Eased sanctions will permit Iran to export oil to N. Korea

Iran is expected to step up exports of oil to North Korea as a result of the lifting of sanctions imposed on Tehran over its efforts to develop nuclear weapons, according to a report released by the US Congressional Research Service.

Under the Joint Comprehensive Plan of Action (JCPOA), which was signed by Tehran and six world powers in July, Iran agreed to strict limits on its nuclear program in return for access to foreign markets for its exports, of which oil is a major component. Thanks to historical ties between Tehran and Pyongyang, both countries are likely to be in favor of resuming the trade in oil, possibly in a barter arrangement for weapons, according to some analysts.

"Iran and North Korea have generally been allies, in part because both have been considered by the United States and its allies as 'outcasts' or 'pariah states,' subjected to wide-ranging international sanctions," Middle East analyst Kenneth Katzman wrote in the CRS report on Iranian foreign policy.

Economic benefits minimal

And while the economic benefits to Iran of a relationship with North Korea are "minimal," the report states, the arrangement does offer Tehran some strategic gains. North Korea is one of the very few states with which Iran has formal military links, and the two regimes have cooperated on a wide range of military ventures, including sharing information on weapons of mass destruction and ballistic missile technology.

As well as an advanced nuclear weapons program, North Korea is believed to have a large biological weapons capability.

As a signatory of the Biological Weapons Convention, North Korea is prohibited from developing, producing of using biological weapons, although there have been repeated reports from South Korean intelligence that the North is able to manufacture 4,500 tons of chemical agents a year and can ramp that up to 12,000 tons a year.

The chemicals that the regime is producing include hydrogen cyanide, phosgene, sarin, tabun, chlorine and a number of agents from the mustard gas family.

It is the nuclear know-how that Iran is most likely to be seeking as its own development projects are now being strictly monitored under the terms of the JCPOA deal. With limited hard currency of its own, Pyongyang may be willing to trade knowledge for desperately needed oil.

Oil flowing east

"As Iran's oil imports increase after international sanctions are removed in conjunction with the JCPOA, it is likely that additional quantities of Iranian oil might reach North Korea, either via China or through direct purchasing from North Korea," the CRS report concluded.

"Traditionally, North Korea has received most of its oil supplies from China, but the relationship has been strained in recent years," Rah Jong-yil, a former head of South Korean intelligence and an expert on the regime in Pyongyang, told DW.

The source of those tensions is rooted in the decision by the regime of Kim Jong-un to ignore pressure from Beijing to cancel the test-launch of a ballistic missile in April 2012 and, in a development that infuriated Beijing, a third underground nuclear test in February 2013.

One way in which China expressed its displeasure was to severely limit the amount of oil flowing over the border, although it is not clear whether exports halted entirely as Beijing stopped reporting oil exports to North Korea.

The North, undeterred, simply went looking for new sources of fuel and has in recent years been cultivating a closer relationship with Russia. It is possible that oil is now crossing the North Korea-Russia border, although Pyongyang will have been keen to diversify its sources of raw materials so that it is not beholden to one producer in the future.

"The North has limited resources and other ways to pay for oil, so the opening up of Iran again gives Pyongyang an opportunity to barter weapons for oil," said Rah.

Weapons seizure

This has been the case in the past, analysts say, with a North Korean aircraft seized in Thailand in December 2009 carrying an undeclared cargo of 35 tons of North Korean made rocket-propelled grenades, missile and rocket launchers, missile tubes, surface-to-air missile launchers and spare parts. The manifest claimed the cargo was oil-drilling equipment and it subsequently emerged that it was bound for Iran.

"There has been a lot of cooperation in hardware, software and nuclear technology in the past, but I would assume the Iranians will be extremely cautious this time about trying to bring in nuclear technology," Rah added.

Marcus Noland, a senior fellow at the Washington-based Peterson Institute for International Economics and a close follower of developments in North Korea, says the lifting of sanctions will make it easier for Iran to export oil, but Pyongyang appears to have muddled through in the interim.

"The sanctions on both Iran and North Korea created serious impediments to the free flow of oil into the North, but the North Koreans I have met in recent years told me there does not appear to be a shortage of oil there," he said.

Sanctions circumvented

"So while the sanctions created obstacles, those most seriously affected figured out how to circumvent them," he said. "The cost and inconvenience were marginal and now the sanctions have been lifted."

China appears to rebuilding bridges with the North "not because they have any great love for the regime, but more because they realize they have to work with Kim," Noland said.

Beijing will be put on the spot in terms of its alliance with Pyongyang, however, when the North carries out its next underground nuclear test. And Noland believes it is not a question of whether Kim will approve that next atomic test, but when.