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Tsutomu Nishioka

【#467(Special)】U.N. Sanctions to Deprive Kim of Foreign Currencies

Tsutomu Nishioka / 2017.09.14 (Thu)


September 12, 2017

     On September 11, the United Nations Security Council adopted a new resolution on sanctions on North Korea only a week after Pyongyang conducted its sixth nuclear explosion test. The unusually quick adoption came only less than one month after the UNSC voted for the previous sanctions resolution on August 5.
     The sanctions in the latest resolution have been watered down from the original U.S. proposal through Washington’s negotiations with Beijing and Moscow. As sanctions under the latest resolution are coupled with those under the August resolution, North Korea will lose massive foreign currency income.

North Korea to lose 80% of foreign trade income
     According to the Korea Trade-Investment Promotion Agency of South Korea, North Korean exports in 2016 totaled $2.8 billion including $1.2 billion in coal and other mineral fuels, $0.2 billion in iron ore, $0.2 billion in fishery products, $0.7 billion in textiles and $0.5 billion in others. Of them, a total $1.6 billion in coal, iron ore and fishery products are subject to the sanctions under the August resolution. As textiles have been added for sanctions under the latest resolution, North Korea is set to lose $2.3 billion or 83% of foreign currency income. The new sanctions also include a ban on new contracts for overseas North Korean migrant workers. Some 90,000 North Korean workers are said to earn $500 million annually. As existing contracts expire in several years, North Korea will lose this foreign currency income source as well.
     The United States had originally proposed a severe resolution calling for an embargo on crude oil and refined petroleum products to North Korea. Eventually, the adopted resolution limits crude oil exports to last year’s level and reduces gasoline, diesel oil and other refined petroleum products exports to 2 million barrels per year. According to U.S. sources, North Korea annually imports 4 million barrels in crude oil and 4.5 million barrels in refined petroleum products. The new sanctions could halve gasoline exports to North Korea.

Washington-Pyongyang chicken race
     The new sanctions, though watered down with Chinese and Russian resistance, are fairly severe, as explained above. The focus of future attention includes whether China accounting for 90% of North Korea’s external trade will fully implement the sanctions and whether North Korea will withstand the sanctions.
     In April, North Korea began to stockpile oil in preparation for new U.N. sanctions, leading to sharp gasoline price hikes. As financial resources have considerably decreased at Workers’ Party of Korea Office 39 that controls foreign currencies necessary to maintain nuclear missile development, luxury life of Kim’s family and the dictatorship, North Korean diplomats stationing abroad not only have failed to receive money for wages and expenses from home but also have been ordered frequently to donate foreign currencies to Pyongyang.
     Kim Jong Un seems to have determined to increase military tensions by conducting nuclear and missile tests frequently and hold eventual negotiations with the United States. I have heard that North Korea is preparing for firing an intercontinental ballistic missile into waters between Hawaii and the U.S. mainland or for conducting cyberattacks on Japan, the United States and South Korea in anticipation of U.S. military attacks.
     The chicken race between the United States and North Korea will thus continue. As described by Yoichi Shimada, professor at Fukui Prefectural University, U.S. President Donald Trump is a heavy-duty dump truck, while North Korean leader Kim Jong Un is a motorbike. Their head-on clash will result in Kim’s sure death. Any dictator will make concessions only when his life is endangered. Even under such situation, the dictator will lie.
     Japan should not concede the top priority of rescuing its own citizens abducted by North Korea while increasing pressure on the North in cooperation with the United States. A storm has come. The time has come for the government and private sectors of Japan to be united to protect the country and the people at any cost.

Tsutomu Nishioka is a member of the Planning Committee at the Japan Institute for National Fundamentals and Visiting Professor at Reitaku University.