Archive for the ‘Statistics’ Category

The July 2017 China-North Korea trade figures, and the 97 drop in gasoline exports

Thursday, August 24th, 2017

By Benjamin Katzeff Silberstein

The July numbers for China-North Korea trade are out. Reuters:

The world’s second-largest economy imported and exported goods worth $456 million in July, down from $489 million in June, according to data from China’s General Administration of Customs.

It was up from $426 million in July last year, according to data on the customs website.

Year-to-date, trade was up 10.2 percent at $3.01 billion.

The data indicates that China’s move to halt North Korean coal imports in February has crimped Pyongyang’s ability to raise hard currency through exports.

Iron ore arrivals from North Korea in July also sank to their weakest since February, while China’s gasoline exports to the isolated state hit their lowest since January 2016.

China’s imports from North Korea were $156 million, down 3 percent from last month and a third lower than a year ago, based on data on the customs website. For January-July, imports were $1.04 billion, down 16.3 percent.

Exports were $300 million, down from $327 million in June, but up from $194 million in July last year. Year-to-date, they were up a third at $1.97 billion.

On Aug. 6, the United Nations Security Council unanimously imposed new sanctions on North Korea banning exports of coal, iron, iron ore, lead, lead ore and seafood, in a bid to choke off a third of Pyongyang’s $3 billion in annual export revenue.

The crackdown on major commodity exports was aimed as punishment for intercontinental ballistic missile (ICBM) tests in July and is due to take effect in early September.

Last week, Beijing issued an official ban on the imports effective from Aug. 15 as it moved to implement the sanctions.

Sources told Reuters China was also pressuring its iron ore traders to stop buying the commodity from North Korea, tightening the screws on Pyongyang even before sanctions.

The data also comes after state-owned China National Petroleum Corp suspended sales of fuel to North Korea in June over concerns it wouldn’t get paid, cutting off crucial supplies. The suspension is still in place.

Full article:
China July trade with North Korea slows from June as coal ban bites
Josephine Mason
Reuters
2017-08-23

And here:

* July gasoline exports down 97 pct vs year ago
    * Just 120 tonnes shipped to North Korea in July
    * CNPC stopped sales over payment fears - sources
    * Iron ore imports in July lowest since Feb

 (Recasts to lead with gasoline, adds details, changes slug)
    By Chen Aizhu
    BEIJING, Aug 23 (Reuters) - China's gasoline exports to
North Korea evaporated to a dribble in July, according to
customs data, the strongest sign yet that the suspension of
sales of the fuel by state oil major CNPC has cut critical
supplies to its isolated neighbour.
    Beijing's General Administration of Customs said on
Wednesday Chinese shipments of gasoline dropped 97 percent from
a year ago to just 120 tonnes of the fuel - worth little more
than $100,000. The number was down from 8,262 tonnes in June.
    Monthly fluctuations in the data are not unusual, but this
was the fourth-lowest volume on Reuters' records of customs data
going back to January 2010.
    Customs data also showed China's trade with North Korea fell
last month as a ban on coal purchases from its isolated
neighbour slowed imports amid growing pressure from the United
States to rein in Pyongyang's missile programme.
    A prolonged supply cut would threaten critical supplies of
fuel and could force North Korea to find alternatives to its
main supplier amid international pressure on Pyongyang to curb
its nuclear and missile programmes. 
    At the end of June, Reuters reported China National
Petroleum Corp (CNPC) suspended sales of gasoline and fuel to
North Korea over concerns CNPC would not get paid for its goods.
Fuel prices in the country surged following the cut and the
measure is still in place, people familiar with the matter say.
 
    "This confirms that CNPC has truly stopped supplies," said
one Beijing-based trading source familiar with China's oil
transactions with North Korea. "The amount is so small, it's
what would typically be lost during transportation."    
    Gasoline typically accounts for the bulk of fuel exports to
North Korea, but July data showed the biofuel, ethanol, took the
top spot with shipments of 4,137 cubic metres, worth $1.9
million.
    Meanwhile China's iron ore imports from North Korea fell
sharply in July, the month before the United Nations passed a
vote to impose tougher sanctions on Pyongyang. The United
Nations Security Council unanimously imposed new sanctions on
North Korea targeting its exports of coal, iron ore, lead, lead
ore and seafood in sanctions to take effect in early September.
    Arrivals of iron ore fell 24.5 percent in July from the same
month a year earlier to 175,980 tonnes. That's down 21 percent
from June and the lowest since February, according to customs'
records.
    Beijing had pressed traders to stop buying from the country
even before the United Nations Security Council vote on further
sanctions to rein in Pyongyang's missile and nuclear programme,
a sign of China tightening the screws on Pyongyang.
    In July, China bought no coal from North Korea, the fifth
month after Beijing halted coal shipments in February. 
    The table below gives a breakdown of imports and exports of
major commodities between the two nations:
        
                July      June 2017  yr-on-yr  Jan-July   % change
                2017                 % change  2017       
 Imports                                                  
 Coal           0         0          -         2,678,131  -78.6
 Iron ore       175,980   224,059    -24.5     1,510,761  41.7
 lead ore &     13,090    13,218     29.1      77,407     45.15
 concentrates                                             
 Exports                                                  
 Ethanol        4,137     4,126      509       19,734     319.7
 Gasoline       120       8,262      -96.5     45,889     -8.8
 Diesel         1,162     367        11,515    10,847     -64
 Jet fuel       153       140        278.6     1,103      47.4
 Other fuel     596       298        -97.2     19,250     -65.26
 oil                                                      
 Fuel No. 5-7   275       844        -41.4     3,953      -8.9
 LPG            79        107        302.8     553        75.4
 In tonnes except for ethanol in cubic metres

Full article:

China July gasoline exports to North Korea almost wiped out -customs
Josephine Mason
Reuters
2017-08-23

A few thoughts on this:

First, overall trade is up between the countries from the same month one year ago, by ten percent. The North Korean economy may be under pressure from China at the moment, but it is not isolated. Moreover, Chinese imports are down by one third but one has to wonder why China would let North Korea run a trade deficit if it weren’t expecting compensation in the future by more imports.

Second, gasoline exports to North Korea are down by 97. This number strikes me as almost conspicuously high and reminiscent of Saddam Hussein’s electoral victory figures (in North Korea, the united front controlled by the Worker’s Party always gets a full 100% of the votes). China has a strong interest at the moment in making it seem like it is being tough on North Korea and a figure like 97 percent certainly makes for good optics. Diesel and petrol prices have remained relatively consistent in Pyongyang through the spring and summer, not changing in July, but it is only now that Chinese customs are reporting a 97 percent drop.

Third and relatedly, we don’t know what (if anything) has happened with the crude oil deliveries, which to my knowledge is largely a form of donation from China to North Korea of some 520,000 tonnes per year. This is roughly twice the quantity of the diesel exports from China to North Korea per year, though these amounts are difficult to compare. It is easy to imagine a scenario where these increase to offset the losses from the lowered gasoline exports.  And of course there’s the smuggling. Meanwhile, diesel exports actually rose over the past month.

Fourth, to really get a grasp of trading figures, I would argue it is necessary to look at full years. Surely there are ways to, for example, date contracts in order to make it look like deliveries and receptions of goods reach certain levels at certain times, or by simply postponing some exports and imports to a later date. Perhaps we will see trading figures later on after the bluster has really settled that compensate for shortfalls at this moment.

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The August 5th UNSC sanctions on North Korea: new scope, but same old tools. Will this time be any different?

Sunday, August 6th, 2017

By Benjamin Katzeff Silberstein

On Saturday August 5th, the UN Security Council passed yet another resolution, 2371, following North Korea’s missile tests. Like resolution 2270 that was passed in March 2016, 2371 also takes aim at North Korea’s mineral exports. The new resolution also bans imports of seafood products from North Korea, and bans member states from hiring new North Korean laborers, but they do not need to fire ones already hired, so it is questionable whether this source of income will decrease and/or disappear, or merely stop increasing.

Unlike 2270 last year, it does not appear to contain a humanitarian exemption or any other loophole for mineral imports. In sum, the new resolution appears much more holistic than its predecessors in fully cutting off North Korea’s most central export revenues.

But while the content of the resolution is different, the tools remain the same. Its efficacy still hinges upon implementation by UN member states, and of course, above all, by China, and it is difficult to see why such implementation would be more likely this time. Both President Trump and the US ambassador to the UN, Nikki Haley, have made a big number of China’s and Russia’s vote in favor of the resolution. WSJ reports:

U.S. Ambassador Nikki Haley praised the council’s 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 Trump said 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!”

However, both China and Russia voted in favor of UNSC 2270 as well, and there are still abundantly clear signs that China did little to implement the ban on imports of North Korean minerals. Had UNSC 2270 been implemented in full, North Korea’s export revenues would already have been badly hit.

Meanwhile, South Korea’s Bank of Korea announced a few weeks ago its estimate that the North Korean economy grew by close to four percent last year. One should read those numbers with a very, very hefty dose of skepticism, given the difficulty in estimating anything relating to the North Korean economy, but at the very least, we can safely conclude that the North Korean economy is not in dire straits. Its foreign trade increased by close to five percent last year, according to KOTRA. Though there have been several reports suggesting difficulties for companies involved in cross-border trade between China and North Korea over the past year, there are no indications that China has implemented the near-blanket-ban in minerals trade that the UNSC resolution from March last year mandates.

So why would this time be any different? My guess is that it won’t be. It is very difficult to imagine that China would have voted in favor of a resolution that would hit North Korea’s economy so badly if it would really have believed that such a resolution would be fully implemented. The basic political dynamics remain: China does not want North Korea to crumble, and China craves geopolitical stability above everything else.

As always, only time will tell. But those who applaud this resolution as a new and radical turn on the global stage in the North Korea issue may want to look back at historical precedent, and moderate their expectations.

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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 council’s 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 Trump said 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 abandon its military exercises with South Korea and dismantle the missile-defense system in South Korea known as Thaad because 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 Russia’s 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 Korea’s military and nuclear programs.

A Security Council diplomat offered this estimate on North Korea’s 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 Korea’s technology trade and tightens enforcement of sanctions on North Korean vessels by banning violators from entering ports around the world.

Under the resolution, North Korea’s 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 Korea’s pursuit of advanced ballistic missiles and nuclear weapons or bring its leader Kim Jong Un to the negotiating table.

North Korea’s economy has managed to stay afloat largely because China, its main trade partner, and Russia and some African nations haven’t fully enforced existing U.N. sanctions. The U.S. Treasury in June sanctioned Chinese entities—primarily banks and shipping companies—and individuals for violating sanctions and conducting trade that contributed to North Korea’s military and nuclear program.

China’s 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 wasn’t seeking 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 People’s Republic of Korea, condemning in the strongest terms that country’s 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 resolution 2371 (2017) under Article 41, Chapter VII of the United Nations Charter, the 15-nation Council decided that the Democratic People’s 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 People’s Republic of Korea nationals working abroad were generating foreign export earnings to support the country’s 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 resolution 1718 (2006).

Through the text, the Council decided that States shall prohibit the opening of new joint ventures or cooperative entities with the Democratic People’s 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 People’s Republic of Korea, and that the Security Council Committee established pursuant to resolution 1718 (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 People’s 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 resolution’s adoption, the representative of the United States said the Council had put the Democratic People’s Republic of Korea’s 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.

China’s representative said that, while today’s 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 resolution’s provisions fully and earnestly, he recalled that China and the Russian Federation on 4 July 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 Peninsula’s reunification, he said an escalation of military activities would be detrimental to all countries of the region.

Japan’s delegate said the sheer number and frequency of the Democratic People’s Republic of Korea’s 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 today’s resolution would reduce the Democratic People’s Republic of Korea’s revenue by approximately $1 billion, he said all Member States must demonstrate renewed commitment to implement the Council’s decisions.

The Russian Federation’s representative, while calling on the Democratic People’s 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 country’s economic asphyxiation.

The Republic of Korea’s delegate said that Pyongyang’s missile provocations on 4 and 28 July, 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 resolution 2371 (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 People’s 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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FAO warns of worst North Korean drought since 2001

Thursday, July 20th, 2017

Benjamin Katzeff Silberstein

FAO sounds the alarm bells yet again this year about drought in North Korea:

20 July 2017, Rome - DPR Korea’s crop production for 2017, including staple rice, maize, potatoes and soybean, has been severely damaged by prolonged dry weather conditions, threatening food security for a large part of its population, according to a new FAO update prepared in collaboration with the European Commission’s Joint Research Centre.

Rainfall from April to June in key crop producing areas in Democratic People’s Republic of Korea were well below the long-term average, severely disrupting planting activities and damaging the 2017 main season crops.

“So far, seasonal rainfall in main cereal producing areas have been below the level of 2001, when cereal production dropped to the unprecedented level of only two million tonnes, causing a sharp deterioration in food security conditions of a large part of the population,” said Vincent Martin, FAO Representative in China and DPR Korea.

Food shortages during ongoing lean season

The severe dry spell also affected the 2016/17 early season crops which were harvested in June and include wheat, barley and potatoes. According to FAO’s latest estimates, production of 2017 early season crops has plunged by over 30 percent, from the previous year’s level of 450 000 tonnes to 310 000 tonnes.

Despite the fact that the early season harvest accounts for only 10 percent of the total annual cereal production, these crops are an important source of food during the lean season from May to September.

Concerns over the 2017 main season crops 

Although rains in the first half of July provided some relief, they were generally too late to allow normal planting and development of the 2017 main season crops, to be harvested in October-November.

The lack of rain is expected to have a serious impact on main season crops in the major cereal producing areas, including the provinces of South and North Pyongan, South and North Hwanghae and Nampo City, which normally account for close to two-thirds of overall main season cereal production.

With forecasts of reduced production of the 2017 main season crop, the food security situation is expected to further deteriorate during the 2017/18 marketing year and cereal import requirements are likely to increase.

Immediate interventions

“Immediate interventions are needed to support affected farmers and prevent undesirable coping strategies for the most vulnerable, such as reducing daily food intakes,” said Martin. “It is critical now that farmers receive appropriate and timely agricultural assistance, including irrigation equipment and machinery.”

According to the report, it is also essential to immediately start rehabilitating and upgrading irrigation schemes to reduce water losses and increase water availability.

Increased food imports, commercial or through food aid, would be required during the next three months at the peak of the lean season, ensuring adequate food supply for the most vulnerable, including children and elders.

Full article:
DPR Korea’s food production hit by the worst drought since 2001
Food and Agriculture Organization of the United Nations
2017-07-20

It is worth noting that many question marks exist on the FAO’s overall methodology. I’ve written about some of these issues before, here and here. Surely, market prices appear to be pointing up in North Korea this summer, but not toward any unprecedented levels. I see no reason to doubt what FAO says about weather conditions, but the consequences for North Korea’s food supply are less clearly outlined, especially since WFP and FAO, for political reasons, often are not able to fully take the market sector into account in their assessments.

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China-North Korea trade up in the first half of 2017

Friday, July 14th, 2017

Benjamin Katzeff Silberstein

‘Tis the season yet again for Chinese customs data. Imports are down, but exports are up even more. Reuters:

China’s trade with isolated North Korea rose more than 10 percent in the January-June period from a year earlier, a Chinese official said on Thursday, amid pressure from the United States for Beijing to pressurize its troublesome neighbor.

Last week U.S. President Donald Trump denounced China’s trade with North Korea, saying it had grown almost 40 percent in the first quarter, and cast doubt on whether Beijing was helping to counter the threat from North Korea.

China has repeatedly said it is fully enforcing United Nations sanctions on nuclear-armed North Korea and there is nothing wrong with what it terms “normal” trade with Pyongyang, referring to areas not covered by sanctions.

Chinese customs spokesman Huang Songping told a briefing on China’s overall trade figures that total trade with North Korea expanded by 10.5 percent to $2.55 billion in the first six months of the year.

While China’s imports from North Korea dropped 13.2 percent to $880 million in the period from January to June, exports to North Korea rose 29.1 percent to $1.67 billion, he said.

The exports were largely driven by textile products and other traditional labor-intensive goods not included on the United Nations embargo list, Huang added.

“As neighbors, China and North Korea maintain normal business and trade exchanges,” he said, adding that goods for ordinary people and those used for humanitarian reasons are not subject to sanctions.

Overall trade growth with North Korea slowed in June, compared with previous second-quarter months.

Trade in dollar terms with North Korea rose about 12 percent in June from a month earlier to $499 million, according to Reuters calculations based on previously released data.

The calculations do not reflect revisions to earlier figures that may not have been announced.

In May, trade with North Korea gained 14.5 percent from April to $443.5 million, previously released customs data show.

Numbers showing an increase are not evidence that China is failing to enforce U.N. resolutions, with imports from North Korea falling every month since March, Huang added.

China suspended imports of North Korean coal in February, while imports of iron ore accord with relevant U.N. resolutions, he said.

“China customs have all along fully, accurately, conscientiously and strictly enforced relevant Security Council resolutions.”

Full article:
China trade with sanctions-struck North Korea up 10.5 percent in first half
Fang Cheng and Ben Blanchard
Reuters
2017-07-13

As Washington Post reports (citing Kent Boydston’s data), this makes for one massive trade deficit for North Korea. Something seems to be odd with the data, which itself isn’t that odd in this context. A Chinese spokesperson explained the trend as follows:

Monthly figures were more representative of the trend, he said, and China’s imports from North Korea had been “falling sharply for four consecutive months since March,” including by 36 percent in March and 42 percent in April.

“The trade growth between China and North Korea in the first half of the year was mainly driven by exports,” Huang said, adding that the exports were mainly labor-intensive products such as textiles, which are not banned under U.N. resolutions.

Letting North Korea run a trade deficit of this magnitude sure would be awfully selfless of China, unless North Korea is somehow borrowing to make up for it, which seems highly unlikely.

Wall Street Journal also reported the trade data:

The rise in trade was driven by a 29.1% increase in exports from a year earlier, while imports fell 13.2%, said Huang Songping, spokesman for the General Administration of Customs, at a briefing Thursday. He said China was abiding by U.N. sanctions “comprehensively, carefully, accurately and seriously” and that the first-half data doesn’t reflect Beijing’s current stance on its neighbor.

He said imports from North Korea have fallen for the past four months and all coal imports were made in the first two months of the year, before China suspended coal purchases from Pyongyang. He said coal imports were down 74.5% for the full first half from a year earlier.

Goods exported to North Korea were largely items such as textile products not covered by sanctions, Mr. Huang said.

China is by far North Korea’s biggest trading partner, accounting for more than 80% of the hermit state’s external trade for the past five years. After North Korea’s successful launch of an intercontinental ballistic missile on July 4, U.S. President Donald Trump in a tweet cited a rise in China’s trade with Pyongyang in the first quarter, questioning Beijing’s willingness to ratchet up pressure on its neighbor.

The U.S. has since stepped up its rhetoric, moving toward unilaterally tightening sanctions, targeting Chinese companies and banks the U.S. says are funneling cash into Pyongyang’s weapons program.

Beijing has resisted suggestions it isn’t doing enough to pressure North Korea, countering that Washington must directly engage Pyongyang to dissuade its nuclear ambitions. China backed tougher U.N. sanctions last year on North Korea’s coal exports, while ensuring an exemption for “humanitarian” needs. Chinese officials say the February suspension of imports of North Korean coal for the rest of this year was part of efforts to enforce those sanctions.

China’s Foreign Ministry says Beijing has played an “indispensable” role in trying to denuclearize the Korean Peninsula. On Thursday, a ministry spokesman said Chinese imports of iron ore in the first half were allowed under the U.N. sanctions as they are for “civilian use” and generate no income for North Korea’s nuclear-weapons program.

The data on the customs agency’s website didn’t break out iron-ore imports from North Korea in the first half.

China’s imports of the steelmaking material from all countries jumped 16% from a year earlier in June and rose 9.4% for the first half, customs data showed, as a lasting property boom has spurred demand from the construction sector.

The Foreign Ministry spokesman, Geng Shuang, also reaffirmed Beijing’s commitment to the U.N. sanctions. “China is implementing the [North Korea]-related resolutions in a full and strict manner,” he said.

In the first quarter, total trade between China and North Korea grew 29.2% from a year earlier, according to Chinese customs data. Both the first-quarter and first-half increases were in dollar terms.

Full article:
China Defends Its Growing Trade With Sanctioned North Korea
Liyan Qi and Chun Han Wong
Wall Street Journal
2017-07-13

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US government seizes millions from big banks though to have dealt with North Korea

Thursday, July 6th, 2017

Benjamin Katzeff Silberstein 

Reuters reports:

U.S. authorities have tried to seize millions of dollars associated with several companies that deal with North Korea, including the country’s military, from eight large international banks, according to court filings made public on Thursday.

The effort was revealed two days after North Korea tested a long-range missile capable of reaching Alaska, ratcheting up tensions with the United States and adding to worries about North Korea leader Kim Jong-un’s nuclear weapons plans.

Thursday’s filings show that Chief Judge Beryl Howell of the federal court in Washington, D.C. on May 22 granted U.S. prosecutors’ applications for “damming” seizure warrants against Bank of America Corp (BAC.N), Bank of New York Mellon Corp (BK.N), Citigroup Inc (C.N), Deutsche Bank AG (DBKGn.DE), HSBC Holdings Plc (HSBA.L), JPMorgan Chase & Co (JPM.N), Standard Chartered Plc (STAN.L) and Wells Fargo & Co (WFC.N).

Prosecutors believe the banks have processed more than $700 million of “prohibited” transactions on behalf of entities tied to North Korea since 2009, including the period after Donald Trump was elected U.S. president, the filings show.

Some of the transactions were processed for Dandong Zhicheng Metallic Material Co and four affiliated “front” companies that prosecutors said tried to evade sanctions through transactions that would benefit North Korean entities, “including the North Korea military and North Korea weapons programs,” according to the filings.

The filings did not say any of the banks knowingly violated sanctions against North Korea.

In her decision, Howell authorized warrants requiring the eight banks to accept incoming transactions but not allow outgoing transactions involving the five companies for 14 days, and thereafter to seize what they collected.

Full article:
U.S. seeks funds tied to North Korea from eight big banks
Jonathan Stempel
Reuters
2017-07-06

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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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Market prices up in North Korea, following Chinese trade restrictions and seasonal variation

Tuesday, June 13th, 2017

By Benjamin Katzeff Silberstein

DailyNK reports that prices on some markets, for certain goods, have gone up recently. The causes are two-fold: increasingly difficult import conditions with heightened scrutiny and more items being restricted on the Chinese side, and seasonal variations. May and June are the height of the so-called lean season in North Korea, when food is in particularly short supply:

According to Daily NK’s sources, the rice price has risen from 4,800 KPW to 5,200 KPW per kilo at Hoeryong Market in North Hamgyong Province. Similarly, 25 kg bags of flour have risen by 10 RMB to 13,000 KPW, while sugar (50 kg) has jumped by 50 RMB.
May and June mark an annual period of agricultural hardship in North Korea. To make matters worse, the farming season began a month late this year, sending the price of vegetables including cabbage and radish skyrocketing. China’s recent efforts to restrict the quantity of imported items is further exacerbating the situation.
“Most of the products that are normally imported through Chinese customs offices, including food and industrial goods, have become much more expensive. The price surge must have been influenced by China’s stricter measures,” a source in North Hamgyong Province said.
Until last April, China’s customs offices generally waved through most items for export to North Korea including food, daily necessities, and clothes, with inspections little more than a formality. But in a sign of worsening relations between Beijing and Pyongyang, an increasing number of items are being placed on the restricted list.
“Due to China’s implementation of stricter customs procedures, the volume of products coming into North Korea has fallen by half compared to the previous month (April). The period of spring poverty is a hard time for North Korean people in both the cities and rural areas, and China’s actions are adding to their problems,” added a source in North Pyongan Province.

Given all the scrutiny and debates about whether or not China is implementing sanctions on North Korea, decreasing trade and upping the economic pressure et cetera, it is important to remember that we’re really not seeing any full-scale blocking off of trade between China and North Korea, even in goods that no country is supposed to be trading with North Korea following UN sanctions. Seasonal variations matter a great deal too. Moreover, though price changes like these certainly are troubling for North Korean consumers, they don’t appear, at least not for now, significant enough to have any major impact on the economy as a whole. Last but not least, Chinese implementation of sanctions measures, scrutiny, surveillance of goods and other similar measures in trade with North Korea has historically waxed and waned, and rarely remained consistent.

Full article:
Market prices leap as China implements strengthened customs procedures
Lee Sang Yong
Daily NK
2017-06-13

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New report on North Korea’s proliferation financing system

Monday, June 12th, 2017

By Benjamin Katzeff Silberstein

The non-profit C4ADS has released a new report (Risky Business) about the networks that North Korea uses to get around the international sanctions regime, and to continue trading and financing its weapons programs. Among the most interesting findings, in my opinions, is that of how interconnected and few the Chinese firms that trade with North Korean entities are:

North Korean overseas networks have been extremely adaptive to the combined pressures of international sanctions, in large part due to their ability to nest and disguise their illicit business within the licit trade. Like the cover material of iron ore over the RPG’s aboard the Jie Shun, or the dual role played by Dandong Hongxiang, the problem is particularly acute in the North Korean context where the state controls major aspects of the international trading economy. As early as 2006, former Undersecretary for Terrorism and Financial Intelligence Stuart Levey noted that, “the line between North Korea’s licit and illicit money is nearly invisible.” As North Korea has become ever more isolated internationally, it has had to confine nearly all of its trade to China. Data from 2016 shows that around 85% of total North Korean trade was conducted with China. According to Harvard-based North Korea specialist John Park, “what we are seeing now is the operation of sophisticated North Korean-run networks based in China.” In this relationship, North Korea has repeatedly taken advantage of the system of trade to conduct illicit activity nested within the licit system.

[…]

Although the regime has seen a boom in the sale of natural resources in recent years, the increased sale of fewer and fewer commodities to a single country has left its system of trade progressively more vulnerable. Analysis reveals that the scope of licit trade, in which North Korea nests its illicit networks, is surprisingly small. According to trade records, from 2013 to 2016, there were only 5,233 companies within China that either imported goods from or exported goods to North Korea. To put that number in perspective,as of 2016, 67,163 Chinese companies exported to South Korea. Additionally, these 5,233 businesses are not all unique actors: many of them have subsidiary relationships with companies within the dataset. For example, the network surrounding the DHID, the Liaoning Hongxiang Group, was made up of 18 companies in China alone, many of which appear within the dataset as unique entities.

The report mainly carries three findings:

In this report, we conduct a system-level examination of the North Korean overseas financing and procurement system. Our paper finds that this system is centralized, limited, and vulnerable, and that its disruption should greatly increase the pressure on the Kim regime to return to the negotiating table.

  • In Centralized, we examine key individuals and companies that connect networks from around the world. We discuss case studies of both regime “tactical controllers,” who conduct the operational tasks needed to move illicit goods, as well as “strategic chokepoints” through which these goods and their regime financing must flow.
  • In Limited, we explore trends within China-North Korea trade, the largest market exploited by North Korean overseas networks. Our data shows only 5,233 Chinese companies to have traded with North Korea from 2013 to 2016. Our analysis shows a small number of interconnected firms annually account for vast proportions of the trade, limiting the number of avenues in which North Korea can nest its illicit activity.
  • In Vulnerable, we analyze corporate structures and risk indicators that can be used to filter this data to identify potential dual-use transactions and networks of possible concern. Our priority lay in linking previously unidentified entities with known North Korean illicit actors to showcase the possibility of causing systemic disruption using targeted enforcement.

Full report:
Risky Business: A System-Level Analysis of the North Korean Proliferation Financing System
David Thompson
C4ADS
June 2017

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An affiliate of 38 North