Mick Hartley

Attention at the moment is, of course, on Iran (Andrew Sullivan is the place to go for the latest updates), but let's not forget North Korea.

According to the Daily NK, the use of foreign currency inside the DPRK has now been prohibited – presumably in an attempt to shore up confidence in the struggling NK won, and kill off the last remains of the market economy, after the fiasco of currency devaluation.

A source inside North Hamkyung Province reported, “A People’s Safety Agency declaration on banning the use of U.S. dollars, Yuan and the Euro was publicized on the 26th. The declaration was posted in public places and in every workplace starting this morning.”

The title of the declaration is, “On punishing severely those who use foreign currencies within our Republic.” Surprisingly, the targets of the declaration are said to include foreigners visiting North Korea.

A source from Yangkang Province also reported, “From December 28, no foreign currencies can be used. The foreign currencies the declaration meant were dollars, Yuan and the euro.” […]

The Daily NK’s North Hamkyung Province source said, “The possibility of compensating for confiscated currency is low, because it has in itself become illegal for an individual to own foreign currency.”

According to the declaration, trading enterprises or foreign currency earning organizations should put earned foreign currency in the bank within 24 hours and, if they fail to do so, managers will be punished…

The North Hamkyung Province source also cautioned, “Upon the release of this declaration, there will inevitably be someone sent to a prison camp or sentenced to an extreme penalty as a model case. These days, if you are unlucky, you may become the model case for bringing in Yuan or dollars.”

The reason for this measure is that there is no confidence in the North Korean currency, so the public preference is for foreign currency holdings, which the authorities cannot regulate easily.

Nevertheless, it is unlikely that people will willingly pay their own foreign currency to the state, irrespective of this requirement, while it is likely to end up stoking inflation.

So it's a double whammy for the wretched North Koreans: the poorer market traders have seen their savings destroyed by the devaluation, and now those few who'd hoped to protect themselves by storing foreign currency have been been hit as well. The state takes total control – or at least attempts to take total control.

Here's Blaine Harden in the Washington Post, in one of the few MSM commentaries on the NK situation (though written before this latest foreign currency ban):

The currency episode reveals new constraints on Kim's power and may signal a fundamental change in the operation of what is often called the world's most repressive state. The change is driven by private markets that now feed and employ half the country's 23.5 million people, and appear to have grown too big and too important to be crushed, even by a leader who loathes them.

The currency episode seems far from over, and there have been indications that Kim still has the stomach for using deadly force.

There have been public executions and reinforcements have been dispatched to the Chinese border to stop possible mass defections, according to reports in Seoul-based newspapers and aid groups with informants in the North.

Still, analysts say there has also been evidence of unexpected shifts in the limits of Kim's authority.

"The private markets have created a new power elite," said Koh Yu-whan, a professor of North Korean studies at Dongguk University in Seoul. "They pay bribes to bureaucrats in Kim's government, and they are a threat that is not going away." […]

In the view of several outside experts, this month's currency revaluation was a preemptive strike against the markets by Kim Jong Il, an aging leader who is worried about succession and trying to buy time.

"This was one of the strongest measures he could take," said Cho Young-key, a professor of North Korea studies at Korea University in Seoul. "Kim is thinking that if he can't control the markets now, in the future it will get even harder, and then he will be handing power to the son."

Stripping wealth from merchants is consistent with Kim Jong Il's long-held abhorrence of capitalist reform. His government regards it as "honey-coated poison" that can lead to regime change and catastrophe, according to the Rodong Sinmun, the party newspaper in Pyongyang.

"It is important to decisively frustrate capitalist and non-socialist elements in their bud," said the newspaper.

So we go into the next decade with the regimes in both Iran and North Korea  – two thirds of the axis of evil (remember the axis of evil?) – looking decidely shaky. And, as Joshua at OneFreeKorea reminds us, they're not unconnected: "Iran is probably the largest single customer of North Korean weapons, and the financier of what North Korea sells to Syria, Hezbollah, Hamas, and other places." If the regime in Iran collapses, it'll be a major blow to the ailing Dear Leader as he struggles to maintain control of his own little prison state.