The United Nations Security Council (UNSC) has adopted a new resolution which includes imposing upper limits on North Korea’s annual coal exports. Attention has been focused on how effective this component of the resolution will be on restricting Kim Jong Un’s ruling funds.
The annual export limit will be imposed at either 409 million USD (approx 472 billion KRW) or 7.5 million tons of coal. The UNSC predicts that the new sanctions could reduce North Korea’s revenues by approximately 700 million USD (approx 1.82 billion KRW).
There have been suggestions that the resolution will be more effective than previous measures because it takes into account confirmation of the actual effect of the sanction through export figures. However, it has also been pointed out that unless the clause for “livelihood exceptions” is removed, North Korea will still be able to evade enforcement by the international community.
The trade patterns of North Korea make it highly probable that the regime will seek to exploit the livelihood exception clause. In North Korea, trading companies are required to receive trade licenses from the Party and are forced to pay a large proportion of their profits to the Party in return.
It is also worth noting that since North Korea launched a full-scale Songun (military-first) policy in the early 2000s, trade rights allotted to the military have grown. This heightens the probability that most of the associated profits will be directed toward the development of conventional weapons or weapons of mass destruction.
A North Korean defector who was previously a high-ranking executive in the coal trade industry between China and North Korea told Daily NK on November 29, “There is practically no concept of ‘trade for the people’s livelihood’ in North Korea. Foreign currency earned through coal exports is not distributed to the workers but goes straight into the national treasury to be spent on weapons development.”
“The food and living necessities given to coal miners are basic provisions to keep their labor going and not a reward for foreign currency earning. The only reward they get out of trade with China is soybean oil or sugar, provided for survival,” he added.
China’s steady position on the clause for exceptions for livelihood purposes has remained a critical factor. Diplomatic sources state that China was cooperative in adopting the new resolution, but they also indicated that the exception clause, which has been criticized as a weak point of Resolution 2270, was maintained largely due to Chinese pressure.
China’s Foreign Ministry spokesperson Geng Shuang commented on November 25 that, “sanctions by the Security Council against the DPRK must not have any negative impact on people’s livelihood and the humanitarian needs in the DPRK Some argue that China is adhering to the clause so as to ensure the stability of its local economy which would be affected by any sanctions on North Korea.
Smuggling is not reflected in the official records, and is also an important variable. Professor Jeong Eun Yi of Gyeongsang National University recently published a paper entitled, “Current State and Implications for North Korea’s Trade.” The paper states, “There are various clandestine trade routes developed between China and North Korea, especially on the border area where smuggling is prevalent as a custom, known as ‘private trade.’ The Chinese government is unable to completely block smuggling as it is closely connected to China’s regional economy. Therefore, the effect of additional sanctions will require further scrutiny.”
