Archive for the ‘Russia’ Category

What Kim Jong Un’s Russia visit could mean for the North Korean economy

Tuesday, September 12th, 2023

By: Benjamin Katzeff Silberstein

Early this morning local time, North Korean leader Kim Jong Un arrived in the Russian town of Vladivostok. There, he is scheduled to meet with Russian president Vladimir Putin. Aside from the geopolitical situation and their political ties, the two are expected to discuss expanding North Korean weapons exports to Russia.

What could this mean for the North Korean economy?

The country’s military industry is an economic sector of significant size both in terms of production and employment. A radical increase in weapons exports to Russia could mean a general boost for the economy through increased consumption.

Gains will, however, be limited by the military industry’s isolated position in the economic structure. Many of the military’s factories supply themselves with most essential raw materials through mines and energy supply channels of their own. While many other sectors in the economy have essentially been privatized since the mid-1990s, the arms industry is entirely controlled and centrally planned by the state. Weapons exports to Russia could in fact hamper North Korea’s economic development in the long run by diminishing the regime’s incentives to reform the domestic economy.

Although the sector is far from the country’s top employer, with two million estimated workers in the defense industry, its contribution to the economy is significant. For a sense of proportion, North Korea’s 2008 census lists 4.4 million as workers in agriculture (including forestry and fishing), 718,000 in mining and quarrying, and close to 3 million in manufacturing. A massive and sudden expansion in weapons exports would not drastically change North Korea’s economic situation but could nonetheless make a modest contribution to economic growth and consumption.

Data sources: DPRK 2008 Census, Namhoon Cho (2019)* (see p. 576 for figures.)

As graph 1 shows, the country’s defense industry is estimated to be the third largest employer in the country. Because the data is so unreliable, these figures should not be taken at face-value. Rather, the proportions are what matter. Regardless of their exact number compared with other groups in the workforce, at an estimated two million, their employees are numerous enough for a drastic increase in purchase orders from Russia to boost the economy through increased wages, expanded hiring, or a combination of both. Major and continuous orders from Russia would benefit some parts of the military industry more than others.

Most profits will likely go directly to the state and the military, but workers in the industry may see their pay rise, and new colleagues recruited, if the orders from Russia end up being large enough. All this will have ripple effects on the overall economy, with increased consumption stimulating the consumer goods economy and service sector as well. Economic benefits are likely to be highly regional, with the impoverished Jagang province standing out as a central beneficiary thanks to its high concentration of arms factories.

In the long run, however, North Korea’s economic benefits will likely be limited. The military economy is independent from the “people’s economy” and is usually known as “the second economy.” The military often operates its own factories and mines through a military-industrial complex of sorts, and do not need to turn to other sectors of the economy for raw materials and other inputs. All this is by design, to give the military special status in funding and budget priorities. This limits the potential spillover effects into other industries.

Overall, boosted arms industry exports could diminish the regime’s incentives to develop the market system. The North Korean leadership is currently on a campaign to restore (at least some of) the state’s power over the economic system, including the private and semi-private sectors such as the general market and service sectors. An inflow of cash or other compensation from Russia, such as vast amounts of fuel oil and food, could give the regime more space and safety to suppress private economic activity in favor of the state-controlled sector. This fits well with the regime’s current strategy for the economy but will dampen the country’s long-term prospects for economic development.

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How large are Russia’s oil exports to North Korea in context?

Thursday, June 15th, 2023

By: Benjamin Katzeff Silberstein

For the first time since 2020, Russia recently reported oil exports to North Korea in their official trade statistics. These numbers obviously do not include the unknown but likely large quantities of oil that the country buys from Russia under the radar, through smuggling. According to the official numbers,

Russia had exported 67,300 barrels of refined petroleum to North Korea by April, the first deliveries reported to the U.N. since Moscow said it shipped 255 barrels of refined oil to the North in August 2020.

Under U.N. sanctions against Pyongyang’s nuclear and missile programmes, countries are required to report monthly sales of refined petroleum to the Security Council North Korea sanctions committee.

The oil sales began shortly after train travel between Russia and North Korea resumed in November for the first time since 2020, raising expectations of a resumption of trade.

(Reuters)

Although likely an underestimate of the total (including smuggling), this number is significant, not least because of the rapid increase. But as with other current trade figures on North Korea right now, as the border seems to be opening slowly to trade, the numbers are only a fraction of North Korea’s regular imports. North Korea’s annual imports of refined petroleum before the pandemic, for example, were estimated at 4.5 million barrels per year. Assuming the same pace of Russian exports continues through the year, that would put these imports for North Korea at around 3 percent of total annual imports.

This is not to say that the news isn’t significant, particularly if it marks the beginning of a longer trend. But for now, North Korea’s oil and fuel imports remain, as far as we can tell, far lower than their regular levels.

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North Korea reportedly sending more workers to occupied Ukraine

Wednesday, October 26th, 2022

By Benjamin Katzeff Silberstein 

I want to emphasize that this is all far from confirmed and that Daily NK, by the nature of their work, often has to rely on a very small number of sources. Nonetheless, this report suggests authorities in North Korea are preparing to send additional workers to Russian-occupied Ukraine, other than those that have already supposedly been selected. Although the move itself is political in context, as the source notes in the article, reasons are likely mainly financial for North Korea.

North Korea plans to select additional laborers to send to Russian-occupied regions of eastern Ukraine. In fact, Pyongyang plans to send about 300 people, with the primary goal being to earn foreign currency.

A source in North Korea told Daily NK on Monday that the country plans to start the second round of selections on Nov. 1. He said the authorities have issued “recommendation rights” to each Cabinet ministry and committee, and that each workplace must submit recommendations to the Workers’ Party’s Cadres Department (human resources department) by the end of November. 

Daily NK previously reported that North Korea had selected personnel to dispatch for reconstruction efforts in regions of eastern Ukraine occupied by Russia.

“Through the second round of selections, North Korea plans to organize a total of six teams [to be sent to Russian-occupied areas of Ukraine],” said the source. “About 50 people will be in each team, so it seems about 300 people will be chosen nationwide. Considering the first round of selections [about 800-1,000 people], the country plans to send a large number of people overseas.”

The source said people in Pyongyang or with connections to the Cadres Department are not inquiring about the location — presumably because they already know about Ukraine — nor do they want their family members to apply for the job.

“Since Pyongyang residents aren’t going, the authorities are giving as many recommendations as they can to provincial residents,” he said.

The source further explained that officials in the cadre departments of major cities like Pyongyang, Nampo and Pyongsong complain that this is the first time in 30 years that they have seen people avoid a chance to go overseas. They say this is a marked contrast with the old days, when people needed official recommendations to go abroad.

On the other hand, provincial residents reportedly demonstrate no real hesitation to apply. The source said volunteers do not believe they are going to die, even if eastern Ukraine is a conflict zone.

“Some provincial residents optimistically believe that the state would never drive them to their deaths,” said the source. “It seems they think the government will conclude a good contract with Russia so that they can work in the safest place possible.”

(Source: Mun Dong Hui, “N. Korea to select additional laborers to work in Russian-occupied regions of Ukraine,” Daily NK, October 26th, 2022.)

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North Korean workers selected to go to Russian-occupied Ukraine, will go in November

Friday, October 21st, 2022

By Benjamin Katzeff Silberstein

I don’t think we’ll fully know how solid and extensive plans are for the dispatch of North Korean workers to Russian-occupied territories in Ukraine until “boots” actually start to arrive on the ground, if even then. A recent report by Daily NK says that authorities have finished selecting workers who will go. It suggests that any contingent that may be sent will be fairly small — 800 to 1,000 — and that they will begin to arrive in November:

North Korea has completed the process of selecting workers to take part in reconstruction efforts in Russian-occupied parts of eastern Ukraine, with plans to send the workers to the region in early November.

A source in North Korea told Daily NK on Monday that the authorities carried out the selection in Pyongyang from July, and that “800 to 1,000” workers were recruited.

Daily NK reported in August that North Korea had planned to send some North Korean workers already in Russia to the Donbas, and that North Korean authorities had also selected workers in North Korea to dispatch to the region.

In fact, Daily NK’s source said the newly selected workers in North Korea would be sent in turns in small teams of 30 to 60 people.

“No firm date has been selected, but they plan to send the selected workers in early November as they select new workers,” he said.

This suggests that North Korea — having weighed when to send the workers while carefully watching the progress of the war — is preparing to send personnel in early November, and also intends to conduct a second round of selections of workers to send to the Donbas.

As for how the workers would get where they need to go, officials are discussing plans to send them by train from the northeastern city of Rason, or by flying them aboard an Air Koryo flight to Vladivostok. Also reportedly being discussed is a plan to send them to Moscow or Saint Petersburg via Beijing.

The source said China has “decided to feign ignorance” since the workers are only transiting through the country, not stepping foot in it.

“North Korea, China and Russia have agreed that sending North Korean workers to Russian-occupied areas would not constitute a violation of sanctions,” he said.

The source added that since sending the workers to Russia through Beijing would cost about the same as sending them through Vladivostok, officials are largely considering sending the workers through the Russian city.

(Source: Mun Dong Hui, “N. Korea finalizes selection of workers to join reconstruction efforts in Russian-occupied parts of Ukraine,” Daily NK, October 21st, 2022.)

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North Korea denies weapons sales to Russia

Thursday, September 22nd, 2022

By Benjamin Katzeff Silberstein

As per New York Times earlier this fall, US intelligence believes North Korea has sold weapons to Russia in aid of its attempt to invade Ukraine. North Korean authorities, for what it’s worth, have publicly denied this. Judging from the evidence reported so far, it doesn’t yet seem fully confirmed that any such weapons trade has in fact taken place. There’s little reason to doubt it’s been discussed — Russia is probably weighing all conceivable options for arms purchases and North Korea isn’t usually a picky seller. AP:

In a state media report Thursday, an unnamed North Korean defense official told the U.S. to stop making “reckless remarks” and to “keep its mouth shut.” Biden administration officials earlier this month confirmed a declassified U.S. intelligence assessment that Russia was in the process of purchasing arms from North Korea, including millions of artillery shells and rockets, as Moscow attempts to ease severe supply shortages in Ukraine worsened by U.S.-led export controls and sanctions.

The North Korean statement came weeks after Moscow described the U.S. intelligence finding as “fake.”

North Korean arms exports to Russia would violate United Nations resolutions banning the country from importing or exporting weapons.

(Source: Kim Tong-Hyung, “North Korea denies sending arms to Russia amid Ukraine war,” AP News September 22nd, 2022.)

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Putin’s letter to Kim Jong-un

Monday, August 15th, 2022

By Benjamin Katzeff Silberstein

In another data point on Russia and North Korea growing increasingly close, President Vladimir Putin sent a congratulatory letter to Kim on the occasion of North Korea’s Liberation Day (August 15th) from Japanese rule. There are clear limits on how far increased economic exchange can go at the moment between the two countries, but interest from both seems genuine and high. From KCNA:

Respected Comrade Kim Jong Un Receives Congratulatory Message from President of Russian Federation

Pyongyang, August 15 (KCNA) — Kim Jong Un, president of the State Affairs of the Democratic People’s Republic of Korea, received a message of greeting from Vladimir Vladimirovich Putin, president of the Russian Federation, on August 15.

In the message, Putin extended sincere felicitation to the respected Comrade Kim Jong Un on the occasion of the day of liberation, a national holiday.

The message noted that the two countries have deeply kept the memories of servicepersons of the Red Army and patriots of Korea who fought shoulder to shoulder for the liberation of Korea.

The glorious traditions of friendship and cooperation gained in the grim days serve as a durable foundation for developing the good neighborly relations between the Russian Federation and the DPRK today, it stressed.

It said that we would continue to expand the comprehensive and constructive bilateral relations with common efforts, adding that this would entirely conform with the interests of the peoples of the two countries and contribute to strengthening the security and stability of the Korean peninsula and the whole of the Northeastern Asian region.

It wished Kim Jong Un good health and success and all citizens of the DPRK happiness and prosperity.

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Daily NK: North Korean laborers reach Russian construction sites despite sanctions

Wednesday, July 24th, 2019

Benjamin Katzeff Silberstein

Daily NK reports:

“Recently, there have been many North Korean workers coming in to Russia. They are arriving at Khabarovsk Station via Tumangang Station. North Korean workers are usually dispatched to Khabarovsk and Ussuriysk and most of them are construction workers,” a source familiar with local affairs told Daily NK.

According to the source, a considerable number of new laborers are being deployed to Russian construction sites as well as some factories and logging sites.

In an interim report submitted to the United Nations in March, Russia said that the number of North Korean workers staying in Russia has declined from 30,023 at the end of 2017 to 11,490 at the end of 2018. Although the number with officially granted visas may have declined, it is believed that these new workers are entering Russia using methods other than a work visa, such as student or temporary stay visas.

It has been reported that in addition to the hard labor, those working in Russia have poor working conditions. They are cooking and sleeping at the same construction site at which they are working.

“North Korean workers are working at a building that is attached to the Far Eastern Federal University in Vladivostok’s Russky Island, and work an average of 15 hours per day from 5:00 am to 9:00 pm or even until 11:00 pm,” he said.

“The daylight is long these days in Russia, so they are working until late in the night without lighting. North Korean workers are really angry because they are worked like dogs. And even though they are working so hard, they do not have much left after paying $1200 dollars to the North Korean company they work for.”

Even under such dire circumstances, North Korean laborers still value being sent to Russia because they can make significantly more money than they can in North Korea.

Some of the highly skilled North Korean workers who have been working in Russia for more than three years are said to be finding their own work under the condition that they pay $1000~$1300 dollars to the state enterprise as a loyalty contribution.

“Those with good skills are freelancing. Some even make $2000~$3000 dollars a month,” a separate source in Russia told Daily NK.

“Russian companies also prefer North Korean workers. Their wages are cheap and they are skilled and work very fast. That is why Russian construction companies prefer to hire them.”

Currently in Russia, there are about 23 North Korean enterprises including Rungrado, Namgyong, Cholsan Trading Company, and Number 17 Construction Company that manage North Korean workers. “A Khabarovsk-based North Korean trading company manages about 2000 North Korean workers,” said the source.

However, it has been reported that recently-dispatched North Korean workers in Russia cannot freely move or contact the outside world as they are under tighter surveillance.

Source:
North Korean laborers reach Russian construction sites despite sanctions
Jang Seul Gi
Daily NK
2019-07-24

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Russia wants sanctions on North Korea to ease

Thursday, September 27th, 2018

Benjamin Katzeff Silberstein

I don’t think we have systematic, rigid data enough to prove that Russian sanctions implementation overall on North Korea has eased even though the Russian government’s line on easing international sanctions has gone on consistently for months. But still, it’s only logical that a government working for sanctions pressure to ease would at the very least make sanctions implementation oversight and rigor less of a priority. Wall Street Journal:

Mr. Pompeo used his opening address to swipe at permanent Security Council members Russia and China for violating U.N. sanctions involving the sale of petroleum products in excess of North Korea’s maximum 500,000-barrel allowance and for providing other forms of economic relief.

“The members of this Council must set the example on that effort, and we must all hold each other accountable,” Mr. Pompeo said, calling for an end of ship-to-ship transfers of petroleum products, linked to Chinese and Russian entities, and a halt to hosting of North Korean laborers, a reference to the thousands of workers who have been granted permission to work in Russia.

“This violates the spirit and the letter of the Security Council resolutions that we all agreed to uphold,” he told the Council.

Mr. Lavrov used his address to bash the U.S. and its allies for exerting excessive pressure on North Korea, saying it was unacceptable for sanctions to be used as a form of “collective punishment.”

Mr. Lavrov defended North Korea’s call for economic relief, saying Pyongyang has taken meaningful steps toward implementing its promise to give up its nuclear weapons and urged the U.N. Security Council to send a “positive signal” in return.

“Negotiations are a two-way street,” Mr. Lavrov said, adding that Russia would draft a proposal to allow certain economic projects in North Korea to be exempt from sanctions.

Mr. Lavrov said such projects would be in the interest of all parties and would ease the “extreme socioeconomic and humanitarian suffering” caused by the sweeping sanctions regime currently in place. He also took aim at the U.S. for implementing secondary sanctions, which he described as “illicit practices” that undermine the sovereignty of other nations.

It’ll be interesting to see what these economic projects are specifically. My bet is on infrastructure and railway renovations and possibly new construction,  or perhaps ones centering around the Rason port and special economic zone.

Full article:
Russia’s Lavrov Calls for U.N. to Ease North Korea Sanctions
Jessica Donati
Wall Street Journal
2018-09-27

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Russia rejects new sanctions on North Korea

Friday, August 10th, 2018

Benjamin Katzeff Silberstein

Full comment here by the Russian Foreign Ministry:

Russia has blocked the US application to the UN Security Council Sanctions Committee on North Korea (1718) on introducing international sanctions against one individual and several legal entities, including the Russian commercial bank Agrosoyuz that are allegedly involved in illegal activities that are violating the sanctions regime against that country.

The US-presented evidence in support of this proposal is totally unconvincing.  We cannot accept the pressure exerted by the US delegation in the UN Security Council and its subsidiary bodies, which has already become a norm. By means of an artificially tightened deadline, it is trying to push through its own decisions without taking into account the opinion of the other members. The Americans are also obviously trying to use the prestige of UN Security Council Committee 1718 for justifying similar unilateral restrictions that they have just introduced under far-fetched pretexts.

Far from improving the atmosphere of Russia-US relations, the new US sanctions contradict the logic of easing tension around the DPRK. Clearly, Washington is trying to keep Pyongyang under maximum pressure as long as possible, in effect, up to the completion of the denuclearisation process. This policy is destructive for settling the issues of the Korean Peninsula and evokes extreme resentment.

Source:

Comment by the Information and Press Department on the US application to the UN Security Council Sanctions Committee on North Korea (1718) on expanding sanctions
Information and Press Department of the Ministry of Foreign Affairs of Russia
2018-08-10

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North Korea exports coal as ‘Russian’ to get around sanctions

Tuesday, August 7th, 2018

Benjamin Katzeff Silberstein

Reports Radio Free Asia:

In a move aimed at evading U.N. sanctions, North Korea is exporting coal to foreign buyers by sending shipments first to Russian ports, where the coal is falsely labeled as Russian-origin, North Korean sources say.

The export of North Korean coal is strictly banned under international sanctions punishing Pyongyang for its illicit nuclear weapons program, but North Korea has now opened new routes for trade with Russian help, a trade worker in North Pyongan province told RFA’s Korean Service.

“As sanctions on North Korea came into effect a couple of years ago, export routes for coal were blocked,” RFA’s source said, speaking on condition of anonymity.

“So North Korean trading companies have been shipping coal to the ports of Nakhodka and Vladivostok in the southern part of Primorsky Krai, in Russia. North Korean coal is then disguised as having come from Russia and is sent on to other countries under fake documents,” he said.

Loading ports for North Korean coal were formerly at Nampo and Songrim, on North Korea’s west coast close to China, but have now been moved to Chongjin and Wonsan, on the country’s eastern coast close to Russia, he said.

“When North Korean coal arrives at Nakhodka, a Russian company records its time of arrival, the length of the ship’s stay in port, and the amount of coal taken off. They then create false papers including a statement of the coal’s quality,” he said.

With these documents declaring the coal to be of Russian origin, “North Korea now has no problem exporting coal to other countries,” he said.

“The name of the Russian company that my company has been working with is Greenwich, and is located at the port in Nakhodka,” RFA’s source said. “They ask for two dollars per ton to disguise North Korean coal as Russian, and the North Korean trading company pays them right away.”

Still in demand

Also speaking to RFA, a North Korean trade worker based in the Chinese border city of Dandong said that North Korean representatives based in South and North Pyongan provinces collect information on countries needing coal and act as brokers for its export.

“Coal from these western-district mines is very high quality, so there is still a demand for it from other countries even though sanctions are in force,” he said.

A 30 percent deposit from the buying countries is required before the coal begins to move, with 30 percent of the balance due when the coal leaves its Russian port. The remaining 40 percent is then paid when the coal arrives at its final destination, the source said.

“For this three-step payment process, the money is deposited in a “borrowed” Chinese bank account, with the North Korean trading company paying banking fees,” he said.

Some of the coal sent from Russia now goes to South Korea and Japan, RFA’s source said.

“But North Korean company names don’t appear on the shipping papers, so the North Korean trading firms aren’t worried at all,” he said.

Resolve questioned

South Korea’s foreign ministry on Tuesday dismissed allegations that a foreign-flagged ship seen earlier at Nakhodka had delivered North Korean coal to South Korea’s southeastern port of Pohang, claiming the ship’s cargo was of Russian origin, according to an Aug. 7 report by the Yonhap news service.

“Critics here question the left-leaning Moon Jae-in administration’s resolve to curb the transport of North Korean coal,” a source of hard currency for the sanctions-hit Pyongyang regime, Yonhap said.

“But the government has stated that it remains committed to strictly abiding by U.N. mandates despite inter-Korean reconciliation,” Yonhap added.

The United States has meanwhile pointed to what it calls credible reports that Russia is in violation of U.N. sanctions against North Korea, with Secretary of State Mike Pompeo on Aug. 4 urging full compliance with measures aimed at forcing the North to give up its nuclear weapons program.

Article source:
North Korea Exports Coal as ‘Russian’ in Bid to Beat Sanctions
Hyemin Son
Radio Free Asia
2018-08-07

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