WTI Crude

Loading...

Brent Crude

Loading...

Natural Gas

Loading...

Gasoline

Loading...

Heating Oil

Loading...

Rotate device for more commodity prices

Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing for news outlets such as iNVEZZ and…

More Info

Can Oil Sanctions Cripple North Korea’s Army?

North Korea

In response to Pyongyang’s latest nuclear missile tests, the world is stepping up sanctions on North Korea with bans on its mining, manufacturing, and seafood exports. The latest round of restrictions is expected to cripple North Korea’s economy and further hurt the ordinary citizens of the reclusive country, analysts believe.

However, the current sanctions are not targeting the most vital commodity for North Korea’s military: Oil. According to experts, oil—most of which North Korea imports from China—is critical for the regime. If oil supplies were cut, Pyongyang could no longer fly jets or generate electricity. If this were to happen though, Kim Jong Un has ways to raise supplies and cash from illicit channels to keep the military going, analysts say.

Sanctions on North Korea have been ratcheted up over the past two weeks, with U.S.-North Korea tensions rising.

On August 5, the United Nations Security Council further strengthened sanctions with a full ban on coal, iron, and iron ore, and added lead and lead ore to the banned commodities subject to sectoral sanctions. The U.N. also banned all seafood exports by North Korea. The new restrictions were a response to Kim’s two missile tests in July, and aim to cut off around US$1 billion from the US$3-billion of annual North Korean exports.

China—North Korea’s biggest trade partner accounting for around 90 percent of the trade—said on Monday that it was halting imports of coal, iron, iron ore, and seafood from North Korea starting on Tuesday, implementing the UN sanctions and thus cutting an important foreign revenue source for Pyongyang.

The latest round of sanctions—and the fact that it’s China that is implementing those sanctions­—are sure to cut deep into the impoverished country of 25.1 million people, 70 percent of whom are food insecure.

Related: Daily OPEC Oil Prices Now Public For The First Time Ever

But this is unlikely to deter Kim from pursuing his nuclear program, because the regime and the military still have access to oil.  

“North Korea’s dependency on Chinese fuel is China’s choke hold on Pyongyang,” Dennis Wilder, former senior director for Asia at the National Security Council during the George W. Bush Administration, told Bloomberg. “If this goes, the North Korean air force can’t fly jets and their electricity system can’t function,” Wilder noted.  

Yet, no one really knows how much oil China is selling to North Korea, because there’s no official statistics, and there are several illicit channels via which Kim’s regime is procuring oil for the army.

Earlier this year, senior-level North Korean defector Ri Jong Ho said that North Korea was likely still buying diesel from Russian oil companies via trading companies in Singapore. According to Ri, China supplies North Korea with around 500,000 tons of crude oil by pipeline, all toward the military, and all free of charge.

Now the U.S. is said to be ready to target oil trade in North Korea in its latest push with the United Nations to further step up sanctions. According to UN diplomats who spoke to Reuters, North Korea’s textile exports and the oil supplies to the government could be cut off in an attempt to stymie another US$2 billion worth of North Korean exports.  

Related: The Next Big Catalyst In The U.S. Oil Export Boom

In an op-ed in The Wall Street Journal on Sunday, U.S. Secretary of State Rex Tillerson and Secretary of Defense James Mattis said:

“The U.S. will continue to work with our allies and partners to deepen diplomatic and military cooperation, and to hold nations accountable to their commitments to isolate the regime. That will include rigorous enforcement of sanctions, leaving no North Korean source of revenue untouched. In particular, the U.S. will continue to request Chinese and Russian commitments not to provide the regime with economic lifelines and to persuade it to abandon its dangerous path.”

If oil supplies to the regime are cut along with all its revenue sources, it could be a blow not only to North Korea’s economy, but to its military as well.  

By Tsvetana Paraskova for Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News