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Continuity and change in North Korea-China relations

Tuesday, February 23rd, 2021

By: Benjamin Katzeff Silberstein

The recent appointment of Ri Ryong Nam as North Korea’s ambassador to China hints at ambitions for greater economic exchange with China, as reported here. As Ri has a strong background in institutions in North Korea related to foreign trade, not least as the country’s trade minister and, later, vice premier in the country’s cabinet.

Above all, the appointment of Ri is interesting as a sign of continuity rather than change in North Korea’s external economic relations. At the moment, cross-border trade is in its deepest lull in many, many years, as a result of the North Korean government’s self-imposed border shutdown to protect against Covid-19. This border shutdown came on top of already harsh and heavy sanctions.

But this border shutdown, like other measures around the world related to Covid-19, has an expiration date. There’s been rife speculation that the border may reopen soon. And when it does, business will likely, at some point, return to the old normal of China being North Korea’s only meaningful source of economic exchange. The appointment of Ri is one data point to suggest this, but there are many other data points that show an increasingly close relationship between China and North Korea since 2018, after a lull in the preceding years of frequent North Korean missile tests and other destabilizing action. For example, North Korea and China and started expanding 12 of its 13 road or rail crossings only in 2020, despite the pandemic.

While all this may only amount to business as usual, it is interesting and noteworthy for several reasons. For one, North Korea’s previous five-year economic strategy, launched in 2016 and subsequently abandoned, reportedly sought trade diversification away from China as one of its main objectives. North Korean publications have long lamented overt dependence on one single country for foreign trade, noting that it easily translates to political dependance as well.

At the same time, North Korea’s trade dependence on China has actually increased over the past few years. Xi Jinping has long since promised Kim Jong-un that China would fund cross-border infrastructure refurbishment and special economic zones along the border. For all the talk of the potential for economic exchange between North and South Korea back in the heyday of inter-Korean diplomacy between Moon and Kim, the fact remains that if any party is likely to expand its economic ties and influence in North Korea, it’s China.

So the recent appointment of Ri as ambassador to China should be seen as a sign of continuity, not change. Given the dire state of the economy, and the economic policy retrenchment drive as of late, North Korean policymakers are likely to stay cautious and safe in economic measures for some time to come. That is precisely the sort of move that strengthening ties and trade with China would be.

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Posted in China, Economic reform, International trade, Political economy, South Korea | Comments Closed

Fertilizer factory shutdown and goods shortages

Monday, February 8th, 2021

Benjamin Katzeff Silberstein

KITA has a new briefing paper out about some developments relating to North Korea’s domestic economy and external trade. If true, the shutdown of the Namhung Youth Chemical Complex (청년화학연합기업소) is one of several examples of how the border shutdown due to Covid-19 is hurting basic industries through a shortage of spare parts. Goods such as cooking oil are also reportedly in short supply on the markets, and local government incomes from market stall fees are also reportedly dropping. As always with this sort of information, none of it is fully confirmed.

You can find the report here (in Korean), below is an excerpt from a summary by Nikkei:

The Namhung Youth Chemical Complex, north of Pyongyang, produces fertilizer and coal gas using anthracite mined in the area. North Korean leader Kim Jong Un visited the site in 2013.

High-pressure valves and jet sprays at the complex have become too worn for continued use, according to reports the Korea International Trade Association received from North Korea in January. Without replacement parts, it is unclear when the plant can resume work.

The suspension hinders North Korea’s push to lift its meager agricultural output. Kim last year ordered a boost in fertilizer production and attended a completion ceremony for a separate fertilizer plant. Coal gas also serves as a valuable industrial energy source for the country, which faces an oil embargo in response to its nuclear and missile testing.

[…]

The resulting shortages also have struck North Korea’s jangmadang informal markets, which have flourished under Kim’s tenure. At one market in the city of Pyongsong, the volume of available flour and cooking oil has halved. Many stalls that used to sell Chinese-made apparel and appliances have shut down as well.

The slowdown of the jangmadang is eating into the coffers of North Korea’s regional authorities. South Pyongan Province, home of the Namhung plant, made about half as much from overseeing these markets in the last quarter of 2020 as in the year-ago period, heavily impacting provincial spending, the KITA report says.

(Source: Yosuke Onchi, “Key North Korea factory shuts down from COVID-19 parts shortage,” Nikkei Asia, February 8th, 2021.)

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Kim Jong-un’s congress speech: strengthening state control over the economy

Tuesday, January 12th, 2021

By: Benjamin Katzeff Silberstein

Unfortunately, North Korean state media has not been as forthcoming with coverage of the congress contents as they were on the first day. They did, however, release a summary of Kim Jong-un’s nine-hour long report to the congress. Presumably, Kim’s report contained much greater levels of detail than the (still very long) report summary put out by KCNA on January 9th.

In this post, I try to summarize the most significant parts of the speech where Kim deals with the economy. Such content is plentiful, but as so often in these speeches, many words are used to say very little.

The bottom-line message is clear, however: state control over the economy is increasing and will continue to tighten. What exactly this means in practice is unclear, but we have seen some very troubling examples as of late, such as the reported executions of foreign currency traders, clear signs of strengthened control over foreign currency market rates, attempts by the state to take control over semi-private corporate operations, among many other examples. And let’s not forget all the anti-corruption campaigns. While fighting corruption is undoubtedly a good thing, in the current North Korean context, it often likely means finding cash earned through semi-legal or illegal private economic activity and hidden from the state.

Indeeed, Kim’s report is abundantly clear in stating that he (or, the collective consensus of the North Korean policymakers with the most clout at present, of which Kim is obviously the most powerful) wants the state to be the main planner and decision-maker not just over the general direction of the economy, but on a much more detailed level than that. As others have pointed out, the anti-covid-19-measures may at least in part be the results of anti-market policymakers in the state apparatus using the current situation to push their agenda. Sentences such as the following are particularly concerning: “It is imperative to improve planning and make proper use of the economic leverages including financial, monetary and price administration so as to ensure rational management of the economy.” Price administration requires a level of economic governance by the state which suggests that the policy direction is hardly about merely setting interest rates and making some public investments.

None of this is happening in a vacuum. Overall, since Kim came to power, there’s been a general push to assert state control not just over the economy, but society overall. Border control has strengthened, as evidenced by the dwindling number of defections. Campaigns against consumption of foreign media have seen a significant uptick although, of course, they were always more or less in force in the country. The speech seems to hint at this too, with passages about enhancing the quality of domestic media, which may be an attempt to compete more strongly with the smuggled foreign culture that the regime considers ideologically poisonous. In any case, taking control over the economy is a natural, and perhaps the most central, part of social and political control overall.

For those hoping that North Korea will go in a direction of looser social and economic control by the state, the congress report does not make for joyful reading. The clippings below are only a small fragment of the gargantuan text, I’ve done my best to curate what I consider to be the most interesting and important parts and annotated some of them. My own emphasis in bold:

Although economic construction failed to hit the expected strategic goals, a precious foundation for making sustained economic development by our own efforts was provided, the report said, adding: The greatest of such successes is that the backbone of the self-supporting national economy, the socialist economy, which is the material basis of the existence and lifeline of our own style of socialism, was maintained and its arteries were preserved.

Kim has made similar admissions of failure in the past, so in my opinion, media headlines framing this as unique have been off the mark. In any case, the full message seems to be: things have been bad, little progress made, but at least we didn’t budge on core principles and reform our system.

The Party Central Committee built up new potentials for readjusting and developing the overall economy by taking revolutionary measures for strengthening the unified guidance and strategic management of the state over economic work and making sure that the socialist principles were thoroughly observed in the economic field.

So, some measures taken for enhanced state control, but many remain.

By prioritizing the long-standing and special DPRK-China relations, our Party developed the friendly relations with China as required by the new century and opened a new chapter in the DPRK-China relations of friendship with socialism as its core, the report stressed.

The Party Central Committee strengthened strategic communication, promoted mutual understanding and deepened comradely trust between the two Parties through five rounds of the DPRK-China summit talks and thus provided a firm guarantee for fresh development of the DPRK-China relations as demanded by the times that required continuity in the fraternal ties and unity between the Parties and peoples of the two countries which are inseparably bound up with each other in the struggle for their common cause.

Attaching importance to the fresh development of the traditional DPRK-Russia relations, the Party Central Committee also conducted external activities for the development of friendly and cooperative relations between the two countries, in the course of which it laid a cornerstone for the expansion of friendly relations with Russia.

These passages are interesting not so much because of their substance, but because an explicit goal of the last five-year plan, according to leaks, was to diversify its trade away from near-total reliance on China, and expand trade with Russia in particular. There is no hint of that goal in the report summary.

The report said that due to such obstacles, state investment and supplies intended to bolster the major economic sectors in the five-year strategy for the national economic development could not be carried out properly.

It made an analysis and appraisal of the Party Central Committee on the cause of non-fulfillment of the five-year strategy for the national economic development during the period under review, seriously pointing out that it could not but draw a conclusion that if one ascribes its failure to objective conditions, he can do nothing and the action and role of the driving force will be unnecessary, and it is impossible to accelerate the revolutionary struggle and construction work unless the unfavourable external factors are removed.

The Party Central Committee analysed the current situation, in which the 5-year strategy for national economic development had not been properly set on the basis of scientific calculation and grounds, science and technology failed to actually play the role of propelling the economic work of the country and the work of readjusting and reinforcing the irrational economic work system and discipline was not properly done.

The report referred to the conclusive lesson that the economy of the country can never be boosted without breaking with the wrong ideological viewpoint, irresponsible working attitude, incompetence and obsolete working manner that have been prevalent so far.

In other words: state officials and managers shouldn’t be content with blaming the external environment, the poor performance of the economy is still their fault, because they were not ideologically convinced enough. It is a convenient conclusion to draw for policymakers who want to avoid serious reform at all costs.

The new five-year plan mainly presupposes that the Cabinet, as the economic headquarters of the country, properly enforces the Cabinet-responsibility system, Cabinet-centred system, for economic work, vigorously accelerates the work of strengthening the essential lifeline and integrity of the country’s economy, definitely improves its economic management, actively promotes the normalization of production, renovation and local provision of raw and other materials by dint of science and technology and orientates the external economic activities toward reinforcing the foundations and potentiality of the self-supporting economy.

And the new plan reflects the demands for perfecting the self-supporting structure of the national economy, lowering the proportion of dependence on imports and stabilizing the people’s living by taking the actual possibilities into consideration.

The main seed and theme of the plan are, as always, self-reliance and self-sufficiency.

[…]

It was noted that in order to attain the goal of iron and steel production mentioned in the new five-year plan, scientific and technological problems must be solved to expand production capacity by renovating the existing production lines with advanced technology and building new energy-saving iron blast furnaces in major iron works and steel plants, to invigorate the production of iron ore and to use brown coal in the northern areas for the production of pig iron.

The report also referred to the direction of the development of the core industry of the country, the chemical industry, which can be likened to the lifeline for the construction of the self-supporting economy and the improvement of people’s standard of living.

It is unclear precisely how the state intends to use such increased production. With regards to the chemical industry, it likely has to do with manufacturing fertilizers and liquified coal, to replace expensive oil imports. 

It put an emphasis on important issues for developing the coal industry, an outpost for the development of the self-supporting economy.

Referred to were the issues of boldly unfolding and powerfully propelling the work of intensively supplying equipment, materials, labour and funds to the coal industry, securing more coalfaces by giving precedence to prospecting and tunnelling in the coal industry, putting efforts into the development of the soft coal industry, pushing forward the work of improving the working and living conditions of coal miners as a priority task for increased coal production and taking measures for the effective use of coal.

The report defined the machine industry as an important sector leading and hauling the overall economic sectors, and set forth the immediate orientation of its development after examining the present situation facing the machine industry of the country and its causes.

The basic task facing the machine industry during the new five-year plan period is to make it an industry with solid foundations and switch to a development- and creation-oriented industry.

The machine industry should positively develop and produce modern and high-performance machine products including machine tools, vehicles, building machines, electric machines, mining machines and hydraulic machines.

The report stressed the need to attach importance to the mining industry and shore it up for the sake of the normal development of the national economy.

Many of the goods mentioned here are North Korea’s most central export commodities. They are hardly useless for domestic purposes, but will of course generate much less revenue than if exported.

The basic tasks facing the construction field during the new five-year plan period is to massively carry out the capital construction including housing construction so as to provide the people with a higher civilized living conditions and radically change the appearances of the country.

The construction field should powerfully push forward the two fronts simultaneously−industrial construction for strengthening the economic foundations of the country and construction for meeting the material and cultural needs of the people.

By concentrating efforts on the construction of 50 000 flats in Pyongyang, it should set the annual plans for building 10 000 flats every year, starting from this year, scrupulously organize the construction operation and guidance for implementing the plans and thus basically settle the issue of dwelling houses for the Pyongyang citizens.

25 000 houses should be built in the Komdok area, a leading nonferrous mineral producer where a large contingent of workers live, and thus build it into a mining city with no comparison in the world.

[…]

The field should step up technical updating of its infrastructure and turn mobile communications into a next-generation one as early as possible by developing the relevant technology.

It is needed to readjust the wire broadcasting and cable TV networks, put the relevant technology on a higher level and provide full conditions for the people in all parts of the country, ranging from cities to remote mountain villages, to enjoy a better cultural and emotional life.

This is a very interesting part of the speech which has received little or no attention. The message seems clear: the state has to improve TV programming to compete with the ideologically contaminated competition coming in from abroad, mainly in the form of South Korean TV dramas.

The report raised it as a very urgent issue at present to develop the state-run commerce and preserve the socialist nature of public catering and welfare service, and set forth the tasks for restoring our commerce, true to its name, to public service activities for supporting the people’s life and promoting their material well-being.

The important tasks to be carried out by our commerce without fail at present is to restore the state’s leading role and control in the overall commerce service activities and preserve the nature of socialist commerce of serving the people.

Commercial service units should put their service activities on a people-oriented, cultural, modern and diversified basis with a correct management strategy, and thus create a new socialist service culture of our own style.

[…]

The report underscored the need to tighten discipline in ensuring unified guidance of the state in the economic work, strengthen the national system of unified statistics, launch a proper project for boosting the mainstay of the national economy, and improve the conditions of industrial establishments to carry on their management activities.

Productive forces should be redistributed in a reasonable way so that economic efficiency may increase in the whole realm of the national economy, weak links in the chain of each economic sector identified, and the sectors that are essential for balanced development of the economy reinforced.

It is imperative to improve planning and make proper use of the economic leverages including financial, monetary and price administration so as to ensure rational management of the economy.

The scientific analysis and clear policies the report put forth with regard to the prevailing situation of the major economic sectors and their readjustment and development serve as a powerful weapon of practical importance in consolidating the material and technical foundations of the self-supporting economy and propelling economic construction in a planned and stable way irrespective of the change in the external environment.

Again, as mentioned in the intro to this post, this is all very traditional rhetoric and worryingly so. A very, very far cry from the early days of Kim Jong-un’s rule, when policy experimentation and limited liberalization moves of that time.

The long-term objective for rural construction is to eliminate disparities between the working class and the peasantry, the gaps between industry and agriculture and differences between the urban and rural areas by pushing ahead with the three revolutions in the rural areas and thoroughly implementing the thesis on the socialist rural question; and the immediate task is to give precedence to the work of transforming agricultural workers on a revolutionary and working class pattern, boost state support to the rural areas and build up the rural communities in a balanced way so that they have regional characteristics of their own.

This is pretty standard rhetoric, but it is incoherent given the consistent prioritizing of Pyongyang for prestige projects and the like. The same text even continues to push this priority with promises of new housing construction in Pyongyang.

Mentioned in the report was a task for city and county Party committees and people’s committees to become a powerful engine propelling the development of their regions, master of the local economy and administrator responsible for the livelihood of the people in their regions.

In other words, stronger local government control over economic affairs.

The report also made serious analysis of the work in the field of art and literature, and set forth tasks for ushering a new era of efflorescence of Juche-oriented art and literature by effecting a radical turn on all fronts of art and literature.

Creation guidance officials, creators and artistes in the field of art and literature should display an enterprising working spirit with high discernment to produce good works embodying the Juche character, national identity and modernity, stage characteristic performances, and purposefully carry out the training of reserves on a long-term basis by establishing a proper system and setting development strategy and clear goals.

Tasks were set forth for the mass media to raise the fierce flames of a new revolution in newspapers, news services, radio and TV broadcasting and publishing as required by the new period of drastic change and upsurge in socialist construction so as to wage a vigorous media campaign aimed at deeply instilling into all the people the core of the ideas, lines and policies of the Party Congress and inspiring them to the implementation of the decisions of the Party Congress, and for the field of physical culture and sports to redouble efforts for making our country join the ranks of advanced sports nations in line with the prestige and position of our dignified state.

The innovative orientations for building socialist culture are a reflection of the grandiose plan for creating a new, Korean style of civilization by bringing about a great revolution in all sectors of socialist culture with the successes, experiences, mistakes and lessons gained in the period under review as a springboard for advance and leap forward.

The report put an emphasis on effecting a revolutionary change in the mental and moral life of the people by pushing ahead with the eradication of non-socialist, anti-socialist practices and thorough establishment of the socialist lifestyle throughout the country as an undertaking involving the whole Party, state and society.

All the people should create and develop a noble and civilized new life of our own style and conduct a powerful mass campaign against the practices running counter to the socialist lifestyle, deeply bearing in mind the faith in socialism and love for and trust in things of their own.

Again, a similar theme to above, namely, improving cultural production — implicitly to compete with the inflows of foreign culture and its problematic ideological influence.

The report underscored the need to strengthen the people-oriented nature of the state befitting the intrinsic character of our style of socialist system, realize its unified, scientific and strategic control and thoroughly establish a revolutionary spirit of law observance throughout society as required by the building of a socialist rule-of-law state, and called on judicial, procuratorial, public and state security organs to fulfill their sacred mission and duty they have assumed for defending the system, policy and people as reliable defenders of the socialist system.

[…]

The Supreme Leader in his report put forward the important tasks for strengthening the working people’s organizations, the links between the Party and the masses and its fringe organizations, into powerful political ones, powerful forces for building socialism.

The report stressed the need for the working people’s organizations to hold fast to their internal work in line with their duty as organizations in charge of ideological education to firmly arm all their members with the Party’s revolutionary ideas and, in particular, the need to prepare the youth league as a reliable successor to and reserve of the Party.

[…]

It clarified it as the first task to attach primary importance to establishing the monolithic leadership system and further develop it.

As mentioned in the report the Party organizations and officials should ensure the absolute authority of the Party Central Committee always and everywhere and staunchly safeguard it. And they should never tolerate or connive at even the slightest tendency to undermine the authority of the Party Central Committee, but wage uncompromising struggle against it.

They should consistently push forward with the efforts to defend and glorify the Party’s leadership feats, particularly give a facelift to the units associated with the leadership exploits and the ones inspected by the great leaders, and ensure that they become the model units in carrying out the Party policies.

Party organizations should scrupulously organize the work to carry out the Party policies, learn in detail about how it is done, and review it, so as to thoroughly implement the policies.

To cement the single-minded unity of the Party and the revolutionary ranks in every way by doing the Party’s internal work effectively was raised as an important task in the report.

[…]

The report stressed once again that abuse of power, bureaucracy, irregularities and corruption are what the Party must most strictly guard against and its primary struggle target at present, and that Party organizations should carry on an uncompromising struggle against even any iota of them.

Calling for thoroughly establishing the revolutionary discipline of intensifying criticism, ideological struggle and study and of working according to functions, the report stressed that it is a way of improving the Party work to decisively improve the level and ability of the Party officials.

These last few paragraphs are perhaps not directly related to the economy, but they do emphasize the push under Kim for tightened discipline and ideological-political control.

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North Korea’s economic growth in 2019

Monday, December 28th, 2020

By Benjamin Katzeff Silberstein

‘Tis the season for South Korean government estimates on North Korea’s economic growth… Maeil Business News: 

The North Korean economy grew for the first time in three years in 2019 following a sharp contraction in the previous two years, but its per capita income gap with South Korea widened further, the South Korean government data found.

According to a report released by Statistics Korea on Monday, the nominal gross domestic production (GDP) in North Korea rose 0.4 percent last year from the previous year to 35.3 trillion won ($32.2 billion). The growth came after the economy had shrunk 3.5 percent in 2017 and 4.1 percent in 2018 due to the poor crop yields and strengthened international sanctions.

South Korea’s nominal GDP in 2019 was 1,919 trillion won, 54 times greater than that of the North.

The statistics bureau said the increased output from construction, agriculture, forestry and fisheries and service sectors contributed to the overall economic growth of the reclusive regime.

North Korea’s per capita gross national income (GNI) was 1.41 million won last year, losing 20,000 won from 2018. It was one twenty-seventh of South Korea’s 37.44 million won. The per capita income gap between South and North Korea widened from 21 times in 2009, 23 times in 2015 and 26 times in 2018.

Crop yields in North Korea came at 4.64 million tons in 2019, higher than 4.38 million tons in the South. But the North’s rice output was 2.24 million tons, about 60 percent of that of the South.

Coal production increased 11.8 percent on year to 20.21 million tons last year.

North Korea’s trade volume totaled $3.24 billion in 2019, up 14.1 percent from the previous year when its trade shriveled 48.8 percent due to the United Nation’s sanctions.

Watches and watch components that are not subject to the sanctions accounted for the biggest share of 17.8 percent of its total exports, up 57.9 percent from the previous year.

Its biggest imports were mineral fuel and oil that took up 11.7 percent. Amid food shortage, grain imports soared 242 percent on year.

(Source: Choi Mira, “North Korean economy grows for first time in 3 years, per capita income falls in 2019,” Maeil Business News, December 28th, 2020.)

A few thoughts:

First of all, these are estimates based on models, not on rigorously gathered statistical data. That is not to criticize the statistical authorities that compile these figures, but it must be mentioned. These may well be the best estimates out there.

Second, a 0.4% growth is not much, especially considering the steep economic fall North Korea went through in the preceding years. News headlines tend to blow these figures up way beyond proportion.

Third, 0.4% does sound like a plausible number in many ways. Some of the metrics used to determine it may well be indicative of other things. Take increased coal production, for example. We know with a fair degree of certainty that (illicit) coal exports to China seem to have increased significantly during 2019, as well as during the present year. So an almost 12% increase in production compared to 2018 is not at all difficult to imagine.

So all in all perhaps a small uptick in 2019, but at the same time, from a very low level.

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North Korean coal trade: the questions that really matter

Tuesday, December 8th, 2020

By: Benjamin Katzeff Silberstein

I have long argued, on this blog and elsewhere, that the question of North Korea and economic sanctions is not a binary one. We don’t have either perfect sanctions implementation with complete suppression of trade, or smuggling and trade under the radar, with or without the complicity of the Chinese government, making sanctions on North Korea meaningless. Rather, sanctions were never going to work perfectly to begin with — government measures rarely do. What sanctions do do, however, is to impose high additional costs to anyone trading with North Korea. North Korea would still import and export sanctioned goods to some extent, but reap lower revenues from exports and pay more for imports.

US intelligence claims over the past few months have contained some information that is highly relevant to that end. Ship-to-ship (STS) transfers are complicated and expensive, but it seems that this method of transferring North Korean coal to Chinese buyers has begun to decrease. Wall Street Journal reports (paywall) that direct deliveries to China, through the Ningbo-Zhoushan area, have increased in frequency over the past few months. Chinese ships have also gone directly to North Korea’s Nampo port to fetch coal deliveries.

The UN Panel of Experts noted this trend already in its March 2020 report:

67. Ship-to-ship transfers in the Gulf of Tonkin (see S/2019/691, para. 20) have decreased substantially in favour of increased deliveries to the Ningbo-Zhoushan and Lianyungang port areas in China. The increase reinforces the need for port and customs authorities to heighten scrutiny of vessels and their shipping documentation, and to impound any vessel suspected of transporting prohibited items.

We still don’t know how widespread such trade is, but it significantly lowers the transaction costs of North Korea’s coal trade, and thereby lessens the impact of sanctions on North Korea’s export revenue.

What about proportions?

  • According to the WSJ report and US intel sources, North Korea exported 4.1 million metric tons of coal between January and September 2020.
  • No one knows what North Korea paid, but the WSJ report assumes a price of $80–100 per ton in 2020. This places the value of the exports between $330 and $410 million.
  • Is that a little or a lot? Well, it depends. According to UN Comtrade figures, North Korea exported on average 1.7 million metric tons of coal per month to China in 2015. In contrast, 4.1 million metric tons between January and September gives close to half a million metric tons per month. In April 2016, coal exports totalled 1.53 million metric tons, to the tune of $72.3 million.
  • The WSJ figures place North Korean revenue at $36.6-$45.5 million on average per month for January-September. Using the 2016 April figure as a benchmark, it is absolutely not an insignificant number. At the same time, it is nowhere near — really, less than half by one measure — what North Korea has received for its coal exports in the past.

This by no means gives a perfect representation of the proportions at hand. After all, both 2015 and 2016 were boom years for North Korean coal exports to China. At the same time, judging from this limited data, we should not assume that things are back to normal only because China’s sanctions implementation seems to have begun to taper off. At the moment, it’s also very difficult to tell what proportions of the downturn in trade originates from North Korea’s own, self-imposed border lockdown, and from sanctions respectively.

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Asahi Shimbun: China provided North Korea with substantial amounts of food and fertilizer this year

Wednesday, November 4th, 2020

Benjamin Katzeff Silberstein

In a piece of news that should surprise no one, Asahi Shimbun reports that South Korean government sources say China provided North Korea with 5-600,000 tons of food aid and fertilizer this year. Although it wouldn’t entirely make up for the estimated shortfall, it is still a highly significant contribution:

But several South Korean government sources said China has provided North Korea with between 500,000 and 600,000 tons of food along with the fertilizer this year.

It also sent about 600,000 tons of corn and other types of grain between June and August, according to Chinese sources with inside knowledge of ties with North Korea.

Pyongyang requested more assistance in the aftermath of the summer typhoon damage and Beijing is considering sending an additional 200,000 tons of food, the sources said.

The South Korean sources focused on the volume of fertilizer shipped to North Korea as such assistance is considered highly unusual.

North Korean authorities equate one ton of fertilizer to 10 tons of food assistance, a former high-ranking North Korean government official said.

“Due to chronic shortages, fertilizer is highly prized in North Korea,” the official added. “The amount sent this year is equivalent to 5.5 million tons of food, which exceeds the yearly production of food. It was a very unusual level of assistance.”

Although North Korea is no longer in the grips of famine that raged in the late 1990s and claimed countless lives, the U.N. World Food Program has estimated that between 2018 and 2019 about 10 million North Koreans did not have enough to eat.

The situation is believed to be worse this year.

North Korea was plagued by flooding and other damage due to typhoons and torrential rain in summer after near-drought conditions in spring.

A source at a Chinese government-affiliated agency who is well-versed in issues involving North Korean agriculture said that the harvest estimate at planting time was between 3.5 million and 3.8 million tons for a shortfall of about 1.5 million tons.

Rice prices were kept stable through the release of grain stockpiled for emergencies, but the situation without China’s assistance was expected to be dire from next spring.

China’s decision to bail out its unpredictable neighbor may reflect a strategy to keep North Korea in its corner as Beijing’s confrontation with Washington worsens. In this regard, Beijing made a big fuss of its involvement in joining fighting in the Korean War on the 70th anniversary of China’s participation.

“China and North Korea have always shared interests in terms of their view of the United States, but that has strengthened recently,” said a North Korean source. “China is sending a message to the United States through its appeal of a honeymoon period with North Korea.”

With no signs of progress in denuclearization talks with the United States, the easing of economic sanctions against North Korea appears unlikely in the short term.

That suggests North Korea will continue to lean on China for support, analysts said.

“If North Korea receives support from abroad, it will no longer be able to say it is getting by with its own efforts,” said a South Korean expert on the North Korean economy. “But North Korea can continue to save face because China does not announce the assistance levels.”

(Article source: Takeshi Kamiya in Seoul and Yoshikazu Hirai in Shenyang, “China bailout to North Korea: massive food and fertilizer aid,” Asahi Shimbun, November 3rd, 2020.)

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September, 2020: the Latest UN Panel of Experts Report and the North Korean Economy

Tuesday, September 29th, 2020

By: Benjamin Katzeff Silberstein

The latest UN Panel of Experts Report is out. Some points relating to the overall state of the North Korean economy, after a quick read:

  • Ship-to-ship-transfers of fuel (“refined petroleum products”) continue. This is nothing new. Only between January and May 2020, North Korea is estimated to have broken the sanctions-mandated ceiling of 500,000 barrels per year. As I have argued elsewhere, many times, even with STS transfers and other illicit methods to flout sanctions, they are taking a toll on the North Korean economy since they are expensive. North Korea has to compensate sellers for the added risk of smuggling somehow. So sanctions, in this sense, are certainly not without impact.
  • Coal deliveries are also happening via STS and other transportation means. Again, this is not new, and rather, is part of the steady state for North Korea under sanctions. As with oil and fuel products, North Korea must be taking a financial hit to compensate buyers for the added risk of violating sanctions. The report says that coal exports resumed, after a Covid-19-pause, in March of this year.
  • The report does note that illicit tanker deliveries decreased thus far in 2020 as compared to 2019. Whether that means that less fuel was actually supplied is unclear. Indeed, according to the report, the delivery tankers had higher capacity than in the past.
  • Overall, it seems that judging from the PoE estimates, North Korea may not be suffering from fuel shortages at all, on the whole. Of course, we know next to nothing about how the illegally imported fuel is used and distributed within the country. Fuel prices have, however, not really been outside the span of the generally normal (or at times even lower), suggesting that the amounts coming in are roughly similar to normal times.

One quick reflection on the exports issue, particularly of coal and other sanctioned export goods: it’s clear that coal trade is happening, seemingly relatively undisturbed, on a scale that is troubling from a sanctions-implementation perspective. What’s tricky, though, is that we know fairly little about proportions. How much coal is North Korea actually able to sell, and to what prices?

As of now, all we know is that coal is being exported on a substantial scale. From an analytical perspective, that leaves a lot to be desired.

However, it is crucial to note the myriads of ways in which the government is able to at least partially compensate for the loss in export income stemming from sanctions. The report details several of these, including a wide range of cyber crime.

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North Korea and China strike agreement on border security

Tuesday, September 29th, 2020

By Benjamin Katzeff Silberstein

Since North Korea closed the border with China due to fears of Covid-19, there have been reports of Chinese citizens being shot at and, in at least one instance, killed by North Korean border guards. The North Korean government ordered border guards to shoot anyone from the Chinese side entering buffer zones it set up along the border.

All of this seems to have been done rather hastily and with little coordination with the Chinese side. Moreover, as is often the case with governance in North Korea, most has been done through relatively unclear decrees. The same factor could possibly explain the recent killing of a South Korean man apparently intending to defect to North Korea over the northern limit line (NLL), for which Kim Jong-un later expressed regret.

Now, Daily NK reports, North Korea and China have struck an agreement about border security in the age of Covid-19:

North Korea and China recently signed an agreement to help ease tensions along their border following shooting incidents involving North Korean border guards and Chinese nationals, Daily NK has learned.

According to a Chinese diplomatic source familiar with the agreement, the Chinese requested consultations with the North Koreans to “protect their citizens” and an agreement on the “working-level measures” came about at the North Korean embassy in China on Sept. 10.

Based on this agreement, China will raise customs duties three-fold on goods entering the country (from North Korea) if North Korean border guards “indiscriminately” and “recklessly” shoot and kill a Chinese national. The agreement also requires North Korea to compensate a shooting victim with RMB 1,200,000 (around USD 175,922).

On Sept. 11, the Ministry of State Security and General Staff Department ordered the North Korean border patrol to abide by details of the agreement. The order was accompanied by a directive telling the border patrol to “refrain” from shooting at people in China who cross into North Korean territory.

“From this past Spring until last month, North Korean soldiers shot and killed several Chinese near the border but North Korea failed to apologize properly, so the Chinese government proposed [the agreement] as a way to protect their citizens,” the source, who requested anonymity for security reasons, told Daily NK.

The source said that the closure of the border because of the COVID-19 pandemic means that North Korea is unable to import many of the things it needs from China. “That’s why North Korea had no choice but to acquiesce to China’s demands,” he added.

CHANGING TACTICS ON THE BORDER

Another source in China who spoke to Daily NK on condition of anonymity recently reported on signs that North Korean border guards seem to be taking a different approach to Chinese who cross the border.

The source said that two Chinese men had brought their cow down to the Yalu River to drink water near Changbai, Jilin Province, on Sept. 21. When the men and the cow moved toward the line demarcating the Chinese border with Yanggang Province, North Korean border guards started to approach them.

Given that the North Korean border patrol had shot and killed a Chinese smuggler in May, the two men were reportedly “tense” because they feared they may be harmed by the border guards.

Despite their fears, the North Korean border guards just threw rocks at the two men while yelling at them to return to Chinese territory; the men took their cow and left the area without incident.

(Full article and source: Jang Seul Gi, “N. Korea and China recently signed agreement aimed at easing border tensions,” Daily NK, September 25th, 2020.)

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North Korea’s convenient but remarkable admission of likely Covid-19 case

Sunday, July 26th, 2020

By: Benjamin Katzeff Silberstein

So, it finally happened: North Korea has officially admitted the suspected existence of a Covid-19 case in the country. State media claims the virus was brought over by a so-called re-defector, who first left for South Korea a few years ago only to return now, reportedly by swimming across the Imjin river. Some South Korean media speculation seems to confirm that a re-defection did happen, reportedly by someone swimming across the Imjin river, though none of this is confirmed. Here is the North Korean statement in full:

Pyongyang, July 26 (KCNA) — Amid the intensified anti-epidemic campaign for thoroughly checking the inroads of the world’s threatening pandemic, an emergency event happened in Kaesong City where a runaway who went to the south three years ago, a person who is suspected to have been infected with the vicious virus returned on July 19 after illegally crossing the demarcation line.

The anti-epidemic organization said that as an uncertain result was made from several medical check-ups of the secretion of that person’s upper respiratory organ and blood, the person was put under strict quarantine as a primary step and all the persons in Kaesong City who contacted that person and those who have been to the city in the last five days are being thoroughly investigated, given medical examination and put under quarantine.

The Political Bureau of the Central Committee of the Workers’ Party of Korea convened an emergency enlarged meeting in the office building of the Central Committee of the WPK on July 25 as regards the dangerous situation in Kaesong City that may lead to a deadly and destructive disaster.

Kim Jong Un, chairman of the WPK, chairman of the State Affairs Commission of the Democratic People’s Republic of Korea and supreme commander of the armed forces of the DPRK, was present at the meeting.

Attending the meeting also were members and alternate members of the Political Bureau of the C.C., WPK.

Present there as observers were members of the Central Emergency Anti-epidemic Headquarters.

Party and administrative leading officials of the Cabinet, ministries and national institutions, members of the executive committees of provincial Party committees and senior officials of the leading institutions at provincial level were present in the video conferencing rooms as observers.

Upon authorization of the Political Bureau of the C.C., WPK, Supreme Leader Kim Jong Un presided over the meeting.

Despite the intense preventive anti-epidemic measures taken in all fields throughout the country and tight closure of all the channels for the last six months, there happened a critical situation in which the vicious virus could be said to have entered the country, the Supreme Leader said, adding that he took the preemptive measure of totally blocking Kaesong City and isolating each district and region from the other within July 24 afternoon just after receiving the report on it.

To tackle the present situation, he declared a state of emergency in the relevant area and clarified the determination of the Party Central Committee to shift from the state emergency anti-epidemic system to the maximum emergency system and issue a top-class alert.

He specified tasks for each sector to be immediately implemented by Party and working people’s organizations, power organs, public security and state security institutions, anti-epidemic and public health institutions.

The meeting unanimously adopted a decision of the Political Bureau of the Central Committee of the WPK on shifting from the state emergency anti-epidemic system to the maximum emergency system.

He instructed all the participants to immediately conduct follow-up organizational work to carry out the decision of the Political Bureau of the Party Central Committee in their fields and units, and party organizations at all levels and every field to ensure and guarantee the most correct implementation of the directions and assignments of the Party Central Committee with a sense of boundless responsibility, loyalty and devotion.

He underscored the need to thoroughly maintain tough organizational discipline and ensure the unity in action and thinking throughout the Party and society, to keep order by which everyone absolutely obeys and moves as one under the baton of the Emergency Anti-epidemic Headquarters and the need for party organizations at all levels to perfectly perform their role and duty.

Saying that everyone needs to face up to the reality of emergency, he appealed to all to overcome the present epidemic crisis by not losing the focus of thinking and action, practicing responsibility and devotion to be faithful and true to the leadership of the Party Central Committee, being rallied closer behind it so as to defend the welfare of the people and security of the country without fail.

The meeting sternly took up the issue of the loose guard performance in the frontline area in the relevant area where the runaway to the south occurred, and decided that the Central Military Commission of the WPK would get a report on the results of an intensive investigation of the military unit responsible for the runway case, administer a severe punishment and take necessary measures. -0-

(Source: “Supreme Leader Kim Jong Un Convenes Emergency Enlarged Meeting of Political Bureau of WPK Central Committee,” Korean Central News Agency, July 26th, 2020.)

This is of course makes for extremely convenient optics for the North Korean regime, and raises lots of questions.

First, to state the obvious: this would make for an extremely convenient way for the regime to admit the existence of Covid-19 in the country. I have written previously about how unlikely the regime claim of zero cases is. The message is: our anti-epidemic measures, such as closing the northern border, were flawless. But one case still slipped through the cracks. Having a first confirmed case coming in from the south relieves the regime of any awkwardness vis-a-vis China.

Second: this is all still very strange. How can the political and strategic cost be smaller of admitting a glitch in the southern frontline defenses? Look at the text in the statement: “loose guard performance in the frontline area” is not a small thing to admit. It’s far from unprecedented criticism, but still. What does it say about morale and readiness within the army that even at a time of relatively high tensions, “loose guard performance” can happen?

Third and relatedly: this is a lot of fuss for a suspected case. Kim Jong Un not only called an emergency politburo meeting, a major event in its own right. The state has also placed all of Kaesong under lockdown and required anyone that traveled to the city within the past five days to go into quarantine. Just imagine how many people in North Korea must be going around with symptoms that should cause suspicion of Covid-19. The sniffles and a subpar sense of smell and taste should be enough. And yet, this is the first time we’ve seen this sort of alarm.

Fourth: how was this detected, and why was this person specifically taken in for testing? Judging from the statement, he was able to slip back into North Korea undiscovered, only to proceed to move around freely in Kaesong and potentially spread the virus. Was he brought in for testing because he came in from South Korea, or because of specific symptoms? What happens to the undoubtedly more numerous arrivals from China – are they all placed under stringent quarantine? Kaesong is far less connected to the outside world than are other parts of North Korea. The chances of it spreading there but not in the north are…extremely, incredibly slim, at best.

In short, it’s very difficult to buy this as a credible explanation or excuse for a Covid-19 outbreak in North Korea. The virus has most likely been around for some time, perhaps something has now prompted the authorities to need to make an official admission. As always, all we can do is await more information and hope that some questions are answered.

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North Korea promoting Mt Kumgang tourism

Thursday, July 16th, 2020

By: Benjamin Katzeff Silberstein

Clearly, now is not the best time for tourism promotion. One might wonder what target audience is for the North Korean promotion website for tourism to Mt Kumgang. The website itself isn’t new, but as Yonhap/Korea Herald reports here, it’s recently been updated for the first time in a while. The update of a website perhaps isn’t the most riveting piece of news, but at the very least, it means that someone in some office in North Korea took time out of their day to keep this website maintained and updated with new pictures.

Even in non-Covid times, however, the success of Mt Kumgang under fully North Korean management is doubtful. Without cooperation with foreign partners, Mt Kumgang may meet the same fate as Masikryong, not exactly overcrowded with foreign visitors even before Covid hit. As I wrote in this column when North Korea confiscated Mt Kumgang, the success of the resort likely hinges upon South Korean and Japanese visitors coming in addition to tourists from China.

You can find the North Korean website in question here.

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Posted in China, South Korea, Tourism, Uncategorized, Wonsan-Mt. Kumgang International Tourist Zone | Comments Closed

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