China has announced it will limit North Korea's oil exports in line with UN sanctions imposed on Pyongyang's nuclear and missile programs. Beijing is the last major trading partner, fuel supplier and diplomatic ally of the North Korean regime. Exports of refined oil to North Korea will be limited to 2 million barrels per year. LNG sales will be banned altogether. Currently, however, the current energy supply to Pyongyang is not known.
Since October 1, Beijing has banned all exports of refined oil products to the N. Korea. China also bans North Korean imports, with the ban coming into force immediately. Textiles are one of the last major foreign exchange sources for the Communist regime after UN sanctions, whereby Beijing stopped buying coal, iron ore, seafood and other commodities.
90% of North Korea's trade is being made with China, meaning that Beijing's cooperation is key to all attempts to stop the North Korean nuclear weapons programs and missiles.
Chinese leaders have long been defending North Korea for a long time, but they are increasingly discontent with the Kim Chen-ni regime. They endorsed the latest UN Security Council sanctions, but do not want to put too much pressure on the regime to avoid its collapse. In addition, they are opposed to measures that may be affecting ordinary North Koreans.
On the chart, we can track North Korea's total exports to China. At the beginning of the year there was a sharp decline, and then stabilization. Following China's new sanctions, market participants expect exports to fall below the bottom formed at the beginning of the year.
Source: Bloomberg Pro Terminal
Jr Trader Petar Milanov
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