North Korean Economy Watch

TU-204-300 touches down at a North Korean airport
(Hat tip to Mateusz)
12/28/2007

A TU-204-300 has touched down at a North Korean airport in what became Russia’s first successful deal to supply its most advanced long-range jet abroad. With its 500-8500 flying range, the plane is capable of swiftly transforming its fuselage on the ground. The plane has already been making shuttle non-stop flights inside and outside Russia. North Korean flag Carrier Air Koryo has ordered the TU-204-300.

TU-204-300 with PS-90A engines is a mid-range passenger a/c is intended to carry passengers, luggage and cargo on domestic and international trunk routes of 500 to 8500 km distance . The airliner was built on the basis of TU-204-100 a/c and represents the continuation of TU-204/214 a/c family. TU-204-300 a/c performed its maiden flight 18 August, 2003. The aircraft is produced in series at “:Aviastar-SP” Closed Stock Company in Ulianovsk. Opposite to TU-204-100 the TU-204-300 a/c has a shortened fuselage (by 6 m) and increased fuel reserve. Set of equipment was updated. Improved comfort level of the cabin helps the passengers to withstand long flights. Maximal payload is cut down to 18000 kg at increased flight range.

Click here to get specs on all the planes in Air Koryo’s fleet (h/t DPRK Studies)

Korea Times
Andrei Lankov
12/9/2007

By 1963, the inhabitants of the huge Soviet Embassy compound in downtown Pyongyang felt themselves under siege. All their communications with Koreans were supervised, and most North Koreans who had expressed some sympathy with Moscow had disappeared without a trace. Soviet aid nearly stopped, and most Soviet advisors left the North. On quite a few occasions, the official media of North Korea and Soviet Russia exchanged broadsides of sharply worded critical statements.

In short, in 1963-65 few people doubted that North Korea, together with Albania and, to a lesser extent, North Vietnam, chose to side with Beijing in its quarrel with Moscow. There were good reasons for this: Moscow was too liberal in its domestic policies, too disdainful of Kim Il-sung’s personality cult, too ready to compromise with the arch-villain of U.S. imperialism. And it was prone to an arrogant attitude in its dealings with the small East Asian country, too.

But then things changed, dramatically and irreversibly. The anti-Soviet pro-Maoist block, clearly in the making in the early 1960s, felt apart in 1966-67. The reason was the Cultural Revolution, the ten years of madness, which engulfed China. Some people believe that there was a system in this madness. Perhaps. But I personally find this system extremely difficult to discover.

It was not the only “cultural revolution,” of course. The Vietnam War demonstrated that China, despite its bellicose rhetoric, was unable to provide enough aid. The Russians provided Hanoi with missiles and tanks while the Chinese largely limited themselves to shipping the “little red books” full of Mao’s quotations.

But it was the “cultural revolution” that played the major role in the alienation between Korea and China. Kim Il-sung was perplexed by the new developments in his sponsor country. Everything looked like madness, and in September 1966 the Cuban Ambassador noticed that North Korean top officials began to make jokes about China and Mao the Great Helmsman himself (they suggested that a bit of Korean ginseng would help the Chinese leader who was obviously becoming senile).

Around the same time, in late 1966, the internal propaganda of North Korea began to criticize “dogmatism” and “superpower chauvinism,” clearly associated with China. For years, the major culprit in the internal propaganda was the “modern revisionism” (read: the Soviet Union). In December 1966, at a secret meeting with the Soviet leader Brezhnev, Kim Il-sung described the “cultural revolution” as a “massive idiocy.” Well, he was probably correct, even if his own policies were not exactly an embodiment of wise statesmanship.

At that stage, China still could play down the differences and probably keep North Korea on its side. But it seems that Beijing was not in control of the situation, or was not able to make reasonable decisions, so in early 1967 the Chinese press began to attack Kim Il-sung. Throughout 1967, the Red Guards newspapers frequently called Kim Il-sung a “revisionist,” the worst term of abuse in their (quite limited) vocabulary. He was accused of “blocking the revolutionary will of masses” and not starting a cultural revolution in his realm.

In early 1967, the Red Guards’ media reported an alleged attempted coup in Pyongyang. As far as we know, the story was a complete fake, but it prompted the North Korean press to react. In January 1967, Nodong Sinmun rebuffed the statements.

The propaganda war escalated. It was meaningless from the Chinese point of view: in its feud with the USSR China needed as many allies as possible. But it seems that the considerations of real politick were rejected by the zealots who required a complete adherence to the then current Chinese political line. Kim Il-sung and his entourage were not famous for their readiness to follow foreigners’ advice, so the situation went from bad to worse.

Bernd Schaefer penned a wonderful monograph based on the now de-classified East German archives, and noted some rather extreme episodes in the late 1960s. In the summer of 1968 the Chinese installed loudspeakers on the border and used them to blast North Korea with Chinese propaganda, largely with tales about the unparalleled wisdom of Mao. The Koreans retaliated in kind, by installing their own loudspeakers and bombarding their opponents with stories of Kim Il-sung’s greatness and superhuman wisdom.

The Chinese accused Kim Il-sung himself of enjoying a luxurious life, very different from the lifestyle of his subjects. This was correct, even if the same thing could be said about Mao. However, these personal accusations made Kim even less willing to accommodate the Chinese.

On one occasion, a group of Chinese soldiers crossed the border, obviously in hope of provoking a clash, but the North Koreans did not react and Chinese soon withdrew. There were also reports that bodies of ethnic Korean officials who were slaughtered in China by the Red Guards were put on a train and sent to the North. Personally, I am somewhat skeptical, but this story was indeed reported in the contemporary diplomatic messages cited by Bernd Schaefer and thus might be true.

Relations reached their nadir in late 1968. However, Kim Il-sung understood that his best policy would be a balancing act between the two Communist great powers, and he was ready to find a path to rapprochement. Fortunately for him, China was gradually coming to some semblance of normality, so from around 1970 it was once again possible to resume the balancing act policy. But that is another story.

International Crisis Group
Asia Briefing N°71
4 December 2007

North Korea’s relations with Russia have been marked by unrealistic expectations and frequent disappointments but common interests have prevented a rupture. The neighbours’ history as dissatisfied allies goes back to the founding of the Democratic People’s Republic of Korea (DPRK) with Soviet support and the Red Army’s installation of Kim Il-sung as leader. However, the Soviets were soon written out of the North’s official ideology. The Sino-Soviet split established a pattern of Kim playing Russian and Chinese leaders off against each other to extract concessions, including the nuclear equipment and technology at the heart of the current crisis. Since Vladimir Putin visited Pyongyang in 2000, diplomatic initiatives have come undone and grandiose economic projects have faltered. Russia is arguably the least effective participant in the six-party nuclear talks.

The relationship between Putin’s Russia and Kim Jong-il’s North Korea has disappointed both sides. Putin has mostly been unable to assert himself as a prominent player in North East Asia, and North Korea has received neither the unalloyed political support nor the economic backing it seeks. Russia has more influence in the region than it did in the 1990s but not enough to change the equation on the Korean peninsula. Opportunities for economic cooperation have been limited, mostly by Pyongyang’s refusal to open its economy but also by Russia’s fixation on overly ambitious schemes that at best may take decades to realise. China’s more nimble investors have moved in much faster than Russia’s state-owned behemoths.

Moscow has been conservative in its political dealings with Pyongyang, playing a minor but thus far positive role at the six-party talks consistent with its concerns about proliferation and the risks of DPRK collapse. It regards the denuclearisation of the peninsula as in its interests, has relatively few commercial opportunities in the North and considers its relations with the other nations in the exercise more important in every way than its ties to Pyongyang.

While Russia has shown interest in building energy and transport links through the North, little progress has been made. Rebuilding railways on the peninsula will cost enormous sums, and overcoming the many obstacles will require years of negotiation. Investments have been hindered by the North’s unreliability and history of default on loans. Russia may eventually have to forgive billions of dollars of debt the North cannot repay. Energy is a major mutual interest but pipelines across the North are unlikely to be built soon; Japan and China are expected to be the main markets for Russian energy, while South Korea is reluctant to become dependent on the North for its supply. 

Pyongyang wants Russia to balance China’s growing influence but appears to recognise that Moscow will never provide the level of support it once did. The North has been keen to discuss economic cooperation but has lacked the political will to reform its economy sufficiently for foreign investment, even from a country as inured to corruption and government interference as Russia. It is equally interested in technical and scientific aid. Russian technology, equipment, and “know-how” have featured prominently in the history of both Koreas, and Pyongyang still seeks to resolve its economic problems by scientific and technical solutions. But there is unlikely to be much growth in bilateral cooperation unless the nuclear crisis is resolved peacefully, and the North opens its economy. 

This briefing completes Crisis Group’s series on the relationships between North Korea and those of its neighbours – China, South Korea, Japan and Russia – involved in the six-party nuclear talks. It examines Russia’s aims and ambitions in the region, as well as the responses from North Korea and is based on both interviews in Russia, Central Asia and South Korea and analysis of Russian and North Korean statements.

Korea Times
Andrei Lankov
9/9/2007

On Aug. 24, 1962, the Soviet Ambassador to Pyongyang, Vasilii Moskovski, met the North Korean foreign minister, Pak Song-chol. The issue to be discussed was nuclear non-proliferation, one closely related to the nuclear test ban treaty, then in preparation. Moscow was an enthusiastic backer of the treaty, and wanted support from its allies. Relations with North Korea were deteriorating fast, but still some supportive gesture from the North was hoped for.

However, Comrade Pak was straightforward: a non-proliferation treaty was a bad idea. He explained the reasons for his skepticism. He asked a Soviet diplomat: “Who can impose such a treaty on countries that do not have nuclear weapons, but are perhaps successfully working in that direction?” Having said that, the North Korean foreign minister continued, “The Americans hold on to Taiwan, to South Korea, and South Vietnam, they blackmail the people with their nuclear weapons, and so rule over those lands and do not intend to leave. Their possession of nuclear weapons, and the lack thereof in our hands, objectively helps them, therefore, to eternalize their rule.”

Indeed, soon Ambassador Moskovski learned that the North Koreans were trying to acquire nuclear technology. As a matter of fact, recently de-classified Soviet papers confirm that in late 1963 Moskovski heard something to this effect more or less every month.

In August 1963 the East German ambassador informed Moskovski that “the [North] Koreans … are asking whether they could obtain any kind of information about nuclear weapons and the atomic industry from German universities and research institutes.”

In September 1963 Soviet geologists, then employed as technical consultants to the North Korean uranium mine, told Ambassador Moskovski that “the Korean side incessantly tries to obtain information about the deposits and quality of the uranium ore mined in the Soviet Union.” They also noticed that the amount of the uranium ore extracted in the North far exceeded the modest demands of its small-scale research program.

In October 1963, another Soviet scientist told the ambassador about a recent conversation on the same subject with a Korean engineer. The engineer asked whether Koreans were able to create an atomic bomb. The Soviet scientist said that the economy of the DPRK could not cope with such a task. But, according to an Embassy document, “the Korean said that it would cost much less in the DPRK than in other countries. If we tell our workers, he declared, that we are taking up such a task, they will agree to work free of charge for several years.”

This new evidence, recently obtained and published by Balazs Szalontaj and Sergei Radchenko, finally confirms what has been long suspected by many (and known to the few) _ from its inception, the North Korean nuclear program was military in its nature.

Actually, North Korea was to some extent involved in nuclear politics as early as the 1940s. It has large deposits of a particular monazite, a mineral that was seen as potentially useful for the Soviet nuclear program. The Soviets demanded payments in monazite for their sales to the North. Eventually, the engineers were disappointed with the properties of the mineral, and abandoned their plans to use it as a source of nuclear material. Russia still does not know what to do with the large stockpiles of monazite it still has from the 1940s.

The North Koreans were mining for uranium as well. There were two major quarries operated with Soviet technical support. The quality of the uranium remained low, but its production was still seen as necessary for the sake of the future.

In 1959 the DPRK signed an agreement on nuclear research with the USSR (soon afterwards, a very similar agreement was signed with China as well). The Soviet Union was becoming very strict about non-proliferation, and the agreement was probably seen as a potential safeguard, to make sure that North Korean ambitions would not result in a military nuclear program.

Needless to say, such a program was indeed what they wanted, and the North Koreans had many ways to outsmart the Soviet supervisors _ not least, by skillfully exploiting the deepening rivalry between Moscow and Beijing, and so it was that Soviet assistance helped Pyongyang launch its first research reactor in 1965.

It seems that the nuclear weapons were not much feared _ generally, in line with Mao’s mad dictum about the `paper tiger.’ In 1962, for example, the East German ambassador had a remarkable talk with Yi Chu-yon, then a Politburo member and one of North Korea’s top leaders.

Yi Chu-yon suggested that it was a good time to start a Third World War. He said that “now, when the USSR has such powerful means of waging war, with missiles that can strike all ranges, perhaps it would be better not to wait, but to strike the imperialists.” Yi Chu-yon received some support, since, according to the East German diplomat, “other Korean comrades who accompanied us also insistently advocated a military resolution of all contradictions between capitalism and socialism.”

Hence, North Korean nuclear ambitions have remained a constant for nearly half a century. However, it took a couple of decades to get things moving. The North was, indeed, too poor for such an undertaking, and no amount of drum-beating nationalism could compensate for lack of resources and technology. At the same time, none of the great power allies was enthusiastic about helping Pyongyang arm itself with nukes.

Nonetheless, work continued, and by the early 1980s the first rumors of the North Korean nuclear weapons project began to spread along the people in the know.

I have just completed reading Andrei Lankov’s North of the DMZ.  One chapter discussed the history of preserving communist leaders in mausoleums so their remains can be venerated for years to come.

I initially posted on this topic here when my friend at Knife Tricks pointed me to an LA Times article in which the author insinuated that Kim il Sung’s remains were actaully wax.  Naturally, Professor Lankov knows quite a bit more about this topic than the general public and I wanted to excerpt from his writings here to update readers on some little known information:

Kim Il Sung’s body has been embalmed and left on public display in a special glass-covered coffin. Actually, in this regard, Korea follows an established — if bizarre — Communist tradition. Like many other Communist traditions, this one originated from the USSR.

In 1924, the body of Vladimir Lenin, the founding father of the Soviet Union, was laid in a specially constructed mausoleum where it was kept in a glass-covered coffin. This mausoleum became a place of mass pilgrimage. Initially most visitors may have been driven by sincere devotion, but in later decades the major impulse bringing visitors was, more likely than not, just bizarre curiosity. Nonetheless, passions sometimes ran high. In the Soviet times, there were two known attempts to damage Lenin’s mummy in an act of symbolic resistance against the regime. On the other hand, the post—Communist Russian government has not dared to close the mausoleum, being aware that such an act is certain to spark large-scale protests and riots of the Russian Left.

In the Soviet times, a special and highly secretive research institute with a generous budget was responsible for the maintenance of Lenin’s body. Over the decades, its research staff gained unique expertise. In due time this expertise was in demand for new generations of the venerable dead.

In 1949, the Bulgarian Communist leader Dmitrov became the first person to be embalmed by the personnel of Lenin’s mausoleum. After Stalin’s death in 1953 the body of the Soviet dictator was also treated with this proven technique and put alongside Lenin’s mummy. However, in 1961 Stalin’s corpse was hastily removed from the mausoleum, to be buried below the Kremlin wall.

Meanwhile, Soviet experts were sent to take care of a number of politically important corpses across the world. They embalmed the bodies of a number of other Communist rulers: Choibalsan of Mongolia, Gottwald of Czechoslovakia, Ho Chi Minh of Vietnam, Netto of Angola (Mao’s body was treated by the Chinese themselves).

Thus, when in 1994 Kim Ii Sung died, few people doubted that his body would be put on display as well. The Russians confirmed that they had taken part in treating Kim Ii Sung’s body. According to unconfirmed reports a group of Russian biologists and chemists worked in Pyongyang for almost a year.

In the l950s and 1960s Moscow did not charge its clients and allies for treating the bodies of their deceased rulers. But this is not the case any more. After the collapse of the Communist system in Russia, the research center has had to survive on a very tight budget, and it is not willing to provide its unique know-how for free. Incidentally, these laboratories’ major income source is now the bodies of Mafia bosses or new Russian capitalists (it was not really easy to distinguish between the former and the latter in the Russia of the 1990s).

The fees for treating the earthly remains of the Great Leader, the Sun of the Nation, were never disclosed, but the Russians reportedly charged North Korea one million dollars. Frankly, this was a steal: Kim II Sung died at the time when the former USSR was in the middle of its severest crisis, and ex—Soviet scientists were ready to accept meager rewards for their work.

Nonetheless, this deal was made at the time when North Korea was on the eve of the worst famine in Korea’s history. The final result of the scientists’ efforts was the mummy of Kim II Sung which, incidentally, cannot be referred to as a “mummy” but only “the eternal image of the Great Leader.”

However, the million-dollar fee is only a fraction of the ongoing cost of keeping Kim Il Sung’s body well preserved. A few years ago a high-level North Korean bureaucrat mentioned to visiting Indonesians that North Korea paid about 800,000 dollars annually for these expenses. On might surmise that at least a part of this money goes to the budget of the same Soviet research centre which once did the embalming.

In one respect the North Koreans did not emulate other Communist countries. The bodies of Lenin, Mao, and Ho Chi Minh were laid in mausoleums specially constructed for that purpose. The North Koreans did not erect a new structure but renovated a pre-existing building, the Kümsusan Palace. This large structure was erected on the outskirts of Pyongyang in the mid—1970s. In subsequent decades it served as the residence and office of Kim Il Sung. Now this building’s huge central hall became the Great Leader’s resting place.

Unlike the USSR, where visits to Lenin’s tomb are essentially voluntary acts, the North Koreans are picked by their party secretaries to visit the Kümsusan Palace. Most of them, admittedly, do not mind going—partially out of curiosity and partially out of sincere reverence to the deceased strong- man.

For the past few years, crowds of North Koreans have passed by the body of the Great Leader who, for better or worse, ran their country for almost half a century. The visItors are required to stop for a while and bow to the glass- covered coffin containing the embalmed body. The dim lights and quiet music emphasize the quasi-religious nature of the entire scene. The visitors pay their tribute to a person who once started the worst war in Korean history, killed at least a quarter of a million people in prisons and ran what even in the Communist world was seen as an exceptionally repressive state.

Indeed, many (I would say, most) North Koreans more or less believed in what the official propaganda told them about the Great Man. All Koreans younger than 70 have spent their entire life listening to stories about Kim II Sung’s greatness. He is supposed to be the person who defeated the Japanese in 1945, then repelled U.S. aggression in 1950 and, by keeping the cunning imperialists at bay for decades, saved North Koreans from the sorry fate of their enslaved Southern brethren. Of course, outside the North it is common knowledge that Kim II Sung did not fire a single shot during the liberation of Korea, that the Korean war was started by him and nearly lost due to his miscalculations, that South Korea had one of the fastest growing economies of the 20th century while the North became an international basket case. But these things remain largely or completely unknown inside the North, where many people still believe in the deceased Great Fatherly Leader.

——————————-

And just where did the communists get the idea of preserving their leaders in perpetuity? One hypothesis can be found in Paul Froese’s forthcoming book, The Great Secularization Experiment:  Assessing the Soviet Attempt to Eliminate Religion. Pick up a copy when it hits the press.

Institute for Far Eastern Studies (IFES)
8/1/2007

INTER-KOREAN RELATIONS

Following two days of talks between economic representatives of the two Koreas at the Kaesong Industrial Complex, South Korea announced on July 7 that it would begin shipping raw materials to the North in exchange for DPRK natural resources. South Korea shipped 800,000 USD of polyester fabric on July 25, and is set to send the rest of the materials by the end of November. North Korea accepted South Korean prices for the goods, and will pay transportation, cargo working, and demurrage costs, as well. South Korea will pay for shipping, insurance, and the use of port facilities. On 28 July, a South Korean delegation left for the North in order to conduct on-site surveys of three zinc and magnesite mines. The team will spend two weeks in North Korea.

It was reported on 17 July that North Korea proposed a joint fishing zone north of the ‘Northern Limit Line’ dividing North and South territorial waters to the west of the peninsula. Seoul turned down the offer.

Inter-Korean military talks broke down early on 26 July after only three days of negotiations as North Korea insisted on the redrawing of the Northern Limit Line.

North Korea demanded on 27 July that workers in the Kaesong Industrial Complex be given a 15 percent pay raise. The North Korean workers will not work overtime, weekends or holidays beginning in August unless the raise is granted.

It was reported by the Korea International Trade Association on 26 July that inter-Korean trade was up 28.6 percent in the first six months of 2007, totaling 720 million USD.

RUSSIA-DPRK INVESTMENT

It was reported on 19 July that Russia and North Korea have agreed to connect Khasan and Najin by rail, enlisting investment from Russian oil companies interested in an inactive refinery at Najin Port capable of processing up to 120,000 barrels per day. The project is estimated to cost over two billion USD.

MONGOLIA-DPRK RELATIONS

During a four-day visit to Mongolia by Kim Yong-nam beginning on 20 July, the two countries signed protocols on cooperation on health and science, trade and sea transport, and labor exchange issues. This follows on the heals of an agreement to allow South Korean trains to travel through North Korean territory on to Mongolia in route to Russia and Europe.

JAPAN-DPRK PROPAGANDA

Japan took one step further to recover abductees in North Korea this month when the government began broadcasting propaganda into the DPRK intended for Japanese citizens. The broadcasts are made in Korean and Japanese (30 minutes each) daily, and updated once per week.

U.S.-DPRK PEACE PROSPECTS

U.S. Ambassador to the ROK Alexander Vershbow stated that Washington was prepared to negotiate a permanent peace regime on the Korean Peninsula by the end of the year if North Korea were to completely abandon its nuclear ambitions.

EGYPT-DPRK INVESTMENT

The Egyptian company Orascom Construction Industries announced a 115 million USD deal with North Korea’s state-owned Pyongyang Myongdang Trading Corporation to purchase a 50 percent state in Sangwon Cement. To put this in perspective, the deal in worth more than four times the amount of frozen DPRK funds that had caused six-party talks to break down and delayed the implementation of the February 13 agreement.

NORTH KOREAN SOCIETY

The Economist reported on 7 July that, according to foreigners living in the North’s capital, concern for petty law appears to be weakening. Citizens are reportedly smoking in smoke-free zones, sitting on escalator rails, and even blocking traffic by selling wares on the streets.

It was reported on July 11 that a letter sent earlier in the year by the North Korean Red Cross indicated severe shortages of medical supplies. The letter stated that North Korea would accept any medicine, even if it was past expiration, and accept all consequences for any problems that arose from using outdated supplies. The (South) Korea Pharmaceutical Manufacturers Association had no choice but to reject the request.

Events were held on July 11 in North Korea in order to promote women’s health and well-being issues. Marking World Population Day, a North Korean official stated that the DPRK has cooperated with the UN Population Fund since 1986, and is now in the fourth phase of cooperation.

Seeing entertainment venues as a “threat to society”, North Korean security forces have been implementing a shutdown of karaoke bars and Internet cafes. These venues mainly cater to traders in the northern regions of the country.

It was reported on July 13 that construction of North Korea’s first all-English language university was nearing completion. The Pyongyang University of Science and Technology, funded largely by ROK and U.S. Christian evangelical groups, will hold 2600 students and offer undergraduate and post-graduate degrees in business administration, information technology, and agriculture.

Local elections were held on 29 July for DPRK provincial, city, and country People’s Assemblies. 100 percent of 27,390 candidates were approved with a 99.82 percent turnout reported.

Korea Times
Andrei Lankov
7/29/2007

On September 30, 1950, at 11:30 p.m., the Eighth Department of the Soviet General Staff received a coded message from Pyongyang. It took about an hour to decipher it, and then a courier was dispatched to deliver it to Stalin’s residence on the outskirts of Moscow. It was 2:30 a.m., but the Soviet dictator liked to work at night. At any rate, the message was so important that perhaps they would wake him anyway. Kim Il-sung had reported that the North Korean army had ceased to exist, and that the only way to save the North Korean state would be through an urgent dispatch of troops from the USSR.

Stalin was hardly surprised. He was never an enthusiast for Kim Il-sung’s invasion plans, and when in January 1950 he finally granted permission to invade the South, he did so on the assumption that the U.S. would have no time, and perhaps, no will, to interfere. Hence, when Stalin learned of the Incheon landing, he was quick to appreciate what had happened.

Thanks to the recent efforts of historians, especially Alexander Mansourov and Pak Myong-rim whose research I use for this article, we know what was happening in Moscow, Beijing and Pyongyang during the fateful two weeks which followed MacArthur’s amphibious operation in Incheon.

The landing did not come as a complete surprise: the Soviet _ and, obviously, Chinese _ intelligence expected something like it, and the Chinese even warned the North Koreans about the danger.

When Stalin learned about the large-scale landing, he realized that a disaster was looming. As early as Sept. 18, he cabled his instructions to Pyongyang. He requested a stop of the push toward Busan, and demanded the withdrawal of troops from the South to reinforce Seoul’s defenses. This was a reasonable suggestion, but Stalin did not appreciate the degree of U.S. military superiority. It is doubtful whether such a withdrawal would have accomplished much.

But Stalin’s representatives in Korea, including Gen. Shtykov, the first Soviet ambassador to Pyongyang, were even less appreciative of the new dangers. While the U.S. and South Korean forces were fighting their way to Seoul, soon to cut the North Korean troops off from their supply bases, both Shtykov and Kim Il-sung still hoped that the landing force could be contained. The documents confirm that even when the U.N. forces took over the Gimpo airfield and entered the outskirts of Seoul, the North Korean command still hoped to take Busan in the following few days.

The North Korean press remained silent about the landing. By Sept. 18, the sounds of battle were well heard in Seoul, but the official propaganda and communist activists assured everybody that nothing special was taking place. Kim Song-chil, a historian and author of a famous diary, described how his Communist interlocutors insisted that the sounds of distant artillery were merely produced by the field exercises of the North Korean troops.

On Sept. 20, Stalin repeated his demand, and required the withdrawal of forces from the southern part of the country to Seoul, in order to “establish strong frontline positions to the north and east of Seoul.” It indicated that Seoul should be surrendered to the U.N. forces. But Kim Il-sung, with his trademark stubbornness, kept pressing on toward Busan.

Only on the evening of Sept. 25, did Kim Il-sung admit that there was no chance of pushing the South Korean forces into the sea near Busan. He ordered a withdrawal, but it was too late. The next day, heavy battles unrolled into the streets in downtown Seoul where the North Korean forces tried to resist. They did what they could. Kim Song-chil wrote about their bravery with great admiration, and the historian was no fan of the communists.

Over the two days of Sept. 27-28, the North Korean command system disintegrated. Kim Il-sung could not even contact his own Defense Minister Choe Yong-gon, who was in Seoul doing his best to keep the city. An emergency meeting in Pyongyang created a new command structure, presided over by Kim Il-sung, himself. But he was a general without an army; after the battle of Seoul, the North Korean forces ceased to exist.

For a while, there was some hope that the U.N. troops would not cross the 38th parallel. But by Oct. 1, it became clear that such a turn of events was very unlikely. Thus, Kim Il-sung and Pak Hon-yong, his foreign minister and future victim of the purges, wrote a cable in which they desperately asked for help. They admitted “if the enemy were to take advantage of the situation and step up its offensive in North Korea, then we would be unable to stop the enemy by our own forces.” Accordingly they asked for Soviet troops.

But Stalin did not want to launch a third World War. He hoped that the Chinese would take the military responsibilities on. After all, their stake in the situation was greater than his. He eventually succeeded, but it took much effort on his part.

Asia Times
Bertil Lintner
7/25/2007

It has been known since the early 1990s that North Korea exports manpower to eastern Russian logging sites. But two remarkable incidents over the past years reveal that the foreign-currency-strapped nation also sends laborers to other, somewhat less expected places in the world.

When North Korea won a soccer game over Japan at the Asian Games in the Qatari capital Doha last December, its cheerleaders became so excited that they rushed on to the field and carried the players on their shoulders around the grounds. They could do that, because the North Korean cheerleaders were not, as cheerleaders usually are, young, petite women. They were all male - sturdy, middle-aged construction workers who belonged to the contingents of laborers that the North Korean government is sending to work in the Middle East.

Then, in January, the managing director of an unnamed construction firm was found slashed to death, and one of his workers hanged, in a building in the East Malaysian riverside town of Sibu, on the fringes of the jungles of Sarawak. The businessman was identified as Ri Won-gil, 52, and the worker as Kim Kwong-ryun, 47 - both North Koreans. Their company had “been doing contract work here for years”, the Malaysian Star newspaper reported, although it was not clear what kind of work that was.

As many as 70,000 North Koreans are currently working in various countries, Kim Tae-san, a defector who testified last year on North Korean migrant labor to the European Parliament, told US-financed Radio Free Asia (RFA) this year. Other estimates are considerably lower, but it is evident that labor export is becoming an important source of income for the government in Pyongyang.

Today, North Korean workers are found not only in Russia, Malaysia and Qatar but in Dubai, Mongolia, the Czech Republic, Poland, Bulgaria, Libya, Saudi Arabia and possibly also some African countries. Many are dispatched through labor agencies based in China, and most of their salaries end up in the coffers in Pyongyang. As North Korea does not publish any economic statistics, it is not known exactly how much it earns from exporting labor to other countries, but is it believed by North Korea-watchers to be bringing in millions of US dollars annually.

In addition, tens of thousands of North Koreans are working illegally in China, and sending money home to their relatives. This may not directly benefit the Pyongyang regime, but it helps alleviate poverty in the country, and therefore stifle possible social unrest on the level that actually hit the North Korea during the great famine in the early and mid-1990s. On a more organized level, trusted citizens are sent by Pyongyang to work in North Korean-run restaurants not only in China - Beijing and Shanghai - but also in Russia, Cambodia, Thailand and Laos. Profits from those enterprises are, naturally, sent to Pyongyang, or to support the activities of North Korean diplomatic missions in those respective countries.

Russia, or the erstwhile Soviet Union, is the oldest destination for North Korean labor, and it probably began when in 1967 Soviet secretary general Leonid Brezhnev and North Korea’s Kim Il-sung reached an agreement to bring manpower to sparsely populated eastern Russia. In September 1996, Amnesty International stated in its “Democratic People’s Republic of Korea/Russian Federation: Pursuit, Intimidation and Abuse of North Korean Refugees and Workers”, one of the earliest reports on the subject: “North Korea brought in the manpower and ran the logging sites, while the Soviet Union provided the natural resources. The profit, reportedly many million dollars over the years, was split between the two countries.” Some of the income was also reportedly used to pay off North Korea’s debt to Russia.

Today, according to Moscow’s Ministry of Economics, 90% of North Korea’s “exports” to Russia consist of workers. An estimated 2,500 North Koreans are to be found in Primorye, or the maritime region adjacent to the Sea of Japan, and almost all of them work at construction sites in Vladivostok and Nakhodka. According to local sources, they sleep in dormitories and eat together under portraits of the late Kim Il-sung and his son, current ruler Kim Jong-il.

Political classes are held every week under strict supervision of members of the ruling Korean Workers’ Party. The supervisors, who belong to North Korea’s security police, also collect their salaries from the Russian construction companies that have hired them, and give the workers only food and some pocket money. The bulk of their incomes are sent back to Pyongyang, or used to buy computers and other electronic equipment for North Korea’s small but burgeoning information-technology industry.

Many more North Koreans - the exact figure is not known but is believed to be at least 10,000 - work under similar conditions in logging camps in Khabarovsky krai (region) and Amursky oblast (province). The main camps in Khabarovsky krai are around Chegmodyn and Alonka in the Verkhnebureinsky region, in the wilderness some 680 kilometers north of Khabarovsk. In Amursky oblast, logging camps with North Korean workers are found in the north along the Yuktali, Yukcha and Gilyui rivers, and along the Arkhara River in the southeast. Fenced off with barbed wire, these camps are in extremely remote areas from which it is almost impossible to escape.

Some Russian logging firms - now all privately owned since the collapse of the Soviet Union and its communist system in 1991 - pay in cash, while others reportedly let the North Koreans keep 40% of the timber they fell as payment. Those logs are sent to North Korea by train, and resold to China, or used in North Korea itself, which has almost no forests left and therefore no timber.

According to Lyudmila Erokhina of the Vladivostok State University of Economics and Services, North Korean workers are preferred in the Russian Far East because they work hard and never complain: “They were brought up as law-abiding citizens in a strictly controlled society.” On the other hand, Chinese and Vietnamese guest workers in the Russian Far East are known to have raised demands for better working conditions, and are alleged by many Russians to be engaged in sometimes dubious local businesses, often in black or gray areas.

The good behavior of North Korean workers and their willingness to put up with harsh conditions may have been selling points when in more recent years Pyongyang began sending laborers to the Middle East, where they, according to RFA, mostly perform “low-skilled labor, such as plastering and bricklaying. The North Korean workers receive meager wages, even lower than the Nepalese workers, who have been known to receive the lowest pay of all foreign laborers” in, for instance, Qatar.

“The entire wage received by North Korean workers goes to the North Korean authorities. In order to make some money they can keep, they have to moonlight,” RFA quoted a South Korean resident in Qatar as saying. Thousands of North Korean construction workers are reported to be living under similar conditions in the United Arab Emirates and Saudi Arabia.

In the Czech Republic, hundreds of North Koreans, mostly women, work in factories producing auto parts, or as seamstresses in the garment industry. According to the US State Department’s 2006 Trafficking in Persons Report, the North Korean regime “provides contract labor for private industry in the Czech Republic. There are allegations that this labor is exploitative, specifically that the DPRK [Democratic People’s Republic of Korea] government keeps most of the wages paid to the North Korean workers and that workers’ movement is controlled by DPRK government ‘minders’.”

Since the formerly communist Czech Republic joined the European Union in 2004, it has been compelled to investigate the conditions of North Korean workers in country. But according to the US report, the Czech government “to date … has not confirmed that they enjoy freedom of movement away from DPRK government ‘minders’ and are not subject to other coercive practices, such as the collection of a majority of the workers’ salaries by DPRK officials”.

Soon, however, the North Koreans in the Czech Republic may be going home because of international pressure. No new work permits will be issued to them, and those who have permits will not have them renewed, which means that by the end of this year there will be no more North Korean workers in that country. The main problem from the Czech government’s point of view is that, since it joined the EU, tens of thousands of its own workers have left to seek higher wages in western Europe, so foreign labor is badly needed. And who could be better than hard-working, compliant North Koreans?

But if they are no longer wanted in the Czech Republic, there are many other countries willing to hire North Koreans - and, as long as Pyongyang needs foreign currency, the export of labor is also likely to continue.

Washington Post, A17
Glenn Kessler
6/15/2007

North Korea took possession yesterday of about $25 million in funds previously frozen by a Treasury Department investigation, potentially clearing the way for Pyongyang to fulfill its commitment to shut down an aging nuclear reactor.

An impasse over transferring the money had stalled an agreement announced in February that the Bush administration had hailed as a first step toward ending North Korea’s nuclear activities.

Under that agreement, which angered President Bush’s conservative supporters, the United States was supposed to end the Treasury investigation within a month and North Korea was to shutter its reactor at Yongbyon by April 14. But North Korea refused to take that step until it received money caught up in the investigation.

The reactor had been frozen under a 1994 deal with the Clinton administration, but in 2002 Pyongyang restarted it after a dispute with the Bush administration. Experts estimate that North Korea — which conducted its first nuclear test in October 2006 — has obtained enough plutonium from the reactor for as many as 12 nuclear weapons.

Late this year or in early 2008, North Korea would need to produce fresh fuel to keep the reactor going, says a recent report by the Institute for Science and International Security.

The Treasury Department had targeted Banco Delta Asia, in the Chinese special administrative region Macau, alleging it was involved in money-laundering for North Korea. But the Treasury’s action had wider repercussions, essentially convincing banks around the world not to do business with North Korean firms.

Though the Treasury Department agreed to allow the return of money tainted by illicit activities, no bank was willing to transfer the money without explicit assurances that the Treasury would take no regulatory action. North Korea could have withdrawn the money in cash, but many experts suspected Pyongyang demanded a wire transfer to signal to financial institutions that it was once again part of the financial system.

U.S. officials trying to save the deal desperately searched for a willing bank, but each time an arrangement seemed possible, complications arose. Finally, after Russia indicated that one of its banks could help, the Treasury arranged for the Federal Reserve Bank of New York to transfer the money to a dormant North Korea account at a Russian bank that operates in the Far East, near the border with North Korea.

“Basically all of it has been transferred,” the Macau government said in a statement yesterday. “For Macao, this incident has come to a conclusion.”

When the Treasury ended the Banco Delta Asia investigation in March, it formally ordered a broad range of U.S. financial institutions to stop doing business with BDA. But that order did not include the banks’ regulator — the Federal Reserve system — which allowed the New York Fed to handle yesterday’s transaction without requiring an exemption from the Treasury.

Still, a group of Republican lawmakers this week asked the Government Accountability Office to examine whether the transaction complies with money-laundering and counterfeiting laws.

N Korea fund transfer ‘under way’
BBC
6/14/2007

The transfer of North Korea’s funds from a bank in Macau - a key issue in nuclear disarmament talks - appears to be under way.

A Macau finance minister reportedly said $20m of Pyongyang’s $25m (£12.7m) had left a blacklisted bank in Macau.

The money was earlier reported to be going to a North Korean bank account in Russia, via the US Federal Reserve.

North Korea insists it must access its funds before abiding by a deal to begin shutting its nuclear facilities.

Q&A: North Korean money in Macau
BBC
6/12/2007

In February North Korea agreed to a timeline for giving up its main nuclear site by April - in return for badly-needed fuel and the return of $25m from a bank in Macau.

But the money has yet to be transferred, and the site remains open.

Now, though, the Russians are offering to step in and get the money to Pyongyang, which could remove a key sticking point in neutralising North Korea’s nuclear capability.

How has such a small amount of money become such a sticking point?

The money is, in a sense, only the visible part of a broader problem.

Dozens of North Korean government departments do their international business through a bank in Macau called Banco Delta Asia.

But in September 2005, the US Treasury accused BDA of being a conduit for laundering money for Pyongyang, triggering severe limits on the bank’s dealings with US financial institutions - and a freeze on $25m of North Korean money in the bank’s accounts.

According to the Treasury, BDA was a “willing pawn” of North Korea, helping process as much as $500m a year in dirty money without asking awkward questions.

The move sent relations between Washington, DC and Pyongyang - frosty at the best of times - into the deep freeze.

Between then and now, the $25m became a tool for the US to achieve a deal on North Korea’s ambitions for nuclear weapons - and an excuse for North Korea to stall.

So has a deal been reached now?

Yes, in February this year. North Korea pledged to give up its nuclear reprocessing activities in exchange for thousands of tonnes of fuel.

At the same time, the $25m would be unfrozen, and could - in theory - head back to North Korea.

But the money has yet to leave Macau, because at the same time the US Treasury cut BDA off altogether from the US banking system.

This ultimate sanction, in banking terms, was made under section 311 of the USA Patriot Act - passed shortly after the 11 September 2001 attacks on New York. Effectively, it bars any financial institution from having anything to do with BDA, if they want to do business with or in America.

Understandably, therefore, attempts to find a way of wiring the money back to North Korea have failed.

Banks in China and Vietnam have been approached and have refused to get involved.

One US bank - Wachovia - has been asked by the US State Department to consider helping out, but it points out that it will need assurances that it is not in breach of section 311 before it can do anything.

What is Russia offering to do?

Russia is one of the partners in the six-way talks over denuclearisation of North Korea, and - given that it shares a border with North Korea - has a powerful interest in moving discussions along.

Early in June, Russian officials suggested that a Russian bank might step in to get the frozen $25m from Macau to Pyongyang - directly or via intermediaries.

The US Treasury has now acknowledged the possibility of Russian assistance.

But Russia is likely to require cast-iron assurances that US sanctions against banks which carry out transactions with North Korea will not apply.

One possibility would be for the money to go first via the New York branch of the US central bank, the Federal Reserve, and then on to Russia’s own central bank before being paid into Moscow’s Far East Commercial Bank, where North Korea has a long-unused account.

But what does a country like North Korea need money-laundering services for?

North Korea, in practical terms, is flat broke.

Its trade is minimal, its agriculture is suffering, and its contact with the outside world is severely limited.

But according to the US Treasury, not to mention many experts elsewhere in intelligence and financial crime, Pyongyang has for the past two decades made up for its lack of legitimate trade by taking an unhealthy interest in faking US banknotes, smuggling counterfeit tobacco products and even the narcotics trade.

Much of the proceeds, the US claims, have been laundered through BDA, which has also facilitated huge bulk cash shipments back to Pyongyang - as well as large trades in precious metals.

BDA, it should be said, has always strongly denied the allegations, insisting its business with North Korea is above board.

Why does the US not just send the money back itself?

In theory, the US could have provided a bank with the reassurance it needs to get involved, although that has yet to happen - and could, in any case, be legally tricky. “Difficult, yes; impossible, no,” was how the State Department’s spokesman described it.

Similarly, reports have suggested that since 2001 there has been a conduit for fund transfers between the State Department’s credit union and the Foreign Trade Bank in Pyongyang.

But as far as the Treasury is concerned, the ball is now in Macau’s court. It is up to the regulators there to work out how to get the money back to North Korea - and in the meantime the section 311 rule stays in force.

In any case, after years of playing hardball with North Korea, the last thing the current US administration wants is look as if it is doing things Pyongyang’s way.

Can’t North Korea get it back any other way?

It could - for instance, through a direct withdrawal from BDA back to Pyongyang.

Alternatively, if the US is right that bulk cash shipments have been going on for years illicitly, perhaps the technique could be used for above-board purposes.

But as far as North Korea is concerned, that kind of deal is unacceptable.

It seems that the authorities in Pyongyang want the transfer to pass through the international financial system, so as to send a signal that handling North Korean money does not mean instant ostracism.

Not only that; keeping the matter rumbling on means more time to extract concessions - and, some experts fear, to keep reprocessing nuclear material.

Yonhap
6/10/2007

Products made in an inter-Korean industrial park in the first four months of the year were valued at US$48.1 million, about 24 percent of which, or $11.3 million worth of products, were exported, South Korea’s unification ministry said Sunday.

Last year’s comparable figure during the cited period was 18.4 percent, or $2.3 million, according to the ministry.

The industrial complex, located in the North Korean border city of Kaesong, is one of two flagship projects the South operates with the North in the spirit of reconciliation that developed following the historic inter-Korean summit in 2000.

Over 13,000 North Korean workers are currently employed by 22 South Korean companies there. They produce garments, utensils and other labor-intensive goods.

The biggest importer of Kaesong-made goods was the European Union (EU), followed by China, Russia and Australia.

The ministry did not give figures on how many goods made in the industrial park the countries imported.