By Lucy Hornby and Jack Kim
BEIJING/SEOUL, Aug 4 (Reuters) - North Korean coal shipments to China have risen steadily this year, hinting at a deepening barter trade that makes it more difficult for the international community to pressure the reclusive state.
North Korea's neighbours, and the United States, have been tightening sanctions to bring the country back to the negotiating table and contain its nuclear ambitions. Former U.S. president Bill Clinton arrived in Pyongyang on Tuesday to seek the release of two American journalists.
Chinese trade data for June showed no cut-off in normal trade shipments to and from North Korea after a series of missile and nuclear tests in May. Chinese experts argue that too strong a stance by China would lose it what leverage it has with its ally.
On the contrary, rising coal exports could reflect increasing investments by Chinese firms in North Korea, in which supply of equipment and capital is repaid in kind.
"There are mines there, under production by big Chinese companies. We give them oil, equipment, everything, they give us ore," said a Chinese trade official. "It's a kind of barter."
In the first half of this year, North Korea more than doubled its exports of anthracite exports to China to 2.36 million tonnes (111 percent increase). That far outpaced the 45 percent rise in China's overall anthracite imports, as importers bought cheap international coal.
Coal shipments from North Korea have leapt each month this year, with the exception of a slight retreat in May.
China imported 646,078 tonnes of coal from North Korea in June, the highest in recent years, a more than threefold (244 percent) increase from June 2008.
Coal made up 68 percent of North Korean exports to China in the first half of 2009, according to Chinese customs data.
Crude oil shipments to North Korea, steady since December at about 50,000 tonnes a month, slipped 6.7 percent year-on-year to 46,673 tonnes. Crude shipments in the first half were down 3 percent, at 294,084 tonnes.
None of those goods is covered by the sanctions, meant to cut off North Korean access to luxury goods and weapons components.
"I think sanctions have been effective to some extent, but I doubt they have done enough to change North Korea's attitude," said Masao Okonogi, a Korea expert at Keio University in Tokyo.
JOINT VENTURES
North Korea does allow foreign joint ventures the right to mine, and pointed to mining earlier this year as a key area of development.
Chinese companies are usually the partners in such ventures, although other foreigners have also invested.
They might take payment in ore, including coal, for building a "joint venture" factory in the North and the roads and bridges leading to it, said Park Byung-kwang of the Institute for National Security Strategy (INSS) in Seoul, affiliated with spy agency National Intelligence Service.
Even Chinese state-owned investors have complained of the murkiness of North Korean regulations and of North Korean requirements that they invest in local industry rather than simply investing to obtain raw materials.
Such investments could still be used to pressure North Korea, should Beijing so choose, but the involvement of state-owned partners means there are vested interests, and sunk capital -- harder to cut off than trading shipments.
South Korean media said last week that Beijing had suspended at least one joint mining project with a North Korean firm blacklisted under a U.N. Security Council resolution.
"It could mean either Beijing is making a strategic move to pressure the North by putting a stop to it as part of participating in sanctions. This would be an easy move to reverse," said Park, from the INSS.
"On the other hand, it is entirely possible the Chinese firm decided it made little economic sense to continue doing business." (Additional reporting by Yoko Nishikawa in Tokyo)