Archive for the ‘Oil’ Category

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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How North Korea turns coal into gas, and what it might mean for sanctions

Tuesday, December 18th, 2018

By: Benjamin Katzeff Silberstein

Wall Street Journal has an interesting and thoroughly researched report out today, on North Korea’s use of a technique to synthetically produce synthetic fuels from coal:

China, North Korea’s longtime ally, has provided technology and expertise for the coal-conversion efforts, according to Chinese companies. One said in July that it is supplying a large coal gasifier designed to produce 40,000 cubic meters an hour of synthetic gas to an industrial zone north of Pyongyang.

That output alone would be enough to produce synthetic fuels equivalent to about 10% of North Korea’s annual imports of crude and refined oil in recent years, according to David Von Hippel, an expert on North Korea’s energy sector at the Nautilus Institute.

[…]

It has become cheaper in recent years—in part because of Chinese development of the technology—and remains viable for countries with abundant coal and few alternatives.

North Korea obtained German coal-gasification technology from the Soviets around the 1960s but did little to develop it, and became dependent on subsidized crude from Russia and China.

[…]

Crucially, coal gasification has helped provide raw materials to increase output of fertilizer and plastic sheeting for greenhouses, boosting food production, and enabled other industries to develop products such as steel alloys and pipes, experts said.

The technology is also now used in small-scale power plants to boost electricity supplies, according to footage broadcast by North Korean state television in November.

One Chinese company, Hebei Kaiyue Group, said on its website that seven officials from North Korea’s Academy of Sciences visited one of its facilities in June to study how it converts coal to methanol, ammonia and dimethyl ether, which can be used as a diesel alternative.

The large gasifier slated for the industrial zone north of Pyongyang was built by Yangmei Chemical Industry Machinery Co. Ltd, a subsidiary of one of China’s biggest coal companies; it has been completed but not yet transported to North Korea, as the Chinese awaited North Korean instructions, according to two people involved. The company declined to comment.

Full article/source:
North Korea Turns Coal Into Gas to Weather Sanctions
Jeremy Page
Wall Street Journal
2018-12-17

I have a brief quote in the story, basically saying that even if North Korea can only produce fairly moderate quantities of gasified, synthetic fuels through this technique, it could potentially be very significant for the economy as a whole. This is particularly true for transportation and industrial manufacturing. The former is crucial not only for the state-side of the economy, but also for the private sector (i.e.: markets and entrepreneurs).

When trying to asses whether North Korea can “weather” sanctions or not, it’s meaningful to remember that the economy as such is still, partially, recovering from the near-complete collapse of the 1990s. So the quantities needed to make a significant contribution to industrial production may not be that massive. All of this is a way of getting at, in absence of actual numbers, how much this coal gasification technique may matter for North Korea. Putting together whatever oil and fuel North Korea can get through smuggling, regular imports, non-commercial transfers from China, and coal gasification, North Korea is probably muddling through sanctions relatively well, and better than many would have expected a year or so ago, at least in some respects.

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China and Russia blocked US request for North Korea oil suspension at UN

Friday, July 27th, 2018

Benjamin Katzeff Silberstein

Reports NK News:

China and Russia have blocked a U.S. request made at the UN Security Council (UNSC) to stop oil transfers to North Korea, the U.S. Ambassador to the UN – Nikki Haley – confirmed on Friday.

The U.S. made the request following a submission of evidence to the 1718 committee that claimed North Korea conducted up to 89 prohibited ship-to-ship (STS) transfers involving oil in the first five months of 2018.

Haley, speaking alongside U.S. Secretary of State Mike Pompeo, reiterated that the U.S. had proposed the complete ban on exporting petroleum products to North Korea as the STS transfers would have exceeded the annual cap for such products established under UNSC Resolution 2397.

“China and Russia blocked it. Now for China and Russia to block it, what are they telling us? Are they telling us that they want to continue supplying this oil?” she said.

“They claim they need more information. We don’t need any more information, the sanctions committee has what it needs, we all know it is going forward, we put pressure today on China and Russia to abide … and to help us to continue with denuclearization,” she added.

Haley was speaking at a press briefing in New York following meetings between herself, Pompeo, UNSC members and officials from Japan and South Korea – including Foreign Minister Kang Kyung-wha.

Pompeo, who spoke to the press prior to Haley’s comments, said he was also there to update the UNSC on diplomatic progress between the U.S. and the DPRK.

Sanctions enforcement, however, was at the forefront of the discussions and despite China and Russia blocking the U.S. request for the halting of oil transfers to the DPRK, Pompeo said the council was in agreement on other key elements.

“The UN Security Council is united, on the need for final, fully verified denuclearization of North Korea as agreed to by Chairman Kim. Members of the UN Security Council and by extension all UN member states have unanimously agreed to fully enforce sanctions on North Korea and we expect them to continue to honor those commitments,” Pompeo said.

Full article:
China, Russia blocked U.S. request for North Korea oil suspension at UN
Hamish Macdonald
NK News
2018-07-20

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Chinese oil exports to N Korea increased after KJU’s third visit to China

Thursday, July 19th, 2018

Benjamin Katzeff Silberstein

Says Chosun Ilbo:

Though the exact figure is not known, China sent an estimated 200,000 to 300,000 tons of fertilizer to the North, according to sources in China.

In 2013, China supplied the North with 200,000 tons of fertilizer. Kwon Tae-jin of the GS&J Institute, an agricultural think tank in Seoul, said, “There are different ways of calculating harvest rates for different types of fertilizer and soil. But in case of urea fertilizer, it’s possible to produce two tons of food more for each ton of fertilizer.”

[…]

China also dramatically increased oil shipments to the North. A source in Beijing said it nearly doubled crude oil supplies to the North through pipelines from Dandong since Kim’s recent visits.

“Some 30,000 to 40,000 tons of oil is enough in the summer to maintain the lowest possible flow of oil in the pipelines to ensure that they don’t clog, and about 80,000 tons in winter,” the source added. “Though it’s summer now China has recently increased flow to the winter level.”

Full article/source:
China Doubles Oil Shipments to N.Korea After Kim’s Visit
Lee Kil-seong and Kim Myong-song
Chosun Ilbo
2018-07-19

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North Korea likely did 89 illegal ship-to-ship transfers in 2018, says U.S. data

Friday, July 13th, 2018

Benjamin Katzeff Silberstein

Reports Chad O’Carroll over at NK News:

North Korea likely conducted at least 89 ship-to-ship transfers to illicitly obtain refined petroleum products between January 1 and May 30, U.S. data provided to the United Nations and seen by NK News on Friday claims.

Pyongyang may have illegally imported up to 1,367,628 barrels of refined petroleum as a result of the transfers, upper-end estimates suggested, over double the 500,000 barrels authorized for export to North Korea each year by current UN sanctions.

Consequently, the U.S. recommended that the UN 1718 sanctions committee issue a “public note verbale to all UN Member States to inform them that the DPRK has breached the UNSCR 2397 OP5 refined petroleum product quota for 2018,” and that all countries should “order an immediate halt to all transfers of refined petroleum products to the DPRK.”

Since the May 30 data cut-off, the Japanese government has revealed details surrounding three extra cases of North Korean vessels caught conducting likely ship-to-ship transfers, with two on June 21 and June 22, and one on June 29.

North Korean skippers are thought to be conducting the at-sea transfers of fuel products to circumvent UN sanctions designed to limit how much Pyongyang can import each year.

Two countries were also flagged in the U.S. report for their role in provisioning on-the-books exports of petrol products supplementary to the barrels illicitly acquired through ship-to-ship transfers.

“As China and Russia have reported to the UN 1718 Committee in 2018, both member states continue to sell refined petroleum products to the DPRK,” the report said.

“These sales and any other transfer must immediately stop since the United States believes the DPRK has breached the UNSCR 2397 refined petroleum products quota for 2018.”

To evidence its claims, the U.S. included satellite imagery of four vessels described as either “likely in the process of delivering” or “delivering refined petrol products” that were “procured via illicit ship-to-ship transfer” at Nampo Port on the DPRK’s west coast.

Full article and source:

N. Korea likely conducted 89 illicit ship-to-ship transfers in 2018: U.S. data
Chad O’Carroll
NK News
2018-07-13

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Fuel prices are dropping in North Korea, and that’s a little odd

Tuesday, July 10th, 2018

Benjamin Katzeff Silberstein

As in the rest of the country, gas prices continue to fall in Pyongyang, data from NK Pro shows, but remains much higher than the closest available month of 2017.

At the same time, recent figures from China state that its exports of refined fuel products to North Korea continues to remain well below the ceiling mandated by UN sanctions. Asia Press reports a slight increase of diesel prices in Yanggang and North Hamgyong provinces, but it’s a fairly minor one and the data by NK Pro and Daily NK still represents more data points. So what’s a plausible explanation here?

My best guess is that it’s a combination of increased smuggling, perhaps aided by China’s declining vigilance in enforcing sanctions and restrictions against illicit trade across the border. Gas prices shot up last spring when China decided to drastically cut sales of fuel products to North Korea, citing financial reasons (that North Korea wouldn’t be able to pay), but the decision was very likely influenced by political considerations as well. Now with the multitude of summits between Kim Jong-un and Xi Jinping, and Kim and Trump, China’s willingness to enforce sanctions with the same vigor as it did through the second half of 2017 and the first half of 2018 has likely waned, impacting matters like fuel prices as well. It also seems plausible that fairly small changes in supply could change prices quite drastically, since North Korea already consumes a relatively small amount of gasoline and diesel on the whole.

Another possibility is that Chinese flows of unrefined oil through the pipeline in northwestern North Korea, through Dandong and Sinuiju, have increased. These aren’t monitored in the same way as Chinese sales of refined fuel to North Korea, and as far as I know, could be increased without the international community easily noticing. These oil flows also aren’t part of regular trade between the countries, and should be regarded more as Chinese financial support to North Korea.

My best bet would be on a combination of these two factors, but there’s obviously much we don’t know about the development.

Update 2018-07-15: NK News reports some US government data seeming to hint at what’s been going on. At least 89 hip-to-ship transfers occurred between January and May, in violation of UNSC sanctions:

North Korea likely conducted at least 89 ship-to-ship transfers to illicitly obtain refined petroleum products between January 1 and May 30, U.S. data provided to the United Nations and seen by NK News on Friday claims.

Pyongyang may have illegally imported up to 1,367,628 barrels of refined petroleum as a result of the transfers, upper-end estimates suggested, over double the 500,000 barrels authorized for export to North Korea each year by current UN sanctions.

Consequently, the U.S. recommended that the UN 1718 sanctions committee issue a “public note verbale to all UN Member States to inform them that the DPRK has breached the UNSCR 2397 OP5 refined petroleum product quota for 2018,” and that all countries should “order an immediate halt to all transfers of refined petroleum products to the DPRK.”

Since the May 30 data cut-off, the Japanese government has revealed details surrounding three extra cases of North Korean vessels caught conducting likely ship-to-ship transfers, with two on June 21 and June 22, and one on June 29.

Article source:
N. Korea likely conducted 89 illicit ship-to-ship transfers in 2018: U.S. data
Chad O’Carrol
NK News
2018-07-13

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China’s exports of fuel to North Korea below UN sanctions ceiling

Friday, July 6th, 2018

By Benjamin Katzeff Silberstein

Between January and May, Chinese imports of refined oil products did not go over the ceiling mandated by UN sanctions, reports Voice of America (in Korean):

중국이 올해 1월부터 5월까지 북한에 제공한 정제유가 유엔이 정한 상한선의 한 달 허용치 수준에 그친 것으로 나타났습니다. 이 정도 수준을 유지한다면 유엔이 정한 정제유 수출 한도를 넘지 않을 것이라는 지적입니다. 김현진 기자가 보도합니다.

중국이 올해 1월부터 5월까지 북한에 정제유 5천921t을 공급한 것으로 나타났습니다.

유엔 안보리 산하 대북제재위원회 (1718 위원회) 홈페이지에 따르면 중국은 1월 201t, 2월 1천 392t, 3월 2천438t, 4월 437t, 5월 1천451t을 북한에 공급했다고 유엔에 보고했습니다.

5개월 총공급량을 배럴로 환산하면, 약 4만7천400 배럴로 유엔이 설정한 한 달 허용치를 조금 넘는 수준에 불과합니다. 연간 대북 정유공급 제한 50만 배럴을 12개월로 나누면 한 달에 4만 1천 배럴 정도입니다.

유엔 안보리는 지난해 12월 채택한 대북결의 2397호를 통해 북한으로 유입이 가능한 정제유의 상한선을 연간 50만 배럴로 정했습니다. 이전 결의가 상한선으로 정했던 200만 배럴에 비해 75%가 줄어든 것입니다.

아울러 올해 1월부터 각국이 북한에 판매하거나 제공한 원유와 정제유 양과 금액을 보고하도록 했습니다.

대북제재 전문가인 윌리엄 브라운 조지타운대학 교수는 중국이 올해 초부터 5월까지 북한에 제공한 정제유는 극히 소량으로, 유엔 결의를 잘 지키고 있는 것으로 보인다고 말했습니다.

[녹취: 브라운 교수] “The recent data provided to the UN from China suggest that they exported about 40,000 barrels to the North Korea in the first 5 months, that well below UN sanction limit…..”

또 올해 남은 기간 동안 이 정도 수준을 유지한다면 유엔이 정한 정제유 수출 한도를 넘지 않을 것으로 보인다고 말했습니다.

브라운 교수는 특히 김정은 국무위원장이 중국을 방문했던 5월 중국이 북한에 제공한 정제유도 소량에 불과했다고 지적했습니다.

[녹취: 브라운 교수] “The month after Kim’s visit to Beijing, China is still only shipping very small amount of refined products and it is still obeying the UN sanctions, according to China. But actually it’s very important that China is telling the world it is still obeying the sanctions… ”

자료에 따르면 중국은 5월 1천451t의 정제유 제품을 북한에 공급했습니다. 전 달 437t을 공급한 것에 비해 3배 이상 늘었지만, 지난 해 같은 기간6천400t에 비해 77% 감소한 규모입니다.

배럴로 환산해도 1만1천608배럴로 한 달 허용치에 크게 못 미치는 수준에 불과합니다.

앞서 헤더 노어트 국무부 대변인은 29일 폼페오 국무장관과 왕이 중국 외교부장과의 전화통화 소식을 전하면서, 폼페오 장관은 유엔이 금지하는 선박 환적을 통한 북한의 불법적인 석탄 수출과 정제유 수입과 관련한 유엔 안보리의 모든 대북 결의안에 대한 전면적 이행의 중요성을 강조했다고 전했습니다.

한편 올해 북한에 들어간 전체 정제유를 월별로 보면 1월, 569.62t에서 2월 3천274t으로 크게 늘었고 3월에는 1천t 이상 증가한 4천337t을 기록했습니다. 4월에는 437t으로 급감했다가 5월에는 다시 1천451t으로 세 배 이상 증가했습니다.

올해 1월부터 5월까지 북한에 수출된 정제유는 총 1만66t으로 집계됐습니다.

중국이5천921t, 러시아가 4천148t을 각각 북한에 제공했다고 신고했습니다. 중국과 러시아 외에 북한에 석유제품을 공급했다고 신고한 나라는 없습니다.

올해 북한에 수출된 정제유를 배럴로 환산하면 8만532 배럴로, 상한선의 15% 수준에 머물고 있습니다.

Article source:
유엔 “중국, 올 1~5월 북한에 정제유 5,921t 공급”…유엔 제재 상한선 크게 못 미쳐
Kim Hyun-jin
Voice of America
2018-07-06

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A Chinese ban on North Korean imports damages the North Korean economy

Tuesday, March 13th, 2018

Institute for Far Eastern Studies (IFES)

The North Korean economy is expected to face serious difficulties due to China’s ban on imports from North Korea. Having analyzed China’s sanctions against North Korea, KOTRA’s Korea Trade Center in Shenyang recently suggested that while North Korea depends overwhelming on China for its export, its exports are expected to plummet due to China’s measures.

After Pyongyang made its fifth nuclear test on February 18, 2017, China joined the sanctions imposed by United Nations Security Council (UNSC) Resolution 2321 and halted its import of North Korean coal until December that year.

Consequently, China’s import of North Korean coal was reduced by 60 percent compared to the same period in the previous year.

Furthermore, China imposed a complete ban on the import of coal, iron ore, lead and fishery products from North Korea, in accordance with the sanctions by UNSC 2371 adopted in response to North Korea’s IBCM launch on August 14, 2017.

Moreover, in response to North Korea’s sixth nuclear test on September 22 and the launch of an ICBM on January 5, 2018, China put a restriction on the export of refined oil, crude oil and refined petroleum products to North Korea.

The restriction on the export of refined petroleum products is expected to be a serious blow to the North Korean industry. Keeping China’s exports below 10 percent of total North Korean demand for the products, the new sanction will hit the North Korean economy across the board, ranging from industry, transportation, cargo transportation and power supply.

In addition, North Korean households, which have lower priority in power supply, would face increasing difficulties in getting electricity and heating. In the meantime, North Koreans may not suffer greatly from the shortage of oil because China has limited its export of crude oil to North Korea to its annual level of supply.

North Korea’s foreign exchange shortage is also expected to be aggravated following the shutdown of North Korean businesses in China and the repatriation of North Korean workers, both of which have been main sources of funds for the North Korean leader.

On September 28, 2017, the Chinese Ministry of Commerce announced that all existing North Korean businesses and joint ventures in China, including those managed solely by North Korean companies and individuals, should be closed by January 9, 2018.

In accordance with the notification of closure, the Shenyang Municipal Bureau of Industry and Commerce Administration issued a letter of notification to North Korean businesses and joint ventures in the city, leading to the shutdown of the Chilbosan Hotel and several North Korean restaurants.

In addition, North Koreans currently employed in China are allowed to remain while they have a valid visa, but have been asked to return to North Korea upon expiration of their visa.

Although the Chinese Ministry of Commerce completely prohibited the import of North Korean textile products on September 22, 2017, the import ban has created little export-ban effects to date, because cargo that has not completed the customs clearance procedure is excluded from the ban.

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North Korea’s ICBM-test, Byungjin and the economic logic

Tuesday, July 4th, 2017

By Benjamin Katzeff Silberstein

At 3:30PM GMT+9 on Tuesday July 4th, North Korean television announced that the country had successfully tested an intercontinental ballistic missile earlier in the day. Wall Street Journal😕

The missile, identified as the Hwasong-14, was launched at a steep trajectory and flew 933 kilometers (580 miles), reaching an altitude of 2,802 kilometers, according to North Korean state television. The numbers are in line with analyses from U.S., South Korean and Japanese military authorities.

US Secretary of State, Rex Tillerson, later confirmed that the launched missile was an intercontinental ballistic one.

Here in Seoul, things seemed to continue on as usual, which tends to be the case in this city more than used to its fair share of similar news. The biggest strategic consequence, of course, is that for the US. A successful intercontinental ballistic missile of this sort?could potentially strike anywhere in Alaska.

With the latest launch, North Korea takes one step further along the nuclear side of the Byungjin line?of parallel development of nuclear weapons and the national economy, and arguably, one step back on the economic side of the dual-track policy. In the formulation of the Byungjin line, of course, both are interrelated. Missile launches are often described as evidence of progress in industry and science, ultimately benefitting economic progress. This launch was no exception. From KCNA:s statement yesterday, July 4th 2017 (my emphasis):

The success in the test-fire of inter-continental ballistic rocket Hwasong-14, final gate to rounding off the state nuclear force, at just one go is a powerful manifestation of the invincible state might and the tremendous capability of the self-reliant national defence industry of Juche Korea that has advanced at a remarkably rapid pace under the great Workers’ Party of Korea’s new line on the simultaneous development of the two fronts, and a great auspicious event to be specially recorded in the history of the DPRK which has long craved for powerful defence capabilities.

This launch happened in a context where North Korea is already under sanctions designed to strike at its coal exports, one of its most important sources of income, and where the US has just signaled its resolve to go after North Korea’s financial channels through secondary sanctions of Chinese entities. At the same time, Kim Jong-un’s tenure has very much come to be associated with some economic progress (albeit from a low level, and primarily benefitting the relatively privileged classes), symbolized by projects such as the recently opened Ryomyong street.

It is not yet clear what the consequences will be. The US will likely try to add more sanctions targeted against specific entities and persons that help North Korea evade sanctions, and acquire equipment for its nuclear and missile programs.

The US will probably also call for international sanctions, but as Chad O’Carroll points out, the US may have a hard time getting such measures through in a quick manner given its currently tense relationships with both Moscow and Beijing. The US may also further push Beijing to implement the already existing sanctions against North Korea, but nothing appears to have changed with the claimed ICBM-test that would fundamentally alter China’s strategic calculations in the region. In other words, it continues to regard North Korea as a buffer between itself and US forces in the region, and as a geopolitical asset.

Whatever happens, it is safe to assume that it will not be good news for North Korea’s international ties in diplomacy, trade, finance, you name it. It would be easy to assume that economic progress and nuclear weapons development are mutually exclusive, since the second leads to further international isolation and economic sanctions, and therefore hampers the first.

In reality, that may be true. The North Korean Byungjin narrative, that weapons development?helps?economic progress, is difficult to swallow, especially when one considers the opportunity cost that the weapons programs carry, both in terms of domestic resource dedication and the cost in international isolation.

But there is another way to look at it. Whatever the actual consequences will turn out to be, North Korea is making a strategic calculation that the gains from the test, and from overall nuclear weapons and missiles development, will be greater than the potential costs and downsides. Consider the following two factors:

First, North Korea has made economic progress in the past few years, and particularly since Kim Jong-un came to power, even under years of severe sanctions. ?North Korea has been under various forms of UN Security Council sanctions since its first nuclear test in 2006. During these years, its economic development has been impacted far more by domestic policy decisions than by international developments.

Again, we are absolutely not talking about any growth miracle, and some probably exaggerate the degree of the wealth increase in North Korea over the past few years. But without a doubt, North Korea is far better off now than it was eleven years ago, and worlds apart from the famine of the 1990s. Food insecurity prevails in North Korea but the country has not seen widespread starvation since the late 1990s, and largely thanks to better economic frameworks (or rather less predatory), and increased space for private production and trade within the economic system, things are looking much better today than in many years.

Just look at this video recently published by the Daily NK, from Chongjin, one of North Korea’s largest cities in its northeast. Is this long-term, sustainable growth that will eventually lead North Koreans to enjoy the same prosperity as their counterparts in South Korea or even China? Probably not. But at least it’s something.

Second, and relatedly, North Korea likely has a significant amount of channels for trade and various transactions that are not commonly known, but that play highly significant roles for the economy. For example, consider the information that Ri Jong Ho, a former official in North Korea’s Office 39, supplied in a recent interview with Kyodo News. Ri claims that North Korea procures up to 300,000 tons of fuel and various oil products from Russia each year, through dealers based in Singapore. As a point of comparison, a commonly cited figure for crude oil supplies from China is 520,ooo tons per year. Proportionately, then, 300,000 tons is not close to a majority, but still a significant amount for North Korea. While intelligence services or others with access to classified information may have known this already, Ri’s claims, if true (they have not and in all likelihood cannot be fully corroborated),

The point here is that North Korea has gotten so used to going through back channels and unconventional means to acquire highly significant amounts of supplies required for its society to function. It is an economic system where unconventional (and often illicit) channels of trade are not exceptions, but core parts of the economic management toolbox. This is not to argue that sanctions do not or cannot work. Rather, it shows the extent to which unconventional methods are institutionalized within economic management in North Korea.

The North Korean government is no monolith, and there are almost certainly some parts of the governing apparatus that are more and less pleased with the ICBM-test. But in the higher echelons of the leadership, the strategic calculation is probably that even with the added sanctions that are very likely to come, North Korea will be able to continue along roughly the same economic strategies as it has thus far. Perhaps we can call it North Korea’s own “strategic patience”: continuing with patchwork strategies for international economic relations, with little concern for the impact of lack of sustainable growth on people’s livelihoods, while banking on eventual recognition as a nuclear power. Only time will tell whether targeted secondary sanctions will change that calculation.

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Ri Jong Ho, high-level defector and former official in Office 39, says North Korea gets much more oil from Russia than previously known

Saturday, July 1st, 2017

Benjamin Katzeff Silberstein

In a fascinating interview by Kyodo News’s Tomotaro Inoue, Ri Jong Ho, a former high-level official in Office 39 of the Korean Worker’s Party, makes several fascinating claims about the supply of fuel to North Korea:

North Korea secures up to 300,000 tons of oil products from Russia each year through Singapore-based dealers, a defector who formerly managed funds for the leadership has told Kyodo News, posing a challenge for the United States as it seeks to isolate Pyongyang.

“North Korea has procured Russia-produced fuel from Singapore brokers and others since the 1990s…It is mostly diesel oil and partly gasoline,” Ri Jong Ho, 59, a former senior official of Office 39 of the Workers’ Party of Korea, said recently in the U.S. capital in his first interview with media under his own name.

Ri also said North Korea relies more on Russia than China for fuel to keep its economy moving, indicating that the U.S. drive for Beijing to restrict oil supplies over Pyongyang’s nuclear and missile programs will only have a limited effect.

“It is a wrong perception that North Korea is completely dependent on China,” he said.

Petroleum products have been shipped to North Korea by tankers leaving Vladivostok and Nakhodka, both in the Russian Far East, with the fuel widely used for cars, ships and trains, helping to support the North’s economy, Ri said.

Other sources familiar with the fuel deals said the petroleum products ending up in North Korea are often purchased by brokers who claim they are destined for China, with the items procured using forged paperwork.

Ri, who defected to South Korea with his family in October 2014, provided details of the activities of Office 39.

The secretive entity, said to have been established by former North Korean leader Kim Jong Il in May 1974, is subject to international sanctions as the United States and other Western countries believe it is engaged in illicit economic activities and the management of slush funds for the leadership.

He said North Korea has been trying to reduce its economic reliance on China, Pyongyang’s most important benefactor, since leader Kim Jong Un issued an order to expand trade with Russia and Southeast Asian countries in August 2014.

The order followed Chinese President Xi Jinping’s visit to South Korea a month earlier, during which he and then South Korean President Park Geun Hye expressed opposition to North Korea’s nuclear weapons development. It was the first time for a Chinese president to visit South Korea before traveling to the North.

Ri said the North Korean leader was “infuriated” by the visit, going so far as to call China an “enemy state,” and began taking measures to boost trade with Russia.

According to Ri, Office 39 has five central groups and systematically acquires foreign currency by sending laborers overseas as well as through gold mining and exports.

“It is an organization that manages the supreme leader’s coffers and the party’s funds to rule the country. It also leads trade activities to earn foreign currency,” Ri said. The office has enormous power as it is directly linked to the leadership and is independent of other government organs, he added.

Ri admitted that Office 39 has evaded U.N. sanctions by asking Chinese and Russian contacts to allow the use of their names for the opening of bank accounts for trade settlement.

The activities of Office 39 require the involvement of hundreds of thousands of people, including those in rural areas who produce items for export. Ri said the bureau is now headed by Chon Il Chun, first vice department director of the party’s Central Committee and a former classmate of Kim Jong Il, the current leader’s father.

A native of Wonsan on North Korea’s east coast, Ri was told to work in Pyongyang by the Central Committee in the mid-1980s. He operated a shipping company at Office 39’s Daehung group and later headed a trade control section in the group between 1998 and 2004.

The Daehung group earns revenue through farm exports and shipping operations, among other means. With exclusive rights to trade “matsutake” mushrooms and snow crabs, it was actively shipping those products to Japan before Tokyo imposed a total ban on trade with the North about 10 years ago.

The four other central groups are Kumgang, which dominates gold export activities, Daesong, involved in the shipment of processed products and intermediate trade overseas, Daesong Bank, in charge of the office’s banking operations, and a group dispatching workers to other countries.

Asked about the possibility that the foreign currency earned by North Korea is being used for its nuclear and missile development programs, Ri only said, “It is up to the supreme leader how to use the funds.”

North Korea receives 500,000 tons of crude oil each year through a pipeline from China, resulting in around 70,000 to 100,000 tons of gasoline and about 100,000 tons of diesel oil after refining, but the oil products are exclusively used by the North Korean army and are not good enough for cars that carry the elite, Ri said.

He also said crude oil purchased from other countries is refined by foreign companies based in China, leading to the importation into North Korea of an additional 50,000 to 100,000 tons of gasoline.

Full article here:
N. Korea procuring Russian fuel via Singapore dealers: defector
Tomotaro Inoue
Kyodo News
2017-07-28

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