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Keeping alive: Understanding North Korea’s supply lines and the potential role of sanctions
Swedish Institute of International Affairs (UI).ORCID iD: 0000-0001-5426-8238
2014 (English)Report (Other academic)
Abstract [en]

Against all the odds, the Democratic People’s Republic of Korea (DPRK, North Korea) has survived two decades of acute crisis since the end of the Cold War. It has neither collapsed nor reformed itself, despite the dire state of its economy and the existence of extensive international sanctions. This has been possible as it has skillfully adapted to circumstances and found new ways to maintain supply lines and revenue streams, developing and using a range of suppliers and altering their relative importance over time, as well as the way in which they operate, in order to circumvent sanctions. Furthermore, they have also been able to develop new ones. There has also been a shift away from direct state control over illicit and semi-official activities, towards putting more trust in market mechanisms and obtaining the state’s and the regime’s share through different forms of “loyalty schemes”, bribery and public-private constructions. This shift has made it more difficult to target the different sources of revenue.

It is possible to identify ten supply lines and revenue streams: (a) The shadow economy and semi-official trade; (b) the “court economy”; (c) international trade; (d) the Kaesong Industrial Zone; (e) the export of labour and remittances; (f) mobile phones; (g) tourism ; (h) the arms trade; (i) illicit activities; and (j) foreign assistance. The shadow economy and semi-official trade have been crucial to keeping the state functioning, and the regime as well as the wider population alive. The success of the court economy has been crucial for the survival of the regime. The revenues gained from the export of labour and the national mobile phone network are also surprisingly large. The arms trade continues to bring in revenue, as do tourism and remittances, but none of these are as important as they once were. Illicit activities continue to be a major source of revenue. However, as the government becomes more skilled at hiding its involvement, it is increasingly difficult to estimate the amounts involved or obtained by the regime. International trade, most notably with China and South Korea, is also a major source of income. Foreign assistance also contributes, but is very limited in comparison.

There is currently a wide range of sanctions on North Korea. These sanctions have been a complete failure in fulfilling their aim of halting North Korea’s nuclear weapon programme. They have, however, had a substantial impact on the country. Under their pressure, North Korea has been forced to adapt to a new reality, not least by hiding its involvement in illicit activities and finding new revenue streams. It has been highly successful at both.

In trying to refine and design new sanctions, it should be clear that there is no silver bullet. First and foremost, it is important to do the utmost to implement the sanctions currently in place, including monitoring and fine-tuning their implementation. All possible efforts should be made to get those states which do not currently comply to do so. Sanctions will not work as long as China and to some extent South Korea continue to engage with North Korea.

Sanctions should target the following areas:

1. The court economy should be a prime target for international sanctions. Financial sanctions are likely to be the most effective.

2. The export of labour should be targeted by sanctions. It is a major revenue stream and, moreover, an area in which dependence on Chinese compliance is less important.

3. Existing sanctions on International trade should be fine-tuned and developed. It is extremely doubtful that they will make a major difference, however, as North Korea’s number one trading partner, China, is unlikely to comply. Nonetheless, such sanctions send a signal and are disruptive in Pyongyang.

4. Efforts to implement sanctions that target the arms trade should continue, not least the work to detect, monitor and intercept suspicious cargoes and financial transactions in and out of North Korea.

5. Sanctions targeting illicit activities should be fine-tuned and developed in order to increase their effectiveness. Efforts should be made to convince China to increase its pressure, in particular because apart from China, there are few channels left for North Korean illicit activities.

6. The Kaesong Industrial Zone is in theory a good and easy target for sanctions, and its closure would be a major blow to the regime. However, in practice this is beyond the control of the international community, and it is unlikely that South Korea would be willing to close Kaesong.

The following areas should not be targeted by sanctions:

1. The shadow economy and semi-official trade are not good targets for sanctions. They are difficult to target, and doing so would be likely to have a disproportionate impact on ordinary North Koreans.

2. Remittances are under control and there is no need for, nor would there be any likely impact from, more sanctions.

3. The mobile phone network offers limited opportunities for successful sanctions. In addition, the proliferation of mobile phones should not be a target for sanctions because increased communication in a closed authoritarian state such as North Korea is a positive development.

4. Foreign assistance is not an area that should be targeted by international sanctions.

5. Outgoing Tourism is not possible to develop effective sanctions against. Nor would it be a good thing if wanting North Korea to open up.

Place, publisher, year, edition, pages
Stockholm: Swedish Institute of International Affairs , 2014. , 26 p.
Series
UI Paper, 6/2014
National Category
Political Science (excluding Public Administration Studies and Globalization Studies)
Identifiers
URN: urn:nbn:se:fhs:diva-4970OAI: oai:DiVA.org:fhs-4970DiVA: diva2:760113
Available from: 2014-11-03 Created: 2014-11-03 Last updated: 2017-06-08Bibliographically approved

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