Did China supply Oil to North Korea illicitly ??

In Nov 2017, U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC)  sanctioned one individual, 13 entities, and 20 vessels as the United States continued  action multilaterally and unilaterally to disrupt North Korea's illicit funding of its unlawful nuclear and ballistic missile programs.  Those  sanctions targetted third-country persons with long-standing commercial ties to North Korea, as well as the transportation networks that facilitate North Korea's revenue generation and operations. 

During the past decade, the price of oil has kept changing and World over, its prices affect the economy – whenever there is price rise in locally traded commodities too, some would say, it is due to rise in price of oil !!   While oil is sold in a global market, the effect of rising or falling prices can be very different for importing and exporting countries.  Mostly it is all about ‘crude’…

Oil tanker vessel representative image – credit  http://maritime-connector.com/ship

Crude oil is a naturally occurring, unrefined petroleum product composed of hydrocarbon deposits and other organic materials. A type of fossil fuel, crude oil can be refined to produce usable products such as gasoline, diesel and various forms of petrochemicals. It is a nonrenewable resource, which means that it can't be replaced naturally at the rate we consume it and is therefore a limited resource.Crude oil is typically obtained through drilling.  In the market, there are two types of oil contracts: futures contracts and spot contracts.

U.S. oil prices closed above $60 a barrel on the final trading day of the year, the first time since mid-2015, as the commodity ended 2017 with a 12 percent gain spurred by strong demand and declining global inventories. International benchmark Brent crude futures ended the year with a 17 percent rise, supported by ongoing supply cuts by top producers OPEC and Russia as well as strong demand from China. The gains indicate that the global glut that has dogged the market since 2014 is shrinking.

Back home, the  petroleum industry has been pushing for its inclusion in the Goods and Services Tax (GST) structure so as not to be deprived of the benefits of input credit.  The Centre is keen to bring under GST products like petrol and diesel that generate considerable reveue for the states, which they are loathe to surrender.

Donald Trump on Thursday said he was “very disappointed that China is allowing oil to go into North Korea” and said such moves would prevent “a friendly solution” to the crisis over Pyongyang’s nuclear program. The president’s disregard or disdain for established US foreign policy has alarmed enemies and allies and got experts nervously shortening the odds on a major war.  Earlier, China said there had been no sanction-breaking oil transfers between Chinese ships and North Korean vessels, of the kind described by a South Korea newspaper, Chosun Ilbo, which said spy satellites had detected 30 instances of such transfers since October.

 “Caught RED HANDED,” the president  Trump wrote, with a characteristic use of capitals. “Very disappointed that China is allowing oil to go into North Korea. There will never be a friendly solution to the North Korea problem if this continues to happen!”   Trump has often departed from diplomatic niceties when discussing North Korea, both on Twitter and in speeches.  In an illustrative tweet in April, he wrote: “China is very much the economic lifeline to North Korea so, while nothing is easy, if they want to solve the North Korean problem, they will.”

On Thursday, Rex Tillerson, the secretary of state, urged Beijing to exert “decisive economic leverage” on Pyongyang. “China has applied certain import bans and sanctions, but it could and should do more,” he wrote in the New York Times. One should recall that the  UN security council last week unanimously imposed new sanctions on North Korea, in response to a recent intercontinental ballistic missile test. The US-drafted UN resolution seeks to ban nearly 90% of refined petroleum exports to North Korea by capping them at 500,000 barrels a year. The resolution also caps crude oil supplies to North Korea at 4m barrels a year and commits the security council to further reductions if North Korea conducts another nuclear test or launches another ICBM.

Market news were abuzz that U.S. reconnaissance satellites  spotted Chinese ships selling oil to North Korean vessels on the West Sea around 30 times since October. According to South Korean government sources, the satellites have pictured large Chinese and North Korean ships illegally trading in oil in a part of the West Sea closer to China than South Korea. The satellite pictures even show the names of the ships. A government source said, "We need to focus on the fact that the illicit trade started after a UN Security Council resolution in September drastically capped North Korea's imports of refined petroleum products."  The U.S. Treasury Department  noted that the two ships appeared to be illegally trading in oil from ship to ship to bypass sanctions.

Ship-to-ship trade with North Korea on the high seas is forbidden in UNSC Resolution 2375 adopted in September, but such violations are nearly impossible to detect unless China aggressively cracks down on smuggling.  But after  Donald Trump’s allegations, China says it has not sold oil to North Korea.  China said it has never violated the United Nations sanctions against Pyongyang.  Reacting to the reports and Trump’s remarks, Chinese Foreign Ministry spokesperson Hua Chunying told reporters, “In reality, the ship in question has, since August, not docked at a Chinese port and there is no record of it entering or leaving a Chinese port.” She said the reports “did not accord with facts”.

Meantime, South Korea has revealed it seized a Hong Kong-registered ship last month suspected of supplying oil to the North in breach of international sanctions. Officials said the Lighthouse Winmore had secretly transferred 600 tonnes of refined oil to a North Korean ship. The ship entered Yeosu port in South Korea on 11 October to load up with refined oil and left for Taiwan four days later, and instead of going to Taiwan it transferred the oil to a North Korean ship and three other vessels in international waters on 19 October, South Korean officials were quoted as saying.

With regards – S. Sampathkumar

30^th Dec 2o17.