North Korea defiant as new sanctions take bite out of exports

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Seafood prices in North Korea began to collapse almost immediately after the international community imposed strict new economic sanctions, including a ban on seafood exports, on a defiant regime that tested two intercontinental ballistic missiles in July.

On Monday, North Korean fresh squid were being offered for barely a third of their value last week, and even then "nobody wants to buy it," said Cui Yanzhi, a Chinese businessman who has operated a seafood processing plant in northeastern North Korea.

Following the sanctions vote on Saturday, he has shut the plant down and is scrambling to empty it out, bringing as much as he can across the border to Hunchun, a thriving Chinese trading town with dozens of seafood markets selling North Korean goods.

"We have to rush," he said. Chinese customs officials had not yet formally received notice to shut down the seafood trade. But he is convinced that will happen soon. "Since China voted to support the sanctions, they will definitely be implemented," he said.

For the White House, the panicked unravelling of businesses like Mr. Cui's looked like grounds for vindication, after the United Nations Security Council unanimously approved a new round of sanctions that ban North Korean exports of coal, iron, iron ore, lead, lead ore and seafood.

The international community has demanded a halt to North Korea's missile and nuclear tests, and the new measures, touted as the "strongest sanctions ever imposed" on the country, could cut $1-billion (U.S.) from its export revenues.

Nikki Haley, U.S. Ambassador to the United Nations, called the new measures a "kick in the gut" to Pyongyang and the retreat of savvy Chinese seafood traders is a sign that Beijing, which dominates trade with North Korea, will play along.

But isolated North Korea is far less trade-dependent than most nations, raising doubts about how much the new measures will accomplish. The country on Monday threatened retaliation, with an extraordinary series of bombastic statements pledging never to negotiate away its nuclear and missile technology, accusing the United States of "trying to drive the situation of the Korean peninsula to the brink of nuclear war" and warning Washington against "believing that its land is safe across the ocean."

And if the U.S. intent is to persuade North Korean leader Kim Jong-un to change course, a better indicator might be the international community's unproductive dealings with North Korean Foreign Minister Ri Yong-ho, who joined some of the world's top diplomats, including U.S. Secretary of State Rex Tillerson, in Manila on Sunday and Monday as part of an ASEAN Regional Forum.

Mr. Ri spoke with his Chinese and South Korean counterparts, and was photographed an arm's reach away from Canadian Foreign Affairs Minister Chrystia Freeland.

But the North Korean representative gave little hope that his country intends to do anything save press forward with its current program. Mr. Ri disparaged a South Korean offer of military talks as "lacking sincerity," given Seoul's support for increased sanctions, the Yonhap news agency reported.

He and Mr. Tillerson did not so much as meet.

"Given that this is the top foreign policy and national security priority facing the United States, that the Secretary of State doesn't talk with the North Korean Foreign Minister when they're both in Manila makes no sense," said John Delury, an expert on North Korea at Yonsei University's Graduate School of International Studies in Seoul. "They're not going to get into the same venue naturally very often. And Ri Yong-ho is a sensible person. You take that opportunity."

Mr. Tillerson said he would be prepared to speak with North Korea, so long as it halts missile tests.

But previous pauses in North Korean testing have not produced dialogue, and Pyongyang has shown no willingness to back down, saying in a statement Monday through its official Korean Central News Agency that it "will never take a single step back from strengthening our nuclear might."

At the ASEAN forum, Mr. Ri added that "possession of nuclear weapons and intercontinental ballistic missiles is a legitimate option for self-defence in the face of a clear and real nuclear threat posed by the U.S.," a North Korean statement said.

"We will, under no circumstances, put the nukes and ballistic rockets on the negotiating table," he said.

The United States has been primarily motivated by a belief that North Korea can be brought to heel if it is made the target of an Iran-style economic embargo, one intended to deliver crippling financial pain.

The new sanctions unveiled on the weekend are a step in that direction.

"The categories chosen are North Korea's major exports that earn hard currency," said Bonnie Glaser, a senior adviser for Asia at the Center for Strategic and International Studies. The sanctions "will potentially reduce the hard currency going to North Korea's missile and nuclear programs. Potential is the key word – if they are enforced."

North Korea needs foreign currency to purchase some components in its weapons program.

But using economic means against Pyongyang is difficult. Trade makes up just 10 per cent of North Korea's gross domestic product, according to estimated statistics published by the Bank of Korea in South Korea. That puts North Korea on par with China in 1960 (the global average today is 58 per cent; Iran is 39 per cent).

When it comes to sanctions, North Korea's economic isolation is a form of insulation.

"You can't get the leverage on North Korea by isolating them that you could on a country like Iran," Prof. Delury said.

North Korea has also proven itself expert at evading efforts to rein it in.

The country's economy grew by 3.9 per cent last year, despite rounds of increasingly strict measures against it, the Bank of Korea estimated.

And while China has supported the expanded trading bans on Pyongyang, it has also made clear that there are limits to what it will do.

"Sanctions to the greatest possible extent must avoid causing negative impacts to ordinary people and to third countries, and avoid bringing disaster to the country in question's normal and legal trade and business exchanges with the outside world, people's normal lives and the humanitarian situation," the Communist Party-run People's Daily said in a front-page commentary in its overseas edition Monday.

The new sanctions, meanwhile, "will not likely have any major effect," said Jin Qiangyi, a professor at the Center for North and South Korean Studies at Yanbian University.

North Korea's rapid progress toward a nuclear-tipped missile capable of hitting the continental United States is constraining Washington's options, he said.

Though the White House has talked openly about a military option, "once the U.S. confirms that North Korea possesses the ability to attack their territory, they cannot attack North Korea. If the U.S. continues acting tough under such circumstances, it will put itself in great danger, too," Prof. Jin said.

"So what can the U.S. do then? They have to make improvements to their relations with North Korea to lower the danger level."

Prof. Delury believes the best path forward lies in dialogue – but such an effort would require an openness to compromise that does not now appear evident.

"There are things you can do through negotiations and diplomacy right now to stop the bleeding," he said.

"The U.S. discussion should be, 'What are we willing to give the North Koreans?' And that is obviously totally counter to what we're hearing, which is basically: 'How much more threatening can we be?'"

With a report from Yu Mei