China Uses Economic Muscle to Bring North Korea to Negotiating Table

China Uses Economic Muscle to Bring North Korea to Negotiating Table

North Korean leader Kim Jong Un and his wife, Ri Sol Ju (far left), meet with Chinese President Xi Jinping and his wife, Peng Liyuan (far right), in Beijing on March 27, 2018. Kim was treated to a lavish welcome by Xi during a secretive trip to Beijing as both sides seek to repair frayed ties ahead of landmark summits with Seoul, South Korea, and Washington, D.C.

SourceGetty

Why you should care

No country exercises the level of influence on North Korea that China does. 

China virtually halted exports of petroleum products, coal and other key materials to North Korea in the months leading to this week’s unprecedented summit between Kim Jong Un, the North Korean leader, and his Chinese counterpart Xi Jinping.

The export freeze — revealed in official Chinese data and going much further than the limits stipulated under United Nations sanctions — shows the extent of Chinese pressure following the ramping up of Pyongyang’s nuclear testing program. It also suggests that behind Xi’s talk this week of a “profound revolutionary friendship” between the two nations, his government has been playing hardball with its neighbor.

China wants to play a central role in resolving this crisis, but it wants to do it on its own terms.

Alex Wolf, Aberdeen Standard Investments

“China has effectively turned off the petroleum taps flowing into North Korea,” says Alex Wolf, economist at Aberdeen Standard Investments and a former U.S. diplomat in China. “From the data available … it appears that the North Korean economy is under a great deal of pressure and this has undoubtedly contributed to North Korea’s change in policy. It is Chinese ‘maximum pressure’ that may be bringing a change in North Korean policy.”

Since its September test of a nuclear weapon, North Korea has launched a highly unusual series of diplomatic forays. Kim’s sister, Kim Yo Jung, was dispatched to the Winter Olympics held in South Korea in February. Kim then shocked many by inviting Donald Trump to a summit — an offer that the U.S. president accepted. Following the visit to Beijing this week, North and South Korea announced a historic summit scheduled for later this month.

Debate has swirled over the motivations behind North Korea’s shift in strategy. Some analysts believe that Pyongyang has achieved its nuclear and ballistic missile goals and now wants to negotiate recognition as a nuclear power. Others say that it is seeking détente with South Korea to weaken the U.S. alliance structure. In the U.S., some attribute Kim’s new approach to pressure from Trump’s White House.

But evidence of a partial Chinese export freeze adds a further perspective. Official Chinese statistics show that the monthly average of refined petroleum exports to North Korea in January and February was 175.2 tons, just 1.3 percent of the monthly average of 13,552.6 tons shipped in the first half of 2017. The level of reduction went far beyond the 89 percent cut in petroleum product exports stipulated by the U.N. sanctions.

Chinese coal exports to North Korea were also cut to zero in the three months to the end of February, after running at a monthly average of 8,627 tons in the first half of 2017. Exports of steel ran at a monthly average of 257 tons in the first two months of this year, down from a monthly average of 15,110 tons in the first half of 2017.

Shipments of motor vehicles also dried up, with just one unit being exported in the month of February, official Chinese statistics show. Concerns over the accuracy of China’s statistics are common, but analysts say that such consistent and bold drops in export volumes are unlikely to have been the result of official massaging.

It is more likely, analysts say, that Beijing is seeking to remind Pyongyang of the economic leverage it wields over North Korea as Kim prepares his diplomatic forays. A senior Chinese official, speaking anonymously before Kim’s diplomatic flurry, said that Beijing wanted to bring Pyongyang to the negotiating table.

It is important that the U.S. and other countries realize that Pyongyang’s objective is not aggression but to win security guarantees for North Korea, the Chinese official said, adding that North Korea had in the past shown a willingness to negotiate but U.S. inflexibility had precluded progress.

The evidence of China’s strong sanctioning of North Korea stands in contrast to Beijing’s long-standing policy of resisting U.S. pressure for stiffer restrictions on economic engagement with North Korea. In one example, Xi told former U.S. President Barack Obama in 2016 that North Korea had little to lose from sanctions, such was the poverty already in the country.

Wolf says, “China wants to play a central role in resolving this crisis, but it wants to do it on its own terms.”

+
By James Kynge

OZY partners with the U.K.'s Financial Times to bring you premium analysis and features. © The Financial Times Limited 2018.

OZYFast Forward

New trends and breakthrough thinking in politics, science, technology, business and culture. It’s futurism at its best.