June 15, 2017 10:00 am JST

China and Russia soften the bite of North Korea sanctions

Iron ore and oil deals continue despite US efforts to tighten screws

TAKAYUKI TANAKA and OKI NAGAI, Nikkei staff writers

This photo of a new surface-to-ship cruise missile was carried in North Korea's Rodong Sinmun newspaper on June 9. © Kyodo

MOSCOW/BEIJING North Korea is refusing to stop firing missiles until the U.S. and its allies make the "right choices." And with China and Russia continuing to trade with Pyongyang despite an international clampdown, the regime has less incentive to change its tune.

The North on June 8 tested what appeared to be surface-to-ship cruise missiles that traveled about 200km off its east coast, South Korea's military said. This followed a May 29 test of a ballistic missile -- the ninth this year -- and came on the heels of a U.N. Security Council decision on June 2 to impose fresh sanctions on the North.

The council unanimously approved the addition of 14 individuals and four companies or organizations to a blacklist.

But amid international efforts to pressure Pyongyang into halting its missile and nuclear development, China and Russia are trading growing volumes of commodities with the country -- creating a hole in the sanctions regime the U.S. has been seeking to tighten.

Since January, China's imports of iron ore from North Korea have more than quadrupled from year-earlier levels despite a U.N. ban on such imports, though the ban includes a significant loophole. Meanwhile, Russia's energy exports to the North for the first three months of this year doubled from the same period in 2016.

TRADING ON TECHNICALITIES China's iron ore imports from its impoverished neighbor soared 340% in April from a year earlier, to $20.26 million, according to data compiled by economic research specialist CEIC Data, using official statistics published by China Customs.

Iron ore shipments fluctuate from month to month, but China's imports of North Korean ore have been running more than 300% higher than year-earlier levels since January.

The trend has not changed since the early April meeting between U.S. President Donald Trump and his Chinese counterpart, Xi Jinping, in which the two leaders agreed to work more closely together to deal with the security threat from Pyongyang's arms programs.

The Security Council banned iron ore imports from North Korea in March last year, but nonmilitary transactions were exempted. Since it was slapped with a strict embargo on coal exports late last year, North Korea has apparently increased its iron ore exports to make up for the loss of foreign currency. China's customs authorities appear to be turning a blind eye to these transactions for "livelihood purposes."

Granted, trade between China and North Korea has fallen sharply as a result of the sanctions. Imports of North Korean iron ore are only worth about one-tenth as much as the previous coal imports, which at one time accounted for half Pyongyang's exports to China. Overall, North Korea's exports to its neighbor plunged 52% on the year in March and 41% in April.

China says it is strictly abiding by the U.N. sanctions. But some diplomats say that although China's increased purchases of iron ore do not, strictly speaking, violate the restrictions, they run counter to the spirit of U.N. efforts to cut off the flow of foreign currency to the North.

As for Russia, the country's trade with North Korea surged 85% on the year in the first quarter of 2017, according to Moscow's data. Russia's exports to the North, mostly energy shipments, jumped 133% during the period to $31.41 million.

Western observers say the official figures only scratch the surface. Russia's actual oil product exports to North Korea amount to hundreds of thousands of tons annually, they say.

In May, Russia started a regular cargo and passenger ferry service between the Far Eastern port of Vladivostok and North Korea's Rajin, operated by a Russian company. With the move, Moscow underlined its commitment to boosting bilateral trade tenfold by 2020.

Russian President Vladimir Putin, speaking at an economic forum in St. Petersburg on June 2, defended North Korea's arms ambitions, saying small countries believe they have no option but to acquire nuclear weapons to protect their independence, security and sovereignty.

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