Art of sanctioning North Korea

By Lee Seong-hyon

The latest U.N. sanctions on North Korea, despite the alleged "toughest ever" severity, despite the Chinese "full" commitment, and despite the "high-profile" North Korean exodus episodes, still leave much uncertainty. It's because China sees that sanctioning North Korea eventually ends up sanctioning itself. It's an intrinsic dilemma China hasn't fully sorted out yet.

Although statistics vary, the latest government figures show that China takes 84 percent of North Korea's total international trade (both inbound and outbound combined). It is also estimated that over 70 percent of foreign currency that arrives in North Korea is serviced via Chinese banking networks. That's why experts believe China is the most important stakeholder when it comes to effectively sanctioning North Korea.

It should be fair to note that the much-touted "Chinese influence on North Korea" is an overused term media outlets uncritically use. For sure, China has economic influence over its neighbor, but not necessarily political influence. This distinction has often eluded attention.

The interesting part is that when China exercises its economic influence on North Korea, for example, by implementing tougher U.N. economic sanctions and thus pressuring North Korea, China's political influence on North Korea diminishes. It's an irony China has learned over the years. It's an irony outsiders still hard to appreciate.

Beijing doesn't regard Pyongyang as an enemy state. China fears that if it pressures North Korea too hard, the North will turn around and become explicitly hostile toward China. That's why Beijing has been always careful when it comes to deciding on sanctions. It doesn't want sanctions to become an eventual "shoot-one's-own-foot" exercise.

Actually, sanctioning North Korea will have a literal impact of sanctioning China, by hitting especially the economy of Chinese cities along the North Korean border. Take Dandong for instance. It's a city of 780,000 population in Liaoning Province. It is the prime Sino-North Korea trade gateway, singlehandedly siphoning 70 percent of the entire bilateral trade.

My preliminary research shows that anywhere from 20 to 30 percent of Dandong people's livelihoods, in one way or another, are tied to Sino-North Korean border trade. This includes natural resources, seafood, tourism, restaurants, North Korean herbs, financial transactions, and not to mention, smuggling. Many Chinese apparel companies that outsource their businesses to North Korea's cheap labor are based in Dandong too. For those individuals, the border trade is an important part of their business. For some of them, it is their main lifeline. It is understandable therefore that local people are not necessarily enthused about the U.N. sanctions. As one Dandong businessman put it: "Whatever [U.S. President] Obama does about North Korea at the U.N., it has nothing to do with me."

Moreover, Dandong is situated at the hub of China's Northeastern region, which is regarded as China's economic backwater. It is among the least economically developed areas. The Chinese government has been ambitiously pushing forward an economic upgrading project in the region, linking the other major cities of Changchun, Jilin and Tumen (often referred to as the "Chang-Ji-Tu" Project). As the area is bordered with North Korea, without the North's involvement, the project is unlikely to succeed. The U.N. sanctions would mean to economically disengage Pyongyang Korea. For Beijing, it would mean to undermine Chinese economic interests.

Furthermore, there is a well-established bureaucratic arm-wrestling in China between the central government and local provinces. Even if the central government sends out directives to them to strictly enforce the U.N. mandates, it's questionable whether the local governments, such as Dandong, will faithfully carry them out, when doing so would be directly hurting the local economy. The Chinese proverb "the heaven is high and the emperor is far away" indicates the limitations to the authority's reach to far away regions. Dandong is enough far away.

That's not all. The U.N. sanctions require countries to inspect all cargo entering or leaving North Korea. That's a call of duty hard to actualize in reality. At the Dandong customs office, it takes two to three hours to pack a truckload of containers. Koreans, regardless of being from the North or South, are known to display a talent to pack as many items as possible into a limited space, by binding items as tightly as possible. It is literally impossible for customs inspectors to thoroughly check over 100 trucks a day by rummaging through all the individual items to check banned goods. So they resort to sampling.

Analysts agree that for the sanctions to be effective, first, they need to be robustly implemented for at least six months; second, the price for the North Korean daily commodities should double from their current price level. Only then, will the North Korean regime feel pinched. However, when the people's livelihoods of China's major gateway city to North Korea is tied to trade, and when local officials' promotion criteria is significantly based on local GDP growth, and when Beijing itself sees limiting its neighbor's economic activities as undermining its own interests, the effectiveness of the U.N. sanctions stands to be undermined too.

Lee Seong-hyon is a research fellow at the Sejong Institute. He can be reached at sunnybbsfs@gmail.com.