[Viewpoint] Bonanza or desperation time?

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[Viewpoint] Bonanza or desperation time?

A photo of a convoy of North Korean trucks loaded with anthracite coal crossing a bridge over the Yalu River to Dandong underscores China’s growing clout over impoverished North Korea.

It is bitter for resource-poor South Koreans when they read reports saying North Korea’s potential underground natural resources could be worth as much as 7,000 trillion won ($6.3 trillion). But many North Korean economic analysts view the picture in a different, more ominous light.

Inter-Korean trade virtually ceased after the sinking of the Cheonan naval ship in March last year. North Korea’s exports to China, naturally, have grown. The statistics aren’t much different from two to three years ago except for one item: anthracite coal.

Anthracite coal shipments, which averaged around $10 million a month, shot up to over $70 million in August. The monthly shipments hovered over $50 million from September to November.

Coal is an easy source of revenues for North Korea. Fortunately for Pyongyang, export prices also went up. Coal that sold for $52.20 per ton in March soared 60 percent to $82.80 in November thanks to gains in international coal prices. Cash-strapped North Korea naturally made the most of the boom. There have been some reports of retired soldiers fleeing from being forced into laboring in coal mines.

But the surge in trade can mask other difficult realities that worry North Korea analysts.

North Korea’s electricity capacity is in a poor state. More than 60 percent of its electricity is from hydroelectric generation. But during frigid winters, dams stop working because the water freezes. At those times, North Korea has to depend on power stations fueled by anthracite coal to keep its people warm.

When the United States suspended heavy oil supplies to North Korea, leader Kim Jong-il banned exports of anthracite coal in August 2009 to secure resources for generating power and infrastructure. An official of the state-run Korea Hydro & Nuclear Power Co. who toured North Korean power stations three years ago said the country has many quality coal mines, but without electricity for mining, they are of no use. Transport is also difficult because freight trains also run on electricity. Without electricity, North Korea cannot produce coal.

But despite an unprecedented cold spell, North Korea’s exports of anthracite coal are surging. We can only assume some unexplainable reasons behind this phenomenon. Koh Il-dong, senior research fellow at Korea Development Institute, says the phenomenon suggests the desperation of North Korean leaders to get their hands on dollars, even if it comes at the expense of electricity generation.

From another perspective, the phenomenon suggests that international sanction must have taken a serious toll on the economy. “This is the archetypal North Korean way of securing dollars to buy luxury items to indulge the elite class and draw loyalty from them,” says Koh. A scarcity of dollars can shake the brittle North Korean system of political control, and Kim Jong-il can’t get cheap about buying loyalty at a time he’s preparing to hand over power to his son.

North Korea’s exchange rates are also showing strange signs. The currency recovered from the disastrous 2009 revaluation by June. After trading at 900 to 1,000 won against the U.S. dollar, the North Korean currency shot up to 2,000 won by December, implying an extreme shortage of dollar reserves.

North Korea’s New Year’s editorial mentioned trade in anthracite coal, which now makes up 60 percent of its exports. “Let’s settle raw material with our rich resources and secure funds,” it exhorted, naming coal, electricity, metal and railway as its key industries. It was the first time in 13 years that the New Year’s editorial named coal as first among its mainstay industries.

The sharp increase in North Korean outbound shipments of anthracite coal during a winter is raising eyebrows among North Korea watchers. Behind the flood of pleas for talks with the South since the start of the new year may be connected with the economy’s dire straits.

These days, our eyes are focused on the North Korean coastlines near our sea borders. We’re looking for signs of military attack.

But we should also keep an eye on the unusual scenes on North Korea’s border with China.

*The writer is an editorial writer of the JoongAng Ilbo.


By Lee Cheol-ho
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