China Suspends Fuel Sales to North Korea

China National Petroleum Corp has suspended sales of fuel to North Korea over concerns the state-owned oil company will not get paid, as pressure mounts on Pyongyang to rein in its nuclear and missile programs, three sources told Reuters.    

It is unclear how long the suspension will last. A prolonged cut would threaten critical supplies of fuel and force North Korea to find alternatives to its main supplier of diesel and gasoline, as scrutiny of China's close commercial ties with its increasingly isolated neighbor intensifies.    

Chinese Foreign Ministry spokesman Lu Kang, asked about the sale suspension and whether the Chinese government put pressure on CNPC to make this decision, said, "I do not understand this situation you are talking about" and declined to elaborate.

A source with direct knowledge of the matter said CNPC decided to put fuel sales on hold "over the last month or two" and described it as a "commercial decision". 

"It is no longer worth the risks," said the source. Chinese and international banks are stepping up compliance checks on companies dealing with countries on the US sanctions list, such as North Korea, he said.

The North Korean agents who mostly buy the diesel and gasoline have been unable recently to pay for the supplies—CNPC normally requires upfront payments, the source said. 

Reuters was unable to determine if the agents have started facing credit problems with Chinese and international banks worried about sanctions compliance issues.

Two other sources briefed about CNPC's decision confirmed the suspension of diesel sales, but did not know directly about the gasoline move. The people declined to be named due to the sensitivity of the matter and are not authorized to speak to the media.

Last year, China shipped just over 96,000 tons of gasoline and almost 45,000 tons of diesel worth a combined $64 million to North Korea, where it is used across the economy from fishermen and farmers to truckers and the military.       

Data for May released last week showed China supplied significantly lower volumes of diesel and gasoline compared with a month earlier, although monthly tonnages can vary widely. June data will be released in late July.