China’s CNPC Stops Selling Fuel to North Korea for Fear It Won’t Get Paid – Report

A picture made available on 19 Ap ril 2016 shows a city view at dawn in Pyongyang, North Korea, 18 April 2016. Photo: Frank Robichon/EPA/REX/Shutterstock

  • China National Petroleum Corporation has suspended gasoline and diesel sales to North Korea for commercial reasons, according to unnamed sources.
  • Chinese and international banks are stepping up compliance checks on companies dealing with countries on the US sanctions list, such as North Korea.
  • In 2016, CNPC sold North Korea sold some 140,000 metric tons of fuel worth USD 64 million.
  • Gasoline and diesel prices are said to have spike in North Korea over the last two months.
  • China’s crude oil exports to North Korea are believed to amount to 520,000 metric tons annually.

China National Petroleum Corp, a state-owned Chinese company, has stopped selling fuel North Korea over concerns it will not get paid, according to a report.

News about the suspension of fuel sales to the regime of Kim Jong-un comes amid continuing pressure on North Korea over its nuclear and missiles programs as well as the US pressing China to exert influence over Pyongyang.

The regime of North Korea’s leader Kim Jong-un is coming closer to being able to produce a hydrogen bomb, also known as thermonuclear weapon, as it is able to produce tritium, a key element, a US nuclear expert has said.

Last week, North Korea carried out a new test of a rocket engine that could be used for powering an intercontinental ballistic missile, the weapon that can threaten directly the US mainland. It is also said to be coming closer to being able to produce a hydrogen bomb.

Aslo last week, on behalf of the Kim Jong-un regime, North Korea’s Ambassador to India offered the US a conditional moratorium on his country’s nuclear and ballistic missile tests.

The offer which is seen as an attempt to hold direct talks with the US comes against the backdrop of the death of US college student Otto Warmbier who has passed away after 17 months in North Korean captivity, and for which Pyongyang has denied responsibility, and South Korea’s decision to suspend the further deployment of the US THAAD missile shield.

In the latest of its constant ballistic missile provocations, in early June, North Korea fired several anti-ship cruise missiles.

North Korea has performed 11th ballistic missile tests since Donald Trump became President of the United States, with eight successful and three failed tests.

Ongoing activity and a large number of people have been spotted at North Korea’s nuclear test site, the Punggye-ri Nuclear Test Facility, amid lingering concerns that the regime of leader Kim Jong-un could carry out its sixth nuclear test.

There have been reports that North Korea has been bracing for a preemptive US missile strike similar to the missile strike on the regime of Syrian President Bashar al-Assad in response to the April 4 attack with chemical weapons.

In early June, the US Treasury Department’s Office of Foreign Assets Control (OFAC) imposed new sanctions on North Korea and entities trading with it over its ongoing development of weapons of mass destruction (WMD) and continued violations of UN Security Council resolutions.

‘No Longer Worth the Risks’

The state-owned China National Petroleum Corp has stopped selling fuel North Korea over mounting risks of not being paid, Reuters reported citing three difference sources.

It is pointed out that while it is unclear how long the suspension of fuel deliveries will last, if it lasts longer, North Korea would be forced to find alternatives to its main supplier of diesel and gasoline.

A source with direct knowledge of the matter said CNPC decided to put fuel sales on hold “over the last month or two” and described it as a “commercial decision”.

“It’s no longer worth the risks,” said the source, adding that Chinese and international banks are stepping up compliance checks on companies dealing with countries on the US sanctions list, such as North Korea.

According to the source, the North Korean agents who mostly buy the diesel and gasoline have been unable recently to pay for the supplies since CNPC normally requires upfront payments.

Reuters says it was unable to determine if the agents have started facing credit problems with Chinese and international banks worried about sanctions compliance issues.

Two other sources briefed about CNPC’s decision confirmed the suspension of diesel sales, but did not know directly about the gasoline move.

The three people declined to be named due to the sensitivity of the matter and are not authorised to speak to the media.

Chinese Supplies

In 2016, China supplied over 96,000 metric tons of gasoline and almost 45,000 metric tons of diesel worth a combined USD 64 million to North Korea, where it is used across the economy from fishermen and farmers to truckers and the military.

Most of the fuel in question was sold by CNPC, which has emerged as the dominant factor in China’s energy trade with North Korea over the past couple of decades.

Data for May released on Friday showed China supplied significantly lower volumes of diesel and gasoline compared with a month earlier, although monthly tonnages can vary widely. June data will be released in late July.

Fuel prices in North Korea, meanwhile, have sharply risen in recent months, suggesting a tightening in supply. The price of gasoline sold by private dealers in Pyongyang and the northern border cities of Sinuiju and Hyesan had hit USD 1.46 per kg on June 21, up almost 50% from April 21.

Diesel prices averaged USD 1.20 per kg as of June 21, more than double over the same period, according to Daily NK, a website run by defectors who collect prices via phone calls with North Korean fuel traders.

North Korea’s unprecedented pace of nuclear and ballistic missile tests has been met negatively by China, which handles 90% of its trade.

In February, China suspended coal purchases until the end of the year, cutting off North Korea’s main export revenue source.

In 2016, North Korea sold 22.5 million metric tons of coal to China, worth about $1.9 billion, according to Chinese customs.

However, Reuter’s sources in China saw no sign yet that Beijing is cutting crude oil supplies to Pyongyang.

China has not disclosed its crude exports to North Korea for several years, but industry sources say it supplies via an aging pipeline about 520,000 metric tons of crude a year to North Korea, worth about USD 170 million at current market prices.

US President Donald Trump is reported to be growing increasingly frustrated with Beijing’s alleged unwillingness to pressure Pyongyang harder as well as over US-Chinese trade issues, and is considering possible trade actions against China, accordiong to three senior administration officials cited by Reuters.

In another development, the US State Department named China as one of the worst offenders in human trafficking and forced labor, partly over forced laborers from North Korea.

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