North Korea still has plenty of options as it faces new sanctions and a frosty Beijing

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North Korea still has plenty of options as it faces new sanctions and a frosty Beijing

  • North Korea faces more sanctions after President Donald Trump labeled it a state sponsor of terrorism
  • Sino-North Korean ties could also be cooling, as analysts observe that China is shifting in its North Korean policy
  • While thought to be internationally isolated, the secretive state still has business partners, and looks to be courting Russia

North Korea is facing a growing number of international sanctions, but there are still plenty of ways the reclusive state can do business.

Despite restrictive conditions, the pariah nation's overall economy grew 3.9 percent last year — its fastest since 1999. Pyongyang did business with at least 80 countries during that time, according to figures from the South Korean government.

It's not yet clear how the North Korean economy is faring this year, but the situation may be growing tougher for the country: The United States announced more sanctions this week after President Donald Trump put the country back on a list of state sponsors of terrorism.

China ties

When the world has been tough on Pyongyang, leaders in the reclusive state have long turned to allies in Beijing to alleviate their troubles. But that relationship is showing signs of fraying.

China makes up more than 80 percent of North Korean trade and has been credited for holding up the regime, but analysts say that China has become more assertive this year in exercising pressure on its ally.

Andrei Lankov, a professor at Kookmin University in Seoul and a specialist in Korean Studies, wrote on Monday that there is an "ongoing U-turn in China's North Korean policy."

He cited strong Chinese support for "the toughest" United Nations Security Council-approved resolution ever on the North Korean issue — an action which he said surprised many observers, including him.

He added that Chinese policymakers and scholars are now saying that "China has had enough and should switch to a tougher policy."

Over the last week, China deployed a special envoy to North Korea for the first time since February last year. China-watchers deemed the four-day trip as important, but its consequences were not immediately apparent.

For its part, North Korea is likely to be feeling the effects of China's new approach.

China released figures last month showing that its fuel exports to North Korea fell sharply in September. Imports of North Korean coal was down 71.6 percent from last year, while exports of petrol were down 99.6 percent.

The pivot to Russia

Given the apparent frostiness with Beijing, it's no surprise that North Korea is looking to put some eggs in other baskets.

In May, the country's state media reported that North Korean leader Kim Jong Un sent his Lunar New Year greetings to Russian President Vladimir Putin before he reached out to any other international leaders.

Moscow has a long history with North Korea — the Soviet Union made up almost half of North Korea's foreign trade for almost 30 years until it collapsed in the 1990s.

Russia looks to be ramping up its involvement again. Last month, a major Russian telecommunications company was reportedly providing an internet connection to North Korea.

The new link came at a time when U.S. Cyber Command was carrying out attacks against North Korean hackers, The Washington Post reported.

More collaboration is on the way. A new ferry service was launched in May to transport cargo between North Korea and the Russian port of Vladivostok, while Russia's state news agency reported plans to expand railway links between the two countries.

Still, official trade volumes last year hit only $77 million, down from $113 million in 2013.

That is a far cry from when Russia's then-minister for Far East development announced in 2015 that Moscow wanted to increase its trade volume with North Korea tenfold to $1 billion by 2020.

People work in a field just outside Pyongyang, North Korea October 8, 2015.
Damir Sagolj | Reuters
People work in a field just outside Pyongyang, North Korea October 8, 2015.

Experts note, however, that Russia's oil deliveries to North Korea do not appear on official customs data, estimating that actual trade volumes are at least three times higher than what is recorded.

Data for the first quarter of 2017 showed that Russia's trade with North Korea more than doubled to $31.4 million.

Academics say Russia's backing of North Korea serves several strategic purposes, such as projecting Russia's image as an international broker and reinforcing its image at home as a great power.

Still, it's likely to remain murky just how Moscow develops its relationship with Pyongyang.

Benjamin Katzeff Silberstein, a researcher with the Foreign Policy Research Institute who tracks North Korea's economy, told CNBC via email that "at the end of the day, it's very hard to say for sure exactly what sort of trade North Korea conducts, and with whom."

"North Korea's trade with countries other than China, in various forms, is probably much greater than we tend to recognize. That with Russia especially may well come to increase in the coming few years depending on how the international environment develops," he said.

Global clients for arms, slaves and statues

Officially, North Korea's top exports are coal and textiles, but its business dealings go beyond those products, extending to arms sales and exported labor.

The United Nations estimates that more than 50,000 North Korean workers are employed in foreign countries, mostly in China and Russia, but also in countries like Malaysia, Qatar, Ethiopia and Poland.

The regime makes between $1.2 billion and $2.3 billion from its citizens' labor, mostly in the forestry and construction sector. For comparison, North Korea's recorded trade volume was $6.5 billion last year.

North Korea also made $300 million in arms sales in 2015, according to South Korean sources.

Arms shipments have been intercepted to some of its clients — a list which includes a Syrian government agency, Egypt, Yemen and Cuba.

The secretive state has lucrative commercial relationships with several African countries, and goods traded with North Korea across Africa amount to more than $100 million a year.

The UN is investigating seven African countries for possible violations of its sanctions on North Korea, such as commissioning construction projects and buying arms.

North Korean-owned enterprise Mansudae Overseas Projects is reportedly behind much of the commercial activity in Africa. Some of its projects include construction work in Namibia, as well as giant statues, mostly of African revolutionary leaders.

The UN cracked down on North Korea's sales of its huge socialist-style statues this year in response to a nuclear test it conducted in September.