China Caught Between Smuggled Oil And Trade Wars

BOTH CHINA AND Russia deny Western accusations that their vessels have been involved in ship-to-ship transfers of oil on the high seas to North Korean tankers in likely contravention of UN sanctions against the Pyongyang regime for its missile testing programme.

Since November, South Korea has detained two ships — one Hong Kong- and the other Panama-registered, alleged to have been involved in such transactions while the UN Security Council has blocked three North Korean- and one Palau-flagged ships from docking at international ports on suspicion of carrying or transporting goods banned by sanctions.

The United States has a list of six more such vessels it wants internationally sanctioned, five China-flagged and one Hong Kong-flagged. Last week, Beijing blocked Washington’s efforts at the UN to have the six ships blacklisted.

In September, the UN cut North Korea’s allowed imports of refined oil to 2 million barrels a year. Its latest round of sanctions further cut the annual quota to 500,000 tonnes and 4 million barrels of crude oil, required the repatriation of all North Korean contract workers abroad within 24 months, and a crackdown on ships smuggling banned items including coal and oil to and from the country.

The United States had wanted a complete ban on oil imports and a freeze of the overseas assets of the government and its leader, Kim Jong-un. That it did not get them, seems to have frayed the patience of the ever-mercurial US President Donald Trump. He told the New York Times last week,

“I have been soft on China because the only thing more important to me than trade is war…If they’re helping me with North Korea, I can look at trade a little bit differently, at least for a period of time. And that’s what I’ve been doing. But when oil is going in, I’m not happy about that.”

Trump had earlier tweeted that China had been “caught RED HANDED” (his all caps) allowing oil into North Korea.

The prompt for that public accusation was a Chosun Ilbo report quoting South Korean government sources as saying that U.S. spy satellites had detected Chinese ships transferring oil to North Korean vessels about 30 times since October. Which is a very roundabout way for a US president to make an accusation based on his own country’s intelligence, especially since U.S. State Department officials have confirmed Washington had evidence that vessels from several countries, including China, had engaged in transshipping oil products and coal to North Korea.

China had long turned a blind eye to smuggling to North Korea but in 2017 started to crack down on it as it shifted stance and began to turn the economic screws on Pyongyang.

The question now is whether Beijing is still turning a selective blind eye. Or is North Korea’s smuggling network, which includes bartering via Russian ports and forging the nationalities and destinations of ships, so well organised that it is beyond being able to be shut down?

The broader concern is that either way Trump will take it as an excuse to move onto his confrontational anti-China trade agenda in 2018. Trump has long argued that foreign countries are taking advantage of America and that America needs to fight back — and that is a message he wants to use to rile up his base support, in 2018 ahead of the US mid-term elections, and again in 2020 when he will be running for re-election as president.

The White House is split on the wisdom of starting a trade war. However, the word from our man in Washington is that the ‘America First’ economic nationalists among Trump’s advisors are currently ascendant and pushing to strike early ahead of the mid-terms while the president himself is itching to slap tariffs first on Chinese electronics and then on steel and aluminium.

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1 Comment

Filed under China-Koreas, China-U.S.

One response to “China Caught Between Smuggled Oil And Trade Wars

  1. Pingback: China’s Economy: Normal Slowing Will Resume in 2018 | China Bystander

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