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China turns the screw on North Korea by cutting its petrol supply, report says
China has turned off the tap on crucial goods for North Korea in a bid to pile on economic pressure as South and North Korean leaders prepare for an unprecedented diplomatic summit this April, and hopes for May talks between the US the isolated country mount.
The leaders of North and South Korea are to meet on April 27 for the first time in more than a decade, the two countries announced on Thursday after preliminary talks between senior officials.
An analysis of Chinese customs data from Aberdeen Standard Investments has revealed that China’s exports of refined petroleum to North Korea have collapsed in the last five months, to as little as 3.7 per cent on the previous year.
Other products have also been hit. North Korean steel imports from China have fallen dramatically, along with car imports. Economists believe that the data may explain the recent dramatic shifts in North Korean policy.
The North Korean leader, Kim Jong-un provoked widespread international attention this week with a trip to meet Chinese President Xi Jinping in Beijing. This followed the country's attendance at the Winter Olympics, and was another highly unusual step for closed-off state, known for its efforts to proliferate nuclear weapons an oppressive regime.
Alex Wolf, a senior economist at Aberdeen Standard Investments told The Daily Telegraph that the data suggested a blocking of the flow of exports into North Korea from China was a case of “using pressure to bring Kim closer to the [Chinese political] fold”.
The economic move will have considerably strengthened China’s position as powerbroker as talks between South and North Korea and the US move forward.
Mr Wolf said that, if petroleum exports were to average the level of recent months over an entire year, it would reach 3,393 tonnes. That is just 3.7 per cent of the amount exported last year from China to its neighbour.
Such a cliff-edge drop in exports “given the timing of it, and the meeting and a flurry of diplomatic activity, [with the US and South Korea]” made it highly likely to be a political decision by China, Mr Wolf said.
President Donald Trump has repeatedly called on China to do more to put pressure on North Korea.
Seasonal variations could be playing a part in the decrease, and inaccuracies have been seen in previous Chinese economic data, but these factors would not account for such as stark drop off, Mr Wolf said. He added that while, as has been reported, illegal shipments of goods might be taking place these could not easily compensate for a 90 per cent fall in visible exports.
China’s customs data suggests Beijing is going much further than UN sanctions on exports to North Korea would require - suggesting they are not merely inflating the figures while continuing to smuggle goods.
This drastic economic step is therefore far more likely to be part of a considered Chinese diplomatic strategy.
“China wants to play a central role in ‘resolving’ this crisis, but wants to do it on its own terms. Perhaps China decided to put immense pressure on President Kim, overcoming its fear of instability and potential regime change, to convince North Korea of China’s massive economic influence,” Mr Wolf said.
Freya Beamish, chief Asia economist at Pantheon Macroeconomics, said such aggressive economic behaviour would fit with the impression many expert observers had of chinese leader Xi Jinping’s strategic position.
Mr Xi was “not a fan” of the North Korean regime, and was likely to do anything necessary to open up the state.
It was highly plausible that hard economic pressure would be applied, Ms Beamish said. However, this would “not be so hard that it was destabilizing”. China’s leaders are fearful of economic hardship triggering a flood of refugees from North Korea, so any such effort would be carefully calculated.
This current diplomatic situation was likely to have binary outcomes. Should China's strategy not work, North Korea could further punish its people economically, withdraw from talks and increase its nuclear capabilities.
“The upside risk is that [as some observers have suggested] that Kim sees himself as the Great Reformer, rather than a supreme leader,” Ms Beamish said. This may be why Mr Kim had allowed the black markets of North Korea to expand so freely, she added.
The Chinese economic model offers a way for Mr Kim to pursue this ideal by “opening up and reforming on the one hand, but continuing to have strong state control on the other,” Ms Beamish said.