Via East Asia Forum, commentary on North Korea’s economic challenges:

COVID-19 came at a tough time for North Korea, both economically and politically, and may have made a bad situation worse. While China’s sanctions implementation has let up somewhat, North Korea’s economic situation still became strikingly dire in 2020.

As elsewhere in the world, COVID-19 has influenced almost all aspects of North Korean governance. Official sources have acknowledged only thousands of ‘suspected’ cases. But anecdotal evidence of actual case numbers from non-state sources is so plentiful that few people believe the regime’s claims.

The government has locked down several urban centres at different times over the course of the pandemic. Recently, all of Chagang province was locked down to prevent the spread, severely impacting economic activity by preventing travel between markets and cities. Nobody knows exactly how widespread the virus is in North Korea, but the government’s claim of zero infections is highly dubious.

The economic damage has likely been just as great as the medical damage. This is largely of the government’s own making. North Korea’s border lockdown has caused trade with China, its only meaningful trade partner, to drop to extreme low levels — just US$1.6 million in October 2020, according to official figures. Several reports have spoken of food shortages and soaring market prices resulting in large part from the border shutdown.

Although significant trade exists off the books, it is unlikely to be enough to make up for losses of this magnitude. Trade is expected to have dropped by 80 per cent in 2020 compared to 2019. This is particularly significant given that North Korea was already suffering vast decreases in trade in 2019 from harsh international sanctions targeting its exports. The drop in 2020 came from an already very low level.

The state simply does not have the capacity to handle a major COVID-19 outbreak on its own. The government lacks the necessary equipment to test and treat any significant share of the population. It would either have to accept help from abroad — which it is not prepared to do, fearing spies and unsavoury ideological influence — or be faced with a health emergency that could spiral out of control. While the virus may already be spreading around the country, keeping the door to the outside world shut allows the state to contain the threat somewhat.

But the border closure comes with heavy damage to society. The closure has reportedly caused significant scarcity in food and other vital goods, raising prices and driving up hunger.

At the same time, North Korean leader Kim Jong-un has continued to push for more state control over the economy, an ambition likely to feature prominently in the new five-year plan to be launched at the January 2021 Party congress. Although the precise number is unknown, a significant share of the population works in sectors outside of direct state control. The state’s drive for more centralised economic management could lead to the suppression of markets and other semi-private sectors, severely damaging people’s livelihoods by stifling market trade and the private economy.

At the same time, this is perhaps the only measure the state can reasonably take, short of systemic reform, which it still deems too politically risky. It needs to drive in more resources from the general public to make up for the vast economic losses from its own anti-epidemic measures and trade losses from sanctions. In the state’s eyes, these are all costs that must be borne by the general public — who have no say in politics — for the sake of its development of nuclear weapons and missiles.

For all its difficulties, 2020 may come to enter the history books as a crucial year for North Korea. Even faced with crippling sanctions, a virtually closed border, natural disasters and a pandemic the full impact of which remains unknown, Pyongyang refused to budge on its nuclear weapons. Policymakers on this issue belong to a separate political class far less touched by the economic downturn than most of the population. Nonetheless, 2020 has shown the world just how heavy of a cost the North Korean elite is prepared to have the civilian population shoulder.

Perhaps the US government will assume, as North Korea wants, that if the country was prepared to take measures so detrimental to its foreign trade to stifle the virus, it is very unlikely to bow to sanctions pressure and give up its nuclear weapons. This could open a path for pragmatic working-level negotiations under the Biden administration — perhaps about an arms control agreement which would regulate Pyongyang’s possession of nuclear weapons and missiles in exchange for sanctions relief, but not require full denuclearisation.