'South Korea, China, US need to coordinate on N. Korea'

Stephan Haggard, professor at the University of California, San Diego and an expert on the North Korean economy, poses before an interview held in Seoul, Monday. / Korea Times photo by Park Jae-hyuk

By Kim Ji-soo

Stephan Haggard, a noted expert on the North Korean economy, said he believes the recent defection of the London-based North Korean diplomat Thae Yong-ho means that sanctions on the repressive state are working “very directly.”

“Embassy staff of North Korea around the world are called upon to engage in a variety of money-making activities, and because of the unilateral sanctions that have been imposed by the Europeans and also just closer vigilance and due diligence with respect to North Korean activities ... the embassy personnel are under tremendous strain to make money out of nothing,” he said.

He does not see, however, the defections as part of a wider dissatisfaction among the North’s military, security apparatus, Workers’ Party, government officials and other powerful actors.

“I wouldn’t assume that this reflects some coming political crisis within the system,” the professor at the University of California, San Diego, said. He was in Seoul to give a speech at the East Asia Foundation, where he said if the diplomats carry money out of the country, they can heavily influence the North’s financial vulnerability, which is worsened by the closure of the Gaeseong Industrial Complex and international sanctions.

Haggard’s comments come amid the recent public defections of Thae, as well as that of Europe-based diplomat Kim Myeong-cheol, who had 400 billion won in tow. The authorities did not specify which European country Kim was stationed, though. Kim’s defection has been confirmed by the Korean intelligence agency, a local vernacular reported.

Following the North’s fourth nuclear test, the United Nations Security Council, in March, slapped the country with one of the strongest economic sanctions in history, including the mandatory inspection of all cargo going in and out of the North and a ban on the country’s exports of coal, iron and other mineral resources, which serve as key sources of hard currency for the regime.

Haggard also pointed out that people should note the secondary U.S. sanctions, which designated the North as a jurisdiction of money-laundering concerns. “They require American banks to inform their corresponding banks abroad that those banks need to exercise due diligence with respect to N.K. accounts,” he said, adding that these requirements make banking difficult for the North.

These financial constraints have prompted the North to sell fishing rights, pressure overseas missions to generate cash, and ultimately, deepen its dependency on China.

But what puzzles North Korea analysts, including Haggard, is the absence of fluctuations in the daily North Korean exchange data, despite significant events, such as the weakening of the North Korean won against the dollar on the black market or the inflation in commodity prices such as rice.

Haggard suggests that it may well be the North’s financial problems haven’t reached a tipping point or that China is ensuring that the North doesn’t collapse.

“After the closure of the Gaeseong Industrial Complex, about 85 to 90 percent of North Korean trade is with China,” he said. South Korea’s plans to go after even the smallest military exchanges, as illustrated by President Park’s three-nation African visit including the traditionally pro-North Korea Uganda, can contribute to the North’s dependence on China, he added.

And as the North’s dependence on China deepens, China might also be less cooperative with South Korea and the United States, especially given the certain political shifts in the region, like South Korea’s decision to deploy the THAAD, and if it perceives that the objective of South Korea and the United States is regime change in North Korea.

Haggard said President Park’s recent comments warning of “serious cracks” in the North Korean regime are not helpful, assessing that the government’s trustpolitik is now dead, as Park has virtually cut off ties with the North.

“Any signs of instability obviously prompt China to turn back to a more cautious direction,” he said.

He stressed that it's critical times and that South Korea, the United States and China need to try to coordinate with each other so as to eliminate divisions between China and the United States, and between China and South Korea, even amid sensitive issues such as the South Korea-U.S. THAAD deployment.

He added that North Korea’s “byeongjin” stance, of continuing on its nuclear course, will not change.

“Waiting for N.K. to change is not a policy; we have to figure out whether China can be made to cooperate more fully ... China really holds the cards,” he said.