Best of the Week
Most Popular
1.US Paving the Way for Massive First Strike on North Korea Nuclear and Missile Infrastructure - Nadeem_Walayat
2.Trump Reset: US War With China, North Korea Nuclear Flashpoint - Video - Nadeem_Walayat
3.Silver Junior Mining Stocks 2017 Q2 Fundamentals - Zeal_LLC
4.Soaring Inflation Plunges UK Economy Into Stagflation, Triggers Government Pay Cap Panic! - Nadeem_Walayat
5.The Bitcoin Blueprint To Your Financial Freedom - Sean Keyes
6.North Korea 'Begging for War', 'Enough is Enough', is a US Nuclear Strike Imminent? - Nadeem_Walayat
7.Bitcoin Hits All-Time High and Smashes Through $5,000 As Gold Shows Continued Strength - Jeff_Berwick
8.2017 is NOT "Just Another Year" for the Stock Market: Here's Why - EWI
9.Gold : The Anatomy of the Bottoming Process - Rambus_Chartology
10.Bitcoin Falls 20% as Mobius and Chinese Regulators Warn - GoldCore
Last 7 days
Catalonia, Kurdistan, Patriotism, Flags and Referendums - 24th Sep 17
Two Key Indicators Show the S&P 500 Becoming the New ‘Cash’ - 24th Sep 17
The Felling of Sheffield's Big Street Trees 2017 - Dobcroft Road - 24th Sep 17
Advantages of Forex Trading - 24th Sep 17
Stocks, Gold, Dollar, Bitcoin Markets Analysis - 23rd Sep 17
How Will We Be Affected by a Series of Rate Hikes? - 23rd Sep 17
Fed Quantitative Tightening Impact on Stocks and Gold - 22nd Sep 17
Bitcoin & Blockchain: All Hype or Part of a Financial Revolution? - 22nd Sep 17
Pensions and Debt Time Bomb In UK: £1 Trillion Crisis Looms - 22nd Sep 17
Will North Korea Boost Gold Prices? Part I - 22nd Sep 17
USDJPY Leads the way for a Resurgent Greenback - 22nd Sep 17
Day Trading Guide for Dummies - 22nd Sep 17
Short-Term Uncertainty, As Stocks Fluctuate Along Record Highs - 21st Sep 17
4 Reasons Gold is Starting to Look Attractive as Cryptocurrencies Falter - 21st Sep 17
Should Liners Invest in Shipping Software Solutions and Benefits of Using Packaged Shipping Software - 21st Sep 17
The 5 Biggest Bubbles In Markets Today - 20th Sep 17
Infographic: The Everything Bubble Is Ready to Pop - 20th Sep 17
Americans Don’t Grasp The Magnitude Of The Looming Pension Tsunami That May Hit Us Within 10 Years - 20th Sep 17
Stock Market Waiting Game... - 20th Sep 17
Precious Metals Sector is on Major Buy Signal - 20th Sep 17
US Equities Destined For Negative Returns In The Next 7 Years - 3 Assets To Invest In Instead - 20th Sep 17
Looking For the Next Big Stock? Look at Design - 20th Sep 17
Self Employed? Understanding Business Insurance - 19th Sep 17
Stock Market Bubble Fortunes - 19th Sep 17
USD/CHF – Verification of Breakout or Further Declines? - 19th Sep 17
Blockchain Tech: Don't Say You Didn't Know - 19th Sep 17
The Fed’s 2% Inflation Target Is Pointless - 19th Sep 17
How To Resolve the Korean Conundrum  - 19th Sep 17
A World Doomed to a Never Ending War - 19th Sep 17
What is Backtesting? And Why You Need Backtesting System? - 19th Sep 17
These Two Articles Debunk The Biggest Financial Nonsense I See In The Media - 18th Sep 17
Bitcoin Price Crash 40% In 3 Days Underlining Gold’s Safe Haven Credentials - 18th Sep 17
The Sum of Risks – Global, Strategic, Political, and Financial - 18th Sep 17
The Netflix Of Canada’s Cannabis Boom - 18th Sep 17
Stock Market Sentiment Speaks: Either You Learn From The Events Of The Past Week, Or You Are Hopeless - 18th Sep 17
SPX 2500 … At Last! - 18th Sep 17
Inflation Lies, Lies and OMG More Lies - 18th Sep 17
How to Choose right Forex Trader? - 18th Sep 17
Who Has Shaped the World the Most? The Dozen Greatest Achievers - 17th Sep 17
Riding the ‘Slide’: Is This What the Next Stocks Bear Market Looks Like? - 17th Sep 17
Gold Up, Markets Fatigued As War Talk Boils Over - 17th Sep 17

Market Oracle FREE Newsletter

3 Videos + 8 Charts = Opportunities You Need to See - Free

Here’s Why China’s Supposed Influence Over North Korea Is A Bluff

Politics / North Korea Jun 22, 2017 - 07:10 PM GMT

By: John_Mauldin

Politics

By Xander Snyder : The US is pushing China deeper into a corner over the crisis with North Korea. It wants the Chinese to persuade the North Koreans to give up their nuclear weapons and ballistic missile programs.

The popular perception is that Beijing has substantial leverage over Pyongyang, partly because China is North Korea’s largest trading partner. This impression also stems from China’s proposals to mediate trade concessions between North Korea and the United States.


The US has recently urged China to continue to use its leverage over North Korea and said there will be consequences if China does not. However, on June 20, Trump tweeted that China’s efforts to influence North Korea appeared to have failed.

Later that night, US satellites reportedly detected modifications to an underground North Korean test site that may be preparing for the country’s sixth nuclear test.

This raises some questions: Does China have the power to deter the North Koreans? and how much influence does Beijing actually have over Pyongyang?

Steps Taken

China has already taken action to apply pressure on North Korea. In February, Beijing said it halted imports of North Korean coal, according to UN sanctions. These sanctions limit North Korean coal exports—which were worth $1 billion in 2014—to $400 million for the year.

Earlier this month, after North Korea did another round of missile tests, the UN expanded sanctions by freezing the assets of four North Korean companies and 14 members of the regime and imposing a travel ban on the same individuals.

China supported this motion. China has also taken action with regard to migrant laborers from North Korea. In March 2016, the Chinese government informally told Chinese companies to stop hiring North Korean workers.

Remittances from North Koreans living abroad are a vital source of hard currency for the regime, up to $2.3 billion annually according to some estimates.

What Can China Do That It Hasn’t Yet Done?

The answer is… not a whole lot.

It could impose greater financial sanctions. But it seems unlikely that financial sanctions could deter North Korea from pursuing a program that it considers central to its security interests. Especially given that current pressure has not done so already.

That leaves Chinese crude oil exports as Beijing’s strongest remaining point of leverage. North Korea generates most of its electricity from coal, but its military would depend on crude oil if a conflict were to break out.

Without it, Pyongyang’s ability to wage war would be significantly reduced.

China no longer discloses how much crude oil it exports to North Korea. However, some estimate that it could account for 500,000 tons per year, or about 3.7 million barrels.

North Korea is believed to have only minimal capacity to produce crude oil. Its imports from Russia are not substantial either. That means it’s a real threat to North Korea and gives China some strong leverage.

But China may decide that it’s not in its interest to cut oil supplies to North Korea. If this move doesn’t stop the North Koreans and war does break out, China doesn’t want to be on Pyongyang’s list of enemies.

The US Will Push China More Going Forward

Given these limited options, there are two reasons the US would continue to demand further action from China.

First, the US will explore all options within a certain window of time before resorting to force. In the lead-up to the Iraq War in 2003, the international community tried to mediate a solution, and the US declined the offer.

This time, it will seek mediation from anyone willing to offer—even Dennis Rodman, who visited North Korea just last week.

If it decides that a strike is necessary, the US wants to be able to point out that it tried every diplomatic solution, including using China as a mediator, before resorting to force.

And by pushing China to act as an intermediary, it can argue that it was China, in fact, that failed to prevent the war.

The second reason the US will demand further action from China is that China has long used its supposed influence over North Korea as a way to gain concessions from the US.

The US is now calling China’s bluff. If China can’t sway the North Koreans, then it will no longer be able to use them as a bargaining chip in future negotiations with the US.

Statements by officials are often just smoke and mirrors.

In this case, the US’s demands for China show that it’s time to act. Public posturing gives the US real leverage in its private discussions with Beijing. But China’s window of opportunity is closing, and if Trump’s tweet is any indication, it may have already closed.

Grab George Friedman's Exclusive eBook, The World Explained in Maps

The World Explained in Maps reveals the panorama of geopolitical landscapes influencing today's governments and global financial systems. Don't miss this chance to prepare for the year ahead with the straight facts about every major country’s and region's current geopolitical climate. You won't find political rhetoric or media hype here.

The World Explained in Maps is an essential guide for every investor as 2017 takes shape. Get your copy now—free!

John Mauldin Archive

© 2005-2017 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife