[Analysis] The mystery of China’s ‘zero’ oil exports to N. Korea

Posted on : 2014-08-04 15:39 KST Modified on : 2019-10-19 20:29 KST
Official statistics show zero exports, but some oil could still be moving, and relations aren’t necessarily a disaster

By Choi Hyun-june, staff reporter and Seong Yeon-cheol, Beijing correspondent

The Ministry of Unification and other government ministries connected with North Korea are paying quite a deal of attention to the fact that China was reporting “zero” exports of crude oil to the North. If China were to actually cut off the crude oil it exports to North Korea, the North Korean economy and society would effectively shut down - considering that the North depends on China for nearly all of its oil - and North Korean relations with China would be shaken to the core. But while the supply of crude oil was suspended for half a year, through June, North Korea remained mostly quiet. This is what experts are calling the “zero mystery” in relation to oil exports to North Korea.

In figures provided by the Chinese customs service on Aug. 3, exports of crude oil to North Korea from January to June this year were recorded as zero. Over the same period in 2013, China exported 251,000 tons to the North, and its yearly exports average 500,000 tons. This year, though, it is not exporting any oil to North Korea at all.

Experts are arguing about the meaning of the unprecedented duration of the suspension of oil exports. For some experts who believe that a severe rift has appeared in relations between China and the North, this situation is a key piece of evidence. In contrast, those who think that fraying relations between the two countries are temporary or illusory argue that the phenomenon needs to be interpreted carefully. But with the Chinese government keeping its lips sealed on the matter, both of these theories are mere conjecture.

Those who argue that there are substantial cracks in relations between North Korea and China believe that China has played the trump card of cutting off the supply of crude oil as a way of putting pressure on North Korea to get back into line. They point out that North Korea has continued to irritate China, which wants stability on the Korean peninsula, by carrying out a third nuclear test at the beginning of 2013 and threatening to move ahead with a fourth test just one year later. The argument is that, though China had formerly hesitated to put pressure on North Korea, it has been compelled to take serious measures to prevent a fourth nuclear test or a military provocation.

However, there are also other experts who counter that suspending the supply of crude oil ought not to be read as a sign of deteriorating relations between North Korea and China. They say that, while the statistics read zero, the supply of crude oil is actually continuing. In fact, the price of gasoline and other petroleum products in North Korea remains stable, reports have indicated.

Radio Free Asia reported that gasoline was selling recently for around 10 to 11 won per kilogram at North Korea’s markets, around the same as the 11 won price from 2012. The price of diesel also remained steady at 6 to 7 won, the broadcaster said.

The South Korean government believes that while China may have reduced its crude oil exports, it is continuing to supply North Korea with oil as a form of aid. “China has been supplying North Korea with 500,000 tons in trade, along with a similar amount of free oil. It appears to be providing North Korea with enough crude oil to prevent problems from occurring in North Korean society,” said a senior Ministry of Unification official on condition of anonymity.

After North Korea carried out its first nuclear test in 2006 and second test in 2009, China reportedly suspended exports of crude oil for one month and four months, respectively. But even then, since there were no reports of a severe shortage of crude oil in the North, many observers argued that China was simply pretending to cut off the supply of crude and was actually still sending oil to the North.

Of course, meetings between senior officials from North Korea and China have been suspended for an unusually long time. The last time such a meeting occurred was in North Korea on July 27, 2013 during the commemorative ceremony for Armistice Day.

In terms of political interaction between the North Korea and China, it is undeniable that a cold wind is blowing. In addition to last year’s nuclear test, the abrupt execution at the end of last year of Jang Song-thaek, the former head of the KWP Administrative Division who was on good terms with China, appears to have had an impact as well.

But many experts believe that relations between North Korea and China are not in such a bad state that China would shut off the supply of crude oil. “Relations between North Korea and China are not normal, but they should not be seen as especially bad, either. From the viewpoint of a superpower, China appears to be steadily observing North Korea’s behavior, without grief or joy,” said Lee Hui-ok, professor at Sungkyunkwan University.

Indeed, aside from interaction between senior officials, other sectors appear to be operating normally without any major disturbances. Trade between North Korea and China in the first half of the year remained at levels similar to 2013. Chinese exports to the North from January to May of this year were US$1.27 billion, down slightly from US$1.33 billion last year. But a big rebound in June brought the first half figures up to US$1.58 billion, nearly the same as the US$1.59 billion posted last year.

In the area of tourism, China also appeared to be taking a more aggressive attitude in the first half of the year than in 2013, running new tourism programs using bicycles and trains, reports said. In the area of personnel exchange, working-level contact is continuing, despite the lack of meetings between senior officials.

“There are virtually no senior political officials from North Korea visiting China. However, technical and economic officials continue to visit China for inspections and training,” said an official at the South Korean embassy in China, on condition of anonymity.

“It is dangerous to read too much into the temporary fluctuations and the sluggish mood recently affecting relations between North Korea and China. That would be a false diagnosis of their relationship,” said Lee Nam-ju, professor at Sungkonghoe University.

“Since North Korea and China understand each other, it does not appear likely that their relations will be suddenly damaged,” Lee said.

 

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