It has been about a month and a half since
the strongest sanctions to date have been passed and implemented targeting
North Korea. As the key to the success of the entire operation, China has
turned heads by participating in this round of sanctions, but we have still not
seen any signs of unrest from inside North Korea. On the contrary, some cadres
have even been calling the sanctions “pointless measures.”
If you ask North Koreans about the current
state of affairs, most of them will respond that, “prices are stable, and
construction projects related to the [upcoming] Party Congress are progressing
according to plan.”
In accordance with Kim Jong Un’s directive,
the construction of Ryomyong (daybreak) Street and other construction projects
are progressing smoothly. In addition, large amounts of goods related to the
7th Party Congress (including televisions, appliances, and sports equipment)
are being imported.
Specifically, rice is now selling in the
range of KPW 4,800 – 5,100 for one kilogram. Last year around this time, rice
was selling for about KPW 5,500, which shows that there hasn’t been a major
change. When residents first began to hear about some of them engaged in panic
buying, but things have calmed down significantly since then.
Similarly, the yuan and dollar exchange
rates are holding steady. In addition, other everyday products have also
remained stable. Save products of South Korean origin, most items available for
sale at the market, namely Chinese products, are selling for similar price
points year-on-year. Moreover, the import supply has also not been
heavily affected by the sanctions.
The only prices that have really stood out
for their sudden rise are gasoline and diesel fuel. The price of gasoline
increased KPW 3,000 per kilogram and the price of diesel increased KPW 1,000 in
the timespan between February to early April. Of course, the sanctions likely
had an effect on this price, but it would have also been pushed up by increased
demand due to farmers and fisherman hoarding in preparation for their busy
seasons.
Because crude oil is not included in the
sanctions list, North Pyongan Province continues to serve as the crude oil
window to China by importing as usual. But China is not North Korea’s only
source of oil. Hamgyong Province and Kangwon Province have been using their
access to the East Sea to continue to importing Russian oil via the port city
of Nakhodka. The western provinces consider this Russian oil to be of a better
quality than the Chinese variety and it is also cheaper.
According to inside sources, the amount of
diesel and gasoline brought in by the state is less than the quantity brought
in by individual trading companies teaming up with donjuLiterally "masters of money," donju refers to people who hav... More (the nouveau riche).
The donjuLiterally "masters of money," donju refers to people who hav... More and trading companies rent oil tankers with less than 3,000 ton
capacities and purchase oil from places like Russia.
However, could it be that the restriction
on mineral exports such as coal out of North Korea is having a big, adverse
impact on Kim Jong Un’s regime? To put it simply, the regime has many ways to
earn foreign currency, so shutting down just one of them is not going to
produce huge effects.
Previously, coal exports sold for about USD
40-48 per ton, while iron ore sold for about USD 50-70 per ton. However, as the
price of Chinese scrap iron dips below 1 Yuan per kilogram, Chinese merchants
are turning their heads away and treating iron as a low quality commodity. In other words, the UN ban on North Korean iron ore exports is not yet altering the
picture in a significant way.
Additionally, the export of unsavory goods
such as drugs and weapons and expensive matsutake mushrooms can more or less
substitute for the lost revenue stemming from blocked mineral exports. These
illicit items are still being smuggled to Japan, China, Southeast Asia, Africa,
the Middle East, etc.
Hungnam Pharmaceutical Factory in South
Hamgyong Province’s Hamhung City produces top quality narcotics that get
secretly sent to Russia, Japan, etc., in order to fund the regime. The North
Korean authorities tend to avoid smuggling drugs to any particular country’s
harbor, instead working with international gangs to exchanging goods for money
on the high seas or on uninhabited islands. This secrecy makes detection and
crackdown extremely difficult.
The same can be said for munitions sales, including weapons of mass
destruction. North Korea is engaged in the continuous sale of
weapons to countries engaged in civil wars such as Syria. War is good business
for the Kim regime. It is quite difficult to detect, block, and prevent North
Korea’s sale of drugs or weapons, which is unfortunate because these methods
end up being a huge source of cash for the regime.
On balance, instead of holding out hope
that we might see some positive effects from the current round of sanctions,
the international community should focus its efforts on finding and eliminating
the regime’s remaining sources of lifeblood, the funding methods that are
slipping through the cracks of the international efforts to rein in North
Korea.
