Why Sanctions Aren't Stopping North Korea — Transcript

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1. 0:01North Korea.
2. 0:02It's a bit of an enigma.
3. 0:05A sealed off society on the doorstep of a global superpower.
4. 0:12A minuscule economy,
5. 0:13but a nuclear arsenal that commands global attention.
6. 0:22And despite a mountain of international sanctions designed
7. 0:25to crush it, the Kim regime has begun to thrive.
8. 0:32The entire North Korean government is in stronger position
9. 0:36than at any point over last 35 years.
10. 0:41Following a brief surge in 2016, crippling UN sanctions
11. 0:45and pandemic lockdowns sent the economy into a
12. 0:48prolonged slump.
13. 0:50But by 2023, something changed
14. 0:53and the regime oversaw rapid GDP growth.
15. 0:58North Korea's trade
16. 0:59and overall regime revenue sources have
17. 1:02shifted significantly.
18. 1:04A rich North Korea has the potential
19. 1:06to be a much larger threat.
20. 1:08If the world once viewed Kim Jong Un
21. 1:10as the lonely dictator of a hermit kingdom,
22. 1:13his recent schedule tells a very different story.
23. 1:17This is an amazing comeback story for leader Kim Jong Un.
24. 1:21We are seeing him more powerful economically, militarily,
25. 1:25politically than ever before.
26. 1:29His newfound cash is funding a massive military buildup
27. 1:32and the Kim dynasty for another generation,
28. 1:35potentially in the hands of his young daughter.
29. 1:40So how did one of the most isolated,
30. 1:42heavily sanctioned regimes on Earth pull off a multi-billion
31. 1:46dollar economic turnaround?
32. 1:58It's quite easy to spot a lottery winner.
33. 2:02That neighbor who used to take a bus
34. 2:03to work now has a brand new Mercedes,
35. 2:06and they've outsourced the steering.
36. 2:10North Korea's capital city
37. 2:11of Pyongyang has been looking suspiciously
38. 2:14flush of late too.
39. 2:15There are more cars.
40. 2:17There are more people who use smartphones.
41. 2:19The ability to call an Uber-like car, these huge leaps
42. 2:23that seem to point to a more prosperous North Korea.
43. 2:28At night, North Korea is the dark patch
44. 2:30between two economic powerhouses, China and South Korea.
45. 2:35But over recent years, someone appears
46. 2:37to have found the dimmer switch and been turning it up.
47. 2:41There has been a noticeable improvement in Pyongyang
48. 2:44and some other major cities.
49. 2:46Starting in 2022 to now, we've seen a huge influx
50. 2:50of revenue to the regime.
51. 2:51Almost 60% increase in the foreign currency
52. 2:55that the regime has access
53. 2:56to in the highest years post-pandemic compared
54. 3:00to their pre-sanctioned levels.
55. 3:01That significantly changed the economic prospects.
56. 3:04Between 2022 and 2025, North Korea has raked in billions
57. 3:09of dollars in foreign earnings, totaling as much
58. 3:12as $22 billion, according to a Bloomberg Economics analysis.
59. 3:17That's nearly four times more than the
60. 3:20previous four-year period.
61. 3:22Although let's be clear on something.
62. 3:26We are still talking about a country that's one
63. 3:29of the most impoverished in the world.
64. 3:31Estimates from the Bank of Korea put its economy
65. 3:33currently, or GDP, at around $30 billion.
66. 3:37And that is 60 times smaller than its southern neighbor
67. 3:41South Korea, which sits at around 1.9 trillion in GDP.
68. 3:48The past decade has actually been a really pivotal moment
69. 3:52for North Korea, not only its economy,
70. 3:54but its entire political system.
71. 3:56A turning point was 2019
72. 3:58and a high profile summit in Hanoi between Kim
73. 4:01and US President Donald Trump.
74. 4:03Donald Trump and Kim Jong Un, arriving in Hanoi.
75. 4:06They were discussing exchanging sanctions relief
76. 4:09with dismantling Kim's nuclear program.
77. 4:12But talks collapsed.
78. 4:14Kim left humiliated and broke.
79. 4:18Basically, they wanted the sanctions lifted
80. 4:21in their entirety, and we couldn't do that.
81. 4:24His economy suddenly hit the wall because of the sanctions.
82. 4:29And so Kim doubled down on his sole explosive leverage.
83. 4:33North Korea is actually accelerating its production
84. 4:36of nuclear weapons and potentially is on track to have one
85. 4:38of the biggest stockpiles out there.
86. 4:41Fast-forward a few years,
87. 4:42things look a bit different, economically and politically.
88. 4:46Chinese President Xi Jinping has appeared alongside Russia's
89. 4:49Vladimir Putin and North Korea's Kim Jong Un at a military
90. 4:52parade marking 80 years since the end of World War II.
91. 4:55I don't think it's something that we would've imagined
92. 4:57when the talks collapsed in Hanoi.
93. 5:00Not least, because China was also growing wary
94. 5:02of Kim's nuclear tests.
95. 5:05That is all signs of Kim very strategically navigating the
96. 5:08geopolitical landscape.
97. 5:12So what happened in those intervening years?
98. 5:14How was Kim able to find both power
99. 5:17and relative wealth despite the weight
100. 5:19of sanctions and isolation?
101. 5:22First, according to the United Nations
102. 5:23and private researchers, stealing internet money.
103. 5:27North Korea has put forward the largest state sponsored
104. 5:32hacking units with a specific focus on crypto sources.
105. 5:37That has reached astronomical levels
106. 5:39with estimates in 2025 putting their thefts into upwards
107. 5:42of two billion a year.
108. 5:44Private research has said that in 2017,
109. 5:47North Korean hacking groups accounted for about 30%
110. 5:51of global thefts of cryptocurrency such as Bitcoin.
111. 5:55Barring a bit of downtime during the pandemic,
112. 5:57it's now thought to be in excess of 70%.
113. 6:01And eventually they cash it out into euros, dollars,
114. 6:05Renminbi, and then that money can be moved
115. 6:08to bank accounts primarily outside of North Korea
116. 6:10to purchase goods for the regime.
117. 6:15Then there's China.
118. 6:17China is still the most important backer
119. 6:20for the North Korean economy.
120. 6:21It's where 98% of North Korea's trade comes from.
121. 6:24China remains the number one destination
122. 6:27for North Korean exports
123. 6:28and the number one source for North Korean imports,
124. 6:31and is incredibly important for the supply
125. 6:34of critical energy resources
126. 6:35for the North Korean economy as well.
127. 6:38Beijing supports its neighbor
128. 6:40to the extent sanctions allow, partly
129. 6:42because it wants to avoid North Korea's economic collapse
130. 6:45and the refugee crisis
131. 6:47and regional instability that may follow.
132. 6:50China is sometimes willing to tolerate actions
133. 6:55of North Korea, which are not actually popular in Beijing.
134. 6:59They need a stable North Korea
135. 7:01and they're willing to pay for it.
136. 7:04But by far, the biggest source of new money
137. 7:06for the Kim regime came from this.
138. 7:10Russia launches an attack on Ukraine.
139. 7:13The Ukrainian government calls it a full-scale invasion.
140. 7:18The emergence of the Russian invasion of Ukraine
141. 7:21and Russia's need for North Korean arms
142. 7:23completely changed the picture.
143. 7:25Russia has been using munitions at a much faster pace than
144. 7:28they initially anticipated
145. 7:30and needed to find another source of Soviet era artillery.
146. 7:34North Korea is a rare place
147. 7:36that had a huge amount in storage
148. 7:38and also had the ability to produce it.
149. 7:40The Center for Strategic
150. 7:41and International Studies estimates North Korea has earned
151. 7:44as much as $12.8 billion from this arms deal alone.
152. 7:49It remains unclear how much of
153. 7:51that is coming back just in cash
154. 7:53or whether it is coming back in goods and technology.
155. 7:57One example would be
156. 7:59that the North Koreans have recently
157. 8:00unveiled a new destroyer.
158. 8:02And that destroyer is using, it appears, Russian technology,
159. 8:06particularly for its air defense.
160. 8:07That air defense equipment likely would've
161. 8:09cost upwards of $20 million.
162. 8:11And in this case, it looks to have been transferred from
163. 8:13Russia to North Korea.
164. 8:19This has changed the regime's ability
165. 8:21to ramp up its own economic and defensive plans.
166. 8:24Particularly as it seeks
167. 8:25to build out its conventional military, which is languished
168. 8:28as it's invested the majority
169. 8:30of its money in its nuclear program.
170. 8:32The war in Ukraine may also have helped manufacturers test
171. 8:35and improve weaponry based on real combat experience.
172. 8:38So even if they started off sending something not
173. 8:42as sophisticated, we do believe
174. 8:44that they've achieved a level of upgrade of these weapons.
175. 8:47Meaning that if it wants to,
176. 8:49it can sell these weapons elsewhere, in other countries.
177. 8:51Kim Jong Un appears to be aware
178. 8:54that the war could end at some point,
179. 8:56and that is in part why we think that he's trying
180. 8:58to restore this relationship with Xi Jinping.
181. 9:01We just saw Xi Jinping visit Pyongyang in June, first visit
182. 9:04in seven years.
183. 9:06With China behind their backs
184. 9:08with their pockets full of money,
185. 9:10I think the government can feel quite secure, confident.
186. 9:14And I think indeed they will probably stay in power
187. 9:18for many years to come.
188. 9:21This influx of capital demonstrates Kim Jong Un's
189. 9:24adaptability in finding new ways
190. 9:27to safeguard regime survival.
191. 9:30For 15 years now, the Supreme leader's continued
192. 9:32to uphold the totalitarian military first communist vision
193. 9:36of his father, Kim Jong-Il,
194. 9:38and his grandfather, the founder
195. 9:40of North Korea, Kim Il-Sung.
196. 9:43He may also be getting an early start on his own succession
197. 9:46planning, this time with a daughter.
198. 9:51Little is known about her, not even her name for certain,
199. 9:54although she's believed to be called Kim Ju Ae
200. 9:57and in her early teens.
201. 9:58She's doing a great deal of military related activities.
202. 10:02Something like two-thirds
203. 10:03or three quarters of events where she participated
204. 10:06are somehow related to the armed forces or military industry.
205. 10:10She also accompanied her father
206. 10:13to his Beijing trip in September last year,
207. 10:16which strongly signals that she is being groomed
208. 10:18as Kim's successor.
209. 10:20One reason why we are seeing Ju Ae more often in state media
210. 10:23as part of Kim Jong Un's efforts to make sure
211. 10:25that she's exposed to the state affairs.
212. 10:28She is seen to ordinary North Korean citizens
213. 10:31that there is a person
214. 10:33to succeed this leadership in North Korea.
215. 10:36Number two, she's a woman.
216. 10:37Unlike his father
217. 10:38or grandfather, he is very open to the idea
218. 10:42of appointing women to the position of power.
219. 10:45He understands
220. 10:46that not all people in North Korean society share his,
221. 10:52I would dare to say, feminist ideas.
222. 10:54So they have to be basically trained.
223. 10:57And the sooner you start, the better.
224. 11:01I think people used to think that Kim is a bit of a
225. 11:03weird dictator in this isolated country,
226. 11:06but what we've seen in the past years is
227. 11:08that he's really emerged as one
228. 11:10of the most unexpected winners of
229. 11:13what is really happening in the world right now.
230. 11:16From the North Korean point of view, the US
231. 11:20and Israel attack of Iran is another confirmation of
232. 11:24what they have known.
233. 11:26That nuclear weapons is the only way
234. 11:29to guarantee regime security.
235. 11:32I think the story that we found when we looked at North
236. 11:35Korean revenue generation is one of the adaptability
237. 11:40of the North Korean regime and how it is leveraging new
238. 11:43and unique revenue sources
239. 11:44to continue down its long-term objectives
240. 11:47to both secure the country
241. 11:49and eventually provide the tools to allow North Korea
242. 11:52to assert itself on the international stage.
243. 11:54They would like to be rich,
244. 11:56but in order to be rich, you have to be alive first.
245. 12:00And they believe that if they sell their nukes, they are dead.
246. 12:04And they're probably right.