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Oil tanks are seen at a Sinopec plant in the Chinese city of Hefei. China is restricting petroleum exports to North Korea.   © Reuters
North Korea Crisis

North Korean gas prices reported surging after new sanctions

Kim regime may be rationing fuel to keep military supplied

SEOUL -- Fuel prices in the North Korean capital of Pyongyang soared last week, the Voice of America reported Saturday, in what may be a sign that international sanctions targeting the country's oil supply are starting to bite.

For nearly three weeks following North Korea's Sept. 3 nuclear test, the gasoline price in Pyongyang had remained steady at 1.60 euros ($1.90) per kilogram, the VOA reported, citing a diplomat based there. Then on Thursday, the price shot up more than 40% to 2.30 euros. Diesel also jumped that day to 2 euros per kilogram from 1.70 euros.

Prices of gasoline and diesel had started the year at 0.75 euros and around 0.84 euros, respectively. The former has more than tripled in price, while the latter is up by 2.4 times, according to the report.

The U.N. Security Council on Sept. 11 passed a new sanctions resolution that, if strictly enforced, would cut petroleum exports to North Korea by an estimated 30%. The reported surge in North Korean gasoline prices came 10 days later. Then followed a statement by leader Kim Jong Un threatening the U.S. with "highest level of hard-line countermeasure in history" and blasting President Donald Trump, who had declared the U.S. would "totally destroy" North Korea if forced to defend itself or its allies.

North Korea's Oil Ministry typically takes 60% of the country's petroleum imports, according to the South Korean government-affiliated Korea Energy Economics Institute. The Defense Ministry gets 20%, the ruling Workers' Party of Korea 15%, and sports organizations 5%, the institute says. The Oil Ministry supplies gasoline stations and other fuel, but some observers believe fuel is being rationed to funnel more to the military.

The possibility that China may further restrict its supply of crude oil has "people in North Korea worried, so they're probably stocking up" on fuel, VOA quoted a U.S. college professor specializing in the North Korean economy as saying.

The Pyongyang-based diplomat speculated the fuel price increase may be targeting foreigners living in the capital. While North Koreans can purchase cheap fuel using coupons, foreigners can use only filling stations, this person explained, adding that while fuel prices had risen, exchange rates were unchanged.

China's government on Saturday announced new sanctions on North Korea, mainly restrictions on exports of refined petroleum products. Beijing appears to be trying to demonstrate to Trump its willingness to comply with international sanctions. China is thought to supply most of the refined products bound for the North. But some observers doubt whether these flows will actually decrease.

North Korea's state-run Korean Central News Agency reported Sunday that the oil minister had been replaced, but no reason was given.

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