In this picture published by state-run media on February 9, the Kim family can be seen walking together. (Rodong Sinmun-News 1)

Daily NK English Editor Robert Lauler recently conducted an email-based interview with Dr. Benjamin Katzeff Silberstein, a Nonresident Fellow with the Stimson Center and editor for North Korean Economy Watch. The short interview focused on several issues facing the North Korean economy, including the country’s state-run food shops, China-North Korea trade, and sanctions.

Daily NK (DNK): We have learned in recent months from grassroots reporting about state-run food shops, which have been established to provide food at prices lower than what can be found in markets. How does the emergence of these state-run food shops fit within your conception of the current status of North Korea’s economy? Based on the limited information we have about them, do you see them as a grave threat for the development of the DPRK’s market economy?

Dr. Silberstein: I don’t think the food shops per se pose a grave threat for the market economy. They are a strong government intervention, for sure, that meddles with the incentive structure of the economy and decreases profits for farmers in an artificial way. The real problem would be if the state would enforce their monopoly, which they still have in law but not in practice. That would mean forcing people to only purchase from the state shops and, most critically, farmers to sell to the state at fixed prices. This would be a major escalation in the regime’s economic oppression. 

DNK: For many months now, there have been reports speculating about the restart of trade with China. Daily NK, for its part, has reported recently on expectations inside the country that full-scale trade could resume in March. Some observers have suggested that any restart of trade with China will be very much different than pre-COVID trade because of the DPRK government’s desire to exert greater control over trade activities. Where do you stand on this issue?   

Dr. Silberstein: I completely agree and I think this is one of the reasons the regime has enforced such a strict border lockdown for such a long time. It seems to be part of a domestic political struggle for resources or, rather, the control of the distribution of those resources. So when trade really re-opens (because I do think it’s a matter of “when” rather than “if”), it’ll likely be much more dominated by state-owned firms that are, both in theory and practice, truly controlled by the state, unlike entrepreneurs that “wear the red hat” and use only the name and trading rights of a state company. This will be a significant setback for the non-state controlled part of the economy. The question is how far the state will take it and how much force it’ll use to enforce its plans. 

DNK: The Arduous March was a major famine that took place in the late 1990s. This term has become a byword for “mass starvation” in the country ever since. You’ve noted that North Korea isn’t quite at 1990s-levels yet, but that the economy is “incredibly fragile” and that current policies are both “messy” and “dangerous,” and that “further entrenchment from global trade” would be potentially “disastrous.” But with increasing Chinese aid and reports about an increase in Russian aid, wouldn’t support from those two countries alone stave off a disaster in the country? 

Dr. Silberstein: Yes, I believe so and this is likely what will happen. So in that sense, and I’ve often stressed this point, the food situation is fragile only to a limited extent because the system looks so completely different today from the 1990s. The markets are one thing but precisely because the situation is incredibly fragile, China has almost routinely shipped aid to North Korea to stave off disaster. Even though the support may not be all that much in total volume, it still plays a critical difference since margins are so thin. 

DNK: On top of the grave economic impact of the COVID-19 pandemic, North Korea is still under sanctions from the international community, including some additional sanctions slapped on South Korea independently a couple of weeks ago. Trump’s maximum pressure campaign did appear to push the Chinese to implement their sanctions more effectively, causing losses in foreign currency for the DPRK. But now in 2023, do you believe that the current sanctions regime is effective to induce changes in decision-making by North Korea’s leadership? 

Dr. Silberstein: In a word, no. Sanctions are far from a major factor in the regime’s decision-making right now. It’s mostly by the regime’s own choice that trade remains at such low levels. I believe it could be expanded rapidly and quite significantly if the regime wanted to do so. The most central trade restrictions right now appear to be on the part of North Korea. Neither China nor Russia (though economic exchange with the latter remains very limited) really has any clear reason to implement UN sanctions on North Korea given the post-cold-war-low point in relations with the west. 

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