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North Korea: Witness to Transformation

The (non-) Embargo

by and Kevin Stahler | August 14th, 2014 | 07:06 am
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Has a Chinese oil embargo delivered a devastating blow to the North Korean economy? Probably not.

There has been some hubbub over China’s alleged de-facto oil embargo to North Korea; according to the Global Post, Chinese trade data has shown no crude exports to North Korea in the first six months of this year. China has been known to curb its oil exports to punish Pyongyang – trade data reports no shipments for four months straight after the DPRK’s second nuclear test in May 2009 (See below) – but the newest embargo, if the trade stats are to be believed and that is what it is, appears to be even more serious.

China monthly crude oil exp to nk

It’s not hard to connect these developments to the perceived nosedive in general relations, in motion at least since the execution of Jang Song Thaek. In his visit to Seoul last month, President Xi became the first Chinese leader to visit the South before the North.  Meanwhile, Pyongyang has been reportedly scrambling to find new business partners, and weeks ago the powerful NDC characterized China as a “spineless” country, and began cracking down on Yuan-denominated exchanges. But, as always, these reports need to be taken with a large grain of salt. The oil embargo may only exist on paper: the Daily NK reported in May that oil is in indeed still flowing to North Korea through North Pyongan, but Chinese operators simply aren’t reporting the data to customs. Rumor has it that North Korea continues to import oil, mostly originating in Dalian, by ship, mainly via Nampo.

As with most things North Korean, triangulating other evidence to get some sense of the plausibility of the narrative is useful. So, on the one hand, we have the New York Times reporting via Free North Korea Radio and Daily NK that there has been a crackdown on motorbikes using fuel in order to conserve on it for military and official use. That would be consistent with the embargo or oil interruption story. On the other hand, the blackmarket value of the North Korean won has been rising, which would not seem to signal a crippling embargo and imploding economy. If forced to choose, I’d keep my eye on the market.

Meanwhile, although North Korea’s attempts to diversify away from China economically (and particularly towards Russia) appear sincere, we must keep relative proportions in mind. North Korea’s trade with Russia stood at just over $100 million in 2013, close to 1/60th of China-DPRK total bilateral trade. Even if the DPRK and Russia can goose the numbers to $1 billion by 2020, that would still be less than 1/6th of the current China-North Korea relationship. Russia does have oil, however.

Cracks will continue to emerge, but North Korea is still highly dependent on China, with no logical replacement partner to step into the breach right away (well, besides South Korea!). Similarly, Beijing has indeed taken incremental steps to signal its pique with the regime, but as Marcus Noland’s conversations in China can attest, taking a major step towards policy reorientation is a long way off. So, yes, it would appear that some kind of signal has been sent. But China and North Korea haven’t had it with each other just yet.

 

 

Comments (1)

Take a closer look at Mongolian HBOil, which took a stake of 20% in North Korean Sungri oil refinery. HBOil delivers crude oil and as payment gets refined products. It´s a classical barter deal.

Roland August 15, 2014 | 1:28 am

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