tag:theconversation.com,2011:/id/topics/democratic-peoples-republic-of-korea-37562/articlesDemocratic People's Republic of Korea – The Conversation2018-02-20T11:39:51Ztag:theconversation.com,2011:article/894232018-02-20T11:39:51Z2018-02-20T11:39:51ZNorth Korea’s growing criminal cyberthreat<figure><img src="https://images.theconversation.com/files/205121/original/file-20180206-88799-jfeluf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Money is a crucial target for North Korea's hacking efforts.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/north-koreas-bitcone-hacking-hacker-bitcond-782624338">rega rega/Shutterstock.com</a></span></figcaption></figure><p>The countries posing the greatest cyberthreats to the United States are <a href="https://theconversation.com/tracing-the-sources-of-todays-russian-cyberthreat-81593">Russia</a>, <a href="https://theconversation.com/how-the-chinese-cyberthreat-has-evolved-82469">China</a>, <a href="https://theconversation.com/following-the-developing-iranian-cyberthreat-85162">Iran</a> and North Korea. Like its counterparts, Kim Jong Un’s regime engages in substantial cyber espionage. And like Russia and Iran, it launches damaging cyberattacks that wipe data from computer disks and shut down online services.</p>
<p>But the North Korean cyberthreat is different in two ways. First, the regime’s online power did not grow out of groups of independent hackers. Even today, it seems unlikely the country has hackers who operate independent of the government. Second, North Korea’s cybercrime efforts – all seemingly state-sponsored – steal money that is then used to fund its cash-strapped government.</p>
<h2>Government-controlled hacking</h2>
<p>One reason for North Korea’s apparent lack of independent hackers is that most North Koreans do not have internet access. Although the country has had an <a href="https://arstechnica.com/information-technology/2017/10/as-us-launches-ddos-attacks-n-korea-gets-more-bandwidth-from-russia/">internet connection through China</a> for several years, <a href="https://fas.org/sgp/crs/row/R44912.pdf">it’s reserved</a> for elites and foreign visitors. Would-be hackers can’t launch attacks across borders; they can’t even pick up hacking manuals, code and tips from the many online forums that other hackers in other nations use to learn the trade and share information.</p>
<p>On top of that, North Korea maintains exceptionally strong controls over its population. Any hacking attributed to North Korea is likely done for the government if not by the government directly.</p>
<h2>State-sponsored hackers</h2>
<p>North Korea’s <a href="http://www.keia.org/publication/north-koreas-cyber-warfare-and-challenges-us-rok-alliance">cyber warriors</a> work primarily for the General Bureau of Reconnaissance or the General Staff Department of the Korean People’s Army. Prospective candidates are selected from schools across the country and trained in cyber operations at <a href="http://www.zdnet.com/article/a-glimpse-into-the-world-of-north-koreas-hacking-elite/">Pyongyang University of Automation</a> and other colleges and universities. By 2015, the South Korean military estimated the KPA employed <a href="http://www.telegraph.co.uk/news/worldnews/asia/northkorea/11329480/North-Korea-doubles-its-cyber-warfare-team-to-6000-troops.html">up to 6,000 cyber warfare experts</a>.</p>
<p>North Korean hackers operate from facilities in <a href="http://www.keia.org/publication/north-koreas-cyber-warfare-and-challenges-us-rok-alliance">China and other foreign countries</a> where their government sends or permits them to work. Indeed, the country has reportedly sent hundreds of hackers into nearby countries to <a href="https://www.bloomberg.com/news/features/2018-02-07/inside-kim-jong-un-s-hacker-army">raise money</a> for the regime. Many of the cyberattacks attributed to North Korea have been <a href="https://www.reuters.com/article/us-cyber-northkorea-exclusive/exclusive-north-koreas-unit-180-the-cyber-warfare-cell-that-worries-the-west-idUSKCN18H020">traced back to locations inside China</a>.</p>
<h2>From espionage to sabotage</h2>
<p>North Korea has been using cyber operations <a href="http://faculty.nps.edu/dedennin/publications/CNO%20threat.pdf">to spy on</a> the U.S. and South Korea since at least 2004. U.S. targets have included <a href="https://www.nytimes.com/2017/10/10/world/asia/north-korea-hack-war-plans.html">military entities</a> and the State Department. North Korea uses cyber espionage to acquire foreign technology, including <a href="http://money.cnn.com/2017/10/31/news/north-korea-hack-stole-south-korea-warship-plans/index.html">technologies relating to weapons</a> of mass destruction, unmanned aerial vehicles and missiles.</p>
<p>By 2009, North Korea had expanded its cyber operations to include acts of sabotage. The first of these <a href="https://www.csmonitor.com/Technology/Horizons/2009/0708/north-korean-hackers-blamed-for-sweeping-cyber-attack-on-us-networks">took place in July 2009</a>, when massive distributed denial of service (DDoS) attacks shut down targets in the U.S. and South Korea. The attackers also used “wiper” malware to delete data on disks.</p>
<p>North Korea has continued to <a href="https://www.symantec.com/connect/blogs/four-years-darkseoul-cyberattacks-against-south-korea-continue-anniversary-korean-war">launch DDoS and disk-wiping attacks</a> over the years, targeting banks as well as other military and civilian systems in the U.S. and South Korea. A cyberattack in April 2011 against South Korea’s agricultural banking cooperative Nonghyup was said to <a href="https://www.reuters.com/article/us-korea-north-cyber/north-korea-hackers-behind-attack-on-s-korea-bank-prosecutors-idUSTRE7421Q520110503">shut down the bank’s credit card and ATM services</a> for more than a week.</p>
<p>In December 2014, the North’s attackers hit desktop computers in a South Korean <a href="https://www.trendmicro.com/vinfo/us/security/news/cyber-attacks/korean-nuclear-plant-faces-data-leak-and-destruction">nuclear plant</a> with wiper malware that destroyed not only the data on hard drives, but also the master boot record startup software, making recovery more difficult. In addition, the attack stole and leaked blueprints and employee information from the plant.</p>
<p>North Korea has also been accused of trying to <a href="https://www.nbcnews.com/news/north-korea/experts-north-korea-targeted-u-s-electric-power-companies-n808996">hack electric power companies</a> in the U.S. and a <a href="https://www.thestar.com/news/gta/2018/01/23/metrolinx-targeted-by-north-korean-cyberattack.html">railroad system</a> in Canada.</p>
<h2>The attack on Sony</h2>
<p>The attack on the nuclear facility took place about a month after North Korea attacked <a href="https://fortune.com/sony-hack-part-1/">Sony Pictures</a> with wiper malware that zapped <a href="https://www.washingtonpost.com/news/the-switch/wp/2014/12/18/the-sony-pictures-hack-explained/?utm_term=.04b27501bbc7">over 4,000 of the company’s desktop computers</a> and servers. The attackers also stole and posted pre-release movies and <a href="https://www.theguardian.com/technology/2014/dec/14/sony-pictures-email-hack-greed-racism-sexism">sensitive, often embarrassing, emails</a> and other data taken from the company.</p>
<p>Calling themselves the “Guardians of Peace,” the attackers demanded that Sony withhold release of the satirical film “<a href="http://www.imdb.com/title/tt2788710/">The Interview</a>,” which depicts an assassination attempt against North Korea’s leader, Kim Jong-un. The attackers also <a href="https://www.theguardian.com/film/2014/dec/16/employees-sue-failure-guard-personal-data-leaked-hackers">threatened violence</a> against any movie theaters showing the film. </p>
<p>Although theaters initially canceled their scheduled showings, ultimately <a href="https://deadline.com/2017/04/as-north-korea-rumbles-insiders-tell-how-small-players-stood-tall-helping-sonys-the-interview-1202069868/">the film was released</a> both online and in theaters. North Korea’s <a href="https://www.cfr.org/blog/north-koreas-offensive-cyber-program-might-be-good-it-effective">coercive attempts</a> failed, as they have in other cases. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/205123/original/file-20180206-88799-tgyq0v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/205123/original/file-20180206-88799-tgyq0v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/205123/original/file-20180206-88799-tgyq0v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=377&fit=crop&dpr=1 600w, https://images.theconversation.com/files/205123/original/file-20180206-88799-tgyq0v.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=377&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/205123/original/file-20180206-88799-tgyq0v.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=377&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/205123/original/file-20180206-88799-tgyq0v.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=474&fit=crop&dpr=1 754w, https://images.theconversation.com/files/205123/original/file-20180206-88799-tgyq0v.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=474&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/205123/original/file-20180206-88799-tgyq0v.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=474&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">North Korea was not happy that Sony planned to release ‘The Interview,’ a comedy depicting the fictional killing of national leader Kim Jong Un.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/North-Korea-Bombs-and-Bluster/4e04bb1b9f864d04995e83d0ec61b919/22/0">AP Photo/Ahn Young-joon</a></span>
</figcaption>
</figure>
<h2>Financial crimes</h2>
<p>In recent years, North Korea started <a href="https://motherboard.vice.com/en_us/article/8xvnmv/facebook-is-disrupting-north-korean-hacking-operations">using cyber operations</a> to generate revenue for the government. This is done through several illicit means, including outright theft of funds, extortion and <a href="https://www.thecipherbrief.com/kim-digs-cybercrime-coin-sanctions-cant-snatch">cryptocurrency mining</a>. </p>
<p>In early 2016, the regime came close to stealing US$951 million from the <a href="https://www.nytimes.com/2016/05/27/business/dealbook/north-korea-linked-to-digital-thefts-from-global-banks.html">Bangladesh Central Bank</a> over the global SWIFT financial network. Fortunately, because of a misspelling, they only succeeded in moving $81 million. Analysts attributed the attack to the “<a href="https://www.cfr.org/blog/north-koreas-offensive-cyber-program-might-be-good-it-effective">Lazarus Group</a>,” the same group believed to be behind many of the attacks tied to North Korea, including those against Sony and other banks.</p>
<p>The Lazarus Group has also been <a href="https://www.cnn.com/2017/12/18/politics/white-house-tom-bossert-north-korea-wannacry/index.html">blamed</a> for the <a href="https://www.csoonline.com/article/3227906/ransomware/what-is-wannacry-ransomware-how-does-it-infect-and-who-was-responsible.html">WannaCry</a> ransomware that spread to computers in 150 countries in 2017. After encrypting data on a victim’s computer, the malware demanded payment in the bitcoin digital currency to get access back.</p>
<p>North Korea has been <a href="https://www.bloomberg.com/news/articles/2018-01-02/north-korean-hackers-hijack-computers-to-mine-cryptocurrencies">mining cryptocurrencies</a> on hacked computers as well. The hijacked machines run software that “earns” the digital currency by performing a computationally difficult task. The funds are then directed into an account tied to the hackers. </p>
<p>North Korean hackers also <a href="https://www.scmagazineuk.com/more-evidence-emerges-of-north-korea-targeting-cryptocurrency-industry/article/719498/">attack cryptocurrency exchanges</a>. They have reportedly <a href="http://www.scmp.com/news/world/article/2131470/north-korea-barely-wired-so-how-did-it-become-global-hacking-power">stolen millions of dollars</a> worth of bitcoin from two exchanges in South Korea and attempted thefts from 10 others.</p>
<h2>A cybercrime power</h2>
<p>Like other countries, North Korea uses cyber espionage and cyber sabotage to acquire secrets and harm adversaries. But it stands out from other countries in its use of <a href="https://www.fastcompany.com/40525120/north-korea-hackers-money-bitcoin-cryptocurrency-theft-sanctions">cybercrime to finance</a> its programs. This is perhaps not surprising given North Korea’s <a href="https://fas.org/sgp/crs/row/RL33324.pdf">history of counterfeiting</a> U.S. currency and using other <a href="https://www.thedailybeast.com/are-cyber-crooks-funding-north-koreas-nukes">illicit activities</a> to acquire funds.</p>
<p>The introduction of online transactions and digital currencies, coupled with inadequate cybersecurity, has opened the doors to North Korea for illicitly acquiring funds by new means. Given the country’s appetite for building nuclear and other weapons, as well as the effects of economic sanctions, it seems likely that North Korea will continue to seek ways of exploiting the cyber world for economic advantage.</p><img src="https://counter.theconversation.com/content/89423/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dorothy Denning does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>North Korea’s cyber army is closely controlled by the ruling regime – a key difference from other countries’ cyberattack and espionage groups.Dorothy Denning, Emeritus Distinguished Professor of Defense Analysis, Naval Postgraduate SchoolLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/845562017-09-22T19:53:25Z2017-09-22T19:53:25ZChina’s leverage over ‘Rocket Man’ is key to avoiding nuclear war in East Asia<p>U.S. President Donald Trump and North Korean leader Kim Jong-Un are playing a dangerous game of brinkmanship while also trading personal insults.</p>
<p>Most recently, Trump <a href="https://www.nytimes.com/2017/09/19/world/trump-un-north-korea-iran.html?_r=0">blasted the “Rocket Man”</a> in his inaugural speech to the United Nations, promising to “totally destroy” North Korea if it threatens the U.S. or its allies. The Trump Administration also <a href="http://www.independent.co.uk/news/world/americas/us-politics/north-korea-sanctions-trump-china-banks-announcement-latest-a7960106.html">added new sanctions</a> aimed at strangling its ability to work with banks. </p>
<p>Kim, for his part, <a href="http://www.cnn.com/2017/09/22/asia/north-korea-dotard/index.html">resorted to calling</a> Trump “mentally deranged” and a “dotard,” while his foreign minister <a href="http://www.npr.org/sections/thetwo-way/2017/09/22/552861261/north-korea-says-pacific-test-of-nuclear-warhead-is-possible">threatened to test</a> a hydrogen bomb in the Pacific. </p>
<p>With <a href="http://www.foxnews.com/world/2017/08/08/north-korea-trump-ratchet-up-tension-with-threats-fire-hours-apart.html">tensions escalating</a>, it is important to be realistic about how we can get out of this mess. </p>
<p>In short, any nonmilitary solution will rely on China choosing to apply its massive economic leverage over the North Korean regime. In a positive sign, <a href="http://www.npr.org/2017/09/21/552708231/china-cuts-off-bank-business-with-north-korea-as-trump-announces-new-sanctions">China’s central bank recently told Chinese financial companies</a> to stop doing business with North Korea.</p>
<p>Overall, however, it appears that China has increased its trade with North Korea in recent years while doing fairly little to forestall North Korea’s nuclear ambitions. China’s foremost objective seems to be promoting greater stability from its volatile neighbor, in part because it fears being faced with a massive humanitarian crisis should the regime collapse.</p>
<p>But while the <a href="https://www.washingtonpost.com/news/worldviews/wp/2017/07/05/the-messy-data-behind-chinas-growing-trade-with-north-korea/?utm_term=.41435ab3f758">poor quality of the data</a> hinders a detailed analysis, a quick look shows just how much leverage China has, if it wishes to use it. </p>
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<h2>North Korea’s primary patron</h2>
<p>In general, exports from one country to another <a href="http://www.cepii.fr/pdf_pub/wp/2013/wp2013-27.pdf">can be mostly explained</a> by the distance between them and the sizes of their markets, a pattern that holds for China and North Korea.</p>
<p>Geographically, they share a long border, which makes China a natural, though not inevitable, partner for trade. As a case in point, North Korea also shares a long border with South Korea, but these countries have almost no trade between them. In addition, North Korea shares a small border with Russia, with whom it has little, though ever-increasing, trade. </p>
<p>China’s large market, proximity and – most importantly – willingness to trade with North Korea has led to a situation in which North Korea has become highly dependent on trade with what has become its primary patron. <a href="http://atlas.media.mit.edu/en/profile/country/prk/">About half</a> of North Korean exports and imports go directly to and from China and most of the rest of its trade is handled indirectly by Chinese middlemen. </p>
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<p>North Korea’s dependence on its neighbor has grown alongside China’s increasing economic dominance of East Asia, which gained momentum 15 years ago when China <a href="https://www.wto.org/english/thewto_e/countries_e/china_e.htm">joined the World Trade Organization</a>. Since then, both Chinese gross domestic product as well as its annual trade with North Korea have increased nearly tenfold, to around <a href="http://data.worldbank.org/country/china">US$11 trillion</a> and <a href="http://atlas.media.mit.edu/en/profile/country/prk/">$6 billion</a>, respectively. </p>
<p>North Korea <a href="http://atlas.media.mit.edu/en/visualize/tree_map/hs92/export/chn/prk/show/2015/">imports nearly everything</a> from China, from rubber tires to refined petroleum to pears, with no single category dominating. Meanwhile, <a href="http://atlas.media.mit.edu/en/visualize/tree_map/hs92/import/chn/prk/show/2015/">coal constitutes about 40 percent</a> of North Korean exports to China. </p>
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<h2>Time to use that leverage?</h2>
<p>However, recent events – such as the use of front companies by Chinese firms to <a href="http://www.reuters.com/article/us-northkorea-nuclear-usa-idUSKCN11W1SL">evade sanctions</a> imposed on North Korea and China’s <a href="http://english.chosun.com/site/data/html_dir/2017/01/05/2017010501412.html">reluctance to cut off</a> energy supplies to the country – have led to some uncertainty about the extent to which China is willing to use this economic leverage to rein in North Korea’s military ambitions. </p>
<p>On one hand, <a href="https://www.nytimes.com/2017/02/18/world/asia/north-korea-china-coal-imports-suspended.html">China previously claimed</a> to have stopped coal imports from North Korea as part of recent efforts to punish the regime for missile tests and the <a href="http://www.cnn.com/2017/02/20/asia/kim-jong-nam-death-timeline/index.html">suspected assassination of Kim Jong-nam</a>, the estranged half-brother of North Korean leader <a href="https://theconversation.com/what-makes-kim-jong-un-tick-77143">Kim Jong Un</a>. This was an important signal of China’s willingness to support U.S. concerns about the missile program since oil represents <a href="http://atlas.media.mit.edu/en/profile/country/prk/">about a third</a> ($930 million) of North Korea’s import revenue. </p>
<p>On the other hand, there is evidence that coal shipments in fact <a href="http://www.slate.com/blogs/the_slatest/2017/07/05/trump_tried_to_make_china_to_do_his_bidding_against_north_korea_and_is_shocked.html">never ceased</a>. And, in any case, China <a href="https://www.washingtonpost.com/news/worldviews/wp/2017/07/05/the-messy-data-behind-chinas-growing-trade-with-north-korea/?utm_term=.41435ab3f758">may have increased</a> its imports of iron ore from North Korea to offset the lost coal revenues. </p>
<p>This is consistent with the idea that China carefully considers the resources and revenue that are available to the North Korean regime at any moment, and uses trade as a lever to control them. In this way, China walks a fine line between providing too many resources, and thus allowing the regime to prosper, and not enough resources, such that North Korea is in danger of collapsing. Ultimately, trade may be used as a lever to do some light scolding, but China’s overwhelming concern is preventing North Korea’s collapse.</p>
<p>Further evidence that China has tight control over the North Korean economy comes from <a href="https://c4ads.org/reports/">a recent report</a> from <a href="https://c4ads.org">C4ADS</a>. The research group found close, and often common, ownership ties between most of the major Chinese companies who do business with North Korea. This suggests that trade with North Korea is highly centralized and thus easily controlled.</p>
<h2>Russia: North Korea’s other ‘friend’</h2>
<p>China is not the only country that North Korea trades with, though the others currently pale in comparison. Other top export destinations include India ($97.8 million), Pakistan ($43.1 million) and Burkina Faso ($32.8 million). In terms of imports, India ($108 million), Russia ($78.3 million) and Thailand ($73.8 million) currently sell the most to North Korea. </p>
<p>Russia in particular may soon complicate <a href="http://www.cbsnews.com/videos/nikki-haley-says-u-s-will-propose-tougher-sanctions-against-north-korea/">U.S. efforts to isolate the regime</a>. While still small, <a href="https://www.usatoday.com/story/news/world/2017/06/05/russia-boosts-trade-north-korea-china-cuts/102389824/">Russian trade with North Korea increased</a> 73 percent over the first two months of 2017 compared with the same period of the previous year. </p>
<p>But whereas China is legitimately worried that an economic crisis in North Korea could lead to a flood of refugees or all-out war, Russia likely sees engagement with North Korea in much simpler terms, namely as an additional way to gain geopolitical advantage relative to the U.S.</p>
<h2>A way out?</h2>
<p>Nearly all experts agree that there is no easy way to “solve” the North Korea problem. However, one plausible approach is to encourage South Korea and Japan to begin to develop nuclear weapons programs of their own, and to only discontinue these programs if China takes meaningful steps to use its trade with North Korea to reign in the regime. </p>
<p>Threatening to introduce new nuclear powers to the world is clearly risky, however stable and peaceful South Korea and Japan currently are. But China is highly averse to having these economic and political rivals acquire nuclear capabilities, as it would threaten China’s ongoing pursuit of regional control. In short, this is a sensitive pressure point that could be used to sway the Chinese leadership.</p>
<p>One way or another, China must become convinced that the costs of propping up the North Korean regime through trade are higher than the costs of an increased probability that the regime will collapse.</p>
<p><em>This is an updated version of <a href="https://theconversation.com/how-china-could-use-trade-to-force-north-korea-to-play-nice-with-the-west-80609">an article</a> originally published on July 6, 2017.</em></p><img src="https://counter.theconversation.com/content/84556/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Greg Wright does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The latest salvo of insults and threats between President Trump and North Korea’s Kim brought the region a little bit closer to war. China, North Korea’s closest trading partner, may be the only way out.Greg Wright, Assistant Professor of Economics, University of California, MercedLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/806092017-07-06T19:04:23Z2017-07-06T19:04:23ZHow China could use trade to force North Korea to play nice with the West<figure><img src="https://images.theconversation.com/files/177214/original/file-20170706-26461-n7vj28.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Chinese President Xi Jinping may be the only person able to rein in North Korean leader Kim Jong Un.</span> <span class="attribution"><span class="source">AP Photo/Wong Maye-E, Michael Dinneen</span></span></figcaption></figure><p>North Korea got the world’s attention – and President Donald Trump’s – when it said on July 4 that it had <a href="http://www.independent.co.uk/news/world/asia/north-korea-missile-icbm-pentagon-trump-not-seen-before-a7825541.html">successfully launched</a> an intercontinental ballistic missile for the first time. The weapon, potentially equipped with a nuclear warhead, <a href="http://www.abc.net.au/news/2017-07-04/where-could-a-north-korean-icbm-hit/8678296">could reach Alaska</a>. </p>
<p>President Trump’s initial reaction included blaming China for letting things get this far. He tweeted that Chinese trade with North Korea “<a href="https://twitter.com/realDonaldTrump/status/882560030884716544">rose 40% in the first quarter</a>,” implying that China is reluctant to punish North Korea for continuing to pursue nuclear weapons. </p>
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<p>Is he right to call out China’s trade relationship with North Korea, which formally goes by the Democratic People’s Republic of Korea?</p>
<p>While the <a href="https://www.washingtonpost.com/news/worldviews/wp/2017/07/05/the-messy-data-behind-chinas-growing-trade-with-north-korea/?utm_term=.41435ab3f758">poor quality of the data</a> on trade between these countries should lead one to be skeptical of any sweeping claims, Trump’s overall sentiment is probably correct. China has increased its trade with North Korea in recent decades and has likely done very little on that front to try to forestall this trading partner’s nuclear ambitions.</p>
<p>Yet a quick look at the data, however murky, shows just how much leverage China has, if it wishes to use it. </p>
<h2>North Korea’s primary patron</h2>
<p>In general, exports from one country to another <a href="http://www.cepii.fr/pdf_pub/wp/2013/wp2013-27.pdf">can be mostly explained</a> by the distance between them and the sizes of their markets, a pattern that holds for China and North Korea.</p>
<p>Geographically, they share a large border, which makes China a natural partner for trade. North Korea also abuts South Korea, which doesn’t trade with its rival, and shares a tiny border crossing with Russia, with whom it trades a little (more on that later). </p>
<p>China’s large market, proximity and willingness to trade with North Korea has led to a situation in which the latter has become highly dependent on trade with its primary patron. <a href="http://atlas.media.mit.edu/en/profile/country/prk/">About half</a> of North Korean exports and imports go directly to and from China and much of the rest of its trade is handled indirectly by Chinese middlemen. </p>
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<p>North Korea’s dependence on its northern neighbor has grown hand-in-hand with the nascent superpower’s increasing economic dominance of East Asia, which began 15 years ago when China <a href="https://www.wto.org/english/thewto_e/countries_e/china_e.htm">joined the World Trade Organization</a>. Since then, both Chinese gross domestic product as well as its annual trade with North Korea have increased nearly tenfold, to around <a href="http://data.worldbank.org/country/china">US$11 trillion</a> and <a href="http://atlas.media.mit.edu/en/profile/country/prk/">$6 billion</a>, respectively.</p>
<p>And today, China is responsible for more than 80 percent of both North Korea’s imports and exports. </p>
<p>North Korea <a href="http://atlas.media.mit.edu/en/visualize/tree_map/hs92/export/chn/prk/show/2015/">imports pretty much everything</a> from China, from rubber tires (1.8 percent of the total) to refined petroleum (4 percent) and apples and pears (1.3 percent), with no single category dominating. Meanwhile, <a href="http://atlas.media.mit.edu/en/visualize/tree_map/hs92/import/chn/prk/show/2015/">coal makes up about 40 percent</a> of its exports to China, followed by “non-knit men’s coats” (7.2 percent). </p>
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<h2>Time to use that leverage?</h2>
<p>However, recent events have led to some uncertainty about the extent to which China is willing to use this economic leverage to rein in North Korea’s military ambitions. It appears that China is willing to use these close economic ties to serve its own diplomatic purposes but it’s unclear whether that includes using this economic leverage to rein in North Korea’s military ambitions. </p>
<p>On the one hand, <a href="https://www.nytimes.com/2017/02/18/world/asia/north-korea-china-coal-imports-suspended.html">China claims</a> that coal imports from North Korea have recently been stopped as part of an effort to punish the regime for recent missile tests and the <a href="http://www.cnn.com/2017/02/20/asia/kim-jong-nam-death-timeline/index.html">suspected assassination of Kim Jong-nam</a>. If true, this would be an important signal of China’s willingness to support U.S. concerns about the missile program as it would represent a loss of about a third ($930 million) of North Korea’s import revenue. </p>
<p>However, there is evidence that coal shipments in fact <a href="http://www.slate.com/blogs/the_slatest/2017/07/05/trump_tried_to_make_china_to_do_his_bidding_against_north_korea_and_is_shocked.html">never ceased</a>. And in any case, China <a href="https://www.washingtonpost.com/news/worldviews/wp/2017/07/05/the-messy-data-behind-chinas-growing-trade-with-north-korea/?utm_term=.41435ab3f758">may have dramatically increased</a> its imports of iron ore from North Korea to offset the lost coal revenues. </p>
<p>This is consistent with the idea that China carefully considers the resources and revenue that are available to the North Korean regime at any moment, and uses trade as a lever to control them. In this way, China walks a fine line between providing too many resources, and thus allowing the regime to prosper, and not enough resources, such that North Korea is in danger of collapsing. Ultimately, trade may be used as a lever to do some light scolding, but China’s overwhelming concern is preventing North Korea’s collapse.</p>
<p>Further evidence that China has tight control over the North Korean economy comes from <a href="https://c4ads.org/reports/">a recent report</a> from <a href="https://c4ads.org">C4ADS</a>. The research group found close, and often common, ownership ties between most of the major Chinese companies who do business with North Korea. This suggests that trade with North Korea is highly centralized and thus easily controlled.</p>
<h2>Russia: North Korea’s other ‘friend’</h2>
<p>Of course, China’s not the only country North Korea trades with, but the others pale in comparison. Other top export destinations, after China, include India ($97.8 million), Pakistan ($43.1 million) and Burkina Faso ($32.8 million). In terms of imports, India ($108 million), Russia ($78.3 million and Thailand ($73.8 million) also sell North Korea stuff. </p>
<p>Russia in particular may be beginning to complicate things for <a href="http://www.cbsnews.com/videos/nikki-haley-says-u-s-will-propose-tougher-sanctions-against-north-korea/">U.S. efforts to isolate the regime</a>. While still little, <a href="https://www.usatoday.com/story/news/world/2017/06/05/russia-boosts-trade-north-korea-china-cuts/102389824/">Russian trade with North Korea increased</a> 73 percent over the first two months of 2017 compared with the same period of the previous year. This may be part of a coordinated effort with China to obstruct attempts by the U.S. to pressure North Korea on its military ambitions. </p>
<p>But whereas China is legitimately worried that an economic crisis in North Korea could lead to a flood of refugees or all-out war, Russia likely sees engagement with North Korea in much simpler terms, namely as an additional way to gain geopolitical advantage relative to the U.S.</p><img src="https://counter.theconversation.com/content/80609/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Greg Wright does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>China is North Korea’s biggest trading partner by far, giving the former a great deal of leverage over the behavior of its neighbor.Greg Wright, Assistant Professor of Economics, University of California, MercedLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/758032017-04-06T01:06:16Z2017-04-06T01:06:16ZNorth Korea cyberspace offensives pose challenge in US-China relations<figure><img src="https://images.theconversation.com/files/164192/original/image-20170405-14612-14t3611.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">North Korean cyberattacks may increase as the country comes under greater international pressure.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/hacker-dark-hoody-sitting-front-notebook-498172096">BeeBright via shutterstock.com</a></span></figcaption></figure><p>This week, U.S. President Donald Trump and Chinese President Xi Jinping will meet face to face for the first time. The expansive list of issues they might discuss is likely to include North Korea, the Chinese <a href="http://www.cfr.org/china/china-north-korea-relationship/p11097">neighbor and ally</a> that just launched its <a href="http://www.npr.org/sections/thetwo-way/2017/04/04/522049164/north-korea-launches-another-ballistic-missile-into-waters-near-japan">fourth missile test of the year</a>, and is <a href="http://www.cnn.com/2017/03/24/us/north-korea-nuclear-test/">preparing for its sixth nuclear test</a>. After conducting two nuclear tests and more than 20 missile launches last year, North Korea has faced <a href="http://www.japantimes.co.jp/news/2017/03/29/asia-pacific/satellite-imagery-shows-north-korea-may-final-stages-nuclear-test-preparations/">mounting measures from the international community to stop</a>. </p>
<p>Before leaving office, President Obama told Trump that North Korea should be treated as his <a href="https://www.wsj.com/articles/trump-faces-north-korean-challenge-1479855286">number one national security priority</a>. In turn, President Trump has clearly stated his administration’s <a href="http://www.cnn.com/2017/04/02/politics/donald-trump-north-korea/">determination to “resolve” North Korea</a>, ideally with China’s help – but <a href="https://www.pri.org/stories/2017-04-03/trump-china-get-board-about-north-korea-or-i-go-alone">alone, if necessary</a>.</p>
<p>Historically, North Korea has captured international attention with its <a href="https://fas.org/sgp/crs/row/RL30004.pdf">erratic and dangerous actions</a>, as well as its <a href="https://www.usnews.com/debate-club/should-the-us-take-north-koreas-saber-rattling-seriously">saber-rattling tone of diplomatic discourse</a>, particularly regarding nuclear weapons. While the country continues to invest heavily in nuclear technology, it has also emerged as a significant cybersecurity threat on an international scale. Though North Korea has been called a “<a href="http://www.cbsnews.com/news/north-korea-the-hermit-kingdom/">hermit kingdom</a>,” it’s quite the opposite in cyberspace. The country has actively engaged across the globe, as seen in <a href="http://money.cnn.com/2016/05/26/technology/swift-bank-hack-philippines-lazarus/">its attack on the international banking system known as SWIFT</a>. </p>
<p><a href="http://www.newsweek.com/north-korean-military-extraordinarily-active-new-frontline-290733">Computer attacks are likely appealing to North Korea</a> (and other adversaries of the U.S.) because it can be <a href="https://theconversation.com/hunting-hackers-an-ethical-hacker-explains-how-to-track-down-the-bad-guys-70927">hard to figure out who’s to blame</a>. On the other hand, cyberspace also offers a new venue for North Korea to send signals to other countries about what it can do. The international community – and the U.S. and China in particular – should give serious thought to what might be North Korea’s cyberattack equivalent of a nuclear weapons test.</p>
<h2>A determined regime</h2>
<p>North Korea keeps its military capabilities secret, and is particularly cautious about revealing its cyberwarfare capabilities. South Korea’s Defense Ministry estimates that North Korea’s <a href="https://thestack.com/security/2015/01/07/north-koreas-internet-tundra-breeds-specialised-cyber-forces-numbering-6000/">“cyber army” is 6,000 strong</a>. That’s <a href="https://defensesystems.com/articles/2016/01/04/air-force-boosts-cyber-ranks.aspx">as big as the U.S. military’s Cyber Mission Force</a> is planned to be.</p>
<p>North Korea’s efforts are undeterred by international economic sanctions. In fact, since the latest rounds of UN penalties – <a href="https://www.nytimes.com/2016/03/03/world/asia/north-korea-un-sanctions.html">in March</a> and <a href="https://www.nytimes.com/2016/11/30/world/asia/north-korea-un-sanctions.html">November 2016</a> – North Korean cyberattacks have increased “<a href="http://time.com/4676204/north-korea-cyber-crime-hacking-china-coal/">in size, frequency and boldness</a>.” In recent months, these attacks have <a href="http://time.com/4676204/north-korea-cyber-crime-hacking-china-coal/">targeted South Korea’s government and businesses</a>, worrying officials in that country and even <a href="https://cchs.gwu.edu/sites/cchs.gwu.edu/files/Cilluffo%20Testimony%20for%20HHSC%203-22-2017.pdf">raising concerns in the Japanese government</a>.</p>
<p>Operating in Pyongyang and with outposts in <a href="https://www.nytimes.com/2017/03/25/technology/north-korea-hackers-global-banks.html">northeast China and Southeast Asia</a>, North Korea launches its cyberattacks around the world, in an attempt to demonstrate to others that the country is much more than an isolated outpost on a small peninsula. They have even targeted major Western companies, <a href="https://www.washingtonpost.com/news/the-switch/wp/2014/12/18/the-sony-pictures-hack-explained/">including Sony Pictures Entertainment</a>. That sort of activity is unlikely to decrease – particularly given recent reports of a “<a href="https://www.nytimes.com/2017/03/04/world/asia/north-korea-missile-program-sabotage.html">secret cyberwar</a>” in which the U.S. is trying to electronically sabotage North Korea’s ballistic missile program. If anything, the revelations may spur North Korea to redouble its efforts.</p>
<h2>Stepping up crime</h2>
<p>As the world’s reserve of patience with North Korea wears ever thinner, we should be ready for a spike in North Korean cybercrime that is either directly sponsored, or indirectly supported, by the government. The country is no stranger to illicit counterfeiting of currency, pharmaceutical drugs and even cigarettes, all of which have <a href="http://www.telegraph.co.uk/news/worldnews/asia/northkorea/10766587/North-Korea-branches-out-into-ivory-fake-cigarette-and-pharmaceutical-trade.html">helped fund the North Korean regime</a>. </p>
<p>Last year’s international economic sanctions, plus <a href="http://fortune.com/2017/02/18/china-nuclear-missiles-north-korea-kim-jong-un-assasination/">China’s recent ban on coal imports from North Korea until the end of 2017</a>, are intended to limit its access to funds. But North Korea remains defiant and has <a href="https://thestack.com/security/2016/07/08/6000-strong-north-korean-hacker-army-collects-866-million-per-year/">turned, of late, to cybercrime to raise money</a>. The country is <a href="https://www.nytimes.com/2017/03/25/technology/north-korea-hackers-global-banks.html">the prime suspect in a series of cyberattacks on global banks</a>, including an <a href="http://time.com/4676204/north-korea-cyber-crime-hacking-china-coal/">attempt to steal $1 billion from the central bank of Bangladesh</a>.</p>
<p>It’s not unheard of that <a href="http://www.newsweek.com/putin-welcomes-return-russian-mafia-484083">criminal elements join forces with governments</a>. Normally the <a href="http://articles.latimes.com/2010/aug/04/world/la-fg-mexico-calderon-20100805">lawbreakers seek official power</a>. The North Korean regime, however, uses its country’s criminals and their computer skills to help ensure the survival of the government and its leadership. This blurring of the lines makes it hard to tell who is calling the shots and who is simply a proxy.</p>
<p>North Korea continues to act like an insurgent in the international community, rejecting generally accepted limits on behavior. The threats it poses are therefore all the more significant – and harder to predict. An appropriate response may be equally hard to choose: Should a particular cyberattack spark a military response or one more appropriate for fighting crime? The international community will need to work together on both fronts. Hopefully, this week’s meetings will strengthen U.S. and Chinese commitments to do that.</p><img src="https://counter.theconversation.com/content/75803/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Frank J. Cilluffo received funding from the William and Flora Hewlett Foundation, the Smith Richardson Foundation and the Japanese External Trade Organization in support of the Center's work on cybersecurity issues. He is affiliated with the Center for the Study of the Presidency and Congress, the National Consortium for Advanced Policing, CBS, and KnowCyber. </span></em></p><p class="fine-print"><em><span>The George Washington University Center for Cyber and Homeland Security (CCHS) receives funding in the current year (2017) from the Japan External Trade Organization (JETRO) in support of the Center's work on cybersecurity issues. CCHS has also been the recipient of funding from The William and Flora Hewlett Foundation, and the Smith Richardson Foundation, for a project on active defense against cyber threats in the private sector.</span></em></p>The international community – and the U.S. and China in particular – should give serious thought to what might be North Korea’s cyberattack equivalent of a nuclear weapons test.Frank J. Cilluffo, Director, Center for Cyber and Homeland Security, George Washington UniversitySharon L. Cardash, Associate Director, Center for Cyber and Homeland Security, George Washington UniversityLicensed as Creative Commons – attribution, no derivatives.