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A nation must think before it acts.
On February 27-28, President Trump and Kim Jong-un, North Korea’s leader, will meet in Hanoi. Both need to bring home concrete results. North Korea is under the strictest sanctions regime it has ever faced, and, with some exceptions, both China and Russia seem to continue upholding the sanctions that ban the imports of North Korea’s most crucial export goods, and severely restrict its imports of oil and fuel.
It’s a safe bet that North Korea will ask for sanctions relief, in one or several ways. That’s not necessarily because the country is under such severe pressure that Kim Jong-un is “backed into a corner,” as some have claimed. Looking at the indicators we have to study the North Korean economy, there are few signs of crisis even though things are difficult, perhaps especially for the regime’s foreign currency assets. The government is losing vast amounts of income from the export ban on its most important goods, and it pays a much higher price than it otherwise would for importing fuel and other goods, since many of them have to be purchased through smuggling.
On a broader level, the government remains severely constrained in its room for maneuver in economic policy as sanctions persist. Kim Jong-un has staked much political capital on economic development from the early days of his tenure. Since coming to power in late 2011, he has designated several special zones for economic development and tourism – including more than ten industrial zones around the country and the Wonsan-Kalma Tourist Zone. North Korea likely believes – with some justification – that it has received fairly little in return for the steps it has taken to destroy some of its nuclear weapons and missile testing sites. Even with no impending large-scale crisis, North Korea’s economic situation will continue to get worse as long as sanctions persist. For example, in the letter recently sent by North Korea’s ambassador to the United Nations, the regime attempts to frame sanctions as detrimental from a humanitarian point of view, and the chief cause behind the country’s poor harvest this year.
Judging by the likely limits of U.S. concessions, as well as political and economic interests in both North and South Korea, North Korea will push for some form of sanctions relief that allows the Mount Kumgang tourism zone to re-open. The zone came out of the Sunshine Era of closer relations between North and South Korea in the late 1990s and early 2000s, but it was shut down after a South Korean tourist was shot to death by a North Korean soldier in the summer of 2008.
For North Korea, Mount Kumgang could be a step toward greater cooperation and economic exchange with South Korea. On the whole and by itself, it wouldn’t be a very significant source of revenue. But as a first step on the road toward more investment from South Korea, which the North Korean regime hopes for, it would be immensely valuable. It would also rhyme well with Kim Jong-un’s long-standing emphasis on tourism. He personally appears to regard tourism as a potentially strong driver of economic growth, and given the proximity of areas like the Wonsan zone to South Korea, he may not be wrong. Mount Kumgang, in other words, makes sense for both domestic and international reasons.
For the United States, Mount Kumgang would be a relatively minor concession. Granted, it would be a major departure from the original standpoint of President Trump, who wanted to give no sanctions relief until the nuclear weapons are completely gone. But that originally strong principle doesn’t seem to be policy anymore. If it were still the administration’s negotiating stance, the process couldn’t move forward in any meaningful way. Economically and by itself, Mount Kumgang would be a relatively minor concession that would make both Kim and South Korea’s President Moon happy. Projects for economic cooperation have vast symbolic meaning, and Moon seems to genuinely regard North Korea as a possible engine for South Korean growth. In return, the U.S. may demand either partial or full shutdown of the Yongbyon complex, and the crucial question is which specific parts North Korea may agree to freeze. And, no less important, whether it would allow international inspections.
Judicially, it remains to be seen how partial relief of sanctions, only pertaining to Mount Kumgang, could be pulled off. If there is a will, however, there is likely a way. If sanctions begin to let up in one area, it’s possible that countries most crucial for sanctions implementation, primarily China and Russia, would take it as a signal that U.S. vigilance has waned, and let up on their own implementation. And this could be the end of this sanctions regime as we know it. But it’s also possible that implementation would remain vigilant. After all, compared to the past, China’s sanctions enforcement has been remarkably strong and durable.
Whatever North Korea and the U.S. end up getting, they both need concrete wins. In a few days, we will know if they get them.