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UN security council adopts sanctions banning imports of wide range of North Korean goods

Saturday, August 5th, 2017

Benjamin Katzeff Silberstein:?

On Saturday August 5th, the United Nations Security Council approved a resolution banning member states from importing North Korean export goods such as minerals and seafood products, and from hiring North Korean laborers. Wall Street Journal:

U.S. Ambassador Nikki Haley praised the council?s solidarity, saying more days like this one were needed at the United Nations. She also personally thanked China for helping move the resolution from talk to action. The U.S., which had drafted and put forward the resolution, negotiated for more than a month with China over the text and final measures targeting Pyongyang.

?This resolution is the single largest economic sanctions package ever leveled against the North Korean regime,? said Ms. Haley, adding the council had put the country and its leadership ?on notice? and ?what happens next is up to North Korea.?

President Donald Trump?said on Twitter, ?The United Nations Security Council just voted 15-0 to sanction North Korea. China and Russia voted with us. Very big financial impact!?

Both China and Russia urged a return to talks with North Korea and told the Security Council that the U.S. must abandon?its military exercises with South Korea?and dismantle?the missile-defense system in South Korea known as Thaad?because North Korea perceived that as a threat and it undermined the security of the region.

?We stress that additional restrictions cannot be an end to themselves, they need to be a tool to engage in dialogue,? said Russia?s new ambassador to the U.N., Vassily Nebenzia.

The nine-page resolution steps up trade restrictions with Pyongyang by aiming to cut off a third of its $3 billion annual export revenue. It bans North Korea from trading coal, iron, lead, iron and lead ore, and seafood.

The resolution also prohibits countries from hiring North Korean laborers and bans countries from entering or investing into new joint ventures with Pyongyang.

Diplomats and sanctions experts have long warned that export revenues, even remittances from foreign workers, are cycled back to North Korea?s military and nuclear programs.

A Security Council diplomat offered this estimate on North Korea?s foreign revenue earnings in 2017: $295 million from seafood; $251 million from iron and iron ore, and $400 million from coal trade.

North Koreans work in China, Russia and the Arab countries in the Persian Gulf in a variety of businesses ranging from factories to restaurants and nightclubs and are estimated to send home several billion dollars in revenue, a large portion of which the government claims, according to U.N. sanctions experts.

The new resolution restricts North Korea?s technology trade and tightens enforcement of sanctions on North Korean vessels by banning violators from entering ports around the world.

Under the resolution, North Korea?s Foreign Trade Bank, which handles foreign exchange, will be added the U.N.?s sanctions list that freezes the assets of targeted entities.

It remains to be seen whether the new sanctions will deter North Korea?s pursuit of advanced ballistic missiles and nuclear weapons or bring its leader Kim Jong Un to the negotiating table.

North Korea?s economy has managed to stay afloat largely because China, its main trade partner, and Russia and some African nations haven?t fully enforced existing U.N. sanctions. The U.S. Treasury in June sanctioned Chinese entities?primarily banks and shipping companies?and individuals for violating sanctions and conducting trade that contributed to North Korea?s military and nuclear program.

China?s Ambassador Liu Jieyi said his country denounced unilateral sanctions by the U.S. and said action against North Korea must be through the U.N. mechanism. Mr. Liu told the council he welcomed the U.S. position that it wasn?t?seeking regime change in North Korea.

?China has always been firmly opposed to chaos and conflict in the [Korean] peninsula,? Mr. Liu said.

Although China and Russia have pushed for a resumption of the six-party talks with North Korea, disagreement remains on how to bring Washington and Pyongyang to the table. China and Russia have called for a freeze-for-freeze plan under which North Korea would halt any more military or nuclear action and the U.S. would end its military exercises with South Korea.

Full article here:
North Korea Hit by $1 Billion Sanctions After Missile
Farnaz Fassihi
Wall Street Journal
2017-08-5

 

The UN summary of the resolution reads as follows:

The Security Council today further strengthened its sanctions regime against the Democratic People?s Republic of Korea, condemning in the strongest terms that country?s ballistic missile launches and reaffirming its decision that Pyongyang shall abandon all nuclear weapons and existing nuclear programmes in a complete, verifiable and irreversible manner.

Unanimously adopting resolution?2371?(2017) under Article?41, Chapter?VII of the United Nations Charter, the 15-nation Council decided that the Democratic People?s Republic of Korea shall not supply, sell or transfer coal, iron, iron ore, seafood, lead and lead ore to other countries.

Expressing concern that Democratic People?s Republic of Korea nationals working abroad were generating foreign export earnings to support the country?s nuclear and ballistic missile programmes, it also decided that all Member States shall not increase the total number of work authorizations for such persons in their jurisdictions, unless approved by the Security Council Committee established pursuant to resolution?1718?(2006).

Through the text, the Council decided that States shall prohibit the opening of new joint ventures or cooperative entities with the Democratic People?s Republic of Korea entities and individuals, or expand existing joint ventures through additional investments.? In addition, it decided that Pyongyang shall not deploy or use chemical weapons and urgently called for it to accede to the Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and Their Destruction.

Also through the resolution, the Council named nine individuals and four entities to be subject to a travel ban and asset freeze already in place, as well as to request that the International Criminal Police Organization (INTERPOL) issue special notices with respect to designated individuals.

In addition, it reaffirmed that its provisions were not intended to have adverse humanitarian consequences for the civilian population of the Democratic People?s Republic of Korea, and that the Security Council Committee established pursuant to resolution?1718 (2006), on a case-by-case basis, exempt from sanctions those activities that would facilitate the work of international and non?governmental organizations engaged in assistance and relief activities for civilian benefit.

Furthermore, through the text, the Council called for the resumption of the Six-Party Talks between China, Democratic People?s Republic of Korea, Japan, Republic of Korea, Russian Federation and the United States towards the goal of a verifiable and peaceful denuclearization of the Korean Peninsula.

Speaking after the resolution?s adoption, the representative of the United States said the Council had put the Democratic People?s Republic of Korea?s dictator on notice by increasing the penalty of its ballistic missile activity to a whole new level.? All Member States must do more to put more pressure on that country, she said, adding that the United States would take defensive measures to protect itself and its allies, including through joint military exercises.

China?s representative said that, while today?s resolution had imposed further sanctions, it did not intend to negatively impact such non-military goods as food and humanitarian aid.? Calling on all parties to implement the resolution?s provisions fully and earnestly, he recalled that China and the Russian Federation on 4?July had put forward a road map to resolve the issue through two parallel tracks ? denuclearization and the establishment of a peace mechanism.? Recalling that the United States had recently indicated that it was not pushing for regime change or for the Korean Peninsula?s reunification, he said an escalation of military activities would be detrimental to all countries of the region.

Japan?s delegate said the sheer number and frequency of the Democratic People?s Republic of Korea?s nuclear and ballistic missile tests ?show how unprecedented and unacceptable these provocations are?.? Not only was the quantity outrageous, but the qualitative advancements were alarming.? Noting that today?s resolution would reduce the Democratic People?s Republic of Korea?s revenue by approximately $1?billion, he said all Member States must demonstrate renewed commitment to implement the Council?s decisions.

The Russian Federation?s representative, while calling on the Democratic People?s Republic of Korea to end its banned programmes, said progress would be difficult so long as it perceived a direct threat to its security. ?Emphasizing that military misadventures risked creating a disaster, he said sanctions must be a tool for engaging Pyongyang in constructive talks rather than to seek the country?s economic asphyxiation.

The Republic of Korea?s delegate said that Pyongyang?s missile provocations on 4?and 28?July, together with its nuclear programme, posed a grave threat to international peace and security.? Indeed, such reckless acts of defiance should be met with stronger measures, he said, adding that additional sanctions contained in resolution?2371?(2017) would significantly cut off the inflow of hard currency that would otherwise have been diverted to illicit weapons programmes.

Full article:
Security Council Toughens Sanctions Against Democratic People?s Republic of Korea,?Unanimously Adopting Resolution 2371 (2017)
United Nations Meetings Coverage
2017-08-05

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Posted in China, Foreign direct investment, International trade, Political economy, South Korea, Statistics, UN, USA | Comments Closed

New Chinese investment in the Yalu bridge

Wednesday, August 2nd, 2017

Benjamin Katzeff Silberstein?

In 2010, North Korean and Chinese authorities decided to build a new bridge across the Yalu River, which is currently estimated to carry 70 percent of all trade between the countries. I recently spoke with a diplomat who was previously based in North Korea, who told me that the current bridge is rather decrepit, and particularly so on the North Korean half. The new bridge was partially built due to an expectation that trade would increase between the two countries, an expectation that seems to have been true for the past few years, including 2016 when North Korea was supposedly under harsh sanctions by the international community.

North Korea, however, has not yet constructed roads to cities on its side of the bridge, making it largely useless. Now, a Chinese businessman has decided to invest in the project — unclear if this is for any expectations of financial gain. Daily NK reports:

Anticipation for the opening of the new Amrok (Yalu) River Bridge connecting Dandong (Liaoning Province, China) with Sinuiju (North Pyongan Province, North Korea) has risen after a Chinese businessman decided to invest money in the project?s infrastructure.
The construction of the new Yalu River Bridge was initiated in December 2010 with the expectation that it will bring an expansion of the trade volume between China and North Korea. The bridge was completed in 2014 after overcoming significant issues. However, the construction of roads on the North Korean side slowed to a halt, delaying further progress.
Recently, a Chinese businessman has announced his decision to invest in North Korea’s road construction efforts, which have remained the biggest obstacle to the opening of the bridge.
A source familiar with North Korean affairs in China told Daily NK on July 24 that according to North Korean traders in Sinuiju, a Chinese businessman has committed 300 million RMB (about US$44.7 million) to the road construction project.
The construction of the new bridge was first proposed due to safety concerns regarding the existing Sino-Korean Friendship Bridge, which although derelict, has been responsible for more than 70% of bilateral trade. The bridge was repaired twice last year alone, highlighting its significant structural issues.
Aware of the situation, China sponsored the construction of a two-way (four-lane) road in the area, paying for the entire construction expenses totaling 2.2 billion RMB (approx US$327 million).
However, the source noted that North Korea suspended the construction of roads between the bridge and North Korean cities, demanding further investment from China.
“North Korea has been continuously demanding investment from Chinese businessmen, threatening them with a suspension of trade unless they invest. It seems that these efforts have produced results,” he said.
But actual construction has yet to start. When asked about this, the source said it is presumably due to the tense bilateral relations between China and North Korea, as well as international sanctions and overall political climate.
Full article:

Chinese investment breathes new life into new Yalu River Bridge
Daily NK
2017-08-02

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Posted in China, Foreign direct investment, International trade | Comments Closed

North Korea’s economy grew by almost 4 percent in 2017, says BOK

Friday, July 21st, 2017

Benjamin Katzeff Silberstein

Yonhap reports:

The estimated expansion of the gross domestic product (GDP) represents a sharp turnaround from 2015 when the economy of one of the world’s most isolated countries shrank 1.1 percent due mainly to a drought.

Last year’s growth is the highest since 1999 when North Korea’s economy expanded 6.1 percent, according to the Bank of Korea (BOK).

North Korea’s economy expanded 1.2 percent on average between 2012 and 2016, a sign that its economy is mired in low growth.

There are no indications that the North’s economy has suddenly improved since late 2011 when North Korean leader Kim Jong-un took power on the sudden death of his father and long-time leader Kim Jong-il, an official said.

“North Korea’s economic structure is very fragile and is not really set up for high growth,” the official spoke on the condition of anonymity.

The BOK estimated North Korea’s gross national income (GNI) stood at 36.4 trillion won (US$32.4 billion) in 2016. South Korea’s per-capita GNI stood at 31.98 million won, which is 22.1 times larger than the North’s 1.46 million won.

Related to last year’s growth, the central bank said North Korea’s mining industry grew 8.4 percent, the highest since 1999 when it expanded 14.2 percent.

North Korea’s trade volume came to $6.55 in 2016, up 4.6 percent from a year earlier, the BOK said. The increase came despite tightened U.N. sanctions imposed on North Korea over its repeated nuclear tests and its long-range rocket launches.

The sanctions call for, among other things, a ban on the country’s exports of coal and other mineral resources to cut off North Korea’s access to hard currency.

Still, the provision will not apply if transactions are determined to be exclusively for livelihood purposes and unrelated to generating revenue for North Korea’s nuclear or ballistic missile programs or other activities prohibited by previous U.N. resolutions.

China accounts for nearly 90 percent of North Korea’s foreign trade, and mineral resources are a key part of their bilateral trade.

Full article:

N. Korea’s economy grew 3.9 pct in 2016: BOK

Yonhap News

2017-07-21

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Posted in Bank of Korea, China, Economic reform, Political economy, South Korea, Statistics | Comments Closed

China-North Korea trade up in the first half of 2017

Friday, July 14th, 2017

Benjamin Katzeff Silberstein

‘Tis the season yet again for Chinese customs data. Imports are down, but exports are up even more. Reuters:

China’s trade with isolated North Korea rose more than 10 percent in the January-June period from a year earlier, a Chinese official said on Thursday, amid pressure from the United States for Beijing to pressurize its troublesome neighbor.

Last week U.S. President Donald Trump denounced China’s trade with North Korea, saying it had grown almost 40 percent in the first quarter, and cast doubt on whether Beijing was helping to counter the threat from North Korea.

China has repeatedly said it is fully enforcing United Nations sanctions on nuclear-armed North Korea and there is nothing wrong with what it terms “normal” trade with Pyongyang, referring to areas not covered by sanctions.

Chinese customs spokesman Huang Songping told a briefing on China’s overall trade figures that total trade with North Korea expanded by 10.5 percent to $2.55 billion in the first six months of the year.

While China’s imports from North Korea dropped 13.2 percent to $880 million in the period from January to June, exports to North Korea rose 29.1 percent to $1.67 billion, he said.

The exports were largely driven by textile products and other traditional labor-intensive goods not included on the United Nations embargo list, Huang added.

“As neighbors, China and North Korea maintain normal business and trade exchanges,” he said, adding that goods for ordinary people and those used for humanitarian reasons are not subject to sanctions.

Overall trade growth with North Korea slowed in June, compared with previous second-quarter months.

Trade in dollar terms with North Korea rose about 12 percent in June from a month earlier to $499 million, according to Reuters calculations based on previously released data.

The calculations do not reflect revisions to earlier figures that may not have been announced.

In May, trade with North Korea gained 14.5 percent from April to $443.5 million, previously released customs data show.

Numbers showing an increase are not evidence that China is failing to enforce U.N. resolutions, with imports from North Korea falling every month since March, Huang added.

China suspended imports of North Korean coal in February, while imports of iron ore accord with relevant U.N. resolutions, he said.

“China customs have all along fully, accurately, conscientiously and strictly enforced relevant Security Council resolutions.”

Full article:
China trade with sanctions-struck North Korea up 10.5 percent in first half
Fang Cheng and Ben Blanchard
Reuters
2017-07-13

As Washington Post reports (citing Kent Boydston’s data), this makes for one massive trade deficit for North Korea. Something seems to be odd with the data, which itself isn’t that odd in this context. A Chinese spokesperson explained the trend as follows:

Monthly figures were more representative of the trend, he said, and China?s imports from North Korea had been ?falling sharply for four consecutive months since March,? including by 36?percent in March and 42?percent in April.

?The trade growth between China and North Korea in the first half of the year was mainly driven by exports,? Huang said, adding that the exports were mainly labor-intensive products such as textiles, which are not banned under U.N. resolutions.

Letting North Korea run a trade deficit of this magnitude sure would be awfully selfless of China, unless North Korea is somehow borrowing to make up for it, which seems highly unlikely.

Wall Street Journal?also reported the trade data:

The rise in trade was driven by a 29.1% increase in exports from a year earlier, while imports fell 13.2%, said Huang Songping, spokesman for the General Administration of Customs, at a briefing Thursday. He said China was abiding by U.N. sanctions ?comprehensively, carefully, accurately and seriously? and that the first-half data doesn?t reflect Beijing?s current stance on its neighbor.

He said imports from North Korea have fallen for the past four months and all coal imports were made in the first two months of the year, before?China suspended coal purchases from Pyongyang. He said coal imports were down 74.5% for the full first half from a year earlier.

Goods exported to North Korea were largely items such as textile products not covered by sanctions, Mr. Huang said.

China is by far North Korea?s biggest trading partner, accounting for more than 80% of the hermit state?s external trade for the past five years. After?North Korea?s successful launch of an intercontinental ballistic missile?on July 4, U.S. President Donald Trump in a tweet cited a rise in China?s trade with Pyongyang in the first quarter,?questioning Beijing?s willingness to ratchet up pressure on its neighbor.

The U.S. has since stepped up its rhetoric, moving toward unilaterally tightening sanctions, targeting?Chinese companies?and?banks?the U.S. says are funneling cash into Pyongyang?s weapons program.

Beijing has resisted suggestions it isn?t doing enough to pressure North Korea, countering that Washington must directly engage Pyongyang to dissuade its nuclear ambitions. China backed tougher U.N. sanctions last year on North Korea?s coal exports, while ensuring an exemption for ?humanitarian? needs. Chinese officials say the February?suspension of imports of North Korean coal?for the rest of this year was part of efforts to enforce those sanctions.

China?s Foreign Ministry says Beijing has played an ?indispensable? role in trying to denuclearize the Korean Peninsula. On Thursday, a ministry spokesman said Chinese imports of iron ore in the first half were allowed under the U.N. sanctions as they are for ?civilian use? and generate no income for North Korea?s nuclear-weapons program.

The data on the customs agency?s website didn?t break out iron-ore imports from North Korea in the first half.

China?s imports of the steelmaking material from all countries jumped 16% from a year earlier in June and rose 9.4% for the first half, customs data showed, as a lasting property boom has spurred demand from the construction sector.

The Foreign Ministry spokesman, Geng Shuang, also reaffirmed Beijing?s commitment to the U.N. sanctions. ?China is implementing the [North Korea]-related resolutions in a full and strict manner,? he said.

In the first quarter, total trade between China and North Korea grew 29.2% from a year earlier, according to Chinese customs data. Both the first-quarter and first-half increases were in dollar terms.

Full article:
China Defends Its Growing Trade With Sanctioned North Korea
Liyan Qi and Chun Han Wong
Wall Street Journal
2017-07-13

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Posted in China, International trade, Statistics | Comments Closed

Washington Post interviews Ri Jong Ho

Friday, July 14th, 2017

Benjamin Katzeff Silberstein

A little over a week after the?Kyodo News interview, Washington Post has also talked to Ri Jong Ho, the former official from Bureau 39 who now lives in Washington DC. The main takeaway from the interview I think, from an economic point of view, is just how far the North Korean economy has gone in its adaptation to its international environment. Rigidity through flexibility, one could call it:

?We were never in pain or hurting in our trade business because of the sanctions. Instead, we conducted our first nuclear test in 2006,? Ri said in an interview near Tysons Corner.

The 59-year-old, whose job had been to raise money for the North Korean regime, and his family live in Northern Virginia, having defected to South Korea at the end of 2014 and moved to the United States last year.

?I used to be sanctioned, as a North Korean who led trade at the front line, but I never felt any pain from the sanctions. The sanctions were perfunctory,? Ri said.

He described being able to send millions of U.S. dollars to North Korea simply by handing a bag of cash to the captain of a ship leaving from the Chinese port city of Dalian, where he was based, to the North Korean port of Nampo, or by giving it to someone to take on the train across the border.

In first the nine months of 2014 ? he defected in October that year ? Ri said he sent about $10 million to Pyongyang this way.

[…]

?Unless China, Russia and the United States cooperate fully to sanction North Korea, it will be impossible to hurt them,? Ri said.

China?s interest in North Korea is well known, but?Russia?s role?in supporting the former Soviet client state?is often overlooked.?Amid calls for China to limit oil exports to North Korea, Russia has dramatically increased the amount of oil it has sent ? some reports suggest exports have quadrupled ? to North Korea this year.

North Korea?s financial networks, moreover, are? intentionally murky. The U.S. Treasury has sanctioned more and more North Koreans and North Korean companies by name to try to cut them off from the American financial system, but few, if any, have any exposure to the United States.

For this reason, Ri?s insights are widely sought after in Washington, where successive administrations have been trying to find North Korea?s pressure points.

[…]

Ri said he worked as president of a shipping company?and was chairman of Korea Kumgang Group, a company that formed a venture with Sam Pa, a Chinese businessman, to start a taxi company in Pyongyang.?Ri suppled a photo of him and Pa aboard a jet to Pyongyang.

He was awarded the title ?hero of labor? in 2002 for his efforts, and said he lived the good life in Pyongyang, with a color TV and a car. ?I was very loyal to Kim Jong Il, so I was rewarded by him,? he said. ?I was rich.?

His last position was running the Dalian branch of Daeheung, a trading company involved in shipping, coal and seafood exports, and oil imports.?The company was given targets to meet in terms of profits, he said, declining to go into details.

But?in 2014,?Ri grew?increasingly?disillusioned after?Kim Jong Un suddenly denounced his uncle, Jang Song Thaek, as a ?traitor for all ages? and had him executed at the end of 2013.

Jang had been leading economic cooperation efforts with China, and dozens of people who worked for him were also purged at the time, Ri said. He worried that his family would be next. They escaped to South Korea before moving to the United States, where his two children, now in their 20s, plan to go to college.

[…]

Ri said North Korea has repeatedly found ways to circumvent whatever sanctions are imposed on it.

?North Korea is a 100 percent state enterprise, so these companies just change their names the day after they?re sanctioned,? he said. ?That way the company continues, but with a different name than the one on the sanctions list.?

Ri?s Chinese counterparts weren?t bothered, either, he said.

?My partners in China also want to make a profit, so they don’t care much about sanctions,? he said. ?When the Chinese government orders them to stop, they stop for a few days and then start up again.?

Growing impatient with Beijing, Washington is increasingly targeting Chinese companies that help North Korea?with what are called ?secondary sanctions.??At the end of last month, the Trump administration blacklisted the Bank of Dandong, located on the border between the two countries, for its dealings with North Korea.

But without knowing how to really hurt North Korea and teaming up to do it, it will be ?impossible? to change Pyongyang?s calculus on the nuclear program, Ri said.

Full article:

He ran North Korea?s secret moneymaking operation. Now he lives in Virginia.
Anna Fifield
Washington Post
2017-07-13
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Posted in Bureau 39, China, Illicit activities, International trade, Political economy | Comments Closed

What about the Chinese companies that depend on trade with North Korea?

Sunday, July 9th, 2017

Benjamin Katzeff Silberstein

Domestic conditions within China are often underestimated as a factor when it comes to the country’s enforcement of sanctions against North Korea. In the grand scheme of things, they may not be a major constituency, but it is difficult to imagine that for a government that values economic growth and social stability as much as China does, it would not factor in the sentiments and demands of domestic businesses who depend on trade with North Korea.

Indeed, when one travels to Dandong, the border town most central to trade between China and North Korea, one can begin to appreciate the magnitude of the trade ties between local businesses and their neighbors on the other side of the Yalu river. I have posted some pictures here. Parts of the city are almost wholly dominated by businesses and stores that cater to North Korean customers, some that are clearly tailored for private and large-scale buyers of goods like cars, machinery, kitchen items such as refrigerators, et cetera. Many companies along the border deal in export-import with North Korea.?Southern China Morning Post?has an interesting story out today about some of these businesses, often an underestimated constituency in the sanctions analyses:

Su Nan, a?trader along the China-North Korea border, used to be a busy man. He used to wake early in the morning, fill his schedule with endless phone calls, and in a good year close deals worth millions of US dollars. But now, all of that has gone.

?We have no revenue so far this year,? Su told?This Week in Asia. ?In fact, we have been struggling since 2016, with fewer and fewer orders coming.?

Although his company hasn?t lowered his salary or laid off workers, Su said he can?t help but worry. After all, ?we just sit in the office and do nothing?, he said.

Su works at Dandong Sevsuns Trading, an export firm located in Dandong, a stone?s throw from?North Korea. China?s 1,420km-long border with North Korea has fostered many cross-border businesses ? Dandong alone hosts 600 such firms by some estimates.

[…]

Since attempts to halt North Korea?s nuclear tests through diplomacy have fallen flat and Beijing doesn?t want a war near its soil, ?curbing North Korea?s nuclear ambition through tougher economic sanctions has become the only choice?, Cheng said.

But that worries the many Chinese whose livelihoods rely on trade with North Korea. For Su, the trader in Dandong, such a move could be ?a killer blow?.

Su?s firm helps international organisations purchase and deliver supplies of humanitarian aid to North Korea. International relief to North Korea has almost dried up in recent months, and Su said his company had likewise been struggling to stay in business.

?If China suspends more trade activities, then we will have no choice but to shut down,? he said.

Other Chinese traders share his concern.

?Selling fruit to North Korea is the only source of income for my family. What shall we do for a living if China will no longer trade with North Korea?? said Wu Xiuhua, a middle-aged Chinese woman in Tumen, a border city an hour?s drive from North Korea.

Like other traders, Wu used to drive her produce straight over the Tumen River; now all must apply for permits to take their goods across the border.

Since the summer months are traditionally a low season for fruit sales, Wu is able to cope with the financial losses ? for now. But other Tumen traders recently took to the street, she said, angry about the costly and time-consuming change.

The local authority in Tumen declined to comment.

It is unclear how many Chinese traders living along the border have been, or will be, affected by the sanctions, but Wu is not optimistic.

?Many people here are running cross-border businesses,? she said, adding that some of her friends had even invested in North Korea, building warehouses equipped with industrial cooling systems to store imported seafood.

?All these investments will go down the drain if China cuts off economic ties with North Korea,? she said.

Besides traders, any business that deals with North Korea, however indirectly, is also at risk.

At a garment factory in Fengcheng, another city near Dandong, an executive told?This Week in Asia?that although his company did not sell to North Korea, it had hired at least 100 North Korean workers to make clothes ? ironically ? for customers in Europe and the US.

?If Beijing expands its sanctions to include the hiring of North Korean workers, that would have a negative impact on our business,? said the executive.

?North Koreans work for a lower salary,? he said. ?It is also hard to find enough Chinese workers, as Fengcheng, like many cities in China, faces a labour shortage.?

Labour exports are considered a major source of income for North Korea.

Nearly 80,000 North Korean working overseas send up to US$2.3 billion back home annually, according to a report by the North Korean Strategy Centre, a defector group. The report said more than half of them work in China and Russia.

The factory has yet to receive any official notices that restrict hiring, but some residents say changes are already underway. ?A restaurant here used to have a lot of North Korean waitresses, but many have disappeared in the past few months. Nobody knows why they left or where they went,? said one resident.

The only businesses that remain unaffected, and at least in some respects optimistic about the future, are Chinese companies that arrange cross-border trips to North Korea.

In fact, an agent at Dandong China International Travel Service said their business had been going so well that the company now ran the tour daily.

?Many Chinese are curious about North Korea,? said the travel agent, who gave only her surname, Wang. ?We now send more than 30 tourists to North Korea every day, with some clients coming all the way from Hong Kong and Macau.?

Full article:
SANCTIONS ARE FINE, BUT WHAT ABOUT THE CHINESE WHO DEPEND ON TRADE WITH NORTH KOREA?
Coco Liu
South China Morning Post
2017-07-09

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Posted in China, Foreign direct investment, International trade, UN | Comments Closed

US government seizes millions from big banks though to have dealt with North Korea

Thursday, July 6th, 2017

Benjamin Katzeff Silberstein?

Reuters reports:

U.S. authorities have tried to seize millions of dollars associated with several companies that deal with North Korea, including the country’s military, from eight large international banks, according to court filings made public on Thursday.

The effort was revealed two days after North Korea tested a long-range missile capable of reaching Alaska, ratcheting up tensions with the United States and adding to worries about North Korea leader Kim Jong-un’s nuclear weapons plans.

Thursday’s filings show that Chief Judge Beryl Howell of the federal court in Washington, D.C. on May 22 granted U.S. prosecutors’ applications for “damming” seizure warrants against Bank of America Corp (BAC.N), Bank of New York Mellon Corp (BK.N), Citigroup Inc (C.N), Deutsche Bank AG (DBKGn.DE), HSBC Holdings Plc (HSBA.L), JPMorgan Chase & Co (JPM.N), Standard Chartered Plc (STAN.L) and Wells Fargo & Co (WFC.N).

Prosecutors believe the banks have processed more than $700 million of “prohibited” transactions on behalf of entities tied to North Korea since 2009, including the period after Donald Trump was elected U.S. president, the filings show.

Some of the transactions were processed for Dandong Zhicheng Metallic Material Co and four affiliated “front” companies that prosecutors said tried to evade sanctions through transactions that would benefit North Korean entities, “including the North Korea military and North Korea weapons programs,” according to the filings.

The filings did not say any of the banks knowingly violated sanctions against North Korea.

In her decision, Howell authorized warrants requiring the eight banks to accept incoming transactions but not allow outgoing transactions involving the five companies for 14 days, and thereafter to seize what they collected.

Full article:
U.S. seeks funds tied to North Korea from eight big banks
Jonathan Stempel
Reuters
2017-07-06

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Posted in Banking, China, Finance, International trade, Statistics | Comments Closed

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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Posted in China, Daesung Trading Company, Foreign direct investment, International trade, Oil, Political economy, Russia, Singapore, Statistics | Comments Closed

US sanctions of Chinese entities over transactions with North Korea

Friday, June 30th, 2017

Benjamin Katzeff Silberstein

Reuters reports:

The United States imposed sanctions on two Chinese citizens and a shipping company on Thursday for helping North Korea’s nuclear and missile programs and accused a Chinese bank of laundering money for Pyongyang.

U.S. Treasury Secretary Steve Mnuchin said the actions were designed to cut off funds that North Korea uses to build its weapons programs in defiance of U.N. Security Council and unilateral sanctions.

“We will follow the money and cut off the money,” he told a news conference.

A Treasury statement identified the bank as the Bank of Dandong and the firm as Dalian Global Unity Shipping Co Ltd. It identified the two individuals as Sun Wei and Li Hong Ri.

The sanctions imposed on the two Chinese citizens and the shipping company blacklists them from doing business with U.S.-tied companies and people.

Bank of Dandong did not respond immediately to a request for comment. A staff member at Dalian Global Unity would not comment on the sanctions and subsequent calls to the firm’s office in Dalian went unanswered.

Mnuchin said U.S. officials were continuing to look at other companies that may be helping North Korea and may roll out additional sanctions.

U.S. foreign policy experts say Chinese companies have long had a key role in financing Pyongyang. However, Mnuchin said the action was not being taken to send China a message. “This wasn’t aimed at China. We continue to work with them,” he said.

China did not respond favorably:

Asked about the U.S. sanctions on Friday, Chinese Foreign Ministry Spokesman Lu Kang said that China consistently opposes unilateral sanctions imposed outside the U.N. framework.

“We strongly urge the United States to immediately correct its relevant wrong moves to avoid affecting bilateral cooperation on the relevant issue,” he said, without elaborating.

China’s ambassador to the United States, Cui Tiankai, said China opposed the United States using domestic laws to impose “long-arm jurisdiction” on Chinese companies or individuals, the official Xinhua news agency reported on Friday.

“If a Chinese company or individual has acted in a way that violates United Nations Security Council resolutions, then China will investigate and handle the issue in accordance with Chinese law,” he told an event in Washington on Thursday evening.

Full article here:
U.S. targets Chinese bank, company, two individuals over North Korea
Joel Schectman and David Brunnstrom
Reuters
2017-06-30

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Posted in China, Foreign direct investment, International trade, Political economy | Comments Closed

CNPC suspends fuel exports to North Korea

Wednesday, June 28th, 2017

Benjamin Katzeff Silberstein

In late June, Reuters reported that the Chinese state-owned enterprise, China National Petroleum Corporation, had suspended its exports of fuel to North Korea, ostensibly because of concerns that North Korean buyers would not be able to pay:

China National Petroleum Corp has suspended sales of fuel to North Korea over concerns the state-owned oil company won’t get paid, as pressure mounts on Pyongyang to rein in its nuclear and missile programmes, three sources told Reuters.

It’s unclear how long the suspension will last. A prolonged cut would threaten critical supplies of fuel and force North Korea to find alternatives to its main supplier of diesel and gasoline, as scrutiny of China’s close commercial ties with its increasingly isolated neighbour intensifies.

CNPC and the Ministry of Commerce did not respond to requests for comment. North Korea’s embassy in Beijing declined to comment.

Chinese foreign ministry spokesman Lu Kang, asked about the sale suspension and whether the Chinese government put pressure on CNPC to make this decision, said: “I do not understand this situation you are talking about” and declined to elaborate.

A source with direct knowledge of the matter said CNPC decided to put fuel sales on hold “over the last month or two” and described it as a “commercial decision”.

“It’s no longer worth the risks,” said the source. Chinese and international banks are stepping up compliance checks on companies dealing with countries on the U.S. sanctions list, such as North Korea, he said.

The North Korean agents who mostly buy the diesel and gasoline have been unable recently to pay for the supplies — CNPC normally requires upfront payments, the source said.

Reuters was unable to determine if the agents have started facing credit problems with Chinese and international banks worried about sanctions compliance issues.

Two other sources briefed about CNPC’s decision confirmed the suspension of diesel sales, but did not know directly about the gasoline move. The three people declined to be named due to the sensitivity of the matter and are not authorised to speak to the media.

PRICES SURGE IN NORTH

Last year, China shipped just over 96,000 tonnes of gasoline and almost 45,000 tonnes of diesel worth a combined $64 million to North Korea, where it is used across the economy from fishermen and farmers to truckers and the military.[O/CHINA4]

Most of that was sold by CNPC, which has grown over the past two decades to dominate China’s energy trade with Pyongyang.

Data for May released on Friday showed China supplied significantly lower volumes of diesel and gasoline compared with a month earlier, although monthly tonnages can vary widely. June data will be released in late July.

Fuel prices in North Korea, meanwhile, have sharply risen in recent months, suggesting a tightening in supply.

A Reuters analysis of data collected by Daily NK showed the price of gasoline sold by private dealers in Pyongyang and the northern border cities of Sinuiju and Hyesan?had hit $1.46 per kg on June 21, up almost 50 percent from April 21. Until then, they had remained relatively stable since late last year.

Diesel prices averaged $1.20 per kg as of June 21, more than double over the same period, according to Daily NK,?a website run by defectors who collect prices via phone calls with North Korean fuel traders.

Full article:
Exclusive: China’s CNPC suspends fuel sales to North Korea as risks mount – sources
Chen Aizhu
Reuters
2017-06-28

This does not seem to imply that the CNPC altogether halted crude oil deliveries to North Korea, only deliveries of fuel purchased on a commercial basis. And usually, the first follow-up question to ask in reaction to news of China halting deliveries of supplies X, or the imports of good Y, is “for how long”?

These deliveries may of course have happened on other contracts, but NK Pro reports continued North Korean oil tanker presence in Chinese oil terminals in both May and June.

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Posted in China, Energy, International trade, Oil | Comments Closed

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