North Korea: Economic Leverage and Policy Analysis [January 22, 2010]   [open pdf - 573KB]

"The economy of North Korea...provides the financial and industrial resources for the Kim Jong-il regime to develop its military and to remain in power, constitutes an important 'push factor' for potential refugees seeking to flee the country, creates pressures for the country to trade in arms or engage in illicit economic activity, is a rationale for humanitarian assistance, and creates instability that affects South Korea and China in particular. The dismal economic conditions also foster forces of discontent that potentially could turn against the Kim regime--especially if knowledge of the luxurious lifestyle of communist party leaders becomes better known or as poor economic performance hurts even the elite. North Korea has extensive trading relationships with China and Russia and, until recently, with South Korea. U.S. and Japanese trade with North Korea since 2006 has been virtually nil except for U.S. aid deliveries. The DPRK [Democratic People's Republic of Korea] has been running an estimated $1 billion deficit per year in its international trade accounts, which it funds primarily through receipts of foreign assistance and foreign investment as well as through exports of arms and various questionable activities. Following the DPRK's second nuclear test and subsequent actions, the focus in 2009 has been on negative incentives and increasing sanctions. The larger question, however, is how to move...to a three-fold transformation of the DPRK: a transformation in its international relations, in the Stalinist methods by which the Communist regime maintains its support, and in a moribund economy that cannot feed its own population."

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CRS Report for Congress, RL32493
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