North Korea
The Democratic Peoples Republic of Korea (North
Korea) occupies a strategic location bordering
China, South Korea, and Russia. In 1994, North
Korea signed an agreement (the "Agreed Framework")
sponsored by the United States, Japan, and South
Korea to halt its graphite technology nuclear
program in exchange for two light water nuclear
reactors. In early October 2002, North Korea disclosed
to U.S. officials that it had violated the terms
of the Agreed Framework by pursuing a nuclear
weapons program, and that North Korea considered
the agreement nullified.
Note: Information contained in this report
is the best available as of October 2002 and can
change.
GENERAL BACKGROUND
North Korea's economy, which remains under tight
state control (collectivized agriculture and state-owned
companies account for about 90% of all economic
activity) grew by 3.7% in 2001, after growing
1.3% in 2000, according to estimates by South
Korea's central bank. Strong increases in agricultural
and mining output, both of which are major sectors
of North Korea's economy, contributed to this
growth. The GDP growth of the last three years
followed a steady economic contraction from 1990
through 1998.
North Korea's communist ideology has been based
on the concept of "juche," or self-reliance.
Severe economic problems have, however, forced
the country to accept international food aid and
embark on a series of limited market reforms.
Famine in North Korea has reportedly killed hundreds
of thousands of people over the last decade.
Several governments, including the United States,
have provided funding to the United Nations' World
Food Program (WFP) for emergency food aid to North
Korea.
North Korea has permitted a small amount of foreign
investment in recent years. Manufacturing plants
of South Korean companies operating joint ventures
in North Korea now generate over $100 million
in annual revenue.
North Korean-South Korean Relations
From June 13th to 15th, 2000, the leaders of the
two Koreas held their first summit meeting in
Pyongyang. The summit led to a joint statement
by the two leaders which supported, in general
terms, the goal of eventual reunification of the
two Korean states, reunification of families divided
since the Korean War, and economic cooperation.
A planned followup visit to South Korea by North
Korean leader Kim Jong-Il, however, has been repeatedly
delayed. Developments in inter-Korean relations
in 2002 have been mixed. A naval clash near the
two countries maritime frontier in June 2002 heightened
tensions, but progress has been made in some areas,
such as the commencement of work in September
2002 on clearing parts of the Demilitarized Zone
(DMZ) to facilitate possible road and rail links.
It is unclear what effect the disclosure of the
North's violations of the Agreed Framework will
have on this work.
United States Economic Sanctions
The United States announced on June 19, 2000 that
it was easing some of the economic sanctions which
have been in place with North Korea under the
Trading With the Enemy Act since the start of
the Korean War in 1950. Licenses are still
required from the Treasury Department's Office
of Foreign Assets Control (OFAC) for many transactions,
and sales of military and "dual-use" items are
still restricted. (See the OFAC Fact
Sheet on North Korea Sanctions for more information.)
The designation of North Korea as a state supporter
of terrorism by the United States also effectively
precludes lending by international financial institutions
such as the World Bank.
DOMESTIC ENERGY RESOURCES
North Korea relies on two domestic sources of
commercial energy -- coal and hydropower -- for
most of its energy needs. In 2000, coal accounted
for about 86% of primary energy consumption.
North Korea's electric generating capacity is
split nearly evenly between coal-fired thermal
plants and hydroelectric plants. In 2000, hydroelectric
power plants generated about 67% of North Korea's
electricity and thermal plants about 33%. The
country's thermal generating capacity is underutilized
due to a lack of fuels. The country's total
electricity consumption in 2000 was only 65% of
what it had been in 1991, though it showed an
increase of nearly 9% over the figure for 1999.
As a result of the electricity shortage, North
Korea has resorted to a rationing system.
The country often experiences blackouts for extended
periods of time, and power losses due to an antiquated
transmission grid are high. Rainfall improved
in 2001, but some hydroelectric facilities are
believed to be out of operation due to flood damage
from major flooding in 1996.
The prospect of South Korean help for North Korea's
electricity shortage was discussed at the June
2000 summit meeting, and North Korea has since
been seeking electricity from South Korea since
then. A linkage between the electric grids of
the two Koreas is one possibility, but it would
be of limited immediate value due to the North's
poor transmission infrastructure. At present,
South Korea has not agreed to supply the North
with electricity from its own transmission grid.
North Korea also has reportedly discussed the
possibility of electricity aid with Russia.
Problems with the North Korean coal industry
are closely related to the problem with electricity
supply. Coal-fired power plants have been running
well under capacity in recent years, due in part
to problems with rail transportation of coal.
PETROLEUM
North Korea lacks domestic petroleum reserves,
but the West Korea Bay may contain hydrocarbon
reserves, as it is considered to be a geological
extension of China's Bohai Bay. Sweden's Taurus
Petroleum holds an oil exploration concession
for two blocks, B and C, off the west coast of
North Korea. Britain's Soco International holds
the concession for Block A. Initial seismic surveys
conducted by Taurus have identified possible oil-bearing
geological structures. The two companies held
separate discussions with South Korea's Korean
National Oil Company (KNOC) and Hyundai about
possibly forming a consortium for joint exploration
of the areas, but no new activity has been reported
in these concessions in the last year. Australia's
Beach Petroleum also holds a concession for one
block off the east coast of North Korea, which
is considered less promising.
In November 2001, the North Korean government
awarded its first concession for an onshore block
to Sovereign Ventures of Singapore, which covers
an area in the Tachon-Rajin area near the Chinese
border. In September 2002, the company reported
that initial seismic survey results had indicated
probable oil and natural gas deposits of modest
size.
In the meantime, North Korea must import all
of the oil it consumes. Oil accounts for about
6% of total North Korean primary energy consumption,
and is mostly limited to non-substitutable uses
such as motor gasoline, diesel, and jet fuel.
With the exception of the heavy fuel oil which
was being provided under the Agreed Framework,
most petroleum is imported as crude oil and processed
at domestic refineries. Under the 1994 "Agreed
Framework," the United States had assumed responsibility
for providing 500,000 metric tons (approximately
3.3 million barrels) of heavy fuel oil annually
through Korean Peninsula Energy Development Organization
(KEDO).
Natural Gas Transportation
South Korea has held discussions with China, Russia,
and BP about the possibility of importing natural
gas from Russia's huge Kovykta gas field near
Irkutsk. While China would be a major importer
of gas through the pipeline, the project could
be made more economical by adding a link to South
Korea, which currently gets the vast majority
of its natural gas by tanker as liquefied natural
gas (LNG). North Korea is one possible route for
the pipeline link to South Korea, and would be
less costly than the subsea alternative.
NUCLEAR ENERGY
Prior to 1994, North Korea's nuclear program had
been a major concern for regional security, since
its graphite reactor technology produced fissionable
plutonium which can be used in nuclear weapons.
North Korea withdrew from the Nuclear Non-Proliferation
Treaty in 1993.
Under the Agreed Framework negotiated with the
United States in 1994, North Korea had agreed
to freeze its nuclear program in exchange for
two new pressurized light-water reactors (which
are considered less capable of producing weapons-grade
plutonium) and 500,000 metric tons per year (about
3.3 million barrels) of heavy fuel oil to meet
its energy needs until the first new reactor becomes
operational. KEDO, an international consortium
led by the U.S. government (with South Korea,
Japan, the European Union, and others), was established
to implement the agreement. The European Union
joined KEDO in September 1997.
Japan signed a contract in May 1999 committing
to provide its $1 billion contribution to KEDO
to fund the new light-water reactors, an action
which had been delayed by North Korea's missile
test in August 1998. The project was expected
to cost a total of $4.6 billion, with South Korea
providing the greatest share of funding at $3.2
billion. The United States and the European Union
also had pledged to contribute funds.
Construction of the light water reactors was
to be performed under a turnkey contract with
KEPCO, which was awarded in December 1999. Initial
site preparation work had begun, and the concrete
foundation at the site was laid in August 2002.
Training of North Korean technicians who were
to operate the reactors had begun in June 2002.
The project had faced many delays, and the completion
date for the first reactor has been pushed back
to at least 2008, from an original completion
date of 2003. One hurdle the project had faced
was the issue of indemnity for potential liabilities
created by the plant. General Electric had
originally been chosen to supply the generators,
but pulled out of the project when the issue was
not resolved to its satisfaction. In January
2001, it was announced that a consortium of Japanese
firms, led by Hitachi and Toshiba, would supply
the generators.
With the North Korean admission in early October
2002, according to press reports, of its violations
of the Agreed Framework by pursuing a program
to enrich uranium for nuclear weapons, the light
water reactor project is currently stalled.
COUNTRY OVERVIEW
Head of State: Kim Jong Il (Chairman, National
Defense Commission)
Independence: September 9, 1948
Population (2002E): 22.2 million
Location/Size: Eastern Asia/120,540 sq.
kilometers (46,800 sq. miles), about the size
of Pennsylvania
Major Cities: Pyongyang (capital), Hamhung,
Chongjin
Language: Korean
Ethnic Groups: Korean
Religions: Buddhism, Christianity, Chundo
Kyo
Defense (6/98): Army, (923,000); Air Force,
(85,000); Navy, (46,000); security/border troops,
(115,000); workers' and peasants' militia (Red
Guard), 3.8 million
ECONOMIC OVERVIEW
Currency: 100 Chon = 1 Won
Official Exchange Rate (10/02): US$1 =
2.20 Won
Gross Domestic Product (2001E): $15.5 billion
Real GDP Growth Rate (2001E): 3.7% (Central
Bank of South Korea estimate)
External Debt (1996E): $12 billion (much
of this debt currently is in default)
Merchandise Exports (2001E): $700 million
Merchandise Imports (2001E): $1.6 billion
Major Import Products: Petroleum, grain,
coking coal, machinery and equipment, and consumer
goods
Major Export Products: Minerals, metallurgical
products, agricultural and fishery products, manufactured
goods (including armaments)
Trading Partners: China, Japan, Russia,
Germany, Singapore, South Korea, Hong Kong
ENERGY OVERVIEW
Minister of the Power Industry: Yi Chi-chan
Minister of the Atomic Energy: Choe Hak-Kun
Minister of the Coal Industry: Kim Ki Kyong
Oil and Natural Gas Production/Proven Reserves:
None
Oil Consumption (2000E): 80,000 barrels
per day (bbl/d) - all imported
Crude Oil Refining Capacity (1/1/02E):
71,000 bbl/d
Recoverable Coal Reserves (12/31/99): 661
million short tons
Coal Production (2000E): 101.4 million
short tons
Coal Consumption (2000E): 103.6 million
short tons
Electric Generating Capacity (1/1/00E): 9.5
gigawatts (about 53% hydropower)
Electricity Generation (2000E): 33.4 billion
kilowatthours
Major Ports: Chongjin, Hamhung, Nampo
ENVIRONMENTAL OVERVIEW
Minister of Land & Environment Protection:
II-Son Chang
Total Energy Consumption (2000E): 2.8 quadrillion
Btu* (0.7% of world total energy consumption)
Energy-Related Carbon Emissions (2000E): 66.1
million metric tons of carbon (1.0% of world total
carbon emissions)
Per Capita Energy Consumption (2000E): 127.8
million Btu (vs U.S. value of 351.0 million Btu)
Per Capita Carbon Emissions (2000E): 3.0
metric tons of carbon (vs U.S. value of 5.6 metric
tons of carbon)
Energy Intensity (1997E): 71,200 Btu/$1990
(vs U.S. value of 13,900 Btu/$1990)**
Carbon Intensity (1997E): 1.7 metric tons
of carbon/thousand $1990 (vs U.S. value of 0.22
metric tons/thousand $1990)**
Sectoral Share of Energy Consumption (1998E):
Industrial (70.9%), Transportation (28.7%),
Residential (0.4%), Commercial (0.0%)
Sectoral Share of Carbon Emissions (1998E):
Industrial (80.3%), Transportation (19.3%),
Residential (0.4%), Commercial (0.0%)
Fuel Share of Energy Consumption (2000E): Coal
(85.8%), Oil (5.9%), Natural Gas (0.0%)
Fuel Share of Carbon Emissions (2000E): Coal
(95.1%), Oil (4.9%), Natural Gas (0.0%)
Renewable Energy Consumption (1998E): 249.5
trillion Btu* (7% decrease from 1997)
Status in Climate Change Negotiations: Non-Annex
I country under the United Nations Framework Convention
on Climate Change (ratified December 5th, 1994).
Not a signatory to the Kyoto Protocol.
Major Environmental Issues: Localized air
pollution attributable to inadequate industrial
controls; water pollution; inadequate supplies
of potable water.
Major International Environmental Agreements:
A party to the Antarctic Treaty, Biodiversity,
Climate Change, Environmental Modification, Ozone
Layer Protection and Ship Pollution.
Has signed, but not ratified, the Antarctic-Environmental
Protocol and Law of the Sea.
* The total energy consumption
statistic includes petroleum, dry natural gas,
coal, net hydro, nuclear, geothermal, solar, wind,
wood and waste electric power. The renewable energy
consumption statistic is based on International
Energy Agency (IEA) data and includes hydropower,
solar, wind, tide, geothermal, solid biomass and
animal products, biomass gas and liquids, industrial
and municipal wastes. Sectoral shares of energy
consumption and carbon emissions are also based
on IEA data.
**GDP based on EIA International Energy Annual 2000
Sources for this report include: The Bank
of Korea (South Korea); Chosun Ilbo; CIA World
Factbook 2002; Dow Jones News Wire service; DRI-WEFA
Asia Economic Outlook; Economist Intelligence
Unit ViewsWire; Energy Compass; Hart's Asian Petroleum
News; Korea Herald; Korea Times; Lloyds List;
Los Angeles Times; U.S. Energy Information Administration;
U.S. Department of State; Reuters News Wire.
For more information on North Korea, please see
these other sources on the EIA web site:
EIA - Country Information
on North Korea
Links to other U.S. government sites:
CIA World Factbook
- North Korea
U.S. Department of
Energy - Office of Fossil Energy - North Korea
U.S. Treasury Department
- Office of Foreign Assets Control
U.S. State Department - Background
Notes - North Korea
U.S. State Department - Consular Information
Sheet - North Korea
Library of Congress Country Study
on North Korea
The following links are provided solely as a
service to our customers, and therefore should
not be construed as advocating or reflecting any
position of the Energy Information Administration
(EIA) or the United States Government. In addition,
EIA does not guarantee the content or accuracy
of any information presented in linked sites.
Korean Peninsula
Energy Development Organization (KEDO)
North
Korea WWW Virtual Library
If you liked this Country Analysis
Brief or any of our many other Country Analysis
Briefs, you can be automatically notified via
e-mail of updates. Simply click
here, select "international"
and the specific list(s) you would like to join,
and follow the instructions. You
will then be notified within an hour of any updates
to our Country Analysis Briefs.
Return
to Country Analysis Briefs home page
File last modified: October 21, 2002
Contact:
Lowell Feld
lfeld@eia.doe.gov
Phone: (202)586-9502
Fax: (202)586-9753
URL: http://www.eia.doe.gov/cabs/nkorea.html
If you are having technical problems with
this site, please contact the EIA Webmaster
at wmaster@eia.doe.gov