2013 luxury goods in north korea

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ACADEMIC PAPER SERIES

Korea Economic

Institute of America

Luxury Goods in North Korea: Tangible and Symbolic Importanceto the Kim Jong-un Regime

By Soo Kim

Abstract

North Koreas adherence to self-suciency has its foundaons

in the countrysjucheideology, meaning a spirit of self-reliance.

The juche spirit sll lives on in the DPRK, but stubbornly so,

as the regime over the past several decades has confrontedthe limitaons of being a truly self-reliant country, faced

declining economic and humanitarian condions, and became

increasingly isolated from the rest of the world. Pyongyangs

insistence upon its own terms in diplomac engagements and

provocave behavior have further isolated the country, and very

few countries are willing to cooperate with the DPRK, for doing

so would cost their own reputaons.

Consequently, North Korea pursues illicit avenues to fund the

lavish lifestyle of its leader, develop its weapons programs, and

strengthen the elites allegiance to the Kim regime. One such

way the Kim Jong-un regime achieves these aims is through theacquision of luxury goods. High-end items, such as wine, liquor,

jewelry, and automobiles are acquired through third-party

countries to fulll Kims penchant for luxury goods and buy the

loyalty of North Korean elites. The internaonal community is

aware of the regimes dependence upon these items. As a result,

sancons have been imposed to restrict the Norths access

channels to luxury products and curtail its provocave behavior.

The eecveness of sancons has been debated, for they oen

lack consistency in denion and applicaon among parcipang

countries. Yet, due to their symbolic value as punive measures

and potenal to be more eecve with proper applicaon, there

is sll value in implemenng sancons.

Key Words:Luxury goods, North Korean leadership, sancons,

elite loyalty, China

Background

North Koreas self-proclaimed, unswerving adherence to se

suciency has its foundaons in the countrys juche ideolo

meaning a spirit of self-reliance. The spirit of juche sll liv

on in the Democrac Peoples Republic of Korea (DPRK), bstubbornly so, as the regime over the past several decades h

confronted the limitaons of being a truly self-reliant count

faced declining economic and humanitarian condions, a

became increasingly isolated polically from the rest of t

world. What had once been a self-imposed ideological convic

is now a reality that the North is forced to accept. Pyongyan

insistence upon its own terms in diplomac engagements a

provocave behavior have further isolated the country. Yet t

North has shown very lile unequivocal signs of wanng

change its course. For abandoning the juche philosophy wou

mean the regimes ineluctable opening of the country to t

rest of the world, and the North would have to consider t

terms of the United States, South Korea, and other like-mind

countriesprobably a last-resort move the Kim regime wou

try to avoid making at all costs. The DPRK most likely will n

accept regime change by the internaonal communitys term

in the foreseeable future. Yet the state of the country rende

it dicult for the regime to be truly self-sucient. Very fe

countries are willing to cooperate, trade with or openly suppo

the DPRK, for doing so would cost their own reputaons, a r

they are hesitant or unwilling to take.

Consequently, the North Korean government pursues illavenues to saate the appetes of its top leaders, connue

develop Pyongyangs weapons programs, obtain currency, a

strengthen the elites allegiance to the Kim regime. One su

Ms. Soo Kimis a former polical analyst for the U.S. Government. This paper is the sixty-rst in KEIs Academic PaperSeries. As part of this program, KEI commissions and distributes approximately ten papers per year on original subjectsof current interest to over 5,000 Korea watchers, government ocials, think tank experts, and scholars around theUnited States and the world. At the end of the year, these papers are compiled and published in KEIs On Korea volume.

For more informaon, please visit www.keia.org/aps_on_korea .

Korea Economic Instute of America

1800 K Street, NW Suite 1010

Washington, DC 20006

www.keia.org

December 31, 2013

Luxury Goods in North Korea: Tangible and Symbolic Importance to the KimJong-un Regime


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way the Kim Jong-un regime achieves these aims is through the

acquision of luxury goods. High-end items such as caviar, wine,

liquor, jewelry, and automobiles are acquired through third-party

countries to fulll Kims penchant for luxury goods and bribe theupper echelons of North Korean leadership to maintain their

loyalty to the Kim regime. North Korean elites have no trouble

acquiring these goods as long as they have the money to purchase

them. The internaonal community has become increasingly

aware of the DPRKs surprisingly easy access to these goods, as

well as the regimes dependence upon these items to maintain

stability and further its polical objecves. As a result, sancons

have been imposed on several occasions, both at the mullateral

and bilateral level, to restrict Pyongyangs access channels to

luxury products and curtail the regimes provocave behavior.

The eecveness of sancons has been debated by many NorthKorea watchers, for these regulaons oen lack consistency and

uniformity in denion and applicaon among parcipang

countries. Yet, because there is sll a symbolic, messaging

value in these punive measures as well as the potenal for

sancons to be more eecve with the proper applicaon and

parcipaon from countries crucial to clamping down on the

North Korean regime, there is sll value in implemenng and

applying sancons.

A Delineaon of Luxury GoodsTo make its restricons and sancons policy vis--vis North

Korea clearer to both the parcipant countries and Pyongyang,

the internaonal community set out to dene what constutes

as a luxury good. The United Naons approved Security Council

Resoluon 2094 (UNSCR 2094) response to the DPRKs February

12, 2013 nuclear test to strengthen and expand its exisng

sancons against the North by targeng the illicit acvies of

diplomac personnel, transfers of bulk cash, and North Koreas

nance relaonships. The resoluon prevents the provision of

nancial services or other assets and resources to North Korea,

its enes and individuals that could contribute to the Northsnuclear and ballisc missile programs or other prohibited

acvies.1 It also imposes a travel ban and asset freezes on

named North Korean enes deemed the primary arms dealer

and main exporter of goods and equipment related to ballisc

missiles and convenonal weapons.2

More importantly for the scope of this paper, UNSCR 2094

delineates and denes luxury goods. It claries that the term

includes but is not limited to the following items specied in t

annex: jewelry, including jewelry with pearls, gems, precio

and semi-precious stones (e.g., diamonds, sapphires, rubi

emeralds), and jewelry of precious metal or of metal clad w

precious metal; and transportaon items, including yach

luxury automobiles and motor vehicles to transport peop

staon wagons, and racing cars.

In addion to imposing UN sancons against the North, ma

individual countries have adopted their own measures

express disapproval of Pyongyangs course of acons and poli

In August 2010, as a response to the DPRKs sinking of the Sou

Korean navy corvee Cheonan, the Obama administraon sign

Execuve Order 13551, which targets the DPRKs arms impo

and exports, imports of luxury goods, counterfeit currenmoney laundering, and narcocs tracking.3 The US Code

Federal Regulaons (CFR) enumerates items that are subje

to a policy of denial in exporng or re-exporng to the Nort

As dened by the CFR, the US has banned the following luxu

goods from going into North Korea: luxury automobiles, yach

gems; jewelry; other fashion accessories; cosmecs; perfume

furs; designer clothing; luxury watches; rugs and tapestrie

electronic entertainment soware and equipment; recreaon

sports equipment; tobacco; wine and other alcoholic beverag

musical instruments; art; and anques and collecble item

including but not limited to rare coins and stamps.

In 2011, Canada imposed sancons (Special Economic Measu

Regulaons) against North Korea under its Special Econom

Measures Act (SEMA) to send the message that Pyongyan

aggressive behavior is unacceptable. The SEMA prohibit

any person in Canada any Canadian outside the country fro

knowingly directly or indirectly exporng, selling, supplyin

transferring or shipping arms and related material, resourc

contribung to the Norths weapons program and luxury good

Canada denes luxury goods as jewelry, gems, precious meta

and watches; cigarees, alcoholic beverages, perfume, designclothing and accessories, furs, sporng goods, and priva

aircra; lobster and gourmet foods and ingredients; compute

television and other electronic devices.5The UN and individu

countries denions of luxury goods banned to North Kor

aims to restrict the regimes access to these items. Rece

reports indicate, however, that Pyongyang is sll able to acqu

these goods.


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North Korean Leaders Lavish Lifestyles

The North Korean regime has had a robust appete for luxury goods

since the late Kim Jong-il was designated successor to his father

Kim Il-sung in the 1970s. Kim Jong-il created Oce 39, a secretorganizaon that served as a repository to generate slush funds for

Kims personal use. Kim used the funds generated through Oce 39

for developing weapons of mass destrucon, construcng idoliza-

on monuments and buildings throughout North Korea, maintaining

elite loyalty, and fullling his penchant for luxury items. Fujimoto

Kenji, Kims longme sushi chef, said that Kim had a predilecon for

cognac and other expensive European alcohol and wines, Iranian

caviar, melons and grapes from China, sushi, and shark n soup.6

Kim reportedly also owned six luxury travel trains that included

conference rooms, satellite phones, and at-screen TVs.7

Kims youngest son, Kim Jong-un, was considered the Norths

heir apparent in 2010 and succeeded his father following the

elder Kims demise in December 2011. The 30-year-old leader

spent several of his formave years abroad, having aended

the Internaonal School of Berne, a boarding school 15 minutes

away from the capital of Switzerland. At the English-language

school, Kim befriended the children of American diplomats and

learned to speak French and German.8He was also reportedly an

avid fan of the NBA, idolizing basketball players such as Michael

Jordan, loved skiing, and spoke highly of actor Jean-Claude Van

Damme.9,10 In accordance with his age, the young Kim projected

a more modern, Western lifestyle to the public in his rst yearas the countrys leader. Alongside Kim appeared his wife, Ri Sol-

chu, on some of the leaders public oungs. The Norths rst

lady wore Western-style clothing and was even spoed carrying

a Chrisan Dior bag in one of her public appearances. 11,12 The

lavish lifestyle of Kim and his wife had been equally the focus of

aenon and point of cricism for many Korea watchers, as they

noted the salient contrast between Kims lavish lifestyle with the

poverty and hunger confronng the average North Korean.

It appears that Kim Jong-un has not only inherited his fathers

penchant for luxury goods, but the young Kims decadent lifestyle

may well surpass that of Kim Jong-ils. In October, South Koreasruling party lawmaker Yoon Sang-hyun released an analysis that

examined Pyongyangs import of luxury goods between 2010 and

2012. According to the analysis, under the Kim Jong-un regime,

North Koreas import of luxury items surged every year, from

$446 million in 2010 to $584 million in 2011 and $645 million in

2012.13The Norths tally of imports in 2012 was more than twice

the average under Kim Jong-il, which totaled approximately $300

million per year.14

An examinaon of UN and Chinese trade data in 2012 reveal

a signicant increase in the export of cars, tobacco, laptop

cellphones, and domesc electrical appliances to North Kor

over a ve-year period.15 According to representave Yoo

the value of North Koreas luxury imports in 2011 was enouto buy 1.96 million tons of wheat.16Imports of cell phones h

risen by more than 4200 percent. In the South Korean Naon

Assemblys analysis, the most popular items to be imported

North Korea included liquors, such as scotch and wine, electro

devices, perfumes and cosmecs, fur coats and luxury items

The North also imported expensive pet dogs and pet suppli

European and US baby products, and German-made sau

facilies. From China alone, the North imported $519,402 wo

of caviar and roe in 2012almost a 50-fold increase in volum

from the previous year.18Pyongyang also imported carpets wor

$448,728, 33 mes higher than in 2011.19

The DPRK import661.7 kilograms of silver worth $653,128 dollars from China t

January; observers speculate the regime may have used the silv

as presents for Kim Jong-uns birthday on January 8. Kim has a

imported scores of Chinese Shih Tzu dogs.20In 2011, shipments

luxury cars were reported at over $230 million.21 Kim reported

uses a Mercedes-Benz GL-Class sport-ulity vehicle when

goes on his inspecon tours throughout the country.22

In addion to imporng luxury items, the North Korean regim

has vigorously pursued the construcon of recreaonal a

leisure facilies, most likely for Kims enjoyment purposes. T

young leader is an avid sports fan and enjoys throwing pareSince September 2010, when Kim Jong-un was designat

successor to his father, North Korea has been construcng ne

villas or expanding exisng ones. For instance, Kim Jong-u

oce Ocial Residence Number 15 in central Pyongyang h

been torn down and a new building is being constructed in

place. Because the locaon is where Kims mother, Ko Young-h

had lived, and also where Kim resided during his youth, it can

inferred that the new building will most likely be intended

Luxury Goods in North Korea: Tangible and Symbolic Importance to the KimJong-un Regime

According to the analysis,under the Kim Jong-un regime,

North Koreas import of luxuryitems surged every year, from$446 million in 2010 to $584million in 2011 and $645 millionin 2012.


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Kims personal use.23North Koreans have also deconstructed Kim

Jong-ils personal villa, imported building materials from abroad,

and begun construcng a new vacaon house that includes

banquet halls and villas. In Kim Jong-uns personal villas, he hasbuilt docks from which he could sail yachts and go jet skiing.24

Pyongyang has also imported equipment to produce arcial

snow for the leaders ski resorts.25The South Korean press reports

that in 2012, North Korea entered into negoaons to acquire

some high-end European luxury yachts priced at approximately

$10 million each. Between 2009 and 2010, North Korea imported

a dozen Italian jet skis. In Kims vacaon house in Kangdong

County, the North Koreans constructed a new banquet hall and

horse race tracks, and invited Chinese and Russian architects

to build an ice rink and indoor gym. Recently, North Korea has

imported dozens of special Russian horses for Kim. Pyongyanghas also imported sauna equipment from Finland and Germany,

possibly to help him beat hangovers and fague from late

night partying.26

An Instrument to Solidify Kims Power Grip

In the case of Kim Jong-il, luxury goods were acquired to sasfy

Kims decadent lifestyle, construct monuments idolizing the

leadership, reward his supporters, and fund the countrys

weapons programs. What about his son, Kim Jong-un?

With barely two years of experience leading the country, the30-year-old Kim, is young and lacks credible experience as a

leader. Though he is the de facto leader of North Korea, Kim most

likely relies on some of the ocials from Kim Jong-ils rule for

support and guidance. The majority of the Norths old guard is

several decades older than the young Kim; many of them are

contemporaries and colleagues of his father. As a result, there is

a generaonal gap that separates Kim and the Party and military

elites ideologically and praccally. Kim has also had exposure

to the outside world in his formave years, which, to a certain

extent, may have shaped his views on his country, its people, and

relaons with foreign countries. In any country, it is importantfor the leader to maintain a close network of supporters and

aliates to assert his leadership and ensure success of his policy

goals. In North Korea, where allegiance to the leadership is

craed around a cult of personality, dissent is not tolerated, and

the leader wields absolute, seemingly undisputed control, the

support of his cronies and the top echelons of the Party, military,

and government is especially important to the leaders longevity

and maintaining of power. And for Kim Jong-un, a young a

inexperienced leader, loyalty from the top ranks in the Party a

military is parcularly crucial to ensuring a strong grip of t

country. He may therefore place greater emphasis on securhis leadership in the rst years of his rule by way of buying o

the support of the older, more experienced high-ranking Pa

and military ocials with expensive gis.

The Kim Jong-un regime imports luxury goods for Kims perso

use, just as his father Kim Jong-il did during his rule. Howev

given Kims recent assumpon of rule and the lack of a so

power base around him, it is likely that luxury goods are

polical import for the new leader. Kim is using these expens

items as gis for the countrys elites. One foreign ocial w

visited North Korea in April 2012 said the regime appeared to

focusing more eorts on pampering the elites, with luxury ite

from Japan and the construcon of high-rise condominiums f

the privileged classes.27 Kim has also spent money on par

for the Norths high-ranking ocials and purchased expensi

products to buy their loyalty. For example, Kim gave Yama

electronic violins and cellos to the Norths all-female Moranbo

Band.28Elite support had been an important xture to regim

survival during both Kim Il-sung and Kim Jong-ils rules, but it

even more important for Kim Jong-un, as he tries to show bo

the internaonal community and the North Koreans that he is

charge of the country.

Dealing with North Korea Through Sancons

The internaonal community is well aware of the North Kore

leaderships predilecon for luxury items and the regim

dependence on these goods to encourage elites to remain lo

and supporve of the Kim leadership and generate revenue th

is used to nance Pyongyangs illicit acvies and programs

understands both the tangible and polical value luxury ite

hold for North Koreans and the Kim Jong-un leadership

maer how dismal the naonal economy may be, the upp

echelons of North Korean society will be able to access aobtain these expensive items. So long as Kim intends on securi

and maintaining his power grip of the country and preven

an outbreak against his leadership, he will connue to rely

the support and loyalty of the Norths Party and military elite

and he will obtain their support by lavishing them with gis a

rewards. Luxury goods will remain an important xture to t

Kim regimes survivability.


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5Luxury Goods in North Korea: Tangible and Symbolic Importance to the KimJong-un Regime

The United States and the United Naons are at the forefront

of promulgang punive, restricve measures against the

Kim regime in the form of sancons. These sancons are the

internaonal communitys responses to the Norths provocavebehavior, namely, the Kim regimes nuclear and missile tests.

The United Naons Security Council Resoluon (UNSCR) 1718,

for example, was passed following the Norths October 2006

nuclear test. As demonstraon of the internaonal communitys

condemnaon of the nuclear test, the resoluon prevented an

enumerated list of goods from entering and leaving the DPRK,

imposed an asset freeze and travel ban on individuals related

to the nuclear program, and prohibited the provision of large-

scale arms, nuclear technology and training, and luxury goods

to the communist country.29Similarly, the UNSC responded to

the Norths May 2009 nuclear test, December 2012 satellitelaunch, and February 2013 underground nuclear test with

ghtened sancons aimed to put a chokehold on any acvies

and transacons funding North Koreas illicit behavior or

strengthening the Kim regime.

Most recently, the UN in March 2013 approved Resoluon 2094,

which, much like the preceding resoluons, condemned the

Norths nuclear test but also included tougher nancial measures

in an aempt to curb Pyongyangs nuclear acvies. UNSCR

2094 imposed travel bans and asset freezes on individuals and

enes responsible for exporng goods and equipment related

to ballisc missiles and convenonal weapons and the researchand development of advanced weapons systems.30The resoluon

increased the number of individuals and enes subject to these

travel bans and asset freezes and for the rst me established

a common denion of luxury goods by providing examples

of banned items, including yachts, racing cars, expensive

automobiles, and several types of gems and jewelry.31Prior to

the passage of UNSCR 2094, each country was responsible for

deciding its own denion of luxury items that were banned to

North Korea.

Ecacy of Sancons in Curbing the Norths Behavior

For all intents and purposes, sancons are penales enforced by

the internaonal community to provide incenves for the state

or enty to obey internaonal norms and regulaons. In the case

of North Korea, internaonal sancons are designed to restrict

the countrys access to funds and goods that enable the regime

to maintain stability, pursue, develop, and proliferate weapons

of mass destrucon, and encourage the extravagant lifestyle

the leadership. Declaring and enforcing sancons on Pyongya

have been the roune pracce of the United States, Unit

Naons, and other states that have an interest in safeguardiinternaonal security condions and preserving peace.

Though sancons send a message of disapproval vis--vis No

Koreas chosen behavior, their ecacy as an instrument to curb

prohibit Pyongyang from perpetuang its acons and incenv

the regime to abide by internaonal norms has been debat

among North Korea watchers. Through loopholes, North Kor

has been able to circumvent these punive measures. A Ju

2011 visit to Pyongyang by a group of US-based researche

found that despite the imposion of the 2009 sancons

the DPRK, North Koreans had no trouble acquiring luxu

items and electronics. The visitors remarked on the numbof luxury foreign cars traveling on the roads in Pyongyang

including BMWs, Mercedes-Benz, and Lincoln Connentals

well as their newness.32 Several new Hewle-Packard and D

computers were seen in the countrys academic and resear

instuons, and factories were using modern machinery a

equipment imported from Europe and Japan.33

Furthermore, sancons do not appear to have had much nega

impact on North Koreas trade with foreign countries. Accord

to Chinese customs data, Beijing in 2012 exported $77.5 milli

worth of pearls, precious metals and coins to Pyongyang, a

$266.9 million worth of sound and television equipmentmothan triple the amount it exported in 2007.34 The Europe

Unions exports to North Korea totaled approximately 45 milli

euros in 2012, up from 42 million euros in 2011.35

The adopon of UNSCR 2094 was inially speculated to dea

substanal blow to the North Korean economy. The resoluo

by obligang UN member states to crack down on the Nort

nancial transacons and inspect cargo suspected of carryi

prohibited WMD-related items, was expected to inict dama

on Pyongyangs trade relaons and weigh on its missile a

nuclear ambions. Yet internaonal media reported the sanco

having lile adverse impact on the Norths nancial transacoand access to luxury goods from abroad. In late March, shor

aer the adopon of UNSCR 2094, internaonal press report

the extent of shopping by North Koreans in Beijing. It indicat

that North Koreansthe elites, in parculardid not have a

dicules acquiring televisions, cameras and perfumes fro

stores near the North Korean embassy in Beijing.36 Sourc

living close to the North Korea-China border said they had n


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observed or heard of ghter measures on the Norths access to

luxury goods since the sancons were announced.

The actual eecveness of sancons in changing the Norths

behavior or cung o the regimes access to luxury items

may not be apparent or signicant, but it is one way for the

internaonal community to convey a message of disapproval

and aempt to gradually change the course of Pyongyangs

acons. The internaonal community may not be able to alter

North Koreas calculus through these sancons and restricons

within an envisioned meline sancons are not a short-term

soluon for the North Korea dilemma. However, there is an

understanding that sancons on luxury items demonstrate the

communitys awareness of the value the regime places on these

goods to fund its illicit programs and strengthen Kims power

base. As long as the regime depends on these goods for survival,the internaonal community will most likely go aer Pyongyangs

avenues for accessing these products.

Beijings Stance Maers

The internaonal communitys concerted eorts to restrict North

Koreas access to nancial assets and luxury items are, without a

doubt, necessary in sending the DPRK an unequivocal message

of intolerance toward its behavior and chosen policy path. The

United States and the UN have been at the forefront of imposing

these sancons and punive measures against the North, butwhat about Chinas stance? Clearly, as much as the eorts of the

US and UN have helped mobilize a collecve, unied approach

with Pyongyang, and as much as their involvement is crucial to

sending a clear message to the DPRK, China also has an important

role to play in negoang with the Kim regime. For one, China

and North Korea share an inmate bond since the Korean War

days. Beijing-Pyongyang es are so close, the two countries

frequently allude to the relaonship as being inmate as lips

and teeth. Despite small ruptures in bilateral relaons in recent

years, North Korea sll regards China as its biggest economic and

polical support. Beijing supplies Pyongyang with almost all itsfuel and more than 83 percent of its imports, ranging from heavy

machinery to grain and consumer goods.37 It is North Koreas

largest trading partner, with DPRK-PRC two-way trade totaling

approximately $1.3 billion in the rst three months of this year.38

In 2012, trade between the two countries totaled around $6

billion.39Trade with China makes up almost 62 percent of North

Koreas imports.40

Pyongyang manifestly reaps economic and polical bene

by maintaining close es with Beijing. China, too, has poli

interests in backing the Kim regimes. For one, Chinas suppo

for the DPRK serves as a bulwark against US and South Korepolical interests. As China views the US as its archrival, it w

have a polical, economic, and security interest in balancing

thwarng US inuence in the East Asia region by propping

the North Korean regime. Addionally, it is in Beijings intere

to maintain regional stability; the enforcement of strict polic

toward the North could potenally induce Pyongyang to purs

provocave, destabilizing means to get what it wants. Chi

has, for the most part, nominally echoed internaonal voic

condemning North Korea, but it has stopped short of imposi

praccably harsh sancons and punive measures again

Pyongyang. Beijings hesitaon to fully cooperate with woeorts to handle the North has been a perennial issue of cricis

by the internaonal community. For instance, China had be

cricized for failing to publish a list of items it sanconed und

the UNSCR 1718 in 2006 and for a lax implementaon of t

sancons compared with other countries. Beijing will noona

agree with the Security Councils decisions, but do nothing

actually implement the sancons.

Chinas response to the Norths December 2012 nuclear te

however, runs counter to its usual pracce of extending nomin

support for internaonal punive measures against Pyongyan

bad behavior, suggesng it is sincere in meeng its commitmento cooperate with the internaonal communitys eorts to be le

tolerant of the DPRKs acons. In addion to supporng UNS

2094, China began cracking down on the North shortly aer t

passage of the resoluon by cung back on exporng seafo

to Pyongyang and the number of freight forwarders for car

passing into North Korea through Dalian from around twenty

two.41The reducon in freight forwarders shrank the number

cargo ships that enter North Korea from Singapore from sev

to three. Chinese authories also aempted to curb the Nort

illegal money laundering acvies by pung the brakes on t

operaons of the Beijing and Dandong oces of several NorKorean banks.42In May, the state-run Bank of China announc

it would be ending all dealings and shung down its accou

with North Koreas Foreign Trade Bank.43 In September, Ch

published a list of weapons-related technology and produc

banned from export to North Korea because of the poten

for these materials to be used in building nuclear, chemi

and biological weapons as well as long-range missiles.44,45 T


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US, South Korea, UN, and other pares intent on changing the

course of North Korean behavior have viewed the change in

Chinas stance with cauous opmism.

Recommendaons

Patently, North Koreas unwillingness to cooperate under

internaonal norms and access to luxury goods and assets to

sustain the Kim regime cannot be curbed or discouraged through

one swi acon or policy, no maer how concerted the eorts

of the involved pares may be. It should be underscored that the

internaonal communitys handling of the DPRKs luxury goods

issue yields repercussions on other North Korea-related issues,

ranging from Pyongyangs leveraging power vis--vis contenous

foreign policy dilemmas such as its nuclear and missile programs,to the viability and stability of the Kim regime and the DPRKs

economic condions. Devising economic sancons and other

punive measures that successfully ghten the Norths access to

luxury goods may therefore help to weaken the Kim regime, as it

runs low on funds and high-quality items with which it could bribe

ocials and reward those who have successfully accomplished

the Norths foreign policy and security goals. The weaker and

lackluster the elite support for Kim, the less maneuverability

the young leader has in both pushing forward his domesc and

foreign policy objecves. On the other hand, ineecve handling

of the issue would not only create loopholes for the DPRK and

do very lile to curb the regimes bad behavior, but it could also

bolster Kim Jong-uns condence to play in the internaonal eld

on his terms.

The ecacy of economic sancons in punishing the North is

demonstrably debatable. On the one hand, sancons send

Pyongyang a message that the internaonal community

disapproves of its behavior and to a certain extent incenvizes the

regime to moderate its aggression. As symbolic and nominal the

actual eects of the sancons are, they do contain a messaging

value. On the other hand, sancons appear to be more eectual

at certain points than others. For instance, a clear denion of

prohibited luxury goods denies Pyongyang access to specic

items. Specifying the items banned to the North and individuals

and companies to be boycoed not only makes the sancons

more palpable to the regime, but it also sends a message to

the DPRK of the internaonal communitys seriousness in its

intent to punish the Norths bad behavior and illicit pracces.

Furthermore, member countries should go beyond nominally

supporng internaonal sancons against Pyongyang, but,

the United States and in recent months China has done, ta

direct, concrete steps to targeng specic behavior, individua

and enes. The more palpable the eects of the sancons ato Pyongyang, the more seriously it will take these internaon

condemnatory measures.

The internaonal community should take both mullate

and bilateral approaches to condemn the Norths behavior.

mullateral approach combines the strengths and interests

numerous countries to send a powerful message to Pyongya

that it is not a single country that is refusing to condone the DPR

acons, but rather a bevy of like-minded states and en

intent on changing the Norths behavior. Bilateral approaches,

the other hand, indicate that the individual country disapprov

of Pyongyang and will take direct, confrontaonal measurespunish the North.

Chinas role is clearly important in this. As the Norths longstand

ally and source of polical and economic support, Beijings pol

vis--vis Pyongyang could determine dramacally diere

outcomes. Should China decide to take a weaker approach w

the North by nominally supporng internaonal eorts to pun

Pyongyang, the Kim regime may become more emboldened, a

interprets Beijings acons as a tacit sign of support or approv

But if Beijing takes a clear stance in echoing the internaon

communitys stern approach by taking concrete measures

curb North Koreas provocave acts, Pyongyang could perceits biggest ally as withdrawing support for the Kim regime. This

not to say that China is North Koreas single viable ally; howev

as Pyongyangs biggest and most reliable neighbor, Beijin

refusal to tolerate the Norths policies and illicit acvies cou

send a strong message to the laer to reconsider taking the pa

that would further isolate the regime.

In view of the fact that there is no one-stop, end-all soluon

the North Korean dilemma, the US, UN and the internaon

community should connue to pursue mullateral and bilate

soluons and send a clear, direct and stern warning of punishme

to the North with palpable consequences to its polical aeconomic future. Furthermore, as Chinas close relaonship w

the DPRK is of import in determining Pyongyangs respons

the internaonal community should make concerted eorts

encourage Beijings greater parcipaon in these eorts.


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8

Denition of Luxury Goods

Luxury Goods dened as... Source

United Naons Security

Council Resoluon 2094

pearls, gems, precious and semi-precious stones, jewelry of precious

metal or of metal clad with precious metal, transportaon items, including

yachts, luxury automobiles and motor vehicles to transport people, staon

wagons, and racing cars

Security Council Resoluon 2094. United Naons Security

Council. 7 March 2013. Accessed 2 December 2013.

United States Code of

Federal Regulaons

luxury automobiles, yachts, gems jewelry, luxury watches, fashion

accessories, cosmecs, perfumes, furs, designer clothing, rugs, electronic

entertainment soware and equipment, recreaonal sports equipment,

tobacco, wine and other alcoholic beverages, musical instruments, art,

anques and collecbles

Electronic Code of Federal Regulaons. Title 15. Commerc

and Foreign Trade, Part 746: Embargoes and Other Special

Controls. hp://www.ecfr.gov/cgi-bin/text-idx?SID=ba72d

459378288126c85af43a7b7d8&node=15:2.1.3.4.30.0.1.4&

gn=div8, 2 December 2013. Accessed 4 December 2013.

Canadas Special Economic

Measures Regulaons

jewelry, gems, precious metals, and watches, cigarees, alcoholic

beverages, perfume, designer clothing and accessories, furs, sporng

goods, and private aircra, lobster and gourmet foods and ingredients,

computers, television and other electronic devices

Regulaons Implemenng the United Naons Resoluons

on the Democrac Peoples Republic of Korea (DPRK).

Government of Canada Jusce Laws Website. hp://laws-

lois.jusce.gc.ca/eng/regulaons/SOR-2006-287/FullText.

html, modied 22 November 2013. Accessed 2 December

2013.


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Endnotes1 Security Council Resoluon 2094. United Naons Security Council. 7 March 2013. Accessed 2 December 2013.

2 Ibid.

3 Electronic Code of Federal Regulaons. Title 15. Commerce and Foreign Trade, Part 746: Embargoes and Other Special Controls. hp://www.ecfr.gov/cgi-bin/text-id?SID=ba72db1459378288126c85af43a7b7d8&node=15:2.1.3.4.30.0.1.4&rgn=div8, 2 December 2013. Accessed 4 December 2013.

4 Special Economic Measures (Democrac Peoples Republic of Korea) Regulaons. Government of Canada, modied 1 October 2011, accessed 2 December 2013,hp://canadagazee.gc.ca/rp-pr/p2/2011/2011-08-31/html/sor-dors167-eng.html.

5 Regulaons Implemenng the United Naons Resoluons on the Democrac Peoples Republic of Korea (DPRK). Government of Canada Jusce Laws Website,modied 22 November 2013, accessed 2 December 2013, hp://laws-lois.jusce.gc.ca/eng/regulaons/SOR-2006-287/FullText.html.

6 Joyce, Colin, Catering to the Excesses of a Self-Indulgent Dictator, The Age, 21 July 2003, accessed 30 October 2013, hp://www.theage.com.au/arcles/2003/07/20/1058639658967.html.

7 Kurczy, Stephen, Secret China Visit: All Aboard Kim Jong-ils Luxury Train, The Chrisan Science Monitor, 6 May 2010, accessed 26 October 2013, hp://www.csmonitor.com/World/Global-News/2010/0506/Secret-China-visit-All-aboard-Kim-Jong-il-s-luxury-train.

8 Harden, Blaine, Son Named Heir to North Koreas Kim Studied in Switzerland, Reportedly Loves NBA, The Washington Post, 3 June 2009, accessed 12 October 20hp://www.washingtonpost.com/wp-dyn/content/arcle/2009/06/01/AR2009060103750.html.

9 Harden, Blaine.

10 Inside the World of Kim Jong-un: North Koreas Strange Hermit King, The Week, 13 April 2013, accessed 26 October 2013, hp://theweek.com/arcle/index/242619/inside-the-world-of-kim-jong-unnbspnorth-koreas-strange-hermit-king.

11 Fieen Minutes of Power: Women Who Rocked 2012, Forbes.com, 2012, accessed 26 October 2013, hp://www.forbes.com/pictures/mlf45hfdi/ri-sol-ju/.

12 Seales, Rebecca, North Koreas New First Lady Adores Dior (but her 1000 bag costs as much as the annual wage), Daily Mail, 8 August 2012, accessed 30 Octob2013, hp://www.dailymail.co.uk/news/arcle-2185377/North-Koreas-lady-Ri-Sol-Ju-1-000-Chrisan-Dior-bag.html.

13 Kim, Hee-jin, Imported Luxury Items Surge in North Korea, JoongAng Daily, 15 October 2013, accessed 20 October 2013, hp://koreajoongangdaily.joins.com/news/arcle/Arcle.aspx?aid=2978858.

14 Kim, Hee-jin.

15 Page, Jeremy, Luxuries Flow into North Korea, The Wall Street Journal, 7 January 2012, accessed 1 November 2013, hp://online.wsj.com/news/arcles/SB10004052970204331304577142372171328622.

16 North Korea Jacks up Imports of Luxury Goods Under New Leader, Dong-A Ilbo Online, 4 October 2012, accessed 12 October 2013, hp://english.donga.com/srv

service.php3?biid=2012100422928.

17 Kim, Hee-jin.

18 N. Korea Raised Imports of Luxury Goods From China Last Year, Dong-A Ilbo Online, 29 March 2013, accessed 1 November 2013, hp://english.donga.com/srv/service.php3?biid=2013032906898.

19 N. Korea Raised Imports of Luxury Goods From China Last Year.

20 Kim Jong-un Inherits Fathers Taste for Bling, Chosun Ilbo Online, 22 August 2012, accessed 1 November 2013, hp://english.chosun.com/site/data/html_dir/2012/08/22/2012082201264.html.

21 , ,,6 March 2013, accessed 20 October 2013, hp://www.sisapress.com/news/arcleView.html?idxno=59974.

22 .

23 Ibid.

24 Ibid.25 Kim Jong-un Inherits Fathers Taste for Bling.

26 Ibid.

27 North Korea Displays Many Japanese Products in Pyongyang Stores to Make Itself Look Rich, Sankei Shimbun, 14 May 2012.

28 Kim Jong-un Inherits Fathers Taste for Bling.

29 United Naons Security Council Resoluon (UNSCR) 1718, United Naons, accessed 1 November 2013, hp://www.un.org.

30 Security Council Strengthens Sancons on Democrac Peoples Republic of Korea, In Response to 12 February Nuclear Test, United Naons Security Council PressRelease, accessed 3 November 2013, hp://www.un.org/News/Press/docs/2013/sc10934.doc.htm.


10/10


10

KEI Editorial Board

KEI Editor:Nicholas Hamisevicz | Contract Editor:Gimga Group | Design:Gimga Group

The Korea Economic Instute of America (KEI) is a not-for-prot policy and educaonal outreach organizaon focused on promodialogue and understanding between the United States and Korea. Established in 1982, KEI covers all aspects of the alliance, includieconomic, trade, naonal security, and broader regional issues through publicaons, forums and conferences across North Americ

KEI is an aliate with the Korea Instute for Internaonal Economic Policy, a public research instute in the Republic of Korea.The views expressed in this publicaon are those of the authors. While this paper is part of the overall program of the Korea EconomInstute of America endorsed by its Ocers, Board of Directors, and Advisory Council, its contents do not necessarily reect tviews of individual members of the Board or of the Advisory Council.

Copyright 2013 Korea Economic Instute of America Printed in the United States of America.

1800 K St. NW, Suite 1010 | Washington, DC 20006

T.202.464.1982 | F.202.464.1987 | www.keia.org

31 Rajagopalan, Megha, North Korea Sees Luxury Goods Flow Into Elite Hands Despite Sancons, Hungton Post,19 March 2013, accessed 20 October 2013, hp:/www.hungtonpost.com/2013/03/20/north-korea-sancons-luxury-goods_n_2910005.html.

32 Kim, Abraham, Pyongyang Has an App for That: Sancons and Luxury Goods in North Korea, Korea Insight, Korea Economic Instute, August 2011, accessed 20October 2013.

33 Ibid.

34 Rajagopalan.

35 North Korea: EU Bilateral Trade and Trade With the World, The European Union, July 2013, accessed 26 October 2013, hp://trade.ec.europa.eu/doclib/html/113428.htm.

36 Rajagopalan.

37 Bodeen, Christopher, China Issues List of Items Banned From Export to North Korea Because of Potenal Military Use, Associated Press, 24 September 2013,accessed 2 November 2013, hp://bigstory.ap.org/arcle/china-lists-items-banned-export-nkorea-0.

38 China Trade in North Korea Falls Aer December Rocket Test, Bloomberg News, 11 April 2013, 26 October 2013, hp://www.bloomberg.com/news/2013-04-10/china-trade-with-north-korea-falls-aer-december-missile-launch.html.

39 Yoo, Audrey, Nearly 90pc of North Koreas Overseas Trade with China, Says Report, South China Morning Post, 4 September 2013, accessed 29 October 2013,hp://www.scmp.com/news/asia/arcle/1303171/nearly-90pc-north-koreas-overseas-trade-china-says-report.

40 North Korea, CIA World Factbook, Page updated 28 October 2013, accessed 2 November 2013, hps://www.cia.gov/library/publicaons/the-world-factbook/geos/kn.html.

41 Kim, Sarah and Choi Hyung-kyu, China Cracking Down on North Aer UN Sancons, JoongAng Ilbo Online , 13 March 2013, accessed 29 October 2013, hp://koreajoongangdaily.joins.com/news/arcle/arcle.aspx?aid=2968488.

42 China Moves on N. Korean Money Laundering, Chosun Ilbo Online, 20 March 2013, accessed 28 October 2013, hp://english.chosun.com/site/data/html_dir/2013/03/20/2013032001091.html.

43 China Exports to N. Korea Fall, Chosun Ilbo Online, 31 July 2013, accessed 30 October 2013, hp://english.chosun.com/site/data/html_dir/2013/07/31/2013073100387.html.

44 China Restricts Trade with N. Korea, Chosun Ilbo Online, 24 September 2013, accessed 30 October 2013, hp://english.chosun.com/site/data/html_dir/2013/09/24/2013092401293.html.

45 Bodeen, Christopher.

2013 luxury goods in north korea

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