November 27, 2006

China resumes crude exports to isolated North Korea

By Emma Graham-Harrison

BEIJING (Reuters) - Chinese exports of crude oil to isolated and energy-hungry North Korea resumed in October, customs data showed on Monday, after a September halt which raised questions about Beijing's relations with its neighbour.

The latest statistics overlap with North Korea's Oct. 9 nuclear test, which drew condemnation from regional powers, including Pyongyang's longtime backer, China, which gave crucial backing to U.N. Security Council sanctions against the North.

A North Korean flag flutters in the wind in the propaganda village of Gijungdong near the truce village of Panmunjom in the demilitarized zone which separates the two Koreas, about 55 km north of Seoul November 23, 2006. (REUTERS/Lee Jae-Won)

China sent 58,685 tonnes of crude to its impoverished neighbour in October, 67.7 percent more than the same month of 2005 and the largest amount since April this year.

But shipments of key refined oil products -- diesel, gasoline and kerosene -- were all down from a year earlier, figures from the General Administration of Customs showed.

Since the nuclear test, North Korea has agreed to return to six-party talks aimed at ending its nuclear weapons programme and expected to resume next month. It has boycotted the talks for a year, complaining about a U.S. financial crackdown.

But envoys have yet to set an exact date for the talks, which bring together the two Koreas, China, the United States, Japan and Russia.

Chinese data shows that Beijing sent no crude to its neighbour in September -- before the nuclear test but two months after the North strained ties with Beijing by test-firing missiles despite public calls from China for restraint.

Beijing and Pyongyang cloak their relationship in secrecy, making it difficult to be sure about even basic diplomatic and economic contacts.

So the September trade figures caused a diplomatic stir, with some analysts interpreting them as a sign that China was using powerful economic levers to pressure its recalcitrant neighbour back to the negotiating table.

Beijing could still be applying subtler pressure through diminished supplies of oil products. North Korea is thought to have only one functioning refinery which processes Chinese oil.

In October alone, shipments of kerosene to North Korea tumbled 75 percent to just 128 tonnes, compared with an average 5,700 tonnes per month in the year through September.

Gasoline exports were down 68 percent. Light diesel shipments fell 17 percent, but at 10,183 tonnes still stood well above the January-to-September average of 2,468 tonnes.

ECONOMIC PRESSURE

Xia Liping, a regional security expert at the Shanghai Institute for International Studies, a government think tank, told Reuters that China had reduced oil and grain shipments to North Korea from July.

"After the missile launchings, China punished North Korea for hurting China's fundamental interests," Xia said. "On the other hand, China has always sought to persuade North Korea to return to the six-party talks to seek a negotiated solution to its problems."

Xia said North Korea and the United States needed to compromise on the U.S. financial restrictions that Pyongyang has said were its reason for boycotting the six-party talks for a year. If the next talks do not happen or fail to make progress, North Korea may again seek to escalate tensions, he said.

"If the talks fail, it's quite likely that North Korea will hold another nuclear test," he said.

In the year through October, exports of Chinese crude oil to North Korea stood at 428,328 tonnes, down 0.8 percent from the same period of 2005.

(Additional reporting by Chris Buckley)

News Poll

Latest Jobs from Star-Jobs

Latest from StarProperty