{"id":4128,"date":"2019-03-19T14:26:31","date_gmt":"2019-03-19T05:26:31","guid":{"rendered":"http:\/\/www.01.asiapress.org\/rimjin-gang\/?p=4128"},"modified":"2019-03-22T10:45:52","modified_gmt":"2019-03-22T01:45:52","slug":"regime-sanctions","status":"publish","type":"post","link":"https:\/\/www.02.asiapress.org\/rimjin-gang\/2019\/03\/news\/regime-sanctions\/","title":{"rendered":"[Special Report] \uff1cInside N. Korea\uff1e Shaken by Sanctions- Regime Takes a Direct Hit as Pyongyang\u2019s Privileged Feel the Pressure"},"content":{"rendered":"
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The Tumen River, frozen over. North Korea is on the left side of the river. Photographed in December 2018 from the Chinese side by ISHIMARU Jiro<\/p><\/div>\n

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On February 27, Kim Jong-un and Donald Trump met in Hanoi for a second round of talks. While the U.S. aimed to set the terms, speed, and extent of North Korean denuclearization, North Korea sought an end to the sanctions imposed by the UN Security Council. Despite North Korean boasts that the country\u2019s philosophy of self-reliance was holding up against the sanctions, the country\u2019s economy was truly crippled.<\/p>\n

According to ASIAPRESS reports from inside North Korea, it is not only the government and military that have been hit hard by the effects of the sanctions. From the poorest citizens to the wealthiest Pyongyang elite, life under the sanctions has been much more difficult for all levels of society. (ISHIMARU Jiro \/ ASIAPRESS)<\/p>\n

\"Trump is a fraud\"<\/strong><\/p>\n

ASIAPRESS relies on a team of about 10 reporting partners living inside North Korea. One of the group, a man in his 40\u2019s, called on February 16, the anniversary of Kim Jong-il\u2019s birthday.<\/p>\n

\u201cWe were very happy about the meeting with Trump last June. We thought that the sanctions would be lifted and that life would get better. But nothing has changed. The people here are angry because, while we have kept our promises to the United States as best as we can, Trump has broken his promises- condemning us to carry on like this. Party officials explain to us what happened at the summit this way.\u201d<\/p>\n

The reporting partner lives near the Chinese border in Musan County, North Hamkyung Province. The county\u2019s main industry, iron ore production, came to a halt late last year when all exports to China were blocked. In accordance with the UN sanctions, China had banned imports of iron ore from North Korea.<\/p>\n

Despite this, the partner says that, due partly to government propaganda, many residents blame the U.S. for their worsening lifestyles.<\/p>\n

In January, a reporting partner living in another region of North Korea said, \u201cKim Jong-un needs to give up the nuclear weapons. Then the sanctions can soon be lifted. Nevertheless, people are saying that Trump is a fraud. We don\u2019t expect anything to come from this next meeting with the United States.\u201d<\/p>\n

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North Korea's monthly trade with China across 2018.\uff08ASIAPRESS\uff09
-Volume of Trade with China in 2018
-\u203b( )Indicates year-on-year rate of change
- \u203b Source: Trade statistics released by Chinese Customs Authorities \/ Unit: U.S. dollars, rounded to the nearest ten thousand<\/p><\/div>\n

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Foreign currency imports plunge...N. Korean exports to China fall off by 88%<\/strong><\/p>\n

In 2017, the Kim Jong-un regime focused on upgrading its nuclear weapon and missile programs. Over the course of the year, the regime conducted 17 ballistic missile tests and experimented on an atomic bomb with 10 times the strength of the one dropped on Hiroshima. In response, the U.N. Security Council, with the full support of China and Russia, stepped up economic sanctions with 4 new resolutions.<\/p>\n

The real force behind the latest sanctions is China, with North Korea\u2019s traditionally supportive neighbor responsible for more than 90% of its neighbor\u2019s trade. According to statistics from China\u2019s customs authorities, trade with North Korea declined sharply following implementation of the sanctions. North Korean exports to China amounted to only $220 million in 2018, down 88 percent from the previous year. In 2016, the year before sanctions were introduced, North Korean trade with China had amounted to about $2.6 billion. It can be estimated that the sanctions have deprived the regime of about 90 percent of its expected trade gains.<\/p>\n

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A truck waiting at North Korean customs. All is quiet at the border crossing. Photographed in October 2017 in the Chinese city of Tumen by ISHIMARU Jiro<\/p><\/div>\n

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Economic sanctions by the UN Security Council against N. Korea<\/strong>
\n-\u2460 Exports of minerals, textiles, and seafood are banned.
\n-\u2461 North Korean workers may no longer be dispatched to work in foreign countries.
\n-\u2462 Joint ventures with North Korea are prohibited. Existing businesses are to be eliminated.
\n-\u2463 Exports of petroleum to North Korea are limited to less than 500,000 barrels per year- a nearly 90% reduction.
\n-\u2464 Exports of industrial machinery and transport vehicles to North Korea are prohibited. Transferring large amounts of cash is also prohibited.<\/p>\n

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Map of North Korea. Produced by ASIAPRESS<\/p><\/div>\n

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Information on the true extent of the damage to the North Korean economy is carefully guarded by the regime. With 90 percent of trade lost, however, the impact must have been severe.<\/p>\n

To find out the exact impact of the sanctions, ASIAPRESS worked with reporting partners living in various regions of North Korea to investigate. Through actual visits to the iron mines, fishing ports, regional trade offices, and Pyongyang markets, reporting partners were able to uncover the true effects of the sanctions on the lives of the North Korean citizens they met. To smuggle this information out of the country, reporting partners were asked to cross the border into China, through both illegal and legal means. Other reports were given through calls on smuggled Chinese mobile phones.<\/p>\n

As the investigation progressed, it became clear that there is rising chaos in North Korea.<\/p>\n

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Seen from across the border in China, Musan County\u2019s open-pit mine was developed by the Japanese during the colonial period and is reportedly the largest iron mine in East Asia. Photographed by ASIAPRESS in March 2012<\/p><\/div>\n

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North Korean exports drop further than predicted<\/strong><\/p>\n

Let\u2019s return to Musan County. Musan is on the border with China, facing the Tumen River, with a nearby iron mine providing work for much of its 100,000-strong population. The closeness of this mine to the border is convenient, as most of the iron produced is traded at the border. According to statistics from 2017, iron ore exports to China in 2014 amounted to $211.9 million and, for 2016, $74.41 million. Iron provided not just for Musan. As the second most important national export, the industry was regarded as a crown jewel among North Korean state-owned enterprises.<\/p>\n

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The landscape of Musan County. Iron ore has been mined in this region since long ago, with recent sanctions hitting the area particularly severely. Photographed from China by ASIAPRESS in July 2012<\/p><\/div>\n

 <\/p>\n

Our local partner set out to investigate the situation in Musan, reporting back that, \u201cAll operations at the mine were suspended apart from a small amount of mining at the domestic steel mills. The company can\u2019t afford gas for its vehicles, so it has been renting them out to local businesses in an effort to recoup some losses. Food distribution to mine workers was suspended in March of last year. In July, workers received 4-5 kilograms of Chinese rice but following that, they didn\u2019t receive anything at all until October. There are many hungry workers who have gone off to look for paying work elsewhere.\u201d<\/p>\n

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(Photo) Prisoners are taken to forced labor camps by truck early in the morning. Photographed in South Hwanghae Province in September 2008 by Shim Ui-cheon (ASIAPRESS)<\/p><\/div>\n

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\u2018Job desertion\u2019 now a major crisis<\/strong><\/p>\n

All adult men in North Korea must work at jobs assigned to them by the government. In the 1990\u2019s, a famine led to the dissolution of the food distribution system and, due to skyrocketing inflation, wages at most enterprises lost their value entirely. Despite this, North Korean men still had to report for work at their state-assigned jobs, mostly for the government to maintain control over their daily lives and political thoughts.<\/p>\n

Workers have to sign in at their offices and, each morning, the police checks attendance registers. The Musan mine was one such employer where attendance was checked daily. The difference though was that due to the mine\u2019s success, it was able to continue providing food and wages to an estimated 10,000 workers. After the sanctions, however, the mine could no longer support its workers and many began to desert their posts.<\/p>\n

Last July, the reporting partner visited the house of an acquaintance who works in the mine. He said that a policeman had came earlier to the house to force him to go to work.<\/p>\n

\u201cThe policeman decided not to drag the friend away once he saw how destitute his house was. Workers who were deserting were going into the mountains to collect herbs and vegetables to sell or eat. Workers who were not deserting their posts couldn\u2019t work anyway because they were too weak from the hunger.\u201d<\/p>\n

Musan County is designated as a \u2018hardship area\u2019, with residents given corn and Chinese dried noodles. The region is on the cusp of a humanitarian crisis. Nevertheless, the authorities have refused to relax their control, prioritizing societal order over the lives of its citizens. Starting last fall, those who were caught repeatedly deserted their posts were sent off to labor camps.<\/p>\n

In February, the local partner reported, \u201cWorkers at the mine have nothing to do even when they attend their posts. So they are being pressed into \u2018construction brigades\u2019 and sent to help with construction at a hydroelectric plant on the East Coast.\u201d<\/p>\n

The \u2018construction brigades\u2019 are units set up to lend labor to national construction projects, with members conscripted from state-owned enterprises and youth organizations.<\/p>\n

Says the reporting partner on life in a construction brigade, \u201cFood is provided on-site but the work is unpaid, with shifts lasting between 3-4 months. Everyone tries to forge medical certificates to avoid conscription, but it\u2019s not easy.\u201d<\/p>\n

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(Photo) Women conducting business outside apartment buildings in central Pyongyang. The woman (center) is selling Chinese sausages. Photographed in July 2011 by Koo Kwang-hoo (ASIAPRESS)<\/p><\/div>\n

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Pyongyang\u2019s privileged elite feel the pressure<\/strong><\/p>\n

What about the impact of the sanctions in Pyongyang, where the rich and privileged are concentrated?<\/p>\n

A Chinese reporting partner for ASIAPRESS met with a Pyongyang businessman in China last November to learn more about the situation in the capital. The businessmen visits China several times a year to buy wallets and bags for resale in Pyongyang.<\/p>\n

Meeting in a restaurant late at night to avoid prying eyes, the businessman said, \u201cThere are a lot of export companies that have gone bankrupt. Many of the newly-rich, private investors and traditionally wealthy elite are poor now. Especially those that were involved in trading coal and other minerals. Sales are slow in Pyongyang as the flow of money is totally blocked. Many vendors have stopped coming to the market altogether because they will make a loss if they have to pay the tax for vendors. My acquaintances can no longer afford to take taxis because of their loss in business. All in all, it can be said that the income of common people has been cut by about half.\u201d<\/p>\n

Who are the \u2018newly-rich private investors\u2019 that the Pyongyang businessman referred to and how did they come to prominence? This can be best explained by examining North Korea\u2019s top foreign currency earner, the coal industry.<\/p>\n

There are many coal mines in North Korea where high-quality anthracite is excavated. Since the 1980\u2019s, however, operations at these sites were significantly reduced due to the country\u2019s crippled economy. In the early 2000\u2019s, however, operations at these sites began to return to their original productivity thanks to investment from new sources as, for the first time, private individuals were allowed to invest in the market economy. These private investors, labeled the kiji, brought back mining at neglected sites across the country, efficiently unearthing iron before selling it on to state-authorized trading companies for export to China.<\/p>\n

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(Photo) A scene from Moran Market in central Pyongyang. The women run 80 centimeter-wide stalls, where they sell products such as Chinese umbrellas. Photograph taken in July 2011 by Koo Kwang-ho (ASIAPRESS)<\/p><\/div>\n

 <\/p>\n

Since private companies are illegal in North Korea, kiji used bribes to secure official permits which would allow them to operate under the banner of state-owned enterprises. In practical terms, however, they were private companies, usually with 30-200 employees. Bribes and wages for workers were the only costs of entry into the market, with profits going straight into the pockets of the kiji. These private enterprises would go on to have great success thanks to a simultaneous boom in coal exports to China, with the kiji becoming subjects of much envy. Kiji would repeat this success in various other fields, reaping profits in the fishing, transportation, and gold mining industries.<\/p>\n

In 2016, before the sanctions were tightened, North Korea exported about $11.8 billion worth of coal to China. This amounted to 45 percent of all exports to China. One year later, however, North Korea would lose all of this trade, with China abiding by the UN Security Council\u2019s ban on coal imports from the country.<\/p>\n

It was not just coal miners or kiji who felt the impact of this ban. Entire towns, such as those in Musan County, are set up to support the mining industry, with mechanics, electricians, shippers, and other professions all depending upon work at the mines to support their businesses as well. All in all, it can be estimated that close to a million people are engaged in coal-related businesses across the country. Now, with coal exports stopped, these people\u2019s incomes have plummeted as well.<\/p>\n

A reporting partner in South Pyongan Province, where large coal mines are also located, described how, as the sanctions have taken effect, markets around the coal mines have become stagnant, with the flow of goods and money totally blocked. In addition, the partner reported that many of the private companies which were running the mines have gone bankrupt and have simply disappeared.<\/p>\n

The reporting partner described local sentiment, further stating, \u201cThe residents say that sanctions have turned the kiji into beggars and that Kim Jong-un has had to approach South Korea because of the loss of revenue from coal. That\u2019s the gossip in the streets.\u201d<\/p>\n

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All quiet at the Kwon-ha Trading District in Jilin Province. In 2016, trucks would go through the district to connect with the special economic zone of North Hamkyung Province. In recent years, only the odd taxi can be seen at the district. Photographed in October 2017 by ISHIMARU Jiro<\/p><\/div>\n

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Kim Jong-un\u2019s treasury takes a hit<\/strong><\/p>\n

Many of the North's trade companies are under the administration of the North Korean People's Army, the Workers' Party, and the Ministry of Security (police). Among these administrative bodies, however, the most important and powerful is an organization called \u201cRoom 39\u201d. This special office is responsible for raising funds for the regime through various trade and financial operations. It is also in charge of dispatching workers to foreign countries.<\/p>\n

So, how is Room 39 being impacted by the sanctions? To find out, ASIAPRESS began an investigation in March of last year with the help of a reporting partner living in the northern region of the country. As the reporting partner is a member of the Worker\u2019s Party and a mid-level executive in a small company, he has several connections in the business world that served to shed some light on the dealings of the secretive organization.<\/p>\n

Under Room 39 there are many bureaus, one of which is the \u201cParadise\u201d Guidance Bureau. It is this bureau that oversees the \u201cPeony Company\u201d, a company headquartered in Pyongyang and with a branch office in Chongjin City, the third largest city in North Korea. Close to the Chinese border and facing the East Sea, the company\u2019s branch office deals with exporting seafood, minerals, and clothing to China. In addition, the company expanded its operations to become a distribution hub for imported Chinese products to be sent across the country. Beginning his research, the reporting partner traveled to Chongjin to learn more about this particular enterprise of Room 39.<\/p>\n

In Chongjin, the reporting partner was able to meet with a senior employee of the company, finding out that the company\u2019s Chongjin operations had been suspended, with the company\u2019s office rented out to a local merchant for use as a warehouse. In addition, the reporting partner was told that the branch office had 35 full-time employees, with many sub-contracted staff as well. These subcontractors, however, were employed solely to collect medicinal herbs to be exported to China and many of them were let go after the sanctions took effect.<\/p>\n

The senior employee told the reporting partner, \"Up until 2018, I would receive 50 kilograms of white rice and 500 Chinese yuan (about 80,000 South Korean won) per month. As official trade with China is totally off the cards, I have an arrangement with a chinese merchant to sell luxury Chinese-made products such as TVs, electric rice cookers, water tanks, and beds to North Korea\u2019s wealthy elite on his behalf. I have to give back 1000 Chinese yuan (about 160,000 South Korean won) of the profits each month to the Chinese merchant. I am allowed to keep any profit made over that but if I do not make 1000 yuan in a month, I will lose the job.\u201d
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The sound of hammers no longer rings out from Namyang Labor District in Onseong County, North Hamkyung Province. Photographed from across the Chinese border in December 2018 by ISHIMARU Jiro<\/p><\/div>\n

 <\/p>\n

Rising discontent among Pyongyang\u2019s privileged class<\/strong><\/p>\n

Profits from trade with China go directly to the regime\u2019s treasury and are distributed amongst the Pyongyang elite. When trade is brought to a halt, this privileged class feels the pressure, as the exploitative system it relies upon to sustain itself collapses.<\/p>\n

Thanks to a Chinese reporting partner for ASIAPRESS, we were able to hear about the situation firsthand from a Pyongyang elite, a senior executive for a state trading company. Meeting the executive in China, the reporting partner asked, \u201cWhat do you suppose will happen next?\u201d<\/p>\n

The executive answered briefly, \u201cIt goes without saying that trade right now is difficult. It is very hard now for the high-ranking officials in Pyongyang. Though life is tough, local people can make ends meet by doing menial day jobs. The higher-ups, on the other hand, have lost their only source of income. If this continues, it could become a big problem. There is a lot of discontent.\"<\/p>\n

The executive didn\u2019t elaborate on what he meant by \u2018big problem\u2019. As a North Korean with permission to conduct business abroad, there is a lot of trust placed in him by the regime. His lifestyle is only guaranteed if he remains loyal to Kim Jong-un. But if, as the man says, discontent is on the rise, does it mean that Pyongyang\u2019s loyal elite will lose their faith?<\/p>\n

The sanctions are not just keeping money out of the hands of North Korean citizens though. The regime too is feeling the pressure and is struggling to maintain its various programs and policies. Although it may present only a small part of the greater picture, we can clearly see evidence of this by studying the North Korean government\u2019s failing national programs, listed below:<\/p>\n

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(Photo) Most residents in Pyongyang make a living through private businesses such as this one, operated in the streets of a residential area in central Moran District. Photographed in July 2011 by Koo Kwang-ho (ASIAPRESS)<\/p><\/div>\n

 <\/p>\n

\u25aa Distribution of new national ID cards, which began in late 2017, took until February 2019 to complete.<\/p>\n

\u25aa The tradition of distributing special rations to celebrate holidays and the birthdays of its leaders has been discontinued since the anniversary of Kim Il-sung\u2019s birthday in April of last year.<\/p>\n

\u25aa Construction of the Samjiyeon Special Tourist Zone at the foot of Mt. Baekdu, labeled by Kim Jong-un as a top priority national project, has been delayed due to financial difficulties. Due to sanctions, the project ran out of rebar and other necessary materials.<\/p>\n

\u25aa Due to financial difficulties and soaring fuel prices, military units have been forced to use ox-drawn carts or charcoal-fueled vehicles to transport supplies.<\/p>\n

\u25aa From November last year, the electricity supply for residents across vast northern regions has been cut off almost entirely.<\/p>\n

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Fluctuations in North Korean market prices and the Chinese yuan exchange rate over 2018. Information collected from North Korean marketplaces by an ASIAPRESS reporting partner. 1,000 south korean won = 750~770 North Korean won. Graph produced by ASIAPRESS<\/p><\/div>\n

 <\/p>\n

Predicted inflation does not occur...but people\u2019s suffering is on the rise<\/strong><\/p>\n

When sanctions were strengthened at the end of 2017, it was anticipated that the North Korean economy would experience heavy inflation. Specifically, the value of the North Korean won was expected to lose its value due to the lack of foreign currency imports. Experts believed that the country\u2019s economy, like that of Zimbabwe and Venezuela before it, could be plunged into chaos due to hyperinflation.<\/p>\n

This was not to be, however. Apart from fluctuations in the prices of gasoline and diesel oil, the value of North Korea\u2019s currency remained relatively stable, with only a 20-30 percent increase in the price of food and other commodities reported.<\/p>\n

This does not mean to say, though, that North Koreans are living comfortably or that the North Korean economy is doing well. Since November of last year, electricity has been reliably supplied to very few cities outside of Pyongyang. Residents outside of the capital no longer refer to the problem as a \u2018power outage\u2019; with no power being provided at all, they say their cities have been \u2018powered down\u2019. In addition to the lack of electricity, residents have to deal with demands from authorities for cash and other resources.<\/p>\n

The North Korean government frequently extorts resources and cash from citizens in order to complete road repairs, school maintenance, military upgrades, and various other construction projects. Now, with sanctions tightening, the regime has begun to demand even more from the local population.<\/p>\n

A reporting partner explained the increasing burden, \u201cThe state extorts about 100 Chinese yuan (16,000 South Korean won) from us each month.\u201d This total represents 30-50 percent of an average household\u2019s monthly income.<\/p>\n

In addition, starting from December of last year, authorities began forcing all households to enroll in a state-run insurance program. A reporting partner in Yanggang Province said, \"We are told to enroll in the insurance program as a show of patriotism. We are not told any information about the contents of the insurance plan or its supposed benefits. We know the state has no money, so it has to take it from us citizens.\u201d<\/p>\n

Despite the recent hardship, the reporting partner maintains a strong sense of perspective, saying, \"It's hard to earn a lot of money, but there's been no word of people starving to death anywhere. All of us common people have taken to the markets and found a way to make ends meet somehow. These days, there are not people dying in North Korea of starvation like there was before.\u201d<\/p>\n

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