BRITISH DCM IN PYONGYANG ON CONDITIONS IN NORTH

C O N F I D E N T I A L SEOUL 000749

SIPDIS

SIPDIS

NSC FOR CHA

E.O. 12958: DECL: AFTER KOREAN REUNIFICATION
TAGS: PREL ECON ETRD PHUM EAGR KS KN
SUBJECT: BRITISH DCM IN PYONGYANG ON CONDITIONS IN NORTH
KOREA

REF: 05 SEOUL 1264

Classified By: POL M/C JOSEPH Y. YUN. REASONS 1.4 (B, D).

SUBJECT
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1. (C) British DCM to Pyongyang Lindsay Skoll told poloffs
on March 6 that the Kim Jong-il regime displayed no signs of
instability, opining that through the effective use of the
state security apparatus and continued economic assistance
from China and the ROK, the regime's staying power might be
nearly infinite. China's economic influence in North Korea
was subtle but pervasive, especially in its near-dominance of
the DPRK's resource industries. Skoll predicted the DPRK
would return to the Six Party Talks, but noted that North
Korean officials were infuriated at China's role in the
financial actions taken against Banco Delta Asia (BDA).
Noting a sharp rise in exchange rates since late 2005, Skoll
reasoned that the BDA case had caused a serious shortage of
hard currency. Reports of the improved food situation in
North Korea appeared largely cosmetic, and living conditions
in non-urban parts of North Korea remained "medieval." The
government's policy of harvest multiple crops from the same
plot of land had all but exhausted the soil capacity. END
SUMMARY.

NO SIGN OF REGIME COLLAPSE
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2. (U) On March 6, British DCM to the DPRK Lindsay Skoll met
with poloffs to share her observations on North Korea's
social, political, and economic conditions. Skoll said there
was no evidence that the DPRK was close to a collapse. On
the contrary, the regime's capacity for survival appeared
almost infinite. The state effectively restricted movement
and information, thus crippling any effort to organize a
coup. The key to overthrowing the regime, asserted Skoll,
was the ability to organize and control the military. The
state security apparatus virtually guaranteed that this was
denied to anyone. The members of the ruling elite were fully
aware that their welfare was tied to Kim Jong-il and the
regime and would not do anything to jeopardize the status
quo. The effective state security apparatus also instilled a
pervasive sense of fear, even among relatively senior
officials. Skoll recalled Foreign Ministry officials who
disappeared for about six months, presumably sent to
reeducation camps. She specifically cited one individual who
returned as an empty shell, with no hint of his original
personality. Although information from the outside world --
especially from South Korea -- was spreading slowly, Skoll
believed there would be no instability in North Korea until
Kim Jong-il's death.
.
CHINA'S DISCREET, BUT PROFOUND ROLE IN PROPPING UP REGIME
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3. (C) Skoll pointed out that China and South Korea's
interest in preventing regime collapse guaranteed continued
economic assistance. The PRC, in particular, had a profound
impact on the regime's survival. Although not readily
visible, China's economic presence in the DPRK was pervasive.
For example, Chinese firms appeared to dominate the DPRK's
resource industries, such as metals. Skoll confirmed reports
that Chinese businesses had expanded investment in North
Korea, in part, to recapture money owed by the DPRK for
previous projects. This phenomenon of expanding unsuccessful
investments was so common that it strongly implied a degree
of control from Beijing. Indeed, the magnitude of Chinese
economic activity alone suggested that the investment was
policy-driven. (NOTE: Per reftel, former British Ambassador
to Pyongyang David Slinn told us last year it was unclear
whether Beijing could exert direct control over Chinese
entrepreneurs. END NOTE.) Border trade was also on the
rise, Skoll reported, adding that she had witnessed North
Koreans dumping truckloads of ginseng in exchange for
television sets and other goods in Dandong, China.
.
HARD CURRENCY SHORTAGE AND BANCO DELTA ASIA
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4. (C) Skoll thought the DPRK would likely return to the Six
Party Talks, although the financial actions against Banco
Delta Asia (BDA) remained a big stumbling block. She was
certain that the freezing of the DPRK's assets was hurting
the regime, as evinced by the shortage of hard currency, and
that North Korean officials were infuriated by the situation,
especially China's actions. Skoll pointed out, however, that
a dramatic rise in the exchange rate coinciding with
financial actions taken against Banco Delta Asia in Macau was
the most salient issue in current DPRK economics. Hard
currency was noticeably short in supply. The current black
market exchange rate was KPW 7,500 to the Euro, up from KPW
4,000 in December, and KPW 3,000 in the fall. (NOTE: David
Slinn, the former British Ambassador to Pyongyang, told
poloffs last year that the exchange rate had averaged between
KPW 2,200-2,400 to the Euro. END NOTE.)
.
REPORTED IMPROVEMENT IN FOOD SITUATION LARGELY COSMETIC
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5. (C) According to Skoll, market activity in Pyongyang did
not appear particularly vibrant compared to previous years.
The Tong-il Market, for example, did not stock a greater
number of goods than in the past. Rice was no longer
available in the formal markets, but could still be found on
the black market.


6. (C) Skoll, who will complete her two-year assignment in
October, remarked that living conditions in North Korea were
harsh, in spite of a bumper harvest in 2005. The food
situation was better toward the end of the year due to a
combination of favorable weather conditions and mass
mobilization of people for planting and harvesting rice
throughout 2005. Skoll said, however, that the ROKG's figure
of a ten percent increase in rice production was overly
optimistic. The traditional lean months of April and May
would be difficult regardless of the bumper crop. For
example, even Foreign Ministry officials had been visibly
gaunt last Spring. The good harvest and the widespread
"feel-good" atmosphere during the August-October Arirang
Festival -- during which Pyongyang residents' food rations
nearly doubled -- provided the cosmetic appearance of
improvements in the food situation. This phenomenon was not
sustainable however, as current average rations approached
the 600-gram mark depending on people's work unit.
.
COPING WITH THE COLDEST WINTER IN A CENTURY
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7. (C) Noting the harsh weather the Korean Peninsula
experienced during December 2005 (reportedly the coldest
December in 40 years) Skoll took it for granted that a
significant number of people perished from the cold.
Pyongyang residents, including the relatively affluent, coped
by huddling together in their apartments for shared body
heat. Many performed physical labor outdoors to avoid the
damp coldness of their dwelling units in old, concrete
buildings. Hard drinking was another coping mechanism.
Skoll added that the power supply was better in February and
the weather had also warmed somewhat.
.
LIMITED ABILITY TO DISTRIBUTE FOOD, VIRTUAL SOIL EXHAUSTION
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8. (C) Skoll stressed that living conditions in Pyongyang
and other urban centers were incomparably better than
provincial areas, where the situation was "medieval." (She
first described conditions outside Pyongyang as primitive,
then corrected herself, quipping that "primitive" conveyed an
inaccurately positive description of the situation.) For
example, the increased agricultural output in 2005 appeared
to make little difference in the provinces due to their
limited ability to use the bumper crop. Machinery was old
and dilapidated, and no fuel was available to operate the
machines anyway. Even if the crop were harvested
successfully, storage was inadequate or unavailable. Even if
storage was found, transportation to populations centers was
unsatisfactory or nonexistent. The result was a huge waste
of such food as was produced.


9. (C) Policies that exhausted the capacity of farms to

produce crops were another serious problem, said Skoll. In
some places, the regime was attempting triple cropping,
leaving the soil so nutritionally exhausted that no amount of
fertilizer assistance from South Korea would make a
difference. Baked, scorched earth was common throughout the
countryside. Citing one telling example, Skoll recalled
seeing workers harvesting still-unripe maize on August 10.
When Skoll asked about the apparent folly of harvesting the
crop before it was ready, local authorities cited orders to
harvest on that day, saying they had a four-day window to
harvest all the maize in that plot of land and plant a new,
third crop. The provinces also suffered from landslides
during the summer monsoon season due to large-scale
deforestation.
VERSHBOW