- North Korea’s economy continues to struggle due to border closures even as the country remains highly vulnerable to Covid-19.
- Domestic conditions could mean Pyongyang refrains from missile or nuclear tests in the near term, creating an opportunity for the new US administration to use offers of humanitarian relief to restart stalled talks – although North Korea appears uninterested in new negotiations.
US President Joe Biden and Korean President Moon Jae-in spoke on Thursday, 4 February for the first time since Biden’s inauguration. The two leaders agreed to develop a joint approach to denuclearization talks and the broader peace-building process with North Korea. The new US administration has launched a North Korea policy review as it looks for a way to restart a diplomatic process that had run aground after the second summit between former president Donald Trump and North Korean leader Kim Jong Un in February 2019. It is not, however, clear whether the Biden administration will be more willing to offer sanctions relief and other financial concessions, particularly concessions that would boost Moon’s efforts to achieve a meaningful breakthrough in inter-Korean cooperation before his term ends next year.
However, the biggest source of uncertainty – and a possible source of leverage – for the Biden administration could be North Korea’s ongoing economic struggles stemming from the near-total lockdown of its borders last year in response to the Covid-19 pandemic. The border with China remains almost entirely closed, resulting in a dramatic reduction in trade year on year, perhaps as large as 90% in October 2020. The economy as a whole may have shrunk by 10% in 2020. The North Korean government may in turn be experiencing a significant decline in revenue; the budget approved by the legislature in January grew only by 1.1%, the smallest increase since Kim succeeded his father, a trend that could mask a more severe fiscal situation. It is possible that the regime could be forced to undertake currency reforms or other interventions in limited private markets to gather more hard currency. This would be a strong indicator that North Korea’s economy has deteriorated even more than estimates suggest and could presage political unrest, since these policies would impose significant costs on citizens and could lead to backlash that further weakens the regime.
Meanwhile, although Pyongyang still claims to have no cases inside the country, it remains uniquely vulnerable to the pandemic, having virtually no medical system capable of handling an outbreak. Despite border controls, it is still possible that Covid-19 could enter North Korea from China due to cross-border smuggling. It is therefore worth watching a spike in cases in China’s Jilin province, on the border with North Korea, which saw the emergence of new cluster outbreaks in January. While officially the province has only 473 cases, the true number could be higher, increasing the risk that the virus makes its way into North Korea. According to the COVAX Facility’s latest estimate, North Korea could receive nearly 2 million doses of the AstraZeneca vaccine from the facility during H1 2021. However, Pyongyang has indicated that it wants only World Health Organization (WHO)-approved vaccines, which for the moment is limited to the Pfizer-BioNTech vaccine. Meanwhile, the COVAX Facility acknowledges that there could be significant challenges distributing the vaccine in North Korea, including political challenges, since the regime will likely want to vaccinate elites and traders first instead of frontline healthcare workers. Meanwhile, electricity shortages and the general lack of a cold chain transportation and storage system could make it difficult to ensure that vaccines are kept at the proper temperature. As a result, notwithstanding the COVAX Facility estimate, most of North Korea’s nearly 26mn people will remain vulnerable for the foreseeable future.
In these circumstances, it may be difficult for Pyongyang to engage in provocative nuclear and missile tests that often greet a new US administration. It may also create an opening for the Biden administration to offer humanitarian assistance in exchange for North Korean concessions – which Secretary of State Tony Blinken mentioned in his confirmation hearing – since humanitarian relief is likely to be more politically palatable and may be more welcome by Pyongyang than sanctions relief, given that border controls could make it difficult to profit from sanctions relief in the immediate term. However, it is unclear whether North Korea is prepared to begin talks with the Biden administration on these terms. The most recent statements by Kim at the Worker’s Party Congress signal a disinterest in dialogue and a focus on growing and modernizing weapons capabilities.