Fuel Shortages And The North Korean Economy, Explained
In his latest tweet about North Korea, President Trump gave leader Kim Jong Un a new nickname — "Rocket Man" — and seems to indicate he thinks sanctions on the country are working: "Long gas lines forming in North Korea. Too bad!" Trump wrote.
But are they, really? And what, if anything, could that tell us about the North Korean economy right now?
Here's what we know: North Korea gets most of its oil from China. "It's a clear fact that North Korea is being managed by China, up to the point that it can survive on it," Yang Moo-jin, a professor at Seoul's University of North Korean Studies, told the Hankook Ilbo newspaper.
A week ago, the United Nations Security Council passed resolution 2375, which sanctions North Korea for its nuclear and missile programs. The U.S. claims the latest "toughest yet" sanctions, after implementation, could cut down by 30 percent the oil products going to North Korea and by extension, dampen the North Korean economy.
Are gas lines forming in Pyongyang?
Not right now, according to the North Korea monitoring website NK News, whose staff and sources include many current and former North Koreans. It reported Monday that "long lines of vehicles waiting to refuel have not been recently observed" in Pyongyang, with this photo. The Washington Post's sources inside the capital city echoed the sentiment: "We are not aware of any long queues at the gas stations," a resident said.
But, it seems gas prices have been going up since April, according to the Associated Press, which runs a bureau in Pyongyang. That was following a previous U.N. sanctions package that was also dubbed the "toughest yet." In late April, the AP reported a shortage began when "signs went up ... informing customers that sales restrictions would be in place until further notice. At least one station was charging more than $5 a gallon, about double the typical price of a week ago."
Last week, ahead of the new sanctions, NK News' sources in Pyongyang said they faced new restrictions on filling up jerrycans for extra supplies and a number of gas stations closed across the city.
As we learned in high school economics, price has an inverse relationship to supply. But that's in a market economy. North Korea's economy is technically state-run and supposed to be "collectivized," but prices could matter here because the black market economy is increasingly market-driven.
"It is illegal; it is informal; it corresponds to basic human needs; and it is 100 percent capitalist," authors Daniel Tudor and James Pearson write, in their book, North Korea Confidential.
What might explain a shortage, if there is one?
North Korea could be deliberately storing up its fuel supplies for lean times later, and/or China could actually be tightening up its supplies of fuel to North Korea, as it supplies most of it to the energy-poor country. In the same April report, the AP reported from Pyongyang that "rumors are rife that Beijing is behind the shortage."
Kent Boydston, who analyzes the North Korean economy for the Peterson Institute for International Economics, suspects that's the case: "Supposedly China has been cutting off refined oil for the last few months, whether for market reasons, or political reasons, so this could be why gasoline prices have shot up since I think about April. I would suspect that given the uncertainty now, the DPRK [North Korean] government may be hoarding gasoline even more, which could make prices go up even higher. So given the trajectory of where things are going, I would expect high gas prices and long lines."
How reliable an indicator are gas lines, anyway?
Since the standard economic metrics aren't accessible or available for North Korea, the price of gas is just one of many indicators to take into account to get a sense of the big picture.
While Pyongyang has fewer gas stations than other major cities because only the elite classof North Koreans owns private vehicles, "there is ample evidence suggesting there are more cars on the road than in years past," Boydston says. "It's worth noting, too, that even if private cars are still not that common, there are an increasing number of taxis on the road." So if lines were indeed forming, that's one thing to watch.
And the gas used to power cars is just one kind of fuel. The type the U.S. and its allies may really want to limit isn't diesel or petroleum, reports The New York Times.It's a potent rocket fuel called UDMH, short for unsymmetrical dimethyl hydrazine. Halting or sabotaging North Korea's UDMH could "slow the North's program," William Broad and David Sanger write.
What other indicators can tell us about how the North Korean economy is faring under sanctions?
North Korea observers are watching the country's currency, the won. In theory, if sanctions were applied effectively, prices would go up and lead to currency devaluation. That could result in a currency crisis, as North Korea has faced before.
But despite rounds of sanctions meant to hit North Korea where it hurts, the North Korean economy maintains stable.
"Quite honestly, I'm not sure how the North Koreans are doing it," Boydston says, about the currency staying stable for the past four years. "Part of it could be that the markets in North Korea are confident that sanctions won't be enforced in a way that will disrupt them, reflecting a belief that China is not really going to clamp down on them. Typically countries can just buy and sell foreign exchange and you can see what they are doing to maintain a stable currency, but in North Korea they don't have access to these kind of international foreign exchange markets so if they are waging a massive monetary policy intervention to keep it stable, I have no idea how they are doing it."
Jihye Lee contributed to this post.
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