Archive for the ‘International trade’ Category

The state of the sanctions on North Korea (April 2018): one step forward, one step back…?

Monday, April 9th, 2018

By Benjamin Katzeff Silberstein

Judging from all publicly available information, China is currently enforcing and implementing, to a much greater degree than in the past, the UN sanctions that stand against North Korea. That of course doesn’t mean full and foolproof enforcement, but there’s been fairly few signs suggesting that the government is knowingly turning a blind eye to trade with North Korea, or exploiting sanctions loopholes, the way it has in the past. Market price data doesn’t suggest that sanctions are hitting against the economy as a whole (yet), in ways that one might expect in the longer run. But certain sectors of the North Korean economy – such as mining and textiles – are likely feeling a significant and hard pinch from China’s enforcement.

But how long will it last? Judging from recent history, I’ve argued that China’s sanctions enforcement would likely be a temporary phenomenon, probably only lasting long enough to give the “right” impression to the US and the international community.

I am by no means alone in this, and given China’s past precedent of squeezing hard for shorter periods and letting go when global attention shifts from North Korea, it’s not really a risky prediction. In any case,  China’s sanctions enforcement is less a result of UN resolutions per se than of China’s own perceived best interests at any given moment.

With Kim’s visit to Beijing, it appears that China may have started to let up some of its pressure. As Curtis Melvin previously noted on this blog, South Korean media has reported that Chinese enforcement of the ban on North Korean guest labor may be easing. Daily NK published video footage a few days ago purportedly showing North Korean workers arriving in China, and one source tells Daily NK that the flow of workers leaving China and heading back to North Korea has ceased:

“About 400 North Korean women were dispatched to Helong, Yanbian Autonomous Prefecture on April 1,” a source close to North Korean affairs in China told Daily NK on April 4.
In the video provided by the source, hundreds of the women can be seen walking in a procession in the Chinese city, with most carrying bags or backpacks. However, the starting point and destination of the group is unclear from the video.
“It has been a long time since this many people have come in [from North Korea], but it’s probably related to the Kim Jong Un’s recent visit to China,” the source said.
“Before Kim Jong Un went to China, we saw a lot of workers returning to North Korea, but we are no longer seeing movement (in that direction),” he added.
A separate source in Jilin Province, China told Daily NK there are signs that North Korean-Chinese joint ventures in the area have begun preparing to restart operations.
“These businesses, where the North Korean side provides the labor and the Chinese side invests in the facilities, came to a halt under international sanctions. But now, business delegations for the two sides have scheduled talks,” the source said.
Radio Free Asia reported similar information a few days ago:

North Korean laborers barred under U.N. sanctions from working abroad are now moving back into China in an apparent violation of restrictions aimed at punishing Pyongyang for its illicit nuclear weapons and missile programs, sources along the border say.

Though workers formerly sent into China to earn foreign currency for North Korea’s cash-strapped regime are still under U.N. orders to return home, no new lines of returning workers are being seen, sources working on the border say.

Instead, North Korean workers have been observed entering China in defiance of the rules, they say.

“This week, on April 2, around 400 female North Korean workers were sent to Helong city in [Jilin province’s] Yanbian Autonomous Prefecture,” an ethnic Korean living in Yanbian told RFA’s Korean Service, speaking on condition of anonymity.

“It seems like Kim Jong Un’s recent visit to China is showing some results,” the source said, referring to an anticipated relaxation of trade restrictions in response to recent China-North Korea diplomatic contacts.

Speaking separately, a source in China’s Dandong, a port city lying on the Yalu River across from North Korea, told RFA he had seen a group of buses carrying North Korean workers arrive on March 30 from North Korea’s Sinuiju city, just across the border.

“They had young women on board who appeared to be North Korean workers,” RFA’s source said, also speaking on condition he not be named.

“The buses crossed the Yalu River’s railway bridge and dropped the workers off at the Dandong customs post,” he said, adding, “There appeared to be roughly more than 100 of them.”

It is worth recalling that sanctions enforcement by China doesn’t just damage North Korean economic interests. As anyone who’s visited Dandong on the Chinese side of the border can attest to, much of the local economy is connected to trade with North Korea.
Daily NK also reports that on the ground, some managers find ways to retain North Korean workers in China even though their original contracts have been cancelled:
China helped pass multiple UN sanctions resolutions against the North following missile and nuclear tests the previous year, and has slowly increased its efforts to enforce measures restricting the presence of North Korean laborers in the country.
For example, one Chinese manager of a clothing factory in Dandong (Liaoning Province) told our source that he was pressured by the Chinese government last year to cancel the contracts of 150 North Korean employees.
“I had no choice but to comply with the order,” the manager said. “But canceling the contracts early meant that I had to pay penalties to the workers. It was extremely difficult to gather enough money for the penalties for all 150 workers at once.”
According to the source, Chinese managers in such cases have made deals with the North Korean managers in charge of the workers, in order to reduce the total payment for penalties.
Under the terms of these kinds of deals, the Chinese side has sought to allow laborers to continue working in China as long as their visas remain valid, and in return for guarantees over uninterrupted currency streams as the workers move to new positions, the North Korean side agrees to accept reduced penalties or to forgo them altogether.
“For example, there’s a restaurant now in Dandong that employs dozens of North Korean women as servers, although these same women were previously ousted from factory jobs,” a separate source in China said, adding that there are many restaurants in the area using the same tactics.
The source spoke with one woman working at a restaurant in Dandong who introduced herself as a native of North Pyongan Province. “I came to work here after being dismissed seven months into a job at a clothing factory. I was originally supposed to work there for two more years, but I had to use the remainder [of my allotted time] to earn money and reduce the burden of the loss,” she told the source.
At the same time, China has taken additional steps to comply with other parts of the sanctions, the government said Sunday April 8th. Wall Street Journal:

China has tightened restrictions on exports to North Korea of items with potential dual use in weapons of mass destruction and conventional arms.

The ban on exports of potential dual-use items, including software, machinery and chemicals, is in line with U.N. Security Council resolution number 2375, the Chinese Ministry of Commerce said in a statement on its website posted late Sunday. That resolution was passed in September.

If tensions do continue to de-escalate around North Korea as they have over the past few months, it shouldn’t come as a surprise if more news of lighter Chinese enforcement of general economic sanctions continue to surface. Stay tuned…

(UPDATE 2018-04-12) Daily NK reports that about 1,000 North Korean workers are to be dispatched to China again, in apparent violation of UN sanctions:

Over 1,000 North Korean laborers are preparing to be dispatched to work assignments in Dandong, China, a source in the area informed Daily NK on Wednesday. This follows sightings earlier this month of over 400 North Korean workers in the Chinese city of Helong to the east, together suggesting the two countries may be cooperating to restart joint business ventures in China.
“There are already about 100 North Koreans working at one clothing factory in Dandong, and they are expecting 1,000 more after a recent conversation with a manager from the North Korean side,” the source said on April 11.
The Chinese manager in the deal told the source that it is a popular opportunity among North Korean factory workers as they see it as a good chance to improve their skills, despite their expectations of low pay and long hours. “People around here are anticipating an influx of more North Korean workers in the near future,” the source remarked.
A separate source in China confirmed the development, saying, “It is true that over a thousand North Korean workers are preparing for the assignment. The Chinese brokers who have engineered the deal for the jobs are working overtime right now.”
He added that the workers are still receiving permits from North Korean authorities to cross into China, as per standard guidelines, though these permits only technically allow up to 30 days’ stay abroad.
“[The Chinese companies] are trying to recruit more North Korean workers now as they feel sanctions may possibly be lifted and that the dangers have subsided. But they will just send them back in case they are not [lifted],” he said.
Following these developments, some are speculating that Kim Jong Un may have come to an agreement with Chinese President Xi Jinping on the matter during their meeting in Beijing last month.
Recent friction between China and the US over a brewing trade war may also be contributing to a sense of optimism among those affected in the region.
“We (Chinese people) are also hurting from sanctions, and now it seems like we are in a trade war with the US,” an additional source in China said.
“Knowing this, it is possible that authorities, despite sanctions, are turning a blind eye to the arrival of the North Korean workers.”
This last point is very important: international sanctions politics is very local. The border region on the Chinese side has likely suffered quite significantly from the sanctions regime, and this is one part of the Chinese calculation that is often forgotten. The northeast is already fairly impoverished, and the local economy isn’t helped by a ban on trade with its most significant partner, North Korea.
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UN blacklists North Korean ships accused of smuggling

Friday, March 30th, 2018

Benjamin Katzeff Silberstein

Talks or none, the international community continues the struggle to tighten enforcement of economic sanctions on North Korea. Reuters:

The United Nations Security Council blacklisted dozens of ships and shipping companies on Friday over oil and coal smuggling by North Korea, boosting pressure on Pyongyang as leader Kim Jong Un plans to meet with his South Korean and U.S. counterparts.

The council’s North Korea sanctions committee acted on a request by the United States, designating 21 shipping companies — including five based in China — 15 North Korean ships, 12 non-North Korean ships and a Taiwanese man.

The move comes days after Kim met Chinese President Xi Jinping and an announcement that the North Korean leader would meet South Korean President Moon Jae-in on April 27. He is also scheduled to meet U.S. President Donald Trump some time in May.

While Trump has agreed to meet Kim, he tweeted on Wednesday that “maximum sanctions and pressure must be maintained.”

Tension over North Korea’s tests of nuclear weapons and ballistic missiles surged last year and raised fears of U.S. military action in response to the North’s threat to develop a nuclear weapon capable of hitting the U.S. mainland.

But the situation has eased significantly since North Korea sent athletes to the Winter Olympics in South Korea in February.

U.S. Ambassador to the United Nations Nikki Haley said the U.N. sanctions designations — the largest agreed by the council’s committee — were aimed at shutting down North Korea’s illegal smuggling activities to obtain oil and sell coal.

“The approval of this historic sanctions package is a clear sign that the international community is united in our efforts to keep up maximum pressure on the North Korean regime,” she said in a statement.

The list was part of a request by Washington late last month for 33 ships, 27 shipping companies and the Taiwanese man to be sanctioned. China delayed that bid on March 2, but did not give a reason. The 15-member committee works by consensus.

Washington then proposed a shortened list on Thursday, which was unanimously agreed by the committee on Friday.

The 12 non-North Korea ships are now subjected to a global port ban and must be deregistered, while the 15 North Korean ships are subjected to an asset freeze and 13 of those a global port ban.

The Taiwanese man, Tsang Yung Yuan, is accused of coordinating “North Korean coal exports with a North Korean broker operating in a third country, and he has a history of other sanctions evasion activities,” according to the U.N. listing. He is subjected to an asset freeze and travel ban.

The assets of the 21 shipping companies, which include businesses based in the Marshall Islands, Singapore, Panama and Samoa, must now be frozen.

Article source:
U.N. blacklists dozens of ships, companies over North Korea smuggling
Michelle Nichols
Reuters
2018-03-30

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China reportedly incentivized Kim Jong-un to visit

Friday, March 30th, 2018

UPDATE 1 (2018-4-4): The Donga Ilbo reports that China is marginally easing up on sanctions following the unofficial meeting that took place with the two country’s respective leaders. According to the article:

Some Chinese enterprises in Dandong, a city in northeastern Liaoning province bordering North Korea, stopped sending back North Korean workers to their home country, South Korea’s intelligence sources said on Monday.


It is reported that the Chinese authorities, however, have not taken any action regarding employing North Korean workers. Rather, a source quoted Chinese government officials as saying “refrain from any action that could upset North Korean people for the time being.”

South Korean government said it is identifying intelligence that the average daily traffic volume between Dandong and North Korea surged to 50 trucks, from 20 to 30 trucks earlier this year. The traffic in this region is one of the key indicators that show bilateral trade flows. More than 100 trucks a day would come and go before the international community strengthened sanctions against the North.

According to data released by China’s customs agency, North Korean exports to China amounted to 1.72 billion dollars, a 33 percent down from 2016. However, Beijing is likely to give some breathing space to its ally as Chinese President Xi expressed his willingness to expand mutual exchanges in a meeting with Kim.

ORIGINAL POST (2018-3-30): I am still of the opinion that “maximum pressure” has not been the primary cause of North Korea’s newfound desire to hold talks with the US and South Korea. However, this article in the FT argues that China has enforced trade restrictions on North Korea in excess of the UNSC resolution requirements, and perhaps this policy played a role in bringing Kim Jong-un to Beijing.

According to the Financial Times:

Official Chinese statistics show that the monthly average of refined petroleum exports to North Korea in January and February was 175.2 tons, just 1.3 per cent of the monthly average of 13,552.6 tons shipped in the first half of 2017.

The level of reduction went far beyond the 89 per cent cut in petroleum product exports stipulated by the UN sanctions.

Chinese coal exports to North Korea were also cut to zero in the three months to the end of February, after running at a monthly average of 8,627 tons in the first half of 2017. Exports of steel ran at a monthly average of 257 tons in the first two months of this year, down from a monthly average of 15,110 tons in the first half of 2017.

Shipments of motor vehicles also dried up, with just one unit being exported in the month of February, official Chinese statistics show. Concerns over the accuracy of China’s statistics are common, but analysts said that such consistent and bold drops in export volumes are unlikely to have been the result of official massaging.

Bonnie Glaser points out a rumor that these stringent trade caps will be lifted to the point that China is still in compliance with UNSC resolutions.

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N. Korea’s high-tech goods imports rise sharply in recent years despite sanctions

Thursday, March 29th, 2018

According to Yonhap:

North Korea’s imports of smartphones, notebook computers and other high-tech products have risen sharply in recent years despite international sanctions following the country’s nuclear and missile tests, a report said Thursday.

High-tech goods accounted for 12.1 percent of the North’s total imports of manufactured products in 2016 from 6 percent in 2007, according to a report written by Kim Yang-hee, an official of the Ministry of Strategy and Finance. The report is carried in the March 2018 edition of the Korea Development Institute’s North Korea Economic Review.

The report was written based on statistics released by the North Korean government.

The high-tech goods include smartphones, PCs, automobiles, and aviation and space technology products.

The proportion of telecommunication and electronics goods also rose to 10.2 percent in 2016 from 3.9 percent in 2007.

The report noted North Korea failed to ship coal to China since October last year when the United Nations sanctions on North Korea toughened.

Read the full story here:
N. Korea’s high-tech goods imports rise sharply in recent years despite sanctions: report
Yonhap
2018-3-29

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Singapore revokes work permits for North Koreans

Tuesday, March 27th, 2018

Benjamin Katzeff Silberstein

In a report to the UN Security Council on its implementation of resolution 2397, Singapore says it has revoked all work permits for North Korean citizens in the country. Straits Times:

The resolution mandated that member states repatriate all North Korean workers in their jurisdictions no later than December 2019, or two years from the adoption of the resolution.

In its implementation report dated March 19, the Singapore government said: “Singapore has revoked the work passes of all nationals of the Democratic People’s Republic of Korea earning income in Singapore and will not grant new work passes to nationals of the Democratic People’s Republic of Korea.

“There are therefore no nationals of the Democratic People’s Republic of Korea with work passes in Singapore.”

Democratic People’s Republic of Korea is the official name of North Korea.

To raise awareness of the resolution, relevant authorities in Singapore have “proactively engaged business owners and relevant entities to remind them of existing and new restrictions” imposed on North Korea, according to the report.

Financial institutions in Singapore have also been alerted to the risk of North Korea “using nominees, front companies and Singaporean companies” to circumvent the UN Security Council’s resolutions, said the report.

In November last year, Singapore suspended all commercial trade with North Korea, a provision also mentioned in the implementation report last week.

“Singapore has imposed a prohibition on the import, export, re-export, transit and trans-shipment of all goods for the purposes of trade with any person in the Democratic People’s Republic of Korea,” said the report.

Article source:
Singapore revokes all North Korean work permits
Straits Times
2018-03-27

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Weekend reading recommendation: North Korea’s Shackled Economy, 2018

Friday, March 23rd, 2018

By Benjamin Katzeff Silberstein

The National Committee on North Korea (NCNK) has published a report by William Brown, and I urge all those with an interest in the North Korean economy to read it. It is a pragmatic take on the North Korean economy in 2018, noting both the progress and the limits of the changes in its economic system over the past few years. Brown is pessimistic (or perhaps just realistic) about North Korean economic resilience in the face of sanctions, but also notes the great potential for economic development that exists in North Korea’s human capital and skilled labor. Brown’s analysis of the country’s currency situation, one of the most opaque topics in already opaque field, is particularly interesting. Below is an excerpt from the executive summary:

The North Korean economy remains weak and vulnerable, but its structure is changing as it confronts major internally- and externally-generated pressures. Ironically, as UN sanctions have tightened in recent years, the economy has become more decentralized and productive, as weakening state controls have allowed the spread of market activities, providing incentives for individuals and families to work in their own self-interest. Central planning is weakening as money replaces the once ubiquitous ration coupon, and self-reliance on both a national and localized level is increasing as foreign trade and foreign aid dwindle. However, the state-run economy has not withered away, and Pyongyang dictates perhaps half of all economic transactions, a far larger share than does the central government in any other country. The state and its enterprises and the huge farmers’ collectives still own most capital and property, and through their extensive regulations and police powers extract large rents from individuals and families.

The full report can be found here.

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“Maximum pressure” and the North Korean economy: what do market prices say?

Friday, March 9th, 2018

By Benjamin Katzeff Silberstein

With the news today about a summit between Kim Jong-un and Donald Trump tentatively planned for the end of May, there has been much debate about the role of the US policy of “maximum pressure” through economic sanctions.

The efficacy of the policy is difficult to evaluate, particularly since it often takes many months or even years for the full effect of sanctions to play out. Whether the policy has been effective or not depends on, well, how you judge success or failure. There is little doubt that North Korea’s exports have taken a significant hit not primarily from the sanctions themselves, but from China’s enforcement of them. This is the single biggest difference between how sanctions have hit the North Korean economy during the past year, versus previous years. It seems fairly indisputable that sectors of the economy have suffered, with export industries taking the biggest hit.

But what has been the impact on the economy as a whole? It’s difficult to say, but we have two important indicators: prices of rice and foreign currency on North Korean markets. The data on these two indicators is far from perfect, and it is difficult, if not impossible, to draw firm conclusions from it. (For an explanation of this data, and the rationale for using rice prices in lieu of the formal goods basket used to measure inflation in other countries, see this article, for example). Nevertheless, neither of the two indicators suggest a situation out of the ordinary on North Korean markets during the period that “maximum pressure” has been applied.

First, a look at rice prices. If sanctions were truly devastating the North Korean economy, there is a whole host of reasons why one should expect rice prices to increase.

One of them is expectations of worse times to come as importing inputs for agriculture as well as food becomes increasingly difficult. Another is that if importing food products in general* becomes more difficult, perhaps because Chinese traders anticipate that their North Korean counterparts won’t be able to pay, consumers would be expected to switch more of their consumption to domestically sourced goods, increasing demand and thus prices. In general, anxiety about worsening times often leads to inflation.

This does not seem to have happened. In fact, rice prices have been remarkably stable over the past year (if the graph looks strange, click for full image):

There may well be other forces at work, too. Increased smuggling of cheaper Chinese rice, for example, may well have contributed to the price stability. But this is in itself a sign of the resiliency of the North Korean economy; when some supply decreases, there are ways of compensating through other means.

Exchange rates are another important metric. If the inflow of foreign currency (in this case US dollars) decreases, its price – the exchange rate – should go up. Expectations matter here, too: if the market expects that foreign currency supply will dry up in the future, it tends to act in the present and make purchases today to hedge for tomorrow. As with rice prices, exchange rates have been remarkably stable over the past year (again, click for better image):

In sum, we have little or no hard evidence that the North Korean economy, on the whole, has suffered significantly and harshly from sanctions thus far. That may itself not be an argument against sanctions, since again, it may take much longer than just a year for their full impact to play out. But it does call into question the claims that “maximum pressure” is the chief reason for Kim Jong-un’s outreach to Donald Trump.

*This likely holds true regardless of the level of self-sufficiency in North Korea’s agricultural production.

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North Korean markets insulated from sanctions, but not forever

Wednesday, March 7th, 2018

Posted by Benjamin Katzeff Silberstein

Analysis at Daily NK:

In 2017 alone, the United Nations Security Council passed four major sanctions resolutions against North Korea: Resolutions 2356, 2371, 2375, and 2397. Under the measures, the North’s crude oil imports were restricted, and coal and mineral exports were banned. Additionally, the North was prohibited from sending its laborers to work abroad – one of the key ways in which the regime earns foreign currency.
“One cannot say that, on a macro level, sanctions against North Korea have been ineffective,” said Lee Seok Ki, a senior researcher at the Korea Institute for Industrial Economics and Trade (KIET). “Since around August or September of 2017, the North’s exports have dropped significantly, and we have seen a major impact from sanctions on their industrial output. The country’s anthracite (coal) exports are down 66% compared to the previous year, which is a devastating hit to their mining sector, and the trend is expected to continue.”
Lee added that while most indicators point to declining imports, it remains difficult to conclude that sanctions have had the same effect on the North Korean manufacturing sector. Despite this, Lee noted that “sanctions are having an effect on the trade sector and we will continue to see both quantitative and qualitative effects in the long term.”
Other experts support the opinion that sanctions are working against the North’s overall trade. “North Korea’s exports to China are down 37%, which has led to a further 1.8% drop in growth for the North’s economy over the last year,” said Kim Byung Yeon, a professor at the Department of Economics at Seoul National University.
“If the North is unable to get sanctions lifted, the growth rate for their economy could drop to as low as minus 5% in the next year,” Kim added, explaining that the effects on economic growth will be significant due to the structure of the North’s economy and the relatively high proportion that exports contribute to it.
Kim said that citizens working in the trade sector have been most affected by sanctions, though he points to the government as taking the most damage. “Most trade has been conducted by state-owned and party- or military-run companies, meaning that the elite class and government officials take a big hit from sanctions,” Kim said. “Kim Jong Un relies heavily on trade as a source of income (for his regime), which means that the person most impacted by sanctions is none other than Kim Jong Un.”
But while sanctions appear to be having a significant effect on the North’s trade and industry, experts are noting that the local markets in the country have not been affected as heavily.
“When you look at the price of rice or the exchange rate over time, it’s hard to see any major effect of sanctions (on local markets),” KIET researcher Lee said.
Daily NK’s own research has come to the same conclusion, finding that the price of rice in North Korea’s markets has remained steady at around 4,000 to 5,000 KPW per kg since the beginning of the recent surge in international sanctions.
“People have been relying on themselves, actively participating in the markets and smuggling since the end of the Arduous March (great famine of the 1990s), which means that sanctions do not yet seem to be having an effect on the markets,” said a source in North Hamgyong Province, pointing to the steady availability of consumer goods as evidence.
“Kim Jong Un has instituted improvements in the quality of domestic-made goods, leading to these products in many cases pushing out Chinese versions from the markets,” said Lee Geun Young, Professor at the Yanbian University Department of Political and Public Administration. “There are now fewer items being brought in from China, so these products are having less influence on market prices.”
However, experts also believe that the damage inflicted by sanctions will inevitably reach the markets. “It’s not easy to precisely predict when the effect of sanctions will reach the markets,” Professor Kim said. “But one thing is clear: because many items rely on some form of importation, the long-term effects of a continuing decline in trade will inevitably lead to a reduction in the volume of available goods and a decrease in consumer purchasing power.”
Article source:
North Korean markets insulated from sanctions, though not forever
Jang Seul Gi
Daily NK
2018-03-07
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International sanctions to reported to hit DPRK economy harder

Wednesday, February 28th, 2018

According to Yonhap:

A series of international sanctions will likely plunge the North Korean economy into a deeper slump this year and sharply worsen the living conditions of its citizens, a report said Wednesday.

The United States, the United Nations and other nations imposed tough economic sanctions on the reclusive country in retaliation for its nuclear and missile tests last year.

Lee Suk, a senior researcher at the state-run Korea Development Institute (KDI) and one of the report’s authors, said the international sanctions clearly dented North Korea’s trade last year, stalling or contracting its industrial activity and agricultural output.

“The impact of the sanctions doesn’t appear to have spilled over into the market yet, but there is a possibility that North Korea may suffer further setbacks in production, trade and consumption, sharply aggravating the welfare of economic actors.”

Kim Young-hoon of the Korea Rural Economic Institute estimated North Korea’s grain output for 2017 at 4.71 million tons, down 2 percent from the previous year.

“Pyongyang’s farm production didn’t increase last year, despite a series of agricultural reform measures since 2012,” Kim said. “It is difficult to paint a positive picture of North Korea’s food supply and demand this year.”

Lee Jong-kyu, a KDI researcher, said North Korea’s coal exports to China, its chief ally and economic benefactor, tumbled 78.5 percent on-year in 2017, with their dollar value sinking 66 percent.

The plunge contributed nearly 80 percent to the decrease in the value of North Korean trade with China last year, Lee said, predicting tougher international sanctions will give Pyongyang less leeway in its policy options this year.

Lee Suk-ki, a researcher at the Korea Institute for Industrial Economics & Trade, estimated that North Korea’s mining, agricultural and construction sectors stalled or contracted in 2017, compared with the previous year.

The sectors’ slack or weaker activity probably resulted from a severe drought, a decline in trade stemming from international economic sanctions and a correction following the previous year’s push to ramp up production, the economist said.

This article is derived from the  February 2018 issue of the monthly KDI Review of the North Korean Economy. See page 45 of this PDF (in Korean).

Read the full Yonhap story here
Int’l sanctions to hit N.K economy harder: report
Yonhap
2018-2-28

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US prepares maritime interdiction to stop North Korean sanctions evasion

Friday, February 23rd, 2018

By Benjamin Katzeff Silberstein

As the Winter Olympics with all its inter-Korean contacts wind down, the US is preparing to place Coast Guard forces to stop and search vessels in Asia-Pacific waters, to prevent North Korean sanctions circumvention. Reuters:

Washington has been talking to regional partners, including Japan, South Korea, Australia and Singapore, about coordinating a stepped-up crackdown that would go further than ever before in an attempt to squeeze Pyongyang’s use of seagoing trade to feed its nuclear missile program, several officials told Reuters.

While suspect ships have been intercepted before, the emerging strategy would expand the scope of such operations but stop short of imposing a naval blockade on North Korea. Pyongyang has warned it would consider a blockade an act of war.

The strategy calls for closer tracking and possible seizure of ships suspected of carrying banned weapons components and other prohibited cargo to or from North Korea, according to the officials, who spoke on condition of anonymity. Depending on the scale of the campaign, the United States could consider beefing up the naval and air power of its Pacific Command, they said.

The U.S.-led initiative, which has not been previously reported, shows Washington’s increasing urgency to force North Korea into negotiations over the abandonment of its weapons programs, the officials said.

North Korea may be only a few months away from completing development of a nuclear-tipped missile capable of hitting the U.S. mainland, despite existing international sanctions that, at times, have been sidestepped by smuggling and ship-to-ship transfers at sea of banned goods, according to officials.

“There is no doubt we all have to do more, short of direct military action, to show (North Korean leader) Kim Jong Un we mean business,” said a senior administration official.

The White House declined official comment.

The effort could target vessels on the high seas or in the territorial waters of countries that choose to cooperate. It was unclear, however, to what extent the campaign might extend beyond Asia.

Washington on Friday slapped sanctions on dozens more companies and vessels linked to North Korean shipping trade and urged the United Nations to blacklist a list of entities, a move it said was aimed at shutting down North Korea’s illicit maritime smuggling activities to obtain oil and sell coal.

Tighter sanctions plus a more assertive approach at sea could dial up tensions at a time when fragile diplomacy between North and South Korea has gained momentum. It would also stretch U.S. military resources needed elsewhere, possibly incur massive new costs and fuel misgivings among some countries in the region.

The initiative, which is being developed, would be fraught with challenges that could risk triggering North Korean retaliation and dividing the international community.

China and Russia, which have blocked U.S. efforts at the United Nations to win approval for use of force in North Korea interdiction operations, are likely to oppose new actions if they see the United States as overstepping. A Chinese official, speaking on condition of anonymity, said such steps should only be taken under United Nations auspices.

China’s Foreign Ministry, in a statement to Reuters, said they did not know anything about the plan, but that in principle China believes U.N. resolutions on North Korea should be fully and thoroughly implemented.

“At the same time, we hope relevant countries act in accordance with Security Council resolutions and international law,” it added, without elaborating.

Full article:
Exclusive: U.S. prepares high-seas crackdown on North Korea sanctions evaders – source
Phil Stewart, David Brunnstrom
Reuters
2018-02-23

I won’t go into the strategic and political implications, but when it comes to sanctions circumvention, a plan like this, thoroughly executed, would likely raise the costs of North Korean sanctions circumvention. Even with what sanctioned trade still goes on, there’s likely a substantial premium charged by traders that deal with North Korea because of the risks involved. As those risks go up, so should the premium. No measures can make circumvention fully impossible, but it can get a whole lot more expensive.

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