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This chart shows how North Korea gets away with such bad behavior

North Korean leader Kim Jong Un
North Korean leader Kim Jong Un
KCNA VIA KNS/AFP/Getty

We take for granted that North Korea is totally isolated in the world — the Hermit Kingdom. And that, ostensibly, is a big part of why the country can get away with such horrible behavior, largely by abusing its own citizens, but occasionally by, say, launching a massive cyberattack against a foreign country. (Even if North Korea was not actually responsible for hacking Sony Pictures, it has hacked many foreign targets in the past, such as a spate of South Korean banks in 2013.)

But while North Korea is indeed probably the most isolated country on Earth, its isolation is not absolute, and is actually declining: foreign trade with the country has been growing steadily for years. That's great news for North Korean leader Kim Jong Un, and bad news for the rest of the world's ability to deter his misdeeds. It helps explain, as much or more so than the country's isolation, how Kim Jong Un can get away with it all.

To see what I'm talking about, look at this chart showing North Korea's total trade since 2000, assembled by CNBC based on data from the excellent North Korea team at the Peterson Institute. The chart breaks down the trade by country, but more than 90 percent of it is with just three countries: China, Russia, and South Korea.

North Korea's total trade since 2000 (CNBC)

The way it's supposed to work is that North Korea's belligerence, aggression, and horrific human rights abuses lead the world to isolate it economically, imposing a punishing cost and deterring future misdeeds. What's actually happening is that North Korea is being rewarded with more trade, which is still extremely small, but growing nonetheless, enriching and entrenching the ruling Kim Jong Un government, even as it expands its hostile nuclear and missile programs.

What's great about this chart is it makes clear that North Korean trade has been so high because of exactly two countries: China and South Korea. Paradoxically, those two are North Korea's greatest ally and arguably its greatest enemy. That tells you a lot about North Korea and how it's managed to survive for so long.

Why South Korea helps out its greatest enemy

South Korean trucks enter the Kaesong complex in North Korea (JUNG YEON-JE/AFP/Getty)

South Korean trucks enter the Kaesong complex in North Korea (JUNG YEON-JE/AFP/Getty)

You wouldn't think South Korea would want to help out North Korea: the two countries are still officially at war, and the North occasionally still murders South Koreans for no reason other than belligerence. In 2010, for example, North Korea shelled a South Korean community on Yeonpyeong Island, killing four, and it sunk the South Korean Cheonan naval vessel, killing 46. So why has South Korean been rewarding its northern neighbor with such substantial trade?

There are a few reasons, but the biggest has to do with a radical policy change South Korea made starting in 1998, called the Sunshine Policy. The idea was that decades of hostility with the North hadn't worked, but maybe that taking a softer line would ease tensions. That included lots of political summits and official rhetoric about Korean unity, but it also meant opening up some trade with the North, which is why you see those blue bars getting larger. South Korean President Kim Dae Jung won the 2000 Nobel Peace Prize for it.

But it turned out that North Korea was just exploiting the Sunshine Policy as a con. The greatest symbol of this was the Kaesong Industrial Complex, a big production center just on the North Korean side of the border, where South Korean companies and managers contract with North Korean workers. The idea was that this daily contact would ease cultural tension and that the shared commercial interests would give the countries a reason to cooperate. In practice, though, the North Korean government stole most of the workers' wages, big South Korean corporations exploited the ultra-cheap labor to increase profits, and North Korea didn't ease its hostility one iota.

The Sunshine Policy ended in 2007, correctly rejected as a failure by South Korean voters. But the trade continued, as did the work at Kaesong. South Korean corporations, which have even more political power there than do American corporations in the US, have come to enjoy this trade as a source of revenue and cheap labor, and push to maintain it. That drop you see in 2013 is actually because North Korea shut down Kaesong for a time as a political provocation — it was the South Koreans, paradoxically, who wanted to reopen the facility that directly funds the North Korean weapons occasionally used to kill South Koreans.

The real reasons China supports North Korea

The majority of North Korea's trade, though, is with China. China sells North Korea a great deal of fuel and supply, invests in North Korea infrastructure, and sends lots of Chinese tourists on officially sanctioned trips. There's also a great deal of illegal smuggling between the two that is probably not recorded here. But the trade is primarily about politics and China's strategy of keeping North Korea stable, supplied, and reliant on Beijing.

China's support for North Korea is absolutely existential for the Kim Jong Un regime; they could not survive without China's economic support, China's diplomatic cover against a world that overwhelmingly hates the Kims, and China's implicit military alliance. But there's a huge, common misconception that China does this because it feels ideological fealty or cultural closeness with North Korea. That might have been true 50 years ago, but today China and most Chinese look down on North Korea, which they see as a necessary but repugnant and unpredictable ally.

The reason that China allows North Korea this regime-sustaining trade is that, as much as Beijing hates the North Korean regime, it sees the alternatives as worse. It expects that, without the trade, North Korea would become unstable or outright collapse, leading to either war or a refugee crisis, either of which would be disastrous for China. And it also uses the trade as leverage to reign in North Korea a bit; without that leverage, China worries North Korea's provocations could go too far, leading to war. The regime's collapse would likely end with Korea's reunification under the South Korean government, which currently hosts tens of thousands of US troops. China doesn't want that on its border.

Beijing is actually quite clear about its priorities with the Koreas. Its long-standing policy is something it describes, quite simply, as "No war, no instability, no nukes." It's practically a catchphrase. The three priorities are listed in order, which is why Beijing is willing to accept a little North Korean nuclear belligerence if they think it will help prevent war or instability. But this set of priorities really explains why China is willing to send so much trade into North Korea: it's all part of propping up the regime, no matter how despicable they may be.

As with South Korea's Sunshine Policy, this is something that North Korea exploits gleefully and adroitly, using every possible opportunity to spin up tensions so that China will seek to calm them down with more investment and trade. Those growing bars on the chart up top are all part of the Kim regime's game, one they play brilliantly.


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