Archive for October, 2021

New time horizon on North Korea’s border shutdown?

Sunday, October 31st, 2021

By: Benjamin Katzeff Silberstein

There have been many rumors on when the North Korean government might end the current shutdown and restore the border trade with China to a somewhat normal, pre-pandemic flow. This is a recent data point (among many) on this and should of course be taken with the customary generous pinch of salt, but Radio Free Asia reports that North Koreans have been told the hardships will last at least until 2025:

After the government informed citizens to expect more years of hardship, people complained that they might not be able to last through the coming winter–much less hold out through the middle of the decade.

“Two weeks ago, they told the neighborhood watch unit meeting that our food emergency would continue until 2025. Authorities emphasized that the possibility of reopening customs between North Korea and China before 2025 was very slim,” a resident of the northwestern border city of Sinuiju, across from China’s Dandong, told RFA’s Korean Service Oct. 21.

“The food situation right now is already clearly an emergency, and the people are struggling with shortages. When the authorities tell them that they need to conserve and consume less food until 2025… they can do nothing but feel great despair,” said the source who requested anonymity for security reasons.

(Source: Jeong Yon Park, “North Korea tells hungry citizens to ‘tighten belts’ until 2025,” Radio Free Asia, October 26th, 2021.)

Share

Kim Jong-un on North Korea’s import problem

Tuesday, October 26th, 2021

By: Benjamin Katzeff Silberstein

Over the past few weeks, Kim Jong-un has made a few interesting statements on reducing North Korea’s imports reliance. This is not a new theme by any means, and economic self-reliance is, at least in theory, a cornerstone of North Korean ideology. At the same time, the timing is probably no coincidence. The Covid-19 border closure has led to serious shortages of imported goods in particular causing, among other things, a lack of ink and paper to print the domestic currency.

In a speech to the Supreme People’s Assembly on September 30th, 2021, Kim spoke about the need to strengthen state “guidance” over the economy, and to make “all trade activities” in the “direction” of “decreasing the reliance on imports”:

대외경제사업에 대한 국가적지도를 심화시켜 모든 무역활동이 경제부문의 수입의존성을 줄이고 자립성을 강화하는 방향에서 확대발전되도록 하며 경제관리분야에서 국가경제지도기관들의 집행력을 강화하고 근로자들의 리익을 보장하기 위한 과학적인 방안들을 진지하게 연구적용할데 대하여 말씀하시였다.

(Source: Choson Sinbo, “김정은원수님께서 력사적인 시정연설 《사회주의건설의 새로운 발전을 위한 당면투쟁방향에 대하여》를 하시였다,” Choson Sinbo, September 30th, 2021.)

On October 19th, as reported by Yonhap here, a North Korean TV-broadcast made virtually the same statement, with the addition that the “economic guidance organs” are taking “active action” to implement the state’s decision.

These are merely two data that points document North Korean concerns about import reliance. Again, it’s nothing new, and I suspect we’ll see more similar statements in the future, perhaps more and more often.

Share

North Korea’s October 19th missile test and the economy

Tuesday, October 19th, 2021

By: Benjamin Katzeff Silberstein 

North Korean missile tests often lead to discussions about what they can tell us about the country’s overall strategic position and thought. So it is natural to ask after today’s missile launch, what does it tell us about North Korea’s economic situation? Is it a display of confidence, crisis, or neither?

I’m not going to attempt to give a solid, certain answer here, but two things are interesting about the timing and contest.

First, the launch came the day after news reports that trade has expanded significantly between China and North Korea. Imports by China have more than doubled, as have exports from China to North Korea. None of these figures are near pre-pandemic levels, but the increases are still significant. Daily NK reports confirm that the authorities are concerned about and trying to mitigate the soaring prices of imported goods, driven largely by the virtual blockade of the border to China. So from this point of view, the missile launch may express confidence that the domestic economic situation is improving or will soon improve.

Second, and contrary to the above, it may express confidence in North Korea’s ability to pull through the current difficulties despite the lack of clear improvements on the horizon. After all, the uptick in trade data may be an anomaly, and what’s most important is whether it is part of a longer-term pattern. In other words, a missile launch at a time when the economy is in many ways near a crisis, may attempt signal Pyongyang’s ability to persevere and continue its weapons development despite the difficult economic circumstances.

Share

North Korea is more connected to global markets than you might think

Wednesday, October 13th, 2021

By: Benjamin Katzeff Silberstein

After a hiatus during the summer following my PhD defense, I now plan to get back to posting regular analyses and news content here. First up, an interesting example of why the North Korean economy is in fact more connected to global commodity markets than many might think.

Over the past few weeks, coal prices have skyrocketed in China, following energy shortages record-high coal prices. In September, the country’s coal imports surged by 76 percent, fueled flooding in one of the country’s main coal producing regions.

Therefore, it shouldn’t be surprising that Chinese demand for North Korean coal — the commodity at the heart of international sanctions on North Korea — is reportedly growing. As Daily NK reports:

According to a source in Pyongyang on Wednesday, there have been noticeably more requests for coal from Chinese traders since North Korea’s national foundation day holiday on Sept. 9. He said there have been several illegal transshipments of coal for export over the last month.

China has recently limited trade with private North Korean traders, dealing instead with official North Korean trading bodies. The source said, however, that Beijing now approves transactions with any North Korean entity that can provide China with coal, including private ones.

In fact, the Chinese government has reportedly launched no particular crackdowns on private imports of North Korean coal.

Rather, according to a source in China, some provincial civil servants in China are advising traders to take care not to get photographed when they transship coal. Essentially, the Chinese government is turning a blind eye to imports of North Korean coal, an internationally sanctioned item. At the same time, they are asking traders to exercise caution, aware that the international community is watching.

(Source: Seulkee Jang, “Amid coal shortages, Chinese traders on the hunt for more North Korean coal,” Daily NK, 7/10/2021.)

There are several things worth noting about this. First, again, it should not be surprising. China’s enforcements of sanctions against North Korea depends primarily on whether Beijing believes it to be in the national interest to clamp down on trade or smuggling. Clearly, China now needs cheap coal, and it’s been a long time since the North Korea issue was at the center of international politics and diplomatic tensions. So there appears to be comparatively little to lose in increasing trade for the moment, although China has been significantly letting up on its sanctions enforcement for several years now, since the days of “maximum pressure” in 2016–2018.

Second, North Korea still appears to be getting shafted by China, who exploits its position as the almost exclusive monopoly buyer buyer to purchase coal from North Korea at prices lower than world market prices or Chinese domestic prices. The precise proportions are uncertain, but Daily NK reports that China is paying less than half of world market prices for coal imports from North Korea, although their source also notes that the North Korean side is using the global shortage as leverage to jack up prices. In other words, while China may in some sense be North Korea’s “patron”, commercial market logic is much more important in coal trade than often assumed, and China isn’t necessarily doing it to help North Korea.

Third, and to tie back to the title of this piece, North Korea, despite its policies of economic autarky, is in fact deeply connected to global commodity markets. This isn’t just true for currency prices. Although the size of North Korea’s foreign trade remains comparatively abysmal, its economy is, just like most other economies today, tied to the broader dynamics of global supply and demand.

It still remains to be seen how much trade can expand under the current North Korean border shutdown. Though some goods are getting through, the border largely remains under lockdown due to Covid-19 despite intermittent news reports that trade might restart and return to its former scale. As many analysts have noted, Covid-19 has succeeded in closing the border more tightly to trade than most sanctions regimes have. How much Pyongyang is willing to meet Chinese demands and let coal shipments go across the border in larger scale, potentially increasing the country’s exposure to the virus (in the eyes of the leadership) remains to be seen.

Share