Remember when Marcus Noland and Stephan Haggard wrote that North Korea, notwithstanding the deepening misery of most of its people, had begun to show a current account surplus in recent years? Their conclusion was based largely on trade data showing that North Korea was importing more foreign goods, mostly through China. If you believe these official Chinese government statistics for the last six months, however, Pyongyang’s imports from China fell sharply … for the first time in four years.
Is this welcome evidence that sanctions are starting to work? Not so fast. The main thing the North Koreans seem to be buying less of from China is oil. Noland expressed his skepticism about a similar previous report of falling oil imports from China, suggesting that the drop might have been because of seasonal factors.
Another possible explanation, however, may be the announcement, in April, that Iran and North Korea had reached an oil-for-minerals barter deal. The deal makes sense for Iran, which is having difficulty finding markets for its oil because of tightening international sanctions, and for North Korea, which had been paying above-market prices for Chinese oil.
The transactions would undermine international sanctions against Iran, and might (depending on the specific financial arrangements) also undermine sanctions against North Korea. The use of barter, which doesn’t rely on the international financial system, lends itself well to sanctions evasion.