North Korean Economy Watch

The Wall Street Journal offers an interesting story on American investor Jim Rogers. Here is an excerpt from the article:

By Sunday, Pyongyang-based Korea Pugang Coins Corp. had sold its entire stock of coins, which included 20 one-ounce gold coins featuring mostly century-old generals as well as several hundred silver coins featuring North Korean sports achievements, cultural landmarks and national animals.

Most of the coins were purchased by Mr. Rogers, an American commodities investor now based in Singapore, said a Korea Pugang Coins representative, who didn’t give her name. The company knows Mr. Rogers from last year’s fair, when he bought the entire lot of North Korean coins offered.

Mr. Rogers, who started the Quantum Fund with George Soros in the 1970s, couldn’t be reached for comment, but had said in a previous interview: “Coins and stamps are the only way I can invest in North Korea.”

By invest in, Mr. Rogers means he wants to wager against the long-term prospects for the isolated, economically struggling country. He views his purchase as a bet on the collapse of North Korea.

“At some point down the line, North Korea will cease existing as a country. Then the value of the coins will go up,” Mr. Rogers said.

According to North Korea’s state-controlled news agency, a special series of gold coins were minted last year to commemorate Kim Jong Il, the country’s leader who died in late-2011. The inscription: “The Great Leader Comrade Kim Jong Il Will Always Be Alive.” However, none of those coins were put up for sale at the Singapore fair.

Mr. Kim was succeeded by his son, Kim Jong Eun.

Situated next to the American Numismatic Association, the North Korean stand drew immediate attention from many visitors, when the Singapore International Coin Fair opened its doors Friday morning. By lunchtime, the sales team, wearing Kim Jong Il pins on their jackets, hardly found time to finish their sandwiches and cans of Coca-Cola KO -0.59% .

Thirteen of the gold coins were purchased by an assistant of Mr. Rogers, said a representative of state-owned Korea Pugang Coins. “He wanted to buy more, but we only had 13 left,” she said. The company offered the gold coins for 2,500 Singapore dollars, or $2,014—well above Friday’s closing gold price of $1,598.25 an ounce.

Mr. Rogers is a fervent believer that the commodities bull-run will continue and that China and other Asian nations will set the global economic agenda for this century. He advocates investing in frontier markets such as Myanmar and Cambodia, and in 2007, sold his New York mansion and moved to Singapore, in part because he thinks it is crucial for his children to learn Mandarin.

…

Korea Pugang Coins has minted coins in Pyongyang since 1987, but the mintage is only around 2,000 each year, as North Korea’s own gold resources are limited.

The coins draw only a limited amount of buyers within North Korea and are mainly sold to international investors and collectors at fairs in Hong Kong, Beijing and Singapore, the company said.

Estonia-based Tavex Group, a company that specializes in gold and currencies, made a deal with Pyongyang in 2008 to sell North Korean gold coins.

But the North Koreans ended it after the first shipment of coins from a 2007 series featuring elephants, rhinos, owls, lions and buffalos.

“We sold them at a relatively high price to collectors, but demand was not big,” says Tomas Pavelson, who works in sales at Tavex Group.

“Actually, we still have one left.”

See some examples of DPRK coins here and here.

Read the full story here:
Executing a North Korean Coin Flip
Wall Street Journal
Jacob Gronholt-Pedersen
2012-3-29

According to Yonhap:

North Korea imported an unusually massive amount of silver from China in January, possibly in relation to leader Kim Jong-un’s birthday that month, sources and China’s customs office said Thursday.

Data from China’s customs office showed that North Korea imported 661.71 kilograms of Chinese silver for US$653,128 in January.

The monthly import is unusually enormous given that the North took in only $77,593 worth of precious metal and other jewels for the whole of 2012. The corresponding amount for 2011 was $57,000.

Before January this year, the North had hardly spent more than $10,000 on monthly imports of such goods, according to the data.

Given the leader’s birthday on Jan. 8, North Korea watchers said the massive amount of imported silver may have been used to produce silverware souvenirs to celebrate the leader’s birthday.

“It’s difficult to assume the exact purpose of the silver imports,” a source said. Given that late leader Kim Jong-il used to bring in foreign brand luxury sedans and expensive watches to treat the country’s top echelon on major holidays, the bulk of silver imported in January may have been used for similar purposes, the source said.

Backing this assumption, the customs data also showed that the North imported an unusually large amount of costume jewelry worth $10,447 in the same month.

A reader points out this Daily NK story hypothesizing that the silver could have been used in batteries:

As such, there are suspicions that the recent North Korean decision to import more than 600kg of silver through China was done to facilitate the production of batteries for submersible production.

A North Korean military source told Daily NK on the 4th, “The [North Korean] Navy has been producing submersibles at every shipyard on their east and west coasts ever since the attack on the Cheonan in 2010.”

According to the inside source, prior to the Cheonan sinking such vessels were produced at one shipyard, the disguised ‘Bongdae Boiler Factory’ in Sinpo, South Hamkyung Province, at a rate of five per year. However, following the sinking of the Cheonan that rate went up four times to 16 per year, as the vessels started being produced across multiple shipyards including Yongampo, Chongjin and Rajin.

The source explained, “The reason why the North Korean authorities are increasing production of this kind of submersible that can fire torpedoes is to maximize their underwater attack capacity. The subs can take 12 to 15 soldiers yet still sink destroyers weighing thousands of tons with their twin torpedoes.”

“The engines noise on the submersibles is very quiet, making them able to approach their targets underwater in secret, while it is impossible to trace crimes such as the Cheonan incident,” the source went on, adding that during North Korean military training exercises they also emphasize the essential nature of the subs.

The rising production is pushing up demand for batteries, the source then went on to add, saying that this required the bulk production of both silver and zinc. “All the silver produced in North Korea is supplied to the shipyards,” he claimed.

The source admitted to being confused, therefore, at North Korea’s recent decision to import 660kg of silver from China, declaring, “There is lots of silver being produced in North Korea, so it’s hard to say why they are importing it from China…I suppose it may have been just that more batteries were being produced so they needed more silver.”

Read the full stories here:
N. Korea imports massive amount of Chinese silver in Jan.: data
Yonhap
2013-3-28

NK Producing More Silvery Subs
Daily NK
2013-4-5

A much-appreciated colleague has sent me a PDF document published by the DPRK’s Committee for the Promotion of External Economic Cooperation in 2003. It that contains hundreds of pages of DPRK laws and regulations.

Click here to open the PDF document

Here is a list of the contents:

1. The Law of the Democratic People’s Republic of Korea on Foreign Investment

2. The Law of the Democratic People’s Republic of Korea on Equtiy Joint Venture

3. Regulations for the Implementation of the Law on Equity Joint Venture

4. The Law of the Democratic People’s Republic of Korea on Contractual Joint Venture

5. Regulations for the Implementation of the Law on Contractual Joint Venture

6. The Law of the Democratic People’s Republic of Korea on Foreign Exchange Control

7. Regulations for the Implementation of the Law on Foreign Exchange control

8. The Law of the Democratic People’s Republic of Korea on Foreign-Invested Bank

9. The Law of the Democratic People’s Republic of Korea on the Leasing of Land

10. The Law of the Democratic People’s Republic of Korea on Foreign-Invested Business and Foreign Individual Tax

11. Regulations for the Implementation of the Law on Foreign-Invested Business and Foreign Individual Tax

12. The Customs Law of the Democratic People’s Republic of Korea

13. The Law of the Democratic People’s Republic of Korea on the Protection of Environment

14. The Insurance Law of the Democratic People’s Republic of Korea

15. The Law of the Democratic People’s Republic of Korea on External Economic Arbitration

16. The Law of the Democratic People’s Republic of Korea on External Civil Relations

17. The Notary Public Law of the Democratic People’s Republic of Korea

18. The Civil Proceedings Act of the Democratic People’s Republic of Korea

19. The Law of the Democratic People’s Republic of Korea on Processing Trade

20. The Law of the Democratic People’s Republic of Korea on Bankruptcy of Foreign-Invested Enterprises

21. The Law of the Democratic People’s Republic of Korea on the Rason Economic and Trade Zone

22. The Law of the Democratic People’s Republic of Korea on Wholly Foreign-Owned Enterprises

23. Regulations for the Implementation of the Law on Wholly Foreign-Owned Enterprises

24. Regulations on the Financial Management of Foreign Invested Enterprises

25. Regulations on the Introduction of Latest Technologies by Foreign-Invested Enterprises

26. Regulations on the Naming of Foreign-Invested Enterprises

27. Regulations on the Registration of Foreign-Invested Enterprises

28. Labor Regulations for Foreign-Invested Enterprises

29. Regulations on the Resident Representative Offices of Foreign Enterprises in the Rason Economic and Trade Zone

30. Regulations on Entrepot Trade in the Rason Economic and Trade Zone

31. Regulations on Contract Construction in th Rason Economic and Trade Zone

32. Regulations on Forwarding Agency in the Rason Economic and Trade Zone

33. Regulations on Statistics in the Rason Economic and Trade Zone

34. Regulations on Tourism in the Rason Economic and Trade Zone

35. Regulations on Financial Management of Foreign-Invested Enterprises in the Rason Economic and Trade Zone

36. Regulations on Foreigner’s Immigration Procedure and Stay in the Rason Economic and Trade Zone

37. Customs Regulations For the Rason Economic and Trade Zone

38. Regulations on Finding in the Rason Economic and Trade Zone

The Bank of Korea has long reported that the DPRK has been running a current account deficit (see their summary report of the DPRK economy in 2011 here).

While working on their own statistics, however, Marcus Noland and Stephan Haggard assert that the DPRK may be running a current account surplus:

According to Noland:

[In all likelihood],  North Korea has run current account deficits for most of its history. That meant that the country was consuming more than it was producing, and the difference had to financed from abroad. However, on our calculation, largely on the back of expanding trade with China, the current account went into surplus in 2011. Our preliminary calculations suggest that the country probably also ran a surplus in 2012.

This is bad news, both for North Korea and the rest of us. It is bad news for North Korea because as a relatively poor country, they should be running a current account deficit, importing capital, and expanding productive capacity for future growth. Instead, our calculation suggests that they are exporting capital. Consumption at home is being needlessly compressed (the recent UNICEF survey documents continuing chronic food insecurity for some significant part of the populace) and instead, money is flowing abroad, presumably to finance the future consumption of the elite. Steph Haggard, in a post last week, pointed to evidence that this capital may be flowing into accounts in China.

It is also bad news for us. If North Korea is running current account surpluses, then they are less vulnerable to foreign pressure.

The Wall Street Journal offered additional information:

Messrs. Noland and Haggard said that taking a pulse on North Korea’s economy is inevitably speculative. Pyongyang doesn’t release trade figures, so estimates are made based on data provided by third parties.

According to South Korean estimates, North Korea’s total trade with its only major ally, China, nearly tripled to around $5.6 billion between 2007 and 2011, and in 2011 it showed a deficit of $700 million in goods trade—a major component of its current account. For there to be an overall surplus, as the research of Messrs. Noland and Haggard suggests, other components in the current account would have to be more than enough to offset that goods-trade shortfall.

“If there were massive dollar remittances back home by overseas North Koreans or a sharp increase in foreign tourists to the North, it would be possible for North Korea to run a current-account surplus despite a trade deficit,” said a Bank of Korea official in Seoul. “But you never know the exact reasons unless you see the full data.”

According to Yonhap (via Global Post):

North Korea revised its trade and customs laws last year to give its cabinet more power over the economy, a copy of the revised laws showed Monday.

The booklet on North Korea laws concerning external economic activities, secured by Yonhap News Agency, showed that the country revised its trade laws in April last year, a first since the previous revision in March 2007.

The revision newly requires trade institutions and other sub-trade groups to have their monthly plans reviewed and approved by the central trade supervision agency, according to the copy of the booklet.

The country’s customs law, also revised in April 2012, indicate that the government has increased its supervision of the customs sector compared with 2007 when the corresponding law was last modified.

The government is also said to be seeking to foster customs specialists and establish an ad hoc committee to review customs affairs.

Analysts said the latest law change suggests that the cabinet’s role in the economic sector has been enhanced compared to the military, which is known to have exerted a strong hold over state affairs reflecting late leader Kim Jong-il’s military-first ideology.

The timing of the revision coincides with incumbent leader Kim Jong-un’s emphasis on the importance of the cabinet in leading national policies. Kim Jong-un took power after the sudden death of his father in late 2011.

“North Korea’s trimming of the trade and customs laws indicates its intention to fasten up the central (government’s) previously loose supervision of trade and customs affairs,” said Im Eul-chul, a research professor of Far Eastern Studies at Kyungnam University. “It is also related with strengthening the role of the cabinet in the economic sector.”

The monthly management of trade performance, envisioned in the revision, reflects the leader’s plan to boost the trade sector as a means of earning more foreign currency, local experts also said. The military’s and the governing Workers’ Party of Korea’s tight hold on economic affairs are widely believed to have posed obstacles in the country’s economic performance.

The booklet, meanwhile, showed that the country rewrote its immigration law last April, doing away with the clause requiring state permission for foreign travelers wanting to travel outside of the capital of Pyongyang. Such a move could allow more freedom of movement by foreign tourists inside the communist country.

Read the full story here:
NK trade-cabinet
Yonhap (Via Global Post)
2013-3-18

By Michael Rank

China has signed its first offshore processing agreement with North Korea, under which four companies in the border city of Hunchun will export textiles which will be made up into shirts in the DPRK, a Chinese website reports.

Under the two-year agreement from January 2013, the textiles will be made up into 8,000 shirts, the report said, adding that the companies will be relieved of some export and import taxes. It gave no further details.

The report said the deal reflected low labour costs in North Korea as well as severe labour shortages in Hunchun, where there is a deficit of 3,500 workers. It said it was the first such agreement not just for Jilin province but for China as a whole, and had the approval of customs headquarters in Beijing.

By Michael Rank

A Taiwanese report says one reason the North Korean nuclear waste deal fell through was that Taipower didn’t obtain an export permit for the waste from the Taiwanese Atomic Energy Council (AEC).

It also says that Taipower claims no final deal was ever signed, so there is no question of the agreement being violated. It quotes Taipower official Huang Tien-huang as saying the North Koreans blocked them from viewing the processing site at Phyongsan (Pyeongsan, 평산, 平山), while the AEC also had procedural problems with the North Koreans, leading it to refuse an export permit.

North Korea has hired a (presumably Taiwanese) lawyer, Tsai Hui-ling, to plead its case, and is claiming NT$300 million (US$10 million) compensation. Tsai can be seen on this English-language video clip.

A PRC report quoting Taiwanese reports says the first stage of the deal worth US$75.66 million envisaged shipping 60,000 barrels of nuclear waste, and a further 14,000 barrels in the second stage, with a total value of $150 million and that the North Koreans were after the deal as a source of foreign exchange at the height of the famine. There have been ten rounds of negotiations to try to resolve the dispute, the report says, adding that Taiwan decided in 1999 that it would process the waste domestically.

As I reported in 2008, North Korea signed a deal with a Chinese company to recycle industrial waste that is so polluted that other countries have refused to handle it.

A slightly fuller Chinese report than the one I cited earlier names the Chinese company involved as Dalian-based Huatai Recycling Resources Co Ltd and says it has close links with the North Korean National Defence Commission, foreign ministry, environment ministry and foreign trade ministry.

It also says the North Koreans have four large recycling sites at Sinuiju and Nampo, two for lead batteries and two for electronic goods, and that they are able to recycle a wide array of equipment, from plastics to refrigerators as well as computers, phones and scanners, including goods that are banned for recycling in China.

It is not clear if the Chinese-North Korean deal was actually implemented.

PREVIOUS POSTS ON THIS TOPIC HERE

According to the Choson Ilbo:

The tiny South Pacific island nation of Kiribati issued passports to North Korean businessmen until 2004 as a “means of generating revenue,” its president has admitted.

There had been speculation for some time that North Koreans engaged in illicit activities such as arms deals were illegally obtaining passports from small countries.

Appearing recently on Australian radio, Kiribati President Anote Tong said he was embarrassed that the passports were reportedly related to international crime. “I can assure you that we had corrected that situation in 2004 when we stopped issuing these passports,” he said.

Late last year, a Japanese activist group said two agents from North Korea, Han Chol [한철] and Ju Ok-hui [주억희), used passports issued by Kiribati and the Seychelles.

They are board members of North Korea’s Tongsin International Trading Corporation, an agency suspected of illegally exporting weapons to Burma and other countries, the group added.

Both Han and Ju were given passports by the Kiribati government in 1996 and by the Seychelles in 2007. The countries reportedly sold passports to foreign businessmen but abandoned the practice due to mounting worries about illicit activities.

A Foreign Ministry official in Seoul said, “Kiribati has been neutral since it won independence from the U.K. in 1979. “It would have been easier for the North Korean agents to travel with those passports rather than with North Korean ones.”

Read the full story here:
South Pacific Island Admits Selling Passports to N.Koreans
Choson Ilbo
2013-3-13

Marcus Noland offers a new estimate of the DPRK’s illicit trade activities:

According to Marcus Noland:

The chart above shows our estimates of illicit revenues (inclusive of arms sales) as a share of merchandise exports. These are admittedly highly speculative and as a consequence we include high and low estimates as well as a best guess. As one can see, this share has been drifting down for more than a decade as both legitimate trade has expanded, and intensified interdiction efforts have crimped criminal activities. We estimate that in 2011, the illicit share of exports was in the range of 5-20 percent, with our best guess at roughly 10 percent. During the hearings, one of the witnesses, Professor Sung-yoon Lee, claimed that illicit activities account for up to 40 percent of the country’s trade; that statement was probably true in the past, but on our calculation, probably no longer true—though again, all this is highly speculative and anyone who claims that they know the real answer is, in the words of former Vice President Mondale, “a liar or a fool.”

A related issue is the degree to which central authorities exercise control over these activities. Some activities are almost surely subject to central control; some are probably conducted by state entities but without direction from central authorities (or perhaps without even their specific knowledge); some of these activities may well be conducted by what amount to local criminal gangs (which may include state, military, or party officials as participants); some of these activities may be organized by Chinese or other foreign gangs with the acquiesence of North Korea officials. Several years ago, for instance, when their was a crackdown no intellectual property rights theft in China, some of the counterfeiting activity allegedly moved across the border into North Korea where control was more lax.

The message is not that we should slack off in our attempts to eradicate these activities. Even they account for a declining share of the North Korean economy, they are still objectionable. But by the same token, we should not make the analytical mistake of thinking that shutting down these activities will halt the North Korean nuclear program or bring down the regime. The real message here is that the expansion of legitimate trade in recent years has made North Korea less dependent on criminal activities and less vulnerable to their disruption.

UPDATE 6 (2013-3-11): Here is the DPRK Ministry of Foreign Affairs response to the UNSC Resolution 2094. As you can imagine, they do not approve.

UPDATE 5 (2013-3-8): The full official resolution can be read here.  Here is the DPRK response to 2094. Here is some information on the Chinese response. Here is some more analysis/commentary from Scott Snyder in The Diplomat. Choson Ilbo reports that large North Korean bank accounts exempt from sanctions.

UPDATE 4 (2013-3-7): The resolution has passed 15-0.  Read more at the BBC, Washington Post, New York Times. Marcus Noland commentary here and here. Victor Cha here. NK Leadership Watch has more on the events in Pyongyang…

UPDATE 3 (2013-3-7): Once made public, the resolution will be posted here. Steve Herman (via Adam Cathcart) tweeted a link to the draft resolution which has been uploaded to Scribed. It is dated yesterday (2013-3-6).

UPDATE 2 (2012-3-7): Here is a Press Release from the US mission to the UNSC that went out this morning on the new sanctions (Resolution 2094). Thanks to Aidan Foster-Carter.

For reasons of brevity, I have put the entire document into this PDF for download.

UPDATE 1 (2013-3-7): Yonhap offers details on the unpublished sanctions proposal put forth by the US and China:

The three North Korean arms dealers are: Yon Chong-nam, the chief representative for the Korea Mining Developing Trading Corp (KOMID); Ko Chol-chae, the deputy chief representative for the KOMID; and Mun Chong-chol, an official at Tanchon Central Bank, the resolution showed.

KOMID is described by the resolution as North Korea’s “primary arms dealer and main exporter of goods and equipment related to ballistic missiles and conventional weapons,” while the North Korean bank is the “main DPRK (North Korea) financial entity for sales of conventional arms, ballistic missiles, and goods related to the assembly and manufacturing of such weapons.”

The two North Korean entities are the Second Academy of Natural Sciences, which is responsible for research and development of the North’s advanced weapons systems, including “missiles and probably nuclear weapons,” and the Korea Complex Equipment Import Corp. linked to the North’s “military-related sales,” according to the draft.

The Security Council is set to vote on the draft resolution on Thursday in New York.

The new sanctions will also focus on the DPRKs shipping, air, and “financial” industries:

The Security Council “decides that all states shall inspect all cargo within or transiting through their territory that has originated in the DPRK, or that is destined for the DPRK,” the draft said.

It also “calls upon states to deny permission to any aircraft to take off from, land in or overfly their territory, if they have information that provides reasonable grounds to believe that the aircraft contains items” banned by previous U.N. resolutions, the document said.

It also makes it difficult for North Korea to move in and out “bulk cash,” in an effort to squeeze the North Korean elite’s access to hard currency.

The Security Council also calls on all states to “exercise enhanced vigilance over DPRK diplomatic personnel so as to prevent such individuals from contributing to the DPRK’s nuclear or ballistic missile programs,” it said.

The U.N.’s powerful body “expresses its determination to take further significant measures in the event of a further DPRK launch or nuclear test,” the draft warned.

The DPRK’s Uranium enrichment program also gets a mention:

Apparently mindful of the North’s uranium concerns, the draft resolution includes Pyongyang’s uranium enrichment program for the first time, condemning “all the DPRK’s ongoing nuclear activities, including its “uranium enrichment.”

The North claims its uranium enrichment program is for peaceful energy development, but outside experts believe that it would give the country a new source of fission material to make atomic bombs, in addition to its widely known plutonium-based nuclear weapons program.

The DPRK, has of course, issued a response

In response to the proposed U.N. sanctions and ongoing Seoul-Washington joint military drills, the North’s military threatened to scrap the Korean War cease-fire.

Kim Yong-chol, a hard-line North Korean general suspected of involvement in a series of provocations against the South, read the statement on state TV, saying the North “will completely declare invalid” the Armistice Agreement that ended the 1950-53 Korean War.

The North also said it will cut off a military phone line at the truce village of Panmunjom.

South Korea’s military responded to the North’s bellicose threats with a verbal salvo, warning it would strike back at the North and destroy its “command leadership,” if provoked by Pyongyang.

ORIGINAL POST (2013-3-5): According to the New York Times:

The United Nations Security Council moved closer on Tuesday to expanding sanctions on North Korea for its nuclear and ballistic missile activities. The United States and China introduced a resolution that would target North Korean bankers and overseas cash couriers, tighten inspections of suspect ship and air cargo, and subject the country’s diplomats to invasive scrutiny and increased risk of expulsion.

Passage of the measure, drafted in response to the third North Korean underground nuclear test three weeks ago, seemed all but assured, in part because China — North Korea’s major benefactor — participated in drafting the language. It would be the fourth Security Council sanctions resolution on North Korea, which has defied the previous measures with increasing belligerence. A vote was expected on Thursday.

Infuriated, North Korea vowed to scrap the 1953 armistice that halted the Korean War and threatened to attack the United States with what the North Korean government news agency called an arsenal of diverse “lighter and smaller nukes.”

American officials played down the North Korean warning, which echoed bombastic admonitions that have become part of the standard fare from the North. Still, the threat of a North Korean nuclear attack seemed all the more provocative, coming two days after North Korea conveyed a message of friendship to a visiting American group that included Dennis Rodman, the former basketball star.

Susan E. Rice, the United States ambassador to the United Nations, who introduced the resolution in a closed session of the 15-member Security Council, told reporters afterward that it “builds upon, strengthens and significantly expands the scope of the strong U.N. sanctions already in place.”

For the first time, she said, the resolution would target “the illicit activities of North Korean diplomatic personnel, North Korean banking relationships, illicit transfers of bulk cash and new travel restrictions.” In the past, North Korea has been accused of running extensive counterfeiting and illegal drug enterprises, to raise much-needed hard currency.

Ms. Rice declined to predict whether the North would respond with another nuclear test or other retaliation. “All I can tell you is that the international community is united and very firm in its opposition to North Korea’s illicit nuclear and missile programs,” she said. “And the more provocations that occur, the more isolated and impoverished, sadly, North Korea will become.”

The Americans did not publicly release the resolution text. But a Security Council diplomat familiar with the measure, who spoke on the condition of anonymity because the language may still be subject to revision, said it broke new ground with restrictions and prohibitions on North Korean banking transactions, new travel restrictions and increased monitoring of North Korean ship and air cargo.

The diplomat also said that the resolution added a special lubricant and valve, needed for uranium enrichment, to items that North Korea cannot import.

The resolution would also place greater scrutiny on North Korean diplomatic personnel who are suspected of carrying proscribed goods and cash under the guise of official business, exposing them to possible deportation. “We know there are diplomats out there cooking up deals and moving funds around,” the Security Council diplomat said.

Among the other provisions, the diplomat said the resolution also included new language aimed at enforcement that had been absent from the earlier resolutions. It requires, for example, that if a North Korean cargo vessel crew refuses a host country’s request for inspection, the host is under a legal obligation to deny the vessel port access.

If a cargo plane is suspected of carrying prohibited goods to or from North Korea, the resolution would urge, but not require, that it be denied permission to fly over any other country — a new provision that could affect China, which routinely permits North Korean flights over its territory.

Previous rounds of sanctions have blacklisted trading and financial firms believed to be directly involved with nuclear and missile work. The sanctions have also restricted the importation of luxury goods, an effort directed at the country’s ruling elite.

American officials said privately that the latest resolution did not go as far as they would have liked, reflecting China’s insistence that the punitive measures remain focused on discouraging North Korea’s nuclear and missile behavior and avoid actions that could destabilize the country and lead to an economic collapse.

But the text was stronger than what some North Korean experts had anticipated, particularly the measures that could slow or frustrate the country’s banking activities and extensive dependence on cash payments in its trade with other countries.

“Going after the banking system in a broad brush way is arguably the strongest thing on this list,” said Evans J. R. Revere, a former State Department specialist in East Asian and Pacific affairs, and now senior director at the Albright Stonebridge Group, a Washington-based consulting company. “It does begin to eat into the ability of North Korea to finance many things.”

Mr. Revere attributed North Korea’s reaction on Tuesday to an accumulation of perceived affronts: China’s cooperation in drafting the sanctions, the annual military exercises under way between the United States and South Korea, and a hardened attitude by the South’s newly elected president, Park Geun-hye.

“This is North Korea’s way of saying, ‘We know you guys are doing several things, and here is our response,’ ” Mr. Revere said.

Here is coverage in The Guardian.

Here is coverage in the Washington Post.

Here is coverage of the DPRK’s response in CNN.

Here is my archive post on the DPRK’s third nuclear test.

Here is a statement (in Korean) by the North Korean military.

Read the full story here:
U.N. Resolution to Aim at North Korean Banks and Diplomats
New York Times
Rick Gladstone
2013-3-5