KDI Journal of Economic Policy

Korea Development Institute (한국개발연구원)
권호 표지
DOI QR코드

DOI QR Code

Finding Loopholes in Sanctions: Effects of Sanctions on North Korea's Refined Oil Prices

  • Received : 2020.09.13
  • Published : 2020.11.30
Download PDF
⟨ Previous Next ⟩

Abstract

The international community's sanctions against North Korea, triggered by North Korea's nuclear tests and by missile development in the country, are considered the strongest sanctions in history, banning exports of North Korea's major items and limiting imports of machinery and oil products. Accordingly, North Korea's trade volume decreased to the level of collapse after the sanctions, meaning that the sanctions against North Korea were considered to be effective. However, according to this paper, which analyzed the price fluctuations of refined petroleum products in North Korea through the methodology of an event study, the market prices of oil products were only temporarily affected by the sanctions and remained stable over the long run despite the restrictions on the volumes of refined petroleum products introduced. This can be explained by evidence that North Korea has introduced refined oil supplies that are not much different from those before the sanctions through its use of illegal transshipments even after the sanctions. With regard to strategic materials such as refined oil, the North Korean authorities are believed to be desperately avoiding sanctions by, for instance, finding loopholes in the sanctions to meet the minimum level of demand.

Keywords

References

  1. Besedes, T., S. Goldbach, and V. Nitsch. 2017. "You're banned! The effect of sanctions on German cross-border financial flows," Economic Policy, 32(90): 263-318. https://doi.org/10.1093/epolic/eix001
  2. Biersteker, T. J., S. E. Eckert, M. Tourinho, and Z. Hudakova. 2013. "The effectiveness of United Nations targeted sanctions," The Graduate Institute of International and Development Studies.
  3. Breusch, T. S. and A. R. Pagan. 1979. "A simple test for heteroscedasticity and random coefficient variation," Econometrica: Journal of the Econometric Society, 47(5): 1287-1294 https://doi.org/10.2307/1911963
  4. Caruso, R. 2003. The impact of international economic sanctions on trade: an empirical analysis, Peace Economics," Peace Science and Public Policy, 9, Article 1.
  5. Crozet, M., J. Hinz, A. L. Stammann, and J. Wanner. 2020. Worth the pain? Firms' exporting behavior to countries under sanctions, Kiel Working Paper, No. 2160.
  6. Dreger, C., K. A. Kholodilin, D. Ulbricht, and J. Fidrmuc. 2016. "Between the hammer and the anvil: The impact of economic sanctions and oil prices on Russia's ruble," Journal of Comparative Economics, 44(2): 295-308. https://doi.org/10.1016/j.jce.2015.12.010
  7. Evenett, Simon J. 2002. "The impact of economic sanctions on South African exports," Scottish Journal of Political Economy, 49(5): 557-573. https://doi.org/10.1111/1467-9485.00248
  8. Haidar, J. I. 2017. "Sanctions and export deflection: evidence from Iran," Economic Policy, 32(90): 319-355. https://doi.org/10.1093/epolic/eix002
  9. Hufbauer, G. C., J. J. Schott, and K. A. Elliott. 2009. Economic Sanctions Reconsidered 3rd edition. Peterson Institute Press: All Books.
  10. Kim. 2018. Analysis of North Korea's Oil Trade and Policy Implications, Policy Study 2018-10, KDI.
  11. Kim, B. Y. and G. Roland. 2014. "How credible is the North Korean threat?" Economics of Transition, 22(3): 433-459. https://doi.org/10.1111/ecot.12044
  12. Lee, Y. S. 2018. "International isolation and regional inequality: Evidence from sanctions on North Korea," Journal of Urban Economics, 103: 34-51. https://doi.org/10.1016/j.jue.2017.11.002
  13. Mun, S. and B. K. Kim. 2020. Effects of Dollarization on Inflation and Exchange Rates in North Korea. Bank of Korea Working Paper, 2.
  14. Neuenkirch, M. and F. Neumeier. 2015. "The impact of UN and US economic sanctions on GDP growth," European Journal of Political Economy, 40: 110-125. https://doi.org/10.1016/j.ejpoleco.2015.09.001