SIM Report: Deteriorating economic conditions in N. Korea, political instability in S. Korea portend increased risks to regional security

SIM Report: Northeast Asia, Issue 12

North Korean leader Kim Jong-un on Thursday (8 April) called for the country’s citizens to prepare for another ‘arduous march’ due to serious economic challenges. The arduous march refers to a period of combined famine and economic crisis lasting from 1994 until 1998 in North Korea that saw hundreds of thousands die. Kim had previously expressed the gravity of the combined impact of the COVID-19 pandemic, US sanctions, and natural disasters. However, Kim’s comments mark the first time that the leader has publicly compared North Korea’s deteriorating economic situation to the period of mass starvation. The ‘arduous march’ was the result of the loss of aid due to the collapse of the Soviet Union, mismanagement, and natural disasters.

The humanitarian crisis in North Korea has most recently been accentuated by the recent exodus of foreign nationals from the country, with Russian diplomats voicing concerns around severe shortages of essential goods. However, hostile and offensive cyber operations by North Korean threat actors aimed at monetary gain to offset financial losses have also served as an indicator of high economic instability; attacks on South Korea’s public and private sector have intensified with 1.58 million attacks recorded daily, according to a February report by South Korea’s National Intelligence Service. More recent cyberattacks have allegedly targeted organisations including COVID-19 vaccine developers, cybersecurity professionals, logistics operators, financial institutions, and cryptocurrency exchanges.

Despite Kim’s grave rhetoric, there are signs that North Korea’s economic recovery is under way. Trade between North Korea and China contracted by approximately 80 per cent over 2020 over strict border closures, according to Chinese data. North Korea remains heavily economically dependent on China, which comprises over 90 per cent of North Korea’s trade. However, North Korea is deepening ties with China as Beijing’s relations with Western countries have worsened. The two countries are preparing to recommence trade in mid-April, according to sources from trading companies cited in a Nikkei report on 30 March. One source claimed that bilateral trade is in actual fact Chinese aid assistance to North Korea. Additionally, construction projects along multiple border trade crossings advanced over 2020, according to satellite imagery analysed by research group NKPro. Trade will resume via the Sino-Korean Friendship Bridge, the primary link for cross-border trade. Additionally, a major new bridge over the Yalu River will open imminently. Cyberattacks by North Korean threat actors primarily motivated by monetary gain are likely to partially abate in tandem with resumption of China-North Korea trade.

However, other hostile cyber operations, including for IP theft, targeting companies in South Korea and other Western-allied countries are likely to increase in the long-term given indications of a worsening of inter-Korean relations.  South Korean President Moon Jae-in’s left-aligned party has typically taken a more conciliatory approach to bilateral relations with China and North Korea. The defeat of Moon’s party in mayoral elections by conservatives in the major South Korean cities of Seoul and Busan on Monday (12 April) indicates a lower likelihood of Moon’s Democratic Party succeeding in South Korea’s 2022 presidential elections. Victory for Moon’s party is unlikely given his administration’s failure to address issues including economic grievances and corruption. The Moon administration has undergone a precipitous decline in support, which is indicated by polls. The increasing popularity of conservative opposition politicians, coupled with rising anti-Chinese sentiment among South Koreans, will likely worsen inter-Korean and China relations in the long-term outlook.


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Open Source Intelligence Review