This article was originally published by Radio Free Asia and is reprinted with permission.
Runaway inflation and severe shortages of food and other necessities are posing the worst suffering in North Korea in a generation, but rather than focus on the economic crisis, Pyongyang has ramped up missile tests to challenge Seoul and Washington, sources in the country and analysts say.
The government last year told the nation of 25 million people to prepare for a depressed economy to rival the Arduous March, what North Koreans call the 1994-1998 famine which killed millions.
This time, however, the steep economic decline is not due to Pyongyang’s inability to quickly adjust to the collapse of a patron state in the Soviet Union. Rather, economic conditions grew worse and worse after Beijing and Pyongyang decided to close the Sino-Korean border and suspend all trade.
Already buffeted by international sanctions that curb trade to starve the country’s nuclear weapons and missile programs, North Korea’s nascent market economy came to a near-complete standstill without imported goods from China. Commerce in entire cities dried up, while idle ships rusted in harbors.
Prior to the pandemic, most people had to go into business for themselves as their government-assigned jobs paid too little to live on. But after the border closed, most lost the side jobs that were their chief source of income.
Shortages went from bad to terrible, but Pyongyang refused to let up, keeping the border closed by establishing a kill zone within 1-km (0.6-mile) of the 880-mile border, ordering special forces to bolster the ranks of the border guards and root out corruption among them, and even laying landmines to keep people from escaping the country.
All the while, the government funded an expensive missile development program it has once again started showing off with a flurry of short- and medium-range missile tests–seven in January alone.
Few actually believe that North Korea is virus-free, but Pyongyang still makes that claim, and points to its restrictive border policies for keeping the people “safe.”
Though China and North Korea resumed rail freight in mid-January, the two long years of the border closure has had a profound effect on the everyday lives of the people, with many still struggling in one of the world’s most oppressive societies.
The border closure has led to key staples in North Korea drastically increasing in price, sources in North Hwanghae and North Hamgong provinces told RFA in early January.
Staples hard to find
Tofu and alcohol have almost doubled in price, and napa cabbage, the key ingredient in kimchi, is so expensive that few can afford to eat Korean cuisine’s ubiquitous signature side dish.
Cooking oil and sugar prices depend heavily on imports, so their prices have skyrocketed also.
North Korean residents complain that store shelves lie barren as the authorities try in vain to meet demand for the most basic essentials with domestic production.
Those who can afford the luxury of eating rice are paying through the nose. Prices increased 8 percent from December to 4,750 won (U.S. $0.95) per kilogram, data from the Osaka-based Asia Press news outlet showed.
The common people who survive on a meager diet of corn were hit with an even steeper increase of 22 percent, as the price climbed to 2,500 won.
“My mother needs money again,” a North Korean refugee identified by the pseudonym Kim Hye Young, who now lives in Seoul, told RFA’s Korean Service.
Kim recently sent money to her octogenarian mother who lives in the North. She received a call Jan. 7 asking for more.
“My mother has no income because she is too old to run a business, and the cash I sent before is not enough because of the high inflation,” Kim said.
She said she spoke to a broker who facilitates communication between North Koreans and their relatives outside the country who told her that things like cooking oil and seasonings are difficult to find.
She also said people in North Korea have reduced their diet from two meals per day to just one. Authorities in some places recognize the situation and are providing free food, she said.
Light rail freight
During the border closure there were limited supplies of Chinese goods coming into the country by sea, but selections were still very limited. RFA reported last month that maritime trade appeared to be picking up, with the biggest imports being construction materials, medicine and high-end commodities.
Domestic manufacturers stepped up to supplement the Chinese goods that were getting through. Since November 2021, prices for Chinese soybean oil dropped significantly after locally produced soybean oil started hitting the market. It once cost as much as 100,000 won ($20) per kilogram but now sells for about 30,000 won.
But many believe that inflation will not be controlled until the border is fully reopen. Although rail freight has officially resumed, it remains a fraction of what it was before the pandemic.
“There have been stories of freight trains passing through since the 15th of this month, but the North Korean traders in China are not expecting much from this,” a trader who deals with North Korea in Dandong, China, told RFA in January.
Another North Korean refugee, speaking under the pseudonym Jeong Mi Young, told RFA, “I recently received a call from my family but there’s no movement to open the border.”
A complete reopening cannot happen until both countries have satisfactorily dealt with their respective COVID-19 situations, a Chinese citizen resident of North Korea told RFA.
“Even if they were to reopen the border between North Korea and China right now, those who travel to China will have to be forcibly quarantined at state facilities for at least three weeks, and that means they would have to pay the quarantine costs of nearly $1,000 at their own expense,” she said.
“Opening the border would be meaningless in this situation,” she said.
The feasibility of a complete reopening will be reviewed following the Feb. 4-20 Beijing Winter Olympics if the pandemic situation improves, Troy Stangarone, senior director and fellow at the Washington-based Korea Economic Institute (KEI), told RFA on Jan. 10.
“So, we’re not likely to see a full border opening but a partial opening that may be only for periods of time,” he said.
Smugglers fill gaps
RFA has confirmed that smuggling between North Korea and China is occurring on the high seas.
A Chinese ship captain in November provided video footage to RFA showing that the ship he owned was loaded with goods from a warehouse in Panjin, on the border between China’s northeastern Liaoning and Hebei provinces.
In the video, the ship goes out to sea fully stocked. The captain told RFA that he engaged in smuggling by rendezvousing with a North Korean ship and transferring all the goods.
He explained that smuggling at sea has started to rise since September, and he and others are actively engaging in the activity.
A trader in Dandong, China, across the Yalu River border from North Korea’s Sinuiju, told RFA that most of the goods being smuggled over the seas are construction materials.
The trader said that food items such as cooking oil, sugar, seasonings and frozen beef are included among the smuggled goods, but only in small quantities, likely for privileged Pyongyangers, or high-ranking elites.
The effects of the runaway inflation and shortage of daily necessities have exacerbated the massive North Korean wealth gap.
Families that still have sources of income despite the dire economic situation are better able to weather price fluctuations.
Jeong, who lived close to the Sino-Korean border before escaping in 2020, told RFA that her family was among the privileged.
“When I contacted my family on New Year’s Day, they didn’t seem to be affected much by price increases. … They didn’t say anything about having a hard time. When I saw the picture of them having a meal, the quality of their food wasn’t any worse off,” she said.
Jiro Ishimaru, founder and chief editor of Asia Press told RFA that people with enough cash can deal with inflation.
“But others have to worry about starvation. The gap between rich and poor, and the polarization of North Korean society has drastically worsened during the coronavirus pandemic,” he said.
People in North Korea who are in the middle classes or higher can still afford to eat, Lim Eul Chul, an expert on the North Korean economy from South Korea’s Kyungnam University, told RFA.
“For ordinary people, the increased price itself is very burdensome, but for people in the middle or higher classes, it is not very expensive. The impact of rising prices on North Koreans should be seen as somewhat differentiated,” he said.
Pricey arms programs
Though much of the North Korean populace suffers under the extremely poor economic conditions, Pyongyang spends hundreds of millions of dollars on its nuclear and missile programs.
In a June 2020 report by the International Campaign to Abolish Nuclear Weapons, a coalition of non-governmental organizations, estimated that North Korea spent $667 million on nuclear weapons and missile programs in 2019 alone.
That figure was about 2.3 percent of the North Korean GDP in 2020 of $29 billion, reported Statistics Korea, South Korea’s Census Bureau.
Each missile launch costs between $1 million and $1.5 million, Markus Schiller, a North Korean missile expert from Germany-based ST Analytics, told RFA in 2019.
Though the North Korean economy shrunk by 4.5 percent in 2020, the worst since 1997, in the thick of the Arduous March, it continues to test missiles in rapid succession in 2021.
Schiller also said that although missile development program costs depend on the size of the missile, it can be estimated to be roughly $1 billion for the development of a complete weapon system, including support vehicles, engines/motors, guidance systems, airframes and warheads. This figure does not include the cost for developing new technology.
Schiller said that the development of new missiles would be a huge burden for an economy the size of North Korea’s.
The country grabbed U.S. attention at the start of 2022 with splashy tests of new weapons systems, including a long-range cruise missile capable of hitting most of Japan and a hypersonic ballistic missile that traveled at Mach-10.
Experts have said that North Korea’s recent frequent missile tests, as well as its recent hint through stte media that it might end a self-imposed moratorium on nuclear testing and intercontinental ballistic missiles (ICBMs), are moves meant to test the reactions of South Korea and the United States.
Pyongyang and Washington failed to iron out a denuclearization for sanctions relief agreement during two summits in 2018 and 2019 between Kim Jong Un and then-U.S. President Donald Trump.
Experts say that as negotiations have stalled, North Korea is returning to its strategy of brinkmanship — engaging in provocations to get something from the U.S. or South Korea.
“It’s always part of the North Korean playbook to use these missile tests knowing that they will be viewed in Seoul and Washington as provocations and to try to use it as leverage to get American concessions for perhaps a renewal or restarting of nuclear diplomacy,” the Atlantic Council’s Robert Manning said.
