| BEIJING, April 28
BEIJING, April 28 As the United Nations Security
Council decides whether to tighten the sanctions screws on North
Korea, the country's increasingly isolated government could lose
a lifeline provided by state-owned China National Petroleum Corp
For decades, the Chinese oil giant has sent small cargoes of
jet fuel, diesel and gasoline from two large refineries in the
northeastern city of Dalian and other nearby plants across the
Yellow Sea to North Korea's western port of Nampo, five sources
familiar with the business told Reuters. Nampo serves North
Korea's capital, Pyongyang.
CNPC also controls the export of crude oil to North Korea,
an aid programme that began about 40 years ago. The sources said
the crude is transported through an ageing pipeline that runs
from the border town of Dandong to feed North Korea's single
operational oil refinery, the Ponghwa Chemical factory in
Sinuiju on the other side of the Yalu river, which splits the
The plant makes low-grade gasoline and diesel, the Chinese
The five people outlined previously unreported details about
CNPC's deals with Pyongyang and how it came to dominate that
business, giving insight into the two countries' relationship
and what's at stake as decades of close ties sour badly because
of growing concerns about North Korea's missile programmes and
development of nuclear weapons.
U.S. Secretary of State Rex Tillerson will press the U.N.
Security Council on Friday to swiftly impose stronger sanctions
in the event of further provocations by the reclusive state,
including a long-range missile launch or sixth nuclear test.
President Donald Trump's administration is focusing its
North Korea strategy on tougher economic sanctions, possibly
including an oil embargo, a global ban on its airline,
intercepting cargo ships and punishing Chinese banks doing
business with Pyongyang, U.S. officials told Reuters earlier
North Korea imports all its oil needs, mostly from China and
a much smaller amount from Russia.
It bought about 270,000 tonnes of fuel, from gasoline to
diesel, last year, according to China's customs data.
Crude oil exports from China to North Korea have not been
disclosed by customs for several years, but the sources say it's
about 520,000 tonnes a year.
In North Korea, diesel has been critical for farming,
especially at this time of year, ahead of the planting season
and also around October for harvesting. Gasoline is mainly used
by the transport industry and the military, experts say.
Earlier this month, the Global Times, an influential Chinese
tabloid whose stance does not necessarily reflect official
policy, raised the possibility of cutting oil shipments to North
Korea if it were to conduct another nuclear test.
Most analysts argue such a harsh policy would be potentially
destabilising to the regime of Kim Jong Un and say
curbing oil imports may be a more realistic option.
"China could potentially be convinced to cap volumes like
they did with coal, at the UNSC (United Nations Security
Council) as part of a new sanctions resolution following another
nuclear test," said Bonnie Glaser of the Center for Strategic
and International Studies in Washington.
Any loss of the North Korea trade will have only a tiny
effect on Dalian. Dalian's two refineries having a combined
capacity to process over 600,000 barrels of crude oil per day,
about 40 times North Korea's requirements.
CNPC, which controls both refineries, started to dominate
the North Korea business in the late 1990s.
Wang Lihua, who ran CNPC's trading arm from 1998 until her
retirement this month, was the mastermind behind the dealmaking,
beating out state rivals like Sinochem, the sources
"CNPC has all along been the most politically minded among
state energy firms, aiming for that role of North Korea's
dominant supplier even if the business makes little money," said
one of the sources, who is close to CNPC.
CNPC and Sinochem did not respond to Reuters' requests for
Pyongyang's increasing nuclear and ballistic missile tests
have already put the brakes on the trade. Beijing quietly
suspended a decades-long aid programme of 50,000 tonnes annually
of aviation fuel in 2013. The government officially announced a
ban on jet fuel only last June.
Russia appears to have replaced China as the top supplier of
jet fuel, according to sources in China familiar with the trade.
But experts are sceptical whether Moscow would be willing to
become Pyongyang's lifeline for other fuels given the country's
"They might fill some of the gap, but I'd be shocked if
Russia wanted the burden of becoming a lifeline to North Korea,"
(Additonal reporting by Gavin Maguire and Florence Tan in
Singapore and Josephine Mason in Beijing; Editing by Josephine
Mason, Raju Gopalakrishnan and Martin Howell)