Is North Korea’s economy feeling the US heat?
SEOUL, South Korea – The blacklisted 1970s-era North Korean oil tanker floated in waters a couple of hundred miles south of Shanghai, tethered to a ship half its size by a hose, as if hooked up to an intravenous line.
The offshore coupling, spotted by the Japanese navy last month, was the latest evidence that North Korea may be succeeding in skirting international sanctions designed to pressure the isolated regime into giving up its nuclear weapons. The ship was likely receiving a transfusion of oil, a primary target of ongoing international sanctions on North Korea.
When North Korea’s Kim Jong Un met with US President Donald Trump last June, Trump claimed it was his “maximum pressure” campaign centered around sanctions that forced Kim to the table for the first-ever summit between US and North Korean leaders.
But analysts say North Korea continues to find ways to adapt. Illegal smuggling operations like the suspected one in the East China Sea have allowed the nation to import between half and two-thirds of the oil supply it was getting before the sanctions ramped up in 2017, according to an estimate by Go Myong-hyun, an economist at the Asan Institute for Policy Studies, a Seoul-based think tank.
As the US and North Korea prepare for a second summit between Trump and Kim later this month, just how much of his nuclear arsenal Kim is willing to trade away may largely hinge on the extent that economic pressure is felt within North Korea. Despite reforms tacitly allowing market activity and an emerging middle class, it remains a highly impoverished nation with an economy a fraction the size of neighboring South Korea.
Determining the state of the economy in North Korea, where economic statistics are rarely published, requires elaborate guesswork. And while it is showing some signs of distress from the sanctions, there is also evidence that Pyongyang is finding ways to cushion the blow, analysts say.
“The threshold is pretty high for economic pain for the North Korean regime,” said Benjamin Katzeff Silberstein, co-editor of the website North Korean Economy Watch and associate scholar with the Philadelphia-based Foreign Policy Research Institute. “They’re better suited than many other countries to handle sanctions. Because the economy is still relatively underdeveloped, there is less to lose in a way.”
US and North Korean nuclear envoys met in Sweden last month and are set to confer again in the coming days to lay the groundwork for the upcoming summit.
In a speech Thursday, US special envoy for North Korea Stephen Biegun reiterated what Trump said he told Kim in Singapore: that the promise of economic prosperity awaits.
“At the appropriate time at the completion of denuclearization we are prepared to explore with North Korea... the best way to mobilize investment, improve infrastructure, enhance food security and drive a level of economic engagement that will allow the North Korean people to fully share in the rich future of their Asian neighbors,” Biegun said in a talk at Stanford. He added, though, that should the diplomatic process fail, the US had “contingencies” at the ready.
Biegun’s remarks came as Trump’s own top intelligence officials cast doubt on North Korea’s willingness to ever denuclearize. Director of National Intelligence Dan Coats told senators last week that the US continued to see “activity inconsistent with full denuclearization” in North Korea.
Within North Korea, there are some signs that the effect of several rounds of sanctions imposed after its nuclear tests in 2017 is adding up. Exports to China, which account for most of North Korea’s trade, were down 88% last year compared with 2017, according to Chinese customs, cutting off a large source of foreign currency. The Seoul-based Bank of Korea estimated that the North Korean economy shrank by 3.5% in 2017. Visitors reported seeing piles of coal, a major trading item with China, getting rained on in North Korean ports, and being told that certain factories weren’t worth visiting because they were shut down.