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Can North Korea Survive An Oil Embargo?

Kim

The United States has recently suggested a global oil embargo against North Korea, something both China and Russia oppose. The DPRK’s neighbours to the north support UN sanctions against Pyongyang, but have firmly opposed unilateral U.S. sanctions against North Korea.

Russia and China have made a commitment never to support sanctions against Pyongyang that could negatively impact the civilian population, a stance that would almost certainly include a full-scale oil embargo.

On the contrary, Russia’s plan to de-escalate tensions on the Korean peninsula is to develop trilateral economic initiatives linking South and North Korea to Russia. Given the realities on the peninsula, Russia’s ‘carrot’ is seen as preferable on both sides of the 38th parallel to Washington’s increasingly bellicose ‘stick’.

But even if Donald Trump was somehow able to convince the world to engage in an oil embargo against North Korea, North Korea would appear to have enough domestic oil reserves to make up for the loss of imports.

In addition to large reserves of domestic coal and an increased reliance on green energy in the form of hydroelectric power, North Korea’s domestic oil reserves are likely far greater than previous conservative estimates have indicated.

Even prior to the new threat of sanctions, North Korea has been increasingly self-sufficient in beginning to tap its still largely unused oil reserves.

In 2015, when relations between the DPRK and the rest of the world were somewhat better than they are at present, independent oil exploration expert Michael Rego investigated North Korea’s oil potential.

The results of his report paint a broadly positive picture for North Korea, a state which has always striven towards economic self-sufficiency, a principle implicit in the Juche idea of the DPRK’s founder Kim Il-Sung, which remains Pyongyang’s guiding political programme.

A summary of Rego’s report, first published in GeoExPro, was published by The Maritime Executive. The key elements are as follows.

“China conducted surveys off the west coast (of North Korea) in the 1960s. Subsequently, Russia has also conducted surveys along with Taurus Petroleum in Switzerland and Malaysia’s Petronas.

NK News reports Rego as saying that the West Sea definitely has oil and has flowed oil at reasonable rates from at least two exploration wells.

However, the country’s political climate, including the sanctions currently in force, and water depths of up to 2,500 meters off the east coast present barriers to development. A shortage of funds is likely to further hamper development. In the 1990s, North Korea couldn’t provide food for its population, and it continues to struggle to meet the energy demands of its population, generally falling short even in providing electricity to its capital city.

Related: The North Sea Oil Recovery Is Dead In The Water

Despite the possible hurdles, some companies appear undaunted, reports NK News. The China Railway Investments Group recently said they were planning large scale investment in North Korea including the oil and gas sector.

The Energy Information Administration (EIA) states, as of July 2015, that the country has no proven oil reserves or petroleum and other liquids production. During North Korea’s industrial peak in the 1970’s and 1980’s, the country was able to import oil from China and the Soviet Union at below market prices. Following the end of the Cold War, these deals ended, and North Korea’s oil consumption dropped from 76,000 barrels per day (b/d) in 1991 to 17,000 b/d in 2013.

It is difficult to get an exact estimate of the amount of oil imported into North Korea each year, states the EIA. Some estimates report that North Korea imports more than half of its oil from China and some volumes from Russia. North Korea has the capacity to refine 64 thousand barrels a day, however as a result of the economic decline, has utilization rates below 20 percent. Despite this, North Korea is able to refine enough crude oil to meet some of their domestic demand.

North Korea is currently under international United Nations economic sanctions due to its nuclear weapon and ballistic missile programs. These sanctions restrict North Korea’s access to international banking, trade and travel. North Korea is also under economic sanctions from individual nations such as the United States, China, the United Kingdom, Canada and Japan”.

The report clearly indicates that in spite of sanctions limiting some of North Korea’s ability to extract its own oil, the country does have enough proven reserves, which as of 2015, the country was able to refine in order to meet the needs of domestic consumption. These needs have not changed significantly since 2015.

In 2004, the UK company Aminex PLC estimated that a North Korea oil shelf off the Sea of Japan which was first explored in a joint effort between the DPRK and another British company in 1998, contains 4-5 billion barrels of crude oil.

Sputnik reports,

“Simultaneously, the Mongolian company HBOil conducted exploration activities in the area south of Pyongyang and drilled 22 wells. Most of wells contained crude, allowing the DPRK to extract an average of 75 barrels per day from each of them”.

As Rego’s report stated, in spite lacking the means (due primarily to sanctions) to purchase modern drilling/extracting equipment from abroad, North Korea still has it within its capabilities to extract enough oil to supply domestic needs.

While most of North Korea’s drilling equipment as of 2015 was purchased from Romania dating back to the Ceausescu period, the country also possesses more widely produced Soviet equipment.

Most experts believe that North Korea has the ability to reverse engineer its existing imported equipment to build contemporary versions without the need to import any specific supplies. Related: Aramco Valuation Comes Under Scrutiny

While North Korea’s detractors often focus on what the country lacks in terms of foreign made technological devices, in the civilian, military and energy sectors, the reality is that considering this artificial deprivation, North Korea has done remarkably well in designing its own computer systems, weapons systems and in many ways most importantly, energy extraction systems.

Based on North Korea’s own claims as well as those of independent experts and contractors who have no reason to exaggerate North Korea’s oil wealth, it is simply a matter of North Korea utilising existing oil extraction systems more effectively combined with building additional new systems based on reliable old models, in order to be largely embargo-proof when it comes to energy.

In any event, the political tensions Donald Trump has created between the U.S. on one hand and China and Russia on the other, means that such an oil embargo is unlikely in any case. But given the tense political atmosphere and the traditional North Korean emphasis on understanding Autarky in positive terms, North Korea may well be immune to such threats sooner rather than later, in any case.

By ZeroHedge

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  • Kr55 on September 16 2017 said:
    I feel bad for average height to tall people in N. Korea. Zero job opportunity in their government.

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