to restrictions and shortages, were most concerned about the risk of already tight fuel supplies being cut further, said Kang Mi-jin, a North Korean defector in Seoul who reports for the Daily NK website.

“If the U.S. were to say they plan to bomb Pyongyang, North Koreans wouldn’t care less. But if China says they are considering slashing oil exports to North Korea because of missile or nuclear tests, North Koreans would absolutely freak out,” she said.

[BKS emphasis.]

Reuters reported in late June that state-run China National Petroleum Corp (CNPC) had suspended sales of gasoline and fuel to North Korea over concerns it would not get paid, and Chinese customs data showed that gasoline exports to the North had dropped 97 percent from a year earlier.

Petrol and diesel prices in North Korea surged after the cut and have almost doubled since late last year. In early September, petrol cost an average of $1.73/kg, compared with 97 cents last December, according to data from the defector-run Daily NK.

“The cost of living has gone up, the price of petrol has risen and there are fewer cars on the streets,” a foreign resident of the North Korean capital told Reuters. The only thing that had become cheaper was coal, he said, after China banned North Korean coal imports earlier this year.

Some of the scarcity of oil products and higher prices may have been caused by hoarding in anticipation of a clampdown on supply.

[Hoarding does seem like a likely culprit judging from the price trend from late spring this year. Basically, none of the current measures are ones that North Korea likely didn’t expect. /BKS]

North Korea canceled an air show scheduled for this month in the coastal city of Wonsan, citing “current geopolitical circumstances”. Several Chinese traders said they believed it was because the military is saving aviation fuel.

The new UN resolution imposes a ban on condensates and natural gas liquids, a cap of 2 million barrels a year on refined petroleum products, and a cap on crude oil exports to North Korea at current levels.

OIL NOT BOMBS

North Korea uses far less crude than during its industrial heyday in the 1970s and 1980s, according to the U.S. Energy Information Administration. After cut-price supplies from China and the Soviet Union ended following the Cold War, consumption dropped from 76,000 barrels per day in 1991 to an estimated 15,000 last year, according to the EIA.

[Oil consumption is already relatively low — key point. /BKS]

The use of small-scale solar has become widespread in the North, with many apartment balconies dotted with panels providing power for cooking and lighting.

China has not disclosed crude exports to North Korea for several years but industry sources say it supplies about 520,000 tonnes of crude a year to North Korea through an aging pipeline.

The pipeline already operates at the minimum level for which the waxy crude from China’s Daqing oil fields can flow without clogging, according to a senior oil industry source.

Chun Yung-woo, a former South Korean envoy on the North Korean nuclear issue, said the North could endure for a year or two without oil imports.

North Koreans are so used to living in harsh economic conditions that they would just get by for at least one year even if the oil ban is adopted, rationing the existing stockpile among top elites at a minimum level and replacing cars, tractors, equipment with cow wagons, human labor etc,” he said.

“They would also manage to produce oil from whatever resources are available, whether it be coal, trees or plants.”

Full article:

As North Korea girds for latest sanctions, economy already feels the squeeze
Sue-Lin Wong
Reuters
2017-09-13

This last point is extremely important: the weakness of the North Korean economy is also its strength. It is still highly underdeveloped and also resilient because so much of it functions on ad-hoc, creative solutions. That’s not to say that current sanctions (if fully enforced — a big “if”) may come to hurt the economy and society if pressure is continued over a longer stretch of time, but they’re unlikely to be completely crippling right away.

(UPDATE 2017-09-26): Added below is some Daily NK coverage from last week on consequences inside North Korea and for North Koreans of the current economic pressure. On September 13th, they reported that large numbers of North Korean workers returning home from China had been spotted at the Dandong railway station:

Daily NK has received photos of North Korean workers waiting to board trains home at Dandong’s railway station (Liaoning Province) on the morning of September 4. They were reportedly working at a cold storage facility in China but having failed to have their contracts extended, have had no choice but to return home.

“Every day, groups of North Korean workers are returning to their country via Dandong railway station due to the sanctions. The Chinese factory owners used to prefer North Korean workers because of the cheaper wages, but now they are employing Chinese workers even though their wages are higher,” a source familiar with North Korean affairs in China told Daily NK.

North Korean trading companies were previously using a system to dispatch workers to overseas factories for three to five year intervals, with an extension of the contracts or the signing of new ones upon expiration of the original contract. Officially, the companies are required to recall workers whose contracts have ended and dispatch new workers, but many workers have been extending their stays in exchange for bribes given to the company managers.

The Chinese factories benefit from a cheap labor force, so the extensions were easily accepted in the past.

However, these factories have recently ceased extending labor contracts and issuing new ones with North Korean trading companies following the adoption of new UNSC sanctions.

Daily NK previously reported that a large number of Chinese factories announced that they will no longer extend labor contracts for North Korean workers due to the sanctions.

As a result, the North Korean authorities are keen to find alternative routes to earn foreign currency and have instructed some workers to look for other ways to earn foreign currency rather than return home after their period of dispatch.

Daily NK also reported that at least some North Korean workers in Dandong (Liaoning Province) have managed to find work at nearby restaurants and hotels.

North Korean workers are often repatriated after an extended period of overseas dispatch, as the regime considers them more likely to learn about the external world and attempt defection. But as the regime has become desperate in its attempts to earn foreign currency, it has started encouraging these workers to extend their stays.

Full article:
Dandong railway station packed with North Korean workers returning home
Kim Ga Young
Daily NK
2017-09-13

Gas prices in North Korea have been skyrocketing for several months, and the rate of the increase has gone up during the current crisis, Daily NK reports:

At the beginning of this month, gasoline prices in North Korea’s capital city of Pyongyang began to sharply rise. Now, oil prices in other regions of the country have started climbing as well. This news was ascertained and delivered to Daily NK on September 7 by inside informants on the ground in North Korea.
After the UN Security Council adopted another round of international sanctions against North Korea (Resolution 2371) on August 5, there were no major price fluctuations. However, oil prices did start to rise in certain regions after the North conducted its sixth nuclear test earlier this month.
According to the inside sources, one kilogram of gasoline rose from KPW 18,000 in Pyongyang at the beginning of September to KPW 23,000 on September 7th. Diesel prices also exceeded the KPW 12,000 mark.
Up until the fourth week of August, diesel was selling for KPW 12,800 per kilogram in Pyongyang. The cost of diesel actually fell in August. At the beginning of the month, it sold for about KPW 15,100.  But then it started to climb again towards the end of the month, jumping to KPW 14,100 at the end of the month, and then surpassing KPW 20,000 within a week after that.
Asked about these quickly elevating prices during a phone conversation with Daily NK  a source in Pyongyang said, “Gasoline prices started to rise at the end of August to KPW 18,000, and then jumped up to KPW 20,000 at the beginning of September. As a result of this increase, motorbikes disappeared from the streets of Pyongyang. The presence of taxis and cars is down by at least half. The streets are totally empty.”
“Some autobike drivers are concerned because the gas price jump will make it harder for them to make a living transporting people and goods,” the source added. “The possibility is large that related industries will also be hurt by the price increase.”
There are signs that the gasoline price increase is also affecting areas far from the capital city, such as Hyesan City, Ryanggang Province. A source from that region said, “The cost of gasoline in Hyesan increased to KPW 21,600 per kilogram.” As recently as the third week of August, the price was at a mere KPW 12,050. Towards the end of the month, it climbed to KPW 14,400, and then kept climbing in September.
The source added, “Gas prices are also rising in rural areas of the country. Some areas feature gas prices approaching the price in Hyesan, and others have surpassed that. Merchants are baffled because the price dipped and then rose suddenly.”
Full article:
Gas prices in North Korea jump on rumors of possible embargo
Kang Mi Jin and Kim Ga Young
Daily NK
2017-09-15

(UPDATE 2017-09-18): Anna Fifield reports in the Washington Post on the textile exports ban and its impact on North Korea’s female population in particular:

There are few areas in the North Korean economy, outside its nuclear weapons program, that could be called booming. But the garment industry has been one of them.

Over the past few years, North Korea has been sending increasing numbers of seamstresses to China to sew clothes for international buyers, and it also has been encouraging the expansion of the garment industry at home.

There are factories around the country producing suits, dresses and children’s clothes — almost all of which are labeled “Made in China.”

That should all theoretically come to an end now, after the U.N. Security Council unanimously decided last week to prohibit North Korea from exporting labor and textiles, adding to existing sanctions on coal, iron ore and seafood.

“Today’s resolution bans all textile exports,” Nikki Haley, the United States’ ambassador to the United Nations, said Monday when the resolution passed. “That’s an almost $800 million hit to its revenue.”

North Korea exported about $725 million worth of clothing last year, according to South Korea’s trade-promotion agency, making it a significant source of income for the cash-strapped country.

Adding textiles to the sanctions list means that more than 90 percent of North Korea’s publicly reported exports last year are now banned, Haley said. Coal, iron ore and seafood exports were prohibited in a previous resolution.

While diplomats have been describing the ban as being on “textiles,” economists say it should more accurately be called a “garment” ban. North Korea does not export bolts of fabric but instead produces labor-intensive articles of clothing.

“When you make simple clothes like T-shirts, the machinery is important. The labor is not so important. So it makes no sense to do things like this in North Korea,” said Paul Tjia, a Dutch consultant who helps businesses operate in North Korea, especially in the garment industry.

“But for garments that require a lot of manual work, like bras or winter sports clothes, it makes a lot of sense to make those in North Korea, because the price-to-quality ratio is very attractive,” said Tjia, who most recently went to Pyongyang in May.

[…]

Although China supported the new U.N. resolution, its implementation of previous sanctions has been spotty at best, analysts say.

But if Beijing is serious about stopping North Korea’s exports of apparel and workers to sew garments in Chinese factories, it would have a significant impact on the North’s economy, said Marcus Noland of the Peterson Institute for International Economics.

“The reason that this is important is not only because apparel exports are a significant number, but because it’s the one non-resource area that’s really growing,” Noland said, differentiating apparel exports from mineral exports such as coal and iron ore. “So it’s not just the static number that’s important. It’s the fact that this sector was emerging as an area of comparative advantage.”

[…]

Previously, governments had stressed that the sanctions were targeting the regime and were aimed at cutting off its access to the money or equipment it needed for its nuclear weapons program.

This effort to shut down North Korea’s garment industry is one that will have wide-reaching ramifications across North Korean society.

“Assuming that the ban is enforced, it will have a huge impact,” said Abrahamian, who visited North Korean garment factories several times while working for Choson Exchange, an NGO focused on business training for North Koreans.

“Tens of thousands, possibly even hundreds of thousands, of North Koreans are employed in this industry, and 98 percent of them are women. That’s the demographic that’s clearly going to suffer as a result of this,” he said.

Full article:
Ban on North Korean clothing exports will hurt women the most, experts say
Anna Fifield
Washington Post
2017-09-17

A few days after the sanctions were adopted that limit oil exports to North Korea, Daily NK interviewed a North Korean merchant working in China, who said he was basically out of work:

Mr. A: In broad strokes, I’d say at least 80% of us North Korean merchants in Dandong were stomping our feet and complaining that we have no work now as soon as the new sanctions were released. Joint ventures with Chinese firms are blocked, bank accounts are blocked, and use of North Korean laborers is limited. These were all important sources of money for us. There is no work left for us to do.
DNK: And the work that you were doing has effectively gone down the drain? 
Mr. A: Yes. Recently, some of the projects that we have been proposing to the Chinese side have been rejected.
DNK: This happened to you personally?
Mr. A: I have mostly earned money by acting as an intermediary connecting North Korean and Chinese merchants. I charged a commission for playing this role. But if demand decreases for this service, there’s nothing I can do. I also used to take the profits I earned to purchase things that North Koreans need, such as materials, but now that has also become quite difficult to do.
The fall harvest is approaching in North Korea, which means that threshers and other agro materials are needed, but because of these sanctions, the work has dried up and I can’t buy them. I think this will have an effect on the size of the fall harvest.
Full article:
Reacting to sanctions, N. Korean merchant in China: ‘We have no work’
Kim Chung Yeol
Daily NK
2017-09-18

Bloomberg wrote last week (2017-09-15) on the smuggling of fishery products in the wake of the sanctions on these goods:

In the fishing grounds where the Yalu River opens up to the Yellow Sea, Chinese and North Korean trawlers intermingle as they search for crabs, conch and yellow clams.

Drifting among them are Chinese boats called “mother ships” that act as floating middlemen, offering dollars, renminbi and even goods like cigarettes for the latest catch, according to traders who have been aboard the vessels. One of them, who called himself Mr. Du, said the seafood is then taken ashore to China and sold in wholesale markets, where it all gets mixed together.

The practice is just one form of smuggling along China’s 1,350-kilometer (840-mile) border with North Korea, roughly the distance from Paris to Rome. Locals use boats, cars, trucks and several rail lines to carry everything from diesel fuel to silkworms to cell phones back and forth across the Yalu.

[…]

For China, implementing sanctions is a tricky balance. It wants North Korea to stop doing anything that leads the U.S. to bolster regional defenses that could also be used against China. At the same time, authorities have long feared that a collapse of the regime in Pyongyang could destabilize China’s northeastern region and bring U.S. troops to the banks of the Yalu.

[…]

hile the latest penalties will take effect from Oct. 1, a ban on North Korean seafood passed a month ago — taking away roughly $300 million in revenue each year — came fully into force only on Sept. 5. Interviews along the border last week with dozens of traders, wholesalers, smugglers, former local officials and foreign diplomats showed that fresh North Korean seafood was still available even as China visibly stepped up enforcement.

China’s border with North Korea stretches from the industrial town of Dandong north to the town of Hunchun, near where the countries converge with Russia. Along the route, police and military have increased patrols and set up checkpoints to inspect vehicles.

Foreign affairs offices for the Dandong and Hunchun city governments didn’t respond to faxes seeking comment on efforts to stop smuggling. Foreign Ministry spokeswoman Hua Chunying told reporters in Beijing on Friday that China was opposed to North Korean violations of sanctions and would continue to strictly implement UN resolutions.

In Hunchun, dozens of seafood wholesalers had closed after the earlier sanctions took effect. Chinese authorities seized shipments of North Korean squid at the border, according to Shi Haiyan, a shopkeeper at Quanhe Port, which sits on a river linked with the Sea of Japan.

“The sanctions are strict now — seafood can’t come through at all,” the 34-year-old said last week.

Even so, restaurants in Hunchun were still selling North Korean crabs and conch. The goods are harder to find but still available, according to a shop owner who asked to be identified only by his family name, Lyu.

The situation was similar in Dandong, the biggest Chinese city along the border and the center of the country’s trade with Kim’s regime. Dandong is home to a pipeline that regularly supplies oil to North Korea — a crucial supply source that was exempted from the new sanctions.

The city of 2.4 million people has several bridges that cross the Yalu, one of which is inoperable because North Korea hasn’t built a road linking to it. Another one bombed out during the Korean War attracted Chinese tourists singing Communist songs about defeating America.

Hundreds of cars and trucks traverse the main Friendship Bridge each day, including many North Korean drivers looking to fill up with petrol. Getting across has become harder after the latest round of sanctions came into effect, according to Wang Lisheng, 64, a former county official from nearby Hekou village who used to trade metals with North Korea.

At Dong Sheng, Dandong’s main seafood market, four traders said last week they could still source the city’s signature yellow clams from North Korea even though supplies had dropped. Ha Wei, 38, said the price of dried clams had risen 20 percent to 30 yuan ($4.6) per half kilogram (1.1 pound) since the sanctions took effect.

Still Demand

About 40 kilometers away at the Yellow Sea Seafood Products Market, a larger complex where hundreds of workers sift through freshly unloaded seafood that is then shipped throughout China, multiple traders told Bloomberg they also were still able to procure goods from North Korea.

“We still have North Korean goods but much less in the last week after sanctions,” said Xu E, 44, a conch trader.

Mr. Du, who described how smugglers bring North Korean seafood into China, has been running goods across the China-North Korea border for the past 20 years. He’s been detained in North Korea several times, including once when he was fed only carrots for three days before being released.

In the 1990s, he said, border smugglers regularly dealt everything from coal to diesel to North Korean brides. He avoided trading guns, drugs or people — things that could earn him a prison sentence instead of a fine. Despite the risk of violating sanctions, he said, the easy money will continue to attract smugglers on the border.

“As long as there’s demand, smugglers will keep coming,” Du said. “No matter how hard Beijing tries.”

Full article:
Smuggled North Korea Clams Show China’s Struggle to Stop Kim
Bloomberg News
2017-09-15

 

(UPDATE 2017-09-19):

DailyNK has published several stories in the past few days on the dire impact that sanctions and tensions are having on the economy. News of sanctions implementation by China, it seems, are impacting North Korean market prices in dire ways:

This upsurge in prices began to occur before the United Nations unanimously passed its latest round of sanctions. Security Council Resolution 2375 – which passed on September 11 – contains some of the strictest provisions yet, including a ban on importing North Korean textiles and a restriction of exports to North Korea to just 30% of current levels. However, since the cost of goods increased prior to the UN’s adoption of 2375, analysts are wondering what lies behind the jump.
According to inside sources, the cost of one kilogram of rice was about KPW 5,800 at the end of last month in Pyongyang, South Pyongan Province Sinuiju City, and Ryanggang Province Hyesan City. On September 5th, the prices passed the KPW 6,000 mark and have continued to slowly rise. After the North’s nuclear test, gasoline prices rose sharply around the country. Rice and other grains followed suit in due course.
Insiders located in the border regions near China – which have long served as hubs of trade and smuggling – are also sensing the climbing prices. A source from Ryanggang Province explained to Daily NK on September 11, “When we heard about economic sanctions in the past, there were merely slight increases in the cost of rice, but now we are seeing a different kind of effect.”
She continued, “Even though we are currently at the height of the corn harvest season, corn is nonetheless selling for KPW 2,700 per kilogram, [it sold for just KPW 1,900 per kg at the end of August]. Merchants haven’t been overly concerned until now, but now that we see corn prices increasing during the harvest season, it seems clear that the economic situation will continue to deteriorate.”
Witnessing the cost of diesel and gasoline spike upwards, some merchants have predicted that this will cause the price of other products to raise as well, and have therefore responded by reducing the number of products available for sale. By doing so, they hope to be able to sell at a higher price later. This reduced supply, in turn, has itself pushed prices up.
Also, as reports and rumors from the outside world penetrate further into North Korea, more and more people are coming to realize that North Korea’s closest friends, especially China, are meaningfully participating in the sanctions. This information also helps to push prices up.
A poor yield of corn this year is also playing a role. Severe droughts in the spring have hurt bottom line harvests of grains such as corn.
North Korean traders are doing their utmost to maintain contact with the outside world so they can ascertain information about how the international situation will affect their livelihood. The source explained, “Residents who trade with Chinese merchants are trembling with fear because they are worried that the goods they deal in will become restricted or the prices will rise.”
The residents are especially concerned because prices are rising for both food products and other daily necessities.
In a telephone call with Daily NK on September 10, a source from Kangwon Province said, “Spring water was selling for KPW 500-600, but it’s risen by about KPW 500. At this time of year, a portion of tofu on the expensive end would sell for KPW 1,100, but now it’s going for KPW 1,300.”
It is also possible that the gasoline price rise is partially due to an effort by the authorities to restrict supply in order to ration. Kim Jong Un, sensing an impending reduction in trade and gasoline supply, might have begun to store up food and oil in military and private warehouses–behavior that would certainly block up market-based distribution networks.
Full article:

What explains the recent rise in the cost of goods in North Korea?
Kang Mi Jin
Daily NK
2017-09-19

 

Daily NK continues to cover the volatile gasoline prices in North Korea, reporting some consequences for the market for gas coupons:

“As fuel prices have been fluctuating, gasoline coupons have become popular items in Pyongyang’s black markets. The merchants who previously bought dozens of coupons have started offering them for sale as the prices began to rise,” a source familiar with North Korean affairs in China told Daily NK on September 20.
According to the source, gasoline can be purchased for the same price at the time that the coupon was issued. For example, if a 15 kg gasoline coupon was previously purchased for 30 USD, the same amount of fuel can be obtained even if the price rises suddenly to 35 USD. In this way, the dealers can make a profit by selling the coupon for 32 USD.
“The coupons are especially popular when the gasoline prices are unstable. The merchants are selling the coupons on the black markets as the fuel prices rise,” the source said.
Originally, gasoline coupons were issued from North Korea’s central government organizations and were sold to officials or foreign embassy staff in Pyongyang. But now the foreign currency earning companies are issuing the coupons themselves. The authorities have actively encouraged new strategies to earn foreign currency.
These foreign currency earning companies are said to be profiting from the fluctuating fuel prices, regardless of efforts to limit the sales of coupons.
“If the authorities move to restrict the sales of coupons, the companies will just sell the coupons on the black market. Despite strong sanctions being imposed on fuel, the major companies that are still holding a large amount of fuel become more powerful in times of fuel crisis,” a source in South Pyongan Province explained.
“Even the Pyongyang cadres have no choice but to purchase coupons on the black market.”
For these reasons, she said, most of the gasoline coupons are often valued at their equivalent in USD.
“Recently, people have been able to use the gasoline coupons for their USD value at restaurants and stores. They can even exchange the coupons for money. It has become a common practice to provide gasoline coupons to officials in Pyongyang as a bribe,” she concluded.
Full article:
Volatile gasoline prices in Pyongyang
Seol Song Ah
Daily NK
2017-09-25
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China closes more RMB bank accounts linked to North Korea

Monday, September 11th, 2017

UPDATE 2 (2017-9-12): According to the Global Times/Reuters (PR China):

Large State banks halt services for North Korean clients, tellers say

The big four Chinese State-owned banks have stopped providing financial services to new North Korean clients, according to branch staff, amid US concerns that the Chinese government has not been tough enough over North Korea’s repeated nuclear tests.

Tensions between the US and North Korea have increased after the sixth nuclear test conducted by Pyongyang on September 3 prompted the United Nations Security Council to impose further sanctions on Tuesday.

Chinese banks have come under scrutiny for their role as a conduit for funds flowing to and from North Korea.

China Construction Bank (CCB) has “completely prohibited business with North Korea,” said a bank teller at a branch in Northeast China’s Liaoning Province. The ban started on August 28, the teller said.

A person answering the customer hotline at the world’s largest lender, Industrial and Commercial Bank of China (ICBC), said the bank had stopped opening accounts for North Koreans and Iranians since July 16. The person did not explain why or answer further questions.

The measures taken by the largest Chinese banks began as early as the end of last year, when the city branch of Bank of China (BOC) in Dandong, Liaoning Province, which borders North Korea, stopped allowing North Koreans to open individual or business accounts, said a BOC bank teller who declined to be identified.

Existing North Korean account holders could not deposit or remove money from their accounts, the BOC teller said.

At Agricultural Bank of China (ABC), a teller at a branch in Dandong said North Koreans could not open accounts. The teller did not provide further details.

Official representatives for BOC, ICBC, CCB and ABC could not be reached for comment.

Banks in Dandong have been under the microscope as tensions have risen, given the city’s proximity to North Korea.

In June, the US accused the Bank of Dandong, a small lender, of laundering money for North Korea.

Attempts to slowly choke off the flow of funds to and from North Korea come after the US imposed sanctions on a Chinese industrial machinery wholesaler that it said was acting on behalf of a Pyongyang bank already covered by UN sanctions for supporting the proliferation of weapons of mass destruction.

UPDATE 1 (2017-9-11): According to the Financial Times:

China’s biggest banks have banned North Koreans from opening new accounts in an unprecedented move to clamp down on financial flows with the country’s unruly neighbour.

Multiple bank branches, including those of the country’s top four lenders, told the Financial Times they had imposed a freeze on new accounts for North Korean people and companies. Some are going even further, saying they are “cleaning out” existing accounts held by North Koreans by forbidding new deposits.

Banks implementing a ban on new accounts include the country’s big five — Bank of China, China Construction Bank, Agricultural Bank of China, and Industrial and Commercial Bank of China and Bank of Communications.

Branches of each of these banks in China’s north-eastern border towns, where trade with North Korea is concentrated, said they had been instructed to stop opening new bank accounts for North Korean individuals or companies.

Branches of three of the banks said they were in the process of cleaning out existing accounts, while the remainder did not comment on procedures for existing accounts.

Although some bank branches said they had received notice of the freeze on North Korean accounts last month, others said they had been told as early as January.

“Branches didn’t implement the rule all at the same time but it started recently,” said one branch of ABC in Dandong, the border city through which roughly 70 per cent of China’s trade with North Korea flows.

“Current bank accounts held by North Koreans should be cleared out,” said a representative of a branch of ICBC in Yanji, the trading hub closest to the nuclear blast site at Punggye-ri. “We implemented the restrictions long before last month’s sanctions.”

However, traders pointed out that there were ways to get around the account ban to continue doing legal business with North Korea.

“We always use Chinese citizens living in North Korea as intermediaries when doing business,” said one groceries trader in Dandong who wished to remain anonymous because of the political sensitivity around North Korean trade.

“There’d be no reason to freeze Chinese nationals’ accounts, unless they’re sanctioning individuals,” he added.

Two Chinese businesspeople who run companies in North Korea — one of whom is based in the Chinese border town of Hunchun and one in Pyongyang — said all their transactions, such as payments to North Korean staff, were made in cash in Chinese renminbi, avoiding the need to have dealings between North Korean and Chinese banks.

Read the fulls story here:
China’s biggest banks ban new North Korean accounts
Financial Times
Yuan Yang and Xinning Liu
2017-9-11

Here is additional coverage in the BBC.

ORIGINAL POST (2017-9-9): Daily NK reports that Beijing orders banks to close accounts for North Koreans:

Chinese banks have reportedly banned North Koreans living in China from opening up new accounts, and have ordered existing accounts to be closed.
.
“The Chinese authorities have made no distinction between North Korean consular officials, laborers, or traders; all are banned from opening accounts,” a local source reported to Daily NK. “Previously, the banks were happy to open accounts for North Koreans living in China for personal reasons (mostly visiting relatives), provided they present their personal identity documents. This practice has ended as well.”

According to the source, the new order applies to the four major state banks, as well as the Construction Bank of China, and regional private banks such as Pudong Bank.

The new measures do not come without precedent. After North Korea’s third nuclear test, China implemented a provision of United Nations Security Council Resolution 2094 that involved suspension of a deal with North Korea’s Joson Trade Bank. However, the UN resolution did not address individual accounts.

Following this, the North Korean authorities began circumventing international financial sanctions by opening accounts in individuals’ names and remitting investment capital and commercial payments to and from Chinese companies.

Because the bank accounts of North Koreans residing in China are being closed, North Korean laborers are having difficulties remitting money back home.

“Under the old system, the monthly wages of North Koreans working in Chinese factories were transmitted through the bank account of the North Korean factory manager. This is no longer possible, so they are being paid in cash,” the source explained.

Also relevant to the measure is that North Korean-Chinese collaborative ventures have been banned from using bank accounts, so seed money is now required in cash.

“Normally, when North Korean merchants want to start a new business in China, they make a business plan and submit it to Pyongyang. Upon approval, they seek out cooperation and investment from Chinese investors. But now, even if the investment request is approved, it isn’t possible to open a bank account so the investor needs to use a third party to provide cash directly,” the source said.

A March 2017 Radio Free Asia (RFA) investigation reported a similar trend, noting, “Private Chinese banks are beginning to close bank accounts held by North Korean nationals. North Korean laborers earning foreign currency in China have been issued an emergency alert.”

The Chinese Ministry of Commerce announced on August 25th that it is banning new joint ventures with North Koreans in China and additional investments.

“The Chinese government is publicly announcing that they are banning business projects with North Koreans and closing North Korean bank accounts, but many loopholes remain in place. Money can be laundered on the North Korean side and passed through Southeast Asian nations,” a separate source in China with knowledge of the matter said.

Read the full story here:
Beijing orders banks to close accounts for North Koreans
Daily NK
2017-9-9

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China closes major border crossing to North Korea

Thursday, September 7th, 2017

By Benjamin Katzeff Silberstein

Quanhe crossing is located about an hour’s drive from Hunchun in China. It leads to the Rason industrial zone on the North Korean side, which also holds several casinos which primarily cater to Chinese guests.

Trucks at Quanhae, July 2016. Photo: Benjamin Katzeff Silberstein

Trucks waiting in line at Quanhae to cross into North Korea, July 2016. Photo: Benjamin Katzeff Silberstein

Chinese tourists lining up to have their passports checked before heading into Rason, July 2016. Photo: Benjamin Katzeff Silberstein

Customs office on the North Korean side of the border crossing, July 2016. Photo: Benjamin Katzeff Silberstein

One Chinese-Korean hotel owner I talked to there last summer said that business was great for the casinos at that time, and that he hadn’t seen any signs of decreased traffic under the sanctions in place at that time.

Now, reports Daily NK, the crossing has been closed (likely temporarily) by the Chinese authorities as a response to North Korea’s nuclear test. As Daily NK notes, Quanhae is a significant crossing for North Korean seafood exports and might have been closed as part of the compliance with the seafood imports ban:

It has been reported a Chinese customs office in the border region has closed its gates to North Korea since September 4. The move is being interpreted as a warning to the country following its sixth nuclear test on September 3.

“An internal source in the Quanhe Commercial District of Hunchun City informed us that the customs offices are preparing to close the gate today (September 4), and that Chinese businessmen and merchants staying in North Korea have been notified,” a source in China with knowledge of the development told Daily NK.

However, the Sino-Korean Friendship Bridge (a road-rail bridge that spans the Yalu river into North Korea) connecting Dandong (Liaoning Province, China) and Sinuiju (North Pyongan Province, North Korea), which accounts for 70% of the trade volume between the two countries, remains open.

The Chinese government may have elected to close its minor customs offices first, as a message to North Korea. Analysts note that China appears to be pressuring North Korea to restrain from provocations with the implied message that it may close other customs offices in the future.

However, it has also been suggested that Quanhe Customs may have closed because it primarily deals with North Korean fisheries products, which have been prohibited for export under the new sanctions. It has also been argued that the measure will have only a minor effect on the North Korean leadership and could be little more than an empty gesture by China to show that it is participating in international sanctions.

“Quanhe Customs has been temporarily closed every time North Korea has engaged in provocations. So it’s likely that China will soon reopen the office after claiming that it is participating in the sanctions,” one North Korea analyst suggested on condition of anonymity.

In parallel, it has been reported that the Chinese authorities are investigating Chinese nationals who may have been involved in smuggling components and materials used for North Korea’s sixth nuclear test.

China has officially banned the export of materials to North Korea that could be used for nuclear tests and missile launches, but has failed to effectively crack down on smuggling.

“The Chinese authorities have been put on the back foot by North Korea’s nuclear test and thus have strengthened the inspections,” a separate source in China familiar with North Korean affairs said.

Full article:
Quanhe Customs closes following nuclear test
Kim Chung Yeol
Daily NK
2017-09-06

 

Like they note, however, it is common for these measures by China to be temporary. When the global attention turns elsewhere, sanctions enforcement typically weakens. This time, however, that global attention has been more outdrawn and consistent than usual.

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Draft UN sanctions resolution against North Korea includes oil sales ban

Thursday, September 7th, 2017

By Benjamin Katzeff Silberstein

Several news outlets have reported that a draft UNSC-resolution that the United States intends to propose includes a ban on member states on selling oil to North Korea, and on purchasing textiles from the country. Wall Street Journal:

If adopted, the resolution would significantly escalate political and diplomatic pressure on Pyongyang as it continues to defy U.N. resolutions with its nuclear and ballistic-missile tests.

The U.S. circulated a draft of the resolution, reviewed by The Wall Street Journal, to all 15 members of the Security Council, and diplomats said they expect a vote on Sept. 11. Negotiations for a consensus have expanded from talks between the U.S. and China to all members of the council, diplomats said.

[…]

The resolution faces hurdles in winning the backing of China and Russia. Both veto-holding countries are allies of North Korea and have said they don’t favor sanctions that would cripple the economy to the brink of collapse, or contribute to the suffering of civilians. Russian President Vladimir Putin said Wednesday that cutting off oil exports to North Korea would violate humanitarian norms.

[…]

Chinese Foreign Minister Wang Yi criticized North Korea’s most recent nuclear test on Thursday, saying Beijing approved of “further action” by the Security Council in response, according to a statement posted on the ministry’s website.

Mr. Wang said China was “firmly opposed” to the Sunday test and urged North Korea to cease “obstinately walking its own path,” the statement said. It didn’t elaborate on what type of U.N. action China would support, but quoted Mr. Wang as saying any measures needed to be aimed at reopening dialogue.

[…]

Under the resolution, member states and their citizens and vessels would be prohibited from exporting to North Korea all crude oil, refined petroleum products and liquefied natural gas.

North Korea would also be banned from selling or transferring textiles, including fabrics and apparel products and member states prohibited from procuring textiles originating from North Korea.

Individuals targeted under the proposed asset and travel freeze include: Hwang Pyong So, vice chairman of the State Affairs Commission; Kim Ki Nam, director of the Workers’ Party of Korea Propaganda and Agitation Department, which controls all media; his Vice Director Kim Yo Jong; and Pak Yong Sik, a member of the Workers’ Party of Korea Central Military Commission.

Seven key government institutions that help prop up the North Korean regime and its control of the public are blacklisted in the resolution. They include the Central Military Commission, the army and propaganda and state-media ministries.

The list of sanctioned entities would also be expanded to Air Koryo, North Korea’s national airline, which the resolution says is implicated for carrying illicit military equipment.

The resolution also would authorize all member states to inspect North Korean cargo vessels on high seas and report the details of the ship and the inspection to the U.N. sanctions committee.

As well, member states would be prohibited from hiring or paying North Korean nationals working in their countries unless approved in advance by the sanctions committee on a case-by-case basis. The resolution stipulates that workers can be expelled back to North Korea if they are remitting funds to the government.

Full article:
U.N. Resolution Proposed by U.S. Would Sanction Kim, Cut Oil Supplies
Farnaz Fassihi
Wall Street Journal
2017-09-07

An oil embargo would likely carry a significant impact on North Korean society and its economy overall. True, there are probably larger-scale unofficial channels than we really know of for North Korea’s oil and fuel imports, and the flow through these channels is likely underestimated in the most commonly cited numbers for North Korean oil and fuel consumption and imports. But still, even though sanctions are never foolproof and often contain massive holes, they often create severe additional obstacles for acquiring the sanctioned products. Particularly when it comes to oil and other basic essentials, the military and higher echelons of the state and Party likely have their own channels for acquiring what they need. They’ll always be first in the hierarchy, as we’ve seen during the gasoline price hike of the spring likely caused at least partially by hoarding by the state, in anticipating difficulties ahead.

On textiles, a great deal of textile products are already exported under Chinese labels even when they’re manufactured in North Korea. It’s unclear how an embargo would impact that side of the exports.

The vessel inspections mandate also raises questions. Several North Korean ships already sail under other countries’ flags. It is unclear to me whether this mandate would include only North Korea-flagged vessels, in which case it should be pretty easy for North Korea to sidestep, or if it would also include ships that are known to be of North Korean origin but registered in other countries. (I am by no means an expert on the technicalities of shipping registries, so anyone who has better knowledge on how this would work, please do get in touch).

In any case, Putin has already come out publicly against an oil embargo, and it seems highly unlikely that China would ever go along with one. China is unlikely to support any sanctions that could seriously de-stabilize North Korea or really cause severe, long-term damage to the North Korean economy. An oil embargo, if properly enforced, surely would do the latter. So whether this ever becomes really is an open question. Perhaps the US will use China’s potential refusal to go along with an oil embargo as leverage for expanded secondary sanctions against Chinese entities trading with North Korea.

Anyway, as has been the case for the past few months on all things North Korea, more to follow…

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Russian-North Korea projects foundering because of missile tests: minister

Tuesday, August 29th, 2017

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.

NK News also reports that the ferry service between Rajin and Vladivostok has also been suspended, although the reasons for the suspension remain murky.

UPDATE: Following North Korea’s sixth nuclear test in early September, Vladimir Putin has signaled his unwillingness to sanction North Korean fuel imports (partially provided by Russia). You can read more in the Washington Post, New York Times, and Yonhap.

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

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China bans new business with DPRK in line with UN sanctions

Saturday, August 26th, 2017

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

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The July 2017 China-North Korea trade figures, and the 97 drop in gasoline exports

Thursday, August 24th, 2017

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.

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