Beijing’s patience with North Korea is wearing thin as Pyongyang continues to conduct nuclear missile tests. According to a state Chinese media outlet, Huanqui, China is considering a suspension of its crude oil exports to its neighbor should North Korea conduct a sixth nuclear test.
North Korea depends on China for 90 percent of its crude oil supply, and stopping these will wreak havoc on the dictatorship, which China has been trying to avoid, since a regime collapse is likely to result in a massive influx of refugees. It has also opposed President Trump’s urging to penalize North Korea for the nuclear tests so far, but now it seems the mood is changing – having another nuclear neighbor is hardly China’s idea of a stable regional environment.
Asia’s biggest economy also has other ways to make Kim Jong Un give up nuclear tests, such as stopping or reducing the food aid it sends to the impoverished nation, or cutting North Korean foreign currency transactions that go through Chinese banks.
The White House meanwhile has sent “an armada” to the Korean peninsula, and is now mulling over measures such as an oil embargo, a ban on the country’s only airline, and interception of ships carrying cargo to North Korea. Also among the measures being considered is penalizing Chinese banks doing business with Pyongyang. Related: Oil Markets Turn Bullish Amid Spiking Geopolitical Risk
Last year, a Korean media outlet described the most likely scenario for the country, should China halt crude oil supplies. The whole nation would be paralyzed in this scenario, from government agencies to the military to production.
Alternative supplies are not really an option: although Russia and some Middle Eastern producers have from time to time sent crude North Korea’s way, they are unreliable suppliers, the outlet noted, especially now, when U.S.-Russian relations are at such a low point over Syria.
By Irina Slav for Oilprice.com
More Top Reads From Oilprice.com:
- Will Shale Kill Off The Oil Price Rally Again?
- Could Guyana Become The Next Oil Hot Spot?
- Oil Prices Slip Despite Draw In Crude, Gasoline Inventories
Does anyone remember what happened to Japan after they bombed Pearl Harbor?
*. Other markets could include..Vietnam,Laos and Cambodia. A nice way to make some sense of that horrible war