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North Korea-China: For the record. Kim Jong-un received a visiting senior Chinese official today in his first such meeting. The visitor was Wang Jiarui, the head of the International Department of the Chinese Communist Party. Kim sent greetings to the Chinese leadership and said the Korean Workers' Party and the government have the unswerving will to carry on the legacy of his father and to consolidate and develop friendly cooperative ties.

Referring to the situation in North Korea, Kim said the Workers' Party of Korea possesses the goal of "developing the economy and improving the people's livelihoods to let the Korean people lead a happy and civilized life." Kim also said Pyongyang "would always make active efforts to safeguard peace and stability on the peninsula."

Wang was quoted as saying the two sides should "enhance strategic communication and coordination on major global and regional issues and make unremitting efforts to safeguard peace and stability on the Korea Peninsula and achieve lasting peace in Northeast Asia."

Wang arrived in Pyongyang on Monday and held talks the same day with Kim Yong Il, a secretary of the Workers' Party Central Committee.

Comment: Wang met Kim when Kim's father was still alive last summer, so this was more than a get-acquainted meeting. One of the signs of serious business is Kim's statement of the priorities of the Korean Workers' Party as developing the economy and improving livelihoods. Those words come close to channeling the priorities of Kim Il-sung in 1993 and 1994 before he died.

Another is the emphasis on "stability," which is China's top priority for North Korea. Kim's use of the word in his statement shows he understands the message.

Kim's words about the economy, however, seem to contrast sharply with the National Defense Commission's statement on the 29th, which clarified North Korean policy regarding the alleged South Korean attempt to destroy the Kim statues in Pyongyang. That statement carried the language of Kim Jong-il's regime about the importance of the "Sangun" - military first - policy.

It appears Kim has a larger and more modern concept of national strength than just funneling resources to the armed forces, as his father did. Plus he is buoyed by the precedent of his grandfather's emphasis on the improving the welfare of the people, during his last year alive.

It also is clear, however, that Kim Jong-un cannot neglect the armed forces and that they have some freedom of action to ensure outsiders do not labor under a misperception that internal economic construction signifies weakness. In fact it does because national power is more than military strength. But the generals will remain prickly nonetheless.

Thus, Kim is the undisputed leader, but he and his cadre of civilian advisors still do not have unchallenged control over national priorities and policy.

Iran: In a late July speech, Supreme Leader Ayatollah Khamene'i used the word "pressures" rather than "sanction" in calling on the government to adopt a "resistance economy."

Khamene'i defined this policy as "correcting consumption methods, preventing waste, doubling efforts, democratization of economy, strengthening the private sector, and reducing Iran's dependence on oil." He suggested "petrol rationing" as one idea for implementing a resistance economy.

Measure the government has enacted include elimination for the budget of funds for family planning; consideration of stockpiling 24 essential commodities; closing border markets to prevent sales of essential commodities outside the country at higher prices; termination of government sales of foreign currency at subsidized prices to Iranians traveling outside the country.

In a joint meeting of cabinet ministers and Majles deputies on 29 July, President Ahmadi-Nejad spoke of "a difficult situation." He said, "We need to start making savings in the parliament and the government; we should not allow the public to bear the brunt of the budget cuts."

Comment: The sanctions are a form of economic warfare and collective pressure to build internal opposition to the nuclear program. Khamene'i's statement represents a call to convert to a wartime economy. Sanctions work slowly, but they work. One analyst suggested in a living systems analogy that they work more like medicine than other, blunter policy measures.

At some point the sacrifices of the people for the sake of the nuclear program will translate into pressure on the regime to make changes that ease the sacrifices. That point is approaching. Khamene'i's call for a resistance economy is an indicator that the sanctions are having a significant impact. The measures he suggested will not support a modern economy and are unsustainable for more than a few months.

Egypt: Comment: Today the new cabinet was sworn into office. While some commentators applauded that an elected president appointed the cabinet, the cabinet's composition indicates Mursi is not fully in control of his government. That is not necessarily bad for Egypt's economy.

The key ministers are holdovers from the military-backed interim government. They include Finance Minister Mumtaz al-Saeed and Defense Minister Field Marshal Mohamed Hussein Tantawi, also head of the Supreme Council of the Armed Forces.

The holdovers demonstrate that the armed forces leadership remains in position to protect military interests and enterprises. Equally important, familiar faces in key positions probably are intended to reassure investors. The top priority for this government is to revive the failing economy and end worsening shortages of gasoline, electricity and key commodities. In this cabinet ideology and theology have taken a back seat to economics.

End of NightWatch ###

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