Archive for May, 2010

Japan tightens controls on DPRK cash flows

Monday, May 31st, 2010

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
Takashi Hirokawa and Sachiko Sakamaki


KPN submarine bases in the East Sea

Monday, May 31st, 2010

A few weeks ago I posted satellite images of the North Korean naval fleet in its southern West Sea waters (link here).  Last week the Choson Ilbo posted information on the DPRK’s East Sea submarine bases:

Between 70 and 80 percent of North Korea’s submarine fleet is stationed along the eastern coast, where four shark-class submarines disappeared recently from South Korean radars. Compared to the shallow waters of the West Sea, conditions in the East Sea are so favorable to submarines that it has been referred to as a “paradise” for them.

North Korea has around 70 submarines — 20 Romeo-class subs weighing 1,800 tons, 40 shark-class subs (325 tons) and 10 salmon-class subs (130 tons). A salmon-class sub is believed to be responsible for sinking the South Korean Navy corvette Cheonan.

There are four North Korean submarine bases along the east coast, including Chaho Base where the four shark-class subs that vanished are stationed, as well as Mayangdo, Toejo and Wonsan, all in South Hamgyong Province.

Chaho and Mayangdo are the main bases. Chaho is equipped with a cave to protect submarines from aerial attacks as well as a canal that can transport submarines faster to the ocean. A Google Earth image unveiled a few years ago shows eight Romeo-class and three shark-class submarines at Chaho.

The Mayangdo Base is near the site of an abortive light-water reactor project in Sinpo and is ideal for safe docking and hiding submarines. It apparently houses Romeo, shark and even whiskey-class training submarines. The base in Toejo is home to North Korea’s eastern naval command and the shark-class submarine that was stranded off the coast of Gangneung in 1996 carrying 25 North Korean spies.

Using the East Sea, which makes it difficult to detect submarines, small North Korean submarines apparently infiltrated South Korean waters regularly during the 1990s. A log found aboard a yugo-class North Korean submarine captured off the coast of Sokcho in 1998 showed records of numerous infiltrations. South Korea’s First Naval Command, which covers the East Sea, has dispatched destroyers, convoys and corvettes to search for the four submarines that have disappeared from radars.

Of course the Choson Ilbo did not post coordinates or images of the sub bases, so I offer them here:

Chaho Base:  40°12’36.28″N, 128°38’55.51″E. See in Wikimapia here.
Mayangdo Base:  39°59’51.79″N, 128°11’31.44″E. See in Wikimapia here.
Toejo Base:  39°52’35.98″N, 127°46’42.48″E. See in Wikimapia here.
Wonsan Base :  39°20’38.43″N, 127°25’28.19″E. There are many naval facilities in Wonsan Bay but I have not located any submarines. The coordinates are from a peninsula in the bay with a significant KPN presence.  See in Wikimapia here.


The NLL and the DPRK alternative

Monday, May 31st, 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


Impact of the ROK’s May 24 economic sanctions against the DPRK

Monday, May 31st, 2010

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-05-27-1

On May 24, the South Korean government announced, in response to the Cheonan incident, the cessation of inter-Korean exchanges and other sanctions against Pyongyang. These measures will directly impact the North, costing it 250~300 million USD. According to the Ministry of Unification, North Korea earned 245.19 million USD from inter-Korean cooperative schemes not related to the Kaesong Industrial Complex. This does not include additions monies for customs fees, transportation costs, mediation fees and other incidentals.

About 254 million USD worth of goods were produced on commission in the North after raw materials or partially manufactured products were sent from the South. 10~15 percent of this (25-38 million USD) covers labor and other costs. Therefore, by halting all exchanges and cooperative schemes other than the Kaesong Industrial Complex, North Korea stands to lose at least 200 million USD.

In particular, as the South has banned the import of North Korean sand and marine products, both known to be money-earners for the North’s military, it appears these sanctions have the potential to really pressure Pyongyang. In addition, preventing North Korean ships from using South Korean waters could cost an additional nine million USD. An additional 6 billion won-worth of government-related projects for the North has also been suspended. Ultimately, the cessation of inter-Korean exchange will cost North Korea 250~300 million USD.

The Korea Defense Institute estimates that through inter-Korean projects, tourism, and the Kaesong Industrial Complex, North Korea earned 180 million USD in 2004, but that jumped to 233 million USD in 2005, 341 million in 2006, and 534 million USD in 2007, before falling to 490 million in 2008, and 347 million USD last year.

It appears that the reduction in foreign currency earned by the North has somewhat impacted its economy. Now, the cessation of inter-Korean contacts means further reduction in the North’s access to foreign currency, possibly causing severe shortages of daily necessities because of a lack of trade and insufficient production capacity. If inter-Korean trade ceases, the North can no longer earn foreign capital from Seoul, and this could cause DPRK-PRC trade to drop off, if the North is unable to cover its bills.

It will also cause a loss of jobs for all those North Koreans involved in consignment production, fishing, farming, and other areas of the economy hit by the freeze in trade with the South. As the processing-on-consignment business has reached 30~35 million USD per year, labor involved in the industry nears that of the Kaesong Industrial Complex, and could mean the loss of as many as 40,000 jobs.

While the government has decided to maintain the Kaesong Industrial Complex, it plans to downsize the ROK manpower by 40-50 percent. The reason given is to be able to ensure the safety of the workers, but if the number of workers is cut by 50 percent, this cannot help but have a huge impact on production, raising concerns with North and South Korean employees alike.


Einhorn named to enforce UN sanctions

Saturday, May 29th, 2010

According tot he Joonang Ilbo:

The U.S. government has nominated Robert Einhorn, an expert in nonproliferation issues, as its new coordinator for implementing UN Security Council sanctions against North Korea, diplomatic sources in Seoul said on Thursday.

Einhorn is currently the special adviser to U.S. Secretary of State Hillary Clinton for nonproliferation and arms control, and a source here said Einhorn is one of Washington’s leading experts in Korean Peninsula and North Korean nuclear issues.

The sources said the United States is looking to streamline the process by which it implements sanctions, as it prepares to seek a UN resolution that addresses the sinking of the South Korean warship Cheonan. Last week, a multinational team of investigators concluded that North Korea attacked the 1,200-ton corvette with a torpedo on March 26.

“The U.S. administration was seeking more efficient management of implementation of sanctions, which had been divided between the State and the Treasury departments,” the source said. “Philip Goldberg, the assistant state secretary at the Bureau of Intelligence and Research, had been doubling as the implementation coordinator, but Einhorn is poised to take over.

“The U.S. government also tried to strengthen its sanctions system after the second North Korean nuclear test last year, when Goldberg was named the coordinator,” the source said. Goldberg was appointed to his Bureau of Intelligence and Research post in February.

Another source said Einhorn’s nomination is also part of the U.S. government’s efforts to follow up on President Barack Obama’s order to review “existing authorities and policies” on North Korea. Soon after South Korean President Lee Myung-bak unveiled Seoul’s countermeasures against Pyongyang Monday, the White House expressed its support and said in a statement, “This review is aimed at ensuring that we have adequate measures in place and to identify areas where adjustments would be appropriate.”

According to the State Department, Einhorn spent 29 years at the department and served as a senior adviser at the Center for Strategic and International Studies from 2001 to 2009. He held arms control and nonproliferation positions at the U.S. Arms Control and Disarmament Agency, and from 1999 to 2001 he was the assistant state secretary for nonproliferation.

In October 2000, Einhorn accompanied then-Secretary of State Madeleine Albright to Pyongyang, where he met Kim Jong-il twice. Einhorn was also involved in missile talks with North Korea.

“Aside from his knowledge of North Korean nuclear issues, Einhorn is tight with Gary Samore, the weapons of mass destruction coordinator at the White House, and other nonproliferation officials in the Obama administration,” another source in Seoul said. “Einhorn should be able to provide leadership in his new role.

“And since he’s also been dealing with financial sanctions on Iran as the special adviser at the State Department, Einhorn is a great fit to manage financial embargoes against North Korea.”

Another diplomatic source said the Obama administration needed to tighten its sanctions regime. The source said when North Korean overseas accounts were closed off by U.S. sanctions, they simply changed the name of the individual or the company which had opened the account and resumed transactions. The sanctions were aimed at banning transactions by companies or individuals suspected of involvement in the North’s weapons of mass destruction programs.

“U.S. officials have taken note of such [name-changing] practices and they’re preparing measures to eliminate them,” the source said.

U.S. officials are also continuing to press China to join them in punishing North Korea. In an interview with National Public Radio yesterday, Korean time, Kurt Campbell, the assistant secretary of state for East Asian and Pacific Affairs, said that because China is cooperating with the United States about nuclear issues in Iran, he hopes it will do the same in dealing with the Cheonan case.

In another related move, Obama and Japanese Prime Minister Yukio Hatoyama condemned the Cheonan attack in a phone conversation and pledged cooperation with South Korea. Japanese Chief Cabinet Secretary Hirofumi Hirano said Japan will lower the limit on the amount of undeclared cash that can be carried into North Korea to 100,000 yen ($1,097) from the current 300,000 yen, as part of Japan’s toughened sanctions.

Read the full story here:
U.S. nominates sanctions ace
Joongang Daily
Kang Chan-ho, Yoo Jee-ho


Be careful out there

Wednesday, May 26th, 2010

A few months ago I wrote about two attempts to hack into my computer.  The post is here if you are interested.  Well, since then I have fended off no less than six attempts to break into my computer–including two attempts just today (three this week).One email containing a virus was ostensibly from a North Korea expert and the second email was intended to look like it came from the Korea Economic Institute (it even referenced an actual upcoming event of theirs).  I know of several others who have been targeted and some who have even been infected so please be careful out there.Someone is still not playing nice.


The short life of the Sunchon Vinalon Complex area

Tuesday, May 25th, 2010

UPDATE (2011-5-31): New Google Earth imagery, dated 2009-5-27, reveals the Sunchon Vinalon Complex area continues to shrink:

Here is an overview of the facilities in question.  Note the two yellow boxes:

Below are images from the complex in the yellow box on the left (March 2004 – May 2009):

Below are images from the complex in the yellow box on the right (March 2004 – May 2009):

ORIGINAL POST (2010-5-25): The Sunchon Vinalon Complex was launched in 1985.  It was intended to produce 100,000 tons of Vinalon as well as methanol, vinyl chloride, sodim carbonate, caustic soda, nitrogenous fertilizers, albuminous feed.  In October 1989 the government announced that the first-stage had gone into production (50,000 tons of vinalon).

Using Google Earth imagery and clandestine video footage we can see, however, that much of the Sunchon Vinalon Complex, what I believe is that largest industrial complex in the DPRK (in terms of geographic size), is now a shrinking pile of scrap materials.

Below is an overview of the Sunchon industrial area.  It is composed not only of the Sunchon Vinalon Complex, but also the Sunchon Thermal Power Plant and Sunchon Cement Complex.  I believe the Sunchon Vinalon Complex is actually composed of three distinct hubs. The two I will be looking at are highlighted in red in the below satellite overview image:


The  red box on the right has seen the most changes.  Between 2004 and 2006 it was nearly entirely stripped:

sunchon-area1-2004.JPG sunchon-area1-2006.JPG

The red box on the left has been stripped as well–though not nearly to the same extent:

sunchon-area2-2004.JPG sunchon-area2-2006.JPG

Recently KBS broadcast clandestine video shot at the Sunchon complex and someone posted a short clip on the web.  You can watch it here.  Below I have matched the clandestine video segments with the satellite imagery which shows just how derelict the facility has become. Satellite image dates are in the upper right hand corner.

sunchon-vinalon-video1.JPG sunchon-sattelite-video1.JPG

sunchon-vinalon-video2.JPG sunchon-sattelite-video2.JPG

sunchon-sattelite-video3.JPG sunchon-vinalon-video3.JPG

sunchon-vinalon-video4.JPG sunchon-sattelite-video4.JPG

sunchon-vinalon-video5.JPG sunchon-sattelite-video5.JPG

The third zone of the complex seems unaffected over the years.  You can see it here.  I suspect this is the successfully launched “first stage”.

Additional Information:

1. Google Books has a blurb about the complex from North Korea: A Strange Socialist FortressSee the blurb here. I own this book and recommend it.

2.  Global Security asserts that the facility produces chemical weapons.

3. Here are all of the KCNA stories that mention the Sunchon Vinalon Complex (Courtesy of the invaluable STALIN Search Engine)

4. The Sunchon Vinalon Complex is the second vinalon facility to be constructed in the DPRK.  The first is the 2.8 Vinalon Complex in Hamhung.  This facility was recently reconstructed and opened after falling into disrepair during the Arduous March.


DPRK severs ties with RoK

Tuesday, May 25th, 2010

UPDATE 4:  Global Security gives a rundown of the steps the DPRK is already taking:

North Korea has begun to freeze ties with the South, which already halted most trade with Pyongyang in retaliation for the sinking of a South Korean warship. The North has denied responsibility for the attack on the vessel and is accusing the South of launching a “smear campaign” against it.

Pyongyang has expelled eight South Korean government officials from a joint factory park in the North. And, it is threatening to block what little cross-border traffic exists.

The Unification Ministry in Seoul says hundreds of South Korean managers and other workers from the South were allowed to enter the industrial complex in the west coast Kaesong border city, Wednesday.

But ministry spokesman Chun Hae Sung tells reporters North Korea quickly acted on other aspects of its threat to cut all communications ties with the South.

He says Pyongyang Wednesday halted contact between the Red Cross delegations in the truce village, Panmunjom, and the North Korean Navy contacted the South to inform it that all marine communications between the two Korea’s are now cut.

Relations between the two Koreas have deteriorated steadily since the Cheonan, a South Korean naval vessel in the Yellow Sea, exploded a month ago, killing 46 crew members. An international investigation concluded last week that the coastal patrol warship was hit by a North Korean torpedo.

South Korea’s defense ministry tells VOA News that plans to send tens of thousands of leaflets northward by ballon have been delayed because of wind conditions, but they could go aloft as early as Thursday. Officials say the leaflets are intended to inform North Koreans about the sinking of the South Korean naval vessel. The North views Southern pamphleteering as hostile propaganda.

South Korea’s military is using loudspeakers along the border, silenced for six years, and re-instituting FM broadcasting to the North.

North Korea’s state television newscaster announced such propaganda will not be tolerated.

The North Korean newscaster says it will open fire on the South Korean loudspeakers and destroy them.

Pyongyang says a resumption of the propaganda campaign will also compel it to totally shut down the Kaesong industrial complex, where more than 100 South Korean firms employ about 42,000 North Korean workers.

The two countries have no diplomatic relations and technically remain at war following a 1953 truce which ended the three-year Korean War.

The United States, which has 28,000 troops in South Korea, has hurriedly announced plans for several joint military exercises in the coming month. In the past, Pyongyang has strongly condemned U.S.-South Korean drills, claiming they are preparations for an invasion of the North.

UPDATE 3: Pyongyang confirms it wants to keep running the Kaesong Zone.  According to Yonhap:

North Korea has said it wants to keep a joint industrial complex with South Korea going and will ban southern firms from taking factory equipment out of the zone, a Unification Ministry official said Monday.

An unidentified North Korean official made the remark Sunday to a South Korean staffer at a joint commission handling the operation of the factory park in the North’s border town of Kaesong, the official said on condition of anonymity.

The remark represents a softening of Pyongyang’s stance on the project as it contrasts with a threat to shut a cross-border route leading to the zone in anger over a series of steps South Korea announced in retaliation to the North’s sinking of a southern warship.

It also appears to reflect the North’s concern that the park’s closure would leave tens of thousands of its workers there without jobs and the regime without a key source of hard currency that has helped prop up the North’s moribund economy.

UPDATE 2:  Pyongyang has scrapped a joint-Korean agreement which ensures the safety of South Koreans crossing the Military Demarcation Line and threatened to close the Kaesong Zone if Seoul resumes propaganda broadcasts.  According to the Korea Times:

“Seoul will take stern measures if Pyongyang harms South Korean workers staying at the Gaeseong Industrial Complex, even by a tiny amount,” Lee Jong-joo, a spokeswoman at the Ministry of Unification, said.

The remark came a day after the communist North issued a statement that it would scrap an inter-Korean pact to ensure the safety of South Koreans crossing the Military Demarcation Line (MDL), which separates the two Koreas.

On Wednesday, Pyongyang also threatened to close the industrial park if Seoul begins broadcasting anti-North Korea propaganda through loudspeakers along the Demilitarized Zone (DMZ).

“We can neither let North Korea harm our citizens in retaliation to the resumption of psychological warfare against it, nor tolerate such rationale,” the spokeswoman said.

UPDATE 1:  According to the Washington Post work is continuing at the Kaesong Industrial Zone:

There was a semi-hopeful signal Wednesday that rising animosity over the sinking of a South Korean warship may not shatter all economic ties between the two Koreas.

Production continued at the Kaesong Industrial Complex, a six-year-old factory park just north of the heavily armed border that separates North and South Korea.

At the last remaining symbol of economic cooperation between the two countries, about 45,000 North Koreans went to work as usual for 121 South Korean companies located in the complex.

North Korea had threatened Tuesday that it would severe all relations with South Korea. Its move was in retaliation for trade and other sanctions that Seoul imposed Monday on Pyongyang for its apparent role in a stealthy submarine attack that torpedoed a South Korean ship and killed 46 sailors.

The North denies sinking the ship and threatens war if there is any move to punish it. But its actions at Kaesong were nearly not as uncompromising as its rhetoric.

North Korea allowed several hundred South Korean managers and engineers to cross the border Wednesday and go to work.

It did kick out at least eight South Korean government officials and cut North-South phone lines for some manufacturers. But one company official said that North Korean workers were allowed to work and South Korean managers were allowed to manage.

“The situation at Kaesong at this moment is that nothing much has changed,” said Song Ki-suk, former chairman of Korea Micro Filter, a South Korean auto parts company that employees 350 North Koreans.

Still, it appears that North Korea wants Kaesong to operate. The industrial park injects more than $60 million a year in rent, fees and worker salaries into the country’s moribund economy.

I would take issue with the last paragraph.  I am pretty sure that the vast majority of hard currency transfers from South to North mean very little to the broader North Korean economy.  Those revenues are held pretty tight.  However, jobs at the Kaesong Zone are among the most desired in the country and there is no doubt that the complex has improved life in the Kaesong Region.

Read the full story here.

ORIGINAL POST: On Monday the South Korean government announced it was severing nearly all trade relationships with the DPRK.  One notable exception to this policy was the Kaesong Industrial Zone.  Today, however, the DPRK announced that it is reciprocating. According to Reuters:

The following are key points from the text of the report issued by the North’s KCNA news agency.

“The Committee for the Peaceful Reunification of Korea, accordingly, formally declares that from now on it will put into force the resolute measures to totally freeze the inter-Korean relations, totally abrogate the agreement on non-aggression between the north and the south and completely halt the inter-Korean cooperation.

“In this connection, the following measures will be taken at the first phase:

“1. All relations with the puppet authorities will be severed.

“2. There will be neither dialogue nor contact between the authorities during (South Korean President) Lee Myung Bak’s tenure of office.

“3. The work of the Panmunjom Red Cross liaison representatives will be completely suspended.

“4. All communication links between the north and the south will be cut off.

“5. The Consultative Office for North-South Economic Cooperation in the Kaesong Industrial Zone will be frozen and dismantled and all the personnel concerned of the south side will be expelled without delay.

“6. We will start all-out counterattack against the puppet group’s ‘psychological warfare against the north.’

“7. The passage of south Korean ships and airliners through the territorial waters and air of our side will be totally banned.

“8. All the issues arising in the inter-Korean relations will be handled under a wartime law.

“There is no need to show any mercy or patience for such confrontation maniacs, sycophants and traitors and wicked warmongers as the (South Korean President) Lee Myung Bak group.”

The Choson Ilbo reports on some of the economic implications if the Kaesong complex was closed:

It would cost about US$500 million to shut the joint-Korean Kaesong Industrial Complex in the North, the government estimates.

A government official on Sunday said the estimate includes insurance payouts from the Inter-Korean Economic Cooperation Fund for South Korean businesses operating at the industrial park if the North decides to shut the industrial park or if Seoul decides to pull out South Korean staff for safety reasons.

The North has earned more than $96.81 million in cash from wages from 2004 to March this year. It expects to earn another $40 million this year.

“Some 100 of 121 South Korean firms at the industrial park are insured with the Inter-Korean Economic Cooperation Fund,” a Unification Ministry official said. “The indemnity insurance will compensate for up to W7 billion (US$1=W1,199) or up to 90 percent of their investment.”

But no firm that voluntarily withdraws before the North or the South shuts the industrial park is entitled to insurance payouts. An executive of a firm operating at the industrial park said, “The total investment South Korean firms made in the industrial park probably exceeds W1 trillion.” That means the $500 million estimate by the government is too low, and despite the insurance limit of W7 billion, quite a few firms have invested more than W20 billion, he added.

It is difficult for early starters to withdraw given that they are making profits now and the amount of their indemnity insurance has shrunk due to depreciation of their properties.

But many latecomers are ready to leave if there is an adequate compensation, though the ministry official said none have yet told the government they want to pull out.

The North Korean media have been repeatedly reporting a statement issued last Friday by the North’s Committee for the Peaceful Reunification of the Fatherland saying it considers itself at war and will respond resolutely to any action the South takes over the sinking of the Navy corvette Cheonan on March 26. It also threatened to cut off all ties with South Korea and scrap a bilateral non-aggression pact.

In 2007 the DPRK’s top trading partners were (in order) China, South Korea, Thailand, Russia, India, Brazil, Singapore, Germany, Netherlands, Taiwan, Algeria. In 2008, China and South Korea accounted for more than 80% of the DPRK’s total trade (China 67%).  Inter-Korean trade was nearly zero until 1988.


Seoul resumes radio broadcasts to DPRK

Tuesday, May 25th, 2010

According to teh Associated Press (5.25.2010):

South Korea is waging psychological warfare against North Korea today after a six year pause, and Pyongyang says its troops are bracing for war amid tensions over the sinking of a warship.

South Korea is blaring radio broadcasts into the North and placing loudspeakers at the border to blast out propaganda to punish Pyongyang.

Although the South Korean government has been out of the game for the last six years, plenty of others have been broadcasting into the DPRK: Free North Korea Radio, Open Radio for North Korea, Radio Free Chosun, Voice of America and  Radio Free Asia.   


Some recent sanctions statistics

Tuesday, May 25th, 2010

According to Reuters:

The state-run Korea Trade-Investment Promotion Agency (KOTRA) said North Korea’s trade, including commerce with South Korea, fell 9.7 percent to $5.09 billion last year from 2008.

Excluding trade with the South, foreign commerce feel 10.5 percent to $3.41 billion last year, KOTRA said in a statement.

It said trade with China, the North’s sole supporter, amounted to about $2.7 billion.

The prospect of further sanctions as a result of the sinking of a South Korean naval vessel by a suspected North Korean torpedo in March would slow trade even more, KOTRA said.

“North Korea’s trade this year is seen shrinking further and depending more on China due to the U.N.’s continuous sanctions against the North and possibilities of further measures,” KOTRA said.

North Korea does not announce its own trade data and KOTRA said it compiled the data from the agency’s overseas offices.

Last week, Seoul released the findings of a report which concluded that a North Korean submarine had fired a torpedo that sank the Cheonan corvette, killing 46 sailors.

South Korea has repeatedly said it would not strike back at the North, aware that would frighten away investors already jittery about the escalating tension on the divided peninsula.

Washington has called for an international response, which could range from fresh U.N. Security Council sanctions on North Korea, although those might be opposed by China, to a statement of condemnation by the world body.

A range of international sanctions have been levied against North Korea in recent years for its missile and nuclear tests.

And according to Leon Sigal in 38 North:

… North Korean trade increased in the two years following the 2006 UN sanctions. Inter-Korean trade totaled $1.8 billion in 2007—about a 33 percent jump from 2006—then rose again to $1.9 billion in 2008. China trade also grew to roughly the same level in 2007, then shot up to $2.78 billion in 2008. North Korea’s total trade increased by more in 2008 than in any other year over the past decade and its economy grew by 3.7 percent according to the Bank of Korea.  

The most recent UN sanctions enacted in 2009 have had similar results. In response to the threat of sanctions, Pyongyang went ahead with a test-launch of a long-range rocket and a second, more successful, nuclear test. The UN Security Council, in response, enacted Resolution 1874 imposing sanctions on the DPRK. The prime target of the new sanctions was the bank accounts of North Korean entities involved in nuclear and missile trafficking. Given the many ways to circumvent the banking system, however, and the reluctance of governments to interpret Resolution 1874 as liberally as the United States did, it is still unclear how much of an impediment this will prove to be. As the Congressional Research Service concluded, “[F]inancial sanctions aimed solely at the DPRK’s prohibited activities are not likely to have a large monetary effect.”

Luxury goods were also a focus of the most recent U.N. sanctions—in the dubious belief that consumerism is as rampant among privileged North Koreans as it is in Georgetown or that Kim Jong Il’s hold on the elite can be loosened by denying them Rolexes or Mercedes imported from China. A Congressional Research Service analysis of Chinese trade statistics for 2008 indicates that Beijing’s exports of luxury consumer goods to North Korea was between $100 million and $160 million, mostly financed by Chinese credit. That trade is not likely to have dropped enough to make any appreciable difference on the loyalty of elites long accustomed to tight belts and even tighter social controls.

Again, the overall economic impact of the sanctions appears to have been limited. Overall, according to U.S. estimates, North Korea’s economy again grew at a 3.7 percent rate in 2009,[7] probably because of a more bountiful harvest. While North Korean exports to China are difficult to estimate because of the introduction of the new currency, imports from China in 2009 dropped sharply to below the 2007 level. Some of the drop was due to the global recession and price deflation.[8] Trade with South Korea fell 8.5 percent in 2009 but still totaled $1.7 billion—five times what it was a decade ago. Trade with Japan was cut to a pittance, though it is difficult to ascertain the extent to which cash remittances from Koreans in Japan still manage to circumvent sanctions. For instance, Tokyo discovered that the DPRK was exporting sanctioned food items such as mushrooms to China and they were then sold to Japan at higher prices. The only losers may have been Japanese consumers.

As for international cooperation to curb the North’s arms sales, the net effect is probably overstated. In 2005, even before sanctions were imposed, the global market for missiles—the big-ticket item—had dried up, as buyers like Iran and Pakistan opened their own production lines, although technological assistance still generated revenue for Pyongyang. Since the UN arms embargo, at least four shipments of arms have been interdicted. Their total value, never mind net profit, fell far short of the estimated $500 million a year North Korean arms sales are supposed to generate. How many of its exports evaded capture is not known.

Read the full stories here:
Sanctions hit North Korea’s crumbling economy: report
Cheon Jong-woo

Looking for Leverage in All the Wrong Places
38 North
Leon V. Sigal