China’s exports to the United States surged last month as its merchants rushed to fill orders ahead of a jump in U.S. tariffs on Chinese goods.

Its shipments to the United States climbed 13 percent in July from a year earlier, to $41.5 billion, after a roughly similar rise in June, customs data show.

At the same time, Beijing’s trade surplus with the United States — a frequent source of anger and threats from President Donald Trump — grew 11 percent to $28 billion.

Chinese exporters appear to be trying to ship their goods to the United States before tariffs that Trump is imposing in a fight over technology policy take full effect. The trade war between the world’s two biggest economies has forced many multinational companies to reschedule purchases and rethink where they buy materials and parts to try to dodge or blunt the effects of tit-for-tat tariffs between Washington and Beijing.

Beijing has warned that its exporters face “rising instabilities” after Washington slapped 25 percent duties on $34 billion of Chinese goods last month in response to complaints that China steals or pressures foreign companies to hand over technology. Beijing has retaliated against the U.S. tariffs with higher duties on a similar amount of American goods.

On Tuesday, the Trump administration announced that it would proceed with previously announced 25 percent tariffs on an additional $16 billion of Chinese imports starting Aug. 23. On Wednesday, China hit back by saying it would impose identical 25 percent punitive duties on $16 billion of U.S. goods, including cars, crude oil and scrap metal, also to take effect Aug. 23.

A Commerce Ministry statement labeled Trump’s decision to go ahead with the latest U.S. tariffs “very unreasonable.” Beijing’s retaliatory move was a “necessary response” to “safeguard its legitimate interests,” the ministry said on its website.

Escalating its tensions with Beijing, the Trump administration has also threatened to impose penalties on an additional $200 billion in Chinese exports to the United States. Beijing says it is ready to retaliate against $60 billion of American imports. (Beijing cannot tax an equal amount of U.S. products, because the United States exports far fewer goods to China than it imports.)

Tariffs are taxes on imports. They are meant to protect homegrown businesses and put foreign competitors at a disadvantage. But the taxes also exact a price on domestic businesses and consumers who buy imports and end up paying more for them.

In July, China’s global exports surged 12 percent, even faster than an 11 percent increase in June. At the same time, overall imports to China jumped 27 percent last month.

Exports to the rest of the world might have been boosted by a weaker Chinese currency. The yuan has declined by 8 percent this year against the dollar and by about 4 percent against a basket of global currencies. A weakening currency makes a nation’s goods more affordable for overseas buyers.

China’s trade conflict with the United States, coupled with weakening global demand, has compounded the challenges for Beijing. Economic growth has slowed since regulators tightened controls on bank lending to rein in surging debt.

The unusually strong July import figures reflected higher prices, according to Julian Evans-Pritchard of Capital Economics.

“We expect export growth to cool in the coming months, though this will primarily reflect softer global growth rather than U.S. tariffs,” Evans-Pritchard said in a report. “Import growth is likely to slow as domestic headwinds continue to weigh on economic activity.”

China’s global trade surplus narrowed by 40 percent from a year earlier to $28 billion. In the meantime, its trade gap with the 28-nation European Union contracted 8 percent to $11.2 billion.

China is running out of American goods to hit with retaliatory tariffs given the two nations’ lopsided trade balance. Last year’s imports from the United States totaled about $130 billion. That leaves only about $20 billion for penalty tariffs after increases that have already been imposed or threatened on U.S. goods are counted.

Beijing has stepped up efforts, so far without success, to recruit governments including Germany and France as allies. Those nations have criticized Trump’s tactics, but they share U.S. complaints about Chinese industrial policy and market barriers.
…

U.S. President Donald Trump predicted Tuesday the United States and China will have a “fantastic trading relationship” but one that will be different from the way it has been under previous presidents.

Speaking to a group of invited business leaders, Trump said he wants China to do well, but also wants Chinese policies to treat the United States fairly.

Trump has frequently highlighted China as a target of what he says are unbalanced trade relationships he wants to alter in order to benefit American workers. He has implemented more than $30 billion in new tariffs on Chinese goods, and on Tuesday his administration said another $16 billion in tariffs would go into effect later this month.

China has said it plans to counter with tens of billions of dollars in tariffs on U.S. exports. It also released its latest trade figures Tuesday showing a surge in exports in July despite the U.S. actions.

Paul Hanke, a professor of applied economics at the Johns Hopkins University and a former Reagan Administration trade official, told VOA the U.S. trade deficit with China is “really not a problem.”

He compared the situation to the trade deficit the United States had with Japan in the 1980s that prompted President Ronald Reagan to institute the type of protectionist policies Trump is now supporting. But Hanke said he expects China to have a stronger response than the Japanese did.

“China is a big power and they’re going to play hard ball with the United States, so this will get worse, not better,” he said.

Trump said Tuesday his administration has already used tax cuts, deregulation and trade policies to boost the U.S. economy, which grew by 4.1 percent in the second quarter of this year.

The president falsely asserted that level of growth was a record, or close to a record. Since 2011, the U.S. economy has posted three separate quarters above 4.7 percent growth.

Trump predicted his policies would push growth even higher, surpassing percent in the next quarter “as trade deals come in” that are “sane and fair for our country.”

He also said that next week the White House would make an announcement regarding his goal of making prescription drugs more affordable.

Trump gave no details other than to say the coming action would “get them down really, really substantially.”

During Tuesday’s event he highlighted his objection last month to planned price increases by pharmaceutical giant Pfizer, which quickly rolled back it prices to prior levels. Pfizer said it would keep the old prices until Trump can put in place a plan to strengthen the healthcare system, or the at the end of the year, whichever comes first.

Victor Beattie contributed to this report.
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New York City’s iconic but imperiled yellow cab industry may be getting help from lawmakers who want to pump the brakes on fast-expanding ride-hailing services like Uber and Lyft.

In what would be a first-in-the-nation step if passed, the City Council on Wednesday is set to vote on proposals that would cap new licenses for car service drivers for one year while officials study the massive changes rippling through the taxi industry.

Other proposals would set minimum pay levels for all drivers and minimum fares, which are now regulated for traditional cabs but not their multitudes of new competitors.

The legislation is a reaction to stories of financial hardship told by drivers, who complain that there are so many Uber cars on the road now that it is getting hard for anyone to make a decent living.

“There has to be a pause button that’s going to give people some breathing room,” said Bhairavi Desai, of the New York Taxi Workers Alliance.

City Council Speaker Corey Johnson said lawmakers aren’t against the ride-hailing newcomers. “We think they’ve actually filled a need,” he said. “We also believe there needs to be a regulatory framework in place.”

For generations, taxi drivers in New York were protected by rules that restricted competition. Around 13,500 yellow cabs had the special licenses, called medallions, needed to pick up passengers on the street. Several thousand more drivers worked for black car companies that dispatched vehicles by phone, mostly in the outer boroughs of Bronx, Queens, Staten Island and Brooklyn, where yellow cabs generally wouldn’t travel.

That system was smashed when the city began allowing passengers to use smartphone apps to hail cars almost anywhere.

The change kicked off a dizzying increase in the number of car service drivers from about 65,000 in 2015 to 100,000 now.

$1 million taxi medallions

One unforeseen development has been plunging value of the traditional taxi medallions. As recently as four years ago, they were changing hands at prices reaching $1 million. They were considered such a ticket to guaranteed income, banks allowed owners to borrow huge sums against them for home mortgages or school loans.

Now, many of those loans are coming due. Drivers no longer have the income to pay them off. And with medallions now trading at $200,000 or less, owners don’t have the collateral to refinance.

Driver Lal Singh said he owes $312,000 on a medallion he thought would be his ticket to middle-class comfort. But he can’t sell at a price high enough to cover his debt. So at age 62, he’s still driving 14-hour shifts, despite having high blood pressure and diabetes, with every penny going to pay off his debt.

“Everybody say, ‘This is my retirement. Some income will come in from the medallion. We will survive,'” he said. “But now we have no hope and I don’t see any place, which direction I should go.”

Six drivers have taken their own lives in the last year, including one who shot himself in his car in front of City Hall after railing against politicians and Uber in a newsletter column.

“I will not be a slave working for chump change,” Douglas Shifter wrote. “I would rather be dead.”

Drivers previously pushed for a cap on new competition in 2015, but were beaten back by ride-hailing companies. The same companies are now pushing back on the new proposals, saying they would prevent them from replacing drivers who quit and lead to reduced service.

“We’re really concerned about the process and the speed with which the council is trying to ram this through,” said Joseph Okpaku, vice president of public policy at Lyft.

Racial profiling argument

Uber spokesman Josh Gold said a cap on new licenses would reverse the progress made extending service to neighborhoods poorly served by traditional taxis.

That argument has gotten support from some civil rights activists like the Rev. Al Sharpton, who have long criticized the yellow cab industry for discrimination and profiling of minorities.

“They’re talking about putting a cap on Uber, do you know how difficult it is for black people to get a yellow cab in New York City?” Sharpton wrote on Twitter.

The level of upheaval in the industry hasn’t been seen on this scale since the first half of the 20th century, when the medallion system was put in place to deal with issues of competition, said Graham Hodges, a professor at Colgate University.

Flaws in that system, like racial profiling and inadequate demand, “made it easy for Uber, Lyft and the others to come in, say, ‘We’re going to provide a much better service,”‘ he said.

“That doesn’t mean those flaws couldn’t be remedied without destroying the system,” he said.
…

Venezuela’s state-run oil company PDVSA has limited the damage from an unprecedented slump in crude exports by transferring oil between tankers at sea and loading vessels in neighboring Cuba to avoid asset seizures.

But the OPEC member nation is still fulfilling less than 60 percent of its obligations under supply deals with customers. Venezuela has been pumping oil this year at the lowest rate in three decades after years of underinvestment and a mass exodus of workers. The state-run firm’s collapse has left the country short of cash to fund its embattled socialist government and triggered an economic crisis.

PDVSA’s problems were compounded in May when U.S. oil firm ConocoPhillips began seizing PDVSA assets in the Caribbean as payment for a $2 billion arbitration award. An arbitration panel at the International Chamber of Commerce (ICC) ordered PDVSA to pay the cash to compensate Conoco for expropriating the firm’s Venezuelan assets in 2007.

The seizures left PDVSA without access to facilities such as Isla refinery in Curacao and BOPEC terminal in Bonaire that accounted for almost a quarter of the company’s oil exports. Conoco’s actions also forced PDVSA to stop shipping oil on its own vessels to terminals in the Caribbean, and then onto refineries worldwide, to avoid the risk the cargoes would be seized in international waters or foreign ports.

Instead, PDVSA asked customers to charter tankers to Venezuelan waters and load from the company’s own terminals or from anchored PDVSA vessels acting as floating storage units.

The state-run company told some clients in early June it might impose force majeure, a temporary suspension of export contracts, unless they agreed to such ship-to-ship transfers. PDVSA also requested the customers stop sending vessels to its terminals until it could load those that were already clogging Venezuela’s coastline.

Initially, customers were reluctant to undertake the transfers because of costs, safety concerns and the need for specialist equipment and experienced crew.

But PDVSA has managed to export about 1.3 million barrels per day (bpd) of oil since early July, up from just 765,000 bpd in the first half of June, according to Thomson Reuters data and internal PDVSA shipping data seen by Reuters.

That was still 59 percent of the country’s 2.19 million bpd in contractual obligations to customers for that period, and some vessels are still waiting for weeks in Venezuelan waters to load oil.

There were about two dozen tankers waiting this week to load over 22 million barrels of crude and refined products at the country’s largest ports, according to Reuters data.

“We are not tied to one option or a single loading terminal,” PDVSA President Manuel Quevedo said on Tuesday of the company’s exports. “We have several (terminals) in our country and we have some in the Caribbean, which of course facilitate crude shipping to fulfill our supply contracts.”

Cuban connection 

PDVSA has also used a route through Cuba to ease the impact of the Conoco seizures. That route is for fuel rather than crude.

The Venezuelan company has used a terminal at the port of Matanzas as a conduit mostly for exporting fuel oil, according to two people familiar with the operations and Thomson Reuters shipping data. Venezuela’s fuel oil is burned in some countries to generate electricity.

Two tankers set sail from the Matanzas terminal for Singapore between mid-May and early July, Reuters data showed. Each ship carried around 500,000 barrels of Venezuelan fuel, Reuters data shows.

In recent months, Venezuela has been shipping fuel to Matanzas in small batches, according to the data.

PDVSA and Cuba’s state-run oil firm Cupet have used Matanzas to store Venezuelan crude and fuel in the past but exports from the terminal to Asian destinations are rare.

That is in part because vessels that use Cuban ports cannot subsequently dock in the United States due to the U.S. commercial embargo on Cuba.

Cupet did not respond to requests for comment. PDVSA has also used ship-to-ship transfers to fulfill an unusual supply contract it has with Cuba’s Cienfuegos refinery.

The refinery dates from the 1980s — when Cuba was a close ally of the Soviet Union during the Cold War — and the facility was built to process Russian crude.

PDVSA typically uses its own or leased tankers to bring Russian crude from storage in the nearby Dutch Caribbean island of Curacao to Cienfuegos. But it is now discharging the imported Russian oil at sea in Cayman Islands’ waters via these seaborne transfers.

ConocoPhillips last month ratcheted up its collection efforts by moving to depose officials from Citgo Petroleum, PDVSA’s U.S. refining arm, arguing it had improperly claimed ownership of some PDVSA cargoes. Citgo declined to comment.

ConocoPhillips is also preparing new legal actions to get Caribbean courts to recognize its International Chamber of Commerce arbitration award. If it succeeds in those efforts, it would be able to sell the assets to help satisfy the ruling.
…

Already threatened by escalating U.S. taxes on its goods, China is about to find it much harder to invest in U.S. companies or to buy American technology in such cutting-edge areas as robotics, artificial intelligence and virtual reality.

President Donald Trump is expected as early as this week to sign legislation to tighten the U.S. government’s scrutiny of foreign investments and exports of sensitive technology.

The law, which Congress passed in a rare show of unity among Republicans and Democrats, doesn’t single out China. But there’s no doubt the intended target is Beijing. The Trump administration has accused China of using predatory tactics to steal American technology.

“As a policy signal, it speaks with a very loud voice,” said Harry Clark, head of the international trade practice at the law firm Orrick. “Leading decision makers and Congress are very concerned about technology transfer to China.”

The Trump administration has already imposed tariffs on $34 billion in Chinese exports, is preparing taxes on a further $16 billion and has threatened to target an additional $200 billion of Beijing’s exports and maybe still more.

As part of the same punitive campaign, Trump had initially ordered the Treasury Department to draft investment restrictions aimed specifically at China. But in late June, Trump decided instead to back Congress’ effort to tighten existing investment restrictions and export controls on all countries, rather than China alone.

The new law strengthens reviews of foreign investment by the existing Committee on Foreign Investment in the United States, or CFIUS, which is led by Treasury Secretary Steven Mnuchin. The committee can now review any investments that grant foreigners access to a U.S. company’s high-tech trade secrets. Before the change, such reviews were done only when a foreigner gained control of a company.

The new law also gives the committee oversight of real estate deals that are deemed to pose a national security risk by putting foreigners in “close proximity” to government offices and military bases. The legislation will also crack down on deals that appear structured to evade such oversight.

Congress is also directing the committee to go beyond specific cases to identify patterns in foreign investment — if, for example, Chinese companies are acquiring a specific technology — and to work with U.S. allies that share its concerns about Beijing’s high-tech ambitions.

“Treasury can now share information,” said Rod Hunter, a partner at the Baker McKenzie law firm and a former White House economic adviser. “They used to have to do all kinds of backflips and workarounds with allied governments to deal with this sort of issue.”

The new law also strengthens the Commerce Department’s oversight of high-tech exports. Government agencies will identify sensitive “emerging and foundational technologies” that will be subject to tougher export controls.

Hunter said he thought the stricter oversight of high-tech exports could potentially impose a bigger impact on China than the tariffs the Trump administration has imposed on Beijing’s exports to the United States.

Still, the new measures could burden U.S. companies that will find it harder to attract Chinese investment or to share with Chinese partners or customers technology that the U.S. government might deem sensitive.

“It could be that we’re pushing American tech firms out of China,” said Derek Scissors, China specialist at the conservative American Enterprise Institute.

The crackdown reflects a sharp reversal in U.S. attitudes toward Chinese investment. From virtually nothing in 2000, Chinese direct investment in the United States (including new plants and offices and acquisitions of American companies) reached a record $46 billion in 2016, according to the Rhodium Group research firm.

Chinese investors sank money into U.S. companies involved in artificial intelligence, robotics and blockchain technology, which is used to do business in cryptocurrencies. U.S. policymakers began to worry about what the Chinese were up to, especially after leaders in Beijing made their ambitions clear: They intend to nurture homegrown Chinese companies that will contend for global dominance in such fields as electric cars, robotics and medical devices.

In March, the Office of the U.S. Trade Representative reported that Chinese investors were using money provided by Beijing to outbid private companies and pay above-market rates for technology and talent. And last year, a Defense Department report sounded the alarm about China obtaining technology that could have military uses.

“The line demarcating products designed and used for commercial versus military purposes is blurring,” said the report from the Pentagon’s Defense Innovation Unit Experimental.

It noted that virtual-reality gaming was becoming as sophisticated as what the armed forces use for battlefield simulations and that facial recognition technology used in social media can track terrorists.

Even before the new law, U.S. reviews of Chinese investments were becoming stricter. In January, the government effectively blocked the acquisition of the Dallas-based money transfer service MoneyGram by the Chinese firm Ant Financial. Its concern was that the deal would give China access to the financial records of millions of Americans, including members of the military.

The result has been a deepfreeze in direct Chinese investment in the United States: It tumbled 36 percent last year to $29 billion. In the first half of this year, such investment dropped to its lowest level in seven years — $1.8 billion — down 90 percent from the first six months of 2017, according to Rhodium Group.
…

Партія «Об’єднання «Самопоміч» стверджує, що відмовилася від внеску осіб, які мали податковий борг, в передбачений законом термін.

Згідно з повідомленням, яке оприлюднила партія, НАЗК поінформувало «Самопоміч» про незаконні внески 3 липня 2018 року, і упродовж трьох днів Київська міська організація «Самопомочі» повернула кошти внескодавцям.

Раніше НАЗК повідомляло, що направило до суду адміністративні протоколи з приводу семи внесків, які здійснили п’ятеро фізичних осіб. За даними агентства, ці люди мали податкові борги, а відтак, згідно законодавства, не мали права робити грошові внески на підтримку політичних партій.
…

Chinese state media are reacting to U.S. President Donald Trump’s trade actions against China in diverse ways. While denouncing the U.S. leader’s actions, Beijing is also using its media to calm markets and express concern about the impact on the Chinese economy.

An editorial in the Communist Party’s People’s Daily said that by raising tariffs and then offering negotiations, the Trump administration is trying to use “carrot-and-stick diplomacy to bully China into unilateral trade concessions.” The paper went on to say “China will eventually defeat the trade blackmail of the U.S. and it is impossible to force China into surrender to the U.S. coercion.”

However, a Chinese senior official attached to the country’s Supreme Court recently expressed worry that the trade friction with the U.S. would result in bankruptcies for state-owned companies.

“It is hard to predict how this trade war will develop and to what extent,” Du Wanhua, deputy director of an advisory committee to the Supreme People’s Court said in an article also in the People’s Daily.

“But one thing is sure: if the U.S. imposes tariffs on Chinese imports following an order of $60 billion, $200 billion, or even $500 billion, many Chinese companies will go bankrupt,” he said.

Ineffective retaliation

Beijing recently slapped additional duties ranging from five to 25 percent on $60 billion worth of American goods. This was in response to Trump administration’s proposal of a 25 percent tariff on $200 billion worth of Chinese imports.

Experts said China has realized that retaliatory action would not persuade the U.S. President to stop his trade actions.

“They switched gear a bit because, I think, they realized that they have the weaker hand here in terms of their ability to retaliate, partly because they import far less from the U.S. than the U.S. imports from China, but also [because] a portion of [goods] they import from China is, you know, high-tech that are quite difficult to import from elsewhere,” Julian Evans-Pritchard, senior China economist at Capital Economics told VOA.

Washington says its actions are aimed at correcting the level playing field because the U.S. suffers from a severe trade deficit in its business with China.

Reassuring markets

Chinese officials are trying to reassure markets and the local population that the U.S. moves would have little impact. Huang Libin, a spokesman for the Ministry of Industry and Information Technology recently said there has not been any significant impact on industrial output.

“We hear complaints from [Chinese] companies that U.S. clients have requested a suspension of orders and deliveries, but so far it has had only a limited impact on the industrial sector,” he said.

The state-run Global Times, responded to White House economic adviser Larry Kudlow’s remarks that China should not underestimate Trump’s resolve, saying that China was not afraid of “sacrificing short-term interests”. “China has time to fight to the end. Time will prove that the U.S. eventually makes a fool of itself,” the paper said.

The official China Daily has joined government officials in an effort to reassure the market. “Market participants foresee a relatively stable Chinese currency in the near term, without fear of impacts from the U.S.-China trade dispute. They expect solid economic growth momentum amid policy fine-tuning,” it said.

“Leading China’s economy on a stable and far-reaching path, we have confidence and determination,” another commentary in the main edition of the People’s Daily said.

Another reason China is worried is because Washington’s actions have come when the domestic Chinese economy is going through a bad time. The last three months have seen a series of corporate defaults besmirching China’s reputation for many fewer loan defaults as compared to most developed countries.

“[The] economy is now slowing and balance sheets are coming under strain after they tightened monetary policy last year and pushed up borrowing costs. This is the main reason why we are seeing this uptrend in bankruptcies and uptrend in corporate bond defaults,” Evans-Pritchard said. “I think the main driver is domestic. Obviously, the U.S. tariffs won’t help and they are going to cause some damage,” he said.

In its latest report, Capital Economics said that it would be naive to dismiss the possibility of financial instability given the rapid rise in debt levels in the country over the past decade. Chinese banks face the grave emerging scenario of bad loans and non-performing assets weighing heavily on their balance sheets, it said.

 
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Longtime PepsiCo CEO Indra Nooyi will step down as the top executive and the world’s second-largest food and beverage company.

Nooyi, who was born in India, is a rarity on Wall Street as a woman and a minority leading a Fortune 100 company. She oversaw the company during a turbulent time in the industry that has forced PepsiCo, Coca-Cola Co., Campbell Soup Co. and Mondelez International Inc. to shake up product portfolios that had been the norm for decades as families seek healthier choices.

Nooyi, 62, has been with PepsiCo Inc. for 24 years and has held the top job for 12.

Ramon Laguarta, who has been with the company for more than two decades, will take over as CEO in October, the company said Monday. Nooyi will remain as chairman until early next year.

“Today is a day of mixed emotions for me. This company has been my life for nearly a quarter century and part of my heart will always remain here,” Nooyi said in a prepared statement. “But I am proud of all we’ve done to position PepsiCo for success, confident that Ramon and his senior leadership team will continue prudently balancing short-term and long-term priorities, and excited for all the great things that are in store for this company.”

Nooyi took over as CEO in October 2006. Between 2007 and 2017, revenue at Pepsico has risen about 61 percent.

The 54-year-old Laguarta has held various positions in his 22 years at PepsiCo, which is based in Purchase, New York. He currently serves as president, overseeing global operations, corporate strategy, public policy and government affairs. He previously served as CEO of the Europe Sub-Saharan Africa region. Prior to joining PepsiCO, Laguarta worked at confectionary company Chupa Chups.

Laguarta will be the sixth CEO in PepsiCo’s history, with all of them coming from within the company.

 
…

Міністерство юстиції стягнуло 250 мільйонів гривень на користь працівників, яким роботодавці заборгували заробітну плату. Про це повідомив голова відомства Павло Петренко.

Петренко нагадав, що 2 квітня Мін’юст започаткував кампанію з ліквідації боргів по зарплаті. До переліку заходів входить створення регіональних штабів та виконавчих груп та розроблено технологічну картку щодо роботи з боржниками, які збанкрутували.

Раніше Міністерство юстиції публікувало перелік найбільших боржників по виплаті зарплати. Станом на червень цього року «лідером» був футбольний клуб «Металіст».

За інформацією Державної служби статистики, загальна заборгованість із зарплат в Україні в липні 2018 року склала понад 2,7 мільярди гривень.
…

Russia engaged in more extensive oil exports to North Korea than had been previously reported, by setting up an illicit trade network that is likely still being used today to evade United Nations sanctions, according a South Korean research organization.

A recent report issued by the Asan Institute for Policy Studies in Seoul used Russian customs data to document how “one North Korean state enterprise purchased 622,878 tons of Russian oil worth $238 million,” between 2015 and 2017.”

While China is North Korea’s main oil supplier, the ASAN estimate for Russian oil exports to North Korea is significantly higher than the $25 million in sales for the same period that was reported by the Korea International Trade Association (KITA) in Seoul.

“Smuggling has always been an important element in the cross-border trade between North Korea and it’s important allies. What the Chinese government and the Russian government to a lesser extent have been doing is to turn a blind eye to these activities,” said Go Myong-Hyun, a North Korea analyst with the Asan Institute For Policy Studies in Seoul.

Russian evasions

The Asan report comes amid allegations that Russia potentially violated international sanctions imposed on North Korea by granting thousands of new work permits to North Korean laborers. Moscow had denied any such actions.

The Trump administration also imposed targeted U.S sanctions on a Russian bank for allegedly doing business with a person blacklisted for involvement with North Korea’s nuclear weapons program.

On Friday U.S. Ambassador to the United Nations Nikki Haley called the allegations against Russia, “very troubling.” U.S. Secretary of State Mike Pompeo called on “the Russians and all countries to abide by the U.N. Security Council resolutions and enforce sanctions on North Korea,” while attending the ASEAN Regional Forum in Singapore on Saturday.

United Nations sanctions imposed in September of 2017 prohibit member countries from “providing work authorizations” permits to North Korean workers.

In December of 2017 the U.N. Security Council further strengthened the sanctions to cut North Korean oil imports by a third, and to impose a total export ban on North Korea’s $3 billion coal and other mineral industries, its $800 million clothing manufacturing output, and its lucrative seafood industry.

Shell companies

The ASAN report is centered on the activities of the Independent Petroleum Company (IPC), a Russian firm that the U.S. Treasury Department targeted in June 2017 for violating restrictions on selling oil to North Korea. IPC has since changed its name. 

IPC was found to have sold large quantities of oil to Russian affiliated companies, such as the Pro-Gain Group Corporation (PGGC) that was actually operating on behalf of North Korea’s state owned Foreign Trade Bank. The North Korean bank has been under U.S. sanctions since 2013.

“The entities involved tried to cover up the transactions by falsifying destination countries for the purchases,” said the ASAN report entitled The Rise of Phantom Traders.

The report notes that PGGC is owned by Taiwan citizen Tsang Yung Yuan. Tsang was sanctioned earlier this year by the U.S. for facilitating North Korean coal exports using a Russia-based North Korean broker. PGGC has headquarters listed both in Taipei and Samoa.

North Korea has also been accused of conducting illicit ship-to-ship transfers of oil, and to conceal these operations by disabling the Automatic Identification System (AIS) transponder of vessels in order to hide their location. There have also been reports of North Korea changing vessel names and identification numbers, even painting over or altering the numbers on the ships’ exteriors.

Rajin-Khasan Exemption

A large number of oil shipments were also delivered to the Russian-North Korean border village of Khasan, which is connected by rail to the North Korean port terminal at Rajin.

The Rajin-Khasan rail project was exempted from U.N. sanctions to allow Russia to use the North Korean seaport to export Russian coal.

Trade records show that oil deliveries arriving in Khasan were on their way to China, but the report suggests it is more likely North Korea was the final destination. Since 2015, the ASAN report says, only PGGC and Velmur, two companies with ties to North Korea, listed Khasan as the point of delivery for oil shipments. 

According to the ASAN report, Moscow and Pyongyang are likely exploiting the Rajin-Khasan rail exemption to evade restrictions on North Korean oil imports.

In 2016, South Korea suspended its participation in the Rajin-Khasan rail project to comply with U.S. unilateral sanctions imposed on North Korea trade.

Recently some officials in Seoul have called for these sanctions affecting the Rajin-Khasan Project to be lifted, so that investment can proceed in connecting South Korean rail both to North Korea, and to the intentional railway system beyond that can reach Europe.

Sanctions effectiveness

The sanctions are intended to cut North Korea off from foreign currency and materials needed for weapons production, and to impose economic pain on the leadership to persuade Pyongyang to give up its nuclear and ballistic missile development programs.

Despite increased reports of sanctions evasions, Cheong Seong-chang, a North Korea analyst with the Sejong Institute in South Korea, says the recent report of an 88 percent decline in North Korean trade in the first quarter of this year indicates the economic situation there is in dire condition.

“If the sanctions from the U.N. Security Council continue, economic breakdown in North Korea will be inevitable,” said Cheong.

Talks between Washington and Pyongyang have made little significant progress toward ending the North’s nuclear program since June, when North Korean leader Kim Jong Un reaffirmed his commitment to denuclearization during his meeting with U.S. President Donald Trump in Singapore.

The U.S. insists that the North completely end it nuclear weapons program before any concessions are granted, while Pyongyang wants early sanctions relief.

On Sunday Pompeo said that North Korean Foreign Minster Ri Yong Ho reiterated a “very clear” commitment to denuclearize when the two met at the ASEAN conference in Singapore.

Lee Yoon-jee contributed to this report.
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