Archive for the ‘Fiscal & monetary policy’ Category

KEDO demands $1.9b from N. Korea for defunct reactor project

Tuesday, January 16th, 2007

Yonhap
1/16/2007

An international energy consortium has asked impoverished North Korea for nearly US$1.9 billion in compensation for its defunct project to build two nuclear power plants in the North under the 1994 nuclear agreement on the North’s freezing of its nuclear activities, diplomatic sources here said Tuesday.

North Korea, however, has yet to respond to the claim, the sources said, speaking on condition of anonymity. Analysts also said the North is unlikely to respond favorably, given its past record and current claims.

The North claims the 1994 agreement, known as the Agreed Framework, was breached by the United States long before it withdrew from the nuclear Non-Proliferation Treaty in early 2003, and is demanding compensation for the unfinished reactors.

“Now that the construction of the light-water reactors came to a final stop, the DPRK is compelled to blame the U.S. for having overturned the Agreed Framework and demand it compensate (the North) for the political and economic losses it has caused to the former,” an unidentified spokesman for the North’s Foreign Ministry said in a statement carried by the country’s Korean Central News Agency Nov. 28, 2005. DPRK is short for the Democratic People’s Republic of Korea, the North’s official name.

The diplomatic sources said the Korean Peninsula Energy Development Organization (KEDO) has asked for the amount in at least three letters sent to Pyongyang.

“(KEDO) has sent a letter (to North Korea) following every meeting of its executive board of directors since (last) May, demanding compensation for its assets at the construction site” in North Korea, one of the sources said.

“Letters were sent on five occasions, but the organization stated the specific amount in the three sent after September,” the source added.

The $4.6-billion project was officially scrapped early last year after years of suspension following the outbreak of an ongoing dispute over North Korea’s nuclear weapons program in late 2002. The communist state conducted its first nuclear weapons test on Oct. 9, 2006.

The sources said the amount includes expenses for KEDO’s executive office in New York.

A total of $1.56 billion had been spent on the nuclear reactor project before its official termination, of which, some $1.14 billion was shouldered by South Korea and $410 million by Japan. The European Union also pitched in $18 million for the joint project, which also includes the United States.

The countries blame the North for scrapping the project, which was part of a 1994 agreement between Washington and Pyongyang to settle a dispute over North Korea’s nuclear weapons program.

North Korea has attended international negotiations aimed at bringing a peaceful end to the dispute over its nuclear weapons program since its eruption in 2002, but no progress has been made since a 2005 round, during which the communist nation agreed in general to give up its nuclear ambitions in return for economic and diplomatic benefits.

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N. Korea escalates ‘cult of Kim’ to counter West’s influence

Saturday, January 13th, 2007

Christian Science Monitor
Robert Marquand
1/3/2007

North Koreans are taught to worship Kim Jong Il as a god. In a manner unique among nations, the North exerts extraordinary control through deification – a cult ideology of complete subservience – that goes beyond the “Stalinist” label often used to describe the newly nuclear North.

While outsiders can see film clips of huge festivals honoring Mr. Kim, the extraordinary degree of cult worship is not well known, nor that programs promoting the ideology of Kim are growing, according to refugees, diplomats, and others who have visited the Hermit Kingdom.

In fact, in a time of famine and poverty, government spending on Kim-family deification – now nearly 40 percent of the visible budget – is the only category in the North’s budget to increase, according to a new white paper by the Korea Institute for International Economic Policy in Seoul. It is rising even as defense, welfare, and bureaucracy spending have decreased. The increase pays for ideology schools, some 30,000 Kim monuments, gymnastic festivals, films and books, billboards and murals, 40,000 “research institutes,” historical sites, rock carvings, circus theaters, training programs, and other worship events.

In 1990, ideology was 19 percent of North Korea’s budget; by 2004 it doubled to at least 38.5 percent of state spending, according to the white paper. This extra financing may come from recent budget offsets caused by the shutting down of older state funding categories, says Alexander Mansourov of the Asia Pacific Center for Security Studies in Honolulu.

It has long been axiomatic that the main danger to the Kim regime is internal unrest. That is, Koreans will discover the freedoms, glitter, and diversity of the modern outside world, and stop believing the story of idolatry they are awash in. “It isn’t quite realized [in the West] how much a threat the penetration of ideas means. They [Kim’s regime] see it as a social problem that could bring down the state,” says Brian Myers, a North Korean expert at Dongseo University in Busan, South Korea.

Since the poverty and famine of the late 1990s, everything from CDs and videos, South Korean radio, and cellphone signals from China, new styles and products, and new commercial habits have seeped in, mostly across the Chinese border, in a way that might be called “soft globalization.” Such flows feed a new underground system of private business, information, bribery, and trade that exists outside the strict party-state discipline and rules.

Yet rather than accept such penetration as an inexorable threat, Kim is putting up a serious fight to slow and counter it – by increasing his program of cult-worship.

Kim Worship 2.0

Like a computer software firm updating program versions, the North is steadily updating its ideology to make it relevant. This practice of mass control by in-your-face ideology has been laughed off in much of the world, including China. But North Korea is increasing its ideological cult worship. The scope of the current project outdoes even the cult of personality during Mao’s Cultural Revolution, according to a 2005 doctoral dissertation by Lee Jong Heon at Chung-Ang University in Seoul. Mr. Lee visited North Korea several times for his research.

After the Oct. 9 nuclear test, for example, banners sprang up over North Korea stating “We are a country with a nuclear deterrent.” Kim’s test feeds a national pride that is part of the propaganda drilled into Koreans from birth: that Kim alone can fend off the US and Japanese enemies. A US diplomat in Asia says such pride may prohibit Kim from giving up his nuclear program in the current “six party talks” – and those talks stalled again in late December in Beijing.

“The cult of personality campaign is more extensive today than in 1985,” says former South Korean foreign minister Han Sung Joo, who visited Pyongyang this past October, and in 1985. “Unlike the Stalin and Mao personality cults, there is a deification and a religious emotional element in the North. The twinned photos of Kim Il Sung and Kim Jong Il are everywhere. Every speech says Kim Il Sung is still alive. I think if I stayed another two weeks, I might even see Kim Il Sung. The country worships someone who is deceased, as if he is alive.”

Kim Jong Il has upgraded his deification strategies to strengthen the family cult system. Western reports often detail Korea’s unique “juche ideology” – a theology of Kim worship, repeated hourly and daily, reminding Koreans they are insolubly bound to the Kim family and must erase foreign influence from their minds.

Yet juche is a subcategory of a far more encompassing umbrella of deification known as woo sang hwa, or idol worship. In North Korea, woo sang hwa contains all the aspects of cult worship. Kim broke away from orthodox communism, for example, in a program called “our style socialism.” While Marxism-Leninism demands fealty to “nation,” “party,” and “serving the people” – Kim’s “our style [Korean] socialism” does no such thing. It makes “family loyalty,” with Kim at the head, the supreme good – a major deflection from communism.

During the late 1990s famine, a “Red Banner” campaign for unconditional loyalty and harder toil began. Then came “Kangsong Taeguk” in the late 1990s – a project to push economic and military ideology. This project culminated in the 1998 Taepodong-1 rocket launches, which thrilled North Koreans, frightened Japan, and started a whole new military mindset in Tokyo.

The North uses “ideology rather than physical control,” Lee says, whenever possible. The current variation of the program is called “military first.” It is intended to bolster North Korea’s nuclear efforts. Military First started as a campaign to support juche, and as a slogan designed to remind Koreans that the nation is at war. It came packaged with a rallying cry called “dare to die,” say refugees and Kim experts. (There’s a dare-to-die pop song, and a dare-to-die movie. Recent internal memos brought by defectors indicate “dare to die” is urged on local officials due to a feeling in Pyongyang that young people aren’t showing enough zeal to make such a dare.)

A new military focus

Yet Military First may now be a tool for evolving a significant structural change – a new ruling elite in day-to-day affairs. For years, the North Korean state was ruled by the workers’ party. Under Kim Il Sung the party was the driving force in Korea – the main route to achievement and pay. Everyone wanted to join. (Party members in China and Vietnam are 5 percent of the population; a 1998 Korean Central report put Korea’s membership at 5 million, or 22 percent, though it may be lower.)

“The outcome of the Military First policy replaces the workers as a main force,” says Haiksoon Paik, a North Korean specialist at the Sejong Institute outside Seoul. “North Korea’s party has not been functioning as well as it is supposed to … several positions in the Politburo have not been reappointed. Kim is not depending on the party, but a smaller more streamlined military apparatus. This is due to his politics as a result of the nuclear crisis brought by the Americans.”

“Military First is not aimed at building up the military, which is already quite built up and strong,” says Lee, whose dissertation is titled, “A Political Economic Analysis of the North Korean Regime.” “It is about replacing the old party – First Rice – structure of senior Kim. If the party is unwieldy, the military will control the people on behalf of the leader.”

Tellingly, on New Year’s Day, Kim Jong Il visited the shrine where his father was interred. He has gone there only four times since he came to power in 1995. Each visit has taken place in a year following major accomplishments. According to South Korean media, for the first time, Kim visited the shrine without party or government officials. This time, only key military officials were in attendance. On Tuesday, North Korean papers heralded the visit, and the Oct. 9 nuclear tests as “an auspicious event in the national history.”

Kim-worship in the North is a vivid – and inescapable – spectacle to behold, say visitors. Thousands of giant “towers of eternality” to Kim scatter the landscape. Special “Kimjongilia” crimson begonias are tended in family gardens. Kim’s media calls him variously the “Guardian Deity of the Planet,” and “Lodestar of the 21st Century.” In 2002, Korean mass dances known as Arirang, featured 100,000 flag wavers (and was described in state media as the “greatest event of humankind.”) Many loyal Koreans bow twice daily to Kim pictures that sit alone on the most prominent wall of their homes.

Perhaps the most misunderstood aspect of the Korean cult project is its recent veering toward race and ethnic solidarity, say Kim watchers. His main appeal to his people today, a push that rarely gets attention outside the North, is to the racial superiority of a people whose isolation and stubborn xenophobia supposedly makes their bloodlines purer. Mr. Myers notes that festivals of 100,000 flag wavers is not a Stalinist exercise, but a celebration of “ethnic homogeneity.” Since the 1990s Kim has more fervently claimed lineage to the first ancient rulers of Korea, a move intended to place him in a position of historical, if not divine, destiny as leader of the peninsula.

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North Korea selling off gold reserves

Wednesday, December 27th, 2006

Korea Herald
12/27/2006

North Korea, desperate for foreign currency under U.S.-imposed sanctions, has started to sell its gold reserves on international markets, a Japanese newspaper said Tuesday.

The United States last year blacklisted a Pyongyang-linked bank in Macau, infuriating the communist regime which walked out of disarmament talks for 13 months during which it tested an atom bomb.

Since the US crackdown on the bank, North Korea has earned 28 million dollars in foreign cash by exporting gold to Thailand, which had not imported gold from Pyongyang for the previous five years, the Yomiuri Shimbun said.

North Korea exported 500 kilograms of bullion to Thailand in April and another 800 kilograms a month later, the conservative Japanese daily said without identifying its sources.

North Korea’s central bank, Choson Central Bank was also re-listed on May 12 for trading on the London Bullion Market, said the newspaper, quoting a spokesman for the London market.

The North Korean central bank, which can issue currency, joined the London gold market in 1976 but was de-listed in June 2004 due to inactive trading, the newspaper said.

The Yomiuri, citing South Korean data, said North Korea was estimated to have between 1,000 and 2,000 tons of gold reserves.

The United States blacklisted Macau’s Banco Delta Asia in September 2005, saying it suspected that 24 million dollars in North Korean accounts were linked to counterfeiting or money-laundering.

The accounts have been frozen and other Asian banks have taken similar moves.

The financial sanctions were a main topic during six-nation talks, aimed at persuading North Korea to end its nuclear program, which ended in deadlock last week in Beijing.

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Frozen bank accounts hold $12 million from Hyundai

Thursday, December 21st, 2006

Joong Ang Daily
12/21/2006
Choi Hyung-kyu, Kwon Hyuk-joo

Half of the $24 million in North Korean assets held in the frozen Banco Delta Asia accounts came from the Hyundai Group of South Korea, sources here told the JoongAng Ilbo yesterday. Other sources said North Korea will be able to access some of the frozen holdings next week, because the money had been proven “legitimate.”

The Macao-based bank froze the North Korean holdings last year after the U.S. government accused Pyongyang of financial crimes, such as money laundering and counterfeiting U.S. dollars. Since then, the North has made the unfreezing of those assets a precondition for the nuclear disarmament negotiations.

A U.S. source who requested anonymity said yesterday the $12 million was a part of Hyundai Group’s payments to North Korea for inter-Korean businesses. The money was wired in several payments, the source said. The payments were initially sent to other bank accounts that deal with North Korea, the source said, and then forwarded to the Banco Delta Asia accounts from there.

To deposit a large sum, an account holder must inform the bank in Macao about the source of the money and its purpose. The source showed North Korean account holders’ statements which claimed the deposits came from Hyundai.

Another source well informed about Banco Delta Asia affairs also said the money came from Hyundai.

“It is not easy to distinguish how much of the North Korean assets was earned from legitimate economic activities,” a senior South Korean government official said. “To sort the matter out, the United States and North Korea should meet and discuss the issue.”

In Beijing, O Kwang-chol, the president of the Foreign Trade Bank of Korea, has been meeting with U.S. Deputy Assistant Treasury Secretary Daniel Glaser since Tuesday.

Signs also pointed to a thawing of the freeze on the accounts in the near future. Other sources said Pyongyang has dispatched officials to the city of Zhuhai in China with papers necessary to withdraw the $12 million from the bank in Macao. They said access will likely be granted Tuesday or Wednesday of next week.

Hyundai Asan, Hyundai Group’s North Korea business arm, said yesterday it has not sent any money to a Banco Delta Asia account. The Mount Kumgang tour program began in 1998.

The company said it has wired $1 million a month to an overseas bank account designated by North Korea.

A senior official with Hyundai Asan said North Korea frequently changed the account. “I don’t know if our payment was later wired to BDA accounts or not, but I think that could be possible,” he said.

Hyundai Group provided $500 million to North Korea on the eve of the 2000 inter-Korean summit by wiring the money to a North Korean account with a foreign bank, but the sum currently frozen at the Banco Delta Asia accounts is not connected to that, the sources said.

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Difficult to Recover British-American Tobacco Funds

Wednesday, December 20th, 2006

Daily NK
Yang Jung A
12/20/2006

Difficult to Recover British Funds Caught in BDA North Korea Accounts

In amongst the North Korean accounts that were frozen from Macao’s Banco Delta Bank (BDA) was joint funds from a British tobacco company which has been deemed difficult to recover.

The U.K. Financial Times reported on the 18th that the $7mn of the $24mn in North Korea funds frozen in BDA accounts is from Korean trusts and banks of which half the funds is estimated to from a joint account by British American Tobacco (BAT) and a tobacco company trading by North Korea.

BAT’s spokesperson Catherine Armstrong revealed in an interview with Radio Free Asia (RFA) on the 18th “The money has been certified as legal so we’re very keen to get the money out of the frozen account.”

Regarding the amount of frozen funds, Armstrong said “As there are no substantial data, an actual figure cannot be revealed but I am aware it is nearing tens and hundreds of thousands of dollars.”

Raphael Perl, a specialist at the U.S. Congressional Research Service (CRS) said “We don’t necessarily know on its face that the North Korean tobacco company is not also involved in criminal activity” and revealed “As North Korea sells fake cigarettes on a large scale, every tobacco company in North Korea is being suspected of conspiring illegal acts.”

Perl said “Even in the case a company is internationally based, a company is not completely owned internationally but if a joint ownership, it is even more difficult to discern whether or not the transaction was legitimate.”

In another sense, as reports suggest that “The U.S. Administration told North Korea $12mn of the $24mn frozen funds appears to be unrelated to North Korea’s illegal actions,” others are cautiously anticipating progress from the six party talks as North Korea’s legitimate funds are released.

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Japanese crack down on pro-DPRK Chongryun

Tuesday, December 5th, 2006

Herald Tribune
12/5/2006

Japanese police raid pro-North Korea group over alleged accounting violation

Japanese police raided offices of a pro-North Korean association and later arrested an executive over suspected accounting violations on Tuesday, the latest crackdown as Tokyo intensifies pressure on the reclusive communist regime.

Investigators searched the offices of the Hyogo chamber of commerce affiliated with the General Association of Korean Residents in Japan, which acts as Pyongyang’s de facto embassy, prefectural (state) police spokesman Naoki Awazu said.

Awazu said no other details were immediately available.

Police suspect a 36-year-old former senior official at the group’s local business office helped North Korea-affiliated companies and offices evade taxes and provided accounting services without a license, Kyodo News agency reported.

Eitetsu Kawa, a North Korean living in Japan, was later arrested on suspicion of accounting law violations.

Japan has been cracking down on the residents’ association amid concerns about North Korea’s nuclear and chemical weapons programs, but it was not immediately known if Tuesday’s raid was linked.

The reclusive regime angered Japan and other nations when it tested ballistic missiles in July and conducted a nuclear test in October.

Pro-Pyongyang Japanese residents have come under increasing scrutiny by authorities as tensions have escalated with North Korea.

Tokyo was also planning to urge local governments to review preferential property taxes for facilities owned by North Korean organizations to check on how the pro-North association uses its buildings and facilities.

On Tuesday, the North’s state-run Korean Central News Agency protested the recent raids, calling them “an infringement upon the dignity of (North Korea) and a vicious political provocation.”

Last week, police raided the association’s Tokyo headquarters and its offices in the northern Japanese city of Niigata on suspicion that a relative of a group official illegally obtained a small amount medical supplies for shipment to the impoverished country.

In August, Japanese police arrested a pro-North resident in Japan for allegedly exporting to the North machinery that can be used to make biological weapons.

In March, Japanese police raided another pro-North Korea local chamber of commerce in connection with Pyongyang’s abduction of Japanese citizens in the 1970s and 1980s.

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Bank of Korea sees hardship in sanctions

Tuesday, October 24th, 2006

From the Joong Ang Daily:
Bank sees North pain if sanctions take hold
10/24/2006
Choi Hyung-kyu, Ser Myo-ja

The Bank of Korea said yesterday, in a report prepared for a legislator, that international financial sanctions on North Korea could deal a heavy blow to the North’s shaky economy.

In an assessment for Representative Yim Tae-hee of the Grand National Party, the central bank said a 30-percent reduction in foreign currency inflows to North Korea would lower economic activity by three-quarters of a percentage point. A halving of North Korea’s external trade, the paper said, would reduce economic growth by nearly 5.5 percentage points; a 70-percent falloff in trade would drop economic output by 8.25 points.

Estimates of economic activity in centrally planned economies are difficult at best, however, and North Korea’s secrecy makes such estimates even more tenuous.

“When international financial institutions join in the sanctions and cut the influx of the annual $800 million in foreign currency to the North, Pyongyang will face serious trouble,” Mr. Yim said.

He added, without citing sources, that the North earns about $300 million through legitimate activities, such as inter-Korean economic cooperation deals and remittances from North Koreans abroad, adding that counterfeiting and drug trafficking bring in about $500 million more annually.

Christopher Hill, the U.S. assistant secretary of state for Asia, arrived in Hong Kong on Saturday to meet, among others, William Ryback, the deputy chief executive of the Hong Kong Monetary Authority.

“The U.S. team asked the Hong Kong authorities to cooperate in its effort to freeze North Korean assets in Hong Kong and Macao,” a Hong Kong source said yesterday. “Hong Kong gave a positive answer.”

Another Hong Kong government source said Mr. Hill also asked the government there to help inspect suspect North Korean ships.

“A North Korean ship under a U.S. intelligence watch is on its way to Hong Kong,” the official said. “Mr. Hill asked the authorities to inspect the boat thoroughly when it enters port here.”

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DPRK raises funds the same way as US local governments-tickets

Sunday, October 22nd, 2006

From the Korea Times:
10/22/2006
Kim Sue-young

Fines on Mt. Kumgang Tourists Rise

An increasing number of tourists have been fined this year at Mt. Kumgang in North Korea, the Ministry of Unification reported yesterday.

Some 1,177 fines were levied by North Korea from January to July, the highest figure to date with $16,800, being paid to the North’s officials according to the report. (more…)

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Sanctions only hurt those on bottom-no matter where imposed III

Tuesday, October 17th, 2006

From the Korea Herald:
Sanctions will cripple N.K. economy: KIEP
10/17/2006
Kim So-hyun

The international sanctions to be imposed on North Korea will further cut into the country’s moribund trade volume and drag it deeper into recession, a South Korean think tank said in a report released yesterday.

The sanctions – being taken under a U.N. Security Council resolution – will likely reduce the North Korean economy to a state worse than in the mid-1990s when millions died of hunger, the Korea Institute for International Economic Policy said.

“The North Korean economy is expected to contract much more severely than in the so-called ‘marching in torment’ times (in the mid-1990s),” the KIEP report said. “More financial sanctions and a block on foreign capital inflow will deepen the shortage of foreign currency, resulting in a wider gap between market and official exchange rates.”

The official exchange rate of the North Korean currency was 137 won to the U.S. dollar in the first half of 2005. However, the dollar was traded for between 1,900 won and 2,600 won in the market, up to 19 times higher than the official rate.

The prohibition of financial transactions and capital inflow is regarded as the most powerful punitive measure since it has been cited by Pyongyang as one of the main reasons for boycotting six-party talks and pressing ahead with its reported test of a nuclear device.

“Although trade accounts for less than 15 percent of North Korea’s gross domestic production, trade and support from neighboring countries allowed its economy to inch up a bit recently,” said Choi Soo-young of the Korea Institute for National Unification.

“Whereas the North could ask for international help when it suffered natural calamities such as draughts in the mid-1990s, it now has to live without such generous aid.”

Since the U.N. resolution bans direct or indirect supply of weapons or any materials that could contribute to the North’s weapons of mass destruction programs, a reduction in Chinese imports of related materials could trigger stagnation in the nation’s machinery, electronics and chemicals output, the KIEP report said.

“The trade volume between North Korea and China has surged by some 30 percent a year since 1999, and this has accelerated the North’s economic growth by 3.5 percentage points annually,” KIEP researcher Chung Seung-ho said.

China accounts for about 40 percent of North Korea’s relatively small volume of trade. South Korea, Thailand, Russia and Japan each take up 26 percent, 8.1 percent, 5.7 percent and 4.8 percent, respectively, according to Chung.

It remains to be seen whether neighboring countries will take individual measures in addition to the sanctions under the U.N. Security Council resolution.

The United States, Japan and Australia are considering harsher measures of their own while South Korea and China seem reluctant to follow suit.

“As China’s involvement in the sanctions is likely to be only symbolic, the level of South Korean participation will determine the degree of the North’s economic decline,” KINU’s Choi said.

China could consider reducing its uncompensated grants to North Korea, which soared 162 percent to $38 million last year, according to KIEP.

“China is expected to partially or entirely stop the trade of machinery and electronics that could be related to weapons of mass destruction in North Korea, but it wouldn’t go as far as forbidding private commercial trade across the border,” the report said.

“Stopping the supply of crude oil, for which North Korea depends entirely on China, is unlikely.”

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Chinese Banks Restricting Cash Flow to DPRK

Tuesday, October 17th, 2006

From the Choson Ilbo:
Chinese Banks Restricting Cash Flow to N.Korea
10/17/2006

Major Chinese banks are currently stopping or restricting remittances or payments to North Korea after the North’s announcement of what it claims was a nuclear test, it emerged Monday. Chinese banks in Dandong, where cross-border trade is concentrated, recently started restricting banking transactions with North Korea, an official with the South Korean Embassy in China said. The restrictions, in fact, started in March this year, when the U.S. imposed financial sanctions on Macau’s Banco Delta Asia after designating it Pyongyang’s “primary money laundering concern.”

But not all Chinese banks are doing so, each bank and branch having its own policy. Sources say it does not look as if the Chinese government is ordering them to do so; rather banks have started doing so on their own. Rumor is spreading among traders doing business with North Korea in China that all financial accounts with North Korea including those by North Korean traders in China could be frozen.

North Korean workers in China are leaving the country in droves after North’s claimed nuclear test. A businessman operating a sewing factory in Shenyang, China, said, “Some 100 North Korean workers in my factory returned home three days ago because the Chinese authorities didn’t renew their work permit.” Banks in Dandong and Shenyang, where many businesses trading with North Korea have accounts, are seeing an increasing number of them not receive payments for exports to the North. “Since the U.S. froze North Korea’s accounts in the Macau bank, it takes three or four times longer for us to get paid for imports to the North, and this is hurting us badly,” a businessman trading with the North said. “We can’t do business with the North any longer.”

As official trade between the North and China shrinks, smuggling between the two countries is thriving, local people say. An ethnic Korean in Dandong said if a North Korean vessel ships 1,000 tons of iron ore to a port here, it officially reports only 100 ton of them and smuggles the rest. Smuggling covers almost everything from iron ore to bronze, TVs, computers, petrochemical products, antiques and maritime products. That is why many feel how determined the Chinese authorities are in cracking down on smuggling will determine the success of sanctions against the North. Locals say they have not heard of any Chinese crackdown on smuggling to and from the North, nor do they expect one.

China clearly stated its opposition against military action in the UN resolution against the North over its claimed nuclear test, calling for “an appropriate level” of sanctions. Beijing says the ultimate goal should be getting the North to return to the six-party talks on its nuclear program, not forcing regime collapse. Some expect China to reduce, rather than stop, its supply of oil to the North.

Meanwhile, China is preparing for an emergency in North Korea. It is setting up barbed-wire fences along the border near the Yalu and Tumen rivers where the military units of the provinces there took charge of guarding the area three years ago. The barbed-wire fences are being extended near Changbai County and the Tumen River. A Chinese official said the fences “were put up after consultations with the North because we needed to draw up a clear border between us and North Korea because of the narrowness of the river or newly built roads.” But some say the main goal is to prevent a mass exodus of North Koreans when the regime falls apart. Experts say another reason China is building up its military strength and carrying out more military exercises near the border with the North is to prepare for regime collapse in the north. The new 60-km long road along the Yalu River is also said to serve strategic military purposes.

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