HONG KONG - The noose is tightening on North Korea. And for the leaders in Pyongyang, two developments in recent days suggest that the country's ravenous thirst for foreign currency, which fuels its military ambitions, may be much harder to satisfy.
As my colleague Keith Bradsher reported Tuesday, the state-controlled Bank of China is shutting down transfers to North Korea's Foreign Trade Bank, a vital source of funds for the government, an action that could further financially hobble a regime that is already dealing with a tightening web of international sanctions. Particularly noteworthy was that the bank did not take such an action quietly, instead issuing a statement that drew widespread notice as a possible sign of Beijing's toughening stance against North Korea, its longtime ally.
The action comes a week after the doors closed, perhaps for good, on the Kaesong Industrial Complex, a joint operation in which South Korean businesses employed North Korean workers on North Korean soil, pumping yet more precious hard currency into the North's economy.
With an outdated industrial infrastructure and a poorly functioning agricultural sector that cannot feed its own people, North Korea's need of foreign currency cannot be overstated, and in recent decades the failures of its economy have forced it to rely on the benevolence of other nations to survive.
Blaine Harden, a former Washington Post reporter, wrote in his recent book “Escape from Camp 14″ about Pyongyang's perennial reliance on outside help, noting that a country that owes its very existence to military support from China now relies on it for financial survival.
“North Korea would have lost the Korean War and disappeared as a state without the Chinese,†Mr. Harden noted about Chinese intervention in the Korean War as Pyongyang stood on the brink of defeat in 1950. He added that after the collapse of its financial benefactor the Soviet Union in the 1990s and the subsequent end in 2008 of the “sunshine policy†that channeled aid from South Korea, “Pyongyang has become increasingly dependent on China†for trade, food aid, and fuel.
Under North Korea's “military first†strategy, the nation's financial resources are channeled primarily to its military, allowing it to make advances in nuclear and ballistic missile ambitions at the expense of the welfare of its people. With the foreign currency spigot running drier, the regime may be forced into a corner.
Recent weeks have in fact seen a relative lessening of the North's outbursts of bellicosity. A widely anticipated missile launch expected around the time of the birthday of the nation's founder, Kim Il-sung, did not come to pass last month. On Tuesday came word that North Korea appeared to have moved its missiles away from its launch site on the country's east coast while reducing its military alert level.
These developments all raise the question of whether the North is paying closer attention to the concerns of a more exasperated Beijing, although the history of North Korean behavior does not offer much hope for moderation.
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This post has been revised to reflect the following correction:
Correction: May 8, 2013
An earlier version of this post said that North Korea's need for foreign currency could not be understated. It should have said overstated.
