US-NK tensions will eventually ease: expert

By Nam Hyun-woo

Cho Bong-hyun, deputy chief of the Industrial Bank of Korea’s Economic Research Institute

Cho Bong-hyun, deputy chief of the Industrial Bank of Korea’s Economic Research Institute, said Monday the recent tension between North Korea and the United States will ease.

Cho, known as an expert on the North Korean economy, did not rule out the possibility of the unpredictable regime’s additional provocations. But he expected that the recent sanctions on its exports and financial activities will be quite effective.

“Tensions have risen on the Korean Peninsula following the North’s provocations,” Cho said in an interview with The Korea Times. “However, the bottom line is neither the U.S. nor China want worst-case scenarios. Thus, China adjusted its stance to some extent and the U.S. also showed its willingness to put forth efforts to avoid an extreme situation.”

On Saturday, U.S. President Donald Trump and his Chinese counterpart Xi Jinping agreed to a peaceful resolution of North Korea issues during a telephone conservation. The call came after the North’s series of intercontinental ballistic missile launches in recent months.

Some critics say Washington’s move to investigate Beijing’s trade practices is the former’s tool to pressure the latter to get tougher on the North and the two leaders were in discord in the way of reining in Pyongyang. But according to Cho, the agreement shows the two superpowers share a common interest in successfully dealing with the bellicose regime.

“The agreement is based on the two countries’ recognition that they don’t want more tensions on the Korean Peninsula and they should do something to control the North,” Cho said.

Effective sanctions

After the North’s recent missile threats, the United Nations Security Council’s unanimously adopted a fresh resolution on sanctions on the North earlier this month.

Resolution 2371 imposes a complete ban on exports of coal, while the previous sanctions allowed the North to sell limited amounts for livelihood purposes. It will also prohibit the North’s other primary exports, including iron, lead and seafood products.

“It is estimated that about $1 to 1.5 billion out of the North’s $3 billion annual export revenue will be gone,” Cho said.

Many of the North’s outbound financial activities were also forbidden.

Included in the sanctions were the Foreign Trade Bank of the DPRK and the (North) Korea National Insurance Corporation.

According to Cho, the trade bank is the regime’s primary payment window for outbound transactions, having offices in China and Hong Kong. With the measure, those offices will stop their operation to block the regime’s payments related to exports.

The insurance firm, which is the only North Korean insurer run by the Workers’ Party of Korea, has been insuring cargo and ships. It is also suspected of having served as a channel of illegal funds for the North. Now, its assets outside of North Korea are frozen and its officials face travel bans.

On top of the above-mentioned measures, some asked for more powerful steps such as a fuel embargo on Pyongyang by China.

“A full-scale oil embargo is like severing the lifeline for the North,” Cho said. “Not only its missile and military programs but also almost its entire industry could stop operating within three months.”

According to him, North Korea imports about 1 million tons of crude oil a year and 70 percent comes from China.

Along with putting North Korean leader Kim Jong-un on the U.N. sanctions list, the fuel embargo is deemed as the last resort against the North’s further provocations.

“Despite the new resolution, Kim will continue pursuing nuclear weapons and missiles,” Cho said. “If additional sanctions are imposed on fuel supply, sightseeing and exporting workers, they would put great pressure on Kim. But such acts largely depend on China’s determination and the country will not likely do this so easily.”

He stressed that an alternative way to a breakthrough in this political deadlock is drawing economic changes inside North Korea.

“In recent years, markets have been growing in North Korea,” he said. “Invigorating those markets would place long-term pressure on the North’s leaders.”