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The Jian-Manpo bridge straddling the North Korea-Chinese border opened on Apr. 8. (Yonhap News)

With a South Korea-US summit scheduled to take place in Washington, DC, on Apr. 11, Washington’s belief in sanctions as an “answer to all things” has hardened into dogma as the two sides seek out ways of getting the North Korea-US denuclearization negotiations back on track. But the question of whether sanctions really are the only answer to achieving North Korea’s denuclearization – and to do so quickly – remains the subject of considerable debate, with Pyongyang regarding the heavy sanctions push as tantamount to a call for “surrender.”

US hardliners appear poised to tighten the sanctions noose in the wake of the North Korea-US summit in Hanoi, where North Korea requested the loosening of sanctions related to public livelihood from among those imposed by the UN Security Council between 2016 and 2017. On Mar. 21, the US Treasury Department announced additional sanctions on Chinese companies for helping North Korea skirt existent sanctions. On Apr. 5, Secretary of State Mike Pompeo stressed, “Economic sanctions, United Nations Security Council sanctions, will not be lifted until we achieve the ultimate objective [complete denuclearization] that we set out now almost two years ago.”

Statistics showed North Korean exports to China – which account for 90% of its trade – amounting to US$220 million in 2018, a decrease of 87% from US$1.65 billion the year before. North Korean imports from China stood at US$2.24 billion, down 33% from the previous year. According to reports, the cost of luxury apartments in Pyongyang have fallen by around 30% since August 2018 as the foreign currency shortage deals a blow to the so-called “donju” (“masters of money”) who represent the North’s emerging wealthy class.

Conversely, there are signals pointing to continued short-term stability for the North Korean economy. In particular, the exchange rate has remained stable at around 8,000 North Korean won to the US dollar, and the price of rice at around 4,500 won per kilogram.

On that basis, experts are cautioning against the risk of oversimplification by exaggerating the effects of the sanctions against the North based solely on a handful of specific indicators such as apartment prices. Yang Moon-soo, professor at the University of North Korean Studies and an expert on the North Korean economy, explained, “Part of it is that North Korean apartment prices had gotten too high in the past and have been undergoing adjustments. And while the price may appear to have dropped with the reduction in transactions and occasional ‘fire sales,’ apartment prices can’t really been seen as having plummeted all around.”

“We need to be cautious in assessing how much of a blow the North Korean economy has suffered,” Yang suggested.

Experts also said there was no basis for claims from some quarters that the North is facing a “second Arduous March” or that its foreign exchange holdings will run out in the first half of 2019. In particular, the experts noted that market development has absorbed the shock from sanctions. A foreign affairs expert in Beijing who is closely acquainted with the situation in North Korea said, “Unlike the time of the Arduous March, markets have developed throughout North Korea, so nobody is starving to death.”

“If the North Korean regime opts to ‘hold out,’ they could probably go for about 10 years,” the expert predicted.

According to this position, US hardliners are miscalculating in their belief that sanctions have taken time away from North Korea and put it on the US’ side. The expert explained, “They can’t stop smuggling vehicles from secretly crossing at night over the 1,400km border between North Korea and China. The US has said it plans to stop ship-to-ship transfers on the sea, but it can’t control that too.”

At the same time, the psychological blow to the market from the Hanoi summit’s failure to produce an agreement warrants some attention.

“The donju and other economic actors in North Korea were hoping to see sanctions lifted at the Hanoi summit, and the blow to the economy could increase as consumption shrinks,” Yang said.

“They’re going to be disappointed, assuming the agreement is not going to come and sanctions are not going to be lifted, and the blow to the economy could increase as consumption shrinks in anticipation of that,” he predicted.

Some have suggested the “sanctions as the only solution” approach could have the opposite of its intended effect, triggering a kind of butterfly effect by sending North Korea off its course of denuclearization talks and giving a boost to hardliners in the regime that leads to North Korea building its nuclear capabilities further.

“Last year, there was an intense debate among North Korea’s elite over the pros and cons of denuclearization around the time of the North Korea-US summit in Singapore,” noted Hong Min, director of the North Korea research office at the Korea Institute for National Unification.

“If the US keeps focusing exclusively on sanctions without sending any positive messages, that could lead North Korea to adopt a more hardline approach to leaves the two sides back in a vicious cycle of tensions and clashes,” Hong said.

By Park Min-hee, staff reporter

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