Why Sanctions May Not Be The Most Effective Way to Deter North Korea 1

The United Nations (UN) affirmed the acceptance of new sanctions on North Korea on September 11, 2017. A month before this in August, the UN had adopted other sanctions on the country, but its belligerent behavior and blatant disregard for them led to this next round of enhanced prohibitions.

The UN placed a complete ban on condensates and natural gas liquids exports to North Korea apart from capping the supply of refined petroleum products at two million barrels annually, among other measures. However, it stopped short of a full embargo on oil exports to the country.

A foreign ministry spokesman from North Korea was quoted as saying that the sanctions are “the most vicious, unethical and inhumane act of hostility” and are aimed “to physically exterminate the people of the Democratic People’s Republic of Korea.”

Analysis by Reuters showed that “The price of gasoline sold by private dealers in the capital Pyongyang and northern border cities of Sinuiju and Hyesan spiked to $2.51 per kg as of Sept. 13, up 45.1 percent from $1.73 per kg on Sept. 5.”

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Further, “Diesel prices also surged 61.5 percent from $1.30 per kg to $2.10 per kg during the same period.”

According to Reuters, gasoline prices have surged by 70.7% and 153.5% from the numbers made available for June 8, 2017 and December 1, 2016 respectively.

Thus, the latest sanctions seem to be achieving the UN’s desired effect. But will they suffice?

Not necessarily

There are two reasons why UN sanctions on their own may not be enough to restrain North Korea:

  • The ebullient domestic economy
  • Deception in trade practices

The local economy

With an aim of stifling the movement of goods by imposing sanctions, the focus is solely on trade currently and North Korea’s dependence on China as we had seen in the previous article of this series.

However, the country has been growing from within recently as a result of reforms undertaken by Kim Jong-un.

According to data from the Bank of Korea, the country witnessed the best growth in 17 years in 2016, with GDP rising by 3.9%. In a column written for Bloomberg, David Volodzko noted that North Korea’s “per-capita GDP is now on par with Rwanda, an African economic exemplar.”

He also noted that “Although China agreed in February to ban North Korean coal imports, iron imports have surged and total trade increased by 10.5 percent in the first half of the year, to $2.55 billion.”

This leads us to the second reason.

Deceptive trade practices

From the data shared above, it is apparent that China’s support has been crucial for the thriving North Korean economy.

But apart from that, the country has been engaging in deceptive trade practices as well – an issue which is on the radar of the UN.

According to media reports, UN experts hold that North Korea illegally exported coal and iron among other commodities worth at least $270 million to China and other countries during the six-month period which ended in August, in clear violation of sanctions.

Meanwhile, Marshall Billingslea, Assistant Secretary, Office of Terrorism and Financial Intelligence, while testifying before the House Foreign Affairs Committee, has said that there are “examples that demonstrate that North Korea is using deceptive practices to mask the origin of exported coal to Russia and China.”

He explained that the country uses ships sailing under false flags which switch off transponders to mask their activities. He also provided proof of these statements and identified the following three ships with the sailing flags in parentheses:

  • Bai Mei 8 (Saint Kitts and Nevis)
  • Sun Union (Panama)
  • Great Spring (Jamaica)

Billingslea also noted that the nation’s trade with Russia has risen this year, thus alleviating some pain of the decline in trade with other countries including China.

The Financial Times quoted him saying “Russian companies continue to provide support to North Korea,” he said, adding that North Korean bank representatives “operate in Russia in flagrant disregard of the very resolutions adopted by Russia at the UN”.

This analysis puts forth a clear case for why sanctions alone may not be effective enough in forcing North Korea to practice restraint on armament.

One possibility is that the US needs closer cooperation with China, rather than issuing threats, in order to control North Korea. Let’s look at this scenario more closely in the next article.

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