December 14, 2018: As expected (by those familiar with North Korea history since World War II) North Korea is avoiding doing what they were asked to do (get rid of the nukes and allow verification) in return of desperately needed food and economic aid, and the lifting of (for the first time) strictly enforced economic sanctions. As per the past, North Korea is trying to delay the negotiation and compliance process while demanding some aid as a “down payment” for the nice things North Korean leaders have said so far. North Korea has not actually done much of anything about denuclearization. Internally North Korea state-controlled media continues to insist that North Korea will never give up its nukes and that North Koreans should prepare for hard times in order to deal with foreign pressure. If the denuclearization issue were put to a vote in North Korea (something that has never happened there) food, fuel and electricity would garner more votes than keeping the nukes, at least if it were a secret ballot. North Korean leaders know this because the secret police nationwide informant network confirms that is the case. The North Korean population may be terrified, conditioned by generations of pro-Kim dynasty propaganda and generally in no position to rebel but all that bad treatment is having an impact. North Koreans are responding, in their own way, to all the shortages and government abuse they endure. North Koreans obey but no longer believe in their government. The disloyalty is increasingly visible with all the blatant corruption, street crime and anti-government graffiti. Situations like this do not end well.

China is still seen as the deciding factor in getting North Korea to give up its nuclear weapons. But the Americans have also noted that China has loosened up on its enforcement of North Korean sanctions since early 2018. Despite that Chinese trade with North Korea fell 57 percent during the first ten months of 2018 (compared to 2017). At the same time, satellite photos show that China has used the reduction in trade (and road use) with North Korea to upgrade and expand the infrastructure along the North Korean border. This would enable much more trade with North Korea once sanctions are lifted.

The Americans say they will negotiate with North Korea, and China, as long as it takes to achieve denuclearization but only if there are no more nuclear tests. The economic sanctions will remain in force until a denuclearization deal is achieved. That means verification, something the north is very much against. North Korea is trying to get around that by persuading South Korea and/or China to press for the gradual lifting of sanctions as progress is made. The Americans are not eager to try that because in the past the North Koreans have extracted what benefits they could with that approach and then let negotiations collapse. China is willing to be flexible, but only if it is good for China; like putting pressure on the Americans about some other issue, like the current trade war and accusations of rampant Internet based espionage. Meanwhile, China has been willing to see North Korea suffer from the sanctions that even China is now enforcing.

The impact of China enforcing all the UN trade sanctions against North Korea has, since it began in early 2018, caused serious shortages of foreign currency. This is how you measure the true impact of any sanctions on North Korea and you know the sanctions are bad when Chinese exporters of consumer goods for the North Korean ruling class (two or three percent of the population, including immediate family, who run the government, universities, research centers and security forces) are now demanding cash in advance. China is the main access point for the thousands of luxury items North Korea imports each month to keep their ruling class content and willing to do what it takes to keep the Kim dynasty in power. There are numerous reports from China about exporters losing sales of these goods to North Korea because bills are not being paid. So suppliers are demanding cash in advance and the North Koreans don’t have it. The Chinese suppliers are complaining to anyone who will listen because this trade with North Korea is big business in some Chinese cities on the border.

When African nations were threatened with sanctions two years ago for buying weapons and military services (training of commandos and secret police) they all said they would stop. North Korea cut their prices and said they would be more discreet and much of this lucrative business continued. North Korea made deals wherever it could to keep sources of hard currency producing and that usually meant cutting prices and getting less. But that was better than nothing. Hard currency was essential for maintaining the loyalty of the senior leadership. For example, South Korean intelligence estimates that North Korea has spent at least $4 billion on imported luxury goods since current leader Kim Jong Un took over in 2012. Despite growing sanctions, those luxury imports have continued and in 2017 averaged about $50 million dollars a month. Analyzing Chinese customs data it was found that about half the money spent since 2012 went for consumer electronics, a third went for luxury cars. The rest went for items like liquor, non-electronic consumer gadgets, high-end appliances, luxury home furnishings, clothing (fur coats and quality materials for custom-made suits and dresses), cosmetics, luxury watches and jewelry.

North Koreans are hungry in part because of these imports. If, in 2017 North Korea had diverted the luxury imports cash to basic foods that would have tripled the tonnage of rice imported. One reason more North Koreans are not enraged by these luxury imports is that over half the senior officials and their families live in Pyongyang, the capital, which has always been the modern looking and affluent area in the country. Most North Koreans never get to visit the capital and personally witness all that wealth. Residence in the capital requires official permission and that is difficult to get. Police are constantly tracking down and arresting those living in the capital without permission. Another attraction of the capital is that it is one of the few areas in North Korea where there is a regular and reliable electricity supply. For all those reasons the capital is seen as a very special place and even hungry North Koreans can appreciate the need to impress foreigners, because living conditions in the rest of North Korea are not impressive at all.

Obtaining hard currency, or valuable items (minerals, gems) that can easily be turned into cash in China, is more difficult than ever because North Korea has lost access to SWIFT (Society for Worldwide Interbank Financial Telecommunication) and that loss of access is being enforced like never before. When a smuggling operation is discovered the first thing sanctions enforcers seek out is a SWIFT connection. If the scam depends on SWIFT access (like the illegal coal exports via Russia) than that can be shut down via threats of SWIFT embargoes on Russian firms involved. It has been noted that several North Korean ships that were involved in the Russian based coal exporting scam have returned after extended periods of not being able to pick and deliver a cargo. The Russians could not figure out a way to pay the North Koreans and eventually the North Korean cargo ships had to return to their homeport with nothing but a large fuel (to run the ship) bill to show for it.

There are ways to get around the SWIFT threat but they can be very expensive and are still vulnerable, as the recent arrest of the CFO (chief financial officer) of China’s largest cell phone company demonstrates. The CFO was arrested while changing international flights in Canada and is being extradited back to the United States to face an embarrassing (for China) indictment for helping Iran bypass a SWIFT ban.

Another Winter of Discontent

Winter in North Korea is particularly cold, similar to New England or Scandinavia. This year there is less food, fuel and electricity. Because of poor harvests in 2018, North Korea will have to import 641,000 tons of food in 2019 to avoid mass starvation. That’s 41 percent more food coming in and nearly all of it will have to be paid for. In 2018, only 14 percent of food imports were foreign aid. Donors are reluctant to donate food because the North Koreans refuse to allow its distribution to be monitored. In the past donors have found that food aid often went to those who did not need it (like the military) or to local or Chinese markets to raise cash. This distribution problem also applies to locally produced food because the government controls the distribution of most of it. Whenever you see a lot of hunger in an area it is often about the locals displeasing the government rather than local crop failures. The UN estimates that nearly 40 percent of North Koreans need food aid to avoid starvation.

The government makes matters worse by banning firewood collection and sales because of the higher priority given to the reforestation program. This reforestation effort is an aftereffect of the mass famine and economic collapse of the 1990s. Since the 1990s illegal tree cutting has become increasingly common in North Korea as people sought fuel with which to survive the cold weather and coal shortages. Coal was for export, not keeping North Koreans warm. Satellite photos show the sharp difference between forestation in the north and south. South Korea is the only nation on the planet to have succeeded at artificial reforestation since World War II. Other nations (mainly in the West) have regrown depleted forests but usually as a result of rural populations moving to urban areas over many decades and allowing forests to naturally return to abandoned fields and settlements. But in areas where huge areas have been stripped of trees, that solution can take centuries, not decades, to work. Both Koreas were heavily deforested in the last two centuries but South Korea fixed the problem while in North Korea it got worse. Even North Korea recognizes this and was willing to adopt the techniques South Korea used and try to replace its depleted northern forests. But the South Korean effort did not do this at the expense of the fuel supply for heatless and hungry rural populations. Nevertheless, South Korea gave the north access to technical aspects of their reforestation problem, including valuable data on how to handle tree disease that will be encountered as certain types of trees are reintroduced to areas where they haven’t been for over a century.

North Korea also decided that continued resistance to seizing land used for family gardens (so they could be reforested) was treason and local officials have been ordered to act accordingly. In practice, this meant local officials could justify demanding larger bribes to move mandatory (as demanded by the central government) tree planting somewhere else. So when you see whose garden got replaced by new trees you know which family is not doing well in an increasingly competitive North Korea.

The sanctions that reduced exports to China put thousands of mine workers out of work and the government is not providing any aid (except for lighter sentences for those caught smuggling). Same goes for young women who have paid a people smuggler by agreeing to be sold to a Chinese man (to be a wife, or worse) and got caught before getting into China. Some women who pay cash to people smugglers are deceived and sold to Chinese men. China has a shortage of women because decades of the “one child” policy produced many more male than female children (because of the preference for a son). Now foreign women are in great demand for wives or brothels. Because of the growing food and fuel shortages, more people will die of starvation and exposure before warm weather returns. Government officials near the Chinese border report more anger and unrest among the population. Many of the unemployed depend on kin or simply go (illegally) to other parts of the country seeking legal or illegal employment.

There are more groups of abandoned children in plain view because the government orphanages (which are basically prison camps for kids) are filled to capacity and there is not enough food for the inmates. This sort of thing is not going to produce a rebellion but it does generate more bad news about North Korea and that news, despite more vigorous efforts to seal the Chinese border, is getting out. Worse, details of this catastrophe are reaching the rest of North Korea and are not helping. A growing number of North Koreans, including those who eat regularly, are wavering in their support of the Kim dynasty. That’s what the secret police reports (from the nationwide network of informants) describe in great detail.

Among the increased security measures along the Chinese border are the new JIT (joint inspection teams). These consist of groups of twenty operatives from the MPS (Ministry of People’s Security, the national police), the MSS (Ministry of State Security, the secret police) and the DSC (Defense Security Command, or military investigators). By having people from three security agencies in one team it is more difficult for members of the team to find associates for corrupt practices (taking bribes). This has become an intractable problem along the Chinese border, where even the most loyal (at least on paper) operatives can be tempted by the huge bribes being offered to allow smuggling of people, goods and information. The JITs were quietly recruited and sent to the border but their presence was quickly known because so many MSS personnel are already working on the border. Yet the JIT isn’t there just to suppress corruption but to gather information on “missing people” who have actually made it out of the country to China or South Korea. Those with kin in South Korea are particularly sought either for recruiting spies in South Korea (by threatening the lives of kin still in North Korea) or simply to extort cash from those in South Korea to keep their North Korean kin safe.

This security force corruption is a problem the government cannot afford to complain of openly, but it is well known by all along the border (as well as in China) and that knowledge is spreading throughout North Korea. All this security activity on the Chinese border has made the assignment to that area a choice and sought-after job. A security operative or commander can make a fortune (by North Korean standards) in less than a year. The risk is execution or slow death in a labor camp. But all that cash is life-changing (one way or another). For a growing number of government officials access to opportunities for bribes is a matter of life or death. The government has cut the food normally provided to government employees and their families and food prices in the markets are going up. Malnutrition is increasingly common among even those who have jobs. But even the police are finding more of their officers are frequently sick or too weak to handle routine tasks. This encourages more government workers to seek out ways to extract bribes. One example is forming an ASTF (anti-socialist task force) for a dozen or more office employees and then go to markets and seek out illegal items for sale and seize them. You need official permission to form and operate an ASTF, and that usually requires a bribe. But income from illegally reselling most of the illegal (or questionable) items seized provides additional income for all. If merchants organize they can go bribe officials to help recover goods illegally seized, the ASTF can demand a bribe to make the return go smoothly.

Across the border in China, the security forces are cooperating in making life more difficult for North Koreans trying to defect. Many of these North Korean illegals end up working for (or even creating) criminal gangs. Northeastern China has always been known as a somewhat lawless area and this is one of the reasons why. North Koreans were once tolerated in northeastern China, where there was always a large minority of Chinese who were ethnic Koreans. Now most Chinese are willing to report North Korean illegals to the police or, if they are young women, to criminal gangs who will pay for that information as they can kidnap the North Korea defector and sell her to Chinese bachelors desperate to find (or buy) a wife.

December 10, 2018: South Korea announced another record increase (8.3 percent) in its defense budget. In 2019 South Korea will spend $43 billion on its military. That’s nearly as much as Japan (with a much larger economy) spends. The 2018 budget had the largest increase (6.9 percent) in the defense budget since 2009. Although North Korea openly complains about how unfair and unfriendly these increases are they are a direct result of the increasing threat from North Korea. The annual South Korean defense budget 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).

The United States imposed individual sanctions on three North Korea officials because of their key role in making possible massive and sustained mistreatment of the North Korean population. North Korea is notorious for its decades of harsh rule and the United States has found that putting sanctions on key personnel responsible is the most effective use of sanction when it comes to widespread mistreatment of a population. North Korea protests this sort of thing but that simply brings more attention to the details of the misdeeds the sanctions are all about.

November 24, 2018: The Philippines, Japan, South Korea and other East Asian nations are complaining to China about the increase in illegal Chinese workers showing up in their territory. These illegals come in as tourists or business visitors and stay behind when their visa expires. China is believed to be deliberately tolerating this as part of some espionage effort. About 10,000 Thais in South Korea (legally) to work were recently rounded up and expelled for overstaying their visas.

November 19, 2018: The U.S. imposed sanctions on Vladlen Amtchentsev, a Russian born South African who runs a Singapore based oil brokerage that has a reputation for advising clients how to move oil illegally. Amtchentsev is accused of being a key advisor to North Korea on how to avoid oil sanctions. The Americans have also sanctioned companies and individuals involved in smuggling Iranian oil to Syria.

November 14, 2018: Indonesia recently ordered three more South Korean KT-1B prop driven basic trainers. Since 2003 Indonesia has ordered 17 T-1s. The three new T-1s are to replace three lost in accidents since 2010. Indonesia was the first export customer for the T-1, which is a 3.3 ton, two-seat aircraft with one engine. Max speed is 574 kilometers an hour and endurance is nearly three hours. The T-1 first flew in 1991 and entered service in 1999 with the initial user being South Korea. The T-1 can also be armed with a 12.7mm machine-gun as well as unguided rockets and bombs. Armed T-1s are often used for combat training and to assist with that the T-1 can also carry an infrared (heat sensing) radar for flying in bad weather. Most of the 175 T-1s already built were for the South Korean Air Force. Export customers (Indonesia, Peru, Senegal and Turkey (which ordered 40) have been pleased with the aircraft. The recent Indonesian order for new T-1s also included upgrades for the 16 T-50 jet trainers ordered in 2011. The upgrades include radars and 12.7mm machine-guns so that the T-50s can be used for more realistic combat training as well as light ground attack aircraft. Both the T-1 and T-50 can be equipped with the Sidewinder heat-seeking air-to-air missile.