Archive for the ‘Nautilus Institute’ Category

North Korea: Changing but Stable

Sunday, May 16th, 2010

Nautilus Institute Policy Forum
Policy Forum Online 10-027A

Alexander Mansourov

North Korea is not static and inflexible. Indeed, there tends to be a very dynamic picture once you look below the surface. Change is a constant but, as in almost any state or society, it brings about tension. However, there is little or no sign that current tensions, caused by changes in the distribution of power within the leaderships’ core cadre, positioning for succession, or economic reforms are eroding the overall strength of the regime. While such tensions may spill over into society, there have been no signs that they have risen to a level that significantly weakens the regime or have made it feel that drastic action is needed.

Contrary to the popular view, North Korea is not being torn apart by an epic battle between the state and markets. The two have over time established an uneasy but symbiotic relationship. The state still considers the markets as parasites and vice versa, but each has learned to exist with the other. The popular argument that the reopening of markets in the North after their alleged (but unverified) closure is a sign of government capitulation before their power is not persuasive.

Much of the “evidence” we have for the latest uptick in internal tensions following the currency redenomination consists of recycled stories from unproven or unreliable sources relating anecdotes from small slices of the country. These publicly available sources for North Korea are very subjective and come through the lens of defector groups and humanitarian non-governmental organizations that, quite frankly, have their own agendas. Corroborating these reports is often impossible. Separating speculation from rumor and fact is difficult. The best we can do is to strip back some of the speculative veneer and establish hypotheses we can test over time.

What is Really Happening?

In spite of recent speculation in the New York Times and other Western media about North Korea’s growing economic desperation and political instability, Pyongyang is, in fact, on a path of economic stabilization. Last year’s harvest was relatively good-the second in a row-thanks to a raft of developments including favorable weather conditions, no pest infestations, increased fertilizer imports from China, double-cropping, and the refurbishment of the obsolete irrigation system. Thanks to the commissioning of several large-scale hydro-power plants which supply electricity to major urban residential areas and industrial zones, North Korea generated more electricity in 2009 than the year before, although losses in the transmission system remain significant.

According to China’s Xinhua news agency, industrial production in North Korea grew by almost 11 percent last year and 16 percent in the first quarter of 2010, compared to the first quarter of 2009. That positive development was facilitated by two nationwide labor mobilization campaigns-the “150-day campaign” and “100-day campaign” as well as growth in extractive industries, construction, a revival of heavy industries, modernization of the consumer-oriented industries and the expansion of the high-tech sector, especially, information and biotechnology.

Despite a decline in inter-Korean commerce and international sanctions imposed after the North’s missile and nuclear tests in early 2009, foreign trade did not contract in any meaningful way thanks to burgeoning ties with China. Moreover, Beijing seems to be committed to dramatically expanding its direct investments in the development of the North’s infrastructure, manufacturing, and service sectors.

There is no question that, for ideological, political, and national security reasons, North Korea’s macroeconomic policy has always been oriented towards the needs of domestic producers. The requirements of large-scale munitions and heavy industries have been the top priority, an orientation that has handicapped the development of domestic consumer-oriented industries. Since the collapse of the government-run, public food distribution system in the 1990s, Pyongyang has largely neglected the interests of individual consumers. It has allowed inflation to eat away at their disposable income, leaving them with only a few possible coping strategies. Those strategies have included pilferage of state assets, official corruption and participation in emerging retail markets where quasi-private merchants have been trading mostly in domestic agricultural produce and Chinese manufactured goods.

As the state-owned economic sector began to recover in the past two years, it had to confront labor shortages, rising production costs, and a powerful competitor-China. Whereas the extractive industries (especially coal and ore mining) benefitted from skyrocketing global raw materials prices as well as proximity and access to the ever-hungry Chinese market, the manufacturing industries hit the “Great Chinese Wall” of cheap consumer goods and industrial products that flooded the country. The competition was killing North Korea’s domestic manufacturers, who had barely begun to recover from two decades of depression.

At the same time, the North’s consumers-always conscious of rampant inflation-dodged mandatory savings requirements and began to increase consumption. They started to develop a clear preference for spending their meager disposable incomes on foreign-made goods in the newly emerging farmers’ and general industrial markets rather than in state-owned stores. Insensitive to the plight of the domestic industries, consumers voted with their purses for better quality, albeit more expensive, imports.

In addition, this development helped drain liquidity from the state banking system. Since the post-July 2002 economic reforms, salaries and money earned by private merchants were rarely deposited in bank accounts and returned to regular state banking channels. Instead, they circulated in emerging markets, were stored in kimchi jars, buried underground, or exchanged for renminbi or euros and taken out of the country by foreign (mostly Chinese) traders. Despite the Central Bank’s proclivity to print more money to increase the supply needed for state investment (which in turn fueled inflation), industrial producers were confronted with increasing difficulty in procuring investment funds from the state banking system, which was running short on previously mandatory individual bank deposits.

Rationale for Current Macroeconomic Stabilization Measures

In formulating the current round of measures, the authorities had to figure out how to cut a political, economic and social Gordian knot. Their options were restricted by an uncertain leadership agenda, ideological confines, political biases, lack of extensive macroeconomic stabilization experience, and scarce resources.

First, they had to reconcile the interests of domestic producers, very well represented by senior managers of state-owned enterprises at all levels of state power, otherwise known as the red directorate, who pressed the government to lower their rising production costs and to protect them from foreign (Chinese) competition. At the same time, consumers, asserting themselves through the nationwide structures of people’s committees and public organizations, sought higher salaries and alternative employment in the non-state sector, with a preference to consume higher quality imports.

Second, they had to reconcile the interests of state bankers-who were urging modernization and re-capitalization of the state banking system in the throes of an unprecedented credit squeeze-with those of the general population worried about inflation, mistrustful of the system, and reluctant to keep their savings in banks.

Third, they needed to find a way to repay the people’s life bond funds “borrowed” from the population in 2003 while also mobilizing additional funds for future capital investment even through confiscatory measures.

Fourth, they probably wanted to restore public confidence in the national currency and must have been motivated by a desire to combat inflationary expectations as well as to signal that inflationary days were over.

Fifth, they probably wanted to curb the growing influence of the new moneyed class demanding fewer restrictions on its businesses and foreign exchange transactions, while placating the regime loyalists, who still believed official propaganda and defended the advantages of the socialist economic system.

Sixth, they wanted to restore the credibility of the state-centered economic management system as demanded by the anti-market neo-conservatives from the party establishment. At the same time, policy-makers wanted to restrain the ever-present bureaucratic class seeking to control, license, and regulate anything and everything, which gave rise to rampant official corruption.

Finally, they wanted to re-assert monetary sovereignty since growing foreign currency substitution was undermining the central bank’s control over the money supply. The loss of monetary sovereignty would have become an insurmountable practical obstacle to building a “strong and powerful state” by 2012, North Korea’s publicly stated objective, and could not be tolerated politically, especially during a leadership transition period.

In an interview with Kyodo News on April 18, 2009, Ri Ki Song, economics professor at the Economic Institute of the Academy of Social Sciences, a North Korean government think tank, pointed out that “redenomination was intended to curb inflation, enhance currency values and create a favorable environment for economic management, and it was also aimed at stabilization and improvement of the people’s livelihood by supplying goods through a systematic national distribution system.”

Outlines of the New “Package Deal”

The currency redenomination began to unfold in late 2009. In November, the Supreme People’s Assembly (SPA) Presidium issued a decree “On Issuing New Currency.” At the same time, the Cabinet of Ministers promulgated two decisions entitled “On Stabilizing People’s Livelihood” and “On Establishing Proper Order in Economic Management System.” These were quickly followed by a series of new regulations issued by the Central Bank, Ministries of Finance and Commerce, Price Regulation Bureau, General Bureau of Customs, and other government agencies.

The purpose of these initial steps appears to have been two-fold. First, the North wanted to reinvigorate domestic production of consumer goods. That would be done through import substitution as well as rebuilding the purchasing power and stabilizing the living standards of the mass of budgetary employees. The livelihood of these people-who constitute the overwhelming majority of the workforce, are employed at institutions such as state-owned industries, hospitals and schools and are paid out of the state budget-had been gradually eroded by marketization and high inflation. Second, the reform was designed to encourage savings as well as induce cash flow from proliferating black markets to the state banking system, which had been rapidly losing its handle on money in circulation.

While this move has been portrayed in much of the Western media as a “failure” that has caused significant tensions inside the North, in fact, it is too early to declare these measures either a failure or success. Such redenominations are almost always a source of tension when they are carried out in any country and often need to be adjusted or implemented again before achieving the intended results. North Korean economist Ri Ki Song admitted that “Price adjustments and other related measures were not implemented quickly enough, and there was a situation where [North Korea] could not open the market for several days.” But he took issue with “some Western reports that did not reflect what actually happened.” Ri noted that “In the early days immediately after the currency change, market prices were not fixed, so markets were closed for some days, but now all markets are open, and people are buying daily necessities in the markets.”[1] If inflation is eventually tamed and the currency exchange rate stabilized in the long run-the verdict is still out on both accounts-then these measures may eventually be viewed as a partial success.

As always, there were winners and losers but, once again, the reality appears to be somewhat less clear-cut than has been assumed by the Western media, economists and other analysts. In view of the ongoing preparations for the leadership succession, the redenomination could be viewed as a populist measure aimed at inflicting pain on less than 10 percent of the population through wealth redistribution in order to win support from more than 90 percent of the population who still live on state salaries and have not seen any improvement in their life despite burgeoning market activities. North Korea is still fundamentally a socialist society, and Kim Jong Il’s regime probably won some measure of support from the vast majority of North Koreans for its crackdown on corruption and abuses by rich traders and corrupt government officials who benefitted the most from bustling activity in black markets.

Private merchants may have felt some pain (although likely had stored their wealth in goods, commodities or foreign exchange rather than the old North Korean currency). But the heaviest losses appear to have been suffered by corrupt low and mid-ranking officials from the “power organs” (People’s Security and State Security officers as well as officials from courts and prosecutors’ offices) and government bureaucrats who wielded licensing, auditing, or controlling authority at the county and provincial levels. They had allegedly accumulated substantial savings through bribes and abuse of power and kept their ill-gotten gains in kimchi jars and under the mattresses at home. As a result, these officials could not find a way to get these stacks of old banknotes exchanged for new ones. According to a knowledgeable South Korean source, it is their money that was reported floating in sacks down the Yalu River after redenomination, not the traders’ capital. In short, the currency move may have ended up as more of a strike against corrupt officials and local elites rather than private traders. With markets re-opening and private trade resuming in late January, the latter rebounded fairly quickly, whereas it is likely to take a long time for the corrupt mid-level bureaucrats to recoup their losses through a new round of bribes and extortion.

In Ri Ki Song’s judgment, “an unstable situation occurred temporarily and partially after the currency redenomination,” but, “it did not lead to social chaos at all, and the unstable situation was quickly brought under control.”[2]

Following the currency redenomination, the next government move was to reset the official prices for commodities, such as grains, meats, and fuel, manufactured goods including textiles and daily necessities, and real estate use and utility fees to the pre-2002 level. Salaries of employees in the state sector of the economy were also adjusted, but at a much higher level. Reportedly, those who previously were paid up to 3,000 old won per a month saw an average 8 percent raise in their salaries, whereas those who used to receive a salary of more than 3,000 old won per month saw a decrease on the average of 10 percent per month. Farmers in the cooperative sector were reported to have received a one-time cash payout from 50,000 to 150,000 won in new money. These economic measures initially increased the purchasing power of most consumers in the country, especially those who depended solely on state salaries and wages for their income.

Even according to the Seoul government, the DPRK’s market prices and currency exchange rate appear to be stabilizing after predictable fluctuations from the surprise government-led currency redenomination last year. In its latest report on North Korea submitted to the National Assembly’s foreign affairs committee, the Unification Ministry said that market prices in the country were on a “downward path” following recent measures by the authorities. A kilogram of rice, which cost around 20 DPRK won immediately after the revaluation, soared to 1,000 won in mid-March but dropped to the 500-600 won range in early April, according to the ministry.

Furthermore, the North Korean government released another broadside of legislation in December and January: the Presidium of the Supreme People’s Assembly revised a number of laws pertinent to economic management ranging from those governing real estate management and commodities consumption to general equipment import, labor accounting, agricultural farms, water supply, sewage, and ship crews. These measures were aimed at bringing the existing regulatory framework in line with the new realities of an emerging market economy, where a growing number of corporate and private interests compete for access to and use of public assets. For example, the Real Estate Management Law is aimed at restructuring existing regulations for the use of public lands, especially for corporate and private purposes, and strengthening the ability of the state to collect real estate taxes and land use fees. It also stipulates the new right to grant “long-term land leases” to foreigners, which is especially important in promoting foreign investment in special economic zones such as Rason and Kaesong.

In January, the North’s Foreign Trade magazine unveiled the contours of the new tariff system established in accordance with the latest revisions in the regulations for the implementation of the DPRK Customs Law and the provisions of the Customs Law. In addition, late last year Kim Jong Il reportedly authorized the restructuring of the foreign trade management system, expanding the prerogatives of general trading companies and upgrading the status of special economic zones, in hopes of boosting domestic production of the export-oriented goods, encouraging import substitution, and attracting foreign investment in the consumer goods sector.

Also in January, the North Korean authorities revealed their intention to seek foreign investment and to reform the state banking system by establishing the second tier of quasi-commercial banks-the State Development Bank, Export-Import Bank, and State Science and Technology Fund-backed partially by the Central Bank and partially by foreign capital.

The stated goals behind this innovation in banking policy are to create favorable financial conditions for the implementation of a 10-year economic infrastructure development plan and five-year science and technology development plan, as well as to facilitate further expansion of foreign trade. The first plan envisions the implementation of six major projects-the development of food production, modernization of railways, construction of roads, expansion of ports, modernization of electric power grid, and development of the energy sector-within the next ten years, to be funded outside the regular state budget channels, primarily relying on Chinese venture capital. The five-year plan stipulates an increase in the state’s investment in science and technology as one of the pillars for a “prosperous, powerful nation,” with a focus on information technology, nano technology and bioengineering.

The notion that all of the measures announced in December 2009 and January 2010 were a hurried response to negative public reaction to problems in the currency revaluation is a little hard to accept. More likely, these were part of a longer-term development strategy of which the currency measures were only one component.

To sum up, North Korea is changing. The latest demonstration of the government’s desire to facilitate change is the new package of economic adjustment measures. Those measures seek to displace imports, restore self-reliance, and consolidate state control over the economic system at the expense of the newly emerging proto-markets in retail trade and the small private merchant class that may create political headaches for the regime down the road.

Subsequently, we may see the establishment of a new-more protectionist and statist-equilibrium in the relationship between domestic producers (industrial factories and plants), importers (trading companies), financiers (state bankers and foreign capital), and consumers (state retail industry and private markets). This might involve the government’s efforts to further control the demand, regulate the supply of imported goods through selective protectionist tariff measures, raise funds for new infrastructure and facility investment, boost the supply of domestically manufactured goods and make them more competitive and affordable.

How this will all work out remains to be seen. Whether the new equilibrium will facilitate economic growth and contribute to increasing production, trade, and consumption, or end up in economic failure causing social chaos and political instability is obviously the core question. Contrary to the rampant, often inaccurate speculation in the Western media, it’s much too soon to tell.


Why the Sunshine Policy Made Sense

Thursday, April 1st, 2010

Nautilus Institute Policy Forum Online 10-020A: April 1st, 2010
James E. Hoare

I. Introduction

James E. Hoare was Britain’s Chargé d’Affaires to the DPRK from 2001-2002 and opened the British Embassy in Pyongyang. In this article on the Sunshine policy he writes, “Slowly, the policy was creating a group of people who could see benefits in remaining on good terms with South Korea and who had wider links with the outside world. Engagement has worked in other countries, most noticeably China, and I believe that it was beginning to work in North Korea. There was never going to be a speedy change in attitudes built up over sixty years, but stopping the process after ten was not a wise decision.”

This article was published by 38 North a web site devoted to analysis of North Korea from the U.S.-Korea Institute at SAIS. 38 North will harness the experience of long-time observers of North Korea and others who have dealt directly with North Koreans. It will also draw on other experts outside the field who might bring fresh, well, informed insights to those of us who follow North Korea.

The views expressed in this article are those of the author and do not necessarily reflect the official policy or position of the Nautilus Institute. Readers should note that Nautilus seeks a diversity of views and opinions on contentious topics in order to identify common ground.

II. Article by James E. Hoare

– “Why the Sunshine Policy Made Sense”
By James E. Hoare

At a recent private meeting in London, a former senior United Nations’ official, drawing on experience relating to a wide range of countries, said that transforming a “failing” or “fragile” state was not something that could be done overnight. Those involved needed to think in terms of ten to twenty years rather than weeks or months. Regardless of whether or not one accepts the idea of the Democratic People’s Republic of Korea (DPRK or North Korea) as a failed or even fragile state-and the term is often used in some quarters-the idea that one is in for the long haul in bringing about major modifications in behavior and attitude is certainly a good one to have in mind when dealing with the DRPK. It was such an approach that marked the Republic of Korea’s policy towards the North under former Presidents Kim Dae-jung and Roh Moo-hyun.

Since the Lee Myung-bak government took office in the Republic of Korea (ROK or South Korea) in 2008, it is fashionable to dismiss the policies followed by his predecessors as an expensive failure. Sneers about “ATM diplomacy,” innuendo about Kim Dae-jung’s motives, and references to his successor Roh Moo-hyun’s naivety, are the commonplace of South Korean academic and press comment, and are heard much further afield. “Sunshine” or engagement have become terms of mockery. The Lee government has adopted a more aggressive policy towards North Korea. It has not refused assistance outright, but has couched its offers in such a way that rejection is inevitable-the most recent example is the “grand bargain” proposed in 2009 in which the DPRK must first give up its nuclear program to receive security guarantees and aid. This is then played back as evidence that the North is incorrigible and not deserving of assistance.

The Lee government’s approach is based on an incorrect assessment both of the Sunshine Policy and what went before it. “Sunshine” or “engagement” was not something that sprang from Kim Dae-jung’s fertile brain, though he certainly can be credited with refining and developing the idea. The policies pursued by Kim and Roh lay firmly within a tradition that goes back to President Park Chung Hee in the early 1970s and that was followed by all his successors to a greater or lesser degree. However, it was never easy to engage the North and it did not take much to divert earlier presidents from such a policy. Frustrated or annoyed, they eventually gave up the effort.

The difference after 1998 was that South Korea stuck to “sunshine” even when there were difficulties. Neither Kim nor Roh were starry-eyed and neither expected that the North would be changed overnight. Both responded to Pyongyang’s bad behavior with firmness. But they realized that circumstances had changed with the famine and other problems that hit North Korea in the 1990s. They also realized that for engagement to be successful, it was best to avoid rubbing in the fact that the country faced real problems. Even if the explanations offered for the problems often ignored the North Korean regime’s own part in bringing them about, there was nevertheless an acceptance that help was needed. The unprecedented appeal for outside assistance that brought in UN agencies and resident non-governmental organizations in the late 1990s showed that the South would help without preaching. No doubt the expense and complications of German reunification also gave pause for thought. If the two Germanys, which had not fought a savage war and were far richer, could not achieve a smooth reintegration, how could the two Koreas?

So Kim and Roh did not break off engagement as a result of “bad” behavior or outside criticism of “soft policies.” They accepted that it would take a long time to modify Pyongyang’s policies and that there were likely to be few expressions of thanks. Of course there was no instant transformation. But the new approach provided a window for other countries to establish relations with North Korea. In theory, it had long been the South’s policy to allow if not to encourage such relations, but the reality had been different. From 2000 onwards, that changed. Countries that had hitherto held back for fear of offending Seoul now found themselves encouraged to establish relations with Pyongyang.

Those that did so found a North Korea that seemed eager for change, although very careful about how that eagerness was expressed. But there was a readiness to do things that would have seemed improbable only ten years before. While never quite admitting that the policies pursued under Kim Il Sung and Kim Jong Il might have had defects, those of us working in the North between 2000-2002 found a willingness on the part of officials to admit that they needed assistance and that mistakes had been made. Examples included a vice-mayor who admitted that post-Korean War town planning had many defects that were only then becoming obvious. Officials were willing to admit that the country was in need of a whole range of economic and commercial skills that had hitherto been neglected. Perhaps most telling of all, a country that had responded to the changes in the former Soviet Union, Eastern Europe and China in the early 1990s by calling home all its overseas students now was most anxious to send students abroad once again.

Engagement was thus helping to open North Korean eyes to possibilities beyond juche, but unfortunately, even before the 2002 nuclear crisis, there was relatively little follow-up on these expressions of intent. Pyongyang found difficulty in matching students to the requirements of foreign universities and other training institutions. Some countries that established diplomatic relations preferred to concentrate on human rights issues to the exclusion of other matters. Since several of these were members of the European Union (EU), their approach inevitably affected the EU’s broad approach to North Korea. Even among countries that did not give predominance to human rights, goodwill was rarely transformed into sufficient funding to make a real difference.

That said, in the British case alone, we were able to fund several sessions of economics training, an English-language training program that put initially two-now four -British teachers into DPRK universities to train English teachers, and intensive English courses for a variety of North Korean officials. In addition, non-governmental bodies such as the BBC and Reuters conducted training programs for media staff in modern methods of news presentation and communication skills. Perhaps if the United States had been more supportive of its ally’s engagement policy these efforts would have made a difference. But as the relatively benign approach towards engagement of the Clinton years gave way to hostility under President George W. Bush after 2000 that too had an impact on how far countries such as Britain would support the sunshine policy.

It was South Korea’s approach to engagement that had the greatest impact. Seoul’s aid and other measures taken under the umbrella of the “sunshine” approach brought North and South into contact across many fields. During the period from 1998-2008, the North became known to South Korean citizens in a totally unprecedented way. The process had begun earlier, especially during the Roh Tae-woo presidency (1988-93), but the trickle of information about the North of those years became a flood. And it was not only information but actual contact with North Korea. For some, this meant tightly controlled tours to the Diamond Mountains (Mount Kumgang) or towards the end of the period, to Kaesong at the western end of the Demilitarized Zone. Limited though these were, they were still a glimpse into what had hitherto been unknown and feared. There were also signs that, as the North got used to the idea of such visits, it might open up a little more; the decision to allow the use of visitors’ own cars in March 2008 was one such indication, but there were several others.

Much more important were the wide range of government and non-governmental contacts. Relatively few North Koreans came South but the traffic in the other direction was enormous. On any given day, there were likely to be several thousand South Korean visitors in the North, dealing with aid, trade, cultural, educational and even religious exchanges-both the Protestant and the Roman Catholic churches in the North had regular South Korean officiating ministers as well as hymnbooks and prayer books produced in the ROK. South Korean journalists were also a not uncommon sight. Most of this activity may have been confined to Pyongyang, by not all of it was. South Koreans were visiting many parts of the country, especially in connection with agricultural assistance and other aid-related projects. Nobody was starry-eyed about these visits. South Korean visitors were watched and controlled. But they were able to learn a lot since they could speak and read Korean. If the projects agreed to at the October 2007 summit between Kim Jong-il and Roh Moo-hyun had been implemented by the incoming Lee Myung-bak government, there would have been a huge increase in these types of contacts.

No doubt engagement was expensive and sometimes the means used to bring it about were shady, but it was producing benefits. The South, and to some extent the rest of the world, now has a far better understanding of how North Korea works then it did before engagement began. Within the North, a large number of people have come to see their southern compatriots in a less hostile light and have some, even if limited, understanding of the economic and social structures of South Korea. Perhaps some of the assistance provided was diverted away from its original purpose, but enough rice and fertilizer bags reached areas far away from Pyongyang and enough people were willing to ask questions about the South to show that the impact of engagement extended beyond a small circle of ruling elite. Slowly, the policy was creating a group of people who could see benefits in remaining on good terms with South Korea and who had wider links with the outside world. Engagement has worked in other countries, most noticeably China, and I believe that it was beginning to work in North Korea. There was never going to be a speedy change in attitudes built up over sixty years, but stopping the process after ten was not a wise decision.


Succession – A Dictator’s Dilemma

Wednesday, January 17th, 2007

Nautilus Institute
Bryan Port

North Korea’s recent nuclear test clearly demonstrates that the Korean peninsula is the crux of Asian Security. The Democratic People’s Republic of Korea (DPRK), North Korea’s official name, poses a range of challenges. Though the nuclear challenge appears to be the most extreme and urgent, developments in the DPRK could lead to violent conventional military spasms or humanitarian disaster, each with consequences as grave as those posed by DPRK weapons of mass destruction (WMD). Regardless of the challenges, Korea’s future has significant ramifications for the balance of power in East Asia and by extension on American security and prosperity. One day, DPRK leader Kim Chong-il will pass the keys to the kingdom and the nuclear launch codes to a successor. Kim’s choice and how he goes about the succession process will impact East Asia for decades and consequently requires significant consideration in US strategic planning.

Effective foreign policy requires an in depth understanding of the historical, social, and cultural context of other nations, their leaders, and their people. Though the DPRK is opaque, much is known about its history and even its people. From what we know we can develop significant insight. However, the balance of what we don’t know requires that we conduct considerable alternative analysis to define a range of possibilities to facilitate effective planning and policy development. Alternative analysis is imperative regarding the succession issue. Though it is nearly impossible to confidently predict who Kim will choose to succeed him, much less the successor’s prospects, analysts can define a range of plausible scenarios which can play a positive role in strategic planning, and leave the US a fighting chance of avoiding strategic surprise.

DPRK CONTEXT. Before analyzing scenarios for DPRK leadership succession, one must first consider the context and circumstances of the DPRK. The dearth of information available on the DPRK and its leaders can lead analysts to over emphasize a given aspect of the DPRK and through this narrow prism turn the DPRK into a caricature. We commonly see this in how the media and others portray Kim Chong-il. Analysts are also at risk of mirror imaging or applying one’s own cultural and historical frames of reference to the DPRK.

The DPRK is a deeply stratified society. An individual’s place in DPRK society is based largely on one’s family history (Songbun) and political reliability. Those with blood connections to Kim Il-sung or those who fought with Kim Il-sung against the Japanese (partisans), and their offspring, comprise the majority of the DPRK’s elites. It is rare for someone without this background to ascend to elite status in the DPRK. Some may gain a certain level of stability, power, or privilege, for example members of the military or scientists, however without the right bloodlines they will not climb to the pinnacle of power in the DPRK.

Despite its societal stratification, there is a shared societal and historical perspective that must be taken into account when thinking about North Korea or North Koreans. Understanding what the DPRK is, or understanding its leaders, requires placing oneself in the historical mindset of a North Korean. The DPRK is the most Orwellian society the world has ever known. The DPRK is not a communist nation; certainly not in the sense of Marx or the perversion of Marx that was the Soviet Union. North Korea has never known a pluralistic political system, much less democracy.

For nearly its entire history Korea has been a feudalistic society, constantly on the edge of survival at both the societal and individual level. Korea has been under constant threat of invasion. Koreans have struggled merely to subsist, with bouts of hunger or famine a common occurrence. Even in South Korea, stability, to say nothing of prosperity, is a recent development. It is only in the last 20 to 30 years that South Korea moved beyond its history.

Even for the most elderly of today’s North Koreans, the historical context is Japanese colonization, Korean War, emerging totalitarian state under Kim Il-sung, relative stability, Kim Chong-il’s accession to power, famine, and economic depression. North Koreans lack outside information and thus lack the basis for comparative thought about their society. Of course, comparative thought about politics presumes the freedom, sustenance, energy and time required to engage in political thought or activity. Only the elite in the DPRK are positioned to have the luxury of political thought, and they are the stakeholders in the current system.

Though it is difficult to understand from an American perspective, many in the DPRK, including its leaders, do genuinely fear the United States and for that matter other foreign powers including Japan and perhaps even China. This is based on Korea’s history of being subject to multiple foreign conquests and leads to the desire for self-sufficiency. Kim Il-sung very effectively manipulated this historical perspective and Kim Chong-il continues to do so.

DPRK CIRCUMSTANCES. The DPRK is in dire straights. A crumbling infrastructure, local ad hoc solutions to problems and corruption are the common denominators of government, economy, and society. Resources, privileges and even security are obtained through barter or by outright buying the services of a corrupt official. Almost everyone is corrupt from the lowest private in the Army to the senior members of the Korean Workers Party.

The DPRK remains a pervasive police state with a population that lacks even the most rudimentary elements of a functioning civil society. Though corrupt, the security services are powerful. While individuals within the security services are “for hire,” when the regime is threatened the security services can mobilize quickly and effectively against individual or group opposition, real or perceived.

Still, KCI cannot take for granted the continued effectiveness or loyalty of the security services. Although Kim has multiple security services to perform checks and balances, eventually the deterioration of ideological integrity, to say nothing of ruinous state of physical infrastructure and corruption, are emboldening entrepreneurial security personnel. More mischief is possible, and emboldened individuals are more likely to seek out other like-minded individuals, at first for profit, and then perhaps for power.

At this point it appears that members of the security services are happy to simply use and abuse their positions to survive, or in the case of senior members enrich themselves. However, the security services as a whole, and their individual members, will face tough questions about their futures deriving from succession. Some may still consider a successor in ideological terms. Is the successor worthy? Pure enough? Others may consider the successor in terms of their position in the security services and the maintenance of their privileged positions in society. Is the successor capable enough? Will they be demoted or purged? How the security services react to the successor issue will be a key determinant to the successful installation of a successor, and ultimately the stability of the DPRK.

DPRK ELITES. North Korea’s elites face a paranoid, schizophrenic existence. This is not to suggest that KCI, or other DPRK elites, suffer from mental disease. Though it is not unreasonable to believe that like people everywhere, even leaders, that some North Korean leaders suffer from mental illness. Rather, elites in the DPRK have much to loose in the event of political change and corresponding to the stakes are at best anxious and likely paranoid about maintaining their positions. The only person who is secure in his position in the current regime is Kim Chong-il.

Chang Song-taek is married to Kim Chong-il’s younger sister Kim Kyong-hui. Until 2003, Chang was considered the second most powerful man in the DPRK, and held the title of first deputy director of the Organization and Guidance Department. In 2003 KCI had Chang arrested. No one is certain as to the reasons for Chang’s fall from power, but speculation exists that Chang had been too overt in his support of Kim Chong-il’s oldest son, Kim Chong-nam, in the race for succession. Even though Chang has been rehabilitated and returned to a position of power, his situation shows that no member of the DPRK elite is secure. The security apparatus is ever present and mistakes often lead to a concentration camp or death.

North Korea’s elites face incredible challenges and pressure. They must at once protect their own interests and also take actions that preserve the regime, which is the source of their relatively privileged existence. These two goals are often at odds, and may even be mutually exclusive. North Korean elites must apply the filter of Juche ideology to their actions and/or be prepared to explain or justify actions in ideological terms.

Elites in the DPRK share in common with elites everywhere a calculating nature and wish to position themselves and their allies to survive and prosper in the future. For this reason, it is imperative for elites in the DPRK to analyze the succession issue, and conduct their affairs so as to maintain favor with KCI, but also be at the vanguard of a successor’s regime.

Some elites may reach the conclusion that Kim Chong-il’s successor has little chance of consolidating power. Such a determination requires not only confidence in predicting who KCI will choose, but also mandates determining who will be powerful enough to supplant the successor. Following is the even trickier task of currying favor with KCI, the individual they believe KCI will choose to succeed him, and the individual who they believe will actually take power.

At the top of the elite and the pinnacle of the succession issue is Kim Chong-il. Almost all of the analysis of the succession issue assumes that Kim will choose a successor and that it will be one of his sons. However, Kim has surprised us in the past and will likely do so again. Before moving on to consider a range of options available to KCI in terms of choosing a successor, it would help to more specifically consider the context and circumstances of Kim Chong-il.

KIM’S CONTEXT AND CIRCUMSTANCES. Even though we are not really able to understand how KCI views the world, we can roughly understand the context and circumstances in which KCI exists. Kim presides over a failed, if not collapsed, state. While North Korea’s military remains intact, it is not the existential threat to South Korea that it once was. Kim’s security services are effective, perhaps too effective. Kim must have multiple security services, not to produce the best intelligence or efficiently secure the state, but to watch one another.

China, North Korea’s one remaining ally of any significance, supports the DPRK for negative reasons. China doesn’t want to deal with the humanitarian consequences of a complete DRPK collapse. KCI and other DPRK elites must consider that China has significant potential to play an active role in the DPRK’s succession dilemma, and has ample motive to do so. Still, China is unlikely to be overt and direct in the application of its influence, knowing that doing so could prompt a backlash. However, China can indirectly bring its influence to bear on who KCI chooses as successor by providing access to resources and senior Chinese leaders to select North Korean elites. It is also likely not lost on DPRK elites that China has the capability to more directly intervene in North Korean politics should its vital interests be threatened.

South Korea is in much the same position as China in that it does not wish to deal with the humanitarian consequences of a complete DPRK collapse. However, South Korea has a significant financial stake and also a much more “personal” stake in the DPRK’s future. Collapse or violent military spasm on the part of the DPRK will be hugely costly to the South both in financial and human terms. Due to North Korea’s desperate situation, one cannot rule out that the DPRK could lash out, but truly North Korea’s only effective remaining leverage is the gun it holds to its own head (collapse) and the nuclear tipped missiles it claims to point elsewhere.

Although other countries disagree with US policy toward the DPRK, this does not mean they support the DPRK. Unfortunately for Kim, Japan, the one country that is most able to help the DPRK in the short term with cash and resources, is not inclined to do so for a variety of reasons, including the DPRK nuclear and missile threat to Japan, DPRK international criminal activity, and past DPRK abductions of Japanese citizens. About the only thing that may motivate Japan to reconsider its stance is the prospect of normalizing relations in the near-term to pay out its World War II reparations prior to a collapse of the DPRK to avoid potentially more responsibility in the event of a collapse and absorption of the North by the South.

KCI likely understands the Chinese, Japanese and South Korean perspective. Thus KCI likely appreciates not only the dire domestic straights of the DPRK, but also its grim international position.

NOT HIS FATHERS SON. Though Kim Il-sung (KIS) is not the man that DPRK propaganda portrays him to be, and though he is guilty of horrible crimes against humanity, Kim Il-sung did fight the Japanese and suffered in doing so. Through cunning and calculation, as well as brutality, KIS led the DPRK into existence. For much of the first half of its existence, the north outperformed the south. After the Korean War, life improved for many North Koreans under KIS and there was relative peace and the possibility of future prosperity. Still in spite of his power and the genuine love and respect of many in the DPRK, Kim Il-sung spent the better part of 20 years preparing to transfer power to KCI.

Kim Chong-il lacks the credibility and stature of his father. KCI never served in the military, much less fight in a war. Though he has displayed cunning and brutality, he did not overcome challenges on par with those faced by his father. Instead, whether it was completely his fault or not, since KCI assumed power in 1994, the DPRK has suffered military decline, economic failure, famine, and even in at least one case, organized resistance from the segment of society it most relies on, the military.

KCI faces significant challenges with respect not only to the succession issue, but generally with respect to running the DPRK. Conventional analysis assesses that KCI will choose a successor and that he will choose his second son Kim Chong-ch’ol. There is nothing that starkly contradicts the conventional wisdom, however, there is nothing that boldly confirms it either.

CONVENTIONAL WISDOM. There are three acknowledged sons of Kim Chong-il. In order from oldest to youngest, KCI’s sons are Kim Chong-nam, Kim Chong-Ch’ol, and Kim Chong-un. The conventional wisdom holds that KCI will opt for one of his sons to succeed him, probably Kim Chong-ch’ol (KCC).

Until embarrassing his father in 2001 by being arrested in an attempt to visit Tokyo Disneyland, KCI appeared to favor Kim Chong-nam, even though there were few outward signs that a formal succession process had begun. Kim Chong-un is not considered a serious contender, if for no other reason than his age and the presence of two older brothers.

In the past year or so Kim Chong-ch’ol (KCC) has emerged as the front-runner. Indicators include Workers Party of Korea Central Committee Secretariat Instruction No. 0101 (Reported in South Korean Weekly Chosun magazine March 2006). According to this instruction, Kim Chong-ch’ol is the party’s nerve center.

There are several reports, conflicting in detail, but consistent in stating that KCC occupied a formal government position and that he has advanced to a more senior position. Pins and portraits of KCC have appeared, and the KWP has issued instructions on their wear and display. Additionally, some of KCC’s associates accompanied KCI on trip to China to observe economic development, and KCC himself has been in Europe on official business.

Even if KCI has resolved to anoint KCC as successor, that is not a guarantee that the succession itself will go smoothly or that KCC will be able to consolidate power. Many segments of the power elite will view KCC as weak. So long as Kim Chong-il remains a force to be reckoned with, opposition to KCC as successor would be controllable. However, as Kim becomes infirm or dies, challenges to KCC will mount. This will force KCC to share power or do the bidding of factions whose support he requires, presumably the security services or military.

Knowing that KCC may or will not be able to go it alone, KCI may opt to install KCC as ruler of the DPRK, but only as a front man for others who will actually wield power. There may be liberal elements of the power elite who favor Chinese like reform. Should they support KCC, they might be able to begin reviving the DPRK, particularly if they are willing to take steps to gain legitimacy in the international community. On the other hand, factions of the DPRK elite pessimistic about their status in a reformed DPRK, concerned that KCC is too weak to control factions hostile to them, or critical as to KCC’s ability to control the country as could seek to overthrow KCC or force him to keep the DPRK on its present course.

There are other mo[r]e Machiavellian possibilities. KCI may be using KCC to flush out dissent, in effect using KCC as a lightening rod. Due to Kim’s advancing age, questionable health, and the poor condition of the DPRK, many elites are likely questioning their future prospects in terms of not only prosperity, but also basic stability and even survival. At some point, for example if KCI should become infirm or seriously ill, the concerns of the DPRK elite could reach a tipping point. It would be prudent to flush out the most disaffected among the North Korean elite now, rather than later. To this end KCC could serve as a useful target and distraction.

ALTERNATIVE ANALYSIS. KCI in his switch from Kim Chong-nam to Kim Chong-ch’ol demonstrated that he is flexible with respect to his choice of successor and has not taken any irreversible steps in designating KCC as successor. However, this will be the 2nd succession in the DPRK and thus there is little ground to talk about patterns or precedent. Conventional wisdom has often not held when analyzing the DPRK, making alternative analysis imperative.

It is important to remember that Kim Il-sung (KIS) spent 20 years preparing for KCI to assume power, and still upon Kim Il-sung’s sudden death in 1994 it took several more years for KCI to consolidate power. Between KCI’s health and the challenges faced by the DPRK it is not at all certain that KCI has 20 years to lay the foundation for one of his sons to assume power, assuming that this is what KCI actually intends and that it is possible to accomplish another hereditary transfer of power.

If not Kim Chong-Ch’ol then who? What other options are there for KCI? Is the choice entirely Kim Chong-il’s to make? KCI lacks the stature of Kim Il-sung and the DPRK faces significant challenges. Even Kim Il-sung faced resistance in installing his son as ruler. KCI will face challenges greater than those faced by his father, and from a weaker position in terms of his credentials, the current situation in the DPRK, and his very legitimacy.

North Korean society is still rooted in Confucian values, even though those values are distorted by North Korea’s ideology (Juche). Thus other Kim family members warrant consideration, including Kim Chong-il’s daughter Kim Sol-song, his half brother Kim P’yong-il, and Chang Song-t’aek or Chang’s children.

Kim Sol-song is Kim Chong-il’s daughter by Kim Yong-suk (Kim Chong-il’s official wife and the only one recognized by Kim Il-sung). There are reports that she currently handles important aspects of her father’s life, including his personal security. Even if not succeeding KCI she could act in a powerful supporting role, even key decision making role, to Kim Chong-ch’ol, or other successor.

Kim P’yong-il is KCI’s half brother. By some accounts, Kim P’yong-il is everything that KCI is not. P’yong-il was an active duty military officer that had genuine respect from many in the military. It is not entirely clear how KCI edged him out as successor, but it is conceivable that Kim Il-sung favored KCI, viewing P’yong-il as a threat. It is also likely that P’yong-il is not ruthless enough to rule the DPRK. Since 1988 P’yong-il has served in a series of ambassadorships, primarily in Europe.

Bearing in mind the North Koreans mindset, P’yong-il would make a good transitional figure. He carries the Kim name, and perhaps continuity with Kim Il-sung’s interrupted dreams for the DPRK. While he would certainly face opposition from segments of the elite, P’yong-il has a huge advantage in that he would likely garner the support of the military. There is a good chance based on his personal background that P’yong-il would change the course of the country. Of course KCI won’t choose P’yong-il, but in the event that Kim fails to entrench a successor, waits too long, or simply does not choose, P’yong-il becomes viable for segments of the elite concerned about their future status.

Chang Song-t’aek is married to Kim Chong-il’s sister Kim Kyong-hui and has powerful family ties to the military. Though recently purged and rehabilitated, Chang has been and is now again a powerful player in the DPRK. Even if he is unlikely to succeed KCI, Chang can still influence the succession issue. KCI might have purged Chang due to Chang’s view on the succession issue, but a rehabilitated Chang will likely not have changed his mind on the subject, but now knows to be more careful.

Chang’s children carry as much of Kim Il-sung’s blood as the children of KCI. There are not presently any signs that Chang’s children are under consideration, at least as far as KCI is concerned. However, they are out there and should KCI loose control over the process, or should other alternative scenarios play out, Chang’s children are viable alternates, particularly as a figure head for a king maker.

BEYOND FAMILY. There are other forces beside Confucianism at work in the DPRK, thus requiring consideration of other succession scenarios including king maker/power sharing, alternate successors, and even that Kim may have no intention of choosing a successor.

Realizing that any one individual is not likely to be powerful enough to rule, KCI may intend to set up a kingmaker(s) to support his successor. KCI may even prefer that his successor require behind the scenes support. If his chosen successor will be too weak to supplant him, KCI can be confident that he can continue to exercise power out front or behind the scenes until his death. Further, KCI could co-opt some of the most effective challengers to his successor and reward them for present good deeds, helping to ensure loyalty.

It is conventional wisdom that KCI desires to anoint one of his sons, or at least a relative, as the next leader of the DPRK. What if he doesn’t? There are scenarios where it is not beneficial to KCI to see one of his blood relatives assume power.

KCI is almost certainly aware that his sons might not be competent enough or ruthless enough to run the DPRK. Even if KCI is still alive and active, he may be unable to stave off his opponents once a successor is appointed or operating. This could have dire consequences for KCI.

History weighs heavily on the minds of dictators, and the fate of other dictators, such as Romanian leader Ceausescu or Cambodia’s Pol Pot likely weigh on Kim’s mind. KCI could seek a successor with the requisite competence to ensure that he doesn’t meet a similar fate. This may lead Kim to choose someone other than his sons. Such a choice, though not comporting well with Confucian values, might ultimately serve KCI well.

Moving further along the spectrum of alternative analysis, what if the most prudent move for KCI is to not name a successor at all. The mere act of naming a successor creates a focal point for opposition. Ironically, at the same time, naming a successor could also set of[f] infighting to curry favor with the chosen successor at Kim’s expense drawing from Kim’s power base. Those patient and shrewd enough could hold fast making a power play at a point in time where KCI is weakening, but the successor is not strong enough to consolidate power.

Alternative power bases might not matter if the successor is not competent enough to consolidate power. The weakened state of the DPRK and Kim’s lack of legitimacy compared to his father could lead Kim to plan to die in office or abdicate at some point to avoid empowering and facing potential adversaries while still in office; something which could lead to his own demise.

One final possibility deserves consideration. KCI could die suddenly as did his father. For the US and the DPRK’s neighbors, the key concerns remain the same and center on DPRK WMD and the possibility of extreme instability that could result in outward military spasms or complete collapse.

Under a sudden death scenario, whatever steps had been made toward anointing a successor may not matter. Opponents to KCI’s choice may likewise be neutralized. It could all boil down to which of the key players learns of KCI’s death first, and whether or not they can control the news, acting quickly to capitalize on their first mover’s advantage. A particularly ruthless individual could quickly act against the key players most threatening to them, changing the whole power dynamic, regardless of whether they are ultimately successful in assuming power. It is difficult to analyze what KCI might do in terms of a deliberate succession process. It is close to impossible to analyze how a sudden death scenario would play out.

The recent nuclear tests serve to highlight the importance of the succession issue to the US and the DPRK’s neighbors. While external reasoning may have lead KCI to test a nuclear device, it is more likely that internal considerations are driving decisions not only on WMD development, but also on the issue of leadership succession in the DPRK. It is even possible that KCI conducted the nuclear test to shore up his legitimacy by doing something his father never managed to accomplish. Possibly due to concerns over succession or just internal dynamics, KCI may also have conducted the tests to strengthen his domestic powerbase and position with the military.

No matter what KCI decides in terms of succession, the consequences could include a twenty something year old leader with nuclear weapons or a collapsed state ultimately resulting in a re-unified nuclear Korea. Regardless of how the succession issue plays out, Korea will continue to be integral to US and East Asian security and prosperity.


Paek the Opaque: Another Old North Korean Bites the Dust

Tuesday, January 16th, 2007

Aidan Foster-Carter
Nautilus Institute

Everyone is famous for 15 minutes, at least according to the late American pop artist and cultural icon Andy Warhol.

For Paek Nam Sun, that was literally true. North Korea’s foreign minister since 1998, who has just died, hit the headlines just once in all his 77 years – and then only on the inside pages, mainly of the regional press in Asia.

Coffee with evil in Brunei

That was in August 2002, when for a quarter of an hour Paek sipped coffee with his rather better known US opposite number at the time, Colin Powell. The place was Brunei; the occasion, the ASEAN Regional Forum (ARF).

Senior American and North Korean leaders rarely meet at the best of times, which this was not. Earlier that year, President George W Bush had famously labeled Kim Jong Il’s regime, along with Iran and Iraq, as part of an “axis of evil”. So for his Secretary of State to dally thus with the enemy, even briefly, raised eyebrows in some quarters.

We know now, as suspected at the time, that Powell was keen to engage North Korea. But vice-president Dick Cheney was dead against, and Cheney had Bush’s ear.

Any hopes of renewed dialogue were dashed later in 2002. Accused by Washington of a second, covert nuclear programme, North Korea restarted its first one precipitating a crisis that continues, climaxing (so far) in its testing a nuclear device on October 9.

Paek low in the pecking order

With the nuclear crisis ongoing, we might have expected to see more of Paek Nam Sun. But they do things differently in North Korea.

A senior diplomat (and sometime ambassador to Poland) who had also been active in early contacts with South Korea since the 1970s, as foreign minister the genial Paek was a largely ceremonial figure: trundled out for occasions like the ARF. As such he was in Kuala Lumpur last July, where he reportedly also had medical treatment.

Serious negotiations, on the other hand, were and are the province of Paek’s nominal deputies: two above all. The better known is deputy foreign minister Kim Kye Gwan, who heads Pyongyang’s delegation to the on-off six party nuclear talks. A skilled and confident negotiator, Kim even gave an unscripted if brief press conference after the latest round of talks, held in Beijing last month, ended inconclusively.

But the real heavy hitter is first vice foreign minister Kang Sok Ju. He it was who negotiated the October 1994 US-DPRK Agreed Framework (AF); defusing an earlier North Korean nuclear crisis (plus ca change), back in the Bill Clinton era, which in mid-1994 had come perilously close to unleashing a second Korean War. If the six-party process ever gets anywhere, which is doubtful, Kang will be wheeled on again. For now, the more junior Kim Kye Gwan does the honours.

Puzzling pseudonymy

So Paek Nam Sun’s passing will hardly send a tremor through North Korea’s foreign policy. But it does shed light on the curious way they order matters in Pyongyang.

For one thing, what was his real name? The man who first showed up in the 1970s for Red Cross talks with South Korea was known as Paek Nam Jun. But after he became foreign minister, the J mysteriously morphed into an S.

Peculiar, but not unique. Ri Jong Hyok, Pyongyang’s current point man for ties with Seoul, was Ri Dong Hyok in the 1980s when he headed North Korea’s quasi-embassy in Paris. There are several other such cases. It’s hardly a disguise, so what gives?

(En passant, the French connection is intriguing. Nominally the last EU state to resist full recognition of the DPRK, in practice France has hosted a North Korean legation since the 1970s. And both Kang Sok Ju and Kim Kye Gwan majored in French: the traditional language of international diplomacy.)

Dying off

Another oddity: North Korean elites hardly ever retire. Like Paek, they mostly die in post, often at an advanced age. Communist regimes tend to gerontocracy: think China, at least until recently. But North Korea has taken this, like most things, to extremes.

Since Kim Jong Il succeeded his father Kim Il Sung as leader in 1994, the nominally ruling communist party, the Worker’s Party of Korea (WPK), seems to be frozen – at least at the top. No new appointments to the Politburo have been announced in over a decade. Instead its ranks have been thinned by the remorseless march of mortality.

Latest to go was Kye Ung Tae, who as KWP secretary for national security wielded far more power than Paek Nam Sun. Kye died of lung cancer on November 23, aged 81. That leaves just six full Politburo members. One anti-Japanese guerilla veteran and honorary vice president Pak Song Chol passed 93 last September. Three others are over 80. Titular head of state Kim Yong Nam turns 79 on February 4, just before the “dear leader” Kim Jong Il a mere lad by comparison reaches his 65th birthday.

That would be retiring age in most normal countries. But Kim Jong Il has yet to name a successor, among several competing sons and other contenders. His health is said to be not of the best although such rumors have proved premature in the past.

A nuclear North Korea is indeed a worry, but it is not the only one. The world, and even Pyongyang, will take the death of Paek Nam Sun (who?) in its stride. But Kim Jong Il could go just as suddenly. In that case all bets for North Korea would be off.


North Korea focusing on developing wind energy

Thursday, November 23rd, 2006


North Korea’s top energy policy is to develop wind energy in a three-stage project planned out to 2020, the country’s officials said in an Asian conference earlier this month.

They claimed they have turned to building hydraulic power stations after the construction of a light-water reactor promised by the international community was suspended.

North Korea is a participant in the Asian Energy Security Workshop sponsored by the San Francisco-based Nautilus Institute and Tsinghua University in China. This year’s meeting was in Beijing on Nov. 5-7, and papers from the conference were recently posted last week on the Nautilus Web site.

South Korea, Russia, China, Japan and Mongolia were also participants.

The paper submitted by the North Korean delegation said building up the wind energy sector is “considered a top priority for policymakers, technicians and managers” in Pyongyang.

North Korea would first construct a prototype wind farm with a 10-megawatt capacity by the year 2010, then build three main wind farms with a capacity of 100 megawatts by 2015, the paper said.

In the third stage ending in 2020, onshore and offshore wind farms would be built throughout the country, it said.

North Korea has already received outside assistance for its wind energy projects, including from Denmark, which provided wind turbines that were installed along the country’s west coast in 1986. The Nautilus Institute funded the installation of a standalone wind energy system in 1998.

The paper cited fund shortages and technological barriers in pursuing the policy, but said “these problems will be gradually solved through the correct policy of the DPRK” and cooperation with the international community.

Ri Yong-ho, an official at the Pyongyang International Information Center of New Technology and Economy, said his country turned to hydraulic power stations after work on the light-water reactor was suspended.

Under the 1994 Geneva Agreed Framework, the North was to receive two reactors financed by the international community in exchange for freezing its nuclear activities. The agreement fell through after Pyongyang was accused of hiding a secret nuclear weapons program.

“To cope with this situation, the DPRK began to increase government investment in the construction of hydraulic power stations,” Ri said in his presentation.

“Our future direction for securing energy is the technological upgrading of existing thermal power plants to increase energy conversion efficiency, further construction of hydraulic power stations to raise its proportion, and taking positive measures to develop and use renewable energy, including wind power,” he said.

But no new plants are being built for the time being, Ri said.

The official said Pyongyang was also trying organic matter energy, particularly methane gas.

“For this purpose, professional research institutions for producing methane gas were organized and set to work to continuously renew and develop the technology of gasification and introduce it to productive sites,” he said.


North Korean energy trade with China

Tuesday, August 1st, 2006

Nautilus Institute
Nathaniel Aden
August 2006

Paper here: Nautilus-Aden.pdf
web link here

Abstract:  China is North Korea’s largest international trading partner. Since 1995, energy and fuels have dominated bilateral trade between allies.  North Korea is a net importer of Chinese crude oil and oil products; however, it became a net exporter of electricity and coal to China in 2003.  Whereas North Korean coal and electricity exports are sold at sub-market “friendship prices,” Chinese coal and oil products have been sold to North Korea at premium prices.  Over the past ten years, North Korea’s imports have become increasingly energy-intensive, while exports have become more labor-intensive.  Chinese customs data suggest that Beijing is taking a pragmatic, market-oriented approach to trade with its reclusive neighbor, while the increasingly asymmetrical energy embodiment of bilateral trade may reflect dilapidation of North Korea’s non-military industries.

Bullet Points:
1.  In 2005, bilateral trade with the PRC accounted for 39% of North Korean international trade by value.

2. North Korean trade data are compiled by partner-country Customs Bureaus, the United Nations, and the Internaitonal Monetary fund (IMF).  China and South Korea provide the best “mirror” statistics.  Customs data do not include aid shipments, official development assistance, direct government transfers, foreign direct investment, services, remittances, barter trade, smuggling, illicit trade, trade in military equipment.

3.  The DPRK has spent an increasing amount of money on diminishing quantities of energy imports, particularly Chinese crude.  The decline of energy import volumes in the face of increasing overall imports and trade may reflect demand sensitivity to increased international market prices and/or North Korea’s lack of hard currency with which to purchase imported energy and fuels.

4. The DPRK has significant, ongoing refining capabilities.

5. Between 1985 and 2002, the DPRK domestic coal production has declined from 37.5 million tons to 21.9 million tons.  Nonetheless, North Korea increased its export quantity to 2% of total domestic production since 2002. 

6.  Starting in May 2005, North Korea has been an uninterrupted monthly electricity exporter.  Hydropower may account for much of the DPRKs surplus electric power.

7.  Energy prices reflect the pragmatic, market-oriented character of China’s economic relationship with North Korea.  North Korea may be providing China coal at subsidized prices, below those of China’s other trading partners.

8.  North Korea coal export prices show an awareness of market prices starting in 2002.

9.  The DPRK has consistently paid premium prices for Chinese oil product exports over the last ten years.

10. Aside from politically-determined prices, several conditions could explain this: 1.  Real factors (transport costs, demand, goegraphy) 2. Pyongyang’s insulation from market realities 3.  No DPRK leverage.

11. In 2005, North Korea imported $2omillion worht of trucks, $2 million worth of cars, $1 million of tractors.  The transport sector has not grown significantly since 1995.

12.  Shift of DPRK trade towards energy-intensive imports and labor-intensive exports suggests deterioration of non-military industry.


Aid Strengthens Kim’s Regime

Thursday, December 1st, 2005

Nautilus Institute
Andrei Lankov

The recent news out of North Korea leaves no room for doubt. After a decade of grudgingly allowing small-scale free markets, Kim Jong Il’s regime is seeking to reimpose total control. Ironically this turning back of the clock is being aided by the “no strings attached” aid policies of two countries, China and South Korea, which claim to be trying to encourage reforms.

From early October, all trade in grain has been forbidden in the small private markets that mushroomed across North Korea when the state-run food distribution system largely collapsed during the famine of the 1990s. North Koreans are now expected to rely on a revived public distribution system for supplies of grain. Special teams of officials have fanned out to check farming households for any “excessive” supplies of grain they might try to sell in the private markets, and ensure they are left only with their officially allowed ration of 700 grams a day.

Internal travel controls are also being tightened. During the famine, authorities turned a blind eye to violations of the regime’s tough restrictions on freedom of movement, as starving North Koreans crisscrossed the country in search of food. Now these are being enforced once again, with North Koreans required to obtain a travel permit from police before they can travel elsewhere in the country.

Pyongyang’s moves in this direction should not come as a surprise. Allowing even a minimal degree of private enterprise reduces the regime’s absolute control over its citizens — especially if they are no longer dependent on the state for their food — and provides firsthand evidence of the existence of a more successful economic system. The Kim regime has seen how economic reform preceded the collapse of Communist regimes across Eastern Europe. It’s no coincidence that one of the questions most commonly heard in private conversations with members of the Pyongyang elite these days is about the fate of Communist cadres in the former East Germany. To avoid reforms is the surest survival strategy for Pyongyang’s ruling elite.

Throughout the past decade, the regime had no choice but to tolerate some degree of private economic activity, because of the collapse of its state-distribution system. But now that the North Korean economy has bottomed out and the famine appears to be over, largely due to generous aid shipments from the outside world, the Kim regime is in a position to get rid of changes that it never wanted in the first place. In addition to trying to curb the activities of private markets, it’s ordered most of the representatives of the international aid agencies that it reluctantly allowed into the country during the famine to leave by the end of the year.

The Kim regime can afford to act in this way because it knows that food aid from its two key patrons, South Korea and China, will keep flowing come what may. These now exceed shipments from elsewhere in the world. According to a recent report to the U.S. Congress, North Korea received 350,000 tons of food aid from South Korea and China in 2004 — compared with 325,000 tons from the World Food Program. Seoul also provides the North with much needed fertilizer, while China takes care of most of its energy needs.

China and, especially, South Korea claim to be supplying aid as part of a strategy of encouraging North Korea to embrace economic reform. That’s the ostensible aim of Seoul’s “sunshine policy” of one-sided concessions to the North, while Chinese leaders have shown visiting North Korean leaders around Shanghai and Shenzhen in an effort to encourage it to follow the same path. But, far from encouraging reform, North Korea’s recent actions show that it can take advantage of such unconditional aid to move in the opposition direction.

While Western countries insist on their aid being monitored by international relief agencies to try to prevent its diversion to the military, South Korea and China take a much more forgiving stance. Beijing wants stability on its borders, and would not be happy to see another nominally Communist regime collapsing. South Korea also wants to avoid the collapse of the Kim regime, since it would then have to foot the bill for an expensive and socially ruinous German-style unification. This means that both governments are ready to ship aid without asking too many awkward questions or demanding that it be closely monitored. Although ostensibly encouraging economic reform in North Korea, in reality both China and South Korea share the same short-term goal of preserving the status quo. They tacitly understand that means the regime must be able to continue to rely on its police and elite army units, and so needs to keep them well fed. That means turning a blind eye to the diversion of aid to the military, police and other members of the Pyongyang elite, even at the expense of the long-suffering North Korean people.

In the long run, this creates a paradox. Unless Seoul and Beijing are willing to foot the ever growing bills from Pyongyang indefinitely, they need to promote reforms there. However the North Korean regime has shown it has no interest in implementing reforms except when it is the only way to survive.

That creates an uneasy dilemma, which is shared by other foreign aid donors to North Korea. Stopping all aid could lead to renewed famine, especially in those areas of the country closed to foreigners. But excessive and unconditional aid is likely to halt all reforms, since the Pyongyang government would simply reverse to its old policies, using foreign aid to pay for the system’s inherent inefficiencies (and perhaps for a bit of luxury for Kim and his cronies). And recent events have clearly demonstrated have how counterproductive showering North Korea with aid can be.


The Nautilus Institute primer on the DPRK

Tuesday, November 26th, 2002

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