[Kiho Han's Column] The Era of the 70,000 Won Market Exchange Rate… What Is Happening in North Korea Now Since the Middle East Crisis

Dr. Kiho Han, Director (Associate Professor) of the Research Laboratory at the Ajou University Institute for Unification Studies and Affiliated Research Fellow at CUKPE

The Middle East crisis, which erupted following the U.S. and Israeli airstrikes on Iran on February 28, is now entering its third month. It has been two months that felt like two years. Rising international oil prices are causing significant inconvenience to the daily lives of citizens, leading to inflation, slowing growth, and mixed fortunes across various industries. As South Korea imports over 70% of its crude oil through the Strait of Hormuz, the country is on high alert regarding energy security. Although South Korea is participating in a multinational force initiative aimed at guaranteeing freedom of navigation and serving a defensive purpose—starting with an international conference on the Strait of Hormuz led by the UK and France this month—it is expected to take time to feel the tangible effects of international cooperation and import diversification.

The repercussions of the Middle East crisis are no exception for North Korea. Coincidentally, as two fronts have emerged since the onset of the pandemic, attention is now focused on the potential impact on North Korea's overall political and economic landscape. Rising international oil prices go beyond mere increases in energy costs; they boost demand for dollars in the foreign exchange market, leading to stagflation that worsens the trade balance and depreciates the value of the won. According to recent data released by Daily NK, the North Korean dollar exchange rate in Pyongyang, Sinuiju, and Hyesan is approaching 70,000 won as of April 26, a twofold increase from 35,000 won in early February. Given that the exchange rate consistently remained in the 30,000 won range from July of last year to early February, it is reasonable to view this as a direct consequence of the Middle East crisis. Of course, the North Korean authorities' decision to increase the supply of won through the Central Bank of Korea instead of tightening internal dollar controls may have fueled the speed of the high exchange rate. However, they are already empirically aware of the side effects of state-led control that lowers the value of the won without adequate supply of goods during a sanctions phase. The instability in the Middle East is demanding a new "new normal" for North Korea's survival strategy, which had briefly paused during the Russia-Ukraine war.

First is the asymmetric surge in fuel procurement costs and inflation in logistics freight rates.

Under UN Security Council Resolution 2397, North Korea is limited to an annual import quota of 500,000 barrels of refined oil, forcing it to rely on unofficial channels such as transshipment at sea. When international oil prices rise, a "sanctions premium" emerges, adding risk premiums and logistics costs required to operate smuggling networks; this drives up domestic import unit prices much more steeply than international market rates. According to price indices from Daily NK and Japan's Asia Press, as of mid-April, gasoline prices in North Korea stood at around 23,000 won per kilogram and diesel at 18,500 won, representing a surge of over 40% compared to the beginning of the year. This figure is approximately 1.5 to 2 times the fluctuation range of international oil prices, reflecting a scarcity premium resulting from supply shortages. There have also been successive reports that rising oil prices have caused freight rates for 'beolicha,' the backbone of North Korea's inland logistics, to nearly double in just one month in some regions, such as Sinuiju. In particular, as authorities reduce the volume of oil distributed to the private sector and prioritize diverting it to the military's strategic reserves in response to the surge in oil prices, the energy supply shortage in the markets is accelerating further.

Second is the spread of a sentiment to hoard foreign currency due to security uncertainty.

Immediately following the aftermath of the Middle East crisis, North Korea has been churning out regime propaganda articles through the Rodong Sinmun condemning the U.S. and Israel for initiating the war; however, this is tantamount to a signal to readers and market participants to prepare for security-related economic risks. Residents may have recalled the period of widespread chaos caused throughout the northern region by the 5th Currency Reform implemented in late autumn of 2009. The situation is similar in that it led to distrust of the domestic won and an excessive concentration of demand for safe-haven assets such as foreign currencies (dollars and yuan) and gold. North Korea's market exchange rate once reached 70,100 won per dollar (Daily NK, April 12), surging 29.3% compared to the end of March. When viewed over a two-week period, this represents the most unstable fluctuation since the currency reform. Anticipating rising import prices and a further depreciation of the won, the "donju" (the nouveau riche) have collectively engaged in hoarding foreign currency, causing the exchange rate to rise sharply. Furthermore, as merchants avoid won-denominated payments, signs of a so-called structural long-term stagnation are being observed, with the efficiency of distribution in the people's livelihood economy rapidly deteriorating. Ultimately, the contraction in resident consumption leads to a decline in merchants' financial power, stagnation of overall market volume, and supply chain stagnation, resulting in a quagmire of a vicious cycle. Third is the sophistication of illegal pipelines in cyberspace.

The butterfly effect caused by President Trump's grandiose Operation Rage does not stop here. To make up for the foreign currency shortage resulting from the skyrocketing exchange rate, North Korea is staking its survival on predatory financing in cyberspace. According to the Chainalysis 2026 report, a North Korean-linked hacking group stole virtual assets worth approximately $2.02 billion (about 3 trillion won) during 2025 alone. This amounts to 4.6 times North Korea's annual official export value. The stolen assets are converted into fiat currency via "mixer" services—which make it difficult to track asset flows—and shell exchanges located in Southeast Asia. This currency is then diverted to circumvent sanctions against North Korea, serving as a key source of funds for fuel smuggling and the procurement of advanced weapon components from Russia. Paradoxically, the geopolitical crisis in the Middle East provides North Korea with a vicious cycle that increases its reliance on illicit means and directly links to funds for the actual advancement of its nuclear and missile programs through loopholes in sanctions.

Fourth, the deepening economic subordination to China and Russia acts as a constraint on diplomatic options.

China, the greatest pillar of the North Korean economy, has engaged in sophisticated "managed support" during periods of currency skyrocketing to prevent the situation from escalating into regime instability. The tendency for the proportion of food and energy in North Korea-China trade to increase abnormally during periods of rising oil prices can also be viewed as an emergency measure aimed at maintaining regional order. The economic challenges North Korea has shouldered due to the prolonged Middle East crisis will fall not only on China but also on Russia (in terms of oil, food, etc.), which bears debts from the deployment of troops to Kursk and the provision of ammunition. Without the support of China and Russia, it now seems difficult to be certain of the tangible success of the "Regional Development 20x10" policy, which the North Korean authorities have ambitiously put forward. It is already known that Russia plans to invest $11 million this year for oil exploration off North Korea's east coast; it is evident that this will further deepen North Korea's external economic dependence on specific countries and lead to asymmetric diplomatic relations.

In conclusion, the Middle East crisis is putting the North Korean economy to the test amidst a trend ranging from rising international oil prices to skyrocketing logistics costs, a depreciation of the won, and a high exchange rate. If advanced technologies such as military reconnaissance satellites, secured through close military ties with Russia following the Russo-U.S. War, represent a security "achievement," then the market exchange rate in the 70,000 won range caused by the Middle East crisis serves as an economic "warning light." North Korea’s unconventional survival strategies, relying on cyber plunder and the special profits from external wars, will gradually elevate its status within the regime; meanwhile, the imbalance in internal resource allocation, the loss of monetary sovereignty, and the deepening economic subjugation to China and Russia will serve as a barometer testing the regime's sustainability. This is why the situation in the Middle East is more painful for the Korean Peninsula than for other nations.

(This article was originally published as a column in Aju News in Korean and translated into English with the help of Google Translate. The views expressed in this article are those of the author(s) and do not represent the official stance of the center.)