Writer: Dima Zayaruzny | Editor: Kiet Hoa
In a world where technology fuels prosperity and innovation, North Korea is being left behind by the rest of the world. The North Korean people are affected negatively by their regime’s economic and political isolation. Countless and continuous international sanctions are placed on the country and tensions have only worsened in recent times. The limited trade that North Korea is involved in, mostly with China, does not create enough wealth to properly sustain a population and a developed economy.
Supreme Leader Kim Jong Un relaxes in luxury within his palace, while his people endure hardships stemming from a lack of economic opportunities and freedoms. With such limited ways for North Korea to create wealth and interact with the international market, the regime has found illegal ways to bypass the sanctions and steal money from abroad.
Crypto-hacking, or stealing crypto-currency from other parties, has become an increasingly popular way for North Korea to create an influx of cash. In September of this year, the FBI reported that North Korea uses “highly tailored, difficult-to-detect social engineering campaigns against employees of decentralized finance (“DeFi”), cryptocurrency, and similar businesses to deploy malware and steal company cryptocurrency.”
North Korea’s pivot to cryptocurrency theft is a strategic response to the severe economic sanctions imposed by the UN, which restrict its ability to engage in international trade and access foreign capital. According to the United Nations, in March of this year alone, North Korean hackers stole $147.5 million from a cryptocurrency exchange. Since 2006, these sanctions have targeted the export of North Korean raw materials and severely limited the regime’s financial flexibility, primarily due to its continued focus on military and nuclear developments. As traditional revenue sources dwindled, North Korea identified cryptocurrency as an ideal medium for illicit financial gain: decentralized, minimally regulated, and easily transferable across borders.
Despite being perceived as a technologically inferior country, North Korea has developed an impressive expertise in ballistic missile technology and cyber operations. Central to their operations is the infamous Lazarus Group, a highly specialized cybercrime unit that has stolen hundreds of millions of US dollars over the last decade. In turn, a large portion of the stolen money is allocated towards the country’s defense budget, explaining how and why their defense capabilities are so developed for such a poor and sanctioned place.
There is limited data relating to North Korea’s economy. However, the leadership has chosen to spend large sums of cash on their military instead of on building industry, creating jobs, or providing benefits to their people. Continuous human rights concerns within the country’s borders have only increased scrutiny from the international community, encouraging more sanctions and hostility. For example, in 2022, North Korea received a measly $10 million of foreign direct investment (FDI) while Australia, with a similar sized population of around 26 million people, had $4.7 trillion of FDI in 2023. The cycle of sanctions, crypto hacking to get around the sanctions, and continued investment in defense does not improve outcomes for anyone. North Korea’s people remain impoverished and isolated while the rest of the world is paranoid about the ballistic missiles pointed at them.
These strict sanctions and high investment in defense beg the question of whether future sanctions should be strengthened or eased. Many intended effects of the sanctions have been undermined by countries empathetic with North Korea and by weak enforcement by others. The Council on Foreign Relations says that “smugglers take advantage of lax inspections at ports in parts of Africa, the Middle East, and Southeast Asia”. Holes in sanctions dampen the repercussions that the United Nations and sanctioning countries hope for. Additionally, the number of nuclear tests has increased as the number of sanctions has increased, perhaps indicating that sanctions have an opposite effect than intended. The human cost from sanctions is immense as well. Export bans on the textile, fishing, and coal industries devastate the livelihoods of North Koreans who rely on these sectors. With half the country malnourished, international bodies must take into account the effect that their decisions have on ordinary people.
The cycle of sanctions, cryptocurrency theft, and military spending perpetuates a costly stalemate that ultimately harms all parties involved—especially the North Korean people. The closed-off nature of North Korea’s economy, coupled with international restrictions, has led the regime to seek alternative sources of funding that circumvent traditional financial channels. However, this approach is unsustainable and detrimental to both the country and the global community. For the well-being of North Korea’s citizens, the regime must ease its heavy emphasis on military investment and consider economic reform. Denuclearization is unlikely to happen on this path, so both sides must come to a different solution. By opening up to international trade and fostering relationships with other countries, North Korea could gain access to vital resources, investment, and methods of technological advancement, which would benefit its people. Although they have created ties with Russia, another heavily sanctioned country, continuing to align themselves with other countries looked down upon by the West will only increase tensions. While North Korea should consider relations with more free economies, the international community should rethink the rigid foreign policy framework they use for North Korea. A balanced approach could break this damaging cycle and pave the way for a more prosperous, stable future for North Korea and the region.
Featured Image by PYMNTS
