Archive for the ‘International trade’ Category

China claims to ban more dual-use products from DPRK

Tuesday, June 14th, 2016

According to Reuters:

China’s Ministry of Commerce released a list of goods banned for export to North Korea on Tuesday, saying the items could be used to build weapons of mass destruction.

The list of dual-use goods, or products that have both civilian and military use, comes after the United Nations nuclear watchdog said North Korea appeared to have reopened a plant to produce plutonium from spent fuel of a reactor central to its banned atomic weapons drive.

The ministry said in a statement on its website that the list was meant to comply with the requirements of a round of U.N. sanctions imposed in March in response to a North Korean nuclear test in January.

The new list adds to a much longer Chinese list of banned goods released in 2013 after the North carried out its third nuclear test that year.

Analysts said at the time the 2013 list was a positive sign that China was working to implement U.N. sanctions targeting the North’s nuclear and ballistic missile programmes.

The new list names dozens of banned items including magnetic materials, high-strength metals, chemical fibres, and laser-welding equipment. It also lists about a dozen chemicals that could be used in producing “chemical warfare agents”.

The banned goods could be used in nuclear, biological or chemical weapons development, the ministry said.

But China has declined in the past to give a full list of items banned for export to North Korea, which U.N. monitors have said makes it difficult to assess how strictly China is implementing sanctions.

China remains North Korea’s largest trading partner and sole major ally. Chinese analysts have regularly expressed concern that North Korea could collapse in chaos if Beijing’s policies become too harsh.

Reclusive North Korea rattled nerves this year by carrying out a fourth nuclear test in January and a satellite launch in February.

Thanks to Werner (a reader), here is the list of newly prohibited items (in Chinese).

I am keeping up with China – DPRK trade in 2016 here.

Read the full story here:
China says to ban export of more dual-use goods to North Korea
Reuters
2016-6-14

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Domestic food price dip in North Korea

Sunday, June 12th, 2016

By Benjamin Katzeff Silberstein

North Korea’s domestic market prices have been behaving somewhat counterintuitively as of late. Harvest declined last year (or at least so the FAO claimed), and given the latest round of sanctions, it wouldn’t have been unreasonable to expect some hoarding and anxiety on the markets, out of anticipation that China may come to control cross-border trade and smuggling more tightly.

Not so, Daily NK reports:

Despite the lean season, referred to domestically as the “barley hump,” during which grains typically get pricier in North Korea, prices are instead on a downward trend, Daily NK has learned.

Daily NK’s sources within the country believe relaxed restrictions on marketplace activity under the Kim Jong Un regime has helped create a balance in the supply and demand of food by way of imports, narrowing the range of price swings even when the local supply dips during the “barley hump.”

“People were quite worried about the economic sanctions from China but are now relieved to see that rice prices have not changed much,” a source in Ryanggang Province told Daily NK, She reported that in her region, rice, which had been selling at 5,000 KPW (a kilogram) until just a few days ago, had dropped to 4,500 KPW; corn, which fetched 1,200 KPW, slid to 1,000 KPW; and pork prices fell about 1,000 KPW to 11,100 KPW.

“More vendors now import rice, corn, etc. from China, so there’s more than enough to go around even after making up for the shortfall in local supply during the barely hump,” she added, explaining that the dip in rice prices is in large part due to the upcoming harvest of early potatoes and barley, as vendors look to offload their supplies.

Overall, it appears, judging from the stability of market prices, that both formal and informal market mechanisms in North Korea function well enough to make up for shortfalls in production.

Full article:
Dip in prices help residents surmount ‘barley hump’ 
Kang Mi Jin
Daily NK
2016-06-12

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China’s enforcement of sanctions on North Korea: a bit of perspective

Thursday, June 2nd, 2016

By Benjamin Katzeff Silberstein

To what extent is China enforcing the latest round of UNSC sanctions on North Korea? This question is as important and interesting as it is nebulously complicated and difficult to answer. For the fact is, like Curtis points out here, that lower coal imports by China from North Korea does not necessarily give evidence to sanctions enforcement. Some of the figures reported in the news concern the value of the imports, which fluctuates with world market prices.

Moreover, as the old saying goes, correlation does not imply causality. In other words, the mere fact that trade in coal and other goods is decreasing does not necessarily mean that it is going down because of sanctions alone. It is worth to remember that Chinese imports of North Korean coal has decreased in the past too, before the latest sanctions round, due to decreased domestic demand and other factors. A whole host of variables other than sanctions may well be at play too.

Looking back at some previous trade data gives some context to the latest reports of decreasing trade. Even though volumes may be down, to fully understand how this impacts the North Korean economy, dollar value terms may be more relevant.

To recap:

  • According to recent data, Chinese imports of North Korean coal have decreased by 20.5 year-on-year for April 2016 (in tonne numbers).
  • According to Yonhap figures, cited here, this translates into a drop from $116.6 a year ago, to $72.27 now. This represents a 37 percent drop.
  • In the pre-sanctions quarter of the year, North Korean exports to China increased by 12 percent.

To put this in perspective, consider the following changes in the past:

  • Between January and November 2014, North Korean exports to China dropped by 12.3 percent in dollar terms.
  • Between 2013 and 2015, the value of coal exports to China dropped by 24.6 percent.
  • Between January and February 2014, total trade between North Korea and China dropped by 46 percent.

The point of citing these numbers is not to show that sanctions are not being implemented by China. Rather, such flows tend to fluctuate quite heavily for other reasons as well, and it is too early to conclude that sanctions are the only reason behind the contraction. As a New York Times story from late March this year showed, Chinese border agents tend to be fairly lax in controlling goods crossing the border – NYT cited a figure of about five percent of all goods being inspected. In sum, it is too early to draw any major conclusions about Chinese sanctions enforcement, and only future data will be able to give a more conclusive picture.

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US Treasury “311s” North Korea

Thursday, June 2nd, 2016

Here is the statement from the Treasury Department:

Treasury Takes Actions To Further Restrict North Korea’s Access to The U.S. Financial System

6/1/2016

Action Responds to the Threat that North Korea Poses to the Global Financial System; the United States Calls on International Partners to Similarly Takes Steps toward Severing Banking Relationships with the Dangerous Regime

WASHINGTON – Today, the U.S. Department of the Treasury announced a Notice of Finding that the Democratic People’s Republic of Korea (North Korea) is a jurisdiction of “primary money laundering concern” under Section 311 of the USA PATRIOT Act. Treasury, through its Financial Crimes Enforcement Network (FinCEN), also released a notice of proposed rulemaking (NPRM) recommending a special measure to further isolate North Korea from the international financial system by prohibiting covered U.S. financial institutions from opening or maintaining correspondent accounts with North Korean financial institutions, and prohibiting the use of U.S. correspondent accounts to process transactions for North Korean financial institutions.

Section 311 gives the Secretary of the Treasury the authority to identify a foreign jurisdiction to be a primary money laundering concern. Once identified, the Secretary can require U.S. financial institutions to take appropriate countermeasures. The special measure proposed in today’s NPRM would impose the most significant measure available to the Secretary under Section 311.

“The United States, the UN Security Council, and our partners worldwide remain clear-eyed about the significant threat that North Korea poses to the global financial system. The regime is notoriously deceitful in its financial transactions in order to continue its illicit weapons programs and other destabilizing activities,” said Adam J. Szubin, Acting Under Secretary for Terrorism and Financial Intelligence. “Today’s action is a further step toward severing banking relationships with North Korea and we expect all governments and financial authorities to do likewise pursuant to the new UN Security Council Resolution. It is essential that we all take action to prevent the regime from abusing financial institutions around the world – through their own accounts or other means.”

Reasons for This 311 Determination

Treasury is taking this action consistent with the North Korea Sanctions and Policy Enhancement Act, enacted on February 18, 2016, which requires Treasury to determine within 180 days whether reasonable grounds exist for concluding that North Korea is a jurisdiction of primary money laundering concern, and if so, to propose one or more special measures. In addition, the United Nations Security Council adopted Resolution 2270 on March 2, 2016, which in part requires UN Member States to sever correspondent banking relationships with North Korean financial institutions within 90 days of the adoption of the resolution.

North Korea is proposed for action under Section 311 because (1) North Korea uses state-controlled financial institutions and front companies to conduct international financial transactions that support the proliferation and development of WMD and ballistic missiles; (2) North Korea is subject to little or no bank supervision anti-money laundering or combating the financing of terrorism (“AML/CFT”) controls; (3) North Korea has no diplomatic relationship, and thus no mutual legal assistance treaty, with the United States and does not cooperate with U.S. law enforcement and regulatory officials in obtaining information about transactions originating in or routed through or to North Korea; and (4) North Korea relies on the illicit and corrupt activity of high-level officials to support its government.

Impact of the 311 Notice of Finding and the NPRM Special Measure

While current U.S. law already generally prohibits U.S. financial institutions from engaging in both direct and indirect transactions with North Korean financial institutions, this NPRM, if finalized, would require U.S. financial institutions to implement additional due diligence measures in order to prevent North Korean banking institutions from gaining improper indirect access to U.S. correspondent accounts. While North Korea’s financial institutions do not maintain correspondent accounts with U.S. financial institutions, North Korean financial institutions frequently conduct transactions on behalf of the North Korean government and state-controlled corporations. The NPRM, if finalized, would prohibit the use of third-country banks’ U.S. correspondent accounts to process transactions for North Korean financial institutions.

Italics added for emphasis.

The “Notice of Finding” is here, and is also worth reading.

According to the Wall Street Journal:

Treasury Department officials said they are moving to ban non-U.S. banks and entities from processing dollar transactions on behalf of North Korea, an arrangement known as a U-turn, in a move to block its international trade.

China is by far Pyongyang’s largest trading partner, and Chinese firms could be caught in the crosshairs, according to current and former U.S. officials.

Zhu Haiquan, the spokesman for China’s embassy in Washington, repeated Beijing’s warnings against what it considers “unilateral sanctions taken by any country.”

He added that “we should avoid any move that may further aggravate tensions” on the Korean peninsula, and said “the unilateral sanctions must not affect and harm the legitimate rights and interests of China.”

U.S. officials were pleased that China agreed in March to support the new U.N. sanctions, which could significantly impair North Korea’s ability to generate hard currency and ship its exports.

Still, U.S. officials have voiced skepticism that Beijing would significantly punish Pyongyang, a longtime ally. China has rebuked North Korea in the past for its nuclear and missile tests, only to increase investment and trade with the country.

The issue is likely to be among the topics discussed when Messrs. Kerry and Lew meet top Chinese officials in Beijing for the Strategic and Economic Dialogue, a series of annual bilateral meetings.

According to the New York Times:

As a practical matter, that would largely affect Chinese banks, which facilitate North Korea’s financial transactions with Beijing, its largest trading partner. It could also affect some institutions in the nominally autonomous Chinese regions of Macau and Hong Kong, as well as in Singapore, where Pyongyang has often gone to hide the true nature of its banking activities, and to pay for missiles, nuclear fuel and the huge infrastructure it has built around those programs.

It is hard to assess how much the action will hurt North Korea. Such sanctions against financial institutions doing business with Iran proved effective because Tehran had billions of dollars in monthly oil and other energy exports that could be choked off; North Korea has none. Oftentimes Pyongyang deals in cash. Until a few years ago it was one of the largest counterfeiters of $100 bills. But that once-lucrative fraud was largely cut off by the redesign of the $100 bill.

Banks in the United States are already prohibited from doing business with financial institutions in North Korea. But the recommended rules would require them to perform additional due diligence to ensure they are not inadvertently transacting with North Korean financial institutions or the Pyongyang government through shell companies or other fictitious entities.

Notice of the new rules has been published by the Federal Register. Feel free to comment if you like.

Josh also writes a walk-through of how this works.

Here is information from Choson Exchange.

Troy Stangarone writes about the sanctions for KEI.

The UK also strengthened financial sanctions against the DPRK.

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Russia sanctions DPRK

Monday, May 23rd, 2016

According to the Choson Ilbo:

Russia has halted financial transactions with North Korea, and the EU has added 18 individuals and one organization to its North Korea sanctions list.

The international sanctions aim to strangle the flow of hard currency into the North’s nuclear and missile programs.

The Russian central bank last Thursday told all Russian banks to halt financial dealings with North Korean agencies, organizations and individuals on the UN Security Council sanctions list, Radio Free Asia reported.

The order said the banks must immediately freeze bonds held by sanctions targets and close accounts related to the North’s development of nuclear weapons and missiles.

A Russian presidential decree will also take effect soon to close North Korean bank branches and joint venture firms.

But Russia will continue to allow financial transactions between Russian and North Korean banks authorized by the UN.

The measures deal a blow to North Korea because the two countries have only recently increased cooperation.

Russia has been criticized for giving the North Korean regime a lot of leeway by allowing its banks to open accounts for North Korean banks and settling business with North Korea in roubles.

“What’s important is whether the international community including Russia and Switzerland will put their decisions into action,” a diplomatic source said. “If they do, the North will suffer a lot.”

A recent gasoline price hike in the North seems due to Russia’s downsizing of supplies to the North.

The EU has announced its third round of sanctions since the North’s latest nuclear test. This has brought the number of sanctions targets to 66 individuals and 42 organizations. They will be banned from entering EU countries and their assets will be frozen.

Here is coverage in the Joong Ang Ilbo:

Russia’s central bank called for a suspension of all transactions with North Korea, media outlets reported Friday, which follows Switzerland’s toughened sanctions on the regime earlier this week.

The move is in line with the strongest-ever United Nations Security Council resolution adopted in early March to penalize North Korea for its fourth nuclear test and long-range missile launch and curb its weapons of mass destruction program.

The Russian central bank was reported to have issued an order to local banks and financial institutions to suspend transactions with Pyongyang on Thursday, according to Radio Free Asia.

The order stated that transactions with Pyongyang were possible only with the permission of the United Nations.

The central bank further declared an immediate freeze on bonds held by North Korean individuals, agencies and organizations blacklisted by the UN Security Council.

Likewise, Russian financial institutions will have to close any accounts that have possible links to the North’s nuclear and missile programs.

On Wednesday, Switzerland imposed tighter sanctions on North Korea, ordering the freezing of assets held by North Koreans in the country and closure of their bank accounts as well as blocking funds owned by the North Korean government.

The Swiss government made the move to block all funds and economic resources connected with North Korea’s nuclear and missile programs in line with UN Security Council Resolution 2270, which was adopted in March in response to Pyongyang’s nuclear test in January and a ballistic missile test in February.

This included mandatory inspections of all cargo going in and out of North Korea, a ban on exports of coal, iron and other mineral resources from the North, as well as prohibiting aviation and rocket fuel exports into the country.

Russia and China, two of the five permanent members of the 15-member Security Council, have generally defended Pyongyang’s stance in the council. They also negotiated some room for leeway in the March resolution on North Korea. How they implement the sanctions will be crucial to cutting the cash flow into Pyongyang’s WMD program.

The Swiss government extended an existing ban on exports of luxury items to include more goods and prohibited North Koreans from studying in Switzerland in higher physics or nuclear engineering.

On Thursday, the European Union expanded its sanctions against Pyongyang, adding 18 individuals and an entity it deemed related to its weapons program to its blacklist.

This brings the EU blacklist to 66 individuals and 42 entities considered to be involved with North Korea’s nuclear and missile development.

When asked about the government’s position on Russia’s sanctions, South Korean Ministry of Unification spokesman Jeong Joon-hee said in a briefing Friday, “We strongly welcome that countries around the world, including China and Russia, are actively taking part in these strong sanctions.”

Read the full story here:
Russian Central Bank Halts Dealings with N.Korea
Choson Ilbo
2016-5-23

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Not surprising: Inter-Korean trade to fall in 2016

Friday, May 13th, 2016

According to the Choson Ilbo:

Trade with North Korea is expected to be practically zero this year now the joint Kaesong Industrial Complex has been shut down.

According to a 2016 White Paper published by the Unification Ministry on Thursday, last year’s cross-border trade volume was a record US$2.7 billion, up 15.9 percent from 2014, thanks to an increase in trade through the industrial park.

But that accounted for 99.6 percent of all cross-border trade since other trade had already been suspended under earlier sanctions in the wake of the sinking of the Navy corvette Cheonan in 2010.

Now the industrial park has been closed there is no trade left, the ministry said.

Since the North’s latest nuclear test in January, Seoul has also halted humanitarian aid to the North. Last year, Seoul gave Pyongyang humanitarian aid worth W25.4 billion, up 30 percent from 2014 (US$1=W1,167).

Read the full story here:
Trade with N.Korea Falls to Near-Zero
Choson Ilbo
Kim Myong-song
2016-5-13

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DPRK participates in Xian trade fair

Friday, May 13th, 2016

According to Yonhap:

North Korea on Friday showed off wild ginseng roots, a tiger painting and other health products at an international trade fair hosted by China’s northern city of Xi’an.

Although North Korea and China have held their annual trade fair in the border city of Dandong, it was unusual for the North to set up booths at a trade exhibition in other parts of China.

International sanctions were tightened in early March following North Korea’s fourth nuclear test in January and launch of a long-range rocket in February.

Forty-five nations, including South Korea, participated in the “Silk Road” trade fair, which is organized by China’s top economic planner and commerce ministry.

North Korea came up with paintings, wild ginseng roots, ginseng tea, cigarettes and some medicine.

Wild ginseng roots, which are highly valued in Korea for its perceived healing benefits, were being sold at 3,600 yuan (US$549.80) per package.

A painting featuring a tiger, which is 4 meters wide and 1.5 meters high, was priced at 100,000 yuan, according to a North Korean representative.

There were about 30 North Korean representatives at the fair.

A source with knowledge of the matter in Xi’an said North Korea applied for booths at the fair, although China had not sent an invitation to the North for the exhibition.

Read the full story here:
N. Korea shows off wild ginseng roots, tiger painting at China fair
Yonhap
2016-5-13

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Taedonggang Beer goes on sale in China

Thursday, April 28th, 2016

According to the Korea Times:

Taedonggang beer, a state-owned North Korean brand, is available in grocery stores in Dandong and Shenyang, China, according to news reports.

“I noticed billboards promoting Taedonggang beer on a street near Dandong Station, and also newspaper advertisements showing the addresses and phone numbers of retail stores,” a source told Radio Free Asia.

The beer is not yet widely distributed in China. Sources from Shenyang and Dandong said they could find only a few stores selling the beer in Xita Street where many Koreans live and in Korean gift shops.

North Korea’s popular beer costs 20 yuan ($3) a bottle, four times the price of regular brands in Chinese grocery stores.

“The beer has a soft, rich flavor with more alcohol than Chinese beers,” said a Chinese man who tasted Taedonggang beer at a restaurant in Dandong.

“However, the price is too expensive for Chinese citizens to drink regularly.”

Read the full story here:
N. Korean beer sale in China
Korea Times
Lee Jin-a
2015-4-28

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North Korea looking to expand foreign trade, turning to EU and BRICS

Thursday, April 28th, 2016

Institute for Far Eastern Studies (IFES) 

North Korea is seeking to expand its foreign trade by turning to the EU and BRICS (Brazil, Russia, India, China and South Africa) for cooperation.

In the recently published book Looking at Today’s Choson from 100 Questions and 100 Answers, North Korea emphasized the importance of cooperation with EU and BRICS, saying it will “seek various ways to expand its foreign trade.”

The book noted that with the upcoming Pyongyang International Trade Fair (PITF) in May and September, North Korea is looking for grounds to engage in foreign trade to “further the cooperation with many countries around the world.”

The book also stated that North Korea is engaging in a wide range of international trade such as economic cooperation and looking into cooperative business models with Europe, Southeast Asia, Latin America, the Middle East and Africa as well as with international and regional economic organizations such as the EU and BRICS.

However, seeing as the book does not specify detailed ways in which North Korea will take to cooperate with the EU and BRICS, the plan appears as a mere hope.

While the book admitted the difficulty in building an economically strong country while facing the sanctions imposed by the international community, it emphasized that “it [North Korea] is putting its effort in expanding international trade to directly penetrate the sanctions to build a strong socialist state.”

The book also noted that the diversification of active foreign trade will enable “the expansion of width and depth of distribution through dealing with more countries on various industries on many accounts.” The diversification in this context refers to the people in charge of trade and the methods of trade.

Continuing on the idea of diversification, the book mentioned that “not only does the diversification of foreign trade not contradict itself with the independence of national economic stability, but it actually is an important asset in developing the ability of economic independence and its capability,” meaning that diversification should be a key foundation in building an independent economy.

The book explained that the independence of economy is the enhancement of people’s identity and independence that is linked to the domestication of materials. Therefore, beginning with coke (coal) gasification, Juche-iron, Juche-refractory material production line, Juche-fertilizer, and Juche-textile production line will be completed, for instance.

According to the book, this will be the core foundation in speeding up economic development in association with the domestic materials parring with international market prices to stay in market competition. It also stated that this is “not only a matter of economic efficiency, but also a fierce fight against enemy states in the war of defending socialism.”

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North Korean market condition since new international sanctions

Wednesday, March 23rd, 2016

Institute for Far Eastern Studies (IFES)

It has been almost two weeks since the enforcement of new sanctions imposed by the United Nations Security Council (UNSC), and so far North Korea’s domestic economy seems calm. Following the sanctions, North Korea has been preparing for the 7th Party Congress in May with its 70-day campaign (or ‘speed battle’). In order for the people to focus on the preparation, the government has reduced the business hours of markets and has begun controlling the street markets (i.e., ‘grasshopper’ markets).

In particular, it was expected that the sanctions would reduce the inflow of goods into the country which would then lead to a rapid rise in market prices and exchange rates, but so far the market prices appear to have remained relatively stable. According to the Daily NK, a South Korean online newspaper reporting on North Korea, 1kg of rice is selling for 5,100 KPW, 5,150 KPW, and 5,080 KPW in Pyongyang, Sinuiju, and Hyesan, respectively. These prices are relatively similar to the prices prior to when the sanctions were in full effect (i.e., 5,100 KPW in Pyongyang and Sinuiju, and 5,260 KPW in Hyesan).

The exchange rate appears no different. One US dollar exchanges for 8,150 KPW in Pyongyang, 8,200 KPW in Sinuiju, and 8,170 KPW in Hyesan. The rate has been only slightly reduced compared to the rate prior to when the sanctions were put in place (i.e., 8,200 KPW in Pyongyang, and 8,290 KPW in Sinuiju, and Hyesan).

The reason for the stability in the market and the exchange rate is because even though the market hours have been reduced due to the 70-day campaign, the markets actually are running better than before and in some regions the price has gone down for some goods, presumably because some of these items that were exported in large scale via China have been circulated in the North Korean domestic market.

Also, aside from the underground resources (i.e., minerals) — the sanctioned items that used to account for most of the exports — other goods are still sold accordingly, which helps in stabilizing the market. Furthermore, the improvement of the domestic market cannot be taken lightly when considering the stability of the markets. In other words, unless markets are completely closed, people in North Korea wouldn’t consider it an issue.

Meanwhile, despite the international community’s sanctions against the country, including that of the UN Security Council, North Korea is claiming overproduction in areas such as electrical power and minerals in the run-up to the Seventh Party Congress in May. The North Korean propaganda media ‘DPRK Today’ has mentioned about production and the country’s success in confronting the imposed sanctions.

More specifically, since the initiation of the 70-day campaign last month (February 23rd), in order to boost economic success, Namhung Youth Chemical Complex has reportedly turned out 60% more fertilizer; Pyongyang Railway Bureau increased the traffic by 40%; Ryongyang Mine increased its production of magnesite by 20%; and 2.8 Jiktong Youth Coal Mine produced 7,200t beyond its quota. In addition, Kim Jong Suk Textile Mill reportedly has seen more than 40 labors complete the plan for the first half of the year, while Baekdu Hero’s Youth Power Plant has reached 37,000m2 in dam construction. Previously on March 3rd, the Korean Central Broadcasting radio reported that many of the production targets for February in the national economy have been surpassed.

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