North Korea Exports to China Show Birthday-Boy Kim's `Back Door' Reprieve

North Korean leader Kim Jong Il turns 69 today, his country beset by international sanctions, livestock disease and the aftermath of floods. A rebound in trade with China may be the best birthday present he gets.

North Korea’s exports to China jumped 51 percent to $1.2 billion last year, led by iron ore, coal and copper, Chinese government data show. China’s sales to its ally rose 21 percent to $2.3 billion from a year earlier, with supplies of wheat and oil helping ease chronic shortages of fuel and food. Two-way trade fell 4 percent in 2009, when the United Nations tightened sanctions after Kim’s regime carried out a second nuclear test.

The revival in commerce contrasts with U.S. efforts to isolate North Korea after a year in which 50 South Koreans died in attacks that roiled markets. Kim needs China to meet a pledge to put “rice with meat soup” on every table and build a “thriving nation” by 2012, the centennial of his father and the nation’s founder, Kim Il Sung.

“Even if North Korea’s front door is firmly locked, there is every reason to think the regime can gain what it needs to survive with impunity as long as the back door is open to China,” said Scott Snyder, an adjunct senior fellow for Korea studies at the New York-based Council on Foreign Relations. China’s trade risks making sanctions “ineffective,” he said.

North Korea’s media has been building up to Kim’s birthday with reports of an ice-sculpture festival, film shows, cooking competitions and flower exhibitions. Trees burst into bud earlier than usual and a “solar halo” appeared on a mountain revered as Kim’s birthplace, the Korean Central News Agency said.

Regime Risk

China wants to avoid regime collapse in its neighbor to prevent a flood of refugees across their 1,415-kilometer (880- mile) border. Economic distress may also lead the North to lash out in a bid to win aid and provide propaganda to prop up the regime, said Kim Yong Hyun, a professor of North Korean studies at Dongguk University in Seoul.

The North’s Nov. 23 shelling of Yeonpyeong Island, which killed four people, sent the cost of insuring South Korean government debt up the most in two years.

China’s government is divided on the best way to deal with North Korea, said Huang Jing, a professor at National University of Singapore’s Lee Kuan Yew School of Public Diplomacy.

“One side wants them to reform and open up,” he said. Another faction is trying to provide North Korea security, giving the country oil, ammunition and spare parts, he said.

Crude oil was the No. 1 item North Korea bought from China last year, according to the Seoul-based Korea International Trade Association, which tracks the data. Automobiles, wheat flour, rice and cell phones were also among the top 10. North Korea’s exports were dominated by coal and iron ore.

Crude, Coal

China sold $325.8 million of crude oil to North Korea last year, up 37 percent from 2009. China’s coal imports jumped 54 percent to $394.4 million, while iron ore purchases doubled to $195 million, according to China’s customs department.

Two-way trade of $3.5 billion was still dwarfed by China’s $207.2 billion commerce with South Korea.

North Korea’s $22 billion economy shrank 0.9 percent in 2009 after its total trade fell 10.7 percent, according to the Bank of Korea in Seoul. North Korea doesn’t release figures.

Secretary of State Hillary Clinton in July said the U.S. would intensify sanctions against North Korea for sinking a South Korean warship, killing 46 sailors. The measures aimed to deny the regime funds to carry out “destabilizing, illicit, and provocative policies,” she said.

Birthday Pressure

“As it’s Kim Jong Il’s first birthday since revealing his youngest son as his heir, he’s under great pressure to rally as much public support as he can,” said Dongguk’s Kim. “There really isn’t much economic achievement Kim can show.”

Kim probably had a stroke in 2008 and is preparing to hand power to his youngest son, Kim Jong Un, the South Korean government says.

China’s Public Security Minister Meng Jianzhu praised the elder Kim in Pyongyang on Feb. 14 for a “successful solution of the issue of succession,” KCNA said. That would mark the first statement by a cabinet official backing the handover. Chinese Foreign Ministry Spokesman Ma Zhaoxu didn’t answer yesterday when asked whether the government approved of the succession.

The junior Kim was named vice-chairman of the National Defense Commission on Feb. 10, the Chosun Ilbo reported today, citing an unidentified person familiar with the issue. The NDC is the highest government body, and is chaired by Kim Jong Il.

Kim Jong Un was named a general and appointed to the second- highest military post of the ruling Workers’ Party in September, paving the way to become the regime’s next leader.

Foot & Mouth

An epidemic of foot and mouth disease that broke out on Dec. 25 is casting a pall over Kim’s plans. The virus has infected more than 10,000 cattle and pigs, killing 8,655 of them, according to a Feb. 7 report by the World Organization for Animal Health. The numbers don’t include outbreaks reported in January, according to the report received by e-mail yesterday.

North Korea’s dependence on oxen to plow fields and haul harvests means the disease may disrupt farming in a nation facing a food deficit of 542,000 tons this year, according to the UN’s World Food Program.

Crop losses from flooding last year restrained the rise in food output to 3 percent for the 12 months ending October, even though more fertilizer, pesticides and tractors were used, the WFP said in November.

“China can help North Korea meet its immediate needs,” said Cho Bong Hyun, a research fellow at the Seoul-based IBK Economic Research Institute. “But that support will still fall far short of what North Korea needs to boost its economy.”

To contact the reporter on this story: Bomi Lim in Seoul at blim30@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg in Hong Kong at phirschberg@bloomberg.net

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