09-4
Sanctioning North Korea: The Political Economy of Denuclearization and Proliferation

Stephan Haggard (PIIE) and Marcus Noland (PIIE)
July 2009

As a small country dependent on foreign trade and investment, North Korea should be highly vulnerable to external economic pressure. In June 2009, following North Korea’s second nuclear test, the UN Security Council passed Resolution 1874, broadening existing economic sanctions and tightening their enforcement. However, an unintended consequence of the nuclear crisis has been to push North Korea into closer economic relations with China and other trading partners that show little interest in cooperating with international efforts to pressure North Korea, let alone in supporting sanctions. North Korea appears to have rearranged its external economic relations to reduce any impact that traditional sanctions could have.

Given the extremely high priority the North Korean regime places on its military capacity, it is unlikely that the pressure the world can bring to bear on North Korea will be sufficient to induce the country to surrender its nuclear weapons. The promise of lifting existing sanctions may provide one incentive for a successor government to reassess the country's military and diplomatic positions, but sanctions alone are unlikely to have a strong effect in the short run. Yet the United States and other countries can still exercise some leverage if they aggressively pursue North Korea's international financial intermediaries as they have done at times in the past.