How North Korea gets its oil from China

CNPC

UN Security Council decides whether to tighten the sanctions screws on North Korea. The country’s increasingly isolated government could lose a lifeline provided by state-owned China National Petroleum Corp (CNPC).

For decades, the Chinese oil giant has sent small cargoes of jet fuel, diesel and gasoline from two large refineries in the northeastern city of Dalian. And also some other nearby plants across the Yellow Sea. All to North Korea’s western port of Nampo. Nampo serves North Korea’s capital, Pyongyang.

Firstly, CNPC controls the export of crude oil to North Korea, an aid program that began about 40 years ago. Crude goes through an ageing pipeline that runs from the border town of Dandong to feed North Korea’s oil refinery. The Ponghwa Chemical factory in Sinuiju on the other side of the Yalu river. It splits the two nations. The plant makes low-grade gasoline and diesel.

There are some unreported details about CNPC’s deals with Pyongyang. About how it came to dominate that business. Explaining the two countries’ relationship. What’s at stake, as decades of close ties sour badly because of growing concerns about North Korea’s missile and nuclear programs.

Donald Trump’s administration

U.S. President Donald Trump’s administration is focusing its North Korea strategy on tougher economic sanctions. Possibly including an oil embargo. Also a global ban on its airline, intercepting cargo ships. Finally punishing Chinese banks doing business with Pyongyang.

Secondly, North Korea imports all its oil needs, mostly from China and a way smaller amount from Russia.

It bought about 270,000 tonnes of fuel last year, according to China’s customs data.

Oil Embargo & North Korea trade

In North Korea, diesel is critical for farming, especially at this time of year. Ahead of the planting season and also around October for harvesting. Gasoline is mainly used by the transport industry and the military.

The Global Times, a Chinese magazine whose stance does not necessarily reflect official policy, earlier this month raised the possibility of cutting oil shipments to North Korea if it were to conduct another nuclear test.

• “China could potentially be convinced to cap volumes like they did with coal. At the United Nations Security Council as part of a new sanctions resolution following another nuclear test.” (Reuters)

“CNPC has all along been really politically minded among state energy firms, aiming for that role of North Korea’s dominant supplier even if the business makes little money.”

Any loss of the North Korea trade will have only a tiny effect on Dalian. Dalian’s two refineries having a combined capacity to process over 600,000 barrels of crude oil per day. Which is about 40 times North Korea’s requirements.

Pyongyang’s increasing nuclear and ballistic missile tests have already put the brakes on the trade. Beijing quietly suspended a decades-long aid program of 50,000 tonnes annually of aviation fuel in 2013. The government officially announced a ban on jet fuel only, last June.

Russia appears to have replaced China as the top supplier of jet fuel.