North Korean House of Cards

Despite the regime’s efforts to shift to other money-making ventures, the
Royal Economy has not recovered the same scale of foreign currency generation that
it had in the early 2000s. During this time, weapon sales, drugs, and counterfeiting
alone brought nearly $2 billion into the regime’s coffers. At the same time, the
Supreme Leader’s needs are growing. In addition to keeping up a lavish lifestyle
of palaces and yachts, Kim Jong-un faces an uphill battle to consolidate his power,
which will take at least two years to complete. In 2012, his gift-giving reportedly
reached record levels of over $600 million, twice the highest level his father spent to
secure the leadership’s loyalty. In the absence of progress in the People’s Economy,
Kim Jong-un will remain constrained in his ability to show his credentials as a leader
that the nation must follow. Thus, he will have to continue to lean heavily on the
Royal Economy to sustain the regime.
If the stories about Kim Yo-jong becoming a critical player inside the Royal
Economy are true, it suggests that the Kim family has learned a lesson from the
Jang Song-taek affair and is strengthening its grip on many critical funds inside the
regime. However, this hoarding of hard currency assets will only work so long
as Kim Jong-un is respected and feared as the Supreme Leader. If the situation
persists, it could exacerbate the already fierce power struggles at the second and third
echelons over continuously decreasing shares of control of hard currency operations.
Even more threatening to Kim’s own power is that the Royal Economy could
become the center of future power struggles within the Kim family. As Kim Jong-un
consolidates his power, he will have to continue to purge potential rivals and
sources of opposition, even within his own family. If the Royal Economy begins to
contribute to the escalation of such struggles, it will further deplete the funding Kim
needs to secure the loyalty of the wider leadership. The result could be a gradual
breakdown of control.
Committee for Human Rights in North Korea
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