Category: North Korea

China and the Effectiveness of Economic Sanctions on North Korea

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Sudarshan Gupta, Research Intern, ICS

Economic sanctions are imposed to coerce the target country to alter its policies or change its behavior. If the cost of sanctions to the target country is not substantial or if the threat is not credible, then there is a high chance that sanctions will fail to alter the behavior of the target country. This is what seems to be happening in the North Korean case. In October 2020, during a military parade, North Korea unveiled what experts believe to be one of the world’s largest road-mobile, liquid-fueled Inter Continental Ballistic Missile (ICBM), possibly with a capability of carrying multiple nuclear warheads. International economic sanctions have failed to produce the desired result of denuclearization of North Korea, and instead, have increased politico-military instabilities in the region.

The United Nations Security Council passed resolution 2397 in December 2017 in response to North Korea’s launch of ICBM Hwasong-15, imposing wide-ranging economic sanctions on the country. In addition to multilateral sanctions by the UN,  the US has imposed unilateral sanctions on North Korea to impede the development of missile and nuclear technology. Given North Korea’s high economic dependence on China, for sanctions to be effective, China’s active and honest participation and cooperation are extremely crucial. China has asserted time and again that the North Korean issue should be resolved through dialogue and has supported a step-by-step process in which sanctions relief and security guarantees are provided in exchange for denuclearization. Most of the Chinese scholars argue that the improvement of geo-economic conditions and closer economic ties between North Korea and China is the only way to gradually induce North Korea to give up its nuclear program and open up to the world.

Following UN sanctions on North Korea after the 2016 nuclear test, China released a comprehensive list of sanctions imposed by it. Many items were allowed to be traded for “public welfare purposes,” while other items whose trade benefitted “livelihood purposes” and did not support the nuclear or missile program were also allowed. Importantly, there has been no clear definition given out by the Chinese as to what exactly constitutes such items, making the enforcement of UN sanctions difficult, if not impossible.

China is the largest trading partner of North Korea, and its continued economic engagement (both overt and covert) with North Korea has ensured the survival of the Kim regime. The relationship between the two countries is symbiotic and beneficial to both of them. For North Korea, illicit coal exports (banned since 2017) to China are a huge source of foreign currency, generating about a third of its exports by value. Apart from coal, in a blatant disregard to UN sanctions, Chinese companies are trading with North Korea in a wide spectrum of goods such as sand, seafood, textiles, iron and steel, industrial machinery, vehicles, and gravel. In December 2020, Deputy Assistant Secretary for North Korea, Alex Wong, accused China of subverting the UN sanctions regime aimed at achieving denuclearization of North Korea, warning sanctions against China-based individuals and entities in response. Wong further added that the US had identified 555 separate occasions in the past year alone of ships transporting coal, sand, and other sanctioned goods from North Korea to China. According to one estimate, in just the first five months of 2020, North Korea imported more than 1.6 million barrels of refined petroleum through numerous ship-to-ship transfers of oil at sea (the 2017 sanctions imposed a limit of 500,000 barrels per year). China has repeatedly turned a blind eye to such illicit activities in its neighbourhood.

Over the years, North Korea has developed a sophisticated web of illicit financial networks to launder money in order to circumvent sanctions. The International Consortium of Investigative Journalists and NBC highlighted in their report of September 2020 that Chinese firms played a prominent role in laundering large sums of money through several American banks to shell companies in other countries like Cambodia between 2008 and 2017. The money then finally reached North Korea.  According to a US Army report, China is possibly supporting North Korean illicit cyber activity through training and academic support, as there are hundreds of North Korean students who study in China and have access to advanced technology.          

A report submitted to the UN Security Council by a Panel of Experts highlights the prohibited transfer by North Korea of its fishing rights to third countries, thus acting as a source of income for the country. The report further claims that hundreds of Chinese boats can be observed in North Korea’s fishing zones, indicating that the country has circumvented sanctions by selling permits to Chinese fishermen. Remittances from North Korean migrant workers in China and Russia also constitute an important source of foreign currency for Pyongyang. The 2017 UN sanctions banned all such migrant workers and set a deadline for December 2019 for their repatriation. China, which employs more than 60,000 migrant workers, mostly in provinces adjacent to North Korea, has conveniently disregarded the deadline set by the UN.       

Kim Jong-un’s rare acknowledgment of the mistakes in the government’s five-year economic strategy from 2016 to 2020 at the eighth congress of the Worker’s Party of Korea indicates the gravity of economic problems that North Korea is facing. The disruptions in economic activities caused by the COVID-19 pandemic and devastation of the country’s infrastructure by typhoons have much more seriously impacted North Korea’s economy in 2020 than the economic sanctions. However, the regime in North Korea remains pretty safe, stable, and unchallenged. Multilateral and unilateral sanctions by the US and its allies have been ineffective and miserably failed to achieve their goal of denuclearization. China has made sure that North Korea remains stable and has continued to undermine the sanctions regime, making the so-called US policy of “maximum pressure” an utter failure. US President-elect Joe Biden’s administration is expected to be tougher on human rights issues and will cooperate more closely with allies, including South Korea, in the context of increasing tensions with China. It is unlikely that North Korea will get sanctions relief anytime soon. However, cooperation with China in enforcing these sanctions will be quite difficult, and Beijing will continue to undermine them.            

North Korea’s Strategic Significance to China

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Pritish Gupta, Research Intern, ICS

The Chinese saying ‘if the lips are gone, the teeth will be cold’ has often underscored the relationship between China and the Democratic People’s Republic of Korea. The standard perception that China has been North Korea’s natural ally and strategic asset never lost resonance. Geographical proximity and ideological similarities also played a significant role in the bilateral relationship. However, as Kim Jong-un came to power in December 2011 and North Korea’s nuclear ambitions began to be purposefully pursued, China’s North Korea policy evolved with a strategic orientation.

Under President Xi Jinping, as Beijing began to increasingly identify itself as a great power, it adopted a more pragmatic approach towards the Korean peninsula. With a sharp strategic competition with the United States over the years, North Korea has become an important vector in China’s evolving foreign policy in pursuit of Xi’s Chinese dream.

The 2017-18 crisis on the Korean peninsula sparked a debate in Beijing’s questioning its continued support to Pyongyang, though Beijing continued with its North Korea policy, which is based on the geopolitical calculus.

The question of stability on the Korean Peninsula

In terms of China’s interests in the Korean peninsula, North Korea acts as a variable in regional competition with the United States. It maintains cordial relations with the Democratic People’s Republic of Korea (DPRK) while maintaining its strategic influence in the region. Beijing is apprehensive about any conflict in its backyard as it may jeopardize its strategic advantage on the Korean peninsula. In case of an imminent threat to its regime, North Korea may resort to a conflict with South Korea, which would lead to instability and uncertainty in the region. Clearly, Beijing prioritizes a peaceful and stable Korean peninsula over the denuclearization of the DPRK. The collapse of the regime may invite all the stakeholders, the United States, South Korea, and China, to intervene militarily to stabilize the peninsula, which might prove to be detrimental to the Chinese interests.

Beijing opposes Pyongyang’s nuclear program but prefers peace and stability over a full-blown conflict. Beijing fears that a direct intervention from the United States and South Korea over DPRK’s nuclear program may result in a unified Korean peninsula. The challenges of a unified peninsula could also pose concerns for Beijing. China has stuck to its principle of ‘no war, no instability, and no nukes’ to avoid any conflict on its borders. North Korea acts as a buffer state for China against South Korea as well as the presence of US troops. It plays well for Beijing that the North Korean regime remains intact where it acts as leverage on the backdrop of US rebalancing to Asia.

Avoiding a refugee crisis

One of the main concerns for China will be dealing with a refugee crisis if there is a potential conflict across the China-North Korea border. Both countries share an 880-mile border. Given any escalation of economic stress in North Korea, there would be a significant number of North Koreans seeking refuge in China, which could result in a humanitarian crisis. It would be a herculean task for the People’s Liberation Army to prevent North Koreans from crossing the border. China’s northeast provinces would always remain vulnerable with the development of any future events on the Korean peninsula.

Economic Aid

Beijing’s potential leverage over Pyongyang is also important for the survival of the North Korean regime. China has been the source of continued assistance to the hermit kingdom. Beijing has always found ways to skirt the sanctions imposed by the United States in the wake of the nuclear program. China has been cautious in dealing with North Korea over denuclearization, which might instigate instability. It understands that any response from Pyongyang may have an adverse effect on the bilateral relationship, Chinese interests and may diminish Beijing’s influence.

US-China equation

The Korean peninsula is a strategic theatre for great power competition between the United States and China. China’s strategic priority has been to contain the US influence in the region. Talks between the United States and North Korea have stalled after the failure of the Hanoi summit between President Trump and Kim Jong-un. The Biden administration would vary in the fact that its foreign policy approach should push for normalizing relations with North Korea. The withering of the US’s multilateral trade framework in Asia favors China’s interests. North Korean leader Kim Jong-un visited China twice before the proposed US-North Korea summits, which strengthened Beijing’s position with respect to the negotiations between both the countries. Also, the possibility of a trilateral alliance between the United States, Japan, and South Korea against China is never ruled out.

Way forward

The global pandemic and fraught relations between the United States and China may impede the prospects of a resolution of the crisis on the peninsula. Though, China has expressed its willingness to play a productive role in the political solution of the issue along with other stakeholders. The targeted sanctions on North Korea have done little to contain its nuclear program. The resumption of the Six-Party Talks could lead to a breakthrough in the negotiations. The new US administration would have its hands full after taking charge with the issue of the Korean peninsula still unresolved and US-China relations at an all-time low. The coronavirus pandemic has led to North Korea being more dependent on Beijing as well. The normalization of relations would give an opening to the American policymakers to work towards the reduction of troops in South Korea, thus reducing the tensions in the region, but if denuclearization of North Korea continues to be a precondition by the Biden administration for normalization of relations and easing of crippling economic sanctions on North Korea, then chances of any forward movement towards peace are rather slim. Though, it is understandable that Beijing’s support for Pyongyang would continue for the foreseeable future, and Beijing’s role would be central in the resolution of the crisis.