PYONGYANG: A North Korean state economic official sought Tuesday to play down the impact of China’s shock announcement that it was suspending coal imports from the country for the rest of the year.
The move came shortly after another missile launch by Pyongyang and the assassination of its leader’s half-brother in Kuala Lumpur, allegedly in a Northern plot. It would go much further than the latest UN sanctions imposed on the country over its nuclear and missile programmes. China is the North’s sole major ally and by far its largest trading partner, with coal the biggest component of its purchases — according to figures from Chinese Customs, Beijing last year imported more than 22 million tonnes worth nearly $1.2 billion.
It is a crucial foreign currency-earner for isolated Pyongyang. “Of course if we can no longer export things that we used to export, it can have some impact on the companies that are directly involved in exports,” Ri Sun-Chol, chief of the economic research institute of the North’s Academy of Social Sciences, told AFP in an interview. But he added: “Direct exports of natural resources have been under great restrictions. So I can’t say that it would have substantial impact on the economy.”
Beijing, which announced the move at the weekend, said it was in line with UN Security Council sanctions on the North. But the latest resolution only imposed a cap on coal exports rather than a complete ban, so the Chinese move appears to go further. Overseas analysts said the impact was likely to be more significant than suggested by Ri. Peter Hayes, executive director of the Nautilus Institute, a California-based public policy think tank, said the cut would hurt Pyongyang. “This is punishment — public shaming and direct and substantial imposition of cost — but not anything close to bringing down the regime,” he said in an email.
The move would “cause belt-tightening” he wrote, although there would also be “a domestic welfare gain from having more and likely cheaper coal available to meet suppressed demand”. In a blog post, Stephan Haggard of the Peterson Institute for International Economics said that a suspension of Chinese coal imports would test whether the North was “more vulnerable to Chinese pressure than is thought”.”North Korea is not immune from the laws of economics, and could easily experience a full-blown balance-of-payments-cum-currency crisis, with the black market value of the won plummeting rapidly and domestic prices spiraling in tandem,” he wrote. But he added that the motivations behind Beijing’s move were crucial to how it would play out, saying the underlying intention was to pressure the new US administration of President Donald Trump to offer “an initiative on negotiations”.
How the move will be implemented is also open to question. Beijing announced a three-week suspension of coal imports in December but still bought more than two million tonnes worth $168 million that month, according to the Customs statistics — the third-highest monthly total of 2016. China has long argued that it has little much less influence over its unpredictable neighbour than the US thinks. But it has become increasingly exasperated with Pyongyang, whose leader Kim Jong-Un has yet to visit Beijing five years after inheriting power from his father.
At the same time, though, China prizes stability above all else, fearing that any North Korean collapse could bring refugees streaming into its territory — or worse, US troops stationed on its border in a unified Korea. The UN Security Council has imposed six sets of sanctions since Pyongyang first tested an atomic device in 2006. In the North Korean capital, economics professor Ri told AFP that “economic sanctions don’t have a big impact on our economy”. Pyongyang was “building an independent national economy”, he said, and had undertaken steps to “minimise the effect of sanctions”.