North Korea

H

Currency and Banking

The unit of currency is the won (2.20 won equals U.S.$1; May, 1998). North Korea has three banks, all state-controlled; the Korean Central Bank is the bank of issue.

I

Foreign Trade

The bulk of North Korea’s foreign trade through the 1970s was with the Union of Soviet Socialist Republics (USSR), China, and other Communist countries. Since then, however, trade has been diversified to include non-Communist countries. Bilateral trade in 2003 totaled $3.3 billion, according to estimates by the Central Intelligence Agency. The CIA estimated that North Korea’s exports in 2003 totaled $1.2 billion, primarily minerals, metallurgical products, manufactures (including armaments), and textiles. The principal trade partners for exports were China (29.9 percent), South Korea (24.1 percent), and Japan (13.2 percent). Imports totaled $2.1 billion, primarily petroleum, coking coal, machinery and equipment, textiles, and grain. The principal sources of these imports were China (32.9 percent), Thailand (10.7 percent), and Japan (4.8 percent).

In 2002 the government of North Korea announced the establishment of a special economic zone in the northwestern city of Sinŭiju, near the border with China and linked by rail to Beijing. The zone will operate autonomously with its own legal and economic systems, allowing free market principles that promote foreign investment and trade. Its creation marked the most significant reversal of economic policy in North Korea since 1948.

VII

History

For the history of the Korea Peninsula before it was partitioned in 1945 into North and South Korea, see Korea. The Democratic People’s Republic of Korea (DPRK) was proclaimed in P’yŏngyang, the capital, on September 9, 1948, but a more significant date of inception would perhaps be August 29, 1946, when the Korean Workers’ Party (KWP) was inaugurated under the leadership of Kim Tubong and Kim Il Sung.

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A

Kim Il Sung’s Rise to Power

After the establishment of the KWP, Kim Il Sung enjoyed the support of the occupying Soviet forces (until most of them withdrew in late 1948), and began playing a leading role in Korean affairs north of the 38th parallel. Under the Workers’ Party leadership and before the establishment of the DPRK, key political and economic changes had already been made. These included egalitarian land reforms that won the support of landless labor and tenant farmers, elimination of moderate and right-wing elements, suppression of religious groups, confiscation of land and wealth formerly belonging to the Japanese or to enemies of the regime, and the initiation of party-directed economic planning and development.

Kim Il Sung emerged early as the principal leader, supported by former officers of his guerrilla forces who had fought against Japanese colonial rule from bases in Manchuria. In 1949 border fighting broke out between the North and the South. On June 25, 1950, North Korean forces crossed the dividing line and invaded the South. Soon, in defense of the South, the United States joined the fighting under the banner of the United Nations (UN), along with small contingents of British, Canadian, Australian, and Turkish troops. In October 1950 China joined the war on the North’s side. By the time a cease-fire agreement was signed on July 27, 1953, some 800,000 Koreans on both sides of the 38th parallel had lost their lives, together with 115,000 Chinese and about 36,400 U.S. military personnel. See also Korean War.

B

The Post-Korean War Period

The war caused enormous damage to North Korea. North Korea endured three years of heavy U.S. bombing in addition to a ground offensive by UN forces along the Yalu River, the border between North Korea and China. Virtually the entire population of North Korea lived and worked in manmade underground caves for three years to escape the relentless attack of U.S. planes. Schools, hospitals, factories, and troop barracks were located in the caves. P’yŏngyang was bombed until almost no buildings were left standing, and an entirely new capital had to be rebuilt after the war.

KWP discipline and forced-labor policies resulted in considerable recovery and development by 1960. At the same time, the North Korean leadership began to turn away from Soviet tutelage, emphasizing the national character of the Korean revolution. As the quarrel between China and the USSR intensified, North Korea maneuvered for even more independence of action. During the 1960s heavy industrial growth was emphasized, but the production of consumer goods and the general standard of living lagged. Late in the 1960s, North Korea developed an especially aggressive stance toward the South: An assassination team tried and nearly succeeded in killing South Korea’s president, Park Chung Hee. In 1968 the Pueblo, a United States intelligence-gathering vessel, was seized by North Korean gunboats and its crew held in extremely severe circumstances for a year. Guerrilla raids were launched on the South, but without much effect. A U.S. reconnaissance plane was shot down in April 1969. These events, rather than weakening the South, stimulated renewed defense measures and were probably counterproductive. They also influenced the formation of a harder political order in South Korea.

In the 1970s, secret talks with southern officials led to a joint declaration (July 4, 1972) that both sides would seek to develop a dialogue aimed at unification, but by spring 1973 this effort had dissolved in acrimony. Sporadic exchanges on unification took place throughout the 1980s.

At the KWP Congress in 1980, Kim Il Sung’s son, Kim Jong Il, was given high ranking in the Politburo and on the Central Committee of the party, placing him in a commanding position to succeed his father. Kim Il Sung was reelected president in May 1990 for a four-year term. In 1991 both North and South Korea joined the United Nations (UN), and the two nations signed accords regarding nuclear and conventional arms control and reconciliation.

In 1992 North Korea signed a pact with the International Atomic Energy Agency (IAEA) to allow the country’s nuclear facilities to be inspected. However, in 1993 the North Korean government refused to let inspectors examine nuclear waste sites believed to contain undeclared nuclear material that could be used for nuclear weapons. North Korea also suspended its formal acceptance of the 1968 Treaty on the Non-Proliferation of Nuclear Weapons (NPT), which it had signed in 1985. In December 1993 the U.S. Central Intelligence Agency (CIA) announced that North Korea had most likely built at least one atomic weapon from plutonium extracted from fuel rods at a nuclear power plant. See also Arms Control; Nuclear Weapons Proliferation.

Throughout the first half of 1994, the North Korean government continued to resist a full IAEA inspection of suspected nuclear sites. The crisis was defused in June, however, when former U.S. president Jimmy Carter met with Kim Il Sung in North Korea. The following month Kim died unexpectedly. Nevertheless, the United States and North Korea reached an agreement in 1994 known as the Agreed Framework, in which North Korea agreed to suspend the operation of designated nuclear facilities capable of producing and reprocessing weapons-grade plutonium. North Korea also agreed to allow IAEA inspections to verify the suspension.

In return, the United States, Japan, and South Korea agreed to construct two new reactors of a type not suitable for nuclear weapons production. The agreement called for annual deliveries of heavy fuel oil to North Korea as well as U.S. steps to end economic sanctions against North Korea that had been in place since the Korean War. The agreement also envisaged steps leading to the normalization of diplomatic relations between the United States and North Korea. North Korea agreed to dismantle the nuclear facilities suspended under the agreement, coincident with the completion of the two new reactors and with U.S. fulfillment of other provisions of the agreement.

Construction of the two reactors began in 1995 but stopped when the United States abrogated the 1994 agreement in December 2002, charging that North Korea had violated the accord by initiating a secret weapons-grade uranium-enrichment program. An American official who visited P’yŏngyang said that North Korea had admitted its guilt; North Korea denied that it did so and denied that it had such a program.

Meanwhile, a nationwide food crisis that surfaced in 1995 became a widespread famine by 1996. Factors contributing to the crisis included the withdrawal of food subsidies from Russia and China in the early 1990s, the cumulative effect of government agricultural policies, and a series of severe floods and droughts that damaged agricultural crops. International humanitarian relief agencies responded to the crisis with ongoing food aid and other relief efforts. Nevertheless, it was estimated that up to 1 million people had died of starvation and famine-related illnesses by 1998. North Korea’s official estimate was 200,000. Although the famine peaked in 1997, the food crisis continued into the early 2000s.

In September 1998 North Korea revised its constitution to recognize the chair of the National Defense Commission, a position held by Kim Jong Il, as the country’s top government post. Kim had been the de facto leader of North Korea since the death of his father, Kim Il Sung, in 1994.

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