North Korea’s economy is hurting. Authoritative estimates indicate that the country experienced its worst decline in two years. This dismal performance is the result of United Nations sanctions. Yet even as they bite, there is a limit to how much such measures can achieve. Geopolitics is as important to North Korea’s survival as is its economy and those winds are shifting in Pyongyang’s favor.
Reliable statistics about any part of North Korea are hard to come by, but the Bank of Korea’s assessment of its reclusive neighbor’s economy is considered pretty good. In analysis released last week, the bank concluded that the North’s GDP shrank 3.5 percent in 2017, the largest decline since 1997; at that time, its economy contracted 6.7 percent amid a famine that is estimated to have killed as much as 10 percent of the population. The bank reckons that last year, North Korea’s total external trade shrank 15 percent to $5.55 billion. Exports fell nearly 37.2 percent to $1.8 billion; mineral exports are thought to have plummeted 55.7 percent.
The performance must have been a shock to North Korea’s leaders, especially since the economy did so well in 2016: That year, the GDP grew 3.9 percent, the best performance in over a decade. The decline reflects tightening U.N. sanctions against North Korea imposed as a result of its nuclear weapons program that defied the will of the international community. Some experts believe that North Korean economy could shrink 5 percent in 2018 if sanctions are fully implemented.
There is little chance of that, however. Pyongyang’s diplomatic offensive has changed international perceptions of the regime. The United States, which has led the campaign to isolate and pressure the North, insists that sanctions will remain in place during nuclear negotiations, but Washington no longer uses the phrase “maximum pressure” to describe its program and Trump has said that he will not push for more sanctions.
More important is thinking in China, Russia and South Korea. China is responsible for some 90 percent of North Korean trade and Beijing’s willingness to implement sanctions — rather than turn a blind eye to rampant violations, as in the past — has been instrumental to their success. After the country’s sixth nuclear test, China agreed to ban the import of North Korean iron ore, iron, lead and coal. As a result, Bank of Korea data showed an 11 percent drop in mining production.
The suspension of North Korean nuclear and missile tests, along with its spring summitry, has prompted Russia and China to argue for the lifting of the most onerous sanctions. Trade along the China-North Korea border has picked up in recent months and there is ample evidence of ship-to-ship transfers of fuel to North Korean vessels from Chinese and Russian ships, as well as transfers of supplies in Russian ports. Seoul too believes it is time to ease pressure: Its efforts to court Pyongyang, such as bringing North Korean officials and athletes to the 2018 Winter Olympics, required the lifting of sanctions, and the two governments have formed working groups to explore forms of economic cooperation.
North Korea denies that economic pressure has driven it to the negotiating table. Instead, the Pyongyang government insists that it has developed its nuclear and missile programs to the desired level and is therefore shifting attention to economic development. One sign of the new emphasis is leader Kim Jong Un’s schedule. In the first six months of 2017, he made 30 trips with a military purpose and 15 for economic reasons; this year, he has made 11 economic trips and three military inspections. He has leveled high-profile criticism of managers and bureaucrats to convince the public and the world of his commitment to economic development. Those complaints imply that economic rewards could get the North to give up its nuclear weapons.
Kim has been traveling to the northeast region that borders China. Following his three trips to China and the dispatch of a high-level delegation to China’s major economic centers, he is courting Beijing to spur his economy. Kim is said to have asked Chinese leader Xi Jinping to end the U.N. sanctions at their last meeting.
Japan wants maximum pressure maintained. It is rightly skeptical of the North’s decision to denuclearize and worries that lessening pressure will allow Pyongyang to protect its nuclear weapons and develop its economy. Moreover, there is no indication that the North is prepared to address the issue of Japan’s abductees. Japan must continue to work with the U.S. and other diplomatic partners to sustain pressure at the U.N. on the North: This is no time to ease up on sanctions. This may be a losing proposition. But there does not seem to be other viable alternatives. Japan’s options are limited, and there are no clear answers to what steps would serve its interests.
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