Cost-benefit analysis of nuclear ambition puts N Korea in front

A North Korean counterfeit, top, of the $US100 bill, below. Photo: AP

By Blaine Harden in Tokyo

(SMH) -AS THE United Nations moves to enact a sanction on North Korea for its second nuclear test, strong evidence of the failure of a previous international squeeze has emerged.

In recent decades North Korea has earned hundreds of millions of dollars from peddling fake drugs, circulating counterfeit currency and moving missiles and missile parts to countries in East Asia and the Middle East, the Centre for Nonproliferation Studies in California has found.

Because of booming business with China, overseas trade has grown substantially since the sanctions were imposed in 2006 after the government of Kim Jong-il exploded its first nuclear device.

Trade volume rose last year to its highest level since 1990, when a less isolated North Korea was heavily subsidised by the former Soviet Union, an analysis by the Korea Trade and Investment Promotion Agency in Seoul found.

North Korean exports surged 23 per cent last year, on the previous year, and imports rose 33 per cent, the agency said. It found that China's share of overseas trade had risen from 33 per cent in 2003 to 73 per cent last year.

UN Security Council sanctions have had "no perceptible effect" on North Korea's trade with its largest partners, another study, by Marcus Noland, a North Korea expert at the Peterson Institute for International Economics in Washington, found.

"In retrospect, North Korea may have calculated quite correctly that direct penalties for establishing itself as a nuclear power would be modest," he wrote in a paper published at the end of last year. "If sanctions are to deter behaviour in the future, they will have to be much more enthusiastically implemented."

A draft resolution agreed on Wednesday by the United States, China and other major powers would tighten the military, financial and trade sanctions approved in 2006. It could be adopted by Friday.

Noland said the plan was clever. "The North Koreans will be down to whatever China gives them and whatever they can get from their subterranean customers in the Middle East."

The Washington Post