The Marmot’s Hole

South Korea’s military authorities estimate that it cost North Korea about 60 billion won (roughly 63 million US dollars) to fire off seven missiles on July 5, reports the Dong-A Ilbo.

Given North Korea’s dire economic conditions, some believe Pyongyang was able to conduct its tests only because of South Korean aid that has flowed into the North since 2000.

Officially, North Korea’s budget last year was 388.5 billion North Korean won, which comes out to roughly 2.59 billion US dollars using North Korea’s official exchange rate of 150 won to the dollar. Accordingly, the missile test would have accounted for 2.5 percent of North Korea’s yearly budget.

However, according to the real exchange rate used in the North Korean market, which is 3,000 won to the dollar, North Korea’s annual budget would come out to only 129.5 million US dollars. Using this standard, North Korea would have blown half its annual budget firing seven missiles into the East Sea.

Of course, as one South Korean researcher pointed out, nobody knows what North Korea’s real budget actually is, given how a lot of its defense expenditures are hidden.

The Dong-A Ilbo, however, said one couldn’t help but be suspicious when North Korea is blowing anywhere from 2.5 percent to 50 percent of its annual budget in just a single day with an unprovoked attack on shallow-swimming fish in the East Sea.

Meanwhile, South Korea has officially provided a total of 1.23 trillion won worth of aid to the North over the last six years. This comes out to 514.8 billion North Korean won using North Korea’s official exchange rate, or 1.3 times North Korea’s annual budget last year.

Now, the Dong-A points out that since much of South Korea’s aid is in humanitarian supplies and the development of North Korean infrastructure, it’s hard to directly tie South Korean aid with North Korean defense expenditures. Experts point out, however, that because Pyongyang is getting such large amounts of aid, it can concentrate its funds on projects like missiles and nuclear weapons.

There is also persistent talk that North Korea is using the foreign currency earned through the Kaesong Industrial Park and the Kumgangsan tourism project on military expenditures. South Korea estimates that North Korea earns about 20 million US dollars annually through the projects.

Finally, more than a few experts believe that if we include the 500 million US dollars former President Kim Dae-jung slipped the North Koreans to smooth the way to the June 2000 intra-Korean summit, South Korean aid has provided Pyongyang with a base upon which it could develop its nuclear and missile programs.