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N. Korean currency crackdown fuels inflation, food shortages

At year's end, the government also announced a ban on the use of foreign currency. The North's richest private traders kept their savings in foreign currency and used it to import Chinese and South Korean goods for sale in North Korean markets.

But euros, dollars and Chinese yuan are also the preferred currency of the North Korean elite, who used them at state shops to buy luxury goods unavailable to most of the population. The survival of Kim's government, many analysts say, depends on catering to the needs of a few thousand elite officials in government and the military.

The consequences of crimping their lifestyles are difficult to predict, but the South Korean government has expressed concern.

"It is difficult to estimate the threat to us that will arise in the aftermath of the currency reform," South Korean Defense Minister Kim Tae-young said in a year-end message to his country's armed forces.

Uncertainty, inflation and shortages triggered by currency reform come at a time when Kim, now 67 and recovering from a stroke in 2008, is laying the groundwork for a successor.

The rollout of his third son, Kim Jong Eun, 26, as the heir apparent may be gathering momentum, according to the North Korea Intellectuals Society, a defector group in Seoul.

Citing sources inside North Korea, it said that his birthday on Jan. 8 is the subject of a Workers' Party decree calling for a commemoration of Kim Jong Eun as "the other leader of us and our future."


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