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North Korea running out of hard currency
By Kim Jae-kyoung
North Korea is suffering a cash crunch due to international sanctions and could soon face a currency crisis, experts on the North said Tuesday.
They said leader Kim Jong-un's recent visit to Beijing was aimed at seeking sanctions relief and easing cash drainage in the reclusive regime.
"I think the February Chinese data shows Pyongyang is running short of cash, hence they have cut back sharply on their essential imports from China," William Brown, adjunct professor at Georgetown School of Foreign Service, told The Korea Times.
"Kim's ship is full of holes and a few patches won't help much. I'm pretty sure that's why Kim felt he suddenly had to go to Beijing."
According to data from Global Trade Atlas, China's imports from North Korea stood at $9 million in February, down 95 percent from a year ago. Its exports to the North fell by 32 percent to $103 million during the same period.
Brown, who previously worked for the CIA and the National Intelligence Council, believes Kim and Chinese President Xi Jinping must have made a behind-the-scenes deal during Kim's "unofficial" visit to Beijing.
"I'd be surprised if Xi didn't give him something in return, presumably for Kim's promises to behave well during the next few months and sincerely approach the upcoming Korean and U.S. summits," he said.
"We did see some North Korean workers flooding back into China. I'm sure Pyongyang needs everything it can get."
Joseph DeTrani, a former U.S. special envoy to the six-party talks with North Korea, echoed Brown's view, saying, "Sanctions are biting."
"China has restricted the amount of petroleum products it's selling to North Korea, while also limiting the amount of crude oil, all critical for the functioning of North Korea's economy," he said.
"Also, North Korea is unable to export the amount of fisheries, textiles and other products, and as their citizens return from working abroad, the economic situation in North Korea is more tenuous."
DeTrani did not rule out the possibility the sanctions-hit Kim regime would undergo a currency crisis this year as its reserves are quickly draining amid snowballing trade deficits.
He pointed out although the official exchange rate remains 8,000 won to the dollar, most transactions in the North use foreign currencies, especially China's yuan.
"Continuing in this way most likely will lead to an eventual currency crisis," he said.
Experts said a series of sanctions have cut off the source of hard currency for the Kim regime.
Tara O, adjunct fellow at Pacific Forum CSIS, said many countries have kicked out North Korean embassy personnel or reduced embassy sizes as well as no longer allowing North Korean workers into their countries.
"North Korea continues to try to circumvent the sanctions by changing the names of entities. In turn, more and more of these entities get on the sanctions list," she said.
"As long as China feels it is in its national interest to maintain North Korea, then it will continue to provide support."
Some analysts claim that despite international sanctions, China continues to maintain unofficial economic activities with North Korea to avoid a sudden collapse of the moribund economy.
"North Korea always runs a trade deficit with China which presumes that Beijing is willing to extend some form of credit to Pyongyang," said Tony Michell of the Korea Development Institute (KDI) School.
"We would assume this credit continues since it is generally acknowledged that China's top priority is to ensure stability in North Korea."
Michell, who is also president of Korea Associates Business Consulting (KABC), assumed the Kim delegation exchanged notes with the Chinese in the recent summit on the economy.
"The fact that the Chinese and Russians did not veto the sanctions implies some understanding between the Chinese and the North of the actual situation," he said.
"Rumors are now that there is or will be a relaxation of the return of North Korean workers and perhaps even some relaxation of those sanctions which have damaged Chinese traders the most."
