Capitalism China & Korea Class Warfare Diplomacy Russia & Korea Sanctions

Kim Jong Un seeks friends and funds abroad as he isolates his people.

In the three years that he has been in power, His Porcine Majesty has found plenty of time for Dennis Rodman, but none for meetings with foreign leaders. Suddenly, in the last two months, he has flirted with (1) a summit with South Korean leader Park Geun-Hye, (2) inviting Japanese Prime Minister Shinzo Abe to Pyongyang, (3) and a visit to Vladimir Putin in Moscow in May. His central bank even “committed itself to implementing the action plan of ‘international standard’ for anti-money laundering and combating the financing of terrorism.” (I’m sure Pyongyang will find some way to reconcile this with its arms sales to Hezbollah and Hamas.)

If you believe that talks with North Korea are immediately capable of solving anything, or that they are an end in themselves, you may be pleased that Kim Jong Un has developed this urgent interest in diplomacy. What accounts for this belated quinceañera, assuming that any of these meetings comes to pass? Only Kim Jong Un knows, but I doubt it has anything to do with a yearning for more intelligent companionship. There’s almost certainly a financial motive, if not more than one.

One motive may be a growing threat of sanctions. Kim’s charm offensive began just after December 19th, when FBI and President Obama announced that North Korea had hacked Sony Pictures and threatened audiences for “The Interview.” Almost immediately, Congress called for stronger sanctions, and centrist figures in the foreign policy establishment, including Richard Haass and Winston Lord, began calling for regime change. President Obama himself suggested that the collapse of North Korea’s system was inevitable, although he didn’t declare an intent to catalyze that result.

On January 2nd, President Obama signed Executive Order 13687, authorizing sanctions against all entities and officials of North Korea’s government and ruling party, and (more importantly) authorizing secondary sanctions against the Chinese, and other entities that provide Pyongyang its regime-sustaining hard currency. The order was potentially sweeping and devastating, but in its actual impact, it reached only three entities that were already sanctioned, and ten mid- to low-level arms dealers. But the President also said that this was only a first step, which left Pyongyang scurrying to secure its financial lifelines.

Pyongyang’s charm offensives always seem to come just as the political will waxes to enforce sanctions against it. The charm offensives play on the individual interest of each interlocutor — Park Geun Hye’s domestic unpopularity, Shinzo Abe’s desire to bring abductees home, Putin’s search for ways to f**k with Obama — to disrupt any coordination among them. It works because we’re dumb enough to let it. And once sanctions enforcement wanes, so will Kim Jong Un’s interest in diplomacy.

One thing is clear enough: a credible threat of sanctions certainly hasn’t done any harm to prospects for diplomacy with North Korea. I could also say, with equal conviction, that they haven’t harmed John Hinckley’s odds of marrying Jodie Foster.

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Another possible explanation is a series of reports suggesting that North Korea’s trade relations with China are declining. For one thing, fewer North Koreans are traveling there:

Overall figures for North Korean residents entering China annually totaled between 100,000-120,000 until 2010 before jumping to 150,000 in 2011. A steady period of continual increase in visitors followed until 2013, when the number of North Koreans traveling to China reached an all-time high of 200,000, roughly half of whom noted their reason for making the trip as “looking for work.” Aside from finding employment, 34,000 went to conduct business or attend a conference, and 1,500 went purely to travel. This represents a 60% and 50% respective reduction when compared to last year’s figures. Visits to friends and relatives dropped to 1,100–one-third of those making the trip for the same reason in 2013.

Male visitors [150,000] composed five times total amount of females [30,000] visiting China from North Korea. Most North Koreans [77,000] traveled by boat for the trip. [Daily NK]

North Korean agents who do travel to China are also having more difficulty doing business there. There’s no evidence this has anything to do with sanctions. It appears to be because of a combination of a sagging Chinese economy and the lingering effects of the Jang Song-Thaek purge. After that purge, I posted here that the regime had called home large numbers of its China-based money men, presumably men who were loyal to Jang or thought to be, and that the money men had stayed away in droves. Subsequently, I posted about another reported defection of a senior financier in Russia. That trend continues:

A source in a northeastern Chinese city, who spoke on condition of anonymity because of the sensitivity of the issue, said only about 30 percent of the North Korean businessmen have returned to China after being summoned.The summonses are also believed to be part of efforts by North Korea to redistribute the “rights of doing businesses with China,” a key source of earning hard currency, to its ruling elite, the source said.”The replacement of businessmen loyal to Jang Song-thaek has been gradually carried out and a lot of North Korean businessmen were summoned until late last year,” the source said. “Of those being summoned, only about 30 percent returned to China.”There are no official data on how many North Korean businessmen are working in the Chinese border cities.A second source in another Chinese border city with North Korea said that about 170 North Korean businessmen in the city were replaced over the past year.With Chinese investor confidence eroding over the North’s unpredictable behavior, the new North Korean businessmen come under further pressure in building business connections with their Chinese counterparts, the second source said. [Yonhap, via the Korea Herald]

Not only is the sagging Chinese economy hurting Bureau 39, but according to the report, “Chinese investor confidence” is also “eroding.” One reason may be the arbitrary behavior of North Korean officials, including their inclination toward unilateral price increases and demands for bribes and prostitutes. I can’t speak to the latter concern, but the former concern can’t have improved since Kim Jong Un had Jang shot for “selling off precious resources of the country at cheap prices.” This is consistent with evidence of a sudden onset of distress in North Korea’s mining industry, although I can’t say whether poor investor relations are a cause of the problems or a consequence of them.

The report cites Korea Trade and Investment Promotion Agency (KOTRA) figures, according to which, “North Korea’s annual trade with China fell 2.4 percent from a year ago in 2014,” from $6.54 to $6.39 billion, “marking the first decline since 2009.” These figures are sourced to Chinese government statistics, which is one reason to distrust them. For example, we read a lot of reporting last year that China had cut off North Korea’s crude oil supply, only to find that China had merely reclassified its trade as aid, or supplied Pyongyang with refined petroleum products (such as jet fuel) instead.

The report also claims that “North Korea’s exports of coal to China slipped 17.6 percent from a year ago to $1.13 billion, marking the first drop in 8 years.” I see more extrinsic evidence that that report is accurate.

And there are other signs of trouble: it would be a snub for Kim Jong Un to visit Russia before he visits China, and it was a snub for the leaders of China and South Korea to meet before the leaders of China and North Korea met. China didn’t send a representative to Kim Jong Il’s latest birthday party, either. This doesn’t yet mean that China has broken with North Korea. It certainly doesn’t mean that China wants to destabilize North Korea. It bears watching, however.

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In other ways, Pyongyang is intensifying its isolationism. The ones that have attracted the most media attention are its bans on foreigners entering North Korea for a marathon and its creepy Arirang Festival. (By contrast, it recently granted permission for this “peace” march by a group of left-wing activists, led by Christine Ahn and Gloria Steinem). The dubious pretext for Pyongyang’s isolationism is that it is a precautionary quarantine against Ebola. This has inconvenienced two groups of useful idiots — the North Korea tour companies and the slummers who use them. I don’t see the down side to that. In the long run, it will mean fewer hostages for Pyongyang, and less hard currency for its bank accounts.

Why would Pyongyang shut down this lucrative, low-risk traffic in people with more money than sense or soul? No one knows but Pyongyang. Maybe it really is terrified of Ebola, yet confident that Gloria Steinem isn’t a carrier. Then again, maybe it’s terrified of a contagion of another kind.

For years, the pro-“engagement” argument for tourism in North Korea has been that there is something transformational, even dangerously subversive, about it that minders, deceptions, and other controls can’t contain. (Somehow, I doubt that Koryo Tours and Young Pioneers make the same argument to their contacts in Pyongyang.) I’ve usually been dismissive of this argument, although I’d be genuinely interested in hearing any evidence that Pyongyang thinks it has anything to fear from this kind of tourism. Even if that argument had any merit, Pyongyang knows how to deal with foreign subversive influences. Maybe it just did.

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Kim Jong Un has been isolating low-caste North Koreans since the very beginning of his reign. His regime continues to do that by terrorizing traders, cracking down on cell phones, and blocking the flight of desperate people:

“A family of four from North Hamkyung Province attempted to escape with the help from a border guard and a smuggler near the end of last month; however, someone tipped off the proper officials, resulting in their arrest,” a source in Yangkang Province reported to Daily NK on February 4th. “To expedite the family’s escape, the smuggler got a number of soldiers, all of whom he deemed trustworthy, involved. But too many caught wind of the family’s plot to defect, which led to the family’s eventual capture.”

The family’s eldest son purportedly fled while being held in custody, leaving behind the parents and their younger son to endure relentless interrogation at a SSD-run detention center, where they are “as good as dead,” according to the source, because not only were they themselves planning to defect, but now their son presumably succeeded in doing so despite being held in custody. [Daily NK]

Human Rights Watch has documented the border crackdown in a new report, which you can read here.

“North Korean authorities are using brutal punishments to shut the door on people fleeing the country, and cracking down on those who share information with the outside world,” said Phil Robertson, deputy Asia Director. “Kim Jong-Un is trying to silence news of his systemic and pervasive rights crimes by going after the messengers, such as people with connections in South Korea or those who can help North Koreans flee there.”

The North Korean leadership has made clear the country must redouble its efforts to remain shut to the outside world.

“We must set up two or three layers of mosquito nets to prevent the poison of capitalism from being persistently spread by our enemies across the border into our territory,” said Kim Jong-Un, North Korea’s supreme leader, during a speech at the 8th Conference of Ideological Workers of the Korean Worker’s Party on February 25, 2014. “We also have to be active to block the imperialists’ plots for ideological and cultural invasion.” The “mosquito net” system Kim referred to was developed in the North to attract the inflow of foreign investment while blocking the infiltrations of foreign ideas, news, and culture. [….]

According to the escapees, the North Korean government has also been actively tracking down unauthorized phone calls from cell-phones operating on Chinese service provider networks being used by people in the North Korean border areas to call to China or South Korea. “The phones have no signal in the cities anymore and I have heard they even have mobile technology to find the exact location of the caller even after you hang up,” said Kim. “I used to call from my living room, but later I had to go high up in the mountains in the middle of the night and I was scared to talk for more than a minute or two.” Park said she used to get calls from North Korea at all times of the day and talk for long periods, but now the number of calls she receives has shrunk by approximately 60 percent since 2012.

“North Korea feels threatened by news and images of the outside world seeping into the country and now is trying to reassert its control by going after people bringing in the information,” said Robertson. “Talking on an overseas phone call, or watching a foreign television show should not be considered crimes, but the government is tightening control through repression and fear.”

More here and here. One backlash of this increased border control is a rise in cross-border violence, and more tension with China. North Korea’s border guards had come to rely on the bribes and extortion they taxed from this localized, illicit cross-border trade. With the loss of that income, the underpaid guards have turned to violent crime, and like all criminals, they go where the money is. China has since raised militias to patrol the border regions, and North Korea has purged an official of the Supreme Guard Command as punishment for the violence. There were also purges at the local level.

There is a very important point here, one that makes Kim Jong Un’s diplomatic outreach completely consistent with his isolationism: it costs money to pay border guards, buy cell phone trackers, and isolate the people you consider “wavering” or “hostile.” North Korea earns that money by extracting aid from foreign sources, and through its officially sanctioned trade relationships. Here is another way that sanctioning the regime can actually open North Korea to outside trade and influence.

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These reports paint a picture of a regime that is struggling to maintain its financial links to the outside world, while severing the economic, social, and cultural links between its people and the outside world. If a less isolated, less hungry, less brutal, and less provocative North Korea is in our interests, then our obvious policy response is to undermine both aspects of that policy — to facilitate illicit cross-border flows of information, people, money, and goods, while cutting Pyongyang’s hard currency flows.

The first part of this strategy is the more difficult one. Some of it can be done through broadcasting, some requires creative technological thinking, and some will require clandestine operations.

The second part is about sanctions enforcement, which requires financial intelligence, legal tools, effective diplomacy, and political will.

The reports of defections by North Korean financiers suggest a potential windfall of financial intelligence. Each of these men, and each of their laptops, represents a potential Rosetta Stone. I certainly hope some of them have found safety in the care of U.S. and South Korean intelligence agents. I’ll also express my hope that The Guardian and Al-Jazeera will refrain from getting them — and their entire families — killed, by printing their names.

The Obama Administration will also have to find the political will to dissuade South Korea and Japan from subsidizing Pyongyang and loosening their own sanctions. It will have to find the political will to threaten secondary sanctions against the Chinese and Russian interests that prop Pyongyang up. Lacking this, the administration’s policy will continue to fail. My guesses are (respectively) that it won’t, it won’t, and so it will. North Korea’s hostage-taking, threats, and inducements will recoup more modest financial benefits for the regime. That’s about all Pyongyang needs to undermine the effect of U.N. sanctions, and to sustain its provocative and repressive ways.