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China’s economic openings to North Korea after summit(s)

Saturday, June 9th, 2018

Benjamin Katzeff Silberstein

A recent Reuters report looks at some of the ways, including tourism and the restaurant business, through which economic contacts between North Korea and China have increased after the spring of summits:

North Korean officials have toured China to discuss economic development. Speculators are snapping up property along their common border. And South Korea is studying ways to boost engagement with its isolated neighbor to the north.

Across the region, there are signs that U.S. President Donald Trump’s campaign of “maximum pressure” on Pyongyang to give up its nuclear weapons is weakening ahead of his summit with North Korean leader Kim Jong Un in Singapore on Tuesday.

Trump, along with leaders like South Korea’s President Moon Jae-in, have credited the pressure campaign with bringing Kim to the negotiating table through a combination of international sanctions, political isolation, and threats of military action.

However, unless there is a major provocation or resumption of nuclear testing or missile launches by North Korea, strategists and academics say it is unlikely that maximum pressure will ever fully return.

“Trump’s campaign is over,” said Kim Hyun-wook, a professor at the Korea National Diplomatic Academy. “The diplomatic openings with North Korea have already been taking a toll on the maximum pressure campaign.”

Trump has himself said he doesn’t want to use the term “maximum pressure” any more because of improving relations with North Korea.

Joseph Yun, the United States’ former top negotiator with North Korea, told a Senate hearing on Tuesday: “Practically it is not possible to continue maximum pressure when you’re talking with your adversary. I don’t think you can have serious engagement as well as maximum pressure.”

Preparations are already underway in China, South Korea and Russia, which share land borders with North Korea, for better ties with the isolated nation.

[…]

Along China’s border with North Korea, speculators are buying land and traders are stockpiling cheap North Korean coal amid hopes that restrictions will soon be lifted.

“It’ll be good if North Korea opens up,” said a hat seller in the border city of Dandong, who only gave her name as Yang. “The people there are so poor, it’s like China in the 1980s.”

She said the number of North Koreans shopping in the city had dropped in recent months after the sanctions were tightened. But now, she said, property prices in Dandong were being driven up by speculators betting that trade would revive.

Other local people in Dandong said North Korean workers were returning, prompting the opening of some restaurants and hotels.

The owner of one Korean restaurant was training staff on presenting a new menu in preparation for more visitors from other parts of China, including people intending to visit North Korea.

The Liuji Restaurant, which was shut after its owner was investigated in 2016 for dealings with North Korea, reopened in March after Kim’s visit to China, his first trip out of the country since taking office.

It was not clear what happened to the investigations or who the new owner was.

The restaurant’s North Korean staff explained the closing as “renovations.”

On June 5, state carrier Air China announced it would resume regular flights between Beijing and Pyongyang, which officials had indefinitely suspended in November, citing poor demand.

Although the first Air China flight had only around 20 passengers, tour operators said busloads of Chinese tourists were in Pyongyang, their numbers surging in recent weeks because of the lowered tensions.

“I went to the train station (in Pyongyang) and it was the busiest I’ve ever seen it,” said the founder of the Dandong-based INDPRK tour company, who goes by the name Griffin Che. “I’d guess about 100 Chinese tourists arrived by train today. In the past I would see a maximum of 30-40 tourists.”

Che said the prospect of new economic opportunities in North Korea has him interested in branching out beyond tourism into investment and coal trading.

U.S. lawmakers have raised concerns that traders in China are already skirting sanctions, but Beijing-based diplomats say that there is no evidence that China is abandoning its U.N. Security Council commitments.
[…]

Some of that political isolation has been reduced, however, by Kim Jong Un’s meetings with leaders of China and South Korea, and this week’s summit with Trump.

At the end of May, Russian Foreign Minister Sergei Lavrov landed the first meeting between a Russian official and Kim as head of state, and extended an invitation for the North Korean leader to visit Russia.

Russia has long been skeptical of the sanctions regime, and South Korea’s Moon has proposed a three-way study on potential joint projects, including railways, gas and power linking Siberia to the Korean peninsula.

“Even if the summit fails and U.S.-North Korea tensions resurface, Russia is unlikely to support new rounds of sanctions on North Korea,” said Artyom Lukin, a professor at Far Eastern Federal University in Vladivostok.

“If previously adopted U.N. sanctions continue to be in effect, Russia will abide by them, but it will probably find some legal ways and loopholes to make their enforcement as mild as possible.”

Kim has met Chinese President Xi Jinping two times in recent months and analysts say Beijing’s willingness to maintain last year’s level of pressure on North Korea is waning.

[…]

Two North Korean restaurants in Jakarta have shut down.

In Vietnam, two North Korean restaurants in Ho Chi Minh City closed in October last year, but there is still one in Hanoi, owned by a Vietnamese businessman who also runs a shipping company.

The country’s once-close ties with North Korea have been strained over North Korea’s alleged use of a Vietnamese citizen in the assassination of Kim Jong Un’s half brother, Kim Jong Nam, in Kuala Lumpur in February last year.

In March, Vietnam filed a report to the United Nations in which the country said it has “always fully implemented” sanctions on North Korea.

In response to U.S. pressure, Thailand said annual trade with North Korea fell by 94 percent, although some North Korean businesses have continued to operate in the country, including two restaurants in Bangkok.

At the Pyongyang Haemaji Restaurant, North Korean waitress Pak Il Sim said tables were routinely full of customers, most of them Japanese.

When asked if the restaurant had come under pressure from Thai authorities to close, she said: “No, business as normal”.

Full article and source:
Door already ajar: Trump may struggle to isolate North Korea again
Brenda Goh and Josh Smith
Reuters
2018-06-09

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South Korea asks for immunity for officials stationed in Kaesong

Tuesday, June 5th, 2018

Benjamin Katzeff Silberstein

While the world gears up for the summit (yes, The Summit), things are moving along on the peninsula as well. Moon promised in the election campaign that he would not only re-open Kaesong, but work to enlarge the zone as well. Last week, South Korea asked that North Korea grant diplomatic immunity for the officials it plans to station in the liaison office the two countries are in the process of establishing in the city:

The two Koreas agreed last week to open a liaison office in the city “at an early date” at high-level talks to discuss steps for implementing promises made by their leaders in the historic April and May summits.

South Korea plans to station its officials there in order to keep communication channels open around the clock as part of efforts to support cross-border exchanges, which are likely to increase.

According to the sources close to the matter, South Korea’s government recently proposed the North grant immunity from arrest and detention for its officials to be stationed in the office, just as the Vienna Convention grants such privilege to diplomats.

In addition, it also proposed that the North guarantee safety of passage and communications for its officials, while exempting them from checks on their bags and pouches, the sources said.

Kaesong is the western border city in the North where the two Koreas operated a joint industrial complex since 2004. It was hailed as a successful example of economic cooperation between the two Koreas as it married South Korea’s capital with the North’s cheap and skillful labor.

South Korea, however, closed its operations there in early 2016 and brought its officials and workers back in protest at the North’s continued missile and nuclear provocations.

Though there was an agreement regarding the safety of South Korean personnel at the time, there was no clear legal ground for the South Korean government to ask for the return of its people in case of their arrest or detention, experts said.

Article source:
S. Korea asks N. Korea to grant immunity to officials at liaison office to open in North
Yonhap News
2018-06-05

It wouldn’t be surprising if moves to open Kaesong come relatively soon, pending the overall diplomatic situation and sanctions regime. Kim Jong-un’s predilection for SEZs is well known and natural, they bring opportunities for making hard currency for the state while keeping systemic changes and capitalist incursion (in the North Korean lingo) contained within a specific geographic area. Some hope that they will eventually bring systemic changes to the broader North Korean society as well, but with Kaesong, we’ve seen no evidence that that is the case.

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Recap: South Korea’s economic plans for North Korea

Monday, May 28th, 2018

Benjamin Katzeff Silberstein

In this post, I’ll be collecting news and information on Moon Jae-in’s plans and ideas for economic development in North Korea. I’ve had to take a little break from blogging for the past couple of weeks due to travel, so the articles here won’t necessarily be recent or up-to-date, especially since up-to-date regarding the Korean peninsula these days seems to extend only to the last five minutes or so.

For the contents of the Panmunjom Declaration that have to do with the North Korean economy, feel free to check out this post, where I make the case (which still holds, I would argue) for why infrastructure is the most plainly obvious as of now for economic cooperation with North Korea in the wake of the latest warming of ties.

Infrastructure was an important component of the famed USB-stick that Moon handed to Kim at the first inter-Korean summit this year. Hankyoreh:

South President Moon Jae-in ordered a joint inter-Korean research effort to examine future economic cooperation ahead of the anticipated lifting of international sanctions against North Korea following an upcoming North Korea-US summit, which will follow up the inter-Korean summit that was held on Apr. 27.

Speaking on Apr. 30 at the first Blue House senior secretaries’ and aides’ meeting since the inter-Korean summit, President Moon said he “look[ed] forward to us being able to carry out a joint inter-Korean research effort for implementation of the Oct. 4 Summit Declaration [of 2007] and inter-Korean economic cooperation,” a key Blue House official reported.“He was saying we need joint research to examine what kinds of economic cooperation the South and North can engage in ahead of [sanctions against North Korea] being lifted,” the official explained.

During their summit, President Moon also personally gave North Korean leader Kim Jong-un a pamphlet on his “new economic vision” and a USB device containing a presentation video, the Blue House reported.

The materials reportedly contained details on power plant construction and other economic cooperation measures that could be implemented once inter-Korean relations gain momentum and sanctions against North Korea are lifted.During the Apr. 30 meeting, President Moon described the Panmunjeom Declaration as “a peace declaration proclaiming to the world that there will be no more threat of war or nuclear weapons on the Korean Peninsula.”

Article source:
South Korean President Moon Jae-in orders joint research effort for inter-Korean economic cooperation
Seong Yeon-cheol
Hankyoreh
2018-05-01

New York Times noted the somewhat ironic fact that Kim received Moon’s plan on a USB-stick, an item whose use by its own citizens the North Korean regime has long cracked down on:

For years, Kim Jong-un, North Korea’s leader, has been cracking down on USB flash drives that activists smuggle into his isolated country to poison his people’s minds with outside influences, like South Korean K-pop music.

But last month, when he met with the South’s president, Moon Jae-in, Mr. Moon handed him a USB drive that contained quite a different message.

In charts and video clips, Mr. Moon’s memory stick laid out a “new economic map for the Korean Peninsula,” including new railways and power plants for the impoverished North, should Mr. Kim abandon his nuclear weapons, according to South Korean officials.

Mr. Moon based his sales pitch on the belief that Mr. Kim wants to become the North Korean equivalent of Deng Xiaoping, who oversaw the economic liberalization of China. In this view, Mr. Kim may be willing to transform his pariah state by trading in his nuclear arsenal for diplomatic and economic incentives he needs to achieve prosperity.

[…]

“Kim Jong-un’s desire to develop his country’s economy is as strong as, and even stronger than, his desire for nuclear weapons,” said Lee Jong-seok, a former unification minister of South Korea. “But he knows he cannot achieve the kind of rapid economic growth in China that he envisions for his country while keeping his nuclear weapons — because of the sanctions.”

[…]

Vilified as he was, however, Mr. Kim has also shown signs of being a reformer, granting farms and factories more autonomy, allowing more markets to open, and setting off a building boom in his showcase capital, Pyongyang. He exhorts his country to follow “international development trends” and “global standards” and even admits failing to deliver on his promise that his long-suffering people would “no longer have to tighten their belts.”

“My desires were burning all the time, but I spent the past year feeling anxious and remorseful for the lack of my ability,” Mr. Kim said in a nationally broadcast speech last year, a startling admission for a member of the family that has ruled North Korea with the help of a personality cult since its founding in 1948.

After meeting him, Mr. Moon called Mr. Kim “open-minded and practical.”

Nowhere is Mr. Kim’s dilemma better seen than in his policy of “byungjin,” or parallel advance, which seeks a nuclear arsenal and economic development simultaneously. Under that policy, Mr. Kim has rapidly developed his country’s nuclear weapons and ballistic missile programs, arguing that a nuclear deterrent would make his country feel secure enough to focus on rebuilding the economy. But the world has responded by imposing crippling sanctions.

[…]

If Mr. Kim pursues the route of economic reform, energy and transportation are the two areas where he most needs outside help. In his meeting with Mr. Moon, Mr. Kim admitted to the “embarrassing” condition of his roads and railways, South Korean officials said.

Trains running on electricity remain North Korea’s main means of transport, carrying 90 percent of its cargo and 60 percent of its passenger traffic, according to Ahn Byung-min, a senior analyst at the South’s government-funded Korea Transport Institute. But its rail systems are so decrepit that its fastest train, which runs to the Chinese border from Pyongyang, travels at 28 miles an hour. Other trains run at less than half that speed, Mr. Ahn said.

Lacking cash for oil imports, North Korea produces all its electricity from hydroelectric dams and coal-burning power plants. But the country’s power industry is trapped in a vicious cycle, energy experts say. Chronic electricity shortages make it difficult to produce coal and transport it to power plants. People in search of firewood for heat and cooking have denuded their hills, causing floods and droughts and making silt pile up at dams. That cuts down hydroelectric generation.

North Korea’s electricity generation amounts to only 4.4 percent of South Korea’s, according to Park Eun-jeong, an analyst at the South’s Korea Development Bank. The country prioritizes supplying electricity to lighting statues of Mr. Kim’s father and grandfather, who had ruled before him, while passengers wait for hours in trains unable to move because of power shortages, according to defectors from the country.

“Electricity is the Achilles’ heel for North Korea,” said Lee Jong-heon, an energy analyst in Seoul.

Mr. Moon’s proposal to modernize the North’s roads and railways and link them to the South’s is not meant to help just North Korea.

South Korean policymakers say that the two Koreas must first integrate their economies to make an eventual reunification less chaotic. They also envision building trans-Korean railways to find faster and cheaper routes to export South Korean goods to China, Russia and Europe, and bring Russian oil and gas into the South through pipelines for its power-hungry economy.

Full article and source:
South Korea Hands Kim Jong-un a Path to Prosperity on a USB Drive
Choe Sang-hun
New York Times
2018-05-10

Moon’s plan consists of three “economic belts”, as South China Morning Post notes, with infrastructure links that carry great potential gains for China and Russia as well:

President Moon Jae-in gave the North’s leader Kim Jong-un a USB drive containing a “New Economic Map of the Korean Peninsula” at the fortified border village of Panmunjom on April 27.

The initiative included three economic belts – one connecting the west coast of the peninsula to China, making the region a centre of logistics; one connecting the east coast to Russia for energy cooperation and one on the current border to promote tourism.

Whilst sources at the South Korean presidential office did not give further details about the information contained in the drive, they confirmed that the plan was in line with Moon’s “Berlin speech” last year when he outlined his basic approach to the north on a visit to the German capital.

During last year’s presidential election campaign, Moon pledged to merge the two Koreas’ economies in a single market to lay the foundations for unification.

Park Byeong-seug, a South Korean lawmaker from Moon’s ruling Democratic Party of Korea, said the proposal was in line with Moon’s campaign promises.

“The concept of the three belts was one of President Moon’s pledges during the election last year,” Park said.

“The new economic map includes railway links between the two Koreas and China’s northeast stretching all the way to Europe.”

One part of the plan would involve the construction of a rail link starting in Mokpo on the southwest tip of the peninsula, passing through Seoul and Pyongyang and the North’s Special Administrative Region of Sinuiju, before reaching Beijing.

Beijing is likely to welcome Seoul’s proposal as it accords with the core Chinese national interest of enhancing sustainable economic development and boosting the country’s northeastern rust belt.

Cheng Xiaohe, a deputy director at the centre for international strategic studies at Renmin University said Beijing may try to incorporate the plan into its Belt and Road Initiative.

“The northeast has been China’s weakest link and seen poor economic development for years. A rail link could make a real difference to the region,” Cheng said.

Improving the area’s logistics would also benefit China as its access to the open seas in that part of the world is physically blocked by the Korean peninsula and Russia’s far east.

North Korea’s economy is also closely tied to the northeast of China and opening up the reclusive state’s markets could provide new opportunities for the Chinese provinces on its border.

Lu Chao, a research fellow at Liaoning Academy of Social Sciences, said: “The plan would have a huge impact on China’s northeastern region as it would transform the region as a centre of logistics in East Asia, which could function as a driving force for the rapid economic growth of the region.”

“The northeast is the region with the greatest economic potential in China. A railway connection would bring a myriad of investments from overseas and would help the economy take off.”

[…]

South Korea would have to allow its allies and the UN to mediate any easing of sanctions before it could establish any economic cooperation with the North.

Moon Chung-in, a special foreign affairs and national security adviser in Seoul, said last month that Seoul’s economic incentives would compensate Pyongyang for freezing its missile programme, disclosing its nuclear capacity and allowing international inspections within its borders.

Full article and source:
Seoul offers Kim Jong-un grand bargain to link North and South Korean economies with China
Lee Jeong-ho
South China Morning Post
2018-05-07

Not surprisingly, Hyundai Asan is hoping to get in on whatever action may come. CNN:

Hyundai Group said Tuesday [May 8th] that it’s setting up a task force to prepare for the potential restarting of economic projects in North Korea.

The announcement comes shortly after a historic summit between South Korean President Moon Jae-in and North Korean supreme leader Kim Jong Un at which they committed themselves to rebuilding ties after years of tensions.

Hyundai Group, which split from the Hyundai Motor Group in 2000, was involved in various business projects in North Korea in the past, including a mountain resort and the Kaesong industrial complex, where North Korean workers made goods for South Korean companies.

“Hyundai needs to be ready when/if the two Koreas agree on terms and inter-Korean economic cooperation resumes,” a company spokesman said.

Hyundai will be closely monitoring the planned summit between Kim and US President Donald Trump that’s expected to take place in the coming weeks, as well as any potential changes to the heavy sanctions in place on North Korea’s economy, the spokesman said.

The Kaesong complex, a symbol of cooperation between the two Koreas, was closed as relations deteriorated in 2016. More than 120 South Korean companies had a presence there, employing tens of thousands of North Koreans and providing a steady stream of foreign currency to the regime in Pyongyang.

Hyundai also previously operated a tourist resort at North Korea’s Mount Kumgang, near the border with South Korea. It was shut down in 2008 after a South Korean tourist was killed by a North Korean soldier.

The company’s ties to North Korea go back to Hyundai’s late founder, Chung Ju-young, who was born there.

Last week, South Korean Deputy Prime Minister Kim Dong-yeon said the country’s government was “considering various scenarios” for economic cooperation between the two Koreas.

“The government is preparing response plans to different scenarios in terms of how and how fast to pursue [economic cooperation] and how to procure the resources for it,” he said.

South Korea’s government has allocated about $900 million to fund economic projects that involve both countries this year, according to the minister.

Full article and source:
Hyundai Group is getting ready to do business in North Korea again
Daniel Shane
CNN
2018-05-08

To be sure, preparations and planning are well underway in Seoul. Reuters:

South Korea’s finance minister said on Wednesday [May 2nd] the government was discussing how to finance possible economic projects with North Korea, although any projects with Pyongyang must first be approved by the international community.

“We’re internally carrying out preparations, in terms of what to prepare, and how to cooperate with the international community, and how to finance (possible inter-Korea projects),” Kim Dong-yeon told reporters in Sejong.

“But we need support from the international community and need to watch the (upcoming) summit between the United States and North Korea,” Kim said, without elaborating on specifics of any government financing.

Kim’s comments come after South Korean President Moon Jae-in and his North Korean counterpart Kim Jong Un agreed last Friday on a common goal of a “nuclear free” peninsula, and to “adopt practical steps towards the connection and modernization of the railways and roads”.

Many speculate that the two Koreas will start joint infrastructure projects as soon as international sanctions on North Korea are lifted. Currently, North Korea is under sanctions imposed by the U.N. Security Council to stop its nuclear weapons and missiles programs.

Kim also said there was a rise in the number of Chinese tourists in March although the services sector has not yet recovered from a drop in such visitors due to tensions between the two countries.

“The number of Chinese tourists is noticeably increasing since March, although it hasn’t recovered to the pre-Thaad level,” Kim said.

Tourist numbers plunged last year after South Korea angered China by deploying a U.S. Terminal High Altitude Area Defence (THAAD) system that features radar which Beijing believes could be used to penetrate its territory.

Full article and source:
South Korea considers financing of possible inter-Korea projects: finance minister
Reuters
2018-05-02

To be continued and updated…

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Goods, and people, crossing the China-North Korea border

Wednesday, April 25th, 2018

By Benjamin Katzeff Silberstein

Over the past couple of weeks, there’s been several news stories that suggest and increased stream of goods – and people – across the North Korean border to China. First, there were the reports that some 400 North Korean workers, who were earlier expelled due to China’s sanctions implementation, came back to China. It shouldn’t be all that shocking if Chinese sanctions enforcement eased somewhat after Kim Jong-un’s visit to Beijing a few weeks ago. Judging from historical patterns, Chinese sanctions enforcement on North Korea may well have relaxed as international tensions around North Korea’s nuclear program are somewhat eased as well.

South Korea’s MBC seem to make the same assessment in a recent dispatch from the Sino-Korean border. On April 24th, they reported that North Korean-owned restaurants in Dandong have opened again after being closed for several months, since China began enforcing UN security council-mandated sanctions against North Korea. Shops selling North Korean goods in China have had their shelves restocked, and judging by ticket sales, the number of Chinese tourists visiting North Korea has increased.

It’s hard to tell precisely what all this means. Surely, this could all be a sign of Chinese concessions to North Korea following Kim’s meeting with Xi. More likely, the relaxation is also a concession to Chinese companies: China’s implementation of sanctions has not only hit against North Korea, but against Chinese business interests in the border regions as well. It appears that the main beneficiaries of whatever relaxation has happened are businesses near the border, such as a number of Chinese factories, and North Korean-run restaurants (usually run as joint ventures with Chinese partners). Information is, as usual, very spotty and one should be careful not to draw too many general conclusions from anecdotal evidence.

In any case, as I write for NK Pro, the signs of relaxation we’ve seen so far don’t merit any change in the assessment that North Korea is experiencing significant pressure from the sanctions. Key exports that dropped in 2017 due to China’s sanctions implementations have, as far as we can tell from publicly available information, not gone up. This may very well change in the future, and the anecdotal signs of relaxation along the border may be indicative of a broader change. But for now, the evidence doesn’t seem to be there.

 

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Chemical factory in North Korea closed due to sanctions

Thursday, April 19th, 2018

Benjamin Katzeff Silberstein

Says Radio Free Asia:

A North Korean chemical plant which had been shuttered for 20 years and renovated for reoperation in 2016 appears to have been shut down again due to international sanctions imposed on the regime of leader Kim Jong Un, sources inside the country and in neighboring China said.

The Chongsu chemical plant located in the workers’ district of Sakchu county in North Hamgyong province sits opposite the city of Dandong in northeastern China’s Liaoning province across the Yalu River separating North Korea and China.

North Hamgyong province is not opposite Dandong, and RFA is likely mixing North Hamgyong up with North Pyongan province. I’m grateful to a reader and good friend for pointing this out!

The chemical factory It underwent a major renovation in October 2016 and until recently was known to produce batteries for military use, sources said.

“The Chongsu chemical plant had been reactivated for less than a year, and it’s been eight months since any smoke has come out of it,” a resident of Dandong’s Kuandian county told RFA’s Korean Service. “If there is no smoke coming out of its smokestack, then it’s evident that the plant has stopped operating.”

“International sanctions on North Korea may have had a big impact on the deactivation of the chemical plant,” said the source who declined to be named. “There is strong possibility that the chemical plant was not able to obtain necessary materials because of China’s sanctions.”

The United Nations, with backing from North Korea’s longtime ally China, unanimously approved sanctions against North Korea in December as punishment for its development and launch of a ballistic missile that Pyongyang said is capable of striking the U.S. mainland.

The sanctions place caps on the import of crude oil, and refined oil products, such as diesel and kerosene that are crucial to North Korea’s economy. They also impose a ban on the export of a range of products, including food, machinery, electrical equipment, wood, earth, and stones, to other countries.

In early January, China’s Ministry of Commerce began imposing limits on exports of crude oil, refined oil products, steel, and other metals to North Korea, in line with U.N. sanctions.

China suspended North Korea coal imports in 2017 after the U.N. adopted a previous sanctions resolution to punish the country for its nuclear weapons program by tightening restrictions on coal exports.

“Because of China’s sanctions, chemicals, including sulfuric acid, are not allowed to be sent to North Korea,” the source said. “So how can the plant produce batteries without an essential material?”

Authorities let the Chongsu chemical plant fall into neglect in 1996 during the Great Famine during which up to 3 million North Koreans starved to death due to a variety of factors, including the state’s economic mismanagement, an end to aid and trade concessions from the former Soviet Union after it collapsed, and a series of floods and droughts.

“When they initiated the major renovation of the chemical plant, they probably did not expect there would be sanctions against them or any power shortages,” he said.

A North Korean resident of North Hamgyong pointed out that that the chemical factory could not sustain operations after a nearby hydropower plant stopped generating electricity last year when the Supung Dam, its water source, dried up during a drought.

“In order to operate factories in North Korea, raw materials and electricity must be guaranteed,” said the source who declined to be named.

Fertilizer production

The chemical plant was built in 1943 and produced calcium cyanamide, a chemical fertilizer commercially known as nitrolime, and phosphate fertilizers when Korea was under Japanese colonial rule (1910-1945).

In 1966, when North Korea founder and former leader Kim Il Sung was in power, the facility was expanded to produce other chemical fertilizers.

The London-based International Institute for Strategic Studies issued a dossier in 2004 listing five major North Korean civilian chemical production facilities that sat on the border with China, including the Chongsu chemical complex.

A report issued five years later by International Crisis Group listed a chemical plant in Chongsu as one of four chemical weapons sites on the border with China, though specific names of the facilities were not given.

Though North Korea has long denied having a chemical weapons program that produces nerve, blister, blood, and choking agents, the U.S. Defense Department believes the rogue nation likely possesses production capability and a chemical weapons stockpile that could be used with artillery and ballistic missiles, according to an Associated Press report in March.

In February, the U.S. determined that North Korean used the chemical warfare agent VX to assassinate Kim Jong Nam, the half-brother of Kim Jong Un, at the Kuala Lumpur international airport in Malaysia in February 2017.

In response, the U.S. imposed sanctions on North Korea under the Chemical and Biological Weapons Control and Warfare Elimination Act in addition to existing U.S. comprehensive sanctions targeting unlawful North Korean activities.

Full article here:
Sanctions Force North Korea to Shutter Chemical Factory
Joonho Kim
Radio Free Asia

2018-04-19

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Russian sanctions enforcement grounds business with North Korea to a halt

Thursday, April 19th, 2018

Benjamin Katzeff Silberstein

NPR reports, from Vladivostok, of frustrated Russian businesspeople and halted dealings with North Korea, in the face of sanctions pressure:

In his second-floor office in a shabby building a few steps away from the Hotel Gavan, Vladimir Baranov was fuming over the new restrictions.

In May, his company, InvestStroyTrest, started a ferry service between Vladivostok and the North Korean port of Rajin, a 12-hour ride along the coast.

“Of course I don’t have any cargo volumes with these sanctions, which ban even wheelchairs,” said Baranov. “I’m not working right now because there’s no cargo.”

His company’s ferry, a North Korean vessel named the Man Gyong Bong, is now stuck in Rajin after Vladivostok port officials refused to let it dock under suspicion it was carrying sanctioned goods — a claim that Baranov is disputing in court.

Baranov is still hoping he’ll find passengers among Russian and Chinese tourists, though he can soon forget about the region’s thousands of North Korean migrant workers that Moscow says will have to leave.

Most of these laborers work on construction sites and farms in the Russian Far East, though some are employed at the North Korean restaurants that dot Vladivostok. At the Koryo restaurant next to city hall, young North Korean women in traditional costumes belt out sentimental Korean tunes over the karaoke system.

“They’re great workers who’ll work day and night,” said Valentin Pak, a Russian entrepreneur and politician whose own ancestors emigrated from Korea five generations ago. “They will be sorely missed.”

Pak said it will be hard to replace the North Koreans and is skeptical of statements by regional officials that they can be replaced with workers from India or Central Asia.

Ever since Russia began settling its remote Pacific territories in the mid-19th century, labor shortages have been a serious problem — and workers from neighboring Korea were a logical choice to help fill the gap. During Soviet times and into the 1990s, North Koreans toiled under brutal conditions in Siberian logging camps run by the North Korean government under an agreement between Moscow and Pyongyang.

Today the government in Pyongyang still profits from its citizens going to Russia for work, which is the whole idea behind the restrictions on North Korean workers.

“For North Korea, it’s a business, because all the laborers who work here pay their government to be here,” said Irina Tyan, a businesswoman who co-owns a farm with the North Korean consulate in Vladivostok. Like Pak, she is a member of Russia’s ethnic Korean community, which is well-integrated into Russian society.

Tyan’s North Korean partners invested $2 million into a 10,000-acre farm that grows soy, corn, wheat and oats. Until last year, the business employed 10 Russians and about 20 North Koreans.

The North Korean workers earned 20,000 rubles ($320) per month plus room, board and clothing, Tyan said, though she didn’t pay them directly but via their North Korean government supervisor.

She disagrees with reports thatNorth Koreans work in slave-like conditions in Russia. They just don’t make the same demands as Russian workers — such as an eight-hour workday with lunch and smoking breaks — and are under the strict guidance of their North Korean minders, Tyan said.

“They’re afraid, that’s clear,” she said. “But they’ll still do anything to get here because they can go where they want, go shopping, buy whatever they want or need. They won’t say it out loud, but it’s clear that they want to continue living and working here.”

After her quota of 30 North Korean workers was canceled because of the sanctions, Tyan’s last eight North Koreans are due to go home this month. If the sanctions aren’t lifted by next year’s planting season, she said she would have to sell the business.

“Of course, nobody knows what will happen next,” Tyan said. “Maybe they’ll lift the sanctions tomorrow, maybe in a year, maybe never.”

One Russian businessman who remains optimistic is Ivan Tonkikh, who runs RasonConTrans, a cargo terminal in Rajin, North Korea, jointly owned by Russian Railways and the North Korean state.

Although the venture is exempt from the latest U.N. sanctions, Tonkikh is having trouble finding partners who would be willing to export coal via Rajin. While business is at a standstill, he said that he wants to convince the U.N. to allow the delivery of humanitarian shipments to his port.

Tonkikh downplays the economic levers Moscow has over Pyongyang, though he adds that the cargo terminal is an investment in a brighter future.

“Rajin is only the beginning. It’s the first segment of a restored trans-Korean railway,” said Tonkikh. “We call Rajin the ‘short track to consensus’ on the Korean Peninsula.”

Article source:
Sanctions Targeting North Korea Ripple Into Russia
Lucian Kim
NPR
2018-04-19

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Posted in International trade, Political economy, Russia | Comments Closed

Use of Yuan in the North Korean economy

Monday, April 16th, 2018

According to the Asahi Shimbun:

The Chinese yuan apparently has growing currency in North Korea and is commonly used in daily transactions such as paying taxi fares and restaurant bills.

…

The situation is a far cry from the 1990s, when only 4.9 percent of defectors said foreign currencies, including the U.S. dollar, were commonly used in daily transactions.

Lee’s study targeted around 1,000 defectors. The results, released Feb. 28, found that 44.3 percent of defectors between 2011 and 2015 said foreign currencies were often used for transactions. However, 52.5 percent of defectors after 2013 said the yuan is chiefly used nowadays.

The survey highlighted the fact that China’s currency is increasingly in circulation in North Korea, which helps explain why the reclusive country’s commodity prices and exchange rates have remained relatively stable.

The Pyongyang regime’s decision to revalue its won currency in November 2009 eroded public trust in the monetary system by 2013 as it wiped out the savings of many North Koreans, sparking incidents of unrest and a thriving black market.

North Korea’s official exchange rate is pegged at 108 won to the dollar. But on the black market, $1 (107 yen) fetches about 8,000 won.

Since 2013, the U.S. dollar has continuously traded at around 8,000 won. There are suspicions that Pyongyong has reduced the volume of won in circulation amid the influx of foreign currencies in daily transactions.

Read the full story here:
China’s yuan now firmly part of North Korea’s daily economy
Yoshihiro Makino
Asahi Shimbun
2018-4-13

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Posted in China, Fiscal & monetary policy, International trade | Comments Closed

North Korea’s Supreme People’s Assembly Session: Economic reporting

Thursday, April 12th, 2018

By Benjamin Katzeff Silberstein

On April 11th, 2018, North Korea’s rubber-stamp parliament held a session in Pyongyang. Some news media has focused on Kim Jong-un’s absence from the session, but some interesting reporting on the economic situation came out of the session as well. Here are the key points on the economy (from KCNA on April 12th, with my annotation and emphasis added):

Deputy Pak Pong Ju, premier of the Cabinet, delivered a report on the fulfillment of the work of the Cabinet for Juche 106 (2017) for carrying out the five-year strategy for national economic development and its tasks for Juche 107 (2018) at the Sixth Session of the 13th Supreme People’s Assembly held on Wednesday.

Last year was a year of great victory in which a great progress had been made in carrying out the five-year strategy for the national economic development under the outstanding and seasoned guidance of the respected Supreme Leader Kim Jong Un, repelling unprecedentedly grave challenges stemming our advance, the reporter said.

According to the report, last year the Cabinet organized a drive for putting the nation’s overall economy on a higher stage with a main emphasis put on revitalizing the production by locally producing equipment, raw and other materials on the principle of self-support and self-sufficiency while focusing the state efforts on augmenting the foundation for electricity production, rounding off the system of Juche iron production and realizing the independence of chemical industry in line with the five-year strategy for national economic development set forth by the Party.

Note the emphasis here on local production, the expansion of which has been a key policy under Kim Jong-un.

The achievements made last year, a year of crucial importance in carrying out the five-year strategy for national economic development, proved once again that no desperate sanctions and pressure moves of the U.S. and its vassal forces to destroy the sovereignty of the DPRK and its rights to existence and development can ever check the progress of the Korean people dynamically advancing with firm faith in the validity of their cause and its final victory under the wise guidance of the Party and that the cause of building a powerful socialist country is sure to be accomplished.

Saying that this year we are faced with the tasks to make a breakthrough of revitalization in the economic front as a whole while frustrating the challenges of the hostile forces, who are making last-ditch efforts, through all-people offensive under the militant slogan of “Let us launch a revolutionary general offensive to achieve fresh victory on all fronts of building a powerful socialist country!”, the reporter specified them.

The fighting goals for the third year of the five-year strategy for national economic development should be attained without fail with a firm hold on the key tasks of strengthening the independence and Juche character of the national economy and improving the standard of people’s living.

The power industrial sector should put defective generating equipment into good shape and reinforce them, take scientific and technological measures for lowering the standard of coal consumption at thermal power plants and put the operation of generating equipment additionally installed at the Pukchang Thermal Power Complex on a normal track and thus increase the electricity production with the use of thermal power source onto a high stage.

The emphasis on independent electricity consumption makes a lot of sense, particularly as North Korea’s oil and fuel imports are being squeezed. But it’s a problem going back much, much further than the past year’s sanctions.

The coal industrial field should attain the monthly and quarterly coal production goals and create more coal fields so as to fully meet the demand for coal increasing in different sectors of the national economy.

Note: the national economy. The dependence on revenues from coal exports has been a problem, and one side-effect of sanctions may be that domestic industries get access to more and cheaper coal.

In the field of metal industry, Korean-style Juche-based iron making production system should be further perfected by the use of oxygen heat blast furnace and efforts be put into improving the quality of steel and diversifying the kinds of steels through introduction of advanced technologies so as to fully meet the demand for iron and steel of the national economy.

Again, national economy. Diversification is also an important and long-standing goal, and North Korea has long sought to not just export raw materials, but manufacture and sell more of end-products as well.

The field of chemical industry should unconditionally hit the fertilizer production target to timely provide nitrogenous fertilizer to the agricultural field ahead of farming processes. The production at the February 8 Vinalon Complex should be invigorated to fully supply various chemical products including vinalon, caustic soda and vinyl chloride to various sectors of the national economy.

Vinalon…Good luck.

Along with the establishment of various catalyst production bases, the construction of main production processes should be pushed forward at the Sunchon Phosphate Fertilizer Factory and the process for production of carbonate of soda with glauberite as starting raw material should be renovated and perfected.

The machine industrial sector has to step up the modernization of machine factories, unconditionally hit the target for production of tractors and trucks and put the quality of machinery on the world level.

Advanced mining methods should be widely introduced to increase the production of minerals and nonferrous metal.

The railway transport sector should ensure in a responsible manner the transportation of materials necessary for various sectors of the national economy and capital construction projects.

The Cabinet will bring about a remarkable turn in improving the standard of people’s living through production surge in the fields of light industry, agriculture and fisheries this year.

Equipment and production processes should be rearranged on a manpower-saving and electricity-saving basis, diverse and quality light industrial goods produced on a larger quantity with locally available raw and other materials, and local economy should be developed in a peculiar way with reliance on the domestic resources.

High-yielding farming methods should be positively introduced and the proportion of farm work done by machines should be drastically increased to attain the grain production goal for this year without fail.

The fisheries field should unconditionally hit the fish production target and at the same time finish the construction of projects for consolidating the material and technical foundation of fisheries ahead of schedule.

Big efforts should be directed to sprucing up Samjiyon County into a standard and model county under socialism and the construction of the Wonsan-Kalma coastal tourist area should be finished within specified date. And such capital construction projects as the Tanchon Power Station and the second-phase waterway project in South Hwanghae Province should be pushed forward.

The rate of rooting of saplings should be ensured at more than 90 percent through efficient tree planting and meticulous cultivation of planted trees and the appearance of the country be bettered through the technical renovation and repairing of highways and tourist roads in a qualitative way and the rearrangement of key rivers and streams based on an all-people movement.

All the sectors and units should solve the sci-tech problems arising in completing the domestic production of materials and equipment and the structure of self-supporting economy with firm reliance on science and technology.

The reporter stressed that the Cabinet and other state economic guidance organs would work out in a practical way an operation plan for hitting this year’s targets and push forward its implementation in a responsible manner through skillful operation and command to successfully attain the fighting goals set forth by the Party and thus fully discharge their responsibility and duty in glorifying this year marking the 70th anniversary of the DPRK as a year of victory to be specially recorded in the history of the country.

I don’t have time to add more commentary right now, but will hopefully be able to return to this later. Below is KCNA’s rendition of the state budget report on last year and this year and there’s lots of interesting stuff to discuss here:

Deputy Ki Kwang Ho, minister of Finance, made a report on the fulfillment of state budget for Juche 106 (2017) and on the state budget for Juche 107 (2018) of the DPRK at the 6th Session of the 13th Supreme People’s Assembly held on Wednesday.

According to the report, last year the state budgetary revenue plan was over-fulfilled by 1.7 percent or 4.9 percent increase from the previous year.

The local budgetary revenue plan was carried out at 100.5 percent.

Last year the state budgetary expenditure plan was carried out at 99.8 percent.

15.8 percent of the total expenditure was earmarked for the increasing of the military capabilities of the country and 47.7 percent for the development of the national economy.

Investment in the field of science and technology increased 8.5 percent as over the previous year, thus contributing to settling the scientific and technological problems arising in the economic development and to accomplishing the tasks for studying ultra-modern field.

5.2 percent more fund was allocated to key sectors of the national economy and for the improvement of people’s livelihood than the previous year, thus actively promoting the drive for putting power, coal, metal, chemical, machinery and light industrial fields on a Juche basis and updating their production processes. In particular, it helped build a Korean-style oxygen heat blast furnace at the Kim Chaek Iron and Steel Complex and attain the goal of producing new type tractors and trucks.

2.6 percent more investment was made for the construction field than the previous year, while 36.3 percent of the total expenditure was directed to facilitating the building of a highly-civilized socialist power, thus contributing to the implementation of the Party’s policies of prioritizing the education and health care and to the development of sports and literature and arts.

According to the report, the state budgetary revenue and expenditure for this year have been shaped in such a way as to carry out the five-year strategy for the national economic development.

The state budgetary revenue envisages 3.2 percent increase over last year, of which the transaction tax, key item of the budgetary revenue, is expected to swell 2.5 percent while the profits from state enterprises is expected to grow 3.6 percent, to hold 85.3 percent of the total revenue.

The income from cooperative organizations is expected to grow 0.9 percent, the real estate rent 1.8 percent, the social insurance fee 1.2 percent, while the revenue from property sales and price differences is to grow 0.5 percent and other revenue 0.8 percent. The revenue from economic trade zones is expected to increase 2.5 percent.

The central budgetary revenue out of the state budgetary revenue stands at 73.9 percent which means that the revenue from the central economy holds an overwhelming proportion. Provinces, cities and counties are expected to balance expenditure with their own revenue and contribute lots of funds to the central budget.

The state budgetary expenditure is to grow 5.1 percent over last year’s.

An investment in strengthening the independence and Juche character of the national economy and improving the standard of people’s living will increase 4.9 percent as against last year and thus relevant fund will go to 47.6 percent of the total expenditure.

An investment in the field of science and technology will increase 7.3 percent.

Expenditure for the overall national economy including power, metal, coal, chemical and machine industries, railway transport, light industry, agriculture and fisheries will increase 5.5 percent.

The financing necessary for actively promoting the capital construction and further expanding the achievements of forest restoration campaign will swell 4.9 percent.

5.9 percent more fund will go to the education field, 6 percent more fund to public health, 5.1 percent more to sports field and 3 percent more to literature and art.

15.9 percent of the total expenditure will go to increasing the military capabilities for self-defence.

This year also, lots of educational aid fund and stipends will be sent for the children of Koreans in Japan.

The reporter said that the state budget for this year will be successfully carried out through meticulous organization of economic operation and command and thus financially back the building of a powerful socialist country.

(UPDATE 4-15-2018: Korean original for the budget report added below, date fixed above):

지난해 국가예산집행의 결산과 올해 국가예산에 대한 보고

(평양 4월 12일발 조선중앙통신)

11일에 진행된 최고인민회의 제13기 제6차회의에서 조선민주주의인민공화국 주체106(2017)년 국가예산집행의 결산과 주체107(2018)년 국가예산에 대한 재정상 기광호대의원의 보고가 있었다.

보고에 의하면 지난해 국가예산수입계획은 101.7%로 수행되였으며 전해에 비하여 104.9%로 장성하였다.

지방예산수입계획은 100.5%로 수행되였다.

지난해 국가예산지출계획은 99.8%로 집행되였다.

나라의 군력강화에 지출총액의 15.8%를 돌렸으며 인민경제발전에 지출총액의 47.7%를 돌리였다.

과학기술부문에 대한 투자를 전해에 비하여 108.5%로 늘여 경제발전에서 제기되는 과학기술적문제들을 해결하고 첨단분야의 연구과제를 완성하는데 기여하였다.

인민경제의 중요부문과 인민생활향상에 전해에 비하여 105.2%로 늘어난 자금을 지출하여 전력,석탄,금속,화학,기계,경공업부문의 주체화와 생산공정의 현대화를 적극 추동하였으며 특히 김책제철련합기업소에 우리 식의 산소열법용광로를 건설하고 새형의 뜨락또르와 화물자동차생산목표를 점령하는데 이바지하였다.

건설부문에 전해에 비하여 102.6%로 투자를 늘이였다.

사회주의문명강국건설을 앞당기는데 지출총액의 36.3%를 돌려 당의 교육중시,보건중시정책을 관철하고 체육과 문학예술을 발전시키는데 이바지하였다.

보고에 의하면 올해 국가예산은 국가경제발전 5개년전략수행의 요구에 맞게 국가예산수입과 지출을 편성하였다.

국가예산수입은 지난해보다 103.2%로 장성할것으로 예견하였으며 그가운데서 예산수입의 기본항목인 거래수입금은 102.5%로,국가기업리익금은 103.6%로 늘어나 수입총액의 85.3%를 차지할것으로 보았다.

협동단체리익금은 100.9%,부동산사용료는 101.8%,사회보험료는 101.2%,재산판매 및 가격편차수입은 100.5%,기타수입은 100.8%,경제무역지대수입은 102.5%로 늘어나게 된다.

국가예산수입에서 중앙예산수입은 73.9%로서 중앙경제에 의한 수입이 압도적비중을 이루며 도,시,군들에서 자체의 수입으로 지출을 맞추고 많은 자금을 중앙예산에 들여놓을것으로 예견하였다.

국가예산지출은 지난해에 비하여 105.1%로 장성하게 된다.

인민경제의 자립성과 주체성을 강화하고 인민생활을 개선향상시키기 위한 투자를 지난해에 비하여 104.9%로 장성시켜 지출총액의 47.6%에 해당한 자금을 돌리게 된다.

과학기술부문에 대한 투자를 107.3%로 늘인다.

전력,금속,석탄,화학,기계공업과 철도운수,경공업,농업,수산업을 비롯한 인민경제전반에 대한 지출을 105.5%로 늘인다.

중요대상건설을 적극 추진하고 산림복구전투의 성과를 더욱 확대해나가는데 필요한 자금보장을 104.9%로 늘이게 된다.

교육부문에 105.9%,보건부문에 106%,체육부문에 105.1%,문학예술부문에 103%로 투자를 늘인다.

자위적국방력을 강화하는데 지출총액의 15.9%를 돌리게 된다.

올해에도 재일동포자녀들을 위하여 많은 교육원조비와 장학금을 보내준다.

보고자는 경제작전과 지휘를 빈틈없이 짜고들어 올해 국가예산을 성과적으로 집행함으로써 사회주의강국건설을 재정적으로 안받침해나갈것이라고 강조하였다. (끝)

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Posted in Agriculture, Economic reform, Foreign direct investment, International trade, Political economy, Statistics | Comments Closed

The state of the sanctions on North Korea (April 2018): one step forward, one step back…?

Monday, April 9th, 2018

By Benjamin Katzeff Silberstein

Judging from all publicly available information, China is currently enforcing and implementing, to a much greater degree than in the past, the UN sanctions that stand against North Korea. That of course doesn’t mean full and foolproof enforcement, but there’s been fairly few signs suggesting that the government is knowingly turning a blind eye to trade with North Korea, or exploiting sanctions loopholes, the way it has in the past. Market price data doesn’t suggest that sanctions are hitting against the economy as a whole (yet), in ways that one might expect in the longer run. But certain sectors of the North Korean economy – such as mining and textiles – are likely feeling a significant and hard pinch from China’s enforcement.

But how long will it last? Judging from recent history, I’ve argued that China’s sanctions enforcement would likely be a temporary phenomenon, probably only lasting long enough to give the “right” impression to the US and the international community.

I am by no means alone in this, and given China’s past precedent of squeezing hard for shorter periods and letting go when global attention shifts from North Korea, it’s not really a risky prediction. In any case,  China’s sanctions enforcement is less a result of UN resolutions per se than of China’s own perceived best interests at any given moment.

With Kim’s visit to Beijing, it appears that China may have started to let up some of its pressure. As Curtis Melvin previously noted on this blog, South Korean media has reported that Chinese enforcement of the ban on North Korean guest labor may be easing. Daily NK published video footage a few days ago purportedly showing North Korean workers arriving in China, and one source tells Daily NK that the flow of workers leaving China and heading back to North Korea has ceased:

“About 400 North Korean women were dispatched to Helong, Yanbian Autonomous Prefecture on April 1,” a source close to North Korean affairs in China told Daily NK on April 4.
In the video provided by the source, hundreds of the women can be seen walking in a procession in the Chinese city, with most carrying bags or backpacks. However, the starting point and destination of the group is unclear from the video.
“It has been a long time since this many people have come in [from North Korea], but it’s probably related to the Kim Jong Un’s recent visit to China,” the source said.
“Before Kim Jong Un went to China, we saw a lot of workers returning to North Korea, but we are no longer seeing movement (in that direction),” he added.
A separate source in Jilin Province, China told Daily NK there are signs that North Korean-Chinese joint ventures in the area have begun preparing to restart operations.
“These businesses, where the North Korean side provides the labor and the Chinese side invests in the facilities, came to a halt under international sanctions. But now, business delegations for the two sides have scheduled talks,” the source said.
Radio Free Asia reported similar information a few days ago:

North Korean laborers barred under U.N. sanctions from working abroad are now moving back into China in an apparent violation of restrictions aimed at punishing Pyongyang for its illicit nuclear weapons and missile programs, sources along the border say.

Though workers formerly sent into China to earn foreign currency for North Korea’s cash-strapped regime are still under U.N. orders to return home, no new lines of returning workers are being seen, sources working on the border say.

Instead, North Korean workers have been observed entering China in defiance of the rules, they say.

“This week, on April 2, around 400 female North Korean workers were sent to Helong city in [Jilin province’s] Yanbian Autonomous Prefecture,” an ethnic Korean living in Yanbian told RFA’s Korean Service, speaking on condition of anonymity.

“It seems like Kim Jong Un’s recent visit to China is showing some results,” the source said, referring to an anticipated relaxation of trade restrictions in response to recent China-North Korea diplomatic contacts.

Speaking separately, a source in China’s Dandong, a port city lying on the Yalu River across from North Korea, told RFA he had seen a group of buses carrying North Korean workers arrive on March 30 from North Korea’s Sinuiju city, just across the border.

“They had young women on board who appeared to be North Korean workers,” RFA’s source said, also speaking on condition he not be named.

“The buses crossed the Yalu River’s railway bridge and dropped the workers off at the Dandong customs post,” he said, adding, “There appeared to be roughly more than 100 of them.”

It is worth recalling that sanctions enforcement by China doesn’t just damage North Korean economic interests. As anyone who’s visited Dandong on the Chinese side of the border can attest to, much of the local economy is connected to trade with North Korea.
Daily NK also reports that on the ground, some managers find ways to retain North Korean workers in China even though their original contracts have been cancelled:
China helped pass multiple UN sanctions resolutions against the North following missile and nuclear tests the previous year, and has slowly increased its efforts to enforce measures restricting the presence of North Korean laborers in the country.
For example, one Chinese manager of a clothing factory in Dandong (Liaoning Province) told our source that he was pressured by the Chinese government last year to cancel the contracts of 150 North Korean employees.
“I had no choice but to comply with the order,” the manager said. “But canceling the contracts early meant that I had to pay penalties to the workers. It was extremely difficult to gather enough money for the penalties for all 150 workers at once.”
According to the source, Chinese managers in such cases have made deals with the North Korean managers in charge of the workers, in order to reduce the total payment for penalties.
Under the terms of these kinds of deals, the Chinese side has sought to allow laborers to continue working in China as long as their visas remain valid, and in return for guarantees over uninterrupted currency streams as the workers move to new positions, the North Korean side agrees to accept reduced penalties or to forgo them altogether.
“For example, there’s a restaurant now in Dandong that employs dozens of North Korean women as servers, although these same women were previously ousted from factory jobs,” a separate source in China said, adding that there are many restaurants in the area using the same tactics.
The source spoke with one woman working at a restaurant in Dandong who introduced herself as a native of North Pyongan Province. “I came to work here after being dismissed seven months into a job at a clothing factory. I was originally supposed to work there for two more years, but I had to use the remainder [of my allotted time] to earn money and reduce the burden of the loss,” she told the source.
At the same time, China has taken additional steps to comply with other parts of the sanctions, the government said Sunday April 8th. Wall Street Journal:

China has tightened restrictions on exports to North Korea of items with potential dual use in weapons of mass destruction and conventional arms.

The ban on exports of potential dual-use items, including software, machinery and chemicals, is in line with U.N. Security Council resolution number 2375, the Chinese Ministry of Commerce said in a statement on its website posted late Sunday. That resolution was passed in September.

If tensions do continue to de-escalate around North Korea as they have over the past few months, it shouldn’t come as a surprise if more news of lighter Chinese enforcement of general economic sanctions continue to surface. Stay tuned…

(UPDATE 2018-04-12) Daily NK reports that about 1,000 North Korean workers are to be dispatched to China again, in apparent violation of UN sanctions:

Over 1,000 North Korean laborers are preparing to be dispatched to work assignments in Dandong, China, a source in the area informed Daily NK on Wednesday. This follows sightings earlier this month of over 400 North Korean workers in the Chinese city of Helong to the east, together suggesting the two countries may be cooperating to restart joint business ventures in China.
“There are already about 100 North Koreans working at one clothing factory in Dandong, and they are expecting 1,000 more after a recent conversation with a manager from the North Korean side,” the source said on April 11.
The Chinese manager in the deal told the source that it is a popular opportunity among North Korean factory workers as they see it as a good chance to improve their skills, despite their expectations of low pay and long hours. “People around here are anticipating an influx of more North Korean workers in the near future,” the source remarked.
A separate source in China confirmed the development, saying, “It is true that over a thousand North Korean workers are preparing for the assignment. The Chinese brokers who have engineered the deal for the jobs are working overtime right now.”
He added that the workers are still receiving permits from North Korean authorities to cross into China, as per standard guidelines, though these permits only technically allow up to 30 days’ stay abroad.
“[The Chinese companies] are trying to recruit more North Korean workers now as they feel sanctions may possibly be lifted and that the dangers have subsided. But they will just send them back in case they are not [lifted],” he said.
Following these developments, some are speculating that Kim Jong Un may have come to an agreement with Chinese President Xi Jinping on the matter during their meeting in Beijing last month.
Recent friction between China and the US over a brewing trade war may also be contributing to a sense of optimism among those affected in the region.
“We (Chinese people) are also hurting from sanctions, and now it seems like we are in a trade war with the US,” an additional source in China said.
“Knowing this, it is possible that authorities, despite sanctions, are turning a blind eye to the arrival of the North Korean workers.”
This last point is very important: international sanctions politics is very local. The border region on the Chinese side has likely suffered quite significantly from the sanctions regime, and this is one part of the Chinese calculation that is often forgotten. The northeast is already fairly impoverished, and the local economy isn’t helped by a ban on trade with its most significant partner, North Korea.
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UN blacklists North Korean ships accused of smuggling

Friday, March 30th, 2018

Benjamin Katzeff Silberstein

Talks or none, the international community continues the struggle to tighten enforcement of economic sanctions on North Korea. Reuters:

The United Nations Security Council blacklisted dozens of ships and shipping companies on Friday over oil and coal smuggling by North Korea, boosting pressure on Pyongyang as leader Kim Jong Un plans to meet with his South Korean and U.S. counterparts.

The council’s North Korea sanctions committee acted on a request by the United States, designating 21 shipping companies — including five based in China — 15 North Korean ships, 12 non-North Korean ships and a Taiwanese man.

The move comes days after Kim met Chinese President Xi Jinping and an announcement that the North Korean leader would meet South Korean President Moon Jae-in on April 27. He is also scheduled to meet U.S. President Donald Trump some time in May.

While Trump has agreed to meet Kim, he tweeted on Wednesday that “maximum sanctions and pressure must be maintained.”

Tension over North Korea’s tests of nuclear weapons and ballistic missiles surged last year and raised fears of U.S. military action in response to the North’s threat to develop a nuclear weapon capable of hitting the U.S. mainland.

But the situation has eased significantly since North Korea sent athletes to the Winter Olympics in South Korea in February.

U.S. Ambassador to the United Nations Nikki Haley said the U.N. sanctions designations — the largest agreed by the council’s committee — were aimed at shutting down North Korea’s illegal smuggling activities to obtain oil and sell coal.

“The approval of this historic sanctions package is a clear sign that the international community is united in our efforts to keep up maximum pressure on the North Korean regime,” she said in a statement.

The list was part of a request by Washington late last month for 33 ships, 27 shipping companies and the Taiwanese man to be sanctioned. China delayed that bid on March 2, but did not give a reason. The 15-member committee works by consensus.

Washington then proposed a shortened list on Thursday, which was unanimously agreed by the committee on Friday.

The 12 non-North Korea ships are now subjected to a global port ban and must be deregistered, while the 15 North Korean ships are subjected to an asset freeze and 13 of those a global port ban.

The Taiwanese man, Tsang Yung Yuan, is accused of coordinating “North Korean coal exports with a North Korean broker operating in a third country, and he has a history of other sanctions evasion activities,” according to the U.N. listing. He is subjected to an asset freeze and travel ban.

The assets of the 21 shipping companies, which include businesses based in the Marshall Islands, Singapore, Panama and Samoa, must now be frozen.

Article source:
U.N. blacklists dozens of ships, companies over North Korea smuggling
Michelle Nichols
Reuters
2018-03-30

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Posted in International trade, Political economy | Comments Closed

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