China uses economic muscle to bring N Korea to negotiating table - Financial Times

China uses economic muscle to bring N Korea to negotiating table
Data reveal how Beijing has drastically cuts exports of key materials to Pyongyang

Kim Jong Un and his wife Ri Sol Ju with China's Xi Jinping during the North Korean leader's visit to Beijing this week © AP
James Kynge in London - 30/3/2018
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 UN sanctions — show the extent of Chinese pressure following the ramping up of Pyongyang’s nuclear testing programme. It also suggests that behind Mr Xi’s talk this week of a “profound revolutionary friendship” between the two nations, his government has been playing hard ball with its neighbour.

“China has effectively turned off the petroleum taps flowing into North Korea,” said Alex Wolf, economist at Aberdeen Standard Investments and a former US 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. Mr Kim’s sister, Kim Yo Jung, was dispatched to the Winter Olympics held in South Korea in February. Mr Kim then shocked many by inviting Donald Trump to an summit — an offer that the US president accepted. Following the visit to Beijing this week, North and South Korea announced a historic summit scheduled for later this month.

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
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 detente with South Korea to weaken the US alliance structure. In the US, some attribute Mr Kim’s new approach to pressure from Mr 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 per cent 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 per cent cut in petroleum product exports stipulated by the UN 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 said that such consistent and bold drops in export volumes are unlikely to have been the result of official massaging.

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

It is important that the US and other countries realise 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 US inflexibility had precluded progress.

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

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