Best of the Week
Most Popular
1.Canada Real Estate Bubble - Harry_Dent
2.UK House Prices ‘On Brink’ Of Massive 40% Collapse - GoldCore
3.Best Cash ISA for Soaring Inflation, Kent Reliance Illustrates the Great ISA Rip Off - Nadeem_Walayat
4.Understanding true money, Pound Sterling must make another historic low, Euro and Gold outlook! - Marc_Horn
5.5 Maps That Explain The Modern Middle East - GEORGE FRIEDMAN
6.Gold Back With A Vengeance As Bitcoin Bubble Bursts - OilPrice_Com
7.Gold Summer Doldrums - Zeal_LLC
8.Crude Oil Trade & Nasdaq QQQ Update - Plunger
9.Gold And Silver – Why No Rally? Lies, Lies, And More Lies - Michael_Noonan
10.UK Election 2017 Disaster, Fake BrExit Chaos, Forecasting Lessons for Next Time - Nadeem_Walayat
Last 7 days
Students, It’s Time to Prepare Your Finances for the Years Ahead - 25th Jul 17
Stock Market and Gold Stocks Trend Forecast Update - 25th Jul 17
Saving Illinois: Getting More Bang for Its Bucks - 24th Jul 17
3 Stocks Sectors That Will Win in The Fed’s Great Balance-Sheet Unwind - 24th Jul 17
Activist Investors Are Taking Over Wall Street, Procter and Gamble Might Never Remain the Same - 24th Jul 17
Stock Market Still on Track - 24th Jul 17
Last Chance For US Dollar To Rally - 24th Jul 17
UK House Prices Momentum Crash Warns of 2017 Bear Market - Video - 22nd Jul 17
Crude Oil, Gold, ETFs & more: Pro-grade Market Forecasts - 22nd Jul 17
Warning: The Fed Is Preparing to Crash the Financial System Again - 21st Jul 17
Gold / Silver Shorts Extreme - 21st Jul 17
GBP/USD Bearish Factors - 21st Jul 17
Gold Hedges Against Currency Devaluation and Cost Of Fuel, Food, Beer and Housing - 21st Jul 17
Is It Worth Investing in Palladium? - 21st Jul 17
UK House Prices Momentum Crash Threatens Mini Bear Market 2017 - 21st Jul 17
The Fed May Show Trump No Love - 20th Jul 17
The 3 Best Asset Classes To Brace Your Portfolio For The Next Financial Crisis - 20th Jul 17
Gold Stocks and Bonds - Preparing for THE Bottom - 20th Jul 17
Millennials Can Punt On Bitcoin, Own Safe Haven Gold For Long Term - 20th Jul 17
Trump Has Found A Loophole To Rewrite Trade Agreements Without Anyone’s Permission - 20th Jul 17
Basic Materials and Commodities Analysis and Trend Forecasts - 20th Jul 17
Bitcoin PullBack Is Over (For Now): Cryptocurrencies Gain Nearly A 50% In Last 48 Hours - 19th Jul 17
AAPL's 6% June slide - When Prices Are Falling, TWO Numbers Matter Most - 19th Jul 17
Discover Why A Major American Revolution Is Brewing - 19th Jul 17
iGaming – Stock Prices - 19th Jul 17
The Socionomic Theory of Finance By Robert Prechter - Book Review - 18th Jul 17
Ethereum Versus Bitcoin – Which Cryptocurrency Will Win The War? - 18th Jul 17
Accepting a Society of Government Tyranny - 18th Jul 17
Gold Cheaper Than Buying Greek Villas in 2012 - 18th Jul 17
Why & How to Hedge the Growing Risks of Holding Stocks - 18th Jul 17
Relocation: Everything You Need to do for a Smooth Transition Abroad - 17th Jul 17
A Former Lehman Brothers Trader: It’s Time To Buy Brick And Mortar Retailers - 17th Jul 17
Bank Of England Warns “Bigger Systemic Risk” Now Than 2008 - 17th Jul 17
Bitcoin Price “Deja Vu” Corrective Sequence - 17th Jul 17
Charting New Low in Speculation in Gold and Silver Markets - 17th Jul 17
Bitcoin Crash - Is This The End of Cryptocurrencies? - 17th Jul 17
The Fed's Inflation Nightmare Scenario - 17th Jul 17
Billionaire Investors Backing A Marijuana Boom In 2017 - 17th Jul 17
Perfect Storm - This Fourth Turning has Over a Decade of Continuous Storms to Come - 17th Jul 17
Gold and Silver Biggest Opportunity Since Late 2015, Last Chance at These Prices - 17th Jul 17
Stock Market More to Go - 17th Jul 17
Emerging Markets & Basic Materials Stocks Breaking Out Together - 16th Jul 17
Stock Market SPX Uptrending Again After Microscopic Correction - 15th Jul 17

Market Oracle FREE Newsletter

Crude Oil, Gold, ETFs & more: Pro-grade Market Forecasts

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