A new round of United Nations sanctions on North Korea has a lot of loopholes, and China is only enforcing those that hit at Pyongyang’s weapons-making capabilities. The rogue nation, that is once again making nuclear threats, is using its hostage population as a human shield in order to get Chinese oil and food.
In January, Pyongyang conducted its forth nuclear test. In February, it launched a long-range rocket. In early March, North Korean leader Kim Jong-un reportedly ordered the military to deploy the country’s nuclear warheads on standby.
It’s not the first time—nor will it be the last—but this colorfully unstable dictatorship will eventually crack, and the price of that could very well be devastatingly nuclear.
Now, in the face of tough new sanctions by the U.N. and ongoing joint U.S.-South Korean military exercises, North Korea is saying it will continue to pursue its nuclear and ballistic missile program in an act of defiance. And Pyongyang says there is no longer any possibility for talks.
The new U.N. sanctions target North Korea’s shipping network, allowing for searches of vessels for cargo that could be intended for Pyongyang’s weapons program.
But it’s tough to get around the economic relationship between China and North Korea. No sanctions can work if China doesn’t play ball. China, after all, is the central point here: Some 90 percent of all North Korean trade flows to or through China.
Most mineral trade with North Korea is banned, because it’s been used to fund the country’s nuclear program. But food and oil gets through because Beijing ostensibly believes that such crippling sanctions would harm the innocent population and lead to dangerous internal destabilization—which no one wants when a country has its finger on the red button.
The mining sector is being hit hard, but the new sanctions also reveal some interesting connections in the supply chain. According to regulatory disclosures cited by Reuters, there are more than 12 U.S.-listed companies with links to North Korean gold in their supply chains. And it counts even if minerals come through a third-country supplier. The chain has to be followed to its end source. The new sanctions mean that a lot of suppliers face being blacklisted because U.S. companies cannot risk the regulatory fines.
It also means that costs could rise for metals, and particularly gold, as the supply chain develops kinks.
Oh, and the Central Bank of the Democratic People’s Republic of Korea is in North Korea, not South Korea—so companies aren’t going to get away with claiming ignorance on this issue any longer.
Take an Inside Look at North Korea
Aug. 26, 2011. A North Korean woman looks down at the city of Pyongyang from the top of the Tower of the Juche Idea.David Guttenfelder—APApril 12, 2011. Central Pyongyang at dusk through a hotel room window.David Guttenfelder—APJan. 16, 2012. Light shines through a window on to a tank filled with goldfish inside an office at the Korean Central News Agency building in Pyongyang.David Guttenfelder—APApril 11, 2012. Under a North Korean flag, residents of Pyongyang wait for public transportation.David Guttenfelder—APFeb. 26, 2008. North Korean commuters are seen riding a bus in central Pyongyang.David Guttenfelder—APApril 12, 2012. A pedestrian walks past a large apartment block in Pyongyang.David Guttenfelder—APFeb. 12, 2012. A North Korean man rides a bike along the banks of the Pothong River in Pyongyang.David Guttenfelder—APApril 14, 2011. North Koreans pay their respects before a monument of Kim Il-Sung at Mansu Hill in Pyongyang.David Guttenfelder—APSept. 17, 2008. North Koreans school girls walk hand in hand past a monument in Pyongyang.David Guttenfelder—APOct. 11, 2011. North Korean construction workers labor in the Mansudae area of Pyongyang.David Guttenfelder—APApril 9, 2012. North Korean women are pictured working in a thread factory in Pyongyang.David Guttenfelder—APApril 3, 2012. A North Korean student learns to drive a tractor on a computerized driving simulator at the Samjiyon Schoolchildren's Palace in Samjiyon, North Korea.David Guttenfelder—APOct. 9, 2011. A man walks past a building in Pyongyang where a picture of North Korea's late leader Kim Il-Sung hangs on its outer wall.David Guttenfelder—APApril 22, 2011. A woman looks at monkeys behind a glass enclosure at the central zoo in Pyongyang.David Guttenfelder—APApril 13, 2011. Workers carry painted doors along a road in Mangyongdae, North Korea.David Guttenfelder—APApril 14, 2011. Portraits of North Korea's late leaders Kim Il Sung and Kim Jong Il hang on a wall at a children's school of performing arts in Pyongyang.David Guttenfelder—APMarch 10, 2011. Children look through a subway car window in Pyongyang.David Guttenfelder—APApril 8, 2012. A North Korean soldier stands at a check point seen from a train heading to North Phyongan Province, about 50 kilometers (35 miles) south of the border town of Sinuiju along North Korea's west coast.David Guttenfelder—APApril 13, 2011. North Korean soldiers tour the grounds of the birthplace of the late President Kim Il-Sung at Mangyongdae, North Korea.David Guttenfelder—APApril 2, 2012. The hoof of a deer used as a door handle hangs on the door of the small cabin that is said to have been the home of the late North Korean leader Kim Il-Sung, and the birthplace of his son and late leader Kim Jong-Il at what was a secret military camp during the fight against the Japanese at the foot of Mount Paektu, North Korea.David Guttenfelder—APApril 4, 2012. a North Korean soldier working as a guide walks through a forest at the foot of Mount Paektu, North Korea.David Guttenfelder—APApril 3, 2012. A man clears snow from the base of a monument at the Samjiyon Grand Monument area in Samjiyon, North Korea at the base of Mount Paektu.David Guttenfelder—APFeb. 11, 2012. Snow blankets farm fields on the outskirts of Pyongyang.David Guttenfelder—APApril 17, 2011. People work in a field outside of Kaesong, North Korea.David Guttenfelder—APApril 10, 2012. A North Korean man rides a bicycle on the grounds of a communal apple farm on the outskirts of Pyongyang.David Guttenfelder—APOct. 8, 2011. A North Korean man rests near a farm field along a highway outside the eastern coastal city of Wonsan, North Korea.David Guttenfelder—APApril 15, 2011. A young North Korean dancer leaps by as North Korean girls put on panda bear costumes as they prepare to perform at a gathering at a park to celebrate the 99th anniversary of the late leader Kim Il-Sung's birthday in Pyongyang.David Guttenfelder—APApril 15, 2011. A North Korean girl uses her digital camera to take a photograph of her friend dancing at a gathering at a park to celebrate the 99th anniversary of the late leader Kim Il-Sung's birthday.David Guttenfelder—APApril 14, 2011. A young girl stands on floral-print carpet inside the Pyongyang Children's Palace in Pyongyang.David Guttenfelder—APFeb. 26, 2008. A North Korean woman peers out of an elevator while speaking on an in-house phone at a library in Pyongyang.David Guttenfelder—APFeb. 12, 2012. A bouquet of flowers sits on a table in front of a painted mural on the wall of a restaurant in Pyongyang.David Guttenfelder—APFeb. 26, 2008. North Korean ushers peer into the concert hall before the start of a performance by the New York Philharmonic in Pyongyang.David Guttenfelder—APFeb. 26, 2008. North Koreans look through the performance program before the start of a concert by the New York Philharmonic in Pyongyang.David Guttenfelder—APFeb. 27, 2008. North Korean girls sing a song entitled "Generalissimo Kim Il Sung Danced With Us" at the Mangyongdae Schoolchildren's Palace in Pyongyang.David Guttenfelder—APOct. 11, 2011. North Korean soccer fans react after their team missed a goal during a World Cup qualifying match between North Korea and Uzbekistan, in Pyongyang.David Guttenfelder—APApril 15, 2011. Women perform a dance routine with badminton rackets at an event to mark the birthday of Kim Il Sung at a park in Pyongyang, North Korea.David Guttenfelder—APSept. 16, 2008. A guide gives a lecture in front of a diorama showing the Korean War's 1950 battle of Taejon as she gives a tour of the War Museum in Pyongyang.David Guttenfelder—APFeb. 16, 2012. Fireworks explode over the heads of North Korean soldiers lined up in formation at Kumsusan Memorial Palace in Pyongyang during a parade of thousands of soldiers commemorating the 70th birthday of the late Kim Jong-Il.David Guttenfelder—APFeb. 14, 2012. A North Korean stands at attention as others cheer during the unveiling of a new bronze statue depicting the late leader Kim Jong-Il and his father Kim Il-Sung at Mansudae Art Studio in Pyongyang.David Guttenfelder—APFeb. 16, 2012. A large screen shows video, recorded during the period of mourning following the death of late North Korean leader Kim Jong Il, during a concert in Pyongyang to commemorate his death and what would have been his 70th birthday.David Guttenfelder—APApril 12, 2012. North Korean residents of the capital city mingle on the side of the street in Pyongyang.David Guttenfelder—APJan. 15, 2012. A song and video showing the launch of the North Korean "Unha-2" rocket plays on karaoke stage inside a restaurant in Pyongyang.David Guttenfelder—APApril 8, 2012. A group of journalists walk down a road in front of North Korea's Unha-3 rocket, slated for liftoff at Sohae Satellite Station.David Guttenfelder—APApril 15, 2012. North Koreans, lit with red light, look on with delight as they watch a fireworks display along the Taedong River in Pyongyang to celebrate 100 years since the birth of the late North Korean founder Kim Il-Sung.David Guttenfelder—APApril 15, 2012. North Korean civilians, some weeping, wave flowers as they look up at North Korean leader Kim Jong-Un, unseen, at the end of a mass military parade in Pyongyang's Kim Il Sung Square to celebrate 100 years since the birth of the late North Korean founder Kim Il-Sung.David Guttenfelder—APApril 12, 2012. A North Korean woman with a pin of the late leader Kim Il Sung attached to her dress sits with fellow audience members at the "World Congress on the Juche Idea" in Pyongyang.David Guttenfelder—APApril 15, 2012. North Korean soldiers ride by on horses in front of flower waving civilians during a mass military parade in Pyongyang's Kim Il-Sung Square to celebrate 100 years since the birth of the late North Korean founder Kim Il-Sung.David Guttenfelder—APApril 13, 2012. North Korean leader Kim Jong Un, far right, applauds with senior military officials as citizens wave flowers at an unveiling ceremony for statues of the late leaders Kim Il-Sung and Kim Jong-Il in Pyongyang.David Guttenfelder—APApril 15, 2012. Two North Korean officials look up at a crowd of military members seated in a stadium in Pyongyang during a mass meeting called by the Central Committee of North Korea's ruling party.David Guttenfelder—APApril 16, 2012. Images of the late North Korean leader Kim Il-Sung and Mt. Paektu appear on a screen behind a choir during a concert in Pyongyang.David Guttenfelder—APApril 17, 2012. A man and a boy pose for a picture in front of portraits of the late leaders Kim Il-Sung and Kim Jong-Il at a festival for the "Kimilsungia" flower to mark 100 years since the birth of North Korea's late leader in Pyongyang.David Guttenfelder—APAug. 8, 2012. North Koreans gather under a high dive platform to watch as fellow swimmers hesitate to try a dive at a newly opened swimming pool in Pyongyang, North Korea.David Guttenfelder—APAug. 8, 2012. North Koreans look at a model of an octopus as they tour a dolphin show facility at a newly-built amusement park in Pyongyang, North Korea.David Guttenfelder—APAug. 8, 2012. A woman rides a roller coaster at a newly-built amusement park in Pyongyang, North Korea.David Guttenfelder—APAug. 11, 2012. North Koreans grill barbecue under a tree at Majon Beach near Hamhung, North Korea.David Guttenfelder—APAug. 11, 2012. Two people dance at Majon beach near Hamhung, North Korea.David Guttenfelder—APSept. 8, 2012. A North Korean woman working at a miniature golf facility give guidance to young players in Pyongyang, North Korea.David Guttenfelder—APSept. 11, 2012. North Korean woman walks down stairs at a restaurant meant primarily for tourists in Kaesong, North Korea.David Guttenfelder—APSept. 13, 2012. North Korean children lift toy barbells during play time at a school for the performing arts in Pyongyang, North Korea.David Guttenfelder—APJan. 10, 2013. North Korean men shovel snow from the roof of a building in Pyongyang, North Korea.David Guttenfelder—APFeb. 16, 2013. Female North Korean traffic police officers gather in front of bronze statues of the late leaders Kim Il Sung and Kim Jong Il to pay their respects in Pyongyang, North Korea.David Guttenfelder—APFeb. 17, 2013. North Korean soldiers ride an escalator past a model of their country's Unha Rocket as they enter an exhibition in Pyongyang, North Korea.David Guttenfelder—APApril 11, 2013. North Koreans visit the Pyongyang Folk Park on the outskirts of Pyongyang, North Korea.David Guttenfelder—APApril 11, 2013. North Koreans dance together beneath a mosaic painting of the late leader Kim Il Sung during a mass folk dancing gathering in Pyongyang to mark the anniversary of the first of many titles of power given to leader Kim Jong Un after the death of his father Kim Jong Il.David Guttenfelder—APApril 14, 2013. Runners rest inside Kim Il Sung Stadium in Pyongyang. North Korea hosted the 26th Mangyongdae Prize Marathon to mark the upcoming birthday of the late leader Kim Il Sung.David Guttenfelder—APApril 15, 2013. A North Korean child covers the eyes of her father as she sits on his shoulders watching mass folk dancing in front of Pyongyang Indoor Stadium in Pyongyang, North Korea.David Guttenfelder—APApril 16, 2013. A North Korean soldier races another man on a go cart track at the Fun Fair in Pyongyang, North Korea.David Guttenfelder—APApril 18, 2013. North Korean children work at easels during a drawing class at Mangyongdae Children's Palace in Pyongyang, North Korea.David Guttenfelder—APApril 24, 2013. A North Korean boy rides in a bicycle basket on a road north of Kaesong, North Korea.David Guttenfelder—APApril 24, 2013. A North Korean man checks his bicycle next to a painted exclamation point on a propaganda billboard in Kaesong, North Korea.David Guttenfelder—APApril 24, 2013. A North Korean boy on rollerblades is pulled by a woman on a bicycle on a road south of Kaesong, North Korea and north of the demilitarized zone which separates the two Koreas.David Guttenfelder—APApril 25, 2013. North Korean soldiers and civilians stand on a foot bridge to look at goldfish in a moat as they tour the grounds of Kumsusan Palace of the Sun, the mausoleum where the bodies of the late leaders Kim Il Sung and Kim Jong Il lie embalmed, in Pyongyang, North Korea.David Guttenfelder—APApril 25, 2013. North Korean soldiers and civilians pose for souvenir photos in front of a fountain as they tour the grounds of Kumsusan Palace of the Sun, the mausoleum where the bodies of the late leaders Kim Il Sung and Kim Jong Il lie embalmed, in Pyongyang, North Korea.David Guttenfelder—AP
So what about oil? Well, this is where the big loopholes become particularly gaping.
A Mongolian oil company is coming under scrutiny for an oil deal with North Korea. According to media reports citing South Korean officials, Mongolian HBOil JSC, an Ulaanbaatar-based oil trading and refining company that acquired a 20 percent interest in North Korea’s Sungri refinery in June 2013, has pulled out of the deal. In May 2014, the company launched a joint venture with Pyongyang.
But HBOil says the reports aren’t true and it hasn’t withdrawn. Mongolia is clearly hedging its bets here and trying to determine how much trouble it could face by going forward with this deal. They may also be trying to determine whether it’s even worth it. The North Korean government is a deplorable investment partner and has delayed the project’s development despite its importance to the North Korean economy as the refinery has been closed down since 2009.
But Mongolia is a bit player here; it’s China’s oil that keeps North Korea afloat.
Washington has been trying to get Beijing to cut off the oil taps to North Korea for some time. Beijing, in February, claimed that Pyongyang had already been cut off for two consecutive years, and that overall oil exports to North Korean have fallen by 60 percent since 2013.
But in the absence of any evidence that North Korea is suffering from a lack of oil, many have questioned the veracity of this.
The Chinese claim that there is a 1-million-ton deficit in North Korea’s oil imports. North Korea is so insular it’s impossible to get any oil data, but the speculation on some levels is that if China were in fact cutting off North Korea from oil, there should be reports about fuel shortages or price hikes. South Korean media in particular noted an increase in fuel consumption and an unusual rate of “activity” in Pyongyang.
According to the New York Times, cross-border trade between China and North Korea—both legal and illegal—continues despite the new sanctions. Crude oil is exempt from sanctions, but coal and iron ore are not; nevertheless, they continue to be traded unabated.
The key problem here is the answer to a question that no one is comfortable guessing at. North Korea needs oil. It needs food. If it doesn’t get it, the regime could collapse. But this is no normal regime. It’s a tyrannical overture to a very unstable sort of insanity that has its finger on a nuclear button.
Sanctions won’t really work unless China facilitates them. But what happens if sanctions do work? China is struggling with the philosophical/psychological question itself. On one hand, it is horribly frustrated with Pyongyang and views it as a loose cannon that could gravely upset regional stability. On the other hand, it fears what might happen if sanctions destabilize the regime, or if the regime really feels that its survival is being seriously challenged.
