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North Korea fuel prices surge after China cuts oil sales
July 17, 2017 / 6:44 AM / 3 months ago

North Korea fuel prices surge after China cuts oil sales

SEOUL (Reuters) - Gasoline and diesel prices surged in North Korea in the weeks after a Chinese state oil company suspended fuel sales to the reclusive state, according to data reviewed by Reuters and an interview with a North Korean defector.

Trucks move across the bridge linking North Korea with the Chinese border city of Dandong in this March 3, 2016 file photo. REUTERS/Megha Rajagopalan

China National Petroleum Corp (CNPC), a state-controlled company, halted diesel and gasoline sales to North Korea “over the last month or two”, amid international pressure on Pyongyang to curb its nuclear and missile programs, Reuters exclusively reported on June 28.

Scrutiny of China’s commercial ties with its isolated neighbor intensified further following North Korea’s first test of an intercontinental ballistic missile two weeks ago.

The price of gasoline sold by private dealers in Pyongyang and the northern border cities of Sinuiju and Hyesan jumped to $2.18 per kg ($2.92 per liter) as of July 5, up 50 percent from $1.46 per kg on June 21, according to Reuters analysis of data collected by the Daily NK website.

Daily NK is run by North Korean defectors who collect prices via phone calls with fuel traders in the North.

Kang Mi-jin, a defector who speaks regularly to market sources inside North Korea and reports commodity prices for Daily NK, said the price spikes in recent weeks were caused initially by the rumors - later confirmed - that China was restricting the flow of oil to North Korea.

North Korea gets most of its fuel from China, with some coming from Russia. A prolonged cut by China would threaten critical supplies of gasoline and diesel and force North Korea to find alternatives sources of refined fuel products.

“After North Korea’s frequent missile tests including its very first ICBM test, the international community has vowed to tighten sanctions and China simply cannot exclude itself from the recent movement, although it probably does not want to indefinitely cut off fuel sales to the North,” Kang said.

Although gasoline prices eased to $2.05 per kg by July 12, they are still more than double from the beginning of the year, when they were averaging just under $1 per kg, the data shows.

Diesel prices rose to $1.45 per kg as of July 12, up 20 percent from three weeks ago. Oil products are sold by weight in North Korea.

Prices stabilized after the sharp spikes through the first week of July, likely because North Korea encouraged fuel smuggling across its border with China, Kang said.

Last year, China shipped to North Korea more than 96,000 tonnes of gasoline and nearly 45,000 tonnes of diesel, worth a combined $64 million.

Most of that was sold by CNPC, which grew to dominate China’s energy trade with Pyongyang over the past two decades.

CNPC declined to comment on Monday when asked by Reuters if fuel sales to North Korea had resumed.

The government is likely North Korea’s largest user of fuel products, but most gasoline and diesel bought by ordinary citizens comes from private dealers and smugglers, experts say.

Primary users of fuel products in North Korea include fishermen, farmers, truckers and the military.

Reporting by Heekyong Yang in SEOUL; Additional reporting by Josephine Mason in BEIJING; Editing by Soyoung Kim and Tom Hogue

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