North Korea: Economic Leverage and Policy Analysis - Juche Philosophy and the Military, Nuclear Six-Party Talks, DPRK Economy, China Investment, Kaesong Industrial Complex, Source of Funds

This excellent report has been professionally converted for accurate flowing-text e-book format reproduction. North Korea's economic straits provide one of the few levers to move the country 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 to resolve issues raised by the DPRK's development of a nuclear weapon. The Six-Party Talks are now stalled. Western leverage over the DPRK remains limited, but China, and to some extent Russia, are in a position to exert pressure on Pyongyang.

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 regimeespecially if knowledge of the luxurious lifestyle of communist party leaders becomes better known or as poor economic performance hurts even the elite.

North Korea has extensive trading relationships with China and Russia and, until recently, with South Korea. U.S. and Japanese trade with North Korea since 2006 has been virtually nil except for U.S. aid deliveries. The DPRK has been running an estimated $1 billion deficit per year in its international trade accounts, which it funds primarily through receipts of foreign assistance and foreign investment as well as through exports of arms and various questionable activities.

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