March 9, 2017 / 2:17 PM / 4 months ago

North Korea's pressure points are hard to push

3 Min Read

North Korean leader Kim Jong Un inspects the Headquarters of Large Combined Unit 966 of the Korean People's Army (KPA) in this undated photo released by North Korea's Korean Central News Agency (KCNA) in Pyongyang on March 1, 2017. KCNA/via REUTERS

HONG KONG (Reuters Breakingviews) - The world is losing patience with North Korea. A barrage of missile and nuclear tests coupled with the alleged murder of the half-brother of Pyongyang’s leader in Kuala Lumpur are irking even traditional friends such as China and Malaysia. Beijing’s recent decision to ban coal imports from its hermit neighbour suggests a fresh desire to tame it. Other pressure points exist but are delicate to push.

The coal ban is a potential game-changer. Though economic data on North Korea is sketchy, China is widely thought to account for around 90 percent of trade. Pyongyang sold goods worth $2.4 billion to China last year, customs data from the latter shows. The Korea Institute for International Economic Policy reckons coal accounts for nearly half of Pyongyang’s exports to the People’s Republic.

Graphic: Going steady: reut.rs/2n8E6LS

There are doubts, however, on whether China will follow through and implement the ban. Beijing has been sceptical of sanctions as a tool against North Korea and is already balking at moves by Seoul and Washington to deploy the THAAD anti-missile shield in South Korea. A humanitarian crisis on its doorstep is also not in Beijing’s interest.

If China were to drag its feet, and North Korea continues to act out, old foes could explore some powerful options. Washington could apply pressure by implementing secondary sanctions on Chinese companies and banks dealing with North Korea, as warned by the Obama administration last year. A record $892 million fine slapped on Shenzhen-based equipment-maker ZTE this week proves the United States is prepared to act against foreign companies to this end.

Yet targeting Chinese companies directly would strain the Sino-American relationship further at a time when U.S. President Donald Trump is also threatening to impose trade tariffs on the People's Republic.

Another key problem is that North Korea is more resilient to foreign sanctions than it has been in the past. Under erratic leader Kim Jong Un, Pyongyang has developed a relatively vibrant informal private sector. One analyst at a major international bank, who prefers to remain unnamed, also estimates North Korea's foreign exchange reserves at $7 billion, enough to keep the economy going for a while even without coal.

That all suggests that cooperation between North Korea's traditional friends and foes is the only way to subdue the hermit state – and to prevent the creation of an even bigger geopolitical headache.

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