North Korea

China sanctions will cost North Korea US$1.5 billion, but won’t curb Kim’s nuclear ambitions

The sanctions on items that make up nearly 60pc of Pyongyang’s exports to Beijing are bound to hurt, but the reclusive state will adapt, experts say

PUBLISHED : Tuesday, 22 August, 2017, 10:35am
UPDATED : Tuesday, 22 August, 2017, 10:50pm

China’s ban on North Korean iron, coal and seafood would bite into Pyongyang’s economy, based on calculations from Chinese customs data, but experts have questioned whether it would do anything to curb Kim Jong-un’s nuclear ambitions.

North Korea last year exported nearly US$1.5 billion in coal, iron ore, lead ore and seafood to China, or 60 per cent of total exports to the Asian giant, a major source of foreign reserves for the reclusive state.

In the first half of 2017, exports to China of the commodities totalled US$474.6 million, or 53.5 per cent of total exports.

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Among the exported commodities, coal generates the most revenue for Pyongyang. In 2016, coal exports generated revenue of US$1.2 billion, far more than iron ore and seafood exports, which amassed revenue of US$74.5 million and US$192.4 million, respectively.

The latest Beijing ban, announced last week, extended existing restrictions on North Korean coal imports to next year. The sanctions are open-ended and will stay in place as long as North Korea continues with its nuclear and missile programmes.

South Korean government analysis has put North Korea’s nuclear spending between US$1.1 billion and US$3.2 billion overall, though experts said it is impossible to make an accurate calculation given the secrecy surrounding the programme, and estimates vary widely, according to a Reuters report last year.

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The US government believes Kim has up to 60 nuclear weapons, though some independent experts said the number was lower. If North Korea does indeed have about 60, that puts the cost of each warhead between US$18 million and US$53 million, CNBC reported earlier this year.

Beijing’s latest bans on North Korean exports came after the UN Security Council approved tough sanctions against Pyongyang on August 6, in response to North Korea’s two successful tests of intercontinental ballistic missiles last month.

Experts said the ban would damage Pyongyang’s ability to generate profit that supported its military programmes and elite families.

“The ban would hurt Pyongyang’s capability to make more money, since non-strategic goods like seafood is now prohibited from trading to China,” said Cai Jian, a Korean affairs expert from Fudan University.

Sun Xingjie, a Korean affairs expert from Jilin University, said a large proportion of North Korea’s earnings from exports usually went to military programmes and the regime’s elite families.

“China’s ban this time would make Kim feel the pressure,” Sun said.

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But Justin Hastings, an international relations scholar at the University of Sydney who has researched Chinese-North Korean trade, doubted whether China would enforce the ban strictly over a long period of time.

“China will probably actually enforce the ban on coal, iron, and seafood in the short term, but given the prevalence of smuggling and the likelihood of China easing off on very strict enforcement after a while, my guess is that the effect on North Korea’s economy will not be 100 per cent,” Hastings said.

“North Korea will probably be hurt in the short term, but in the long term, unless China completely changes its approach to North Korea, North Korea will likely be able to adapt to a certain extent.”

Although the Chinese ban would exert pressure on Pyongyang, both Cai and Sun doubt it would have a meaningful impact in terms of restraining North Korea’s nuclear ambitions.

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“The core national interests, seen by North Korea’s young leader Kim Jong-un, are national security and regime stability, which he would never compromise – no matter how severely Pyongyang’s exports were hurt by external forces,” Cai said.

Sun said the latest ban “would possibly let Kim feel the threat from the international community and thus [move him to hasten] nuclear programmes, the only means he has to ensure his regime’s survival.”