India-N Korea trade set to look up

Despite stringent economic sanctions in place, India is the 2nd largest exporter to North Korea

Of the refined petroleum worth more than $36 billion exported by India in 2017-18, a small amount of $16 million managed to find its way to North Korea, despite economic sanctions currently in place.

It, however, constituted the largest component of India's exports of $57.55 million to North Korea, something that experts say may only increase because the nation has agreed to abort its nuclear weapons programme.

While official figures from North Korea are hard to come by owing to the regime’s limited contact with the larger global economy, India remains North Korea’s largest importer after China, according to estimates by multilateral bodies.

But there’s a problem. “Adhering to United Nations Security Council sanctions resolutions, India has banned all trade, except food and medicine, with the Democratic People’s Republic of Korea with effect from April this year,” according to a statement from the Ministry of External Affairs in October 2017.

However, official statistics from the Commerce and Industry Ministry show bilateral trade reached $82.63 million in the last financial year.

A majority of the trade items is not in the allowed categories of food and medicine.

India’s exports are commodities such as crude oil, cotton and ores — crucial items that the regime needs for running its state-controlled industrial manufacturing complex.

“Since the threat of breaking international trade protocols remains high, Indian sellers of oil have continued to operate through a network of traders and banks in Dubai and Liaoning — the Chinese province that borders the country,” a business leader who visited the Chinese port last year said. Little direct trade occurs for most of the other items including cotton and ores, which take a circuitous route through China, he added.

Sanctions may go?

India may also have found a new market to send its excess produce in certain sectors — a market that is relatively close and has established trade links in place.

Hours after photos of vigorous handshakes and awkward smiles between North Korean leader Kim Jong-un and US President Donald Trump were sent all over the world from their summit in Singapore, China officially suggested the sanctions might now be removed gradually.

A senior commerce department official said: “It’s early days yet. The government will take a call only after North Korea starts effectively dismantling its nuclear infrastructure. India is committed to international sanctions but we reserve the right to take bilateral action as well.”

While there have not been any trade missions to the country, India participated in the Pyongyang Autumn International Trade Fair, which attracts sellers from Taiwan, China and Japan, according to him.

But India may not be in a position to take advantage of a new market, given the inherent challenges of the export sector.

“We have to align our exports with global demand. If things work out well, there will be major demand for farm products from the impoverished country,” trade expert and Jawaharlal Nehru University professor Biswajit Dhar said.

While India may not have much use for most of the goods traditionally exported North Korea, such as coal and textiles, Indian traders have taken advantage of deep discounts on bulk shipments, according to people in the know.

As a result, machinery and electrical equipment sourced from sweatshops in North Korea are passed off as exports from China. The only demand of the North Korean regime is that payments be made in dollars. The country has one of the lowest levels of foreign exchange reserves and it charges tourists and visiting journalists in dollars.

Politics and beyond

Experts say Kim’s meeting with Trump in Singapore was necessitated by the fact that trade embargoes by countries such as the US, Japan and China have shut down the last remaining engines of factory-led growth in North Korea.

“The trade figures could be much higher. It has less to do with current international sanctions and more with the fact that the government was miffed at the regime's support to Pakistan on certain geopolitical issues back in 2015. Before that, trade had reached a high of $208 million in 2014-15, after which it has continued to fall,” a senior Foreign Ministry official who was earlier overseeing North Korean bilateral relations said.