Archive for the ‘Political economy’ Category

Market prices in North Korea rise sharply after sanctions and tensions

Tuesday, September 19th, 2017

By Benjamin Katzeff Silberstein

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

This time, it’s different.

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

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

Thursday, September 14th, 2017

Benjamin Katzeff Silberstein

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

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

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

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

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

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

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

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

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

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

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

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

FUEL PRICES SURGE

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

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

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

[BKS emphasis.]

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

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

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

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

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

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

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

OIL NOT BOMBS

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

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

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

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

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

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

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

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

Full article:

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

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

(UPDATE 2017-04-18): Anna Fifield reports in the Washington Post on the textile exports ban and its impact on North Korea’s female population in particular:

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

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

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

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

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

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

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

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

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

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

[…]

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

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

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

[…]

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

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

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

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

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

 

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

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

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

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

[…]

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

[…]

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

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

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

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

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

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

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

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

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

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

Still Demand

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

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

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

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

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

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

 

(UPDATE 2017-09-19):

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

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

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

 

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Draft UN sanctions resolution against North Korea includes oil sales ban

Thursday, September 7th, 2017

By Benjamin Katzeff Silberstein

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

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

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

[…]

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

[…]

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

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

[…]

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

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

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

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

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

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

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

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

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

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

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

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

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

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UN security council adopts sanctions banning imports of wide range of North Korean goods

Saturday, August 5th, 2017

Benjamin Katzeff Silberstein:

On Saturday August 5th, the United Nations Security Council approved a resolution banning member states from importing North Korean export goods such as minerals and seafood products, and from hiring North Korean laborers. Wall Street Journal:

U.S. Ambassador Nikki Haley praised the councils solidarity, saying more days like this one were needed at the United Nations. She also personally thanked China for helping move the resolution from talk to action. The U.S., which had drafted and put forward the resolution, negotiated for more than a month with China over the text and final measures targeting Pyongyang.

This resolution is the single largest economic sanctions package ever leveled against the North Korean regime, said Ms. Haley, adding the council had put the country and its leadership on notice and what happens next is up to North Korea.

President Donald Trumpsaid on Twitter, The United Nations Security Council just voted 15-0 to sanction North Korea. China and Russia voted with us. Very big financial impact!

Both China and Russia urged a return to talks with North Korea and told the Security Council that the U.S. must abandonits military exercises with South Koreaand dismantlethe missile-defense system in South Korea known as Thaadbecause North Korea perceived that as a threat and it undermined the security of the region.

We stress that additional restrictions cannot be an end to themselves, they need to be a tool to engage in dialogue, said Russias new ambassador to the U.N., Vassily Nebenzia.

The nine-page resolution steps up trade restrictions with Pyongyang by aiming to cut off a third of its $3 billion annual export revenue. It bans North Korea from trading coal, iron, lead, iron and lead ore, and seafood.

The resolution also prohibits countries from hiring North Korean laborers and bans countries from entering or investing into new joint ventures with Pyongyang.

Diplomats and sanctions experts have long warned that export revenues, even remittances from foreign workers, are cycled back to North Koreas military and nuclear programs.

A Security Council diplomat offered this estimate on North Koreas foreign revenue earnings in 2017: $295 million from seafood; $251 million from iron and iron ore, and $400 million from coal trade.

North Koreans work in China, Russia and the Arab countries in the Persian Gulf in a variety of businesses ranging from factories to restaurants and nightclubs and are estimated to send home several billion dollars in revenue, a large portion of which the government claims, according to U.N. sanctions experts.

The new resolution restricts North Koreas technology trade and tightens enforcement of sanctions on North Korean vessels by banning violators from entering ports around the world.

Under the resolution, North Koreas Foreign Trade Bank, which handles foreign exchange, will be added the U.N.s sanctions list that freezes the assets of targeted entities.

It remains to be seen whether the new sanctions will deter North Koreas pursuit of advanced ballistic missiles and nuclear weapons or bring its leader Kim Jong Un to the negotiating table.

North Koreas economy has managed to stay afloat largely because China, its main trade partner, and Russia and some African nations havent fully enforced existing U.N. sanctions. The U.S. Treasury in June sanctioned Chinese entitiesprimarily banks and shipping companiesand individuals for violating sanctions and conducting trade that contributed to North Koreas military and nuclear program.

Chinas Ambassador Liu Jieyi said his country denounced unilateral sanctions by the U.S. and said action against North Korea must be through the U.N. mechanism. Mr. Liu told the council he welcomed the U.S. position that it wasntseeking regime change in North Korea.

China has always been firmly opposed to chaos and conflict in the [Korean] peninsula, Mr. Liu said.

Although China and Russia have pushed for a resumption of the six-party talks with North Korea, disagreement remains on how to bring Washington and Pyongyang to the table. China and Russia have called for a freeze-for-freeze plan under which North Korea would halt any more military or nuclear action and the U.S. would end its military exercises with South Korea.

Full article here:
North Korea Hit by $1 Billion Sanctions After Missile
Farnaz Fassihi
Wall Street Journal
2017-08-5

 

The UN summary of the resolution reads as follows:

The Security Council today further strengthened its sanctions regime against the Democratic Peoples Republic of Korea, condemning in the strongest terms that countrys ballistic missile launches and reaffirming its decision that Pyongyang shall abandon all nuclear weapons and existing nuclear programmes in a complete, verifiable and irreversible manner.

Unanimously adopting resolution2371(2017) under Article41, ChapterVII of the United Nations Charter, the 15-nation Council decided that the Democratic Peoples Republic of Korea shall not supply, sell or transfer coal, iron, iron ore, seafood, lead and lead ore to other countries.

Expressing concern that Democratic Peoples Republic of Korea nationals working abroad were generating foreign export earnings to support the countrys nuclear and ballistic missile programmes, it also decided that all Member States shall not increase the total number of work authorizations for such persons in their jurisdictions, unless approved by the Security Council Committee established pursuant to resolution1718(2006).

Through the text, the Council decided that States shall prohibit the opening of new joint ventures or cooperative entities with the Democratic Peoples Republic of Korea entities and individuals, or expand existing joint ventures through additional investments. In addition, it decided that Pyongyang shall not deploy or use chemical weapons and urgently called for it to accede to the Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and Their Destruction.

Also through the resolution, the Council named nine individuals and four entities to be subject to a travel ban and asset freeze already in place, as well as to request that the International Criminal Police Organization (INTERPOL) issue special notices with respect to designated individuals.

In addition, it reaffirmed that its provisions were not intended to have adverse humanitarian consequences for the civilian population of the Democratic Peoples Republic of Korea, and that the Security Council Committee established pursuant to resolution1718 (2006), on a case-by-case basis, exempt from sanctions those activities that would facilitate the work of international and non?governmental organizations engaged in assistance and relief activities for civilian benefit.

Furthermore, through the text, the Council called for the resumption of the Six-Party Talks between China, Democratic Peoples Republic of Korea, Japan, Republic of Korea, Russian Federation and the United States towards the goal of a verifiable and peaceful denuclearization of the Korean Peninsula.

Speaking after the resolutions adoption, the representative of the United States said the Council had put the Democratic Peoples Republic of Koreas dictator on notice by increasing the penalty of its ballistic missile activity to a whole new level. All Member States must do more to put more pressure on that country, she said, adding that the United States would take defensive measures to protect itself and its allies, including through joint military exercises.

Chinas representative said that, while todays resolution had imposed further sanctions, it did not intend to negatively impact such non-military goods as food and humanitarian aid. Calling on all parties to implement the resolutions provisions fully and earnestly, he recalled that China and the Russian Federation on 4July had put forward a road map to resolve the issue through two parallel tracks denuclearization and the establishment of a peace mechanism. Recalling that the United States had recently indicated that it was not pushing for regime change or for the Korean Peninsulas reunification, he said an escalation of military activities would be detrimental to all countries of the region.

Japans delegate said the sheer number and frequency of the Democratic Peoples Republic of Koreas nuclear and ballistic missile tests show how unprecedented and unacceptable these provocations are. Not only was the quantity outrageous, but the qualitative advancements were alarming. Noting that todays resolution would reduce the Democratic Peoples Republic of Koreas revenue by approximately $1billion, he said all Member States must demonstrate renewed commitment to implement the Councils decisions.

The Russian Federations representative, while calling on the Democratic Peoples Republic of Korea to end its banned programmes, said progress would be difficult so long as it perceived a direct threat to its security. Emphasizing that military misadventures risked creating a disaster, he said sanctions must be a tool for engaging Pyongyang in constructive talks rather than to seek the countrys economic asphyxiation.

The Republic of Koreas delegate said that Pyongyangs missile provocations on 4and 28July, together with its nuclear programme, posed a grave threat to international peace and security. Indeed, such reckless acts of defiance should be met with stronger measures, he said, adding that additional sanctions contained in resolution2371(2017) would significantly cut off the inflow of hard currency that would otherwise have been diverted to illicit weapons programmes.

Full article:
Security Council Toughens Sanctions Against Democratic Peoples Republic of Korea,Unanimously Adopting Resolution 2371 (2017)
United Nations Meetings Coverage
2017-08-05

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North Korea’s economy grew by almost 4 percent in 2017, says BOK

Friday, July 21st, 2017

Benjamin Katzeff Silberstein

Yonhap reports:

The estimated expansion of the gross domestic product (GDP) represents a sharp turnaround from 2015 when the economy of one of the world’s most isolated countries shrank 1.1 percent due mainly to a drought.

Last year’s growth is the highest since 1999 when North Korea’s economy expanded 6.1 percent, according to the Bank of Korea (BOK).

North Korea’s economy expanded 1.2 percent on average between 2012 and 2016, a sign that its economy is mired in low growth.

There are no indications that the North’s economy has suddenly improved since late 2011 when North Korean leader Kim Jong-un took power on the sudden death of his father and long-time leader Kim Jong-il, an official said.

“North Korea’s economic structure is very fragile and is not really set up for high growth,” the official spoke on the condition of anonymity.

The BOK estimated North Korea’s gross national income (GNI) stood at 36.4 trillion won (US$32.4 billion) in 2016. South Korea’s per-capita GNI stood at 31.98 million won, which is 22.1 times larger than the North’s 1.46 million won.

Related to last year’s growth, the central bank said North Korea’s mining industry grew 8.4 percent, the highest since 1999 when it expanded 14.2 percent.

North Korea’s trade volume came to $6.55 in 2016, up 4.6 percent from a year earlier, the BOK said. The increase came despite tightened U.N. sanctions imposed on North Korea over its repeated nuclear tests and its long-range rocket launches.

The sanctions call for, among other things, a ban on the country’s exports of coal and other mineral resources to cut off North Korea’s access to hard currency.

Still, the provision will not apply if transactions are determined to be exclusively for livelihood purposes and unrelated to generating revenue for North Korea’s nuclear or ballistic missile programs or other activities prohibited by previous U.N. resolutions.

China accounts for nearly 90 percent of North Korea’s foreign trade, and mineral resources are a key part of their bilateral trade.

Full article:

N. Korea’s economy grew 3.9 pct in 2016: BOK

Yonhap News

2017-07-21

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Washington Post interviews Ri Jong Ho

Friday, July 14th, 2017

Benjamin Katzeff Silberstein

A little over a week after theKyodo News interview, Washington Post has also talked to Ri Jong Ho, the former official from Bureau 39 who now lives in Washington DC. The main takeaway from the interview I think, from an economic point of view, is just how far the North Korean economy has gone in its adaptation to its international environment. Rigidity through flexibility, one could call it:

We were never in pain or hurting in our trade business because of the sanctions. Instead, we conducted our first nuclear test in 2006, Ri said in an interview near Tysons Corner.

The 59-year-old, whose job had been to raise money for the North Korean regime, and his family live in Northern Virginia, having defected to South Korea at the end of 2014 and moved to the United States last year.

I used to be sanctioned, as a North Korean who led trade at the front line, but I never felt any pain from the sanctions. The sanctions were perfunctory, Ri said.

He described being able to send millions of U.S. dollars to North Korea simply by handing a bag of cash to the captain of a ship leaving from the Chinese port city of Dalian, where he was based, to the North Korean port of Nampo, or by giving it to someone to take on the train across the border.

In first the nine months of 2014 he defected in October that year Ri said he sent about $10 million to Pyongyang this way.

[…]

Unless China, Russia and the United States cooperate fully to sanction North Korea, it will be impossible to hurt them, Ri said.

Chinas interest in North Korea is well known, butRussias rolein supporting the former Soviet client stateis often overlooked.Amid calls for China to limit oil exports to North Korea, Russia has dramatically increased the amount of oil it has sent some reports suggest exports have quadrupled to North Korea this year.

North Koreas financial networks, moreover, are intentionally murky. The U.S. Treasury has sanctioned more and more North Koreans and North Korean companies by name to try to cut them off from the American financial system, but few, if any, have any exposure to the United States.

For this reason, Ris insights are widely sought after in Washington, where successive administrations have been trying to find North Koreas pressure points.

[…]

Ri said he worked as president of a shipping companyand was chairman of Korea Kumgang Group, a company that formed a venture with Sam Pa, a Chinese businessman, to start a taxi company in Pyongyang.Ri suppled a photo of him and Pa aboard a jet to Pyongyang.

He was awarded the title hero of labor in 2002 for his efforts, and said he lived the good life in Pyongyang, with a color TV and a car. I was very loyal to Kim Jong Il, so I was rewarded by him, he said. I was rich.

His last position was running the Dalian branch of Daeheung, a trading company involved in shipping, coal and seafood exports, and oil imports.The company was given targets to meet in terms of profits, he said, declining to go into details.

Butin 2014,Ri grewincreasinglydisillusioned afterKim Jong Un suddenly denounced his uncle, Jang Song Thaek, as a traitor for all ages and had him executed at the end of 2013.

Jang had been leading economic cooperation efforts with China, and dozens of people who worked for him were also purged at the time, Ri said. He worried that his family would be next. They escaped to South Korea before moving to the United States, where his two children, now in their 20s, plan to go to college.

[…]

Ri said North Korea has repeatedly found ways to circumvent whatever sanctions are imposed on it.

North Korea is a 100 percent state enterprise, so these companies just change their names the day after theyre sanctioned, he said. That way the company continues, but with a different name than the one on the sanctions list.

Ris Chinese counterparts werent bothered, either, he said.

My partners in China also want to make a profit, so they don’t care much about sanctions, he said. When the Chinese government orders them to stop, they stop for a few days and then start up again.

Growing impatient with Beijing, Washington is increasingly targeting Chinese companies that help North Koreawith what are called secondary sanctions.At the end of last month, the Trump administration blacklisted the Bank of Dandong, located on the border between the two countries, for its dealings with North Korea.

But without knowing how to really hurt North Korea and teaming up to do it, it will be impossible to change Pyongyangs calculus on the nuclear program, Ri said.

Full article:

He ran North Koreas secret moneymaking operation. Now he lives in Virginia.
Anna Fifield
Washington Post
2017-07-13
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North Korea’s ICBM-test, Byungjin and the economic logic

Tuesday, July 4th, 2017

By Benjamin Katzeff Silberstein

At 3:30PM GMT+9 on Tuesday July 4th, North Korean television announced that the country had successfully tested an intercontinental ballistic missile earlier in the day. Wall Street Journal:

The missile, identified as the Hwasong-14, was launched at a steep trajectory and flew 933 kilometers (580 miles), reaching an altitude of 2,802 kilometers, according to North Korean state television. The numbers are in line with analyses from U.S., South Korean and Japanese military authorities.

US Secretary of State, Rex Tillerson, later confirmed that the launched missile was an intercontinental ballistic one.

Here in Seoul, things seemed to continue on as usual, which tends to be the case in this city more than used to its fair share of similar news. The biggest strategic consequence, of course, is that for the US. A successful intercontinental ballistic missile of this sortcould potentially strike anywhere in Alaska.

With the latest launch, North Korea takes one step further along the nuclear side of the Byungjin lineof parallel development of nuclear weapons and the national economy, and arguably, one step back on the economic side of the dual-track policy. In the formulation of the Byungjin line, of course, both are interrelated. Missile launches are often described as evidence of progress in industry and science, ultimately benefitting economic progress. This launch was no exception. From KCNA:s statement yesterday, July 4th 2017 (my emphasis):

The success in the test-fire of inter-continental ballistic rocket Hwasong-14, final gate to rounding off the state nuclear force, at just one go is a powerful manifestation of the invincible state might and the tremendous capability of the self-reliant national defence industry of Juche Korea that has advanced at a remarkably rapid pace under the great Workers’ Party of Korea’s new line on the simultaneous development of the two fronts, and a great auspicious event to be specially recorded in the history of the DPRK which has long craved for powerful defence capabilities.

This launch happened in a context where North Korea is already under sanctions designed to strike at its coal exports, one of its most important sources of income, and where the US has just signaled its resolve to go after North Korea’s financial channels through secondary sanctions of Chinese entities. At the same time, Kim Jong-un’s tenure has very much come to be associated with some economic progress (albeit from a low level, and primarily benefitting the relatively privileged classes), symbolized by projects such as the recently opened Ryomyong street.

It is not yet clear what the consequences will be. The US will likely try to add more sanctions targeted against specific entities and persons that help North Korea evade sanctions, and acquire equipment for its nuclear and missile programs.

The US will probably also call for international sanctions, but as Chad O’Carroll points out, the US may have a hard time getting such measures through in a quick manner given its currently tense relationships with both Moscow and Beijing. The US may also further push Beijing to implement the already existing sanctions against North Korea, but nothing appears to have changed with the claimed ICBM-test that would fundamentally alter China’s strategic calculations in the region. In other words, it continues to regard North Korea as a buffer between itself and US forces in the region, and as a geopolitical asset.

Whatever happens, it is safe to assume that it will not be good news for North Korea’s international ties in diplomacy, trade, finance, you name it. It would be easy to assume that economic progress and nuclear weapons development are mutually exclusive, since the second leads to further international isolation and economic sanctions, and therefore hampers the first.

In reality, that may be true. The North Korean Byungjin narrative, that weapons developmenthelpseconomic progress, is difficult to swallow, especially when one considers the opportunity cost that the weapons programs carry, both in terms of domestic resource dedication and the cost in international isolation.

But there is another way to look at it. Whatever the actual consequences will turn out to be, North Korea is making a strategic calculation that the gains from the test, and from overall nuclear weapons and missiles development, will be greater than the potential costs and downsides. Consider the following two factors:

First, North Korea has made economic progress in the past few years, and particularly since Kim Jong-un came to power, even under years of severe sanctions. North Korea has been under various forms of UN Security Council sanctions since its first nuclear test in 2006. During these years, its economic development has been impacted far more by domestic policy decisions than by international developments.

Again, we are absolutely not talking about any growth miracle, and some probably exaggerate the degree of the wealth increase in North Korea over the past few years. But without a doubt, North Korea is far better off now than it was eleven years ago, and worlds apart from the famine of the 1990s. Food insecurity prevails in North Korea but the country has not seen widespread starvation since the late 1990s, and largely thanks to better economic frameworks (or rather less predatory), and increased space for private production and trade within the economic system, things are looking much better today than in many years.

Just look at this video recently published by the Daily NK, from Chongjin, one of North Korea’s largest cities in its northeast. Is this long-term, sustainable growth that will eventually lead North Koreans to enjoy the same prosperity as their counterparts in South Korea or even China? Probably not. But at least it’s something.

Second, and relatedly, North Korea likely has a significant amount of channels for trade and various transactions that are not commonly known, but that play highly significant roles for the economy. For example, consider the information that Ri Jong Ho, a former official in North Korea’s Office 39, supplied in a recent interview with Kyodo News. Ri claims that North Korea procures up to 300,000 tons of fuel and various oil products from Russia each year, through dealers based in Singapore. As a point of comparison, a commonly cited figure for crude oil supplies from China is 520,ooo tons per year. Proportionately, then, 300,000 tons is not close to a majority, but still a significant amount for North Korea. While intelligence services or others with access to classified information may have known this already, Ri’s claims, if true (they have not and in all likelihood cannot be fully corroborated),

The point here is that North Korea has gotten so used to going through back channels and unconventional means to acquire highly significant amounts of supplies required for its society to function. It is an economic system where unconventional (and often illicit) channels of trade are not exceptions, but core parts of the economic management toolbox. This is not to argue that sanctions do not or cannot work. Rather, it shows the extent to which unconventional methods are institutionalized within economic management in North Korea.

The North Korean government is no monolith, and there are almost certainly some parts of the governing apparatus that are more and less pleased with the ICBM-test. But in the higher echelons of the leadership, the strategic calculation is probably that even with the added sanctions that are very likely to come, North Korea will be able to continue along roughly the same economic strategies as it has thus far. Perhaps we can call it North Korea’s own “strategic patience”: continuing with patchwork strategies for international economic relations, with little concern for the impact of lack of sustainable growth on people’s livelihoods, while banking on eventual recognition as a nuclear power. Only time will tell whether targeted secondary sanctions will change that calculation.

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Ri Jong Ho, high-level defector and former official in Office 39, says North Korea gets much more oil from Russia than previously known

Saturday, July 1st, 2017

Benjamin Katzeff Silberstein

In a fascinating interview by Kyodo News’s Tomotaro Inoue, Ri Jong Ho, a former high-level official in Office 39 of the Korean Worker’s Party, makes several fascinating claims about the supply of fuel to North Korea:

North Korea secures up to 300,000 tons of oil products from Russia each year through Singapore-based dealers, a defector who formerly managed funds for the leadership has told Kyodo News, posing a challenge for the United States as it seeks to isolate Pyongyang.

“North Korea has procured Russia-produced fuel from Singapore brokers and others since the 1990s…It is mostly diesel oil and partly gasoline,” Ri Jong Ho, 59, a former senior official of Office 39 of the Workers’ Party of Korea, said recently in the U.S. capital in his first interview with media under his own name.

Ri also said North Korea relies more on Russia than China for fuel to keep its economy moving, indicating that the U.S. drive for Beijing to restrict oil supplies over Pyongyang’s nuclear and missile programs will only have a limited effect.

“It is a wrong perception that North Korea is completely dependent on China,” he said.

Petroleum products have been shipped to North Korea by tankers leaving Vladivostok and Nakhodka, both in the Russian Far East, with the fuel widely used for cars, ships and trains, helping to support the North’s economy, Ri said.

Other sources familiar with the fuel deals said the petroleum products ending up in North Korea are often purchased by brokers who claim they are destined for China, with the items procured using forged paperwork.

Ri, who defected to South Korea with his family in October 2014, provided details of the activities of Office 39.

The secretive entity, said to have been established by former North Korean leader Kim Jong Il in May 1974, is subject to international sanctions as the United States and other Western countries believe it is engaged in illicit economic activities and the management of slush funds for the leadership.

He said North Korea has been trying to reduce its economic reliance on China, Pyongyang’s most important benefactor, since leader Kim Jong Un issued an order to expand trade with Russia and Southeast Asian countries in August 2014.

The order followed Chinese President Xi Jinping’s visit to South Korea a month earlier, during which he and then South Korean President Park Geun Hye expressed opposition to North Korea’s nuclear weapons development. It was the first time for a Chinese president to visit South Korea before traveling to the North.

Ri said the North Korean leader was “infuriated” by the visit, going so far as to call China an “enemy state,” and began taking measures to boost trade with Russia.

According to Ri, Office 39 has five central groups and systematically acquires foreign currency by sending laborers overseas as well as through gold mining and exports.

“It is an organization that manages the supreme leader’s coffers and the party’s funds to rule the country. It also leads trade activities to earn foreign currency,” Ri said. The office has enormous power as it is directly linked to the leadership and is independent of other government organs, he added.

Ri admitted that Office 39 has evaded U.N. sanctions by asking Chinese and Russian contacts to allow the use of their names for the opening of bank accounts for trade settlement.

The activities of Office 39 require the involvement of hundreds of thousands of people, including those in rural areas who produce items for export. Ri said the bureau is now headed by Chon Il Chun, first vice department director of the party’s Central Committee and a former classmate of Kim Jong Il, the current leader’s father.

A native of Wonsan on North Korea’s east coast, Ri was told to work in Pyongyang by the Central Committee in the mid-1980s. He operated a shipping company at Office 39’s Daehung group and later headed a trade control section in the group between 1998 and 2004.

The Daehung group earns revenue through farm exports and shipping operations, among other means. With exclusive rights to trade “matsutake” mushrooms and snow crabs, it was actively shipping those products to Japan before Tokyo imposed a total ban on trade with the North about 10 years ago.

The four other central groups are Kumgang, which dominates gold export activities, Daesong, involved in the shipment of processed products and intermediate trade overseas, Daesong Bank, in charge of the office’s banking operations, and a group dispatching workers to other countries.

Asked about the possibility that the foreign currency earned by North Korea is being used for its nuclear and missile development programs, Ri only said, “It is up to the supreme leader how to use the funds.”

North Korea receives 500,000 tons of crude oil each year through a pipeline from China, resulting in around 70,000 to 100,000 tons of gasoline and about 100,000 tons of diesel oil after refining, but the oil products are exclusively used by the North Korean army and are not good enough for cars that carry the elite, Ri said.

He also said crude oil purchased from other countries is refined by foreign companies based in China, leading to the importation into North Korea of an additional 50,000 to 100,000 tons of gasoline.

Full article here:

N. Korea procuring Russian fuel via Singapore dealers: defector

Tomotaro Inoue

Kyodo News

 

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US sanctions of Chinese entities over transactions with North Korea

Friday, June 30th, 2017

Benjamin Katzeff Silberstein

Reuters reports:

The United States imposed sanctions on two Chinese citizens and a shipping company on Thursday for helping North Korea’s nuclear and missile programs and accused a Chinese bank of laundering money for Pyongyang.

U.S. Treasury Secretary Steve Mnuchin said the actions were designed to cut off funds that North Korea uses to build its weapons programs in defiance of U.N. Security Council and unilateral sanctions.

“We will follow the money and cut off the money,” he told a news conference.

A Treasury statement identified the bank as the Bank of Dandong and the firm as Dalian Global Unity Shipping Co Ltd. It identified the two individuals as Sun Wei and Li Hong Ri.

The sanctions imposed on the two Chinese citizens and the shipping company blacklists them from doing business with U.S.-tied companies and people.

Bank of Dandong did not respond immediately to a request for comment. A staff member at Dalian Global Unity would not comment on the sanctions and subsequent calls to the firm’s office in Dalian went unanswered.

Mnuchin said U.S. officials were continuing to look at other companies that may be helping North Korea and may roll out additional sanctions.

U.S. foreign policy experts say Chinese companies have long had a key role in financing Pyongyang. However, Mnuchin said the action was not being taken to send China a message. “This wasn’t aimed at China. We continue to work with them,” he said.

China did not respond favorably:

Asked about the U.S. sanctions on Friday, Chinese Foreign Ministry Spokesman Lu Kang said that China consistently opposes unilateral sanctions imposed outside the U.N. framework.

“We strongly urge the United States to immediately correct its relevant wrong moves to avoid affecting bilateral cooperation on the relevant issue,” he said, without elaborating.

China’s ambassador to the United States, Cui Tiankai, said China opposed the United States using domestic laws to impose “long-arm jurisdiction” on Chinese companies or individuals, the official Xinhua news agency reported on Friday.

“If a Chinese company or individual has acted in a way that violates United Nations Security Council resolutions, then China will investigate and handle the issue in accordance with Chinese law,” he told an event in Washington on Thursday evening.

Full article here:
U.S. targets Chinese bank, company, two individuals over North Korea
Joel Schectman and David Brunnstrom
Reuters
2017-06-30

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Chinese officials telling companies not to hire North Koreans

Sunday, June 18th, 2017

By Benjamin Katzeff Silberstein

The sourcing for this story looks to be some quite thin gruel, but given the current context, it makes sense. Nikkei Asian Review:

According to a source who is familiar with China-North Korea diplomacy, Beijing began instructing Chinese businesses to refrain from hiring North Korean nationals in March 2016 — the month that the U.N. toughened sanctions on the country in response to Pyongyang’s fourth nuclear test.

The instruction has so far been given informally, and in some cases, orally. No formal notices have been issued, the source said.

The companies receiving the instruction are mainly in Jilin and Liaoning provinces, on the border with North Korea. Beijing appears to be gradually including more companies in its whisper campaign, the source said.

The informal sanction appears to contradict the Chinese foreign ministry’s position that the country should not impose any form of sanction against North Korea if it is not based on a U.N. Security Council resolution. At the same time, it is a means by which Beijing can register its displeasure with Pyongyang’s missile and nuclear testing.

Full article:
China telling companies not to hire North Koreans
Oki Nagai
Nikkei Asian Review
2017-06-18

This seems to be the pattern when it comes to Chinese sanctions enforcement against North Korea. Orders and directives are given in a vague, non-specific fashion, making them relatively easy to rescind and relax at a later time. In other words, news like this should not necessarily be taken as evidence of some grand Chinese push against North Korea. The way that policy directives like these are delivered, is itself indicative of their temporary nature. This current period is not the first (and probably not the last) time that China has restricted trade with North Korea, but that itself is not evidence of any long-term “squeeze”. It is probably safe to assume that these directives will be reversed or relaxed soon enough.

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