The Fallout from Jang Song-taek's Execution

1) Who was Jang Song-taek and why was he so important to the Kim family regime?

• First and foremost, Jang was the CEO of North Korea, Inc. (He was related to the family not through blood, but by marriage to Kim Jong-il's younger sister, Kim Kyong-hui. She's Kim Jong-un's closest living senior relative).
• He was the Kim family regime's #1 revenue generator. He set up, staffed, and oversaw the largest and most powerful North Korean state trading companies.
• The revenue he made went directly into Kim family slush funds — the proceeds were used for: lavish celebrations marking important anniversaries of the births of Kim Il-sung (founder of the state) and of the founding of the military; luxury goods to cultivate the loyalty of the elites; and WMD programs.
• He was reported to have the "Midas touch." Whatever business venture he launched turned into a major commercial success. A key ingredient for such a track record was his cultivation of senior positions in the three important organizations in North Korea: the military, the Workers' Party of Korea, and the Cabinet. Jang perfected the art of "monetizing political relationships."

2) What does Jang's execution tell us about the Kim family regime?

• One of the greatest assets to the Kim family regime turned into its greatest threat.
• Piecing together the various charges against him reveals a pattern where his biggest crime against the Kim family was rapidly expanding his patronage system in a manner that made serving the Kim family secondary to increasing his own power. The charge of selling strategic resources to China at low prices has connotations of siphoning funds from the mineral trade to Jang's patronage system. That's tantamount to stealing from the Kim family. That may explain the swiftness and severity of Jang's punishment.

3) What's next for the Kim family regime?

• Jang’s execution marks the beginning of what is going to be an extensive program of weeding out his large patronage system. Given that Jang's patronage system was the largest in North Korea, this process will entail the removal of senior individuals. His patronage system is closely intertwined with the structure of the Kim family regime. It's going be a messy affair tearing out the tentacles.

4) What are the key crises ahead for the Kim family regime?

• While removing this patronage system is a top political priority for the Kim regime, the success of this program would mark a strategic setback for the regime as well. Who will replace Jang as the CEO of North Korea, Inc.? His track record of having the Midas touch is unparalleled in North Korea. The Kim regime needs constant generation of funds to maintain its viability. Kim Jong-un may be the Chairman of North Korea, Inc., but the key skill of making money had resided in the CEO. Jang could be replaced by another senior official close to Kim Jong-un, but that individual is going to lack the unique skills necessary to run North Korea, Inc.
• The major crisis ahead is reassuring Chinese business partners who are major players in the DPRK mining sector. Under Jang's management, North Korea's exports of coal and iron ore rose to comprise the largest components of trade with China. The PRC partners proceeded with their investments and business dealings largely based on their interactions with Jang. Personal relationships were critical in a country where there's a long list of foreign investors and business partners who have been swindled by North Korean state companies.
• In terms of Communist Party of China — Workers' Party of Korea relations, there's a huge power vacuum now with the CPC losing the person with whom they felt comfortable doing party business. Senior CPC leaders viewed Jang as an economic reformer who had a moderating influence on the Kim regime. For the CPC Jang was the embodiment of stability — a focus of Chinese obsession when it came to the quality they were desperately trying to seek and cultivate.

5) What are the implications for the international community?

• Under Jang, North Korean state trading companies earned more of their profits from commercially-related activities with Chinese partners inside of North Korea and inside of China than from illicit activities as in the past. In 2011, Sino-DPRK trade was almost $6 billion — the majority on the North Korean side of the ledger went to the 1% elites. With the elimination of Jang and the dismantling of his lucrative patronage system, there will be setbacks in Sino-DPRK commercial interactions that will decrease the generation of funds for the Kim regime. In order to fill these funding gaps, it's now more likely that the Kim regime may try to increase revenues from illicit activities like WMD-related sales. That's the area on which military-related state trading companies traditionally focused.