North Korean Economy Watch

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Northeast Asia can be considered the last major economic frontier on the Asian continent.  The region has enormous economic potential, but this potential can only be realised through dynamic cooperation and sharing of resources.

Recognising Northeast Asia’s considerable potential and geopolitical significance, UNDP in 1991 agreed to support the initiative of the countries in the region to establish an institutional mechanism for regional dialogue and further cooperation.   For the past twelve years, the Tumen River Area Development Programme has facilitated economic cooperation among the five member countries: China, the Democratic People’s Republic of Korea (DPRK), Mongolia, the Republic of Korea (ROK), and the Russian Federation.  The member countries are equally represented in the Consultative Commission for the Development of the Tumen River Economic Development Area and Northeast Asia, which meets annually at Vice Ministerial level.

The main objectives of the Tumen Programme are to:

• attain greater growth and sustainable development for the peoples and countries in Northeast Asia, and the Tumen Region in particular;
• identify common interests and opportunities for cooperation and sustainable development;
• increase mutual benefit and mutual understanding;
• strengthen economic, environmental and technical cooperation; and
  work to ensure that the Tumen Region is attractive for international investment, trade and business.

The first phase of the Tumen Programme involved extensive planning and background studies.  An interim phase focused on investment promotion and development initiatives designed to build momentum for the region as a growth triangle.  The second phase built on the institutional framework for regional cooperation created by the multilateral agreements concluded in 1995.  The third – and current – phase continues to address factors fundamental to regional economic cooperation and is designed to ensure the sustainability of this regional cooperation framework.

Why the Focus on the Tumen Region?
The Tumen Region has great potential as a major entrepot for international trade because of the strategic location of the Tumen transport corridor, the strong complementarities of the Tumen River Area, vast natural and human resources, and the area’s accessibility to the resources and markets of Northeast Asia.

Northeast China and Mongolia are landlocked and therefore have a strong interest in access to ports in DPRK and the Russian Far East.  Overseas shippers also have a stake in the Tumen transport corridor, for it offers a much shorter route to affluent and new markets, and facilitates transit trade to a number of destinations.

The local governments in the Tumen Region have been steadfast supporters of the Tumen Programme since its inception.  It appears that central governments in Northeast Asia are now re-emphasising the value of the Tumen Region, particularly its strategic transport corridor.  Northeast Asian governments are rapidly improving the Tumen Region’s infrastructure network and transport services.  They are also working to create legal and institutional mechanisms conducive to cross-border trade and transport.  The Tumen Programme is actively facilitating the creation of an enabling environment through “soft” infrastructure and human capacity building.

Why is Regional Cooperation so Important?
Regional cooperation is a vital part of the development process and a building block for effective participation in world trade and capital markets.  For the Tumen Region, which partly consists of small and remote areas of large countries, economic cooperation is an effective way to avoid marginalisation.  Cross-border cooperation also helps resolve environmental issues and facilitates the adoption of international environmental standards.  Most importantly, enhanced economic cooperation in Northeast Asia helps improve political relations and stability, in turn vital elements for investment and economic growth.

It is worth recalling how remote and closed the Tumen Region was just a dozen years ago, to appreciate the full significance of its role as a frontier for economic cooperation in Northeast Asia.  Much has been achieved during the Tumen Programme’s existence, particularly in terms of opening borders and increasing interaction in a region that was, until recently, tense and largely closed.  A new trade and transport corridor has been created, which will – in time – evolve into an economic corridor with a significant impact on poverty reduction and improved living standards in the region.

The Future of the Tumen Programme
The prevailing political and economic climate in the region has altered dramatically since the start of the Tumen Programme in 1991.  The Soviet Union has dissolved, China and ROK have established diplomatic relations and a major trading partnership, and there has been a degree of rapprochement between DPRK and ROK.  The transition to stronger economic systems in the countries that relied on the Soviet Comecon trading system has reinforced the logic of economic cooperation in the Tumen Region.  The increased participation of DPRK, Mongolia and the Russian Far East, combined with the rapid expansion of the Chinese economy, will help the Northeast Asian economy grow.

Dynamic cooperation has found increasing expression in Northeast Asia, and relations in the region continue to improve, helped by stronger economic links.  Despite major improvements in the geopolitical circumstances of the region, however, much remains to be done.  The Tumen Programme is the only initiative that brings the member countries together on a sub-regional basis, and its existing institutional structure and multilateral agreements should be utilised to maximum effect to help Northeast Asia achieve peace and prosperity.

Asia Times
(abridged)
11/30/2006

United Nations Security Council Resolution 1718 has had no impact on the economic activity in the remote northeastern corner of North Korea where Russians and Chinese are building transportation infrastructure for future industrial-development projects. As was planned before the nuclear test, the Russians began repairing a dilapidated railway line, while the Chinese continued with their highway-construction project.

There were no delays in the normal operations of the Kumgang (also transliterated Geumgang) project, a joint tourist venture on the border between two Koreas. Every day many hundreds of South Korean tourists travel about 20 kilometers into the North to visit the picturesque mountains and spend a few days there, leaving their currency in the accounts of the North Korean government. The project has always been a major money-earner for the cash-hungry North. The Americans tried to stop Kumgang operations, but the South Koreans refused, and business continued as usual.

It was reported this month that a number of the North Korean workers employed by South Korean companies in Gaesong industrial park exceeded the 10,000 mark. Gaesong industrial park is the largest cooperative venture between two Koreas. It is the place where South Korean capital and technology use cheap North Korean labor to produce internationally competitive stuff – or at least this is what is supposed to be going on there.

In spite of optimistic talk, so far the project has been a money-losing enterprise for the Southerners, and most companies stay in Gaesong only because their government is willing to back them financially.  Still, Seoul, even when it talked tough, did not do anything to slow down the project. On the contrary, the Gaesong project is growing fast, and so, one might suspect, are revenues it provides to the Pyongyang regime.

By now it has become patently clear. No international sanction regime against North Korea worthy of its name is in place, and there is no chance that such regime will emerge in future. China, Russia and, above all, South Korea do not want to punish North Korea for going nuclear.

China is not happy about a nuclear North Korea, but probably sees it a lesser evil than a unified Korea that is likely to be under US influence and will perhaps even have US military bases. Beijing does not want this. It also does not want a collapse of another state under communist rule – this might be a bad news for domestic propagandists.

And last but not least, in recent years Chinese companies have moved into North Korea, taking over mining and infrastructure, so such gains need be protected as well. At the same time, the North Korean nukes are not seen by Chinese strategists as an immediate problem: the Chinese assume (correctly, perhaps) that these weapons will never target China and will not be transferred to China’s enemies. So for China, keeping North Korea afloat is a strategic imperative.

Russia is not a major player in the Korean game nowadays, but it has some leverage as a potential “blockade breaker”. Without sincere cooperation from Russia, no efficient sanctions regime will be possible, and such cooperation seems unlikely. Moscow does not want the North Korean regime to collapse. The country’s leader Kim Jong-il is potentially useful for numerous diplomatic combinations, and also as a deterrent against the Americans, who are increasingly seen by President Vladimir Putin’s Moscow as dangerous global bullies.

However, it is South Korea whose policy is decisive in these issues. Indeed, in recent years North Korea was kept afloat by generous Southern aid, with some 500,000 tons of grain and a large amount of other supplies being sent north every year. This aid saved countless lives in the North, but it also contributed to keeping the regime in control.

It has been clear for a decade that South Korea, in spite of all the rhetoric, does not want unification to happen too fast or too soon. The German experience demonstrated how vastly expensive unification might become, and Koreans have good reasons to believe that their situation is much worse than that of Germany. After all, the per capita gross national product in East Germany was roughly half of the West German level, while in the case of North Korea, per capita GNP is less than one-tenth of the South Korean level.

Judging by the experience of the 1990s when the North Korean regime was more isolated than now, economic pressures alone will not necessarily lead to its collapse. During the great famine of the late 1990s, between a half-million and a million people starved to death without causing any inconvenience to the regime. There are no reasons to believe that sanctions would achieve much either, apart from producing another famine and many more deaths.

In contrast, the ongoing exchanges bring to North Korea information about the outside world, and this information is subversive by definition, making more and more people wonder whether something should be done about their country’s political and economic system, so clearly inefficient and anachronistic. Thus the current situation surrounding the so-called “sanctions” might be a rare case when the hypocrisy and duplicity of so-called “collective diplomacy” is doing more good than harm.

Early this month a market riot happened in the remote North Korean city of Hoeryong. Perhaps for the first time since 1945, a large group of North Koreans openly and vocally protested an unpopular decision of the local administration. This was a minor incident, but in the long run it might be more significant than all the meaningless invectives delivered by the well-dressed people in the UN Assembly Hall.

Korea Times:
11/13/2006
Andrei Lankov

For the last few decades a visitor to Eastern Siberia would sometimes come across unusual logging camps: fenced off with barbed wire, they sported the telltale portraits of Kim Ilsung and Kim Jong-il. These are North Korean camps: from the late 1960s, North Korean loggers have been working in Russia’s Far East.

In the 1960s the timber shortage was felt both in North Korea and the USSR, but the reasons for the shortages were different.

The Russians had plenty of forest, but lacked labor. When the gulags were emptied after Stalin’s death, few people were willing to up and fell trees in remote corners of Siberia.

The North Koreans had an abundance of cheap labor, but almost no good timber. Thus, the two Communist states had a potential match made in heaven.

In March 1967, when the relations between the two countries began to recover after a serious chill, the logging agreement was signed.

According to the agreement North Korean loggers were allowed to work in designated areas of the Russian Far East.

They were housed in special labor camps, run by the North Korean administration. The timber was to be divided between the two sides: the Russians 60 percent and the North Koreans 40 percent.

At their peak in the mid-1980s the Far East joint logging projects employed over 20,000 North Korean workers. This means that some 0.5 percent of all North Korean able-bodied men labored there. Nowadays, the operations are smaller in scale, with some 8,000 workers employed. An additional 3,000 North Korean workers are employed in other joint projects in Russia (construction industry, vegetable gardening etc.). Since the workers were rotated every three years, it is likely that up to a quarter of a million North Koreans have taken part in this project over the decades.

Politically, this was not as dangerous as it might seem. Even in the 1960s, the Soviet Union had far higher standards of living and was much more liberal and permissive society than the North.

However, the North Korean workers were in the middle of nowhere, and kept under the watchful eyes of their supervisors in the nearly isolated camps. People who broke the rules were arrested and sent back to the North. If it was deemed too difficult or impractical, they could be killed on the spot _ the Siberian forests provided more than enough space for unknown burials.

The Soviets usually turned a blind eye to everything the North Korean administrators did. In the early 1990s the situation changed. During the heyday of perestroika, investigative journalists began to report on the conditions of the North Korean workers.

An expose of the prison maintained by the North Korean security police in one of the logging camps led to a particular public outcry. In those days the Russians felt a nearly universal enthusiasm for democracy and believed that Kim Il-sung’s regime would soon collapse.

There were also publications about the secret opium plantations and illegal harvesting of protected species of plants and animals _ both, frankly, long established pillars of North Korea’s foreign currency earning programs.

On top of that, some loggers used the change in the international situation to defect to the South. In those days, defectors were still rare and thus welcomed in Seoul.

In 1992-1994 it appeared that the entire timber project would be discontinued owing to political considerations. However, the situation changed. The events of 1992-2005 made Russians quite skeptical about democracy, and very suspicious of idealistic crusades of any kind.

Thus, the North Korean camps were left alone to the great relief of the local Russian administrators and businessmen who make good money out of these projects.

For them, the North Koreans were but a source of cheap labor, and they did not care how these “Orientals” were treated by their supervisors.

When the initial Russian enthusiasm for a free press died out, the local politicians learned how to keep journalists away.

By the late 1990s, it also became clear that South Korea was not going to encourage the defection of the loggers. On the contrary, anecdotal evidence indicates that loggers who approach the local South Korean consulate are unceremoniously turned away.

Seoul does not need these impoverished and potentially troublesome brethren in our sunshiny days! Of course, some loggers run away, but largely in order to find better job opportunities in Russia’s black economy.

There are about a thousand such runaways hiding in Russia now, but the authorities tend to ignore their presence.

But what was the incentive for the North Koreans workers? The short answer is: money.

Really good money _ at least, by North Korean standards.

From the Korea Times:
Andrei Lankov
11/6/2006

First Embassy

The Cold War propaganda in the West, and particularly in South Korea, used to present North Korea as a puppet regime, completely dependent on Moscow. This propaganda image was patently wrong in the 1950s, let alone 1960s.

However, in the early stages of its history, before the Korean War, North Korea indeed could be described as a Soviet dependency.

The first speech of Kim Ilsung, delivered in October 1945 at a mass rally in Pyongyang, was written in the Soviet Army headquarters and then translated into Korean by a Soviet officer.

All major political pronouncements and most of the important speeches of the North Korean dignitaries were initially given to Soviet supervisors for editing and approval.

In the North Korean armed forces, all appointments above battalion commander had to be cleared with the Soviets. And all major political events had to be discussed with the Soviets beforehand.

The major task the Soviets strove to achieve in the late 1940s can be described as the ‘communization of Korea.’ They wanted a stable and efficient local regime that would become a reliable junior partner for Moscow in the region.

This policy was implemented by a remarkable group of people who came to Korea from Stalin’s USSR and stood for everything that was good and bad in the Soviet bureaucracy of the era. They were brutal, efficient, determined, ruthless, and intelligent. They belonged to the same cast of cadres who transformed a backward agrarian Russia into a superpower (and killed millions in the process).

The major role in Soviet diplomacy of the pre-war era belonged to Colonel General Terentii Shtykov, a member of the Military Council (political commissar) of the First Far Eastern front. In fact, in 1945- 48, he was the supreme ruler of North Korea, the principal supervisor of both the Soviet military and the local authorities.

General Shtykov was a party functionary rather than a military officer. He was a farmerturned- worker who came to Leningrad in the 1920s, was recruited to the Communist Party and made a remarkable career in Stalin’s Russia. By 1945, Shtykov held the rank of Colonel General, then the highest possible for a political commissar (besides him, only three political officers had the same rank in the entire Soviet Army).

He was an autodidact: a poor farmer’s son and had only attended primary school, but few people could guess that the general had almost no formal education.

In 1948, when the Soviet troops were withdrawn from Korea and the newly established DPRK was recognized by Moscow, it was only logical that Shtykov became the first Soviet ambassador to Pyongyang.

In this position, Shtykov was assisted by a remarkable group of people, mostly in their 40s and 50s. Colonel Ingnatiev supervised the development of the North Korean bureaucracy and arranged the foundation of the Korean Workers Party in 1946.

He was also an early champion of Kim Il-sung, whose rise to the political heights would never have happened without Colonel Ignatiev’s support.

Another part of the Soviet bureaucracy in the North was known as the ‘office of the political adviser.’ This nebulous name was used by the local office of the MGB (the KGB’s predecessor), run by the enigmatic and efficient Armenian, Colonel Balasanov. Balasanov was an intelligence operative specializing in East Asia. His agents were responsible for a range of clandestine activities in the North and South, as well as for supporting the South Korean Communist insurgency that began in 1947 and was secretly supplied from the North (and, of course, from the USSR).

One also has to mention the brilliant Dr. Tunkin, an expert on international law, who was responsible for negotiating with the Americans (or breaking the negotiations off: as every diplomat knows, sometimes the ability to not achieve anything is as important as the ability to achieve something).

In the late 1940s, Ambassador Shtykov became a supporter of Kim Il-sung’s plan to invade the South. Both Shtykov and Kim spent a long time lobbying Moscow for permission to attack, and assuring Stalin that victory would be swift, cheap, and easy. It was not.

The ill-advised invasion of the South seriously damaged Shtykov’s career. He was recalled to the USSR and appointed to an insignificant post (when we recall the situation those days, he should consider himself lucky to have stayed alive). Other people left, too: after all, in the post-1953 period Korea stabilized and lost much of its strategic importance.

Dr. Tunkin embarked on successful academic career that would eventually grant him a place in the Encyclopedia Britannica, and Col. Ignatiev was killed in an American air raid.

In the early 1950s, these ‘old Korean hands’ were replaced by a new crop of diplomats who were, frankly, of much inferior quality.

From the Donga
11/3/2006

It is being reported that North Korea has increased its oil imports from Primorsky, Russia every year and made its payment by sending labor abroad due to its payment incapability.

According to the government of Primorsky yesterday, North Korean oil imports increased from 62,000 dollars in 2001 to 4.4 million dollars last year. Considering that the export price for Russian Urals oil has increased 35% during the past four years, North Korean oil supplies imported from Primorsky have been more than a 42-fold increase.

“Primorsky, which does not have oil resources, exports oil to North Korea through the federal government and in compensation we get labor instead of money due to North Korean incapability of making its payment,” said Primorsky experts on North Korea.

Dong-A Ilbo special team confirmed in an interview with the government of Primorsky that North Korea has been increasing its labor exports from 3,320 workers at the end of last year to 5,000 workers until late of this year. The current number of abroad sending workers is the greatest ever since Statistics Committee of Primorsky analyzed statistics of North Korean labors in 1993.

The government of Primorsky allowed only some North Korean labor force imports. Recently, however, it is reported that they have increased the scale according to the increasing demand from local companies in Russia.

A government official of Primorsky stated over a phone call with reporters on October 30, “We have limited the number of labor permits since foreign workers are taking away employment from Russian workers.” The official did not specifically mention the reason of the recent growing North Korean labor forces because “the person in charge is away at the moment.”

However, Professor Larisha Jabrobskaja at the Far Eastern Research Center in Vladivostok, who has studied North Korean labor problems for 15 years, explained the reason as, “North Korea, suffering from a chronic trade deficit since the 1990s, is sending labor abroad in an attempt to make its payment.”

He added, “Considering the current trade structure of Primorsky, which its oil import to North Korea accounts 70% of the total exports, it seems Primorsky is swapping oil for North Korean labor.”

“North Korea is planning to expand its oil import through attracting Russian energy corporations in the Rajin-Sonbong Economic Special Zone and the Primorsky’s project to expand its oil and coal export is taking shape these days,” according to the government of Primorsky.

Most of the workers who were forced to enter into Russia in the 1990s worked as woodcutters, but nowadays they work in various fields including construction, agricultural and marine industry.

Local Russians in Primorsky said, “North Korean workers usually get disadvantaged when they look for jobs after the entry and also when they exchange money through North Korean executives, even by offering bribes.”

Joong Ang Daily
Lee Young-jong, Shin Eun-jin, Sohn Hae-yong
9/20/2006

North Korea has filed claims with British and Russian reinsurance companies after four disasters in the North, and seeks millions of dollars in compensation, a source in Seoul said yesterday. His comments were confirmed by government officials.

The sources said the claims were filed by Minjok Insurance General Company, and asked for payments related to two rail crashes and two other incidents.

Reinsurers help policy-issuing insurance companies spread the risk involved in their policies to other insurance companies around the world. Companies buy “packages” composed of parts of many policies, and share in both the policy payments and claims made under those policies.

The reinsurers reportedly received permission from Pyongyang to conduct investigations at the accident sites before paying the claims; those visits have already taken place, these sources said, adding that the visits were made to places normally off-limits to foreigners.

One of the incidents was the sinking of a passenger ship traveling between Wonsan and Heungnam, both east-coast ports. Half of the ship’s 200 passengers lost their lives, Minjok reportedly told its reinsurers. Industry officials here estimated that the insurance payment would be in the millions of dollars. Another incident was a train accident in South Hamkyong province in April, which resulted in the deaths of 270 soldiers and 400 civilians. Rumors had circulated in Seoul about the latter accident, but those rumors were dismissed at the time by South Korean government officials.

Another train crash occurred near Nampo, a west-coast port, in April. Dozens were reportedly killed in that crash. Little is known about a helicopter crash near Pyongyang in May, these sources said.

“North Korea has been in a bad plight since September 2005, after its assets in Banco Delta Asia in Macau were frozen and the United States announced financial sanctions,” a Seoul official said. “It is my understanding that the North is also trying to press claims linked to flood damage this summer.”

One observer said the North’s rare disclosure of disasters indicates how serious Pyongyang’s cash crunch is. “It means that Pyongyang is more interested in gaining tangible benefits despite the risk of airing its dirty linen in public,” said Yang Moo-jin, a North Korea-watcher at the University of North Korean Studies in Seoul.

Others said Pyongyang may be learning to tweak global financial systems. “North Korean entities have been involved in competition to earn foreign currency, and now one of them is focusing on loss recovery through insurance,” said Lee Yeong-hun, a North Korea economic specialist at the Bank of Korea.

Experts said reinsurance payments to the North are outside the scope of any financial sanctions. “The North is operating all of its legitimate dollar-earning channels at full capacity,” a Seoul official said.

Korea Times
Andrei Lankov
9/17/2006

Nicholas Eberstadt once described the North Korean foreign economic strategy as a chain of “aid-maximizing stratagems.” Indeed, this is a good description.

For many decades, the international environment has made North Korea indispensable for some large sponsors, and Pyongyang diplomats have been very good at playing the aid-maximizing game and extracting money from those sponsors.

It is interesting that none of those great sponsors was inspired by the “aid idealism” that is so powerful in the West nowadays. Western left-leaning (and not necessarily left-leaning) intellectuals have for decades believed that the prosperous West has a duty to provide the less fortunate parts of the globe with aid. This belief became a part of Western psyche since the 1960s, but it is not shared by the countries of East Asia or by the former Communist world.

Indeed, most aid to the North was motivated by cold self-interest, not by some ideological construct. However, the North Korean diplomats could always steer this self-interest in right direction.

Actually, until the Korean War the USSR did not, in a strict sense, provide aid to the North. In the late 1940s, Stalin controlled the satellites (and I do not think that this is too strong an expression) via more direct channels, and even deliberately tried to bend the conditions of trade to Soviet favor.

In the case of North Korea, the USSR provided technical assistance, largely for military purposes. This required adequate payment, which had to be made in products that could be sold on the international market.

In those days Pyongyang paid in steel, iron, and monazite concentrate, the latter a substance that was then seen (mistakenly, as it turned out eventually) as potential raw material for producing nuclear weapons.

However, from 1953 the situation changed. The post-Stalin leaders relaxed their control over the Communist camp, and began to put more emphasis on economic dependency as an important additional tool to keep their involuntary allies from defecting.

North Korea was seen as a major strategic ally: it formed a protective buffer between the Soviet Far East and U.S. bases in the South. It had to be kept stable and, ideally, prosperous, so the late 1950s was the time of large-scale Soviet aid. Chinese aid was smaller, but the Chinese troops, stationed in the country until 1958, were widely used as an unpaid labor force on various construction projects.

In the late 1960s, Soviet aid dwindled, but the feud between China and the USSR provided Pyongyang with leverage over the two Communist great powers.

In essence, this was a policy of blackmail: if one of two quarrelling Communist giants refused to provide sufficient assistance or peculiar technology, Pyongyang switched to the other one. Both Moscow and Beijing wanted to have Pyongyang on their own side, but having it neutral was the second best option.

Thus, the great principle of the North Korean aid-maximizing approach was discovered: money was paid not for some action, but rather for nonaction.

With the Sino-Soviet rivalry, aid was extracted as a fee for not joining the other side. Ha[d] I been a fancy “political science” theoretician, I would probably call such an approach a “negative concession strategy.”

Of course, both China and the USSR also wanted North Korea to remain in good shape to contain the U.S. influence, even if this consideration was secondary to the politics of the Sino-Soviet rivalry.

The scale of the aid will never be known for sure, since a large part of it was provided indirectly: through preferential pricing or through a willingness to accept substandard North Korean merchandise in lieu of currency payment.

However, the depth of the crisis that struck North Korea after the collapse of the USSR once again confirmed how important the aid was for keeping the North Korean economy afloat.

The collapse of the USSR and the reforms in China around 1990 seemingly made such blackmail impossible. But soon the North discovered new rivalries to exploit.

First, there was a nuclear program, the same old good type of “negative concession” Pyongyang expected to be paid for not developing its nuclear weapons. The Geneva framework of 1994 was a masterpiece of blackmail diplomacy.

Then, there was (and is) a veiled but clearly present rivalry between China and the U.S. Beijing does not want a nuclear North Korea, but it is not happy about a unified country which might become _ or rather remain _ pro-American. It also needs a Communist regime or two hanging around and thus helping the current government to survive. This means that China is willing to keep the North in operation by providing it with aid, especially with food aid.

Finally, there are South Korean phobias to exploit. Seoul is increasingly uneasy about Chinese presence in the North.

There are other phobias as well. The South is afraid of a democratic revolution in the North, politely known as an “implosion.”

German-style unification is seen as a disaster since it will lead to a dramatic decline in the living standards of South Koreans.

This is a unique situation with few parallels in world history: a government feeds its enemy precisely to avoid its own swift victory!

However, it seems that the expectations of Seoul politicians are based on incorrect assumptions.

From AFX News on Yahoo:
9/3/2006
NKorea opens bank accounts in Russia to dodge US sanctions – report

TOKYO (XFN-ASIA) – North Korea has opened about 10 bank accounts at Russian financial institutions in an effort to secure fund flows now blocked by US financial sanctions, the Sankei Shimbun here reported at the weekend.

The newspaper, quoting sources who it described as being close to North Korean affairs, said senior North Korean officials were transferring their funds through the accounts.

Thi is part of Pyongyang’s efforts to escape pressure from the US, which has moved to freeze North Korean funds it claims are the profits of drug trafficking, money laundering and other illegal activities.

Washington is aware of North Korea’s money flows through the Russian banks and it may step up pressure on the Russian authorities to abandon such support for North Korea, the newspaper said.

North Korea has warned the United States it will take ‘all necessary counter-measures’ against Washington for increasing the the pressure on North Korea through financial sanctions.

In November, Pyongyang walked out of six-way talks on its nuclear ambitions after Washington accused a Macau-based bank of helping Pyongyang launder earnings from fake US currency, and told US financial institutions to stop dealing with the bank.

From the Korea Times:
Ship Carries 1st Flood Relief to North
8/30/2006
Lee Jin-woo

The South Korean government has shipped its first batch of flood relief to North Korea via the Red Cross, the Ministry of Unification said yesterday.

The shipment included some rice, the supply of which had been halted since the North’s test-firing of missiles on July 5. The government has made it clear that the humanitarian aid is unrelated to the government’s halted periodic aid provided annually to the communist state.

The shipment comprising 300 tons of rice and 20,000 blankets as well as other emergency relief supplies was made through the Korean National Red Cross (KNRC) and set out from Inchon port, west of Seoul, the ministry said.

The ship, Trade Fortune, is expected to arrive at the North Korean port of Nampo in a day or two. Four Red Cross officials are on board to supervise the delivery, a KNRC official said.

The total aid, comprising 100,000 tons of rice, 100,000 tons of iron rods, 80,000 blankets and more than 200 construction vehicles, will be delivered in 40 installments by mid-October.

“The torrential rain also left damage in South Korea, but we decided to send the flood relief to North Koreans, who face a much more dire situation,’’ said Han Wan-sang, president of the KNRC during a ceremony before the shipment. “I hope the two Koreas can find a breakthrough in the chilly inter-Korean relations through the aid program.’’

Also speaking at the ceremony, Vice Unification Minister Shin Un-sang said the humanitarian flood relief has great symbolic meaning as it was based on bipartisan support from the governing and opposition parties as well as the public.

After a meeting of Red Cross officials from the two sides at Mt. Kumgang in the North on Aug. 19, the government announced its humanitarian aid plan for the North to help repair the damage from recent flooding.

The ministry estimates the rice aid will cost some 195 billion won ($203 million); and the construction supplies and equipment, 26 billion won.

The ministry plans to use the Inter-Korean Cooperation Fund to match the contribution made by local private relief organizations. A 10 billion won subsidy will be given to those organizations next month.

The exact number of flood victims in the North has not been confirmed yet due to a lack of information on the reclusive state.

The National Intelligence Service (NIS) has reported to the National Assembly that some 900 North Koreans are dead or missing because of flooding, sources said. The number greatly differs from claims by South Korean humanitarian aid groups who say casualties have reached 10,000.

From the Korea Times:

North Korea has recently changed its means of selling missiles to avoid interception, delivering them by air instead of by sea and in the form of components and equipment rather than complete products, a U.S.-based research organization said yesterday.
In its latest report, the Center for Nonproliferation Studies (CNS), headquartered in Monterey, California, said North Korea’s missile program appears to be under the command and control of its air force, not the army, an arrangement similar to Iran, which is believed to be buying missiles from the communist regime, according to the Yonhap News Agency in Seoul.

The report, called “CNS Resources on North Korea’s Ballistic Missile Program,” said that as Western opposition to the deliveries has increased, Pyongyang’s shipments have begun to be made by air rather than by sea, sometimes with the help of Moscow.

“Insome instances, this has been accomplished with private-sector Russian assistance, thereby calling into question the Russian government’s ability and/or willingness to control North Korea’s missile proliferation,” said the report.

The CNS Web site says the report was updated Aug. 11 this year.

North Korea also resorted to selling missile components and production equipment to clients, which include Iran, Pakistan and Syria, the report said.

“These changes will allow more rapid shipping deliveries, and interception of such shipments will become more difficult,” it said.

The CNS noted with interest that North Korea’s ballistic missiles appear to be under air force, not army, command and control.

It was Gen. Jo Myong-rok, then commander of the North Korean Air Force, who led a delegation to Iran in February 1994 to discuss testing of the Rodong missile in Iran, the report said.

“It should also be noted that Iranian ballistic missiles fall under the command and control of the air wing of the Iranian Revolutionary Guard Corps,” it said.

North Korea’s missile program came under renewed scrutiny after the secretive regime test-fired seven missiles last month, ranging from versions of its short-range Rodong to its long-rang Taepodong presumed to be able to strike the U.S. west coast.

The CNS said that while the test launches suggest advances in North Korea’s missile capabilities, there are still several technical hurdles before the long-range versions can be fielded.

“The developmental leaps to successful multiple stage systems using large rocket motors cannot be achieved without external technological assistance,” it said.

“Some of this assistance is probably being provided by Russian specialists, both in North Korea and Russia,” said the report, due mainly to Moscow’s inability to completely halt the leakage of information.

It added that while the shorter-range Rodong missiles are operational, since it has exported some to Iran, Pakistan and other nations, “it may not have enough missiles to field a full brigade.”