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RPT-For North Korea, cutting off oil supplies would be devastating
April 13, 2017 / 1:12 PM / 5 months ago

RPT-For North Korea, cutting off oil supplies would be devastating

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By Tony Munroe and Jane Chung

BEIJING/SEOUL, April 13 (Reuters) - Isolated North Korea doesn’t consume much oil, but curbing or cutting off its supplies in retaliation for further nuclear or long-range missile tests would be painful and potentially destabilising to the regime of Kim Jong Un.

U.S. officials have told Reuters that an oil embargo is among tougher sanctions Washington could pursue to counter North Korea’s nuclear and missile programs

Separately, the Global Times, an influential Chinese tabloid whose stance does not necessarily reflect official policy, said in an editorial on Wednesday that “Chinese society” would approve of “severe restrictive measures that have never been seen before, such as restricting oil imports to the North,” if Pyongyang engages in further provocative activity.

China, which supplies most of North Korea’s crude, no longer reports its oil shipments to the country, but according to South Korean data supplies it with roughly 500,000 tonnes of crude oil annually. It also exports over 200,000 tonnes of oil products, according to U.N. data.

Analysts said the impact of a full oil embargo on Pyongyang would be so damaging that China, which opposes any measures that could fuel instability in North Korea, would be unlikely to take that step or agree to such a measure in the United Nations Security Council, where it has a veto as a permanent member.

“If China cuts off oil supply, North Korea would not survive on its own for three months and everything in North Korea would be paralysed,” said Cho Bong-hyun, who heads research on North Korea’s economy at IBK Bank in Seoul.

“This could increase the possibility of North Korea’s collapse and have an adverse impact on China as well. China would rather consider reducing crude oil supply,” he said.

North Korea has virtually no domestic oil production, and has traditionally imported the little demand it has for fuel at its refineries from China and, to a lesser extent, Russia.

North Korea has two refineries: the Ponghwa Chemical Factory sits on the river border with Dandong in China, while the Sungri refinery is located on the Tumen River bordering Russia.

Much of North Korea’s energy is supplied by abundant domestic coal, but oil is used by the military as well as in transport and agriculture.

“Cutting off all oil for an extended period of time, perhaps indefinitely, is probably the toughest economic punishment that China could impose on North Korea. It is highly unlikely that China would take such a step,” said Bonnie Glaser of the Center for Strategic and International Studies in Washington.

“It is possible that it might reduce the flow, stop oil deliveries for a week or two, but not cut it off entirely.”

In 2003, China’s oil pipeline to North Korea shut down for three days after a missile launch, adding to pressure on Pyongyang to draw back from nuclear brinkmanship. Chinese officials said then it was a mechanical breakdown, but some experts said it was deliberate.

CREDIBLE SIGNAL

Data from Seoul’s Korea Trade-Investment Promotion Agency (KOTRA) shows North Korea imported 525,000 tonnes of crude oil from China in 2015, up 5 percent from a year earlier.

United Nations data shows China also exported 218,087 tonnes of refined oil products to North Korea in 2015, about six times what Russia sent.

“The objective of a statement like this is not to follow through; the objective is to send a credible signal that would make the North Korean leadership think twice,” Stephan Haggard, an expert on the North Korean economy at the University of California, San Diego, said of the Global Times editorial.

“It is all about shifting North Korea into a mode where negotiations would resume,” he said. (Additional reporting by Ju-Min Park in SEOUL and John Ruwitch in SHANGHAI; Editing by Raju Gopalakrishnan)

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