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Value of U.N. Sanctions on North Korea Disputed

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By Blaine Harden
Washington Post Foreign Service
Friday, June 12, 2009

TOKYO, June 11 -- As the United Nations moves this week to sanction North Korea for its second nuclear test, there is strong evidence that a previous international squeeze did not work.

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Thanks to booming business with neighboring China, North Korea's overseas trade has grown substantially since the U.N. Security Council imposed punitive sanctions after the government of Kim Jong Il exploded its first nuclear device in 2006.

Trade volume rose last year to its highest level since 1990, when a far more prosperous and less isolated North Korea was heavily subsidized by the Soviet Union, according to an analysis by the Korea Trade-Investment Promotion Agency, a government-funded organization in Seoul.

North Korean exports surged 23 percent last year, compared with the previous year, and imports jumped 33 percent, the agency said. It found that China's share of overseas trade with the North is soaring, up from 33 percent in 2003 to 73 percent last year.

The Security Council sanctions have had "no perceptible effect" on North Korea's trade with its largest partners, according to another study by Marcus Noland, a North Korea expert at the Washington-based Peterson Institute for International Economics.

"In retrospect, North Korea may have calculated quite correctly that direct penalties for establishing itself as a nuclear power would be modest," Noland wrote in a paper published at the end of last year. "If sanctions are to deter behavior in the future, they will have to be much more enthusiastically implemented."

A draft resolution proposed this week by the United States, China and other major powers tries to be more enthusiastic. If approved, the resolution would restrict the North's access to international grants, financial assistance and low-interest loans, while reinvigorating enforcement of the sanctions approved after Pyongyang's first nuclear test.

With certain caveats, it also authorizes member nations to search ships suspected of carrying banned materials, such as missiles or nuclear technology, on the high seas and to seize what they find. But it would not limit North Korea's more conventional, and lucrative, trade with China.

Noland describes the current sanctions plan as "clever." Instead of a "crime and punishment" approach to North Korea, he said, the proposed sanctions are "basically defensive," relying on interdiction of ships and global financial restrictions.

In recent decades, North Korea has earned hundreds of millions of dollars by transporting missiles and missile parts to countries in East Asia and the Middle East, according to the Center for Nonproliferation Studies in Monterey, Calif.

"The North Koreans will be down to whatever China gives them and whatever they can get from their subterranean customers in the Middle East," Noland said.

But there is little chance that these tougher sanctions will limit the ability of Kim Jong Il's government to profit from more conventional overseas trade, said Lim Eul-chul, a researcher who specializes in North Korean trade for the Seoul-based Institute for Far Eastern Studies.

"The sanctions will not have much effect on what North Korea trades with China," he said.

A sharp increase in military tension on the Korean Peninsula has recently made the North "very reluctant to export sensitive items overseas," such as missiles and counterfeit goods, said Lim, who has monitored North Korean trade for years.

"That kind of trade is not the current story," Lim said. "The current story is that North Korea is doing a lot of normal trade with China."

North Korea consistently fails to grow enough food to feed its 23 million people, and its state-controlled economy is moribund, but it does have mineral resources that are coveted by many industrialized countries.

The estimated value of its reserves -- including coal, iron ore, zinc, uranium and the world's largest known deposit of magnesite, which is essential for making lightweight metal for airplanes and electronics -- is more than $2 trillion, according to the Korea Chamber of Commerce and Industry.

The manufacturing boom in neighboring China has dovetailed with North Korea's acute need for hard currency and has accelerated Chinese access to the North's resources, according to Lim, Chinese mining experts and South Korean government officials.

There is, however, a significant new wrinkle in the North's trade with China, Lim said. "The military is taking control of export sales," he said, citing informants inside North Korea.

Other branches of the North Korean government, such as the Workers' Party and the cabinet, have been forced to relinquish their interest in these sales to the military, Lim said. The military has grabbed greater control of export revenue, he said, as it has provoked the outside world with missile launches and the nuclear test.

Based on the recent growth of North Korean-Chinese trade, Lim said he does not believe that China wants to "take any strong measures to crush the North Korean economy."

As China's trade with the North has soared, South Korea's has fallen off sharply, a victim of the undisguised contempt that Kim Jong Il's government has shown toward South Korean President Lee Myung-bak.

After Lee came into office last year, he halted a decade-old policy of giving the North unconditional gifts of food and fertilizer. North-South trade fell nearly 25 percent in the first four months of 2009, according to the Korean Customs office.


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