Pandemic Response Decimated North Korean Economy, U.N. Panel Finds

The North Korean metro. (Source: Unsplash)

By Samuel Rubenfeld and Priscilla Kim

Tuesday, October 5, 2021

Shipments of alcoholic beverages to North Korea have been practically non-existent since early 2020 and booze became unavailable in the country due to its coronavirus pandemic-related restrictions, according to the latest report by a United Nations panel of experts.

A seized shipment of beer cited in a prior U.N. panel report had revealed a multi-million dollar North Korean illicit trading network based out of a suite in a hotel in Dalian, China, Kharon reported in April 2020. Later that year, North Korean authorities launched a crackdown on homemade alcohol production to prevent the diversion of grain intended for food purposes, according to a report by DailyNK, a North Korea-focused media outlet based in Seoul.

The lack of alcoholic drinks is one of many indicators cited in the U.N. panel report released this week that show how North Korea’s blockade in response to the COVID-19 pandemic continues to affect the movement of people and goods, both legal and illicit, into and out of the country. 

North Korea has not reported a positive case of COVID-19 since the pandemic began, according to testing data tracked by NK News, a Seoul-based media outlet. The country has generally forbidden cross-border movement and trade since January 2020, and flight and passenger rail services in and out of Pyongyang have been suspended, the U.N. report said. 

Maritime exports from North Korea of coal and other sanctioned commodities continued but at a much reduced level during the period between February and August 2021, the report found. The same was true for imports of oil products in the first half of the year, according to the U.N. Imports of luxury goods have virtually stopped, though some luxury supplies for the elite were transported by ship to North Korean ports and stored in nearby trains, the panel’s report said. 

Recorded foreign trade has plummeted in response to the COVID-19 measures, the U.N. report said. Exports in 2020 were about one-third of the year-earlier total, while imports were about one-fifth of the 2019 amount, according to the U.N., citing global trade data. Infrastructure development continued at factories, but at a less-intensive pace due to the pandemic, the U.N. said. Some trade operations restarted in recent months after North Korea constructed disinfection facilities for imported goods, according to the panel, which cited an NK News report.  

“Statements made by [North Korea] suggested a deepening humanitarian crisis in the country, although the blockade in response to COVID-19 means that the relative impact of sanctions on the humanitarian situation has probably decreased,” the U.N. panel said in the report.

North Korean leader Kim Jong-Un had warned in the spring that the country faces its “worst ever” situation, comparing its economic difficulties to the famines of the 1990s. Humanitarian organizations surveyed by the U.N. panel cited struggles with getting assistance into the country, however, and urged the creation of a whitelist to streamline a procedure for exemptions.  

Pyongyang’s preconditions for restarting negotiations with the U.S. include the relaxation of sanctions on exports of minerals and imports of refined fuel, but the country also wants access to liquor and suits, The Wall Street Journal has reported, citing the South Korean spy agency.

Despite the economic situation, North Korea continued to maintain and develop its nuclear and ballistic weapons programs, and sought to procure related material and technology, the panel found. The ballistic missile program had lost momentum in the first half of 2021 compared to the pace of the last few years but it remains “coherent and dynamic,” according to the U.N. report. 

Representatives of the country based overseas have been under pressure to make money for the country’s needs, according to the U.N. While stuck abroad due to the pandemic, foreign representatives of North Korean trading companies and the Academy of National Defense Science continued to import and export munitions materials, according to the U.N. report, which cited assessments from member states without corroborating their findings. The Academy of National Defense Science, which controls a network of overseas front companies tasked with collecting scientific information, has been sanctioned by the U.S. and the U.N. 

The U.N. panel is also investigating a “choke point” item procurement network that might be related to the North Korean nuclear and ballistic missile program, according to its report. Choke point items are goods that North Korea seeks to procure from abroad for either economic reasons, such as lower cost, or technological reasons, like an inability to produce them domestically or to obtain know-how to make the goods at home, the U.N. has previously said.

Korea Machinery General Trading, a company represented by Kim Jong Dok, regularly places orders of sensitive industrial materials with third country-based companies, the report said.

A Dalian, China-based unit of the company was the consignee for USD 4.7 million worth of goods shipped between January 2018 and October 2020 by Viet Nam Vifotex Investment Company Limited, according to trade data reviewed by Kharon. The items included consumer electronics and appliances made by Japanese multinational firms that are prohibited for import by North Korea under U.N. sanctions, Kharon found.

Korea Machinery General Trading also placed at least four orders since January 2021, including for items such as a certain type of stainless steel that can be used for aeronautical purposes as well as for the fabrication of liquid-propelled ballistic missile engines or the casing of nuclear weapons, according to the U.N. report. North Korea is known to pursue this type of steel for its ballistic missile program, the U.N. said. 

Pyongyang has conducted a number of missile tests in recent weeks, including one launch during its envoy’s remarks last month at the U.N. General Assembly. This week, North Korea condemned the U.N. Security Council after the body had criticized the missile tests.

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