Korea: If You Can Pay You Can Be On Your Way

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July 10, 2016: Years of reports of poor discipline and plunging morale in the North Korea security forces appears to be true. The latest evidence comes from northwest China where the chatter among smugglers is that business is terrible because the North Korean economy is suffering much from the latest round of sanctions and one of the side effects is that even the most elite (and most difficult to bribe) secret police are now taking bribes. Being elite these guys have it well organized with the use of middlemen and other precautions in case the government gets really desperate and purges the secret police in another attempt to eliminate bribery from the units that are used to keep an eye on other elite security organizations. This is a scary development because a certain amount of corruption was always tolerated but the most elite and well paid secret police units were supposed to be immune to bribes. Maybe they are, if it involves treason. But when it comes to illegal use of cell phones near the Chinese border or people trying to sneak out of the country, if you can pay you can be on your way. For these more expensive bribes you get greater assurance that someone else won’t catch you. The elite secret police have access to all security records including schedules of patrols and where surprise inspections by security personnel will occur. The secret police still arrest offenders, as they are ordered to do, just not any of those lawbreakers that can pay a high enough bribe.

North Korea has found, as has China, Russia and other dictatorships, that cell phones are a serious threat. The latest example is a new North Korean decree declaring use of cell phone messaging apps like Kakao Talk, Line, and WeChat to be a capital crime. Those caught using these apps on Chinese cell phones may be executed. The reason is that these apps enable users near the border to send messages so quickly, and then hang up, that even the high-tech cell phone detectors used by the border guards and secret police, cannot catch the culprits. Anyone caught using these apps can walk free if they can pay. If not they may become an “example.” That usually means execution or, at the very least, being sent, along with your family, to spend years in a labor camp.

Northern Hospitality

In the north there are some things the police and the average North Korean can agree on; robbery and looting by hungry (or just greedy) soldiers is out of control. The government will not punish soldiers unless people are killed or badly injured during the incidents. Police are often called by suspicious neighbors and catch soldiers who have broken into a house seeking food and valuables. The soldiers are arrested but must be taken back to their base where the military takes over. The soldiers are “punished” with some verbal abuse for getting caught and that is all. The government has made some effort to address the problem. In 2015 there was a new program to expand food production by the military. Troops were allowed to raise pigs as well as the usual vegetable and grain crops. Meat has been in particularly short supply for the troops in the past few years and hungry troops are becoming more of a problem. Many military units don’t have enough to eat, either because the food was not to be had or, as is more often the case, corruption (someone in a position of power stole it.) This led to more soldiers stealing food from civilians or selling military clothing and equipment on the black market so they can buy food. Soldiers have opportunities to steal food and sell stolen goods when they are off their base doing construction or farm work. This is how troops spend a lot of their time and they receive no extra pay or food even when the outside work requires heavy (and calorie consuming) labor. All this is illegal, but commanders are not eager to punish hungry soldiers.

Sanctions

The impact of China enforcing all the UN trade sanctions against North Korea has, after four months, 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 now 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.

The shortages caused by Chinese enforcement of the sanctions is having impacts far beyond the inability to pay to some imports. The economy was threadbare even before the March sanctions and managers were under tremendous pressure to complete high profile (Kim Jong Un had a personal interest in it) construction projects. Managers can cut corners drastically, with the understanding that he will have to get himself and his family out of the country in the next few years before the shortcuts manifest themselves in building or bridge collapses (a death penalty event for the building managers) or shoddy work becomes obvious and is publicized. Managers are given authority to impose “special taxes” on the local population to help pay for these projects but the locals are increasingly broke (or expert at pretending to be) and of little help to desperate managers operating on a dwindling budget. In a growing number of cases senior government officials recognize the risks here and have come up with a solution; give the project to one of the new (now legal) donju (entrepreneurs). In effect the government is contracting out more and more of their work to donju. This is not a good idea for a dictatorship, because this is now you become too dependent on the private sector which, if the past is any guide, eventually decides that the dictatorship can be easily eliminated.

North Korea is desperate and North Korean leaders are willing to do almost anything to mend relations with China. “Almost” may not be enough unless North Korea agrees to adopt a market economy to the extent that China has. China, however, is willing to be more flexible on that if North Korea will cooperate in other ways. North Korean officials were recently told, privately, that all would be well if North Korea got rid of its nuclear weapons and its nuclear weapons development program. So far the north is not interested.

South Of the DMZ

Today the UN announced that it had changed its rules to allow UN sponsored forces in South Korea to carry machine-guns, recoilless rifles and mortars in to the DMZ that separates the north and south. This is in response to North Korea doing so for years. While the north struggles South Korea is beginning to receive the new ships, aircraft and combat vehicles ordered after the 2010 North Korean attacks. Since 2010 South Korean military power has substantially increased while North Korean forces grow weaker. Apparently North Korea believes the only way to deal with this is with nuclear weapons that can be launched via ballistic missiles.

July 9, 2016: Off the east coast North Korea again attempted launching a ballistic missile from its lone SSB (diesel-electric submarine carrying ballistic missiles). This, like the last test launch in April was near the Simpo shipyard. While the April test could be considered a “successful failure” as it showed a missile successfully reaching the surface and igniting its main engines but then went out of control and plunged back into the ocean seconds later (and 30 kilometers away) the test today was even less successful. A 2015 test failed and did some damage to the SSB, which is now called the Simpo class because of where it was built. All ballistic missile tests are in violation of UN sanctions.

July 8, 2016: the United States and South Korea announced that it was agreed that South Korea would receive the American THAAD anti-missile systems as soon as possible. Earlier in 2016 the United States attitude was there was no need to hurry the deployment of THAAD to South Korea. Because of continued North Korean nuclear and ballistic missile development South Korea had asked to get the THAAD as soon as possible. China, Russia and North Korea have long opposed THAAD. South Korea wants THAAD for protection from North Korean missile attack and always resisted Chinese objections, even when China hinted that failure to drop THAAD might result in less trade with China. That was a signal to South Korean voters to carefully consider the cost of defying China. The Chinese will not come right out and say it but they object mainly because THAAD would also make South Korea less vulnerable to intimidation by Chinese ballistic missiles. South Korean voters understand that so the economic threats are having less impact than China expected. South Korean public opinion polls show voters are even more enthusiastic about the high tech and very expensive (over $100 million per launcher and associated equipment) THAAD system now that North Korea has continued launching ballistic missiles and preparing for more nuclear tests. While China has openly said it still objects to THAAD it does agree that South Korea has the right to do what it considers best to defend itself against North Korea. South Koreans won’t feel better about this until THAAD arrives and is operational. That will now happen by the end of 2017 rather than several years later.

July 7, 2016: China went public with its opposition to the American plan to unilaterally impose a wide range of sanctions on North Korea leader Kim Jong Un because of the “crimes against humanity” he has committed on his own people. Apparently China believes all the economic sanctions against North Korea must be approved by the UN (where China has a veto) and not unilaterally (where China cannot promise North Korea that in return for something China can make the sanction disappear). The proposed American sanctions ban any American firm (or foreign subsidiary) from having anything to do the Kim Jong Un or members of his immediate family. That would include the many overseas economic activities done for Kim Jong Uns personal benefit. Going after that might expose more Chinese corruption, which Chinese officials know exists but want to deal with on their own terms, not in an international media storm created by these American sanctions.

July 2, 2016: A North Korean diplomat in Russia has defected, via Belarus, to somewhere in Europe. The diplomat got out with his wife and son.

July 1, 2016: China told the UN what additional economic sanctions it would be willing to impose on North Korea but the details have not been made public yet. China and Russia have joined South Korea, the United States and Japan in an effort to get North Korea to abandon its nuclear weapons program. North Korea is not cooperating even though China is apparently prepared to do the unthinkable and cut off all trade with North Korea. While the UN sanctions do not prohibit imports of essentials, like food and these continue, China can simply close its North Korea border to any trade. Because of the legal market economy in North Korea that means some food would be still available but at higher (market) prices. The government continues to import enough Chinese food to avoid another famine like the one that killed over a million people in the 1990s. The North Korean government has also refused to do what China has done and let the market economy legally spread to larger enterprises (like manufacturing or farming and mining). That means the North Korean government can no longer pay workers in food as it was able to do since the 1950s because of food and other aid coming in from Russia (mostly) and China. Most of that disappeared after the Soviet Union collapsed in 1991. For the growing number of North Koreans who have seen how the Chinese economy works they know that if China cut all trade with North Korea the shortages, especially of food, in North Korea would have catastrophic consequences within weeks or months. Chinese know this and during the first week of June senior Chinese and North Korean officials met to try and improve diplomatic and economic relations between the two countries. This involves the essential role China plays in keeping North Korea alive. This year North Korea got a very visible and painful reminder of that in March when China began enforcing all the UN trade sanctions against North Korea. Now China promises more pain if North Korean rulers do not become more cooperative. So far the North Korean leadership remains defiant.

June 30, 2016: In North Korea the government recently began enforcing a new ban on smoking in many public places. Police can demand fines on the spot. This was seen as a way to improve pay and morale among the police because bribes could be demanded and, because the amounts were small, would often be paid. If smokers cannot pay the police have to make an arrest, which is not profitable for anyone. Police also get to seize and resell (or some themselves) any tobacco products the offenders have with them.

June 26, 2016: For the third time this year North Korean workers in China have managed to get away from their North Korean “minders” and seek freedom. North Korea is furious and apparently made some kind of arrangement with China that allowed more North Korea secret police to enter China to search for the women, who worked in a Chinese factory near the North Korean border. In May another group of North Korean workers in central China fled. In April South Korea revealed that 13 North Koreans had reached South Korea and were accepted for the refugee aid and adjustment program that would help them adjust to life in South Korea. A few days later China dropped a major bombshell when it admitted that, for the first time, these North Koreans were able to legally leave China. The 13 were all slave laborers in one of the many Korean restaurants North Korea operates in China. Sanctions, and growing Chinese hostility to all things Korean, had led to most of these workers not being paid for over a month. The workers are officially paid the prevailing wage but the North Korean government takes over 80 percent of it in “taxes”. Even so these North Koreans are making more than they would back in North Korea and send most of what they get back to their families. The workers are constantly watched and not allowed to freely move outside their cramped living quarters or the place where they work. Somehow these thirteen got their North Korean ID documents and fled. What was really surprising is that this is the first time China has not cooperated with North Korea to catch and return such “traitors.” This is a big deal because nearly all the 25,000 North Koreans who made it South Korea did so via China. If the Chinese continue this lenient policy a lot more North Koreans will seek to escape via China and the North Korean leaders will not be amused. China is apparently using this fear as a way to get North Korea to back off on their nukes and missiles.

June 25, 2016: South Korean media published numerous reports from northwest China that North Korea had resumed counterfeiting Chinese and American currency. There were similar reports in April when Hong Kong media spent weeks doing stories about high quality counterfeit Chinese currency showing up in China. The Chinese government tried to keep this quiet but it appears the North Korean counterfeiting operation resumed in 2015. North Korea had been turning out similar high-grade counterfeits of American and Japanese currency for decades. In North Korea counterfeiting currency is a government monopoly. Since 2009 foreign (mainly Chinese and American) currency has been preferred in North Korea because the local currency is seen as worthless and unpredictable. The counterfeit Chinese 100 Yuan notes (worth about $15) began showing up in North Korea earlier in 2015 and moved into China via unsuspecting merchants and tourists. Officially the North Koreans deny any responsibility for the fake currency and always have. But back in 2015 North Korea openly said it would strike back at China for enforcing UN economic sanctions. North Korea has long considered counterfeiting currency as a weapon. China is now blocking essential (in terms of obtaining foreign currency) North Korea exports like coal and iron ore. Imports of aviation fuel are also blocked and more bans are threatened. To North Korean leaders, counterfeit Chinese currency helps balance the books. But the latest information (via refugees) from North Korea indicates the production of counterfeit Chinese 100 Yuan notes began in 2013 when small numbers of bills were put into circulation to test how effective they would be in the marketplace.

 

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