North Korean Economy Watch

UPDATE:  The Daily NK offers some more information:

North Korea has leased the rights to use Chongjin port to a Chinese firm, according to a Yonhap report released yesterday.

The report, citing an anonymous government official from Tumen in China’s far northeast, across the Tumen River from Namyang in North Hamkyung Province, said that the usage rights have been sold to a “Chinese state company, Yanbian Haihua Import-Export Trade Company.”

He predicted, “Yanbian Haihua Import-Export Trade Company will start shipping between Chongjin port and Busan by container ship in September, and will start shipments to southern regions of China soon.”

The anonymous official also revealed that North Korea has agreed to allow the Chinese company to use the railroad between Tumen and Chongjin as part of the deal. The deal, the official said, will “facilitate trade from Tumen,” and added that the Chinese company which inked it is planning to use it to fulfill shipping contracts with three other Chinese companies.

The Chinese company is reportedly investing 10 million Yuan ($1.48 million approx.) in shipping cranes and other construction at Chongjin, and is having 150 freight cars produced to add to 50 already sent.

The deal follows a similar one for the No. 1 dock at Rasun port, some 70km north of Chongjin. That deal, made after the visit to Pyongyang of Chinese Premier Wen Jiabao in October last year, gave the rights to the dock to another Chinese company, Chuangli Group.

ORIGINAL POST: According to Yonhap:

China has acquired the rights to use another one of North Korea’s northeastern ports, signaling deepening economic ties between the ideological allies, a Chinese official said Thursday.

China has used the North Korean port of Rajin in North Hamgyong Province for commercial trade since 2008. An official at the Tumen city government in northeast China said that a Chinese state company has now also obtained the rights to use the port of Chongjin, about 70 kilometers south of Rajin.

South Korea’s Unification Ministry, which handles North Korea affairs, said it could not immediately confirm the comments by the Chinese official, who spoke on condition of anonymity.

Since North Korean leader Kim Jong-il’s visit to Beijing earlier this year, the two countries have been strengthening their economic cooperation. China is the foremost ally of the cash-strapped North, which is under deepening sanctions for its nuclear testing.

The Chinese official also said in an interview with Yonhap News Agency that North Korea and China have also agreed to allow Chinese companies to use North Korea’s railways from Tumen to Chonjin.

The series of agreements would “facilitate trade from Tumen,” the official said, adding the Chinese company that struck the deal to use the port of Chongjin will use it to carry out shipping agreements with three Chinese companies.

Here is a map of the Rajin port showing which pier the Chinese are leasing.

Read the full story here:
China allowed to use another N. Korean port: official
Yonhap
7/22/2010

According to the Irrawaddy:

A recent New York Times op-ed article by Aung Lynn Htut, formerly a high-ranking Burmese military intelligence officer who defected in 2005 while he served as an attaché at the Burmese embassy in Washington, shed new light on the history of the still murky relationship between Burma and North Korea, two of the world’s most isolated, secretive and oppressive regimes.

Burma broke diplomatic relations with North Korea in 1983, when North Korean agents attempted to assassinate the South Korean president on Burmese soil. But according to Aung Lynn Htut, shortly after current junta-chief Snr-Gen Than Shwe assumed power in 1992, he surreptitiously moved to renew ties with Pyongyang.

“Than Shwe secretly made contact with Pyongyang. Posing as South Korean businessmen, North Korean weapon experts began arriving in Burma. I remember these visitors. They were given special treatment at the Rangoon airport,” Aung Lynn Htut said in his June 18 article.

The junta kept its renewed ties with North Korea secret for more than a decade because it was working to establish relationships with Japanese and South Korean businesses, Aung Lynn Htut said. By 2006, however, “the junta’s generals felt either desperate or confident enough to publicly resume diplomatic relations with North Korea.” 

In November 2008, the junta’s No 3, Gen Shwe Mann, visited North Korea and signed a memorandum of understanding, officially formalizing military cooperation between Burma and North Korea. Photographs showed him touring secret tunnel complexes built into the sides of mountains thought to store and protect jet aircraft, missiles, tanks and nuclear and chemical weapons.

According to Aung Lynn Htut, Lt-Gen Tin Aye, the No.5 in the Burma armed forces and the chief of Military Ordnance, is now the main liaison in the relationship with Pyongyang. Tin Aye has often traveled to North Korea as well as attended ceremonies at the North Korean embassy in Rangoon.

In September 2009, The New Light of Myanmar reported that Tin Aye went to the anniversary celebration of the Democratic People’s Republic of Korea (DPRK), held in a hotel in Rangoon. In February, Tin Aye, along with other senior officials, attended the birthday event of the Dear Leader of North Korea at the embassy.

Flights and ships from North Korea to Burma have been carrying more than just Burmese generals. Analysts, including Burma military expert Andrew Selth, say that for years Burma and North Korea have used a barter system whereby Burma exchanges primary products for North Korean military technologies.

In June 2009, a North Korean ship, the Kang Nam I, was diverted from going to Burma after being trailed by the US navy. Then in April, another North Korean ship, the Chong Gen, docked in Burma carrying suspicious cargo, allegedly in violation of the UN Security Council Resolution 1874, which restricts North Korea from arms deals and from trading in technology that could be used for nuclear weapons.

In May, the seven-member UN panel monitoring the implementation of sanctions against North Korea said in a report that Pyongyang is involved in banned nuclear and ballistic activities in Iran, Syria and Burma with the aid of front companies around the world.

According to the UN report, a North Korean company, Namchongang Trading, which is known to be associated with illicit procurement for Burma’s nuclear and military program and is on the US sanctions list, was involved in suspicious activities in Burma.

The report also noted three individuals were arrested in Japan in 2009 for attempting to illegally export a magnetometer—a dual-use instrument that can be employed in making missile control system magnets and gas centrifuge magnets—to Burma via Malaysia allegedly under the direction of another company known to be associated with illicit procurement for North Korea’s nuclear and military programs.

The UN experts also said that the Korea Kwangson Banking Corporation has handled several transactions involving millions of dollars directly related to deals between Burma and the Korea Mining Development Trading Corporation.
 
With this string of events and the suspicions surrounding them as a dramatic lead in, on June 4, Al Jazeera aired a news documentary prepared by the Democratic Voice of Burma (DVB) which was written by Robert Kelley, a nuclear scientist and former director of the International Atomic Energy Agency (IAEA). The DVB report claimed that the ruling military junta in Burma is “mining uranium, converting it to uranium compounds for reactors and bombs, and is trying to build a reactor and/or an enrichment plant that could only be useful for a bomb.”

The IAEA wrote to Burma’s agency representative, Tin Win, on June 14 and asked whether the information provided in the DVB report was true. Burma, which is a member of the IAEA, a party to the Nuclear Non-Proliferation Treaty and a signatory to the Southeast Asia Nuclear-Weapon-Free Zone Treaty, responded with a letter stating that the DVB report allegations are “groundless and unfounded.”

“No activity related to uranium conversion, enrichment, reactor construction or operation has been carried out in the past, is ongoing or is planned for the future in Myanmar [Burma],” the letter said.

The letter also noted that Burma is a signatory of the Nuclear Non-Proliferation Treaty and the agency’s so-called safeguards agreement. “As stated in the safeguards agreement, Myanmar will notify the agency if it plans to carry out any nuclear activities,” the letter said.

The regime, however, has not signed the IAEA’s Additional Protocol, meaning that the agency has no power to set up an inspection of Burma’s nuclear facilities under the existing mechanism known as the Small Quantities Protocol.

Previously, on June 11, Burma’s state radio and television news had reported the Foreign Ministry’s denial of the allegations in the DVB report. The denial claimed that anti-government groups in collusion with the media had launched the allegations with the goal of “hindering Burma’s democratic process and to tarnish the political image of the government.”

The Foreign Ministry denial also addressed Nyapyidaw’s relationship with Pyongyang. “Following the re-establishment of diplomatic relations, Myanmar [Burma] and the DPRK, as independent sovereign states, have been engaging in promoting trade and cooperation between the two countries in the same way Myanmar is dealing with others,” the ministry said in its statement.

The regime did acknowledge that the Chong Gen docked at Thilawa Port near Rangoon in April. But the statement said the North Korean vessel was involved in importing cement from North Korea and exporting rice from Burma.

But in an article for Asia Times online, Burma analyst Bertil Linter noted that, “if carrying only innocuous civilian goods, as the statement maintains, there would seemingly have been no reason for authorities to cut electricity around the area when the Chong Gen, a North Korean ship flying the Mongolian flag of convenience, docked on the outskirts of Yangon.”

“According to intelligence sources, security was tight as military personnel offloaded heavy material, including Korean-made air defense radars. The ship left the port with a return cargo of rice and sugar, which could mean that it was, at least in part, a barter deal. On January 31 this year, another North Korean ship, the Yang M V Han A, reportedly delivered missile components also at Yangon’s Thilawa port,” Linter said.

Strategypage.com, a military affairs website covering armed forces worldwide, said, “Indications are that the North Korean ship that delivered a mysterious cargo four months ago, was carrying air defense radars (which are now being placed on hills up north) and ballistic missile manufacturing equipment. Dozens of North Korean technicians have entered the country in the last few months, and have been seen working at a military facility outside Mandalay. It’s unclear what this is for. Burma has no external enemies, and ballistic missiles are of no use against internal opposition.”

In his Asia Times online story, Lintner noted that on June 24, the DVB reported that a new radar and missile base had been completed near Mohnyin in Myanmar’s northern Kachin State, and he reported that work on similar radar and missile bases has been reported from Kengtung in eastern Shan State,160 kilometers north of the Thai border town of Mae Sai.

“Since Myanmar is not known to have imported radars and missile components from any country other than North Korea, the installations would appear to be one of the first visible outcomes of a decade of military cooperation,” Lintner said.

Lintner also reported that Western intelligence sources know that 30 to 40 North Korean missile technicians are currently working at a facility near Minhla on the Irrawaddy River in Magwe Division, and that some of the technicians may have arrived overland by bus from China to give the appearance of being Chinese tourists. 

North Korea has also issued adamant denials with respect to allegations regarding its relationship with Burma.

According to the Korean Central News Agency (KCNA), on June 21 Pyongyang said, “The US is now making much fuss, floating the sheer fiction that the DPRK is helping Myanmar [Burma] in its nuclear development.”

The KCNA often highlights the close relationship between North Korea and Burma.

On June 20, the Pyongyang news agency reported that ex-Col Than Tun, deputy chairman of the Union of Myanmar Economic Holding Ltd., sent a statement cheering Kim Jong Il’s 46th anniversary at the Central Committee of the ruling Workers’ Party of Korea.

On April 18, Korean state-run- media reported that Than Tun also issued a statement cheering the 17th anniversary of Kim Jong Il’s chairing of North Korea’s National Defense Commission.

“Kim Jong Il’s field inspection of KPA [Korean People’s Army] units served as a main source that helped bolster [North Korea’s] self-reliant defense capability in every way,” the statement noted.

Military sources said the Union of Myanmar Economic Holding Ltd, managed by the junta, is responsible for purchasing imported weapons for Burma’s armed forces, including transferring money to overseas banks such as Korea Kwangson Banking Corporation.

Meanwhile, in addition to its escalating relationship with North Korea, the Burmese military regime has recently boosted ties with Iran, which according to the UN report is also allegedly receiving nuclear and missile technologies from North Korea.

In recent years, Burmese and Iranian officials visited their counterparts homeland for the purported purpose of improving economic ties. Observers, however, said Than Shwe has made a tactical decision to develop relationships with other “pariah states,” particularly enemies of the US, to relieve Western pressure on his regime.

Iranian Deputy Foreign Minister Mohammad Ali Fathollahi met Burmese Foreign Minister Nyan Win and Minister of Energy Lun Thi during his trip to Burma on June 15-17.

“The two sides reiterated their desire to further expand the ties of friendship and economic cooperation and to increase cooperation in the regional international forums such as [the] United Nations and Non-Aligned Movement,” The New Light of Myanmar reported on June 18.

Fathollahi’s visit came three months after Maung Myint’s visit to Iran on March 8-11, when he met Iranian Foreign Minister Manochehr Mottaki and Deputy Minister of Petroleum H. Noghrehkar Shirazi.

Read the full story below:
Burma-North Korea Ties: Escalating Over Two Decades
Irrawaddy
Wai Moe
7/7/2010

According to Yonhap:

South Korea is inspecting its major ports to keep North Korean products from entering its soil after Seoul banned trade with the communist state over the sinking of a warship, an official said Thursday.

The ban took effect in late May when Seoul announced that a multinational probe found Pyongyang responsible for the March 26 sinking of the 1,200 Cheonan corvette. Forty-six South Korean sailors died in the sinking for which North Korea denies any role.

According to KBS:

Japan is reportedly planning to implement on Sunday its special law on cargo inspections of ships with suspected illicit ties to North Korea.

Kyodo News reported Friday that the law allows inspections of cargo if there are suspicions that nuclear weapons or missile-related goods are being transported by ships that visit North Korea. Consent from the country to which the vessel belongs will be required for inspections of ships from a third nation.

The law passed the Japanese parliament in May 2009 after sanctions were adopted by the United Nations Security Council in response to North Korea’s nuclear tests.

The Japanese government also plans to hold joint drills in the waters off its island of Kyushu under the assumption that a North Korean-related ship appears in Japanese waters.

According to Yonhap:

“Since the decision to block the passage of North Korean ships [May 24], we expelled 11 North Korean ships from our waters 20 times,” Kim was quoted by Rep. Hwang Jin-ha of the ruling Grand National Party as saying.

Kim told lawmakers that there was “no major trouble” in turning away the North Korean ships.

Read the full sotry here:
11 N.K. ships expelled from South’s waters since passage ban: minister
Yonhap
6/11/2010

In February 2010 Somali pirates seized a North Korean-flagged cargo ship owned by Libya’s White Sea Shipping in the Gulf of Aden. The crew and ship were taken to Somalia to be held for ransom.

Well after several months of captivity, the North Korean crew re-captured their ship and escaped to safety!  One member of the crew was injured and required medical assistance. 

According to Marine Log (h/t Monster Island):

The crew of the North Korean flagged general cargo ship RIM have regained control of the ship. It had been hijacked on February 3 and was being held at Garacad, off Somalia’s northern coastline.

Yesterday, at 1010 local time, the RIM reported that the crew had successfully retaken control of the ship and that it was headed south. One crew members was seriously injured.

The closest EU NAVFOR warship, the Spanish frigate VICTORIA, which was 100 miles away, was directed to the scene to give medical assistance and immediately launched its helicopter.

The helicopter found that, though the crew were still in control of the RIM, it was being pursued by pirates in another hijacked vessel, the MV VOC DAISY. When the helicopter approached the MV VOC DAISY, it changed her course – no warning shots were fired.

On reaching the scene, the VICTORIA then sent medical assistance to the vessel and took the injured crew member on board for treatment.

It is believed that some of the pirates were killed during the retaking of the ship.

The North Korean government should write a song about these guys!  They are way more courageous than a CNC machine! 

This means we can take away one point from the Somali Pirates and give it to the North Koreans.  This brings the cumulative score to: DPRK (4)* vs. Somali Pirates (1). The * is appropriate because the DPRK crews have received assistance from the USA and, this time, from a medical helicopter.

Previous DPRK VS. Somali pirate posts can be found here.

According to Bloomberg:

Japan tightened controls on sending money to North Korea and authorized the Coast Guard to search the communist regime’s ships in response to the deadly attack on a South Korean naval vessel.

The cap on undeclared cash transfers will be lowered to 3 million yen ($32,800) from 10 million yen, Chief Cabinet Secretary Hirofumi Hirano said today in Tokyo. Parliament passed a bill allowing the boarding of ships in international waters suspected of carrying North Korean nuclear or missile technology.

The toughened sanctions come a week after an international report concluded that a North Korean torpedo sank the 1,200-ton Cheonan in March, killing 46 sailors. Japan banned almost all trade with Kim Jong Il’s regime last year in response to a second nuclear weapon test and several missile launches.

“The cabinet has decided to take these new measures prompted by the unforgivable torpedo attack,” Hirano said. Japan also reduced the amount of money an individual can legally take into North Korea to 100,000 yen from 300,000 yen, he said.

Prime Minister Yukio Hatoyama will hold a two-day summit with South Korean President Lee Myung Bak and Chinese Premier Wen Jiabao starting tomorrow on South Korea’s Jeju Island. Japan and the U.S. are pushing Wen to acknowledge and condemn North Korea’s role in sinking the ship.

Koreans in Japan

Japan is home to about 589,000 Korean nationals, based on 2008 data, most of them the descendents of forced laborers brought back from the peninsula during Japan’s 1910-1945 occupation. South Koreans number almost 400,000 and North Koreans about 40,000, according to the Korean Residents Union, a pro-South group in Tokyo. Chosensoren, a Japan-based group that supports North Korea, doesn’t disclose its membership numbers.

North Korean residents in Japan have sent billions of yen in money and goods back home to relatives since the 1953 end of the Korean War, much of it derived from their operation of pachinko gambling parlors. Sanctions imposed last year and in 2006 have reduce the amount.

“Japan has imposed so many sanctions in the past that the new measures won’t have much impact,” said Pyon Jin Il, author of the “The Truth of Kim Jong Il” and chief editor of the Tokyo-based monthly Korea Report. “This is more symbolic, to show the world that Japan is doing something.”

In the 11 months through February, 55 million yen was wired or brought to North Korea from Japan, down from 280 million yen in the April to March 2006 fiscal year, according to Ministry of Finance data.

Trade between Japan and North Korea fell 97 percent to 793 million yen in 2008 — all in Japanese exports — from 21.4 billion yen in 2005. Last year’s sanctions added to a previous ban on exports of luxury goods imposed in 2006 following the communist nation’s first nuclear test.

Read full story here:
Japan Tightens Control on Sending Cash to North Korea
Bloomberg
Takashi Hirokawa and Sachiko Sakamaki
5/28/2010

We frequently see maps of the Northern Limit Line (NLL), the defacto and disputed maritime border that separates the two Koreas in the West Sea.  Recently a friend emailed me a map of the DPRK’s desired alternative maritime border–something I had never seen.  I have mapped out both borders in the image below.

Click image for larger version.

The source map comes from this AEI article.

UPDATE: Evan Ramstad offers some more information in the Wall Street Journal:

Known in South Korea as the Northern Limit Line, or NLL, the border was drawn up by the United Nations after the end of the Korean War in 1953. The North has objected to the line since the early 1970s, arguing in part that the line forces its ships to take lengthy detours to international shipping lanes.

Those objections intensified in the 1990s and led to two deadly skirmishes in the area in 1999 and 2002. In 2007, leaders of the two Koreas agreed to turn the area into a “peace zone.” That agreement—vaguely worded, struck just ahead of a South Korean election by an outgoing government and never implemented—was interpreted in the North as erasing the border and in the South as keeping it.

“North Korea’s provocations near the NLL are aimed mainly to show that it doesn’t acknowledge the line,” says Kim Jang-soo, who was South Korea’s defense minister in 2007.

Officials and analysts in South Korea, backed by some in the U.S., are making connections between Kim Jong Il’s appointment early last year of his friend O Kuk Ryol to the National Defense Commission, the North’s most important state body, and an increase in statements about the disputed sea border by the North’s state media.

Mr. O led the North’s Operations Department, the umbrella group widely believed responsible for the regime’s illicit activities, including counterfeiting and drug production. The department was later merged with the military’s Reconnaissance Bureau, which includes its special forces, and is considered by outside analysts as most likely to have planned and carried out the Cheonan attack.

“O was a childhood friend of Kim Jong Il and is perhaps his closest friend today,” says Bruce Bechtol, a Korea specialist and professor at the U.S. Marines Corps Command and Staff College.

North Korea’s alleged attack on a South Korean patrol ship is part of dictator Kim Jong Il’s efforts to redraw the western sea border between the two countries, according to an increasingly held view.

The March 26 sinking of the Cheonan, which South Korea blames on a North torpedo attack, has long been seen as retribution for the heavy damage South Korea inflicted on a North Korean ship in a November naval firefight.

More broadly, intelligence analysts in Seoul and abroad believe the alleged attack is part of military muscle-flexing by Mr. Kim as he prepares to transfer power in his family’s regime to a son.

The authoritarian, closed North, having denied torpedoing the Cheonan, isn’t talking about motivations. But some specialists and intelligence analysts in South Korea and the U.S. are focusing on what they see as the driving factor in the North’s actions, a sustained effort to redraw the inter-Korean border in the Yellow Sea off the two countries’ west coast.

Known in South Korea as the Northern Limit Line, or NLL, the border was drawn up by the United Nations after the end of the Korean War in 1953. The North has objected to the line since the early 1970s, arguing in part that the line forces its ships to take lengthy detours to international shipping lanes.

Those objections intensified in the 1990s and led to two deadly skirmishes in the area in 1999 and 2002. In 2007, leaders of the two Koreas agreed to turn the area into a “peace zone.” That agreement—vaguely worded, struck just ahead of a South Korean election by an outgoing government and never implemented—was interpreted in the North as erasing the border and in the South as keeping it.

“North Korea’s provocations near the NLL are aimed mainly to show that it doesn’t acknowledge the line,” says Kim Jang-soo, who was South Korea’s defense minister in 2007.

Officials and analysts in South Korea, backed by some in the U.S., are making connections between Kim Jong Il’s appointment early last year of his friend O Kuk Ryol to the National Defense Commission, the North’s most important state body, and an increase in statements about the disputed sea border by the North’s state media.

Mr. O led the North’s Operations Department, the umbrella group widely believed responsible for the regime’s illicit activities, including counterfeiting and drug production. The department was later merged with the military’s Reconnaissance Bureau, which includes its special forces, and is considered by outside analysts as most likely to have planned and carried out the Cheonan attack.

“O was a childhood friend of Kim Jong Il and is perhaps his closest friend today,” says Bruce Bechtol, a Korea specialist and professor at the U.S. Marines Corps Command and Staff College.

Mr. Roh said it called for creating a joint fishing zone in the disputed border area. He called it the most significant accomplishment of the summit and hinted a few days later that he might bend on the NLL, saying it was “misleading” to describe it as a border.

Kim Jang-soo, then-defense minister, said in an interview that he left the summit understanding that the sea border would remain intact. He and many military and political leaders in South Korea worried that changing the line would make it easier for the North’s naval ships to reach the Southern port city of Incheon and its capital, Seoul.

In the November meeting between defense officials, “we talked a lot about common fishing areas with our North Korean counterparts,” Mr. Kim said. “But our position was that we could never agree with this area unless North Korea acknowledged the [NLL] line.”

Some critics in South Korea saw the summit and Mr. Roh’s apparent flexibility on the line as an effort to bolster support for his progressive party, which was trailing in polls two months ahead of national elections. It was a miscalculation.

The victor in the December election, current President Lee Myung-bak, in his campaign described the NLL as a “critical border that contributes to keeping peace on our land.”

After taking office in February 2008, Mr. Lee said South Korea would move forward on the 2007 summit deal and other economic aid only after North Korea took steps to end its pursuit of nuclear weapons.

After Mr. Lee’s election, there have been no further meetings on the proposed peace zone.

Read the full article here:
Korea Crisis Has Roots in Border Row
Wall Street Journal
Eavn Ramstad and Jaeyeon Woo
6/2/2010

According to the Washington Post:

South Korean President Lee Myung-bak said Monday that his country is stopping all trade and most investment with North Korea and closing its sea lanes to North Korean ships after the nation’s deadly attack on a South Korean warship.

Lee also called for a change in Pyongyang’s Stalinist regime.

The tough measures, announced in an address to his nation, were bound to ratchet up pressure on the isolated Pyongyang government and add a new flash point in U.S. relations with China.

“Fellow citizens, we have always tolerated North Korea’s brutality, time and again. We did so because we have always had a genuine longing for peace on the Korean Peninsula,” he said. “But now things are different. North Korea will pay a price corresponding to its provocative acts.”

Lee then said that “no North Korean ship will be allowed to make passage through any of the shipping lanes in the waters under our control” and that “any inter-Korean trade or other cooperative activity is meaningless.”

A senior U.S. official, traveling with Secretary of State Hillary Rodham Clinton in China, said the United States will back “all the steps the South Koreans are going to announce.” In an indication of the seriousness with which the Obama administration views the drama between the North and South, home to nearly 29,000 U.S. troops, he added: “We have not faced something like this in decades.” Lee apparently has ruled out military action because he does not want to trigger an all-out war.

The official said that, based on talks over the past two days, Chinese officials have not accepted the results of a South Korean investigation — backed by experts from the United States, Australia, Britain and Sweden — that implicated North Korea in the attack on the 1,200-ton Cheonan that killed 46 sailors. As such, it is unclear whether Beijing will support Lee’s measures or his call, also made in the speech, to take the issue to the U.N. Security Council.

China’s reluctance to agree with the report underscores the challenges the United States faces as it seeks to forge closer ties to Beijing. The U.S. official also noted Sunday that China and the United States still do not see eye to eye on the details of planned economic sanctions on Iran for its failure to stop its nuclear enrichment program. Of specific concern, he said, are disagreements between Beijing and Washington about how investments in Iran’s oil and gas sector will be treated. China has committed to investing more than $80 billion in Iran’s energy sector; tightened sanctions against Tehran could threaten those investments.

…

Tough options for China

The attack and its aftermath also threaten China’s place in the region and could force it to make an unwanted choice between South Korea and North Korea — two countries that it has handled deftly since normalizing relations with Seoul in 1992. South Korea wants China, which is a permanent member of the Security Council, to back Seoul’s call to take the Cheonan issue to the council. So does the United States, the U.S. official said.

But that could risk hurting Pyongyang, and China appears committed to maintaining the North Korean regime above all.

“For China,” the U.S. official said, “they are in uncharted waters.”

China reacted slowly to the Cheonan’s sinking, waiting almost a month before offering South Korea condolences. Then it feted North Korea’s Kim in May, apparently offering him another large package of aid, Asian diplomats said. China’s attitude has enraged South Korea.

Michael Green, a national security official during George W. Bush’s administration, said the Cheonan crisis highlights just how differently China views its security needs than the rest of the players in Northeast Asia. For years, as China worked with the United States, Russia, South Korea and Japan to try to persuade North Korea to give up its nuclear weapons programs, these differences were obscured. But the Cheonan’s sinking has changed that.

According to Yonhap, the Kaesong Industrial Zone will be spared from the chopping block:

South Korean Unification Minister Hyun In-taek said Monday that Seoul will still maintain the joint economic project in Kaesong despite the attack, but will “respond with resolute measures” to any bid by the communist neighbor to undermine the safety of its workers.

“If North Korea ignores our careful consideration to preserve the complex even under current circumstances, and subsequently threatens the safety of our citizens there, we will never tolerate any harm to our citizens,” Hyun said.

Hyun was speaking at a joint press briefing with the foreign and defense ministers following President Lee Myung-bak’s nationally televised speech condemning the North for the ship sinking.

Hyun was apparently referring to the half-year long detention of a South Korean worker in Kaesong last year amid deteriorating political ties between the countries.

Also according to Yonhap, some aid projects will be maintained:

Lee announced his government will suspend all trade and exchange programs with the North except for the Kaesong project, while maintaining minimum levels of humanitarian aid for infants and children living in the impoverished communist country.

“Under these circumstances, any inter-Korean trade or other cooperative activity is meaningless,” the president said, adding that North Korean ships will no longer be allowed to use South Korean waterways as short-cuts.

Yonhap reports:

A suspension of inter-Korean trade would deal a “direct blow” to North Korea by blocking its major source of hard currency needed to govern the reclusive and impoverished country, a Seoul think tank said Monday.

The state-run Korea Development Institute (KDI), however, noted in a report that such a move could fail to achieve its intended goal if other global powers like China do not agree, highlighting the importance of securing international cooperation.

…

“North Korea’s trade with the South has accounted for up to 38 percent of its total trade volume and makes up 13 percent of its gross domestic product. With the dollars obtained through inter-Korean trade, the North has expanded its businesses with China. It (the trade with the South) also helped Pyongyang to cushion any negative external risks such as sanctions by Japan, while acquiring dollars needed to govern the country,” the report said.

“If we push for a measure to suspend the trade, it could translate into a decline in its trade with China and make it tough to find other business partners as a result, dealing a direct blow to its regime by blocking it from obtaining dollars,” it added.

The report noted that a trade ban by the Seoul government would have a maximum level of impact if China follows suit, which it expects could place Pyongyang under a situation where “it has to think about its life or death.”

Currently, the North depends on South Korea and China for up to 80 percent of its external trade and 35 percent of its GDP, according to the report. Especially, China provides many strategically important materials such as oil to the North.

The report said that if China decides to support the North, it would reduce the overall impact but it will still destabilize its regime in the long term by making it heavily dependent on its closet ally and fast-emerging global economic power.

“It would weaken the regime’s principle not to depend solely on a single country even for its trade based on the so-called juche (self-reliance) doctrine. Also China’s support would prompt opening of the reclusive nation to outside, making it more difficult for the regime to keep its tight grip on domestic market and those who want and push for market opening,” the report said.

“In summary, a political choice by China would have some impact but in the end, a trade suspension with the South would cause a significant amount of pain to the country. We need to have to push for such an action with self-confidence if there is a consensus, while taking diverse efforts to persuade China over such a measure, while establishing an international cooperative framework with the United States and Japan as well,” it added.

Business Week (Bloomberg) reports on the impact of UN sanctions last year:

UN sanctions imposed on North Korea after its second nuclear test in May 2009 caused the North’s international commerce to shrink 9.7 percent last year, according to the Seoul-based Korea Trade-Investment Promotion Agency. Stripping out South Korea’s one-third share, China accounted for 78.5 percent of North Korea’s commerce, the agency said. North Korea, whose leader Kim visited China earlier this month, doesn’t release trade data.

The New York Times also has good coverage

The full text of President Lee’s speech can be found here.

All previous posts on the Cheonan are here.

Read full article here:
South Korea to halt all trade with North Korea over sinking of Cheonan warship
Washington Post
John Pomfret
5/24/2010

Jin Hualin, dean of the College of Economics and Management at Yanbian University, talks about Chinese investment in Rason in China’s Global Times.  Here is an excerpt:

GT: If China does continue to rent Rajin harbor for another 10 years, what will the effects be?

Jin: China has reached an agreement to rent a pier at Rajin Port for another decade. A Dalian-based Chinese company has invested 26 million yuan ($3.8 million) in the reconstruction of Rajin Port No.1 Pier. Park also said that China may enjoy more favorable conditions there, such as more berths.

I think Chinese companies’ participation is good for promoting the North Korean economy and building logistical infrastructure in the area, which is beneficial to China, North Korea and the Northeast Asian countries.

When the Sino-Mongolia route is finished, raw materials and natural resources from Mongolia can be shipped to Japan and South Korea via Rajin harbor, and then China’s northeastern regions and North Korea can both benefit.

GT: What should China do to promote Northeast Asian cooperation and devel-opment?

Jin: I suggest Chinese governments at all levels consider the following issues. They should accelerate trade and tourism and build cooperation on logistics, and support Chinese companies going global and investing in North Korea.

Actually, China now has many companies capable of investing abroad. The point is foreign countries’ investment environment.

We should strengthen cooperation on education with North Korean universities and colleges, sending students to study there and exploring research in new areas together.

We can also strengthen regional cooperation. We can designate China’s Hunchun city and North Korea’s Rason city as pilot cities and permit China’s commercial banks to open yuan-based accounts in Rason’s commercial banks.

Relations between Northeast Asian countries are subtle and complicated because of geopolitical contradictions, different political systems, the influence of the Cold War, historical issues, territorial disputes and sentiments caused by historical and territorial issues.

Mutual distrust fundamentally hinders cooperation. China needs to take the responsibility to promote regional cooperation and make it institutionalized and legally guaranteed as soon as possible.

GT: How do you evaluate the political and economic risks for Chinese companies going into North Korea? What advantages do Chinese companies have?

Jin: There are always political and economic risks involved in trade between different countries. The first major solution is to establish a mutual investment guarantee agreement, so that the two countries’ economic cooperation will be protected legally.

We hope that North Korea can keep the stability and consistency of its policies and issue development policies that is in line with international conventions. As long as North Korea adopts consistent policies, Chinese companies won’t encounter great political and economic risks there.

China and North Korea are believed to enjoy good mutual trust. China has experience from its reform and opening-up and plenty of investment capability. North Korea has a good educational foundation, low labor costs, and rich natural resources.

Chinese companies are active participants in investing in North Korea and I believe they’ll do well there.

Read the full interview here. Hat tip to Adam.

(* = assist from the US Navy)

According to Sapa-AFP (via iol.com of South Africa):

Heavily armed Somali pirates shot and wounded nine seafarers during a bloody attempt to hijack a North Korean cargo ship off Kenya on Wednesday, a maritime watchdog said.

“There was a very violent attack against a North Korean vessel by Somali pirates who used automatic rifles and RPGs (rocket-propelled grenades),” Pottengal Mukundan, director of the London based International Maritime Bureau (IMB) told AFP.

“Nine crew members have been seriously injured as a result of the attack,” he added.

Mukundan said Somali pirates, who have become a serious hazard for shipping in the region, attacked the ship which was heading to Mombasa.

“Despite coming under heavy attack, the pirates were unable to board the ship,” he said.

Mukundan said IMB had relayed news of the attack to the relevant authorities to provide assistance to the crew.

Urging seafarers to remain alert, he said pirates were shifting their attacks against ships “well south of the previous areas of risk, threatening the trade route into Mombasa and Dar es Salaam.”

“The level of violence has increased against ships. We call on the navies to continue robust action against mother ships when the mother ships are located,” he said.

Somali pirates have expanded from the Gulf of Aden into the open seas of the Indian Ocean, venturing as far as the Seychelles and beyond.

Despite the increased international military presence off Somalia’s coastline – the longest on the African continent – pirates have raked in huge ransoms.

Alongside the EU, the United States and other national navies deployed warships off the Somali coast in December 2008 to protect shipping and secure maritime routes in the Gulf of Aden and the Indian Ocean.

Read past stories about Somali Pirates and the DPRK here:
DPRK Merchants (2)* Vs. Somali Pirates (2)

DPRK Merchants (2)* Vs. Somali Pirates (1)

DPRK Merchants (1)* vs. Somali Pirates (1)