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Last Updated: June 2018

Overview


Map of Korea, North
Map of Korea, North
  • North Korea was once the industrial center of the Korean peninsula. Following the dissolution of the former Soviet Union in 1992, North Korea lost its major trading partner. North Korea’s economy was unable to adapt, and its economy soon deteriorated. Without subsidized oil from the Soviet Union, North Korea has faced challenges in meeting its energy demand and has struggled with energy shortages for several decades. North Korea relies on coal, hydropower, and petroleum products for most of its energy needs, but renewable sources such as biomass, waste, and solar panels also supply energy in the residential sector.
  • The United Nations (UN) has imposed various economic sanctions on North Korea since 2006 because of the country’s nuclear weapons and ballistic missile programs. These sanctions restrict North Korea’s access to certain types of energy, international banking, trade, and travel. They also freeze the funds of certain North Korean assets. Individual nations—including South Korea, the United States, China, the European Union, Canada, and Japan—also have imposed economic sanctions on North Korea.

Petroleum and other liquids

  • North Korea has undertaken some limited crude oil exploration, but it has no proved reserves of petroleum and other liquids. During North Korea’s industrial peak in the 1970s and 1980s, it imported oil from China and the Soviet Union at below-market prices. After the Cold War, these deals ended, and North Korea’s oil consumption dropped from 76,000 barrels per day (b/d) in 1991 to lower than 15,000 b/d in 2017. Consumption data for 2017 are based on reported trade information. Actual consumption could be higher given that trade volumes could be underreported, according to published articles by Stratfor and NK Pro.
  • North Korea’s launch of several ballistic missiles and its nuclear testing in 2017 has prompted tighter international sanctions on the country’s commodity trade. Following a unanimous vote, the United Nations Security Council imposed new limits on North Korean imports of petroleum products on December 22, 2017. Starting in January 2018, the UN prohibited most refined petroleum exports to North Korea by capping them at 500,000 barrels per year, and crude oil imports were limited to the current level of 4 million barrels per year (about 11,000 b/d).
  • China supplies most of North Korea’s crude oil imports. Although China’s customs records have not reported any amounts in the past few years, some reports estimate that North Korea imports between 10,000 b/d and 11,000 b/d of crude oil from China, all of which is sent to the country’s only operating refinery, the Ponghwa refinery, located close to its border with China.
  • Under current sanctions, North Korea is allowed to import small amounts of petroleum products (500,000 barrels per year), mostly gasoline and diesel fuel, which are vital to the country’s agriculture, transportation, and military sectors. In 2017, exporting countries reported sending 4,500 b/d of oil products to North Korea, down from 12,100 b/d in 2016, according to customs data. Most of these imports came from China. Other countries reported smaller amounts of oil product exports to North Korea, although published articles by Stratfor and NK Pro claim some volumes could be underreported each year. Also, recent accounts of prohibited ship-to-ship transfers of refined oil products could indicate higher oil product trade with North Korea.

Coal

  • Coal and iron ore exports are key drivers of North Korea’s economy, and the country has considerable proved coal reserves, estimated at 661 million short tons in 2015. North Korea has historically been the global leader in anthracite coal exports, most of which were sent to China. The country’s coal exports generated slightly more than $400 million (about 22% of total exports in terms of revenue) in 2017, down from $1.2 billion (about 40% of total exports) in 2016. North Korea has received most of its mining machinery, infrastructure, and training from China. Many of the ports and rail facilities involved in this trade are jointly owned and operated by Chinese-Korean ventures.
  • Almost all of North Korea’s coal exports were sent to China, which increased its shipments of coal from North Korea over the past few years until 2017. According to customs data from various countries, North Korea exported nearly 25 million short tons of coal in 2016, a 15% increase from 2015 levels. The UN tightened sanctions on North Korea in late 2016 and imposed a cap on coal exports from North Korea not to exceed 7.5 million metric tons (8.3 million short tons) or $400 million in 2017, whichever was reached first. China suspended all coal imports from North Korea for all but four months in 2017 in an effort to comply with these sanctions. Total coal exports from North Korea dropped to 5.3 million short tons in 2017.
  • North Korea’s launch of intercontinental ballistic missiles in mid-2017 prompted the UN Security Council to further tighten sanctions and ban all of the country’s coal exports on August 5, 2017. Coal export volumes have not been reported in trade data since September 2017.

Electricity

  • During North Korea’s economic downturn in the early 1990s, the country’s electricity consumption dropped by more than half from 33 billion kilowatthours (BkWh) in 1990 to 16 BkWh by 2000. The country experiences chronic electricity shortages and a deteriorating industrial sector. Electricity consumption fell to 11 BkWh in 2015 as a result of a major drought that caused massive power outages.
  • Hydroelectric power accounted for an estimated 76% of the electricity produced in North Korea in 2015. The remaining 24% came from coal and petroleum. North Korea has dammed a large number of its rivers. These dams produced roughly 13 BkWh of electricity annually for a decade and dropped to 10 BkWh in 2015 as a result of the drought. China and North Korea share electric power produced by four hydropower facilities along the border at the Yalu River. These facilities account for a significant portion (16 - 17% reported by one source) of North Korea’s total generation. The two countries are part of a joint venture that is constructing two more hydropower dams along the Yalu River by 2019. The plants are expected to serve both countries.
  • The government is attempting to use more of the country’s indigenous coal for electricity feedstock to provide alternatives to hydropower and oil and to improve its energy security. North Korea’s conversion of the 200-megawatt-Sonbong oil-fired power plant to a coal-fired facility is expected to be completed in 2018.
  • North Korean citizens have also started to import Chinese solar panels to generate power for private households in the past few years because the North Korean electric grid is unreliable.
  • North Korea’s electricity infrastructure is inefficient and in need of repair in many areas. Some of the generation and transmission equipment dates back several decades. Most electricity must be generated near the end user because long-range transmission is no longer possible. Only 27% of the North Korean population received electricity in 2016, according to the International Energy Agency.
  • Most of the areas outside the capital, Pyongyang, receive little power except for the industrial zones near the Chinese border, which import electricity from the Chinese grid. Electricity shortages have also resulted in rolling blackouts throughout the capital. Despite its severe power supply shortages, North Korea is a net exporter of electricity to China. According to Chinese customs data, North Korea almost doubled its exports to China in 2017 from the previous year, rising from 167 gigawatthours (GWh) to 320 GWh. Electricity is exempt from current UN sanctions on North Korean exports, allowing the country to earn more hard currency reserves.
  • Even though North Korea has a nuclear weapons program, it does not use nuclear power for electricity generation. In the 1990s, a nuclear deal was reached with North Korea that required the country to give up its nuclear weapons program in exchange for nuclear reactors from South Korea that cannot produce weapons material. The deal was abandoned after accusations of noncompliance from both countries.