UN sanctions to cut North Korea’s fuel imports as crude keeps flowing

New United Nations sanctions on North Korea will cut imports of fuels such as gasoline and diesel by almost 56% while capping shipments of crude at current levels, according to the US.


The oil supply restrictions, which were less than the full embargo sought by the US, was the main element of Monday’s resolution. The UN Security Council also banned textile exports and gave countries the ability to freeze assets of cargo ships whose operators do not agree to inspections on the high seas.


The US also provided a fresh estimate for the isolated nation’s total oil and product imports — about 8.5 MMbbl annually, or a little more than 23,000 bpd — a figure which been difficult to determine given the paucity of official or consistent trade and consumption data.


According to the US and UN, details of the resolution include:

Starting on the 1st October, a cap on the sale of petroleum products, including gasoline, diesel and fuel oil, which is equivalent to 2 MMbbl annually.


The country’s 8.5 MMbbl of overseas supply consists of 4 MMbbl of crude and 4.5 MMbbl of refined products. Banning crude supply to North Korea beyond what China provides through the Dandong-Sinuiju pipeline.


In order the prevent North Korea from obtaining substitutes for refined products, the resolution also bans the sale of condensates — a low-density form of crude oil typically produced alongside natural gas — and natural gas. The US and UN documents switch between referring to natural gas and natural gas liquids, which includes fuels like propane and butane.


Varying Estimates

It is unclear what concrete impact the sanctions will have on fuel supplies to North Korea given that accurate figures are difficult to determine. The new restrictions will result in a 30% drop in overall oil supply to North Korea, according to the US.


“These are areas where experts disagree, and there’s a big difference in the potential impact based on how much the North Korean regime relies upon outside sources based on those estimates,” Paul Musgrave, a professor at the University of Massachusetts Amherst, said.


For instance, the US Energy Information Administration said in May that demand estimated using reported trade information totalled about 15,000 bopd. That is about 5.48 MMbbl per year. Bill Brown, an adjunct professor at Georgetown University, estimated the figure at 6.6 MMbbl annually (about 18,000 bopd), although he cautioned that is based on incomplete or unclear data.


Significant Reduction

North Korea’s daily consumption is tiny, regardless of the difference in estimates. It compares with demand last year of almost 2.6 MMbopd in South Korea, 12.5 million in China and 19.6 million in the US, according to the EIA.


The Nautilus Institute, a California-based researcher which has focused on North Korea issues, sees the total 8.5 million barrel figure from the US in line with its latest estimates.


“The sanctions do probably represent a significant reduction in oil products imports and use, relative to current levels,” David von Hippel, a senior associate at Nautilus Institute said in an email.


Transportation and the military are the major outlets for North Korea’s fuel supply, Nautilus said in a report last week. They are also used in the industrial sectors, including the production of cement and minerals, and some diesel fuel goes into the agriculture sector.


Non-military Impact

Even if China reduces oil exports to North Korea by 50 percent, Pyongyang could cut non-military use of oil, having no immediate impact on its nuclear programme, Nautilus said.


“The immediate primary impacts of responses to oil and oil products cut-offs will be on welfare,” the report said. “People will be forced to walk or not move at all, and to push buses instead of riding in them. There will be less light in households due to less kerosene and less on-site power generation.”