October 17, 2017: North Korea continues refusing demands (from just about everyone) to drop its nuclear weapons program. North Korean officials recently said there could not even be negotiations with the United States until North Korea had developed and tested an ICBM carrying a nuclear weapon that could reach the American east coast. That could mean never, or at least a very long time, because North Korea has bragged more than demonstrated its ability to develop a reliable ICBM armed with an equally reliable nuclear warhead. Meanwhile the North Korean economy very visibly continues to deteriorate while corruption, especially within the security forces, grows. At the same time the United States after decades of ignoring or trying (unsuccessfully) to placate North Korea is now trying the North Korean approach (lots of threats and demonstrations of force) and the North Korean leaders do not like it and appear to have no effective response. That means the North Korean leaders are made to look foolish and weak to their own people. This is not a good thing when you are running a police state. The longer North Korea does nothing to act on its growing list of threats the worse it looks to its own people and the world.

North Korean leaders, especially the latest member of the Kim dynasty, apparently never expected to face a situation like this. Worse the Kim crowd does not appear to have practical strategy for extracting themselves from this mess. Worst case, for the neighbors (especially South Korea, Japan and China) is that North Korea tries another military show of force and it escalates. There is general agreement that this would be the end for the Kim dynasty and their key supporters. But while that is happening North Korea might actually use some of the forbidden weapons like nukes or chemicals (nerve gas and so on). Even if not effective they would be destructive, if only near where they were launched from. Same with the legendary (and apparently real enough to be dangerous) arsenal or artillery and rockets (mostly unguided) aimed at the South Korean capital and positioned in bunkers just north of the DMZ that separates the two Koreas. Some North Korean soldiers would fight but many would (or could) not because of years of growing shortages. That now includes food and fuel for lighting and heating their barracks. So may uncertainties, most of them bad.

The Rot Inside North Korea

The details of how North Korea has been hollowing out and collapsing make interesting, if painful, reading. These days it is mostly about scarcity and the desperate efforts to deal with that. For example, despite decades of trying to enforce laws against the use of foreign currencies the North Korean government has been forced to gradually make use of foreign currency mandatory. This is directed mainly at the growing donju (entrepreneur) class and government officials who have legally or illegally obtained (via bribes or other forms of corruption) lots of foreign currency. A recent example of this is a year-long effort to reregister all motor vehicles in North Korea. Many North Koreans resisted this because the registration fees had to be paid in yuan (the Chinese currency) and there was the risk of illegally imported (often stolen in China) vehicles would be confiscated. North Korean currency was not acceptable and the government was not interested in seizing illegal imports. The government wanted the foreign currency and this was another way to “tax” those who had a lot of it. In the last few months police have been more active enforcing the mandatory reregistration and fining (demanding a bribe) from those they catch at roadblocks without the new license plates.

Since 2009 government efforts to halt the “invasion” of Chinese and American currency in markets has been resisted to the point where many North Koreans believe it is no longer illegal to use foreign currency. The Chinese currency has become the most widely used cash in much of the economy. This was a result of the ill-conceived 2009 currency reforms, which wiped out the savings of many entrepreneurs. Now these business-minded North Koreans prefer to do as much of their business as possible using Chinese and American currency. The local currency (the North Korean won) has lost most of its value (in terms of how many won it costs to buy a dollar or Chinese yuan) since 2009. Currently it takes about 1,400 Korean won to buy one Chinese yuan and 8,500 won for one dollar. Aside from the volatility and unreliability, using the won means lugging around a lot more paper currency. A lot of the crackdowns on foreign currency are mainly to make local police (and secret police) richer via a cut of the confiscated currency or bribes to ignore some merchants. Such confiscations are increasingly rare because North Koreans have reached the point where they will unite and oppose such police actions with force. This sort of resistance was unheard of a decade ago but now as the security forces become almost totally corrupt such resistance is more the norm.

Since the 1990s government control of the economy has gradually disappeared. Until the 1990s the North Korea government controlled everything, including distribution of food (to most of the population) and consumer goods to everyone. That all changed during the 1990s when the Russian foreign aid, which had subsidized North Korea since the late 1940s, disappeared. That and decades of mismanaging the economy caused the Great Famine. The military was given more control over the crumbling North Korean economy because the officers and troops were more trustworthy and disciplined than the demoralized government officials who were seeing everything they believed in fall apart in front of them. The soldiers train to deal with disaster, the Workers Party members are rewarded for being optimistic and ruthless. In the 1990s that was no longer enough and its been downhill ever since.

China Gets Serious

Since mid-September it has been openly admitted in northwest North Korea (especially North Pyongan Province) that the Chinese government has quietly but thoroughly shut down most of the smuggling operations with North Korea. This is the area, (where the Yalu River reaches the sea) where most of that smuggling has taken place. Many of the Chinese actions involved physically blocking the beaches on the Chinese side of the Yalu River where North Korean smuggler boats had landed or taken on illegal cargo for decades. The bribes no longer worked and the Chinese appeared to have a lot of popular support on the Chinese side because most Chinese now regarded North Korea as dangerous to China. Unlike North Korea China tolerates most of the chatter on the Internet and in the streets. Anyone can monitor this and the Chinese middlemen that depended on (and grew rich from) this illegal trade are in big trouble. Many of the ethnic Koreans in this part of China openly show concern for North Koreans who are now cut off from some essential items like medicines, petroleum products and spare parts for essential equipment (power and water utilities, food processing plants). There is less sympathy for the few percent of North Koreans who can afford consumer goods and luxury items. In North Korea this has meant these smuggled goods are still available in markets but cost a lot more. Even prices of basic food items are rising and continue to rise in some cases nearly doubling. Even clothing is getting more expensive. In North Korea it’s going to be even colder and darker over the next six months unless the sanctions are ease.

The Chinese crackdown is hurting the North Korea secret police, who now dominate border security in areas where most of the smuggling took place. There are fewer smugglers to pay bribes and in response the secret police have gone after North Koreans encountered near the border who appear capable of paying a bribe to avoid summary punishment (a beating for “resisting arrest” or robbery via “seizure of evidence”). More potential victims fight back. Whiles these North Koreans usually lose there enough instances where the security forces suffer injuries to shake confidence in the power of the North Korean government to protect itself. The growing incidence of crime in general (robbery, burglary, rape, murder, assault) cannot be ignored, nor can the growing incidents of vigilante groups, especially in rural areas, that protect themselves and people in general where the police are often the criminals and too busy taking care of themselves. The farmers, despite a poor harvest this year, have more incentive to guard their crops and harvested food from the growing number of thieves and the decline in police efforts to deal with the problem.

The regular police are not only using corruption to survive but many do better than that and become relatively affluent. This can be seen on the streets where donju (legal market entrepreneurs) were driving used cars smuggled in from China. Now a growing number of those cars are driven by police or members of their families. Meanwhile the donju are smuggling in used (and some new) trucks from China, or at least they were until the additional September sanctions being enforced by China. When the police are openly displaying their illegally obtained wealth and doing so in more parts of the country it means the government has less ability to defend itself. There are exceptions. Police will carry out orders to shut down illegal (“grasshopper”) merchants operating near legal markets. The grasshoppers avoid paying fees or bribes and are often working a second job while still officially employed in a state owned operation (like a farm) that needs him in the fields not an illegal (but more lucrative) second job.

The latest North Korean nuclear and missile tests have caused Chinese public opinion towards North Korea to become even more hostile. According to opinion polls North Korea has, over the last few years, turned into a larger military threat to China than the U.S. or anyone else. To deal with this China has increased the number of troops and border police stationed near the North Korean border and conducted more military exercises close to the border. This also addresses another Chinese fear (that gets less publicity in China) that a government collapse in North Korea would send millions of desperate, and opportunistic, North Koreans into China. There is no way China or the Chinese living along the North Korean border would tolerate that. Meanwhile China is becoming more hostile to North Koreans no matter what their legal or economic status is. Part of that is because North Korea has become a very unpleasant place for Chinese to visit or do business in.

Russia Goes Along

While Russia is still doing business with North Korea they are, like China also officially cooperating with many of the new sanctions. Despite that China recently had to explain why some trade with North Korea went up in August. China pointed out that the small print in the new sanctions included a “buffer” period that North Korea took full advantage of to export as much of the now forbidden items (mainly coal and seafood). Meanwhile North Korea has increased food imports from China, its main source for this item, which is not sanctioned. Most of the Chinese food imports must be paid for and this points out that North Korea is still finding ways to obtain foreign currency.

North Korea is still allowed to import food and such imports from China have been way up since early 2017. Partly this is a response to poor harvests and growing problems with malnutrition in parts of North Korea. The government cannot afford another round of starvations deaths, not after over a million died that way in the 1990s. North Korea is also taking advantage of the fact that China has an oversupply of corn and prices are at record lows.

Russia can’t admit it openly but a troublesome North Korea is an asset to Russia. The current North Korean government is more of a threat to Japan, the United States and China and that is good for Russia, which has no illusions about the long-range economic and military threat from China. The other East Asian economic giants (especially Japan and South Korea) are also a threat. This was obvious to anyone who noted the recent (August) announcements of increased defense spending among these eastern neighbors. South Korea announced its largest increase (6.9 percent for 2018) in its defense budget since 2009. This is a direct result of the increasing threat from North Korea. Next year South Korea will spend $38 billion, which is more than a third larger than the annual GDP of North Korea (which spends about a third of GDP on defense compared to less than three percent in South Korea).

South Korea is in the top ten of national economies, something which annoys North Korea (and the current Russian government) but is admired by the other neighbors (including China). Meanwhile Japan is also increasing its defense spending by 2.5 percent in 2018 (to $48 billion). Japan, like China and the U.S., are among the top five economies on the planet. Japan, because of the post-World War II constitution the United States insisted on (and Japan did not much object to) has been largely demilitarized considering the size of its economy. That is changing and the U.S. has dropped nearly all restrictions on what weapons it will export to South Korea and Japan and is ignoring treaties it has with both nations that restrict what types of advanced weapons (like ballistic missiles and nukes) they can develop. The Americans would still prefer that South Korea and Japan not build nukes (which both these nations could easily and quickly do). China and Russia would also prefer that Japan and South Korea remain non-nuclear weapon nations. But if North Korean military ambitions and threats (especially against South Korea and Japan) are not curbed popular opinion in South Korea and Japan is becoming more comfortable with the having their own nukes.

October 16, 2017: The EU (European Union) joined several other nations and imposed sanctions on the North Korean Army. This means known North Korean Army assets can be seized and trade with North Korean Army entities is banned. Since the 1990s the North Korean military has taken over a lot of the North Korean economy because this was one way to reward the military and ensure their loyalty in the post-Cold War world.

October 15, 2017: Russia officially approved the most recent UN sanctions on North Korea and ordered Russian security and banking officials to implement the bans on most imports and exports to North Korea as well a more specific bans on North Korean individuals and companies known to be working on nuclear weapons. On a more positive note the Vladivostok ferry to North Korea resumed operation. But now it only carries cargo (checked to ensure none of it violates sanctions). In June 2017 Russia and North Korea opened a new weekly ferry service between North Korea and Vladivostok, the major Russian port on the Pacific coast. A 1,500 ton North Korean ship was used, a vessel that carries 193 passengers plus cargo. Because Russia checked cargo (for sanctioned items) and IDs the ferry was not getting much business, except for a dwindling number of Chinese tourists. The ferry stopped operating in August when the Russian company operating it was banned from Vladivostok because of unpaid port fees. Those overdue bills have apparently been paid and enough legitimate cargo business found to justify resumption of service. That may change at any time. Russian trade always accounted for only a few percent of North Korean foreign trade.

October 14, 2017: American and South Korean intelligence recently detected the presence of at least four large (probably 16 wheel) TEL (Transporter Erector Launcher) vehicles on the move near the northwest border and around the North Korean capital. These TELs normally spend most of their time in well-protected shelters. The four TELs moving about now each appear to be carrying a two or three stage ballistic missile. A TEL is an unusual vehicle, specially built to carry, then erect and survive launch of a ballistic missile. Since 2012 a TEL unlike any seen in the north before began showing up in North Korea. It was soon noticed that the cab was similar to a Chinese heavy transporter. A Chinese truck manufacturer soon admitted that they had sold North Korea the vehicles, but that is was not a TEL, unless the North Koreans turned it into one. The truck was designed to haul non-military cargo but, as is the case with many "dual-use" technologies, can easily be adapted to military use. The Chinese manufacturer added that the truck in question was an excellent vehicle and there were many satisfied users. Large trucks modified to be TELs are often not real TELs. There are a lot of manufacturers out there who build huge (12-20 wheel) trucks, and these are often used to carry military equipment (like 60 ton tanks). A 12-50 ton ballistic missile is no problem, but installing the hydraulic gear and controls to erect the missile to a vertical position is tricky. Even more difficult is hardening the rear of the vehicle to minimize the damage from the rocket exhaust. This last bit can be dropped if you only expect to use these TELs once for a live fire. The larger North Korea TELs appear to have been one of those "use once and abandon the trailer" models and now four of them are on the move.

October 13, 2017: An American SSGN (nuclear powered cruise missile/commando sub) arrived in South Korea at Busan, as the southern tip of the Korean peninsula. This was in preparation for a large joint (U.S.-South Korean) naval exercise to start on the 16^th and last until the 20^th. While the U.S. is encouraging media to report all the surface warships being sent to Korea the SSGN is the only submarine that is mentioned. It is U.S. Navy doctrine to deploy SSNs (nuclear attack submarines) in crises situations but these rarely reveal themselves unless they launch cruise missiles (which they have done several times since the 1990s). But these SSNs can also quietly detect and track enemy surface ships and submarines. The one naval asset that North Korea has are its dozens of ramshackle Cold War era diesel-electric subs, including one that can carry and launch a ballistic missile. North Korea knows about these SSN tactics but are not saying anything about it because it is one threat they cannot easily track or count and that is, as intended, unsettling.

October 12, 2017: China has warned some (at least ten) South Koreans working near the North Korean border that there is risk of Chinese or North Korean criminals kidnapping South Korea citizens and taking them to North Korea to be ransomed (for cash or South Korea government concessions). Kidnappings by North Korea agents have been increasing but the targets are usually other North Koreans. China believe this program is being expanded as a reaction to the stricter enforcement of sanctions by China. At least five vulnerable (prominent or wealthy) South Koreans are known to have left. North Korea has kidnapped about 500 South Koreans since 1953. Some were taken in South Korea but most of these kidnappings take place outside of Korea.

China reported that its trade with North Korea had, in September, declined for the seventh straight month. In September North Korean exports to China were down 38 percent (compared to September 2016) while North Korean imports from China were down 6.7 percent. There is less precise data on illegal trade, which has always existed. China has tried to crack down on that but some of it is still going on. That is obvious from the continued presence of North Korean seafood (long a delicacy in China) in Chinese markets. But a lot of the more obvious smuggling efforts have been shut down and China has been quick to go after new scams. For example the North Korean Army was spotted operating a smuggling operation in a remote portion of the China-North Korea border and it was shut down. But even with the additional troops China has brought in to guard the border, and a Chinese population near the border quick to report an activity that might be North Korean, there is still some movement of goods in (mainly) and out of North Korea. This is known because South Korea, the United States and Japan have naval and intelligence resources in the region that can detect continued trade and now it is documented (if possible) and publicized since the Chinese and Russian government have both agreed to act on any violations of sanctions. This is having an impact because a growing number of Chinese smuggling partners have been arrested in China or quietly stopped dealing with the North Koreans. That means North Korea has to pay more to the few remaining Chinese smugglers and some of those Chinese are willing to take the risk for a big payday. The U.S. has suggested shutting down the North Korean fleet of cargo ships that frequently mix smuggling with legitimate work. There is less and less for these ships to carry legally, and then there is the growing number of cargo ships and tankers North Korea secretly owns or operates. So far there is not enough support for taking down the smuggling fleet but it remains an option.

October 10, 2017: Despite Chinese economic pressure on South Korea (over South Korean missile defenses) China renewed a three year deal that guarantees three years of currency swaps (the two governments allowing businesses to exchange Chinese yuan for South Korean won) worth up to $56 billion. This encourages trade between the two countries and despite Chinese economic pressure on South Korea over the last year it was believed China would renew the deal because China is pushing the yuan as a new “international currency” (as the dollar, euro and yen have been) and needs major local economies like South Korea. The swap agreements began in 2009 as Chinese-South Korea trade was sharply rising.

Meanwhile China is still visibly angry at South Korea, fearing the growing military power of South Korea and the recent installation of a THAAD anti-missile battery despite vigorous Chinese diplomatic and economic efforts to prevent that. The diplomatic and economic pressure continues but the South Koreans are in no mood to back off as long as the North Korean threat remains.

October 9, 2017: South Korea revealed that one of its military networks had been hacked into last September and a large quantity of secret documents appear to have been copied. This apparently included several OPLANs (Operational Plan, a plan for a single or series of connected operations to be carried out simultaneously or in succession by specified military units). American OPLANs after World War II often involved allied forces and there are a number that involve South Korea. Two that the hackers are believed to have taken are OPAN 5015 (joint U.S.-South Korean response to all-out war with North Korea) and OPLAN 3100 (South Korean only responses to various North Korean local provocations.) OPLANs are typically updated frequently (even daily) in times of crises so what the North Koreans may have got could already be out-of-date. However OPLANs also include a lot of operational details that do not change much over time so grabbing even one version of a particular OPLAN has its uses.

South Korea and the United States have a number of shared OPLANs. Some of these are more like disaster plans but involve military units. For example OPLAN 5029 deals with making sure North Korean nuclear weapons technology will not get into the wrong hands (the U.S. will deal with this), and that preparations are in place to deal with the North Korean army falling apart, or millions of hungry North Koreans trying to move into South Korea (South Korea takes care of this). There are also plans for dealing with natural disasters that do a lot of damage to both countries. Another shared operation is OPLAN 8044 that covers nuclear retaliation for a wide variety of situations. This OPLAN has long included details of which nuclear missiles were aimed where in Iran and North Korea if the need arose to fire back.

In response to this latest hack South Korea quickly ordered some changes in its Cyber War defenses. OPLANs were apparently also updated to minimize the damage done by North Korea possibly having some current as of late 2016.

October 1, 2017: China began enforcing the new UN sanctions on oil exports to North Korea. This reduces the amount of petroleum products allowed in by about a third. At the same time China is severely restricting smuggling so that the actual cut in petroleum products to North Korea is now down by about half. In response fuel and heating oil prices are rising. The North Korea government is allowing their entrepreneurs to try and fix this problem by rapidly building crude facilities for converting coal (which North Korea still has plenty of) to petroleum products.

September 30, 2017: South Korea revealed that during September American and South Korean air-defense units has conducted their first joint SHORAD (short range air defense) exercise to see how well SHORAD methods and equipment used by both nations worked together in practice.

September 28, 2017: China has ordered North Korean companies operating in China to shut down within 120 days.