So far in 2017, North Korea has launched no less than 12 missiles which it has claimed throughout, to be capable of delivering nuclear warheads into the territories for it's nations. The expected reaction from the international community is that of condemnation, but what if this posturing and sabre-rattling by the rogue nation is a smokescreen for it's efforts to be connected to the international economy in a means which makes it immune from economic sanctions?

All possible through digital currencies, namely cryptocurrencies in the forms of bitcoins.

 

To unpack all of this and fully understand how this rhetoric from North Korea factors into their economic situation we need to understand how the rogue nation is connected to the world wide economy first.

Trade Partners and commodities

The DPRK currently only trade with their direct border neighbors, being Russia and China. With very little capacity to refine raw products for export this limits exports to minerals, some armaments, textiles, fishery products, coal, iron ore, limestone, graphite, and some precious metals. In turn, the DPRK will import petroleum, coking coal, machinery, textiles and grain. The balance between imports and exports have been rather balanced of late, with an estimated $4 billion USD in exports (2012) and $5 billion USD in imports (2012).

With these rather well balanced imports and exports figures it makes it very difficult to explain how the DPRK can afford to run a logistically expensive and complex missile testing programme. In 2016, the total GDP for North Korea was estimated to be $28.5 billion USD ($1,300 GDP per capita).

Communications

Communications into and out of North Korea is a very tightly controlled medium, and in part this has been aimed at insulating the population from the influences of the Western media, most importantly to prevent South Korea from spreading propaganda into North Korea. Previously the only line of communications to the outside world has been through a single internet link via a Chinese telecommunications firm (China Unicorn), however in recent weeks a Russian communications company has provided the regime with a new internet connection through state-owned company (TransTeleCom).

Whilst this does not immediately mean that Russia is supporting the North Korean regime, it does mean that Russia now has the capacity to peer into the rogue nation's internet traffic, and where appropriate impose sanctions on their connection to the outside world.

From a North Korean perspective, this added redundancy may also limit the United State's efforts to congest their Internet connection to the outside world. From a Russian perspective, to attack the North Korean's internet infrastructure, would involve such an attack traversing the Russian infrastructure. An act which may be interpreted as an act of war should physical damage be caused in it's implementation.

North Korean based hacking groups

In recent years there have been many reported cases where North Korean related groups have been attacking businesses with the aim of either degrading a business function (Sony - presumably in response to a satirical movie), or in attempts to steal money via financial institutions.

In 2016, $101 million dollars was stolen from a Bangladesh central bank account (at the New York Federal Reserve), and then funneled through Sri Lanka and the Philippines, most of which has not been recovered. Similar tactics and methods were also used against banks in Ecudor and Vietnam, but purportedly the same groups.

Kaspersky Lab speculates that these intrusions were performed by the Lazarus group, reportedly a North-Korean based and funded state-sponsored hacking group.

Economic Sanctions from the International Community

During 2017, pressure has been placed on international trading partners to cease trade with North Korea in an attempt to bring their efforts regarding nuclear testing into line. North Korea has responded emphatically with more threats against objectors to their actions, while China and Russia are remarkably quiet (at least from a media reporting perspective).

Sanctions against North Korea's economic trading partners and it's currencies would be crippling at first, however given the previously demonstrating interest in cryptocurrencies, the diplomatic efforts may be in vain. Should the DPRK resort to using cryptocurrency as it's currency for international trade then it may be impossible to stem their economy from an international perspective.

Short of forcibly closing their borders to trade (which may not be possible considering the entanglement between China and Russia with North Korean communications infrastructure), there may not be a readily accessible solution to curb North Korea's nuclear ambitions.

 

 

But whilst these events remain fresh in the minds of the public, those on the cybersecurity front will be watching to determine how Lazarus may rise again.