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Working Paper 09-4

Sanctioning North Korea: The Political Economy of Denuclearization and Proliferation

by Stephan Haggard, University of California, San Diego
and Marcus Noland, Peterson Institute for International Economics

July 2009

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As a small country dependent on foreign trade and investment, North Korea should be highly vulnerable to external economic pressure. In June 2009, following North Korea’s second nuclear test, the UN Security Council passed Resolution 1874, broadening existing economic sanctions and tightening their enforcement. However, an unintended consequence of the nuclear crisis has been to push North Korea into closer economic relations with China and other trading partners that show little interest in cooperating with international efforts to pressure North Korea, let alone in supporting sanctions. North Korea appears to have rearranged its external economic relations to reduce any impact that traditional sanctions could have.

Given the extremely high priority the North Korean regime places on its military capacity, it is unlikely that the pressure the world can bring to bear on North Korea will be sufficient to induce the country to surrender its nuclear weapons. The promise of lifting existing sanctions may provide one incentive for a successor government to reassess the country's military and diplomatic positions, but sanctions alone are unlikely to have a strong effect in the short run. Yet the United States and other countries can still exercise some leverage if they aggressively pursue North Korea's international financial intermediaries as they have done at times in the past.


RELATED LINKS

Book: Witness to Transformation: Refugee Insights into North Korea January 2011

Peterson Perspective: North Korea's Immunity to Outside Pressure: Part I December 12, 2012

Policy Brief 10-1: The Winter of Their Discontent: Pyongyang Attacks the Market January 2010

Working Paper 10-2: Economic Crime and Punishment in North Korea March 2010

Paper: FTAs and the Future of US-Korean Trade Relations November 2009

Paper: Implementing the KORUS FTA: Key Challenges and Policy Proposals February 2008

Policy Brief 08-6: North Korea on the Precipice of Famine May 2008

Policy Brief 07-7: The Korea-US Free Trade Agreement: A Summary Assessment August 2007

Policy Brief 06-4: Negotiating the Korea–United States Free Trade Agreement June 2006

Working Paper 07-7: North Korea’s External Economic Relations August 2007

Book: Avoiding the Apocalypse: The Future of the Two Koreas June 2000

Book: Free Trade Between Korea and the United States? April 2001

Working Paper 08-4: Migration Experiences of North Korean Refugees: Survey Evidence from China March 2008