SEOUL — North Korean factory workers and restaurant staff have been returning from China in droves since the United Nations ordered member states to send laborers home last year.
North Korean “ghost ships” containing dead, or almost-dead, fishermen have been washing up on the shores of Japan after the seafood industry was sanctioned, too.
And even Kim Jong Un has admitted that the American-led “maximum pressure” campaign is hurting his country’s economy. The “life-threatening sanctions and blockade” were causing “difficult living conditions,” the North Korean leader said in a New Year’s address that repeatedly emphasized self-sufficiency.
But the campaign to squeeze Kim and his cronies into denuclearization talks already could be having a tangible — and, from the perspective of Washington, undesirable — effect.
“The sanctions will set back what has been basically a positive process — the development of markets,” said one regular visitor to Pyongyang.
This will make it harder for money to flow within the private economy, and as markets contract, it will also make it harder for isolated North Koreans to get information from the outside world, said the visitor, who spoke on the condition of anonymity to avoid jeopardizing access to North Korea.
The international sanctions imposed at the end of last year in response to North Korea’s intercontinental ballistic missile launches and nuclear test were designed to cut off key revenue earners for the regime.
Together, the mineral, garment and seafood industries — all now sanctioned — accounted for about one-third of the country’s $3 billion annual export revenue. The tens of thousands of North Koreans working abroad for the regime, a practice now also banned, had been bringing in an estimated $500 million a year for Kim’s coffers.
“This will have a big impact,” said Ro Hui-chang, who was in charge of North Korean construction workers in Russia until he defected in 2014. Even after international financial sanctions were imposed on North Korea, Ro said, he would hand-carry $1 million a month on flights back to Pyongyang.
“Construction work is good because it doesn’t require any investment” on North Korea’s part, he said. “You just send the workers, and they’re ready to start building and making money the very next day.”
A U.N. resolution banning joint ventures with North Korean companies, a measure that will be implemented mostly through China, took effect last month and has the potential to cripple North Korean business.
The sanctions have not — or at least, not yet — had the desired effect of inflicting so much pain on Kim that he would be prepared to talk about his nuclear weapons program. In fact, they have made him only more defiant and given him a convenient excuse for the country’s economic woes.
Statistics from North Korea are unreliable, and it will take months for the full effect of the sanctions to be felt, particularly at the relatively well-cushioned state level. The price of rice and the exchange rate with the Chinese renminbi, both bellwethers of economic stress, have remained relatively stable over the past few months.
But anecdotal evidence from inside the country suggests the sanctions are affecting ordinary people.
“We have the taste of death in our mouths,” a North Korean merchant on the border with China recently told The Daily NK, a Seoul-based news service with contacts inside North Korea.
“Since last year, the number of sanctioned products has increased, and Chinese customs inspections have strengthened,” he said, and this has sharply limited Chinese imports into North Korea. “Merchants like me don’t really have a future.”
Indeed, American humanitarian agencies working inside North Korea say their shipments of medicine and equipment are undergoing draconian checks in China.
In one case, the Christian Friends of Korea, a group that helps treat North Koreans with tuberculosis and hepatitis, had two shipping containers stopped in the Chinese port of Dalian because personal-hygiene kits for the patients contained nail clippers. The U.N. sanctions prohibit metal items from being sent to North Korea.
Separately, UNICEF last week warned that 60,000 North Korean children will become severely malnourished and could face starvation because international sanctions are slowing down the delivery of food aid.
“This is the malnutrition that potentially can lead to death,” said Manuel Fontaine, director of UNICEF emergency programs worldwide.
The nominally socialist Kim regime has stayed in power for decades by tightly controlling ordinary North Koreans’ access to information and food. But since a devastating famine in the 1990s, which killed as many as 2 million people, the regime has been unable to feed the populace.
As a result, the state has tolerated an increasing amount of market activity, allowing people to trade and earn their own livings to buy the food that the state can no longer provide. This trend has accelerated in the six years that Kim has been in power, with as much as half the population now relying on markets instead of on the regime for subsistence.
With this increased economic independence have come other freedoms. Markets have become places for selling pirated films smuggled in from the outside world and for trading gossip, both of which help belie the regime’s propaganda that North Korea is a paradise on Earth.
Money earned through the markets sometimes is used to bribe guards and officials so North Koreans can travel or make more money, including through illicit activities — dealing in crystal meth, for instance, even to police officers, or renting out apartments by the hour during the daytime to young couples.
This market economy has been the biggest force for change in modern North Korea. But it could now be under threat.
“The sanctions place the massive numbers of ordinary people working in these industries at risk for loss of income,” said Kee Park, a Korean American neurosurgeon who travels to Pyongyang every year to perform surgeries. “The loss of income limits their ability to purchase food in the market to supplement [rations] as well as the economic opportunities.”
In state-run industries such as garment manufacturing and fishing, the regime pockets much of the profits, but investors in the country say that people who work in such export-oriented industries were earning more than those in purely domestic businesses.
As for those working abroad, while the regime keeps two-thirds of their wages, the laborers earn up to $100 a month, an astronomical sum compared with the single-digit salaries they would earn at home.
These earnings have increased the amount of money in the private economy and have helped lessen reliance on the regime.
“When industries are harmed by sanctions, there are also wage earners who are harmed because they’re out of work and have to go try to find work elsewhere,” said Andray Abrahamian, a fellow at the Pacific Forum of the Center for Strategic and International Studies, who has visited North Korea dozens of times as a business consultant. “So in that sense, there are consumers that are losing their power to consume.”
But Cho Bong-hyun, a North Korea expert in the Industrial Bank of Korea’s Economic Research Institute in Seoul, says sanctions could have the opposite effect. By introducing more stress into the economy, they could encourage more adaptation from the regime and more entrepreneurialism from the people.
Indeed, Kim has promised a two-track policy for North Korea: simultaneous development of nuclear weapons and the economy. He also laid out, in 2016, an ambitious five-year economic plan.
So now he needs to find a way to meet his own goals, sanctions or no sanctions.
“North Korea claims that it has already achieved nuclear weapons; now they have to deal with the other half of the equation: the economy,” Cho said. “There are only three years left for him to show signs of progress.”