North Korea’s illicit and highly sophisticated efforts to circumvent UN sanctions might have sought to cushion their impact, but they offer no long-term solution to the fallout of tightened economic isolation, analysts said.
Sanctions relief was top of North Korean leader Kim Jong-un’s agenda for his Hanoi summit with US President Donald Trump last month, but the meeting broke up without a statement or even a lunch as the two sides disagreed over walking back Pyongyang’s nuclear weapons program in exchange for relaxation.
North Korea publishes virtually no economic statistics of its own, but according to figures from the Chinese General Administration of Customs, exports to its biggest trade partner have plummeted more than 90 percent.
Photo: AFP
Until 2016 — when the figures say North Korea sold China US$2.5 billion of goods — the UN Security Council sanctions largely targeted technology that could be used for weapons development.
Since then new measures have taken aim at a variety of broad economic sectors, including some of Pyongyang’s key foreign-currency earners, with exports of coal, iron ore, seafood and other commodities banned, trade in textiles blocked in both directions, and curbs on oil and fuel deliveries.
Exports to China were just US$213 million last year, Chinese statistics showed — although some observers question their reliability.
A report released last week by the UN’s independent Panel of Experts found that Pyongyang was employing increasingly sophisticated and varied ways to circumvent the rules, including the “physical disguise of tankers” and illegal name-changing, as well as ship-to-ship cargo transfers on the high seas.
Panel coordinator Hugh Griffiths likened Pyongyang’s efforts to high-net-worth tax avoiders and multinational corporations.
“They are exploiting international waters and the offshore economy,” he said.
North Korea uses ship-to-ship transfers for “most of its maritime-related coal trade,” the report said, adding that “such illegal deliveries became regularized and systemic in 2018.”
“No member state has supplied me with evidence to show that other member states in the region are allowing or aware of any systemic import of coal onto their territory,” Griffiths said. “It all has to be primarily in international waters through ship-to-ship transfers. It takes more time, more effort and more cost.”
North Korea was using “increasingly advanced evasion techniques” to circumvent a cap of 500,000 barrels of refined petroleum products imports a year, the panel said.
It described one example of vessel identity fraud as “the most sophisticated case” it had yet seen, which had “defeated the due diligence efforts of the region’s leading commodity trader,” US and Singaporean banks, and “a leading United Kingdom insurer.”
The world’s biggest container shipping line has also been caught up in the efforts, with the UN report saying it had continued to “unwittingly transport prohibited items.”
Copenhagen-based APM-Maersk said in a statement that its policy was “not to trade with North Korea” and that it had “guidelines and processes in place to ensure compliance with international sanctions and trade controls.”
However, while sanctions were being “successfully evaded on a case by case basis, they are working and that’s very evident from the Hanoi summit. What was the sole demand of the North Koreans? That sanctions be lifted,” Griffiths said.
Analysts say the five sanctions North Korea wanted withdrawn make up the bulk of the pressure that has helped bring Kim to the table, and without them the US would lose leverage.
The “dramatic” drop in its exports to China “underscores the effectiveness of Beijing’s enforcement,” said Jeong Hyung-gon of the Korea Institute for International Economic Policy.
Under-the-table trade would always fall far short of offsetting lost official revenue, Sejong Institute senior researcher Cheong Seong-chang said.
Those earnings were “not enough” for North Koreans, especially for those in the ruling class, he added.
“No matter how hard the regime tries to get around the sanctions,” without relief from the restrictions, Kim’s economic goals are “doomed to fail,” said Koh Yu-hwan, professor of North Korean studies at Dongguk University.
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