3 Reasons China Can’t Stop Exporting Oil to North Korea

For months the administration of United States President Donald Trump has imposed “maximum pressure” on North Korea, both diplomatically and militarily, to stop its development of nuclear and missile programs.

But, as if to make Trump lose face in front of the international community, Pyongyang forced through its second intercontinental ballistic missile test on July 28— much to the annoyance of the US, Japan, and South Korea.

Trump reacted emotionally to Pyongyang’s latest provocation by immediately accusing China of doing “NOTHING for us with North Korea, just talk” on Twitter the following day.

Echoing Trump, US ambassador to the United Nations Nikki Haley also pointed to China, saying that Beijing “must decide if it is finally willing to take this vital step” of stopping Pyongyang’s belligerent behavior.

Then what does the US want China to do next against North Korea? It has been calling on Beijing to crack down on firms and individuals that are doing business with Pyongyang, in a punitive measure of the so-called “secondary boycott.”

Japanese media have said Washington’s purpose of this push is to cut off funds to Pyongyang’s nuclear and missile programs. That must be true. But equally important, the US is aiming to put strong pressure on China to cut off its oil shipments to North Korea through this secondary boycott.

China accounts for about 90% of North Korea’s foreign trade and its crude oil supply, respectively: reason enough for the US to demand China enforce strong sanctions against Pyongyang.

Specifically, China sends about 500,000 tons of crude oil to North Korea beneath the surface every year—not appearing statistically, according to the South Korean government. And stopping this energy lifeline will no doubt wreak havoc on Kim Jong-un’s reclusive regime.

China has yet to cut its oil supply to North Korea. Chinese President Xi Jinping has opposed any unilateral sanctions, including its oil export cutoff, reiterating its commitment to settle the North Korean issue through negotiations.

For sure, Beijing won’t cut off the oil supply to North Korea significantly—even if the US tries to impose secondary sanctions on Chinese banks and companies that do business with Pyongyang.

Why?

Here are three reasons we have to take into consideration.

The first is a technical reason. Although this is little known in the West media, there is a view that China faces difficulties in adjusting oil production in order to cut off its oil supplies to North Korea.

According to a report issued in September 2016 by RIM Intelligence, a Tokyo-based leading energy information provider in Asia, China currently exports crude oil produced at the Daqing oilfield in northern China’s Heilongjiang province, or the nation’s largest field, to North Korea.

“Although little known, the Daqing oilfield is not a single field, but an oilfield group comprising about 20 oilfields, such as Sartu and Putaohua oilfields,” RIM’s report said. “Crude oil produced there is usually first sent to Liaoning province by pipelines, and subsequently sent to Dalian, Qinhuangdao, and Beijing areas.”

Therefore, in order to stop oil exports to North Korea, it is needed to shut off production in many of those oilfields all at once, the reports said.

In addition, the report said that crude oil produced in the Daqing oilfield contains a lot of paraffin, or a basic ingredient of candles. Therefore, once production activities stopped, the inside of a pipe will be cemented easily. This means once oil production is discontinued, that makes it quite difficult to resume production in the oilfield.

“This is the reality why [they] have to continue production seamlessly there,” Rim’s report said.

But it is also true that China used to cut off oil supplies to North Korea in a very short term. According to an article published by the Chosun Ilbo on July 11, in early 2003, China cut off crude supplies to North Korea for three days, making Pyongyang return to negotiations.

The second is political reason. To cut-off crude oil supplies will surely deliver a heavy blow to North Korea’s still small economy. If China achieves a complete ban of crude oil supply or limit oil supplies to North Korea as a measure of last resort against Pyongyang’s repeated provocations, Kim Jong-un will see Beijing as an enemy. This could cause unexpected retaliation by Pyongyang against Beijing.

Any oil embargo is a double-edged sword. If we look back over the modern history of the world, the US imposed the oil embargo on Japan on August 1st, 1941, to make the Imperial Japanese Army withdraw from China and from Indochina. Japan didn’t withdraw from there, rather it desperately started a war against the US for self-defense by conducting the attack on Pearl Harbor. North Korea would do the same if it faces an oil embargo.

The third reason is that there are increasing uncertainties over the Trump administration. With widespread speculation that the Trump administration won’t last more than a few years, mired as it is in many scandals, China will try to maintain the status quo as long as possible. Beijing may be thinking of relations with the US in the longer term, not in the short term, therefore, not using a precious diplomatic card of a cutoff of oil shipments to North Korea this time around.

Also, Chinese President Xi will try to take a wait-and-see attitude for the time being by not wreaking any serious economic havoc on Pyongyang. This is especially true as China holds the 19th National Congress of the Communist Party of China in autumn, an epoch-making event that is set to centralize power in Xi’s hands. Any serious disputes with a long-time ally could bring about negative impact on the consolidation of Xi’s power.

The current North Korea seems like China in 1960s. Around that time, China desperately kept developing nuclear and missile programs even though it faced strong counter-pressure from the US and the Soviet Union. After all, in 1972, then US President Richard Nixon traveled to China and met with Mao Zedong, bringing about a historic rapprochement between two major powers. Pyongyang may be aiming to follow the same path as China.

In any case, with North Korea’s threats ever-increasing, a fierce diplomatic tug of war between the US and China over a most effective oil sanction against Pyongyang will likely further escalate in the coming months.

Kosuke Takahashi is a journalist. He is ‎Tokyo correspondent of IHS Jane’s Defence Weekly. He worked for The Asahi Shimbun, Bloomberg News, Huffington Post Japan editor in chief and Thomson Reuters. Born in 1968, Takahashi is a graduate of Columbia University’s J-School and SIPA.