China: Big Brother Battles To Control The Future

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October 10, 2019: China has decreed that starting December 1st anyone opening a new Internet access account or buying a new cellphone must have their facial scan on file with the government. This will make it more difficult to hide your identity on the Chinese Internet or via cellphone. Facial recognition is a key element in the new SCR (Social Credit Rating) surveillance and control system. China is trying to apply its new Big Brother control system to the persistent and large scale anti-government activity in Hong Kong. The government is using proven tech and in Hong Kong, this new tech is dealing with a far more tech-savvy population than in northwest China.

The Big Brother tech has been in development for over a decade. Not just in China but worldwide. The difference is that China seeks to use this tech aggressively for population control. Since 2017 China has been testing SCR tech on its Moslem minority in the northwest (Xinjiang province). Their extreme security measures have been mainly directed at Uighur, Kazakh and Kyrgyz Moslems. The tech included a growing number of electronic tracking methods like mandatory cell phone apps, extensive use of high-resolution security vidcams and effective facial recognition tech that enable police to monitor most everyone in Xinjiang in real-time and enormous detail. This system automatically detects and locates “disloyal” people and has them picked up for reeducation.

Nearly a million of these Moslems have been sent to reeducation camps that are now estimated to hold ten percent of the adult Moslems in the province. The reeducation often consists of confinement and lectures about what the government considers bad behavior, which is basically doing anything the government does not like. Inmates are given a choice; do what the government wants or undergo an escalating series of punishments. Xinjiang has been the test site for how extensive networks of vidcams and other forms of population monitoring can lead to more control over large populations. Already the government boasts that nationwide millions of people have been identified and punished because of their low SCR. Low SCR makes it more difficult to get a good job, a bank loan or a passport. SCR scores depend on what the government sees, hears or reads via that growing network of sensors and informants.

Hong Kong Is Different

Hong Kong is a riskier test for Big Brother, not just because the Hong Kongers have more tech skills, but because the jobs many Hong Kong residents have and the skills they possess are essential to the efficient functioning of the Chinese financial system. Xinjiang province has nothing as vital to the economy and important economic activities in Xinjiang are often operated by Han Chinese, which is one reason so many Han have moved to Xinjiang.

Hong Kong is not only nearly all Han but these Han are very well educated and accustomed to thinking for themselves and improvising. Thus the facial recognition is largely useless to the police. This inventiveness is great if you need a financial center staffed with people who can deal efficiently with the worldwide financial community. For the SCR system, Hong Kong people are the worst nightmare imaginable.

The government appears to have decided to take on the Kong Kongers because there is no better solution. Surrender to Hong King demands more freedom and autonomy would question the ability of the government to rule all of China. For Chinese leaders, the worst case is the confrontation slowly grinding on to the point where the Hong Kong financial community has suffered major damage with shutdowns and an exodus of key staff before the government decides to suppress the protests with force. Having a foreign passport is common among key people in Hong Kong and “exit plans” are common. The young people in the streets are the key people of the future and if they don’t get out of a collapsing Hong Kong they will add to the number of Chinese who are opposed to the current CCP (Chinese Communist Party) dynasty. The CCP may not be monarchists but they are absolute rulers who claim their own form of “divine right” to rule and are every bit as brutal and tyrannical as the worst of the many dynasties that have ruled or misruled, China for millennia. The CCP believes they can survive the temporary loss of Hong Kong as a financial center. They can rebuild those capabilities somewhere more loyal, like Shanghai. Before the CCP took over in 1947 Shanghai was seen as a rival for Hong Kong when it came to banking and international financial services. All that disappeared from Shanghai for half a century. Since the 1990s Shanghai has been slowly getting its financial mojo back.

The CCP would rather not endure this worst-case but given the lack of interest in talking to or negotiating with the protesters, that appears to be the plan. That plan also involves trying to wear the protesters down with escalating force and restrictions. This escalation will do more and more damage to the Hong Kong economy and while that might trigger greater problems in the national economy, the CCP has designated that as the lesser of two evils, with the other one is giving in to the protestors.

China may not be able to put ten percent of Hong Kong adults into reeducation camps but they can start with one or two percent and see what happens. If Big Brother and SCR tech can be made to work in Hong Kong it can work just about anywhere, at least in China (a big country) and East Asia (which shares a lot of cultural norms). That is one positive thing for Xinjiang province to come out of this mess.

The government expects to have the Big Brother monitoring and SCR systems operating nationwide by 2020 or the early 2020s. Already local officials are finding SCR a useful tool. Xinjiang is apparently the laboratory in which it is discovered what works and what does not. For example, Xinjiang factory workers who refused to accept harsh working conditions and no pay increases were assigned a low SCR and then told they must either improve their attitude towards bad working conditions or go to a reeducation camp for a while, perhaps a long while if they refuse to behave as ordered. Many Chinese have no problem with SCR and see it as an opportunity. One reason for that, which the government does not like to talk about, or even acknowledge, is that SCR has already been corrupted. Local officials and police have a lot of discretion in deciding which behavior is likely to lower an SCR. In other words, some well-placed or well-timed bribes can keep your SCR healthy. The government is aware of this but knows that despite the vulnerability to bribery the SCR is still a powerful tool for controlling the population. For example, one way of boosting your SCR, and making some legal money (although usually less than $50 a month) is to agree to work for the secret police as a local informer. In some parts of the country, like the capital, there are a lot of these paid informants. In central Beijing, where nearly four million people live and even more work or pass through, about three percent of the population are paid informants. That is in addition to the extensive network of security cameras and extensive surveillance carried out on the Internet. Exactly how the population will react to extensive and sustained use of SCR is an unknown. But at this point, we are beginning to find out, especially in Xinjiang province and some of the major cities. The cost of building and operating the SCR system is one reason why China spends more on internal security (secret police, riot police, coast guard and so on) than they do on the defense budget.

Yuan Decline

The trade war with America (and the added bad news of the Hong Kong unrest) is doing a lot of damage to the Chinese currency (the Yuan), which currently trades at 7.15 Yuan per dollar. China has long sought to prevent the Yuan from going over 7 to the dollar but that barrier has been broken and it seems to be getting worse. From the beginning (in early 2018) it was understood that the trade war would force China to let its currency, the yuan, trade freely and it promptly lost value and it cost more in yuan to buy dollars. Since 2014, and sometimes earlier, wealthy Chinese have been seeking to buy foreign currencies rather than hold large sums of cash using the yuan. If the Chinese banks do get in very visible trouble, the value of the yuan will plummet sharply. Such devaluation of the yuan impacts all Chinese because that means it takes more yuan to buy a dollar, the main currency for international trade. That means it costs Chinese more (over ten percent more so far) to pay for imports. The Chinese government does not have enough cash to stop this devaluation, despite all the government pronouncements that everything is fine. For three years China has been trying to keep the yuan stable but that has now been abandoned. Since 2015 a growing number of Chinese didn’t believe their government could handle this mess and that results in hundreds of billion dollars’ worth of Chinese currency trying to get converted to more trusted foreign currencies (like the dollar, euro and yen).

In China, there are too many people trying to convert their yuan into foreign currency. The government has limited ability to stop this process. This means the yuan will lose a lot of its value versus foreign currencies. Since the late 1990s, this was seen as an inevitable problem and in 2010 China agreed to allow the yuan to be freely (within limits) bought and sold. This meant that the international value of the yuan would more accurately reflect the state of the Chinese economy. By letting the yuan "float", the cost of Chinese exports went up (reducing demand somewhat), while the Chinese were able to buy foreign goods for less. Unfortunately the government efforts to control how far the value of the yuan would fall failed and by 2015 it was obvious (because of the stock market collapse that began earlier in the year) that more extreme measures were needed. Those measures have been abandoned, using the American trade war as the reason. That is not accurate, and Chinese who buy and sell dollars and yuan for a living know it. People who run Chinese banks and foreigners who do business with those banks know it as well. As prices rise for Chinese consumers most Chinese will be reminded of their own banking crises and the risks of holding onto yuan or assets denominated in yuan.

The American trade war and the Hong Kong unrest have brought out some unsavory Chinese traits. For example, any foreign trading partners who criticize Chinese behavior in Hong Kong, northwest China, the South China Sea or anywhere else can expect swift retribution and calls for apologies and assurances that such disrespect of China will not happen again.

China also likes to point out that its growing dependence on foreign financial markets works both ways. China has been piling up huge trade surpluses for decades and China currently holds nearly $4 trillion in foreign currency (or equivalents) and assets. If China gets into serious financial trouble some of those foreign reserves are sold off and the last time that was done, in 2008, it made the worldwide stock market decline even worse. If China gets into financial trouble they will automatically share the pain with its major trading partners.

China is also not averse to taking advantage of the financial difficulties of friends or enemies. For example, China is technically observing the sanctions that prevent Iran and Venezuela from selling them oil. Yet at the southern end of the South China Sea, a growing number of Chinese oil tankers have been seen taking on cargoes from foreign tankers and then delivering that oil to Chinese customers. The at-sea transfers are usually for illegal oil. In this case heavily discounted oil from Iran and Venezuela. Given that several million tons of oil have been involved and that a 10-20 percent discount (or the expense and risk of dealing with illegal oil) means the buyer gets their oil for about a $100 less per ton and that adds up when you are getting several million tons a month this way.

South China Sea

China continues trying to enforce its illegal claims on all the smaller (and largely uninhabited) South China Sea islands. One of the major victims, the Philippines, tried being more realistic about resisting the Chinese effort to take possession of the South China Sea. That did not work out and the Filipino government recently concluded that China was not willing to negotiate when it came to its South China Sea claims. While there is a growing anti-China alliance in the region, the combined military might of this coalition depends on how much the United States is willing to push back.

Of all the nations involved with this Chinese aggression, the Philippines has the most to lose. In terms of land area, the 7,600 islands that comprise the Philippines amount to only 300,000 square kilometers (120,000 square miles) of land area. Compare this to China, with 9.6 million square kilometers of land. But according to international law (which China agrees with, at least officially), the Philippines controls (via its EEZ or Exclusive Economic Zone) water areas covering 2.26 million square kilometers. By the same standards, the Chinese EEZ waters comprise 877,000 square kilometers. But the new Chinese claims, not recognized by any international law or treaty, claims most of the South China Sea and expands the Chinese EEZ to 3.8 million square kilometers, mostly at the expense of the Philippines. Vietnam also suffers major losses and other nations like Taiwan, Indonesia, Japan and South Korea are threatened to a lesser extent. The Chinese claims are not confined to the South China Sea but aim to expand Chinese control to much of the Western Pacific and the Indian Ocean. As a result, India, Singapore and Malaysia feel threatened as well.

These threatened nations are coming together in an anti-China coalition that may (if the Americans take an active role) persuade China to back down and play by the international rules it agreed to in the past. So far China is building bases and, according to one Filipino official, only “controls” seven percent of the South China Sea. China is not yet trying to strictly enforce its claims although it is increasingly vocal about other nations for “violating Chinese territorial waters.” This includes non-military force to prevent non-Chinese (especially Filipino) fishing boats from operating in traditional (and legally Filipino) fishing grounds. President Duterte of the Philippines sought to negotiate a deal with China that would compensate the Philippines for lost access to their fishing areas. That was blocked by Filipinos invoking the constitution and its prohibitions against officials negotiating away those rights without the assent of the people (the national legislature).

Chinese claims have no standing when it comes to existing international law and agreements. Yet China is slowly seeking control over the entire South China Sea and is willing to spend as much time as it requires to achieve recognition as the undisputed owner of the South China Sea. This is the ancient “death of a thousand cuts” strategy China has used for centuries and is being blatantly applied, for the first time, on vast maritime areas. The fishing resources alone are enormously valuable and, based on past Chinese performance, likely to be exploited to the point where there are not many fish left to catch.

There is also offshore oil and gas and much else on the bottom of the shallow waters of the South China Sea. So far the Chinese threat has proved immune to accommodation. China wants it all and the only question now is will China risk war over their territorial claims.

The Americans have gone to war with China, but not militarily. The Americans and many other Chinese trading partners have been accumulating grievances because of Chinese economic crimes and rampant (and ongoing) espionage efforts. China steals patent protected property as well as trade secrets (unpatented knowledge that was created at great expense.) China is currently caught between the aftereffects of economic misbehavior inside China and American demands to reform and restitution. The U.S. is imposing tariffs and other trade penalties on China and the Chinese leadership is feeling the heat and unable, so far, to come up with an adequate defense.

Growing Chinese aggression has led to neighboring nations to boost their defense spending and the capabilities of their armed forces. Japan will spend a record $50 billion for defense in 2020. That’s an increase of six percent over 2019. This is the eighth year in a row that Japan has increased defense spending and it is all about North Korea and China. North Korea openly complains about how unfair and unfriendly these increases are but they are a direct result of the increasing threat from North Korea. Both Japan and South Korea have annual defense spending that is more than a third larger than the annual GDP of North Korea. That is one reason North Korea spends about a third of GDP on defense compared to 1.2 percent for Japan and less than three percent for South Korea.

The disparity in military manpower is also unusual. While North Korea has a million men (and some women) in its military, South Korea had 500,000 and Japan 247,000. North Korea depends on a large number of poorly equipped troops. Japan depends a lot more on high-tech weapons, and lots of them, plus lots of training for its all-volunteer force.

Giving Thanks

The Americans have been waging a trade war with China since 2018 and one of the issues is Chinese theft of IP (Intellectual Property). President Zelensky of Ukraine, newly elected and facing major IP threats from China sees the Americans as the ideal partner in the Ukrainian effort to fend off the Chinese. As if to confirm what China was up to, Sohu.Com, a Chinese media outlet, recently published an article called “Thank you Ukraine.” This story literally thanked Ukraine for helping Chinese military technology to advance so quickly by making available much Soviet era military tech at low prices and with few restrictions. To its Chinese audience (the article was only published in Chinese) the article made a lot of sense. When Ukrainians got translations of the article the reaction was less complimentary. As the Americans are also interested in how China obtains military tech, it is not surprising that Zelensky has found the Americans interested in assisting him in dealing with the Chinese threat as well as corruption facilitated by Americans.

China is still at it in Ukraine and has some very ambitious schemes underway. For example,China is trying to buy Motor Sich, a major and profitable defense manufacturer, and that caused problems because China was often taking advantage of the corrupt government and industry officials associated with firms like Motor Sich to get better deals. These were often at the expense of Ukraine but very lucrative for the corrupt Ukrainians involved. Many Ukrainians, and Americans realized how China operated in deals like this. If China obtained a major, or majority, stake in Motor Sich they could, and probably would, steal all the technology and manufacturing secrets and eventually move Motor Sich production to China. Initially they would hire some Ukrainian tech experts to help the Chinese manufacturing operation to get up to speed, but  Motor Sich in Ukraine would become a branch of the main operation in China. Eventually, the Ukrainian branch of the renamed to something Chinese and “Motor Sich” would disappear. Zelensky wants to keep Motor Sich Ukrainian and not plundered of all its tech by the Chinese.

Venezuela

There is no easy fix for the mess two decades of socialist rule has created in Venezuela. China is willing to help, for the right incentives. As the Venezuelan GDP declines, more of what cash it has goes to keeping the socialist rulers in power while making life more miserable for most Venezuelans. No one is willing to bail this government out, even though Venezuela has the largest oil reserves in the world. Russia and Iran, two Venezuelan allies, are willing but broke. China is the largest creditor and working on restoring production, if only because their loans are being repaid with Venezuelan oil. China could afford to bail the Venezuelan government out but won’t because, unlike the Russians and Iranians, the Chinese have a more practical approach to such situations. In other words, as long as the socialist government is running the country, economic rescue is not likely. Even fixing the broken Venezuelan oil industry is beyond Chinese capabilities because too much of it is dependent on the United States. That’s because Venezuelan oil, while abundant, is of the lowest quality. It is more expensive to refine and requires special refineries to handle the job. Since the Americans were the largest and closest, oil importer in the Western Hemisphere, and it was possible to build specialized refineries for Venezuelan oil in the U.S., much key Venezuelan oil infrastructure is in the United States. Since Maduro has seized a lot of American assets recently, U.S. courts have allowed the owners of those seized assets to go after Venezuelan government property in the United States for compensation. This process has been underway for several years and Venezuela has run out of appeals and options. The Chinese are still in Venezuela as a “friend of Venezuela” not a socialist government supporter. Everyone else (Russians, Iranians and Cubans) are in it for ideological, as well as financial reasons. The Chinese have been frank with the local leaders and are still there but there are limits to how much of the Venezuelan oil industry they can repair or even maintain. The Chinese cannot replace the U.S. based refineries or the American companies that are still operating some Venezuelan oil rigs. These Americans are likely to be gone soon and the Chinese don’t have the resources to replace them. There are also American sanctions on Venezuelan oil exports which limits who Venezuela can sell to. But given the extra cost of refining Venezuelan crude that are few customers willing to buy the stuff, even at the deep discounts being offered.

October 9, 2019: China agreed to begin work on the next major phase of its BRI (Belt and Road Initiative) in Pakistani. This involves an $8.2 billion upgrade of key Pakistani rail lines that will allow freight and passenger trains to nearly double their safe speed (to as much as 100 kilometers an hour). This allows more and faster traffic on existing lines. Most of the work will be on 1,800 kilometer line from the port of Karachi to the inland city of Peshawar. China will finance the project and supply some of the workforce. A lot of Pakistani laborers and technical personnel will also be put to work which will be completed by 2023. Phase 2 of this project will upgrade some rail lines to handle high-speed passenger trains.

China prefers its neighbors to be submissive and open to Chinese investment. Not all the neighbors cooperate. North Korea would like to but it has a very dysfunctional and self-destructive government. Even when Chinese investors are welcomed, the North Korean government and North Koreans, in general, will cheat and steal from the Chinese firms at every opportunity. Vietnam does not want the Chinese at all because centuries of bad experiences have taught Vietnam to not trust China. Many neighbors of Vietnam have the same attitude even without all the bad experiences that Vietnam has suffered.

One of the China neighbors has behaved quite well and is well taken care as a result. This is Pakistan and China has become active in helping with Pakistani stability and prosperity. Over a hundred billion dollars in Chinese economic aid and investment is coming into Pakistan and makes Pakistani stability and prosperity a Chinese goal. Since China is a prosperous police state is prefers to work with Pakistan on these matters privately, saving the media for propaganda and other forms of distraction, disinformation and deflection.

October 8, 2019: The United States has blacklisted and sanctioned 28 Chinese companies and government agencies for their role in the growing number of abuses inflicted on the Moslems of northwest China. This is where Big Brother technology and techniques are being tested and perfected using the Moslems there as the test subjects.

October 5, 2019: Vietnam called for some international help in dealing with recent, and ongoing, violation of the Vietnamese EEZ (Exclusive Economic Zone) that extends 380 kilometers from the coast . Over the past few days a Chinese oil and gas field survey ship, along with an armed escort (from the Chinese coast guard) have been studying seafloor areas where offshore drilling might best be tried. Vietnam threatens to resist with force but the Chinese are defiant because they have defeated Vietnam several times at sea since the 1970s. So Vietnam is trying to entice some allies with military muscle to help out. American offshore survey experts estimate there could be oil and gas deposits in the Vietnam EEZ worth over two trillion dollars.

October 4, 2019: The Hong Kong government the emergency powers act, a colonial era law from 1922 and last invoked 50 years ago. This led to a shutdown of the metro (subway and light rail) systems and a ban on masks at demonstrations. Earlier the Chinese government ordered Apple to delete an app from their App Store that shows all the current demonstrations in Hong Kong. China said this app was used to aid the demonstrators to create more disorder.

India repeated its position on the OBOR/BRI (belt and road project) and repeated its objections to the Chinese offer were primarily about sovereignty. Many other nations that are already participating in BRI are having second thoughts. But others are joining. Earlier in 2019, Italy became the first major European nation to become part of the BRI. For Italy, this means $2.8 billion worth of Chinese investments in Italian ports and transportation infrastructure. China already has similar, but smaller BRI deals with Croatia, Czech Republic, Greece, Hungary, Malta, Poland and Portugal.

October 1, 2019: China celebrated its 70th year of rule by the CCP with a parade in the capital featuring 15,000 troops and lots of new weapons designed and built in China. In Hong Kong, millions of locals hit the streets to protest 70 years of CCP rule. None of the weapons shown in the parade were unknown but some had never been officially displayed or acknowledged before. However, the government did not try very hard to prevent people from living near shipyards, airfields and military testing areas from taking cell phone photos and posting them on the Internet. Some of the more “advanced weapons” like ballistic missiles that can attack ships at sea or hypersonic glide IVBM warheads are recycled Cold War tech that was abandoned either because of disarmament treaties or because it didn’t make a lot of difference and cost more.

September 26, 2019: After years of escalating complaints from member states the UN undertook and investigation of religious persecution in China. The report is out and it confirms reports that China continues to persecute practitioners of the Falungong and now other religions as well. For centuries Chinese governments have viewed religion as a constant threat. The persecution has not wiped out these two movements, and this, government officials know, sets a dangerous example for other Chinese. Throughout Chinese history, governments have been overthrown by religious movements that harnessed and directed mass discontent.

Christianity, despite cooperating with the government, has been under attack. In 2014 there was yet another effort to keep growing religious zeal in check. This time China cracked down harder than ever on the celebration of Christmas. This included blocking much Google (including Gmail) traffic. There was nothing really public about this crackdown, which is normal, just a lot of orders to halt this and that. Throughout Chinese history, governments have been overthrown by religious movements that harnessed and directed mass discontent and the current rulers are well aware of this. Sometimes the targets of this persecution fight back. In January 2014 millions of Chinese Internet users were redirected to a site connected with banned (and much persecuted) religious group Falungong. Their users were shown how they could easily get around the heavy government censorship of the Internet. This was just another Falungong hack. Other nations have noticed and back in 2010, the U.S. government donated $1.5 million to an Internet freedom group GIFC (Global Internet Freedom Consortium), whose main function is producing software that enables Chinese Internet users to get around Chinese government censoring software. GIFC is one of several similar groups. But what really got the Chinese steamed and angry at the United States is that GIFC was supported and heavily staffed by members of Falungong. The government sees religion as a constant threat. While the Chinese are free to worship any way they want, the government picks religious leaders and imposes discipline. Thus the ongoing war against Falungong and Tibetan Buddhism. Both of these religions refuse to accept government control and are persecuted for it. But the persecution has not wiped out these two movements and these government officials believe sets a dangerous example for other Chinese. Falungong has used hacking and Internet-based efforts to embarrass the government and keeps getting away with it. Christians, who so far have not been as willing to fight back as Falungong, have been rapidly growing in numbers. Christianity has been in China for centuries and currently is about five percent of the population.

The UN investigators found that there was indeed massive punishment against the Chinese for simply belonging to Falungong and not for doing anything illegal. The accusations of imprisonment, torture and murder for transplantable organs were also found to be credible. Actually China has long had a policy of taking transplantable organs from executed criminals and selling them to the highest bidder. China has become the largest source for “grey market” transplantable organs and surgery teams able to do the procedure. China always denied such a thing existed but that reaction is normal.

September 16, 2019: In the Philippines, police arrested 324 Chinese, many of them in the country illegally, and charged them with participating in a large Internet-based crime operation. Three days ago another 277 Chinese were arrested on similar charges. A decade ago the Philippines became a hotspot for computer hacking groups, and for nearly a decade the computer crime gangs were able to survive by bribing the right officials. Only when the cybercrime involved Islamic terrorism did the bribes not always work. Then the government legalized online gambling operations in 2016, although Filipinos are forbidden to play. There was also an effort to eliminate a lot of the bribery that often caused things like online gambling to become more of a problem than an economic benefit. This time around the Filipino police have been able to act and corruption and criminal activity associated with it is more likely to result in lots of arrests and prosecutions. Many of these recent arrests were the result of information provided by the American FBI, which had been investigating international computer and phone fraud and the hackers behind it. China has also provided information about Internet-based criminals preying on individuals and businesses in China.

September 10, 2019: Thailand announced generous tax concessions and other assistance to companies considering moving operations, usually manufacturing, out of China. The American trade war with China has a lot of other nations in East Asia encouraging the U.S. because Chinese trade practices with everyone have been questionable legally and ethically. Thailand has long been a popular location for manufacturing high-tech items. An educated population and good infrastructure make Thailand an attractive alternate location for foreign firms moving out of China. Plus, many Thais like to irk China at any opportunity.

September 9, 2019: It was not surprising that China and Russia were the principal obstacles to the release of a new UN report on North Korean sanction violations. China and Russia continue to tolerate North Korean evasion of the sanctions, although such tolerance is more restricted than in the past, especially in China. Even when complying with the sanctions China is still the largest North Korean trading partner. In the last decade the growing list of sanctions and increasing compliance has driven away most non-Chinese trading partners and now North Korea is more economically dependent on China than ever. Russia is a minor player, mainly because the Russian economy is much smaller and less efficient than the Chinese. Moreover the Russian economic and population presence in the region (the Russian “Far East”) is miniscule compared to China.

The new UN report got leaked and the contents documented the illegal economic support North Korea still obtains from Chinese and Russian sources. Not from the governments of China and Russia, but from the companies or criminal gangs in those two nations that make possible illegal imports and exports with North Korea. Having these operations described in a UN-sponsored report that has been officially released puts pressure on UN members listed as working with North Korea to curb those activities. Russia and China are the biggest offenders and among the few UN members who have permanent use of a veto over UN decisions. Thus UN-sponsored research like this usually has problems getting past Russia and China, which tend to have some of their people showing up as involved in whatever bad behavior is being studied. In practice,it is mainly China the UN has to worry about because Russia is increasingly dependent on Chinese economic and diplomatic support to survive and can be pressured by China to do whatever China wants. In the case of UN sanctions on North Korea, the report shows how China is not bothered by blatant Russian efforts to help North Korea evade sanctions. This ranges from tolerating the North Korean use of Russian student visas to continue exporting workers to Russia (who have most of their pay taken by the North Korean government) to facilitating illegal exports (coal) and imports (oil). Russia says it will end these practices by the end of the year but Russian has said things like that before.

The UN study detailed how North Korea was continuing to carry out transfers of refined petroleum products at sea. This is being done by using smaller ships to take the cargo from Chinese or Russian tankers. These smaller ships are not required to have the most effective transponders (to show the position of the ship) and can more easily evade detection as they head back to North Korea with their cargo. In this way, North Korea has been importing about three times more refined petroleum products than sanctions allow. North Korea is also able to illegally export coal and other minerals using the same technique.

 

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