The North Korean Economy: Leverage and Policy Analysis

North Koreas dire economic straits provides one of the few levers to move the Democratic Peoples Republic of Korea DPRK or North Korea to cooperate in attempts by the United States, China, South Korea, Japan, and Russia to halt and dismantle its nuclear program. These five countries plus North Korea comprise the six parties who are engaged in talks, currently restarted, to resolve issues raised by the DPRK s development of a nuclear weapon. This report provides an overview of the North Korean economy, its external economic relations, reforms, and U.S. policy options. In June 2008, the Bush Administration announced that it was lifting restrictions under the Trading with the Enemy Act and was starting the process to remove the DPRK from the list of State Sponsors of Terrorism. Other sanctions, including U.N. sanctions imposed following North Korea s nuclear test, still remain in place. The economy of North Korea is of interest to Congress because it provides the financial and industrial resources for the Kim Jong-il regime to develop its military and to remain in power, constitutes an important push factor for potential refugees seeking to flee the country, creates pressures for the country to trade in arms or engage in illicit economic activity, is a rationale for humanitarian assistance, and creates instability that affects South Korea and China in particular. The dismal economic conditions also foster forces of discontent that potentially could turn against the Kim regime especially if knowledge of the luxurious lifestyle of communist party leaders becomes better known or as poor economic performance hurts even the elite. Economic conditions in North Korea have been improving since the disastrous conditions in the mid-1990s but still are dismal for those out of the center of power.