Who Is Calling the Shots?

It's time to think more about the logic of engagement with North Korea, to improve the lives of North Koreans and, in the case of private businesses, to make a profit; and the alternate logic of squeezing the Kim Jong Il regime until it pops, but potentially at the expense of the North Korean people alive today.

The reality is that while most experts and politicians view this as an either/or question, it doesn't have to be. Both approaches have a vital role to play. When well-coordinated, they can even create potentially productive synergy.

For example, when Saebyul Coal Mining Complex, a North Korean mining management organization, recently sealed a contract between two mines under its auspices and a Chinese enterprise, it agreed to hand over a substantial and unusual degree of discretion in affairs of personnel management, food, wages, materials and working methods to the Chinese. Anything of note for the running of the mines, basically.

Accordingly, and you won't need to sit down for this, the productivity of the mines has drastically improved. Needless to say, so have profits. Better yet, the Party committee at the mine has apparently been scaled back, so it presumably has less manpower to employ in making business more difficult, profits less, workers unhappy and the future grimmer.

And profitability is not the only winner;

The source noted, “North Korean workers are delighted with this method of collaboration. They get guaranteed wages and food, and the working environment has also improved thanks to new, stronger mining timbers, so productivity has increase.”

In the cafeterias at the mines, they serve 900g of rice to everyone, and pork and eggs, which workers like. According to the source, “Workers want to take meals served in the cafeteria home for their family members. In this worker-friendly mood, Party cadres are unable to complain.”

A while ago, an anonymous, prominent American expert told me that he had it on good authority that the Obama administration had told the Chinese to keep investing in the northern provinces of North Korea regardless of the rhetoric coming out of Washington. Every deal I see like this makes it more and more likely that this is the case.

It would not help for the U.S. to admit to such a conversation publicly, of course, since that would make the North Koreans leery and reduce Chinese leverage, not to mention making the U.S. appear somewhat two-faced. However, that it happened makes a lot of sense; after all, such investments are pretty clear violations of sanctions, but are never questioned publicly by anyone.

And what effect are they having? If this one is anything to go by, they are making lives better in small pockets of North Korea, and, just like the jangmadang they are wrestling control of the people's lives away from the state.

Furthermore, they are developing areas of north and northeastern North Korea which are pretty low down the list of priorities in Pyongyang's own development plans. This is taking a measure of economic strength away from the Pyongyang region and placing it in the hands of traditionally less developed areas along the border which, if it continues, will make those areas harder to police and control. People will have more money, hopefully they will have food in their bellies, and they will know all too well what life in China must be like. There is nothing about that not to like.

It should not be forgotten, then, that some part of the reason why North Korea is being forced to accept Chinese investments on Chinese terms like this is doubtless because UN and U.S. Treasury sanctions are having an effect on North Korean access to "normal" sources of funding. It's the good cop, bad cop routine.

So, from that perspective maybe we should let Hu Jintao do the diplomatic dance with Kim in Beijing, for if he is building confidence so the Kim regime will let Chinese businesses push harder and harder bargains with the North Koreans inside the country, that might not be such a bad outcome.