Asia Pacific

Virus shuts North Korea's best route around Trump and sanctions

Bloomberg

North Korea’s decision to shut the border with China to avoid the coronavirus will set back its nascent economic recovery, renewing pressure on Kim Jong Un to return to nuclear negotiations with Donald Trump.

A jump in fuel prices, a dip in port activity and the suspension of train and air links show the early impact as reports emerge of the first virus case in North Korea. In recent days, Seoul-based NK News reported a 36 percent jump in diesel prices and diminished activity at the port of Nampho, along with new quarantine procedures.

North Korea announced Thursday that it will extend its quarantine period for all foreign visitors and others suspected of having the new virus to 30 days, based on research suggesting that its incubation period could be as long as 24 days. The Russian Embassy in Pyongyang said earlier this month that North Korea was putting foreign visitors under a 15-day quarantine.

The closed borders will cut off foreign tourism that provides the cash-starved state with hard currency and further limit the trickle of trade it has with the outside world. The economic blow — if sustained — might make it tougher for Kim to keep pushing back against Trump’s demands.

Kim, who once went to school in Switzerland, has made tourism a centerpiece of his economic vision since taking power almost a decade ago, building ski resorts to attract winter-sports enthusiasts and hard currency.

But with the Wuhan virus spreading in China, Kim has shut the border to his neighbor, cutting off the largest group of tourists to North Korea.

Worse still, like other snow centers from the French Alps to Japan, North Korea is falling victim to changing Arctic weather patterns that are warming winters and reducing the levels of snow on lower slopes. North Korea reported this month that higher-than-usual temperatures are causing “abnormal climatic phenomena.” South Korea’s weather office says average temperatures in its northern neighbor will probably rise 15 percent by 2040 from 1981-2010 levels.

Some 200,000 Chinese tourists visited North Korea in 2018, a North Korean tourism official told the Chinese news agency Xinhua. That number of Chinese visitors would spend a total of $152 million on average globally, according to calculations based on Nielsen data. Their contribution would be a sizable chunk of the $240 million the nation earned in exports.

While that number may drop this year due to the coronavirus outbreak, the economic potential remains large, with even the chance of South Korean visitors increasing.

Last month President Moon Jae-in said South Korea could restart tourism to North Korea, as he pledged to help alleviate the standoff between Kim and U.S. President Donald Trump after their failed summit in Hanoi last year.

His proposal quickly drew a U.S. warning to proceed with caution because it could end up breaching sanctions imposed on North Korea.

North Korea attracted more than 2 million South Korean tourists before the cross-border project ended in 2008, when a woman visiting a North Korean mountain resort was fatally shot after wandering close to a military facility.

Before the virus complicated matters, things had been looking up. Reforms, a bumper harvest and sanctions-dodging were helping North Korea claw back some of the lost growth triggered by tougher United Nations trade restrictions and a drought.

The U.N. Conference on Trade and Development estimated that the economy expanded by 1.8 percent last year, following its biggest slump in decades in 2018. That view tallied with a surge in China’s imports that suggested an increase in economic activity and trade.

Global sanctions piled on North Korea in 2017 for its nuclear and missiles tests have slammed its trade and access to vital resources such as oil. That hasn’t stopped Kim from building his nuclear arsenal and finding ways to evade the economic restrictions, such as the illegal trading of commodities via high-seas transfers between ships, the U.S. and others have said.

North Korea stepped up its illegal exports of coal last year, with most of those deliveries headed for China, according to a confidential U.N. report reviewed Monday by Bloomberg News. Pyongyang raked in $370 million of shipments from January through August alone, a panel monitoring the enforcement of sanctions on North Korea said in the report to the Security Council, citing evidence provided by an unidentified member state.

The Kim regime also managed to import luxury vehicles and other sanctioned items including alcohol and robotic machinery, the report showed. While these activities could be affected by the border closure, other illicit activity highlighted in the report won’t, such as the country’s acquisition of virtual currencies and cyberattacks against global banks to evade financial sanctions.

Prior to the virus lockdown, Kim had been pushing back against Trump’s pressure. In a speech to ruling party leaders on Dec. 31 — the same day reports of the new virus first emerged in China — Kim denounced the U.S.’s “gangster-like acts” and said he was no longer bound by a two-year freeze on tests of nuclear weapons and long-range missiles.

A resumption of major tests would undercut Trump’s claim that his unprecedented decision to meet with Kim in June 2018 made the U.S. safer, just as he gears up for a tough re-election fight. Still, Kim has so far refrained from provocations that could blow up his relationship with Trump.

North Korean foreign ministry adviser Kim Kye Gwan said last month that Pyongyang would never propose trading a key nuclear facility in exchange for U.N. sanctions relief, according to state media. He added that it would be “stupid” to expect ties between Trump and Kim to help restart talks.

Even before the virus, there was a limit to how much Kim could do to shore up the economy without more access to foreign capital. One study after another has suggested that Kim would eventually face a economic crisis if he was unable to secure enough hard currency to sustain a push forward with development.

“Kim wants sanctions lifted because he wants high-powered economic growth to underpin his power grip, but he has no reason to risk his survival by giving in to U.S. demands to denuclearize first,” said Lee Jong-seok, a former South Korean unification minister. “Kim won’t budge, no matter the pressure.”

Information from AP added

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