As we all know, the Russian ruble has not fallen without reason. Nor have the energy and mineral prices so important to its economy. Russia is being subjected to economic sabotage reminiscent of Cold War times for not playing the Western game by the Western rules.
Another popular game in the West at present is “What then?” If Greece leaves the Euro, what then? If Iran ignores sanctions, what then? If US troops get spread so thin they can’t achieve their objectives, what then? Leadership involves resolving problems, not raising more questions, but the world’s leaders seem incapable of acting according to the job description.
Another question being asked is: if North Korea continues to confront the West by continuing with its nuclear programme, what then? We don’t hear this question asked as often as the ones above, but there is a reason for that. This is one question Western leaders do know the answer to, because it is an answer of their own devising, but the words leave too nasty a taste in people’s mouths for them to be uttered in public.
Ways and means
You have to be quite a powerful nation to be subject to sanctions. There wouldn’t be any point in imposing economic sanctions on somewhere like Kyrgyzstan because it doesn’t have much of an economy to begin with. When you don’t sell much it doesn’t hurt you a lot if people stop buying, and in these days of vast international smuggling rings the legitimate economy is often a luxury anyway.
But powerful nations have a trick up their sleeve. The more powerful you are, the less dependent you are. Countries like Honduras, the original ‘banana republic’ whose whole economy was tied to the whims of a single US company, will never exercise any geopolitical power under those circumstances. If you are powerful enough to have sanctions imposed on you, you are not dependent on a single friend and your economy doesn’t depend on a single export.
Falling energy and mineral prices are hurting Russia because Russia produces and exports so much of both. But despite all the modernisation it badly needs its production base is strong enough to withstand any assault.
Other exports won’t replace oil and gas overnight, but there are enough of them, and enough Russian trading partners, to make energy sanctions moot over the longer term. No matter what Russia’s share of the global energy market is, it will remain a great power with an economy to back it up.
North Korea may be seen as a threat for political reasons, but economically it is relatively small beer because it is heavily dependent on mineral sales. International financial sanctions have been imposed on North Korea due to its nuclear programme, though they are not imposed on Israel for consistently refusing to say whether it has nuclear weapons or not. Therefore these mineral exports, largely anthracite coal and iron ore, are practically its only way of earning any foreign currency.
If North Korea’s mineral export earnings are damaged by economic sabotage it just has to grin and bear it. It has no way of diversifying its export portfolio. As long as it has even one customer for its minerals they will continue to be important, and with fossil fuels making a comeback in countries tired of having “green targets” imposed on them by the biggest polluters, there are going to be customers for the foreseeable future.
The more mineral prices are depressed by “international” speculators who invariably reflect US thinking, the more the countries which can diversify out of minerals will. At the same time, demand for energy is not going to fall. North Korea’s biggest minerals customer is China, and China has already shown it will stop at nothing to get the energy it needs to fuel its vast new factories and provide higher living standards.
The more other countries reduce their energy export portfolios, the more the countries which can’t do this, such as North Korea, will fill the gap. Energy and mineral prices will not fall to zero, and the more other countries seek their fortunes elsewhere the more North Korea will benefit from whatever prices are at a given time. In fact a greater North Korean presence in minerals markets may well drive prices up, as the supplies are all controlled by Kim Jong-un and not subject to even the minimal competition structures which exist between global monopolies.
The manufactured fall in world energy and mineral prices is designed to make North Korea a bigger player in these markets. Is there a reason anyone would want this, when the country is an international pariah? If you look closely, it is the very fact that it is an international pariah which provides that reason.
Mixed messages which say the same thing
No one can seriously suggest that trade relations have no political dimension. Russia was kept out of the World Trade Organisation for decades, despite being one of the major industrialised countries, because some governments had political reasons for not wanting it in the club. Any trade relations, like formal political relations, imply some degree of friendship, even if the friendship is often regarded as exploitation by those who are continually told what a good friend the more powerful partner is.
Throughout Cold War times, despite official sanctions, there was a network of trade relations between Western countries and the Eastern bloc. Similarly, whilst China wasn’t recognised by the US it still exported goods to the West. Hong Kong and Singapore did not develop through their own products alone, and the Taiwanese electronic goods which flooded Western markets were not exclusively manufactured with Taiwanese components.
Why did this happen? There are two main reasons. The first was that the West wanted to send a message to the enemy that it was prepared to be friendly as soon as the enemy’s politics changed, as trade is supposed to be above politics, despite the reality. The other is that it simultaneously wanted to send the opposite message: that it wanted to conquer the East through aggressive trade, creating relations the East could not afford to ignore.
North Korea is home to over 200 different minerals which can be mined and sold profitably. They include molybdenum, an anti-corrosion agent increasingly used in steel production, and a variety of rare earth elements used in smartphones and other equipment used every day. Its reserves are estimated by South Korea, hardly likely to build up its neighbour, to be worth around 6 trillion dollars, a vast sum on paper which it will not require any structural change to turn into real earnings.
The more other countries are forced to diversify, the more the West will be forced to use North Korean minerals. The West will enter its antiquated but productive mining sector, buying its production as a supposedly friendly gesture and then trying to make the country dependent on these sales. All this will give the West a platform to ultimately control and undermine North Korea, or so it thinks. But the real reason it wants this is nothing to do with the minerals themselves, or the profit the West can gain from them.
We know what isn’t good for you
After 70 years of mutual accusation it was, paradoxically, politicians who found the ending of the Cold War easiest. The leaders of East and West found they were as bad as each other, and could find a common language in which to reshape the geopolitical landscape. But the diplomats and industrial leaders involved in trade relations had a much more difficult time, because the old arrangements were unsustainable when there was no need for anything other than genuine friendship.
The Eastern countries who were now agreeing with the West politically made a very simple request. Now you are genuine friends, behave like it. Help us develop our production capacity and sell our goods. Do not pretend to be our friends by buying small things just to force our economies into dependence.
The West has been very slow to respond to this, if it has at all, as all the restrictions on movement of labour and bogus “EU standards” bear witness. While the East has offered the hand of friendship, the West has tried to take it in a clenched fist. After the Berlin Wall fell there was more change of personnel in the commercial circles of the East, and ultimately its political circles, than in the West. Too many important Westerners had built their reputations by following the old trade policies to have any serious interest in changing them.
When Die Another Day, the then-latest instalment in the James Bond franchise, was made in 2002 the villain was a rogue North Korean colonel. It was clear to audiences that this was an essential plot device because North Korea was the only enemy left, and its military were the face of that enemy. Nowadays a number of other countries could be presented in this way, but none with the pedigree of the People’s Republic. Unreconstructed communist states with a huge military still have a place in the world which has supposed to have moved beyond them.
In recent years we have seen bastions of the Western world suffer so much from its own policies that they have had to be bailed out. Greece, Italy, Portugal – all have been part of “Europe” much longer than the old Eastern bloc states, which have managed to whether the economic storm better by being less able to adopt the policies which have led to disaster. This would have been unthinkable in 1989 or 2002, when a new world on Western terms was the key to universal peace and prosperity.
The West has mishandled the new world badly. It handled the old world better, because it won. The rest of the world turned West, the West didn’t turn East. To prevent the other side winning, the pariahs such as Iran and Syria it has created through its own mishandled policies, it has to get back to winning ways quickly, no matter what steps it takes to do so.
The old methods provide a means of doing that – provided there is a big enough enemy you can use them against. All these North Korean minerals can be used in weapons of mass destruction. So can a lot of things produced in the West, like fertiliser, televisions, plastic and paint. But the bigger North Korea can become through its mineral market the easier it is for the West to go back to its old methods, no questions asked, as there is nothing else the West would be expected to do under the circumstances.
The West has lost at being a friend. It once won at being an enemy. North Korea is being financially manipulated into becoming the new enemy so the West can get its act together.
The West is not trying to destroy this pariah but promote it for its own convenience. The longer this goes on, as a more convenient alternative to pursuing genuine friendship with other countries, the more dangers will face us all.
North Korea can profit greatly from minerals without changing the way it does things. It spends most of its earnings on building its combat and nuclear capacity. Is that going to change when it is a victim of Western aggressive trading in the very area it gets its income from?
Maybe it is the world’s best interest if the West always wins. Whether anyone will actually win as a result of this policy remains to be seen.
Seth Ferris, investigative journalist and political scientist, expert on Middle Eastern affairs, exclusively for the online magazine “New Eastern Outlook”.