September 8, 2017 3:56 pm JST  (Updated September 12, 2017 12:34 pm JST)

North Korea sanctions: will they work?

US, China, Russia compromise on watered-down measures could weaken effect

NIKKEI STAFF WRITERS

UNITED NATIONS/SEOUL/TOKYO -- In light of North Korea's latest nuclear test, its sixth and most powerful, the United Nations Security Council unanimously passed a resolution imposing fresh sanctions on the country on Monday. 

The latest measures are a watered-down version of the initial draft, which included stringent measures such as cutting off the country's oil supply completely.

What do the latest sanctions entail?

This is the ninth such package of restrictions imposed on North Korea since 2006. The initial draft, written up by the U.S., included measures such as an oil embargo but was then amended.

The measures will now limit Pyongyang's access to refined petroleum to 500,000 barrels between Oct. 1 and Dec. 31 and up to 2 million barrels a year starting in 2018, while crude oil trade is to be capped at current levels. The text also includes a total ban on all condensates and natural gas liquids.

The new set of sanctions dropped a proposed travel ban and asset freeze on North Korean leader Kim Jong Un, and moved away from restricting countries from using North Korean workers altogether. The final version bans countries from hiring new personnel but does not require current workers to be expelled.

Maritime measures that would have allowed the nonconsensual inspection of designated vessels on the high seas were also scrapped. The new text lets ships refuse inspections but requires countries to notify the Security Council of any such incidents.

The new resolution did retain a proposed ban on all textile exports from North Korea, one of Pyongyang's most vital sources of income.

Why was the initial proposal changed?

The amendments most likely come in response to China and Russia's reluctance to approve stricter sanctions. Both countries hold the power of veto in the Security Council and had expressed skepticism over how effective tougher measures would be in bringing an end to North Korea's nuclear program. Russian President Vladimir Putin said that the regime would rather "eat grass" than cave into outside pressure and give up the program.

Toning down the oil element was mostly a nod to China, which is believed to pipe about 500,000 tons of crude oil to the country every year. Beijing had also been wary of the potential fallout from a strict embargo, fearing it could send a wave of North Korean refugees across the border.

Putin has also acknowledged that his country ships oil to the North.

The weakened language on North Korean workers is out of consideration for both countries. North Korea has up to 147,600 workers stationed abroad, according to estimates by the Seoul-based Korea Institute for National Unification. About 80,000 work in China, mainly at factories, while another 53,000 are in Russia, mostly in construction.

Will the new sanctions work?

Nikki Haley, the U.S. ambassador to the U.N., claimed after the vote that the new sanctions are "by far the strongest measures ever imposed on North Korea."

There is some truth in her comments. The ban on apparel exports is expected to squeeze the regime's ability to continue its nuclear and missile programs. Much of the clothing North Korea exports is shipped to China, generating an estimated $50 million to $100 million in income a year. The North exported $726 million of clothing in 2016, its biggest export after coal, according to the South's Korea Trade-Investment Promotion Agency. With the new resolution, the U.S. estimates that 90% of all North Korean exports are now banned.

However, the effect of capping refined petroleum and crude oil exports remains unclear.

The fuel shortage the country is facing is said to have reached a point where the military cannot conduct exercises using its jets. However it is also believed the military possesses roughly a year's worth of reserves.

Yang Moon-soo, a professor at the University of North Korean Studies in Seoul, also argued that because North Korean industry relies heavily on coal, restricting the supply of oil will not greatly affect factory output.

Further, Rajiv Biswas, APAC chief economist at IHS Markit, noted that North Korea could turn to coal-to-oil technology to convert its substantial reserves of anthracite into oil, the same technology used by the Germans during World War II and South Africa when it faced international sanctions during the apartheid era, should the oil shortage become more of a problem.

"These new sanctions will clearly ramp up economic pressure on North Korea and further choke off foreign exchange inflows," Biswas said. "However the relatively moderate sanctions imposed on oil exports to the DPRK will not have much impact on one of the North Korean regime's greatest potential economic pressure points."

How effective the sanctions will be also remains in the hands of the U.N. member states that implement them. A report last week by the committee tasked with monitoring sanctions implementation indicated that bringing everyone on board is no easy feat.

The North earned some $270 million from resource exports between February and August, according to the report, despite progressively harsher restrictions.

"We all know these steps only work if all nations implement them completely and aggressively," ambassador Haley said.

 

Nikkei staff writers Sotaro Suzuki in Seoul, Shotaro Tani in Tokyo, Ariana King and Rina Takahashi in New York contributed to this article.

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