Peterson Institute research staff
The Peterson Institute for International Economics is a private, nonprofit, nonpartisan
research institution devoted to the study of international economic policy. More › ›
RSS News Feed Search

Case Studies in Sanctions and Terrorism: North Korea

Case Studies in Sanctions and Terrorism

<< Case Studies Index

Case 50-1
US and UN v. North Korea
(1950–: Korean War)

Case 93-1
US and UN v. North Korea
(1993– : nuclear proliferation)

| Chronology of Key Events | Goals of Sender Country | Response to Target Country |
Attitude of Other Countries | Legal Notes | Economic Impact | Assessment |
Author's Summary | Bibliography |

Economic Impact

Observed Economic Statistics

Case 50-1

US and UN v. North Korea
(1950–: Korean War)

North Korea: Foreign trade and national income, selected years (millions of dollars except as noted)

Year
Exports
Imports
National income (1946 = 100)

1946
n.a.
n.a.
100
1949
76.3
106.0
209
1953
31.0
42.0
145
1954
29.0
39.3
n.a.
1955
45.0
60.3
n.a.
1956
65.8
74.5
319
1957
100.0
114.8
n.a.

n.a. = not available
Source: Chung 1974, 105, 146–47.


“. . . during the Korean War . . . normal foreign trade activities either nearly ceased or slowed down considerably. . . .” (Chung 1974, 104)

Impact of war on North Korean economy is illustrated by fact that by end of conflict “the output of steel and rolled steel was only 2.5 and 3.0 percent, respectively, that of 1949.” (Chung 1974, 106)

Until mid-1960s, USSR and China were North Korea's principal trading partners, accounting for about 90 percent of total trade. “Since the mid-1960s the proportion has been gradually declining owing to expanding North Korean trade with the non-Communist world, especially with Japan and Western Europe.” (Chung 1974, 108)

USSR extends credit of 212 million rubles (repayable at 2 percent interest starting in 1952) to North Korea to cover Soviet imports from 1949–52. (Chung 1974, 118)

“According to an agreement concluded in September 1953, North Korea received a grant totaling 1 billion rubles (U.S. $250 million) from the Soviet Union for the express purpose of aiding North Korea's efforts to reconstruct. . . . The full amount of the grant was to be received within a two-year period. . . .” (Chung 1974, 118)

North Korea, China sign treaty in 1953 in which Chinese write off North Korean war debts (about $114 million), agree to provide North Korea about $325 million in reconstruction aid, 1954–57. (Chung 1974, 122)

In 1949–62 North Korea receives total of $1.37 billion in grants and loans from USSR ($557 million), China ($517 million), other Communist countries ($296 million). (Chung 1974, 142)

Calculated Economic Impact (annual cost to target country)

Decline in North Korean GNP; welfare loss estimated at 20 percent of drop in GNP, 1949–53.
$42 million
Offsets
Forgiveness of North Korean war debts to China; welfare gain valued at 80 percent of total debts written off.
($30 million)
Soviet trade credits to North Korea, 1949–52; welfare gain estimated at 20 percent of face value of credits
($4 million)
Total
$8 million


Relative Magnitudes

Gross indicators of North Korean economy
  North Korean GNP (1949 est.)
$684 million
  North Korean population (1949)
9.6 million
Annual effect of sanctions related to gross indicators
  Percentage of GNP
1.2
  Per capita
$0.83
North Korean trade with US as percentage of total trade
  Exports (1949) (authors' estimate)
20
  Imports (1949) (authors' estimate)
20
Ratio of US GNP (1949: $258.3 billion) to North Korean GNP (1949: $684 million)
378

Case 93-1
US/UN v. North Korea
(1993
: nuclear proliferation)

“The largest single source of hard currency, apparently, is the North Korean community in Japan, which sends anywhere from $600 million to $2 billion per year in cash to Pyongyang annually. Much of the cash reportedly is carried in suitcases and plastic bags on the twice-a-month ferry from Niigata by Japanese North Koreans going to visit family members in North Korea.” (New York Times, 1 November 1993; Journal of Commerce, 20 June 1994, 7A; Washington Post, 7 June 1994, A13)

“North Korean trade has been declining since 1991. One reason is that Russia, Pyongyang’s major trading partner, has been reluctant to trade with North Korea unless and until the North pays in hard currency. For a similar reason, Pyongyang’s trade with China has also become sluggish.” (Korean Overseas Information Service, 1996)

“Experts in Seoul and Washington argue that even if China, which provided 72% of North Korea’s food imports, 75% of its oil imports and 88% of the coal needed for its steel production in 1993, would support UN sanctions, sanctions would only have a limited impact. China’s northeastern provinces would continue to provide aid to North Korea and trade with it because the provincial authorities rather than Beijing make the decisions relating to trade, investment and joint ventures in northeastern China.” (Far Eastern Economic Review, 10 February 1994, 22–23)

“North Korean arms exports generate an estimated $50 million per year in hard currency receipts.” (Washington Post, 15 June 1994, A32)

“In 1965, South Korea’s gross national product (GNP) was only 1.6 times larger than North Korea’s. In 1994, however, South Korea’s GNP amounted to US $376.9 billion, approximately 17.8 times larger than North Korea’s US $21.2 billion. South Korea’s economy grew at an average annual rate of 7.5 percent in real terms for the five years, 1990 through 1994; North Korea’s economy registered a negative rate of growth for each of the same five years.” (Korean Overseas Information Service, 1996)

“As of January 1998, net blocked North Korean assets in the US amount to $22.2 million.” (OFAC, Terrorist Assets Report, January 1998, 6)

“Because of Korea’s strong political ideology emphasizing self-reliance, US export sanctions have generally had a minimal effect on US exports. In the absence of the US embargo, some United States industries (vehicles, machinery, chemicals) could have potential export sales of up to $50 million a year, as determined by current trade with European suppliers.” (Bureau of Export Administration, Annual Report 1997, III-42)

North Korea: Foreign trade by source (millions of dollars)

   
Exportsa
Importsa
   
 
   
1989
1990
1991
1992
1993
1989
1990
1991
1992
1993

USSR/ FSUb  
891
1047
563
n.a.
n.a.
1641
1668
858
n.a.
n.a.
China  
167
142
85
154
297
399
403
524
541
600
Japan  
268
271
284
n.a.
n.a.
216
194
223
n.a.
n.a.
A. Subtotal  
1326
1460
932
n.a.
n.a.
2256
2265
1605
n.a.
n.a.
B. All Sources  
1686
1857
1240
916
1020
2905
2930
2280
1500
1620
A/B  
78.6
78.6
75.2
n.a.
n.a.
77.7
77.3
70.4
n.a.
n.a.

a. The data for 1992 and 1993 are from a different source and thus may not be completely consistent with earlier years.

b. The collapse of the Soviet Union further complicates the problems in compiling consistent, reliable data on the North Korean economy. Among other things, the exchange rate of the ruble has depreciated significantly and some sources suggest that the drop-off in trade with Russia when valued in dollars was even greater than indicated in the table. An article by JETRO researcher Dr. Murooka Tetsuo presents data showing two-way trade between North Korea and Russia of only $1,142 million in 1990 and $365 million in 1991 ("The Future of North Korea Trade in Agricultural Products," Vantage Point, vol. XVI, no. 3 (March): 1–20).

Sources: For 1989–91, JETRO and South Korean Ministry of Foreign Affairs, as reported in Economist Intelligence Unit, op. cit., p. 88; for 1992–93, the Central Bank of the Republic of Korea, as reported in the Journal of Commerce, June 20, 1994, 1A, 7A.


North Korea: Actual and “natural” trade share with other countries

 
Actual trade share (percent)
   
"Natural" trade share (percent)
 

China
26
  South Korea
35
 
Japan
18
  Japan
30
 
Russia
11
  China
13
 
Iran
9
  United States
7
 
Rest of World
36
  Rest of World
15
 

Memorandum: Share of total trade in GDP
15
   
71
 

Source: Noland (1995, 74).

“North Korea’s economy shrank throughout the 1990s as drought and floods helped trigger near-famine conditions and aid dried up from the former Soviet Unions after it dissolved in 1991.” (Financial Times, 5 April 2000, 4)

“North Korea appears to be emerging from a prolonged severe famine with the help of international food aid, but four terrible years of hunger from 1995 through 1998 may have cost the country two million to three million lives, according to accumulating evidence gathered by a range of experts.” (New York Times, 20 August 1999, A6)

“According to some estimates, as many as two millions people may have died of starvation and famine-related disease. Under these circumstances, economic aid and the remittances of Koreans living in Japan, and more recently, receipts from a booming, if tightly controlled, tourist trade with South Korea have become vital sources of income for the Government of President Kim Jong Il.” (New York Times, 25 September 1999, A7)

“Before the 1998 missile launching, Japan supplied North Korea with 5000,000 pounds of rice and a $500,000 contribution to the United Nations aid organizations in 1995; $6 million to international aid agencies like the World Food Program in 1996; and $27 million to the food program and $841,389 in medical assistance to the International Red Cross in 1997, according to the Foreign Ministry.” (New York Times, 26 August 1999, A9)

“Japan has discussed ending financial backing for the nuclear power plant, and political pressure has risen sharply on Japan to suspend lucrative remittances by Koreans living in Japan. Estimates of the value of the remittances range from $250 million to $600 million a year.” (New York Times, 7 September 1999, A6)

Sources estimate that under cruise ship deal with North Korea “Hyundai [who arrange the tours has] so far paid North Korea $166 million for the tourism rights, and has promised $942 million over five years.” (Washington Post, 23 August 1999, A10)

“In recent years, South Korea has tried trade diplomacy of its own, with limited success. Two-way exchanges totaled $383 million in 1997, but declined to $220 million last year.” (Washington Post, 18 September 1999, A16)

“A second test-launch also would jeopardize what North Korea has gained so far from the international community. The North has received $1.4 billion worth of international food aid in the past four years.” (Far Eastern Economic Review, 30 September 1999, 20)

“North Korea earns about $1 billion a year from its missile sales, and has asked to U.S. for compensation if that source of income were cut off.” (Far Eastern Economic Review, 30 September 1999, 32)

“Suspension of oil would worsen North Korea’s already chronic electricity shortage. US oil provides between 15 and 30 per cent of the fuel used in the country’s power stations.” (Financial Times, 15 November 2002, 2)

“The suspension of oil deliveries may have far less of an effect than anticipated. Peter Hayes, director of the Nautilus Institute, …said his agency estimated that American-supplied fuel may provide only about 2 percent of the country’s energy.” (New York Times, 23 November 2002, A11)

“The White House has … moved to choke of KEDO funding for the current fiscal year [2003]. The administration requested $75 million for the organization last February. But Congress has yet to pass the fiscal year 2003 appropriations bill for foreign assistance and in recent discussions with congressional appropriators the administration has asked that the amount be reduced to $3.5 million, just enough to cover the U.S. share of administrative expenses, according to State Department official and congressional aides.” (Wall Street Journal, 4 February 2003, A8)


Average cost of heavy fuel oil, 1995–2002
(dollars per metric ton)

1995
1996
1997
1998
1999
2000
2001
2002

83
121
108
83
104
180
142
162

Source: CRS 2003, KEDO.


US assistance to North Korea, 1995–2005 (millions of dollars)

FY
Food aid
Medical supplies
KEDO assistance (including fuel oil)
Total

1995
0
0.2
9.5
9.7
1996
8.3
0
22
30.3
1997
52.4
5
25
82.4
1998
72.9
0
50
122.9
1999
222.1
0
65.1
287.2
2000
74.3
0
64.4
138.7
2001
102.8
0
74.9
177.6
2002
82.4
0
90.5
172.9
2003
25.5
0
2.3
27.8
2004
52.8
0.1
0
52.9
2005
7.5
n.a.
n.a.
n.a.
 
Total
701
5.3
403.7
1,102.40

Source: CRS 2003, 1; CRS 2006, 2; White House Press Release, Presidential Determination regarding KEDO Funding, 15 September 2003.
Food aid to North Korea, by donor, 1995–2003 (millions of US dollars)

 
1995
1996
1997
1998
1999
2000
2001
2002
2003a

South Korea
Through United Nations
0.2
3.5
25.3
10.9
0.5
15.8
16.2
19.2
Total
3.4
25.5
27.8
38.5
0.5
68.5
82.0
19.2
Korean government figureb
232.3
4.6
47.2
31.9
46.9
113.8
135.4
 
United States
Through United Nations
0.2
7.2
45.4
171.9
160.7
29.2
102.7
63.5
31.1
Total
9.1
57.4
173.1
160.7
29.2
102.7
63.5
31.1
US government figurec
0.2
8.3
52.4
72.9
222.1
74.3
102.8
82.4
 
European Uniond
Through United Nations
4.0
2.6
49.7
16.3
15.2
4.8
12.4
12.4
21.4
Total
11.9
68.0
53.3
17.5
14.3
17.9
29.4
22.0
 
Japan
Through United Nations
0.1
6.0
27.0
95.7
104.9
Total
6.0
27.0
95.7
104.9
 
Total
Through United Nations
34.4
158.4
215.9
189.9
153.1
248.0
120.7
78.7
Total
272.4
50.3
292.5
335.1
235.9
153.7
375.2
261.4
82.1

a. Through April 27.
b. The South Korean Ministry of Unification figures include both public and private food and non-food assistance. They do not included payments made prior to the 2000 North-South summit or other official meetings, however, and as a consequence the figures may understate the true magnitude of South Korean assistance. See Noland 2003, footnote 11.
c. The annual figures derived from the UN system and those derived from USAID and US Department of Agriculture differ for a number of reasons. The United States uses a fiscal year, whereas beginning in 1998, the UN system uses a calendar year; the United States dates the contribution when it is disbursed, while the WFP dates it when it is pledged. For further details see Noland 2003, footnote 11.
d. European Union includes the donations from the European Commission and member countries.

Source: Noland (2003).
Funding appeal by UN World Food Program (WFP) for North Korea (millions of dollars)

 
Requirements
Contributions
Percentage of requirements met

1999
141.6
177.7
100.0
2000
106.3
98.3
92.5
2001
315.9
220.0
69.6
2002
216.7
189.0
87.2
2003
202.7
117.8
58.1
2004
172.3
118.9
69.0

Source: United Nations Consolidated Inter-Agency Appeal for Democratic People’s Republic of Korea, Summary of Requirements and Contributions by Appealing Organization, various issues. www.reliefweb.int/appeals/index.html

"..information collected in the course of the Treasury Department's investigation gave it grounds to designate Banco Delta Asia as a "primary money laundering concern" under the USA Patriot Act….  [T]he declaration had immediate and far-reaching results… a run on the bank by customers drained about $133 million, about one-third of its deposits… Banks around the world, fearing exclusion from the American banking system, started to shun business with North Korea, setting off an informal financial embargo of that country."  (New York Times, 13 April 2007, A2)

"The big loophole [UN Resolution 1718] concerns policing the North's border with China. The two countries had about $1.7 billion in trade last year. The Chinese declaration Saturday [to not participate in the inspection regime] cast doubt on the likelihood that China would inspect, much less stop, much of the trade moving across that border." (New York Times, 15 October 2006, A1)

"In September 2006, Chinese trade statistics reflected a temporary cut-off in oil exports to North Korea, a period which followed several provocative missile tests by Pyongyang. Although Beijing did not label the reduction as a punishment, some analysts saw the move as a reflection of China's displeasure with the North's actions."  (CRS 2010e, New York Times, 31 October 2006, A12)

"In 2008, China exported an estimated $100 million to $160 million in sanctioned luxury goods. ….Following both UN resolutions, such exports continued to rise with some month-to-month fluctuation.  ..Chinese exports of luxury goods to the DPRK averaged around $11 million per month in 2009, while total Chinese exports to the DPRK have been in the range of $100 to $200 million per month."  (CRS 2010a, 18-19.)

"UNSCR 1874 banned exports of luxury goods to North Korea, but it did not specify which goods were included in the ban.  Using U.S. and U.K. definitions of luxury goods, in 2009, countries that reported trade with the United Nations exported $212.2 million in luxury goods to North Korea.  China led the way, with exports of $136.1 million in 2009 (mostly tobacco, computers and cars.) Brazil exported $36 million (mostly tobacco and precious stones), Singapore $29 million (mostly tobacco), and Russia $4 million (mostly cars, some beef and computers but no alcoholic beverages). … China's exports of luxury goods to North Korea have fluctuated each month but generally continue to rise after each UNSC resolution before falling more recently."  (CRS, 8 October 2010, 11)

North Korea: Foreign trade by source (millions of dollars)

 

Exports

 

Imports

Source

2008

2009

Source

2008

2009

 

 

 

 

 

 

South Korea

932.3

934.3

China

2033.2

1887.7

China

754.0

793.0

South Korea

888.0

744.8

Brazil

176.4

96.0

India

1048.1

315.4

Venezuela

213.6

60.4

Brazil

204.7

118.6

Germany

20.2

39.7

South Africa

152.1

103.8

Hong Kong

31.7

30.0

Singapore

120.0

55.4

Netherlands

26.7

26.9

Germany

31.4

43.2

Paraguay

33.1

20.8

Russia

97.0

41.1

Russia

13.5

20.6

Italy

37.0

39.4

Peru

14.6

20.1

Thailand

47.8

30.3

Thailand

29.0

14.0

Costa Rica

31.4

29.4

Taiwan

15.6

13.3

Hong Kong

8.6

26.3

Mexico

20.9

12.5

Canada

21.2

22.8

Source: CRS, 8 October 2010, 21-22.

"Beginning with visual inspection and ending with the most sophisticated time-series models that can be implemented given the weakness of the data, no evidence has been found that UN economic sanctions [UNSC 1695 and 1718] have had any effect on North Korea's trade in luxury goods with its largest trade partner, China. Nor is there evidence that sanctions have had an indirect effect on North Korea's aggregate trade with its principal partners, China and South Korea."  (Noland 2009, 74)

North Korea's direction of trade: Top ten trading partners, 2004-071
North Korean imports

 

2004

2005

2006

2007

1

China

26.6%

China

31.7%

China

32.8%

China

32.9%

2

South Korea

14.6%

South Korea

21.0%

South Korea

22.1%

South Korea

24.4%

3

Thailand

8.0%

Algeria

8.1%

Algeria

9.3%

Algeria

9.9%

4

Russia

6.9%

Thailand

6.6%

Thailand

6.0%

Thailand

4.6%

5

Algeria

6.8%

Russia

6.6%

Russia

5.1%

South Africa

3.6%

6

Brazil

6.2%

Congo

2.6%

Congo

2.9%

Congo

3.2%

7

India

4.5%

India

2.3%

India

2.6%

Brazil

3.2%

8

Netherlands

4.4%

Singapore

2.2%

South Africa

2.3%

Russia

3.0%

9

Japan

3.0%

Brazil

2.1%

Brazil

1.9%

India

2.8%

10

Congo

2.6%

Japan

1.8%

Singapore

1.6%

Saudi Arabia

1.6%

North Korean exports

 

2004

2005

2006

2007

1

China

41.2%

China

32.2%

South Korea

30.0%

South Korea

36.8%

2

South Korea

18.2%

South Korea

21.9%

China

27.0%

China

27.9%

3

Japan

11.5%

Japan

8.4%

Thailand

8.5%

Venezuela

9.3%

4

Thailand

6.4%

Thailand

8.0%

Brazil

4.8%

Brazil

4.8%

5

Brazil

4.5%

Brazil

4.2%

Japan

4.5%

India

4.4%

6

Qatar

2.4%

India

2.6%

Greece

4.5%

Myanmar

2.3%

7

Myanmar

1.9%

Saudi Arabia

2.1%

India

4.2%

Netherlands

1.8%

8

France

1.9%

Myanmar

2.0%

Myanmar

2.2%

Thailand

1.7%

9

Germany

1.6%

Germany

2.0%

Saudi Arabia

1.6%

Russia

1.6%

10

Nigeria

1.2%

France

1.9%

Paraguay

1.3%

Saudi Arabia

1.4%

Source: Haggard and Noland (2010).

"The passage of [UNSC 1874] demonstrates growing Chinese disaffection with North Korea's behavior. The resolution also garnered support from Russia. Nonetheless, the changing political geography of North Korean trade suggests why sanctions may not be effective. Those countries most inclined to sanction North Korea do not trade or invest with North Korea and have seen economic relations decline." (Haggard and Noland 2010)

"Implementation of economic sanctions by South Korea, Japan and major Western nations is making headway, but it is a work in progress.  Private bank lending to North Korea entities dropped from around $400 million outstanding in 2001-2003 to $62 million in March 2010. … This reported lending, however, does not include loans from Chinese banks (except those in Macao and Hong Kong) or from Russia."  (CRS, 8 October 2010, 10)

Calculated economic impact (annual costs to target country)

Phase I: (1993–94)
None since sanctions threatened but not imposed
 
Phase II: (2002–2006)
Suspension of oil shipments following the revelation of uranium program; welfare loss calculated at 90 percent of reduced shipments based on average cost per metric ton in 2001 and 2002.
$68.4 million
 
Suspension of food aid; welfare loss calculated at 100 percent of shortfall in percentage of WFP requirements met compared with 1999–2002 average.
$59.2 million
 
Total
$127.6 million

Relative magnitudes

Gross indicators of North Korean economy
  GNP (1991 est.)a
$22.5 billion
  Population (1991)
20.2 million
  GNP (2002 est.)a
$22.3 billion
  Population (2001)
22.5 million
   
Annual effect of sanctions on gross indicators
  Percentage of GNP
nil
  Per capita
nil
  Percentage of GNP
0.6
  Per capita
$5.67
   
North Korean trade with the UN as percentage of total trade
  Exports (1991)
100
  Imports (1991)
100
  Exports (2002)
100
  Imports (2002)
100
   
Ratio of UN GNPb (1991: $15,963 billion) to North Korean GNP
709
Ratio of UN GNPb (2002: $25,951 billion) to North Korean GNP
1164

a. On a purchasing power basis, estimates vary widely.
b. The figure used to estimate the sender countries’ GNP is the sum of the GDPs of all OECD countries.

Source: OECD, National Accounts, Comparative Tables, Vol. 2004, release 2, www.sourceoecd.com; CIA, World Factbook 2003.

 

Assessment

Joseph Sang-hoon Chung
“. . . the trade embargo imposed by the United States and other Western nations which went into effect during the Korean War had severely curtailed North Korean trade with some of the important potential trade nations of the non-Communist world including Japan.” (Chung 1974, 109)

Jessica Mathews
"A country that has followed a policy of strict economic self-sufficiency for several decades is not a prime candidate for the application of economic sanctions…. What little we know about North Korean thinking strongly suggests that before Pyongyang peacefully succumbed to economic coercion it would have turned to its million-man army." (Washington Post, 30 October 1994, C7)

Leon V. Sigal
“While the North has held open its nuclear option as leverage for cooperation, it has been punctilious in observing the letter of the Agreed Framework, as demonstrated, for instance in the ‘canning’ of spent fuel rods at Yongbyon. Classified intelligence no doubt shows North Korea engaging in activities that concern decision-makers, but it is critical to distinguish between a threat to break the Agreed Framework and actually breaking it.” (Sigal 1998b)

William Perry
“The Agreed Framework of 1994 succeeded in verifiably freezing North Korean plutonium production at Yongbyon—…without the Agreed Framework, North Korea could have produced enough additional plutonium by now for a significant number of nuclear weapons. Yet, despite the critical achievement of a verified freeze on plutonium production at Yongbyon under the Agreed Framework, the policy review team has serious concerns about possible continuing nuclear weapons-related work in the DPRK.” (“Review of United States Policy Toward North Korea: Findings and Recommendations”. Unclassified Report by Dr. William J. Perry, U.S. North Korea Policy Coordinator and Special Adviser to the President and the Secretary of State. Washington, October 12, 1999)

Congressional report, November 1999
“While North Korea’s nuclear program at its Yongbyon and Taechon facilities appears to be frozen under the 1994 Agreed Framework, there is significant evidence that other nuclear weapons developments activity is continuing.” (p. 8)

Susan Shirk
“Kim’s decision in the 1990s to violate the Framework Agreement and continue with a nuclear program reflected his understanding of the world at that time: If he were able to keep the program secret, he would strengthen his deterrence against an American or South Korean attack. If the Americans or the International Atomic Energy Agency inspectors found out about the program, he would trade it away (or pretend to do so) in exchange for aid. Why should we think Kim’s 2002 decision to reveal the nuclear program is any different?… What’s different is that Kim has a domestic program that cannot succeed without help from the United States, South Korea and Japan… He could build nukes without us, but he cannot build an economy without us.” (Washington Post, 22 October 2002, A27)

James A. Baker III
“…North Korea now admits it has a secret program to develop nuclear weapons. …This is exceedingly dangerous and enormously troubling. What it is not, however, is surprising. Rather, it is the natural and foreseeable result of the 1994 Framework Agreement, the United States turned a policy based on strength into one based on accommodation, compromise, and appeasement... our policy of carrot and sticks had given way overnight to one of carrots only—fuel oil to help run North Korea’s beleaguered economy, two new nuclear reactors and diplomatic ties. Moreover, Pyongyang was given another five years to do what it had already agreed to do in 1991—allow a full inspection of its nuclear facilities. This agreement…in the end, in my view, proved to be a mistake that has made stability on the Korean peninsula less, not more, likely.” (Washington Post, 23 October 2002, A27)

Anthony Lake and Robert Gallucci
“In 1993, as since, it was the judgment of our intelligence agencies that North Korea likely had one or possibly two nuclear weapons, manufactured from plutonium produced some years earlier. President Clinton therefore decided that it was vital not to allow the North to produce more plutonium. This we did. The Agreed Framework we negotiated secured the spent fuel they held in storage (enough plutonium for five nuclear weapons), and all other plutonium-producing facilities were frozen under inspection. Had these facilities been allowed to become operational, North Korea would by now be producing enough plutonium for 30 nuclear weapons a year. ...Now Pyongyang has revealed that it more recently initiated a dangerous, secret uranium enrichment program. It is true that the Agreed Framework did not create a new, comprehensive inspection regime that could have prevented this. We would have to rely on our own intelligence in this regard. But this would have been the case without the agreement. And the deal did at least give us new leverage. . . .Simply put, the Agreed Framework was never based on trust. It was designed to leave us in a better position no matter what the North did. And so we are.”

“Nobody in 1994, and probably few today, expect international sanctions alone to stop a North Korean nuclear weapons program. The Chinese, and perhaps others, would provide enough aid to prevent sanctions from starving the North into submission. Using the threat of sanctions and isolation can, however, force the North to see the wisdom of a negotiated halt.” (Washington Post, 6 November 2002, A21)

Kim Keun-sik, North Korea specialist at Kyungnam University
"Sanctions won't bring North Korea to its knees,…The North knows this very well, from having lived with economic sanctions of one sort or another for the past 60 years."  (New York Times, 13 June 2009, A4)

"This time, in addition to financial sanctions, the proposed Security Council resolution [1874] calls on tighter arms embargo, possible interdiction of North Korean vessels. But most analysts say that none of the threats are large enough to stop a government that sees nuclear weapons as the key to its survival, and that has endured decades of economic sanctions and hardships, including even starvation, rather than capitulate to outside pressure." (New York Times, 13 June 2009, A4)

Julia Choi and Karen Lee
"Measures (UN Resolution 1695) are to be implemented by Member States "in accordance to their national legal authorities and legislation and consistent with international law," leaving room for interpretation. … The different interpretations of Resolution 1695 are not surprising because the resolution itself reflects a compromise, balancing the draft resolution submitted by Japan and supported by the United States, with the draft president's statement submitted by China after the July 5 missile launches.  Rather than viewing Resolution 1695 as "without teeth", perhaps a more accurate position might be recognition of China and Russia's choice to support a definite and adamant stance against North Korea's proliferation activities. The resolution's significance comes from the apparent readiness for compromise demonstrated by the five permanent Security Council members. UN Resolution 1695 was therefore somewhat of an initial turning point, paving the way for UN Resolution 1718."  (Choi 2006, 24) 

Author's Summary

Case 50-1
US and UN v. North Korea
(1950–: Korean War)

Overall assessment
 
Impairing military potential
 
Policy result, scaled from 1 (failed) to 4 (success)
2
Sanctions contribution, scaled from 1 (negative) to 4 (significant)
2
Success score (policy result times sanctions contribution), scaled from 1 (outright failure) to 16 (significant success)
4
 
Regime change
 
Policy result, scaled from 1 (failed) to 4 (success)
1
Sanctions contribution, scaled from 1 (negative) to 4 (significant)
1
Success score (policy result times sanctions contribution), scaled from 1 (outright failure) to 16 (significant success)
1
 
Political and economic variables
 
Companion policies: J (covert), Q (quasi-military), or R (regular military)
R
International cooperation with sender, scaled from 1(none) to 4 (significant)
4
International assistance to target: A (if present)
A
Cooperating international organizations
Sanction period (years)
56+
Economic health and political stability of target, scaled from 1 (distressed) to 3 (strong)
2
Presanction relations between sender and target, scaled from 1 (antagonistic) to 3 (cordial)
1
Type of sanction: X (export), M (import), F (financial)
X,M,F
Cost to sender, scaled from 1 (net gain) to 4 (major loss)
2

Comments
Scoring is based on the outcome of the war and not hostile relations since 1953 including nuclear proliferation.

Case 93-1
US/UN v. North Korea
(1993
: nuclear proliferation)

 
Phase I
Phase II
Overall Assessment
Policy result, scaled from 1 (failed) to 4 (success)
3
1
Sanctions contribution, scaled from 1 (negative) to 4 (significant)
3
1
Success score (policy result times sanctions contribution)
9
1
 
Political and economic variables
Companion policies: J (covert), Q (quasi-military), R (regular military)
Q
Q
International cooperation with sender, scaled from 1 (none) to 4 (significant)
3
3
International assistance to target: A (if present)
Sanction period (years)
1
4+
Economic health and political stability of target, scaled from 1 (distressed) to 3 (strong)
1
1
Presanction relations between sender and target, scaled from 1 (antagonistic) to 3 (cordial)
1
1
Type of sanction: X (export), M (import), F (financial)
X, F
Cost to sender, scaled from 1 (net gain) to 4 (major loss)
2
1

Comments

Our scoring of the policy result in phase 1 reflects the success of the Agreed Framework in shutting down the Yongbyon research reactor and freezing North Korea’s nuclear reprocessing capability for nearly a decade. Sanctions appear to have contributed modestly to this outcome, while the carrots included in the framework agreement were at least as important. This case is thus scored an overall modest success, despite the apparent efforts by North Korea to undercut the agreement by developing a uranium enrichment capability, because of the value of the framework agreement in blocking the surer and quicker reprocessing path to North Korean development of nuclear weapons.

Phase II is scored as a failed policy to which sanctions contributed negatively because it resulted in North Korea abandoning the framework agreement and potentially reprocessing enough nuclear waste into plutonium for several nuclear weapons.

Bibliography

Center for Strategic and International Studies.  1994. Chronology of the North Korean Nuclear Crisis. Unpublished. Washington.

Central Intelligence Agency. 1995. The World Factbook: 1994. Washington.

CRS (Congressional Research Service). 2002. North Korea's Nuclear Weapons Program. By Larry A. Niksch. CRS report IB91-141, updated. Washington: Library of Congress (21 October).

CRS (Congressional Research Service). 2003, 2006. U.S. Assistance to North Korea. By Mark E. Manyin and Ryun Jun. Report to Congress RL31785, updated. Washington: Library of Congress (17 March, 31 January).

CRS (Congressional Research Service). 2010a. China-North Korea Relations. By Dick K. Nato, Mark E Manyin, and Kerry Dumbaugh. R41043. Washington: Library of Congress (22 January).

CRS (Congressional Research Service). 2010b.  North Korea: Back on the Terrorism List? By Marl E. Manyin.  RL30613.  Washington: Library of Congress (29 June).

CRS (Congressional Research Service). 2010c. North Korea: Legislative Basis for U.S. Economic Sanctions. By Dianne E. Rennack.  CRS Report R41438. Washington: Library of Congress (29 September).

CRS (Congressional Research Service). 2010d. North Korea's Nuclear Weapons Development and Diplomacy. By Larry A. Niksch.  CRS Report RL33590. Washington: Library of Congress (5 January).

CRS (Congressional Research Service). 2010e. North Korea: U.S. relations, Nuclear Diplomacy, and Internal Situation. By Emma Chanlett-Avery and Mi Ae Taylor.  R41259. Washington: Library of Congress (26 May).

CRS (Congressional Research Service). 2010f. Implementation of U.N. Security Council Resolution 1874. By May Beth Nikitin et al.  Available at http://lugar.senate.gov/issues/foreign/reports/NKoreaCRSReport.pdf.  Washington: Library of Congress (8 October)

Choi, Julia and Karen Lee. 2006. “North Korea: Economic Sanctions and U.S. Department of Treasury Actions 1955-September 2006.”  Washington: National Committee on North Korea (October),

Haggard, Stephen and Marcus Noland. 2010. “Sanctioning North Korea: The political Economy of Denuclearization and Proliferation.”  Asian Survey 50, no.3: 539-68.

Eui-Gak Hwang. 1993. The Korean Economies. Oxford.

Bon-Hak Koo. 1992. Political Economy of Self-Reliance: Juche and Economic Development in North Korea: 1961-1990. Seoul: Research Center for Peace and Unification of Korea.

Noland, Marcus. 1995. The North Korean Economy. APEC Working Paper Series, Number 95-5. Washington: Institute for International Economics.

Noland, Marcus. 2003. Famine and Reform in North Korea. Working Paper 03-5. Washington: Institute for International Economics (July).

Noland, Marcus.  2009.  “The (Non-) Impact of UN Sanctions on North Korea.”  Asia Policy, no. 7: 61-88.

Ono, Kyoko. 1999. Turning Sticks to Carrots: US Economic Sanctions Against North Korea. Unpublished Dissertation, University of Leeds, School of International, Development and European Studies (August). 

Perry, William. 1999. Review of United States Policy Toward North Korea: Findings and Recommendations. Unclassified Report by Dr. William J. Perry, US North Korea Policy Coordinator and Special Adviser to the President and the Secretary of State. Washington, October 12.

Panel of Experts. 2010. Report to the Security Council from the Panel of Experts established Pursuant to Resolution 1874 (2009), May. Available at  http://www.armscontrolwonk.com/files/SCR1874.pdf.

Sigal, Leon V. 1998a. Disarming Strangers: Nuclear Diplomacy with North Korea. Princeton: Princeton University Press.

Sigal, Leon V. 1998b. Averting a Train Wreck with North Korea. Arms Control Today (November/December). Available online at www.armscontrol.org/ACT/novdec98/sigal98.htm.

GAO (US General Accounting Office). 1998. Nuclear Nonproliferation: Difficulties in Accomplishing IAEA's Activities in North Korea. GAO/RCED-98-210, July.

US House of Representative. 1999. Congressional Report on North Korean Threat. House North Korean Advisory Group Report. Washington, November.

<< top of page