The influence of UN security council sanctions on the North Korean economy

Abstract

This article examines the economic sanctions imposed by the UN Security Council (UNSC) on the Democratic People's Republic of Korea (DPRK or North Korea) in 2006-2017 in response to Pyongyang's nuclear tests and missile launches. The UNSC adopted a number of resolutions containing obligations for all UN member states. Some of them have a direct impact both on North Korea's economic contacts with the outside world and on the country's economic development. The restrictive measures imposed against the DPRK in 2016-2017 were particularly biting. The purpose of this study is to explore economic sanctions imposed on the DPRK by the UNSC and examine their possible consequences for the North Korean economy. The study is based on a systems approach. It examines the DPRK's economy as a system, and the UNSC sanctions as an external factor that influences its development. Methods of comparative analysis are applied to explore the dynamics of the tightening sanctions regime. Statistical and analytical methods are also used to evaluate the current state of the North Korean economy, identify the key factors of its development and the potential impact of multilateral sanctions. In the 1960s, the DPRK classified most of its economic statistics and sometimes released only certain indicators, such as the gross domestic product (GDP) for certain years. Therefore, to analyze the long-term dynamics of North Korean economic development it is necessary to use evaluations from secondary sources, including international organizations and government agencies of the Republic of Korea (ROK). It is estimated that the last decade was marked by the growth of North Korea's GDP despite the restrictions imposed by the UN Security Council. Pyongyang's efforts to expand foreign economic relations, as well as the growth of a market sector in the country's socialist economy contributed to that upward trend. The present study identifies important consequences that multilateral sanctions might have for the North Korean economy. By the end of 2017, North Korea was effectively cut off from the global banking system and substantially restricted in its foreign trade, investment, transport and scientific ties. In addition to a significant drop in exports, all external transactions for North Korean companies have become more expensive. The DPRK will have to search for new ways of interacting with the world economy, including the use of cryptocurrencies. Previously export-oriented producers in North Korea will be forced to focus on the domestic market. With increased local competition and limited access to resources, big companies connected with the state will probably oust smaller "private" forms of business from the market. An important unintended result of international sanctions is the negative humanitarian impact on the civilian population of the DPRK.