North Korean Economy Watch

On November 18, 2010, the US Treasury Department issued the following press release:

Treasury Designates Key Nodes of the Illicit Financing Network of North Korea’s Office 39

WASHINGTON – The U.S. Department of the Treasury today designated Korea Daesong Bank and Korea Daesong General Trading Corporation pursuant to Executive Order (E.O.) 13551 for being owned or controlled by Office 39 of the Korean Workers’ Party.  Office 39 is a secretive branch of the government of the Democratic People’s Republic of Korea (North Korea) that provides critical support to North Korean leadership in part through engaging in illicit economic activities and managing slush funds and generating revenues for the leadership. Office 39 was named in the Annex to E.O. 13551, issued by President Obama on August 30, 2010, in response to the U.S. government’s longstanding concerns regarding North Korea’s involvement in a range of illicit activities, many of which are conducted through government agencies and associated front companies. Korea Daesong Bank is involved in facilitating North Korea’s illicit financing projects, and Korea Daesong General Trading Corporation is used to facilitate foreign transactions on behalf of Office 39.

“Korea Daesong Bank and Korea Daesong General Trading Corporation are key components of Office 39′s financial network supporting North Korea’s illicit and dangerous activities,” said Under Secretary for Terrorism and Financial Intelligence Stuart Levey.  “Treasury will continue to use its authorities to target and disrupt the financial networks of entities involved in North Korean proliferation and other illicit activities.”

E.O. 13551 targets for sanctions individuals and entities facilitating North Korean trafficking in arms and related materiel; procurement of luxury goods; and engagement in certain illicit economic activities, such as money laundering, the counterfeiting of goods and currency, bulk cash smuggling and narcotics trafficking. As a result of today’s action, any assets of the designated entities that are within U.S. jurisdiction are frozen and U.S. persons are prohibited from conducting financial or commercial transactions with these entities.

You can learn more about the Treasury’s press release here.

Here is the US Treasury Department’s new North Korea resource page.

In response, the Daedong Credit Bank issued the following press release:

FOR IMMEDIATE RELEASE:

US Treasury Press Release 18th November 2010

London UK/Pyongyang DPRK, December 20th 2010

Daedong Credit Bank (DCB) has noted the press release of 18th November 2010 by the US Treasury and makes the following comments:

1.    Korea Daesong Bank (KDB) is a 30% shareholder in DCB.  DCB is not, and never has been, aware of any activity by KDB which is in breach of any of its obligations, domestic or international.  In particular, DCB is not aware of KDB having acted in breach of any sanctions.  DCB is not aware of any cause of concern about the conduct of KDB.

2.    KDB has no executive control of DCB.

3.    DCB is majority owned by overseas investors and is foreign-managed.

4.    DCB does not act and has never acted in breach of any of its domestic or international obligations.  DCB acts in a manner consistent with domestic and international law.

5.    DCB is apolitical and promotes foreign investment in the DPRK as a positive development.

The Daedong Credit Bank looks forward to playing a significant part in facilitating normal commercial relationships between the DPRK and the international business community.

About Daedong Credit Bank

Daedong Credit Bank is a joint venture retail bank based in Pyongyang. It was established in 1995 as “Peregrine Daesong Development Bank”. The Bank underwent a change of name and foreign ownership in 2000.

Daedong Credit Bank is the first, by fifteen years, foreign majority held bank in the DPRK. DCB considers itself a flagship successful joint venture in the DPRK, and a key part of the infrastructure needed to assist the foreign-invested ventures, which drive the country’s economic reforms.

The bank’s principal function is to offer normal “high street” banking facilities in hard currency to; foreign companies, joint ventures, international relief agencies and individuals doing legitimate business in the DPRK.

Daedong Credit Bank was the first bank in the DPRK to introduce, and vigorously implement, a comprehensive set of anti-money laundering procedures. DCB’s anti-money laundering procedure manual was introduced seven years ago, and subsequently updated based on anti-money laundering guidelines provided by the Asian Development Bank. The manual has been sent to, and accepted by, DCB’s international correspondent banks.

Daedong Credit Bank also maintains strict procedures for the detection and rejection of counterfeit bank notes; it uses regularly updated note checking machines, and has personnel with over 10 years’ of experience of handling notes. DCB have encountered and impounded the so-called ‘superdollar’ notes, proving that these notes (despite media misconceptions) are not undetectable.

The wealth of experience garnered over Daedong Credit Bank’s 15 years of successful operation is unrivaled.

Daedong Credit Bank has a significantly strong position in relation to the future economic development of the DPRK and, being the oldest established foreign invested commercial bank in the DPRK, it is the intention of the bank to capitalise on these advantages.

CONTACT INFORMATION:

Daedong Credit Bank office address in Pyongyang is:

Daedong Credit Bank
401, Potonggang Hotel
Ansan-dong
Pyongchon District
Pyongyang
Democratic People’s Republic of Korea

Phone Switchboard  +850 2 381 2228/9    ext 401
Direct line     +850 2 381 4866
Mobile          +850 193 801 8400 *
*Note, the mobile number may not be obtainable from certain countries (eg UK and Hong Kong).
Corporate Website www.daedongcreditbank.com

According to the Choson Ilbo:

South Korean intelligence officials breathed a sigh of relief on Sunday. They had finally located Jon Il-chun, the head of a special department in North Korea’s Workers Party that manages Kim Jong-il’s slush fund. Jon, who had eluded intelligence officials for the past six months, was finally spotted on a North Korean TV broadcast featuring one of leader Kim Jong-il’s so-called on-the-spot guidance tours in Pyongyang.

The 69-year-old Jon went to high school with Kim (68) and was appointed head of the department, known as Room 39, early this year. It manages 17 overseas branch offices and around 100 trading companies and even owns a gold mine and a bank. The US$200-300 million those companies make each year is funneled into Kim’s secret bank accounts around the world.

Room 39 is targeted each time the U.S. and other foreign governments apply financial sanctions against North Korea. Kim replaced its head early this year because the former director, Kim Tong-un, was put on an EU list of sanctioned individuals late last year, making it impossible for him to manage the leader’s secret overseas bank accounts.

Due to the importance of the department and the clandestine nature of its business, the director of Room 39 rarely appears in public, but he sometimes accompanies Kim Jong-il on guidance tours when they involve organizations linked to Kim’s slush funds, an intelligence official said.

In the TV clip on Sunday, Jon is seen with Kim on an tour to Hyangmanlu, a popular restaurant, and Sonhung food manufacturing plant. A North Korean defector who used to live in Pyongyang, said the restaurant was built in the 1990s by a wealthy ethnic Korean from Japan and is located in a busy part of Pyongyang. “It was always packed with wealthy party officials,” the defector said, adding the party manages the restaurant so the entire proceeds probably go into Kim Jong-il’s coffers. He added there is a strong possibility that the food factory also belongs to the party.

The last time Jon appeared on North Korean TV was on June 20, at the opening of a mine in Yanggang Province. A North Korean source said the Huchang Mine is a famous copper mine that had been closed for some time but must have reopened. “Judging by the fact that Jon took part in the opening ceremony, it appears to be one of many mines run by Room 39.”

Jon was also spotted at Kim’s inspections of two fisheries companies last year and one this year. A Unification Ministry official said, “North Korean exports of fisheries products are handled by the party or the military and they’re sources of revenue for Kim Jong-il’s slush fund.” Fisheries products accounted for the second largest North Korea’s W1.64 trillion exports to South Korea last year, amounting to W173 billion or 16.3 percent. Textiles totaled W477 billion or 44.8 percent.

“This is one of the reasons why we blocked imports of North Korean fisheries products” following the North’s sinking of the Navy corvette Cheonan, the official said.

Additional Information:

1. Michael Madden has written a biography of Jon Il-chun here.

2. Here is a satellite image of the Hyangmanru Restaurant.  Here is a satellite image of the Sohung Foodstuff Factory (right next door).

Read the full story here:
Elusive Manager of Kim Jong-il’s Slush Funds Pops Up Again
Choson Ilbo
12/15/2010

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-11-22-1
11/22/2010

The Chosun Sinbo reported on November 15 that North Korea has erected hundreds of cellular signal towers throughout the country, providing phone service to every province, city, and town in North Korea. According to the report, the expansion of the North’s 3G network has really taken off in 2010, and the number of subscribers within the country has grown 2.5 times in the latter half of the year, as has the available coverage area.

This initiative has focused on setting up hundreds of cell towers near major highways, cities, and industries important to economic advancement. It was also reported that industry insiders had revealed that not only towns, cities, and provinces were targeted for the expansion of cellular service, but that there was a plan to erect towers in the back country, as well, and that authorities aimed to extend service to every village in the country by next year.

To this end, the Chosun Sinbo reported, the Pyongyang-based DPRK-PRC JV Checom Joint Venture Company has set up a “flow manufacturing process and is producing hundreds of high-performance cellular phones each day” and, “Related sectors are testing new devices and actively working on a project aimed at modifying the operating software to suit the needs of North Koreans.”

The paper also reported that North Korea’s academics and scientists collaborated to develop such a system in a short time, and that the system was also integrated into the nation’s Intranet. This system is different from the previous configuration in that videos, recordings, and text messages can be sent both ways, so that the system better supports an exchange of information rather than merely a transfer.

The paper emphasized that by providing distance education service to every local academic office, city and town library, and science and educational facility, the North has enacted a state-of-the-art, nationwide education system. In addition, by providing the infrastructure for real-time interactive lectures, workers and children in every region of the country can easily pursue their education by actively participating in a wide range of lectures.

According to the Choson Ilbo:

The Agostinho Neto Center of Culture is a massive national park that the Angolan government is building on 12,000 sq. m of land in the capital city Luanda in memory of its first president. On Oct. 24, the entrance was firmly shut with a black iron gate. Through barred windows, three or four Asian workers could be seen: they are staff of North Korea’s Mansudae Overseas Project Group of Companies, which earns much-needed foreign currency for the regime from massive construction projects and monumental sculpture in the developing world.

Initially, the Agostinho Neto Center was commissioned to a Brazilian construction company, but work came to a halt until the North Koreans took over at the end of 2007.

The North Korean workers are living together in temporary wooden accommodation in a corner of the construction site. There are reportedly 100 to 120 of them in Angola. North Korea supported independence movements and civil wars of some African countries, and has been involved in some large construction projects there based on the diplomatic ties built this way. The North provided military aid to the side currently in power during the Angolan civil war and is reportedly building other parks and peace monuments in Cabinda and Huambo, one or two hours away by plane from Luanda.

The Daily NK reported North Korea has earned at least US$160 million in construction projects in Africa since 2000. A South Korean resident in Angola said, “Although North Korean workers only get minimum living cost from their government, they make additional money by working on smaller-scale projects locally when they have some spare time waiting for equipment or materials to arrive.”

One North Korean worker said, “When we go to the site for work, we sometimes get Angolan traditional congee called Fungi. It’s delicious. We eat better here than in North Korea because we can get rice from Chinese construction firms.”

In a predominantly black residential area in Luanda, there is a pharmacy run by a North Korean doctor in a shabby one-story building. “I work at a national hospital in the morning, and run this pharmacy privately in the afternoon. This is the only way I can make the ends meet,” he said.

According to a local source, there are about 180 North Korean doctors across Angola, including about a dozen in Luanda. There are also North Korean doctors in Mozambique and Congo, and some practice oriental medicine. At the pharmacy, acupuncture costs $80 for the first treatment and $40 thereafter.

Read the full story here:
N.Koreans Struggle for Hard Currency in Africa
Choson Ilbo
11/20/2010

UPDATE 2: Here is the actual Treasury Department Press Release (11/18/2010):

Treasury Designates Key Nodes of the Illicit Financing Network of North Korea’s Office 39

11/18/2010
WASHINGTON – The U.S. Department of the Treasury today designated Korea Daesong Bank and Korea Daesong General Trading Corporation pursuant to Executive Order (E.O.) 13551 for being owned or controlled by Office 39 of the Korean Workers’ Party.  Office 39 is a secretive branch of the government of the Democratic People’s Republic of Korea (North Korea) that provides critical support to North Korean leadership in part through engaging in illicit economic activities and managing slush funds and generating revenues for the leadership. Office 39 was named in the Annex to E.O. 13551, issued by President Obama on August 30, 2010, in response to the U.S. government’s longstanding concerns regarding North Korea’s involvement in a range of illicit activities, many of which are conducted through government agencies and associated front companies. Korea Daesong Bank is involved in facilitating North Korea’s illicit financing projects, and Korea Daesong General Trading Corporation is used to facilitate foreign transactions on behalf of Office 39.

“Korea Daesong Bank and Korea Daesong General Trading Corporation are key components of Office 39’s financial network supporting North Korea’s illicit and dangerous activities,” said Under Secretary for Terrorism and Financial Intelligence Stuart Levey.  “Treasury will continue to use its authorities to target and disrupt the financial networks of entities involved in North Korean proliferation and other illicit activities.”

E.O. 13551 targets for sanctions individuals and entities facilitating North Korean trafficking in arms and related materiel; procurement of luxury goods; and engagement in certain illicit economic activities, such as money laundering, the counterfeiting of goods and currency, bulk cash smuggling and narcotics trafficking. As a result of today’s action, any assets of the designated entities that are within U.S. jurisdiction are frozen and U.S. persons are prohibited from conducting financial or commercial transactions with these entities.

UPDATE 1: Here is the US Treasury Department’s web page on North Korea.

ORIGINAL POST: According to Reuters:

The United States sanctioned on Thursday two North Korean companies linked to a group it accuses of drug smuggling and other “illicit” activities to support the nation’s secretive leadership.

U.S. sanctions against North Korea aim in part to persuade Pyongyang to abandon its nuclear programs, which the United States views as a threat to its allies South Korea and Japan. The North tested nuclear devices in 2006 and 2009.

The Treasury Department’s moves against Korea Daesong Bank and Korea Daesong General Trading Corporation will freeze any assets belonging to them that fall within U.S. jurisdiction as well as bar U.S. companies from dealing with them.

Their main aim is not to block North Korean assets in U.S. banks — analysts say there are unlikely to be any — but to discourage other banks from dealing with North Korea, thereby cutting off its access to foreign currency and luxury imports.

Perks and luxuries such as jewelry, fancy cars and yachts derived from North Korea’s shadowy network of overseas interests are believed to be one of the main tools Pyongyang uses to ensure loyalty among top military and party leaders to North Korean leader Kim Jong-il.

The Treasury described the two entities as “key nodes of the illicit financing network” of Office 39 of the Korean Workers’ Party, which it accuses of producing and smuggling narcotics to earn foreign exchange for the government.

“Korea Daesong Bank and Korea Daesong General Trading Corporation are key components of Office 39’s financial network supporting North Korea’s illicit and dangerous activities,” Treasury Under Secretary Stuart Levey said in a statement.

Heroin Production?
The Treasury designated the two under a recent executive order that targets entities that support North Korea’s arms trafficking, facilitate its luxury goods purchases and engage in illicit economic activities such as money laundering, drug and bulk cash smuggling and counterfeiting goods and currency.

President Barack Obama signed the executive order on August 30 allowing the Treasury to block the U.S. assets of North Korean entities that trade in arms or luxury goods, counterfeit currency or engage in money laundering, drug smuggling or other “illicit” activity to support the government or its leaders.

When that executive order was announced, the Treasury accused Office 39 of producing opium and heroin and of smuggling narcotics such as methamphetamine.

U.S.-North Korean relations have deteriorated since Obama took office, with his aides deeply unhappy about Pyongyang’s decision to conduct nuclear and missile tests last year as well as the March 26 sinking of the South Korean corvette Cheonan.

Forty-six South Korean sailors were killed in the incident, which the United States, South Korea and other nations blame squarely on North Korea. Pyongyang denies responsibility.

In the August 30 executive order, Obama cited the Cheonan’s sinking as well as 2009 nuclear and missile tests by North Korea as evidence it poses “an unusual and extraordinary threat” to U.S. national security, foreign policy and economy.

The Obama administration has been skeptical about returning to so-called six-party negotiations with the two Koreas, China, Japan and Russia under which Pyongyang committed in 2005 to abandon its nuclear programs.

U.S. officials say they do not want to talk for the sake of talking and North Korea must show some commitment to abandoning its nuclear programs.
Read the full story here:
U.S. sanctions two North Korean entities
Reuters
Arshad Mohammed
11/18/2010

According to Bernama:

North Korea has started to mass-produce cellular phones while trying to customize their operating systems to satisfy local needs, Yonhap news agency reported, citing a pro-Pyongyang newspaper as saying.

The report by Chosun Sinbo, run by a group of pro-North Korea residents in Tokyo and monitored in Seoul, came after Cairo-based Orascom Telecom Holding announced earlier this month that its mobile business in the communist state is rapidly expanding.

The number of mobile phone subscribers has at least quadrupled over the period of one year in North Korea, according to Orascom. The expansion doesn’t mean that the regime has eased its rules aimed at restricting the flow of information in and out of the country.

Chosun Sinbo said Monday in its report from Pyongyang that a firm known as Checom Technology Joint Venture Company has set up a “flow manufacturing process and is producing hundreds of high-performance cellular phones each day.”

Checom is a Pyongyang-based electronics and communications company, according to the Web site of Songsang Company, a Dandong, China-based firm that trades with North Korea.

Flow manufacturing is a build-to-order process aimed at minimizing inventory.

“Related sectors are testing new devices and actively working on a project aimed at modifying the operating software to suit the needs of local users,” Chosun Sinbo said.

“Central engineering rooms for mobile communications are also pushing a program to develop software for their main machines to meet the domestic environment.”

The report added that a video calling service has also been made available while “hundreds of base stations” that transmit signals have been set up across the country.

Orascom, which operates jointly with the local Koryolink, had said in its earnings report that video calling “resulted in a high level of demand, especially from the youth segment.”

North Korea first launched a mobile phone service in Pyongyang in November 2002, but banned it after a deadly explosion in the northern Ryongchon train station in April 2004, possibly out of concern that it could be used in a plot against the regime.

In 2008, the country reversed its policy and introduced a 3G mobile phone network in the joint venture with Orascom.

However, the overall “mobile penetration” remains at 1 percent in the country that has a per-capita GDP of US$1,900 and a population of 22.8 million, according to Orascom.

Read the full story here:
North Korea begins mass-producing cell phones to meet local demands
Bernama (Malaysia)
11/15/2010

According to the Daily NK:

It has been confirmed by The Daily NK that North Korea failed in a recent attempt to import beef from New Zealand for the purpose of providing special gifts to cadres on Kim Jong Eun’s birthday, January 8, after the plan ran afoul of the New Zealand government, which froze the funds.

According to a source from North Korea today, “$170,000 remitted by ‘Myohyang Bureau’ to a New Zealand bank in October to import parts for Japanese tourist buses and beef has been frozen by the New Zealand authorities.”

The source added, “The New Zealand authorities are investigating whether or not the money is related to (North Korea’s) drug dealing.”

The source explained, “The beef is for special distribution to cadres on the Youth Captain (Kim Jong Eun)’s birthday, while the parts of Japanese buses are to repair buses operated by the Tour Bureau,” adding, “Myohyang Bureau is alarmed that there might be a snag in Comrade Youth Captain’s birthday special distribution.”

In North Korea, workplaces have already started to prepare presents for Kim Jong Eun’s birthday. There are two types of presents: the first is from cadres to Kim Jong Eun; and the latter is special distribution to cadres in Kim Jong Eun’s name. However, even though the special distribution is like a gift handed out by a monarch, factories and Party organs have to prepare it. According to the source, the Myohyang Bureau’s duty this time is to supply beef.

The Myohyang Bureau is directly in charge of tour events including Arirang performance-related tours and Mt. Baekdu and Geumgang tours. It sends the profits from these businesses involving foreign tourists to the No. 39 Department of the Central Committee of the Party.

The source explained further, “Due to Japanese sanctions against North Korea, the Tour Bureau has not been able to obtain parts for Japanese buses, so the Myohyang Bureau asked a New Zealand business partner to obtain them for them. In doing that, they also asked for beef.”

“Since the Myohyang Bureau sent the money via a secret bank account held with a bank in Latvia to a bank in New Zealand, it incurred the suspicion of the New Zealand government. Money is still money, but the bigger problem is to expose the Latvian account.”

This is the first time that a Latvian account has been linked to North Korea, adding to known secret accounts in Switzerland, China, Macau and the Caribbean.

The source said, “The Myohyang Bureau opened the account in the name, ‘RUSKOR International Company Ltd’ in a bank of Latvia,” adding, “The account name is the connecting of the words Russia and Korea.”

“Gift rations” have been in the news a lot lately.  Links to previous posts about the DPRK’s “gift rations” can be found here.

Read the full story here:
North Korean Funds for Beef Frozen by New Zealand
Daily NK
Park In Ho
11/5/2010

Richard Stone writes in 38 North:

The curtain is rising on a bold experiment to engage North Korea’s academic community—and possibly shape the country’s future. On October 25, 2010, Pyongyang University of Science and Technology, or PUST, opened its doors to 160 elite North Korean students. By improving North Korea’s technical prowess, PUST might nudge the country’s tattered manufacturing-based economy toward an information-based economy.

“Our purpose is the globalization of North Korea through PUST. In that way, their economy can gradually develop, which will make it easier for reunification later,” says Park Chan Mo, former president of the National Research Foundation of Korea and one of four founding committee chairs of PUST. More initiatives are in store after South-North relations improve, says Oh Hae Seok, Special Adviser on Information Technology (IT) to South Korea’s President Lee Myung Bak. “The South is ready to assist the North by building an IT infrastructure and supporting IT education, as long as the North opens its door,” he says.

PUST will test North Korea’s appetite for engagement. Perhaps most discomfiting to the North is that the new university is led and bankrolled by devout Christians. The North Korean government espouses atheism and takes a dim view on South Korean evangelists, particularly for their role in an “underground railway” in northeastern China that steers defectors to safe havens. PUST leaders and professors, primarily ethnic Koreans, have promised not to proselytize.

PUST’s main mission therefore is to lead North Korea out of a scientific wilderness. The North is light-years behind industrialized nations in many areas of science and technology. It excels in a few spheres. For instance, North Korea is notorious for its skill at reverse-engineering long-range missiles and fashioning crude but workable plutonium devices. Less well known, the North has developed considerable expertise in information technology—and has staked its future on it. “North Korea has chosen IT as the core tool of its economic recovery,” says Park. But it has a poor grasp on how to translate knowledge into money. “Instead of just giving them fish, we will teach them how to catch fish,” Park says.

There are serious risks in giving North Korea a technical assist, according to PUST’s critics. Opinion in South Korea is split on PUST; many people have voiced concerns. The chief worry is that PUST students could feed information or lend newfound expertise to the North Korean military. To minimize these risks, PUST’s curricula have been vetted by government and academic nonproliferation experts.

To proponents, the new venture’s benefits far outweigh the risks. PUST has been promised academic freedom, the likes of which has been virtually unknown in North Korea, including campus-wide internet access. “We hope that PUST will open channels to the outside,” says Nakju Lett Doh, an assistant professor of electrical engineering at Korea University in Seoul and member of PUST’s academic committee.

Few people of university age or younger can imagine a world without internet. But it’s rare a North Korean of any age has tasted this forbidden fruit. The government takes infinite care to shield innocent minds from corrosive facts about the Korean War, descriptions of life in modern South Korea, and western notions of freedom of expression, among other things. Instead, the Garden of Juche offers Guang Myung, or Bright Light: an Intranet not connected to the outside world.

When I visited Pyongyang on invitation from the DPRK Academy of Sciences in July 2004, my hosts gave me a tour of the Central Information Agency for Science and Technology’s computing center and showed me the Guang Myung home page, which reminded me of Yahoo. They claimed the system has tens of millions of records, including digital tomes on agriculture and construction as well as the complete writings of Kim Il Sung.

Since then, fiber optic cables have spread Guang Myung to the far corners of the nation. “The main purpose is to disseminate scientific and technological information,” says Lee Choon Geun, chief representative of the Korea-China Science & Technology Cooperation Center in Beijing. On a visit to Pyongyang a few years ago, Lee, an expert on North Korea’s scientific community, witnessed Guang Myung in action, including a live lecture broadcast over the Intranet. At the time, he says, Kim Chaek University of Technology had around 500 Pentium 4’s and 5’s connected to the system. He estimates that nationwide, tens of thousands of computers of all types are now linked in. However, it’s not clear how effective Guang Myung is outside Pyongyang, where clunky routers funnel information to ancient machines—remember 386s and 486s? Another major woe is an unstable electricity supply that regularly fritzes electronics. Lee, who has visited North Korea 15 times, says that when he asks what scientists need most, they request laptops, whose power cord adaptors and batteries can better handle electrical fluctuations.

Indeed, it’s a formidable job to erect an IT infrastructure inside a cocoon. South Korea has lent a hand. With the government’s blessing, private organizations in the South have sent approximately 60,000 IT publications—periodicals and books—to North Korean universities, and IT professors from the South have visited the North for lecturing stints, says Oh. South Korean groups have also helped train North Korean computer scientists in Dandong, China, just across the border from North Korea. The training center had to close earlier this year due to budget cuts, says Lee.

The juche philosophy embraces self-reliant efforts to gather technical information from abroad. North Korean diplomats are one set of eyes and ears. They collect journal articles, textbooks and handbooks, surf the Web and ship any seemingly useful information to Pyongyang, where analysts evaluate it and censors clear it for posting. When sent via internet, information is routed primarily through Silibank in Shenyang in northeastern China. North Korea has also deployed abroad around 500 IT specialists in the European Union and dozens more to China—in Beijing, Dalian, Shanghai, and Shenyang—to acquire knowledge for the motherland. “Through them a lot of information goes to North Korea,” says Park.

Such activity may seem like a packrat cramming its nest with equal portions of usable materials and shiny baubles. But it has paid off in at least one area: software development. “They are developing their own algorithms,” says Doh, an expert on control system theory. Even though North Korea’s programmers are almost completely isolated from international peers, they lag only about 5 to 6 years behind the state of the art in South Korea, Doh says. “That’s not that bad.” The Korean Computing Center and Pyongyang Information Center together have around 450 specialists, and universities and academy institutes have another 1,000 more experts on computer science, says Lee. And all told there are about 1,200 specialized programmers.

The programmers have enjoyed modest commercial success. The state-owned SEK Studios in Pyongyang has done computer animation for films and cartoons for clients abroad. And software developers have produced, among other things, an award-winning computer version of the Asian board game Go. “Their software is strong,” says Park, a specialist on computer graphics and simulation. “They are very capable.”

But the resemblance to IT as we know it ends there. “In North Korea, IT is quite different from what most people think,” says Lee. Most computing efforts these days are focused on computerized numerical control, or CNC: the automation of machine tools to enable a small number of workers to produce standardized goods. “Their main focus is increasing domestic production capacity,” says Lee. North Korea’s CNC revolution is occurring two to three decades after South Korean industries adopted similar technologies. And North Korea is struggling to implement CNC largely because of its difficulties in generating sufficient energy needed to make steel—so its machinery production capacity is a fraction of what it used to be—and it lacks the means to produce sophisticated integrated circuit elements.

Antiquated technology may be the biggest handicap for North Korea’s computer jocks. North Korea “doesn’t have the capacity to make high technology,” says Kim Jong Seon, leader of the inter-Korean cooperation team at the Science and Technology Policy Institute in Seoul. North Korea is thought to have a single clean room for making semiconductors at the 111 Factory in Pyongyang. Built in the 1980s—the Stone Age of this fast-paced field—the photomask production facility is capable of etching 3 micron wide lines in silicon chips. South Korean industry works in nanometer scales. The bottom line, says Kim, is that in high technology, “they have to import everything.”

That’s a challenge, because no country—China included—openly flouts UN sanctions on high-tech exports to North Korea. Any advanced computing equipment entering the country is presumably acquired through its illicit missile trade and disappears into the military complex. North Korea’s civilian computer scientists are left fighting for the scraps. One of only five Ph.D. scientist-defectors now known to be in South Korea, computer scientist Kim Heung Kwang, fled North Korea in 2003 not for political reasons or because he was starving—rather, he hungered to use modern computers.

To help North Korea bolster its budding IT infrastructure and not aid its military, PUST will have to walk a tightrope. School officials have voluntarily cleared curricula with the U.S. government, which has weighed in on details as fine as the name of one of PUST’s first three schools. The School of Biotechnology was renamed the School of Agriculture and Life Sciences because U.S. officials were concerned that biotech studies might be equated to bioweapons studies, says Park. North Korean officials, meanwhile, forbid PUST from launching an MBA program—a degree too tightly associated with U.S. imperialism. “So we call it industrial management,” Park says. “But the contents are similar to those of an MBA.”

Besides cleansing PUST of any weapons-grade information, Park and university representatives are working with the U.S. Commerce Department to win export licenses for advanced computing equipment and scientific instruments not prohibited by dual-use restrictions. Approval is necessary for equipment consisting of 10 percent or more of U.S.-made components. “You can attach foreign-made peripheral devices and reduce U.S. components to less than 10 percent, but that’s a kind of cheating,” Park says. “We want to strictly follow the law.”

This improbable initiative in scientific engagement was a long time in the making. PUST’s chief architect is founding president Kim Chin Kyung, who in 1998 established his first venture in higher education: Yanbian University of Science and Technology in Yanji, the capital of the Yanbian Korean Autonomous Prefecture in northeastern China’s Jilin Province, just across the border from North Korea. A businessman who studied divinity in university, Kim, who goes by his English name James, was accused of being a spy on a visit to North Korea in 1998 and imprisoned there for six weeks. He stuck with YUST, however, and in 2001, North Korean education officials visiting the university stunned Kim by inviting him to establish a similar university in Pyongyang. Kim got a rapturous response when he pitched the idea to YUST’s sponsors.

Progress came in fits and starts. PUST was originally envisioned to open in 2005, but work on the initial 17 buildings of the $35 million, 100-hectare campus in southern Pyongyang’s Rakrang district was completed only last year. North Korean education officials have promised the school academic freedom and internet access. Such startling privileges will be doled out byte by byte. “In the beginning, they are allowing us to do emailing,” says Park. Full internet access is expected to come after PUST earns their keepers’ trust. “To do research, really you have to use the internet. The North Korean government realizes that. Once they know students are not using the internet for something else, it should be allowed,” Park says.

While YUST and PUST may both have ardent-Christian backers and cumbersome acronyms, the atmosphere on the two campuses will be markedly divergent. In Yanji, encounters outside the classroom are common: faculty and students even dine together in a common hall. “YUST professors and students are like one family,” says Park.

In contrast, PUST students and faculty will inhabit two entirely different worlds that only merge in the classroom. The North Korean government handpicked the inaugural class of 100 undergraduates and 60 graduate students, including 40 grads who will study IT. All will study technical English this fall, then in March a wider roster of courses will become available after key professors and equipment arrive on campus. A student leader will shepherd students to and from class to ensure that no lamb goes astray. “There will be no way to teach the gospel,” says Doh.

PUST professors expect to be impressed with the students, selected from Kim Il Sung University and Kim Chaek University of Technology. “These are the most brilliant students in North Korea,” says Doh. PUST plans to ramp up enrolment to 2,000 undergrads and 600 graduate students by 2012. To expose these young, agile minds to a wide range of ideas, PUST plans to fly in a number of visiting professors during the summer terms. They also intend to seek permission for students from other Pyongyang universities to attend the summer sessions. As trust develops, PUST hopes that some of its students will be able to participate in exchange programs and study abroad.

PUST’s success may hinge on the disposition of North Korea’s leader in waiting. Kim Jong Un was tutored privately by a “brilliant” graduate of Université Paris X who chaired the computer science department at Kim Chaek University of Technology before disappearing from public view in the early 1980s, says Kim Heung Kwang, who studied at Kim Chaek before working as a professor at Hamhung Computer College and Hamhung Communist College. After defecting and settling in Seoul, Kim founded North Korea Intellectuals Solidarity, a group of university-educated defectors that raises awareness of conditions in North Korea.

According to internal North Korean propaganda, Kim Jong Un oversees a cyberwarfare unit that launched a sophisticated denial-of-service attack on South Korean and U.S. government websites in July 2009. South Korea’s National Intelligence Service blamed the North, which has not commented publicly on the attack. Kim Jong Un’s involvement cannot be confirmed, says Kim Heung Kwang. “But Kim Jong Un is a young person with a background in information technology, so he may desire to transform North Korea from a labor-intense economy to a knowledge economy like South Korea is doing.”

Another big wildcard is North-South relations. After the sinking of the Cheonan, South Korea froze assistance to the North. In the event of a thaw, “the South wants to build a digital complex” in the Demilitarized Zone (DMZ) or in South Korea similar to the Kaesong industrial complex, says Oh. This, he says, “would be the base camp of North Korea’s IT industry development.” North Korea has reacted lukewarm to the idea: It would prefer that such a venture be based in Pyongyang, says Lee. To facilitate denuclearization and help skilled North Korean workers adapt to market economics, the Science and Technology Policy Institute in Seoul has proposed the establishment of an Inter-Korean Science and Technology Cooperation Center modeled after similar centers established in Kiev and Moscow after the Soviet breakup.

Such projects, if they were to materialize, along with well-trained graduates from PUST, may help pull North Korea’s economy up by its bootstraps. “We are trying to make them more inclined to do business, to make their country wealthier,” says Park. “It will make a big difference once they get a taste of money. That’s the way to open up North Korea.”

Additional information:
1. Here are previous posts about PUST.

2. Here are previous posts about the DPRK’s intranet system, Kwangmyong.

3. Here is a satellite image of PUST.

Read the full story here:
Pyongyang University and NK: Just Do IT!
38 North
Richard Stone
11/1/2010

According to the AFP:

North Korea is forging trade documents and changing the names of its trading firms to try to dodge international sanctions, a Seoul intelligence official and a media report said Wednesday.

Pyongyang changed the name of the Korea Mining and Development Corp to Kapmun Tosong Trade after the UN Security Council blacklisted the firm following the North’s missile test in April 2009, Dong-A Ilbo newspaper reported.

The communist state also renamed weapons trader Tangun Trade as Chasongdang Trade when the company was put on the sanctions list after the North’s second nuclear test in May 2009.

The tests prompted the Security Council to impose tougher sanctions targeting Pyongyang’s weapons exports and blacklisting companies suspected of such dealings.

The sanctions also called on UN member states to inspect ships and planes suspected of carrying banned cargo to or from the North.

Since then, the North has mostly used China to transport its arms exports, Dong-A said.

It had forged trade invoices on military products, for instance by labelling torpedoes as fish processing equipment and anti-tank rockets as oil boring machinery, the paper added.

A spokesman for Seoul’s National Intelligence Service confirmed the report but declined to give details.

“Intelligence authorities in South Korea and the United States are trying to crack down on the North’s forging of company names and export invoices, but it is becoming increasingly difficult since the North keeps coming up with new schemes,” the paper quoted one South Korean official as saying.

The impoverished North faces multiple sanctions imposed by the UN and the United States and targeting its illegal trade in arms, drugs and luxury goods.

The US Treasury Department announced Monday it was imposing sanctions on four people and eight organisations accused of aiding the communist government through illicit trade.

Of course these games are nothing new. About this time last year DPRK sanctions enforcement was in the news.  Marcus Noland referred to the task as “Whac-a-mole”.

Read the full stories here:
N.Korea forges trade documents to dodge sanctions
AFP
9/1/2010

N. Korea Fakes Trade Documents to Export WMDs 
Donga Ilbo
9/1/2010

UPDATE 4: The following statement appeared on the Treasury Department web page:

In joint actions, the U.S. Departments of Treasury and State today announced the designations of five North Korean entities and three individuals under Executive Order (E.O.) 13382 for supporting North Korea’s Weapons of Mass Destruction (WMD) program. Executive Order 13382 is an authority aimed at freezing the assets of WMD proliferators and their supporters thereby isolating them from the U.S. financial and commercial systems.

Also today, President Obama signed an Executive Order that directs the Secretary of the Treasury, in consultation with the Secretary of State, to target for sanctions individuals and entities facilitating North Korean trafficking in arms and related materiel; procurement of luxury goods; and engagement in illicit activities, including money laundering, the counterfeiting of goods and currency, bulk cash smuggling and narcotics trafficking. The new Executive Order supplements E.O 13382, under which North Korean entities have been designated to date, and is consistent with measures required in UNSCRs 1718 and 1874.

The following individuals have been added to OFAC’s SDN list:

KIM, Yong Chol (a.k.a. KIM, Yong-Chol; a.k.a. KIM, Young-Cheol; a.k.a. KIM, Young-Chol; a.k.a. KIM, Young-Chul); DOB circa 1947; alt. DOB circa 1946; POB Pyongan-Pukto, North Korea (individual) [DPRK]

RI, Hong-Sop, c/o General Bureau of Atomic Energy , Haeudong, Pyongchen District, Pyongyang, Korea, North; DOB 1940; nationality Korea, North (individual) [NPWMD]

RI, Je-Son (a.k.a. RI, Che-Son), c/o General Bureau of Atomic Energy, Haeudong, Pyongchen District, Pyongyang, Korea, North; DOB 1938; nationality Korea, North (individual) [NPWMD]

YUN, Ho-Jin (a.k.a. YUN, Ho-Chin), c/o Namchongang Trading Corporation, Pyongyang, Korea, North; DOB 13 Oct 1944; nationality Korea, North (individual) [NPWMD]

The following entities have been added to OFAC’s SDN list:

GREEN PINE ASSOCIATED CORPORATION (a.k.a. CHONGSONG YONHAP; a.k.a. CH’O’NGSONG YO’NHAP), Nungrado, Pyongyang, Korea, North; c/o Reconnaissance General Bureau Headquarters, Hyongjesan-Guyok, Pyongyang, Korea, North [DPRK]

KOREA HEUNGJIN TRADING COMPANY (a.k.a. HUNJIN TRADING CO.), Pyongyang, Korea, North [NPWMD]

KOREA TAESONG TRADING COMPANY, Pyongyang, Korea, North [NPWMD]

MUNITIONS INDUSTRY DEPARTMENT (a.k.a. MILITARY SUPPLIES INDUSTRY DEPARTMENT), Pyongyang, Korea,
North [NPWMD]

OFFICE 39 (a.k.a. BUREAU 39; a.k.a. CENTRAL COMMITTEE BUREAU 39; a.k.a. DIVISION 39; a.k.a. OFFICE #39; a.k.a. OFFICE NO. 39; a.k.a. THIRD FLOOR), Second KWP Government Building (Korean – Ch’o’ngsa), Chungso’ng, Urban Town (Korean – Dong), Chung Ward, Pyongyang, Korea, North; Chung-Guyok (Central District), Sosong Street, Kyongrim-Dong, Pyongyang, Korea, North; Changgwang Street, Pyongyang, Korea, North [DPRK]

RECONNAISSANCE GENERAL BUREAU (a.k.a. CHONGCH’AL CH’ONGGUK; a.k.a. KPA UNIT 586; a.k.a. “RGB”), Hyongjesan-Guyok, Pyongyang, Korea, North; Nungrado, Pyongyang, Korea, North [DPRK]

SECOND ACADEMY OF NATURAL SCIENCES (a.k.a. 2ND ACADEMY OF NATURAL SCIENCES; a.k.a. ACADEMY OF NATURAL SCIENCES; a.k.a. CHAYON KWAHAK-WON; a.k.a. CHE 2 CHAYON KWAHAK-WON; a.k.a. KUKPANG KWAHAK-WON; a.k.a. NATIONAL DEFENSE ACADEMY; a.k.a. SANSRI; a.k.a. SECOND ACADEMY OF NATURAL SCIENCES RESEARCH INSTITUTE), Pyongyang, Korea, North [NPWMD]

SECOND ECONOMIC COMMITTEE, Kangdong, Korea, North [NPWMD]

UPDATE 3: According to the Wall Street Journal:

The Obama administration outlined new financial sanctions on North Korea aimed at further choking off Pyongyang’s arms trade and the illicit businesses funding dictator Kim Jong Il’s government.

The U.S. specifically targeted a secretive unit of Pyongyang’s ruling Korean Workers’ Party, known as Office 39, which American officials believe serves as a private slush fund for Mr. Kim.

Washington also blacklisted nearly a dozen North Korean individuals and entities alleged to be overseeing Pyongyang’s development of conventional arms and weapons of mass destruction, as well as their sales to third countries.

Among those designated are the Second Economic Committee of the Workers’ Party and Yun Ho-jin, Pyongyang’s onetime ambassador to the United Nations’ nuclear watchdog, the International Atomic Energy Agency. The U.S. also named to its sanctions list two top officials from Pyongyang’s General Bureau of Atomic Energy, Ri Je-son and Ri Hong-sop.

“When it comes to focusing on illicit activity, we have seen that the world reacts to this kind of thing very, very positively,” said Stuart Levey, the Treasury Department’s undersecretary for terrorism and financial intelligence. “We believe that this sort of program can have a very powerful impact.”

The new U.S. measures freeze any assets of the designated persons or entities inside the U.S. and bars American companies from conducting business with the listed North Koreans. Mr. Levey also said that any foreign entities conducting business with the sanctioned North Koreans could also face U.S. penalties.

Secretary of State Hillary Clinton announced in June that the U.S. would enact new financial penalties on Pyongyang, in part, in response to the North’s alleged torpedoing of a South Korean naval vessel. The March sinking of the Cheonan killed 46 South Korean servicemen and has led to heightened tensions on the Korean peninsula.

U.S. officials fear the attack could be linked to a political succession process inside Pyongyang and could presage other provocative acts by the North. U.S. and Asian officials believe Kim Jong Il is seeking to pass power to his third son, Kim Jong Eun.

…U.S. officials said the targeting of Office 39 is among the most direct assaults on Kim Jong Il’s finances to date and illustrates Washington’s support for the North Korean people. Office 39 has been directly involved in procuring luxury goods for Mr. Kim and Pyongyang’s political elite, even as many North Koreans face starvation.

Office 39 was blacklisted under a new executive order signed by President Barack Obama on Monday that specifically seeks to end North Korea’s ability to raise hard currency through illicit activities like drug smuggling and counterfeit $100 bills. The Treasury said Office 39 was directly involved in a 2009 scheme to illegally export into North Korea two luxury yachts valued at $15 million for Kim Jong Il.

UPDATE 2: According to the Wall Street Journal:

A North Korean arms chief and Pyongyang’s former ambassador to the United Nation’s nuclear agency have emerged as key figures in an intensifying international effort to curb North Korea’s weapons-trading activities.

The global dealings of the two men, Chun Byung-ho and Yun Ho-jin, whom North Korea analysts believe to be related through marriage, date back to the 1980s. They have played leading roles in North Korea’s development and testing of atomic weapons, according to current and former U.S. officials, Asian intelligence analysts and U.N. nonproliferation staffers.

More troubling to officials, Messrs. Chun and Yun also oversee Pyongyang’s vast arms-trading network, which appears to be spreading. They have shipped components for long-range missiles, nuclear reactors and conventional arms to countries including Iran, Syria and Myanmar.

On Monday, the Obama administration announced economic sanctions against various individuals and entities involved in Pyongyang’s nuclear work and in alleged illicit trading activities. The Treasury Department named Mr. Yun and the North Korean body headed by Mr. Chun—the Second Economic Committee of Pyongyang’s ruling Korean Workers’ Party. The sanctions freeze any U.S. assets of those named and bar Americans from conducting business with them. Treasury also warned that foreign firms doing business with them risked sanctions.

The Second Economic Committee oversees a little-known foreign trade office with the Orwellian name of Office 99. The proceeds from the Office’s arms sales go directly to North Korean dictator Kim Jong Il and Pyongyang’s senior leadership, according to these officials and recent North Korean defectors.

“It is broadly believed that the Second Economic Committee…plays the largest and most prominent role in nuclear, other WMD and missile-related development programs, as well as arranging and conducting arms-related exports” for North Korea, says a report issued in May by the U.N. committee tasked with enforcing international sanctions on Pyongyang.

The U.S. and U.N. recently have intensified efforts to combat the Second Economic Committee and Office 99, alarmed by Pyongyang’s two nuclear-weapons tests and its alleged role in sinking a South Korean naval vessel in March. Last year, the U.N. formally sanctioned Mr. Yun and his arms company, Namchongang Trading Co.

North Korean arms shipments moving through Thailand, the United Arab Emirates, South Africa and the South China Sea have been seized or turned back by the U.S. and its allies over the past few years. A Japanese court convicted a Tokyo-based trading company in November of procuring military technologies for Pyongyang with the intent of shipping them to Myanmar.

Still, Messrs. Chun and Yun’s decades of experience in the weapons trade pose a challenge to an international community keen to disrupt Pyongyang’s proliferation activities, say U.S. and Asian officials. “There is no reason to assume that Chun and Yun won’t sell nuclear weapons,” says David Asher, a former Bush administration official who has tracked Pyongyang’s arms trade for a decade. “There needs to be an active effort to disrupt their WMD networks and drive them out of business now, before it’s too late.”

The two men have established a network of front companies in Asia, Europe and the Middle East and have partnered with Southeast Asian, Japanese and Taiwanese criminal syndicates to move cash and contraband, say U.S. officials. And Mr. Yun has used the political cover provided by Pyongyang’s closest ally, China, to openly conduct business in cities such as Beijing and Shenyang, drawing official rebukes from Washington.

North Korean diplomats at Pyongyang’s U.N. mission in New York did not respond to requests for comment. Messrs. Chun and Yun couldn’t be reached.

Current and former U.S. officials say North Korea’s operations resemble in both scale and tactics those of Pakistan’s Abdul Qadeer Khan—one of the most notorious arms dealers in recent years. U.S. officials fear that isolated North Korea, desperate for hard currency, could accelerate its arms exports in a bid to prop up Kim Jong Il’s finances.

Mr. Chun, now 84 years old, and his Second Economic Committee emerged as major global arms exporters in the 1980s, as North Korea shipped as much as $3 billion worth of rockets, pistols and submarines to Tehran during the eight-year Iran-Iraq war, say recent defectors and North Korea analysts.

Pyongyang assisted some communist and socialist countries militarily during the 1960s and 1970s, and provided fighter pilots to aid Egypt and Syria in their wars against Israel. But North Korea found a largely captive market in Iran, which faced a U.S.-led weapons embargo as the West threw its support behind Iraqi strongman Saddam Hussein.

One senior North Korean defector who worked in Pyongyang’s munitions industries says he was dispatched to Iran by the Second Economic Committee in 1987 with the task of constructing missile batteries on the Iranian island of Kish to help Tehran better control the movement of ships through the Straits of Hormuz.

His main interlocutor was Iran’s elite military unit, the Islamic Revolutionary Guard Corps. The former hydro-mechanic says camaraderie developed between his 100-man team and the Guard, despite their different backgrounds.

Mr. Chun’s control over the Second Economic Committee was tied to his close relationship with Pyongyang’s ruling Kim family, say defectors and North Korea experts. The Russian-trained bureaucrat served as a member of North Korean founder Kim Il Sung’s bodyguard unit. He rose up the ranks of the Korean Workers’ Party with the political support of Kim Jong Il, eventually securing a position on Pyongyang’s most powerful political body, the National Defense Commission.

North Korea’s high-level defector, Hwang Jang-yop, has identified Mr. Chun as the broker of a key barter trade in the 1990s with Pakistan that significantly advanced Pyongyang’s nuclear infrastructure. The agreement resulted in North Korea shipping parts for long-range missiles to Islamabad in exchange for A.Q. Khan sending centrifuge equipment used in producing nuclear fuel.

As Mr. Chun pushed forward North Korea’s nuclear program from Pyongyang, Mr. Yun, believed to be the husband of Mr. Chun’s second daughter, emerged as a key player in procuring technologies for the Second Economic Committee from Europe, according to U.S., U.N. and European officials.

Mr. Yun, 66, arrived in Vienna in 1985 as Pyongyang’s ambassador to the International Atomic Energy Agency. The English and German speaker led negotiations with the U.N. agency aimed at forging a nuclear-inspection agreement with North Korea, and he helped oversee a 1992 tour of his nation’s Yongbyon nuclear facility for Hans Blix, the IAEA’s then-managing director.

“Yun was dedicated to turning things around. I truly believe that,” says Willi Theis, who worked closely with Mr. Yun as the head of the IAEA’s safeguards unit overseeing North Korea. Mr. Theis is now retired.

Still, concerns grew inside the IAEA about Mr. Yun’s activities, as relations between Pyongyang and the international community deteriorated, according to IAEA officials.

In 1993, North Korea broke off talks with the IAEA over the agency’s demands for an inspection of the country’s nuclear operations, and the U.S. charged Pyongyang with secretly stockpiling plutonium for atomic weapons. The next year, the Clinton administration threatened to bomb the Yongbyon facility if North Korea didn’t explain where the plutonium had gone. Mr. Yun grew embittered with the diplomatic process and mistrustful of the U.S. and its allies, according to IAEA staff and journalists who met with him.

Mr. Theis says he spent hours discussing the process with Mr. Yun and pressed the Agency to remain engaged with Pyongyang. The West German-born nuclear inspector says he grew suspicious of Mr. Yun’s many trips to other European cities and his contacts with local companies. Mr. Yun even hinted to Mr. Theis that he might have no choice but to directly support North Korea’s nuclear-weapons programs if relations with the IAEA collapsed.

“He came to the conclusion that dealing with the international community was totally disappointing,” said Mr. Theis in a phone interview from Austria. “Mr. Yun had definitely learned how to establish contacts with all types of people [while in Vienna]—not just from the IAEA, but managers of companies.”

Mr. Theis’s concerns about Mr. Yun would be borne out in 2003, when a German businessman, Hans Werner Truppel, was arrested and eventually convicted by a Stuttgart court of selling 22 metric tons of aluminum tubes to Mr. Yun.

The North Korean and his company, Namchongang Trading, used offices in Beijing and Shenyang, China, to place orders for the equipment, which is critical to building centrifuges needed to enrich uranium, according to a German Customs Bureau report. U.S. officials briefed on the case were alarmed that Mr. Yun conducted some of his business through the offices of Shenyang Aircraft Industry Co., a Chinese state-owned firm.

In the ensuing months, the State Department aired its concerns about Mr. Yun’s activities to China’s government, according to former U.S. officials. But Beijing took no action.

China’s ministries of foreign affairs and commerce didn’t respond to requests for comment. Shenyang Aircraft says it had no recollection of any dealings with Mr. Yun.

Messrs. Chun and Yun have sought to accelerate North Korea’s weapons sales and procurement in recent years and allegedly have played important roles in strengthening Pyongyang’s military ties to countries such as Syria and Myanmar, say current and former U.S. officials.

North Korea analysts believe most of these transactions have been conducted through Office 99, which they describe as an international sales office and slush fund for Kim Jong Il.

“Anything that has to do with the imports and exports of weapons flows through Office 99,” says Oh Kongdan, a North Korea expert at Virginia’s Institute of Defense Analyses, a Pentagon-funded think tank. “It’s a royal patronage system.”

U.S. officials say that since the late 1990s they detected through intelligence channels intensifying military cooperation between North Korea and Syria, focused on everything from the development of chemical weapons to missiles.

In September 2007, Israeli jets bombed a facility in eastern Syria that U.S. officials say was a nearly operational replica of North Korea’s Yongbyon nuclear reactor. As many as 10 North Koreans died in the Israeli attack, according to U.S. officials. Mr. Yun and Namchongang Trading are believed to have played a central role in brokering development of the facility.

“That particular company was all over the nuclear trade. There’s no question about it,” says John Bolton, who served as the Bush administration’s top non-proliferation official. Both Syria and North Korea have denied cooperating on developing nuclear technologies.

Over the past two years, U.S. and U.N. officials have also voiced concerns about North Korea’s deepening military ties with Myanmar, the Southeast Asian country formerly known as Burma.

North Korea engineers have helped Myanmar build a maze of fortified bunkers to house senior government officials and military installations, according to Burmese defectors and commercial satellite photos. Current and former U.S. officials say Washington has intervened to block the transfer of Scud missiles to Myanmar from Pyongyang.

In June, Japan’s Ministry of Economy and Trade banned Tokyo-based Toko Boeki Trading Co. and device maker Riken Denshi from conducting international trade after three of their affiliated executives, one of them an ethnic Korean, were arrested trying to send machine tools on an export-control list to Myanmar using a dummy company in Malaysia. The equipment could be used to develop either ballistic missiles or centrifuges for a uranium-enrichment program, according to weapons experts. And the U.N. in its May report said it was examining “suspicious” ties between Mr. Yun’s Namchongang Trading and Myanmar, possibly linked to these activities in Japan.

The Obama administration, in response, has announced a stepped-up campaign to block North Korea’s ability to raise funds through the arms trade. In addition to the new sanctions, the Pentagon has said it will intensify the interdiction of ships and planes believed to be carrying North Korean arms.

Still, Mr. Theis and other North Korea experts believe that it is only through dialogue that the West will be able to curb the North’s proliferation threat. Mr. Theis says he is recently lobbied the IAEA to allow him to return to Pyongyang to hold meetings with Mr. Yun. So far, he says, the IAEA hasn’t agreed.

UPDATE 1: According to Reuters:

President Barack Obama on Monday broadened U.S. financial sanctions on North Korea, freezing the U.S. assets of eight North Korean companies or agencies and four individual citizens.

The U.S. Treasury released a fact sheet detailing U.S. allegations against the North Korean entities and individuals targeted under the new U.S. executive order and a previous one. The following is a summary:

Companies and Agencies

The Reconnainance General Bureau
The Reconnaissance General Bureau (RGB) is North Korea’s premiere intelligence organization, created in early 2009 by the merger of existing intelligence agencies. The RGB trades in conventional arms and controls the North Korean conventional arms firm Green Pine Associated Corporation, which was also identified for sanctions under Obama’s order for exporting arms or related materiel from North Korea, the Treasury said.

Green Pine Associated Corp.
Green Pine was brought under the control of the RGB in 2009. The Treasury said it specializes in the production of maritime military craft and armaments, such as submarines, military boats and missiles systems, and has exported torpedoes and technical assistance to Iranian defense-related firms.

Green Pine is responsible for approximately half of the arms and related materiel exported by North Korea and has taken over many of the activities of the Korea Mining Development Trading Corporation, according to the Treasury.

Office 39
Office 39 of the Korean Workers’ Party engages in illicit economic activity to support the North Korean government, the U.S. Treasury fact sheet said. Office 39 has branches throughout the nation that raise and manage funds and is responsible for earning foreign currency for senior party leaders through illicit activities such as narcotics trafficking.

Office 39 controls a number of entities inside North Korea and abroad through which the Treasury said it is involved in the production, smuggling, and distribution of narcotics, and it has also been involved in the attempted procurement and transfer to North Korea of luxury goods.

Office 39 produced methamphetamine and was also involved in its supply to small-scale North Korean smugglers for distribution through China and South Korea. It also operates poppy farms and produces opium and heroin, the Treasury said.

In 2009, Office 39 was involved in the failed attempt to purchase and export to North Korea — through China — two Italian-made luxury yachts worth more than $15 million and destined for North Korean leader Kim Jong-il, the Treasury said.

Korea Mining Development Trading Corp. (KOMID)
KOMID is Pyongyang’s main arms dealer and main exporter of goods and equipment related to ballistic missiles and conventional weapons, with offices located in multiple countries around the world with the primary goal of facilitating weapons sales and seeking new customers for its weapons, according to the Treasury.

KOMID uses Korea Taesong Trading Company and Korea Heungjin Trading Company for trading purposes. Korea Taesong has acted on behalf of KOMID in dealings with Syria, and Korea Heungjin acts as the procurement arm of KOMID, the Treasury fact sheet said. Korea Heungjin is also suspected to have been involved in supplying missile-related goods to Iran’s Shahid Hemmat Industrial Group, it said.

Korea Taesong was previously sanctioned by the U.S. Department of State in 2008 under the Iran, North Korea, and Syria Nonproliferation Act.

Munitions Industry Department
The Treasury said the Munitions Industry Department is responsible for overseeing the development of North Korea’s ballistic missiles, including the Taepodong-2 which was first test-launched in 2006 and has a possible range of 4,100 miles.

The Second Economic Committee
The Second Economic Committee is responsible for overseeing production of North Korea’s ballistic missiles. It also directs the activities of KOMID, according to the U.S. Treasury.

The Second Academy of Natural Sciences
The Second Academy of Natural Sciences is a national-level organization responsible for research and development of North Korea’s advanced weapons systems, including missiles and probably nuclear weapons. It uses a number of subordinate organizations, including Tangun Trading Corporation, to obtain technology, equipment, and information from overseas for use in North Korea’s missile and probably nuclear weapons programs, the U.S. Treasury said.

Individuals

Kim Yong-chol
General Kim Yong-chol commands the Reconnaissance General Bureau.

Ri Je-son and Ri Hong-sap
The U.S. Treasury fact sheet said Ri Je-son and Ri Hong-sop act for or on behalf of the General Bureau of Atomic Energy (GBAE), which is responsible for North Korea’s nuclear program and manages operations at the Yongbyon Nuclear Research Center. GBAE was designated by the United Nations in July 2009 for its involvement in North Korea’s nuclear program and subsequently sanctioned by the State Department.

Ri Je-son is the director of GBAE and is responsible for facilitating several nuclear endeavors including GBAE’s management of Yongbyon Nuclear Research Center and Namchongang Trading Corporation, according to the Treasury.

Ri Hong-sop is a councilor for GBAE. He is also the former Director of Yongbyon Nuclear Research Center. In that capacity he oversaw the three core facilities that North Korea used to produce weapons-grade plutonium, the Treasury said.

Both Ri Je-son and Ri Hong-sop are also subject to the asset freeze and travel ban provisions under an earlier United Nations Security Council resolution.

Yun Ho-jin
Yun Ho-jin acts for or on behalf of Namchongang Trading Corporation (NCG), a North Korean trading company subordinate to GBAE. NCG has been involved in the procurement of Japanese- origin vacuum pumps that were identified at a North Korean nuclear facility, as well as nuclear-related procurement associated with a German individual.

Yun Ho-jin has acted on behalf of NCG in various capacities since the 1980s. As a senior official at NCG, he oversaw the import of items needed for North Korea’s uranium enrichment program.

Through an NCG office in China, Yun Ho-jin was also involved in purchases of sensitive material linked to the construction of a nuclear reactor in Syria, the Treasury fact sheet said.

He is also under U.N. Security Council asset freeze and travel ban sanctions.

ORIGINAL POST: Here is the full statement by the US Treasury Department:

August 30, 2010
TG-840

United States Designates North Korean Entities and Individuals for Activities Related to North Korea’s Weapons of Mass Destruction Program

WASHINGTON – In joint actions, the U.S. Departments of Treasury and State today announced the designations of five North Korean entities and three individuals under Executive Order (E.O.) 13382 for supporting North Korea’s Weapons of Mass Destruction (WMD) program. Executive Order 13382 is an authority aimed at freezing the assets of WMD proliferators and their supporters thereby isolating them from the U.S. financial and commercial systems.

Also today, President Obama signed an Executive Order that directs the Secretary of the Treasury, in consultation with the Secretary of State, to target for sanctions individuals and entities facilitating North Korean trafficking in arms and related materiel; procurement of luxury goods; and engagement in illicit activities, including money laundering, the counterfeiting of goods and currency, bulk cash smuggling and narcotics trafficking. The new Executive Order supplements E.O 13382, under which North Korean entities have been designated to date, and is consistent with measures required in UNSCRs 1718 and 1874.

Korea Taesong Trading Company and Korea Heungjin Trading Company
Pyongyang-based entities the Korea Taesong Trading Company and Korea Heungjin Trading Company, are used by the Korea Mining Development Trading Corporation (KOMID) for trading purposes. Korea Taesong Trading Company has acted on behalf of KOMID in dealings with Syria, and Korea Heungjin Trading Company acts as the procurement arm of KOMID. Korea Heungjin Trading Company is also suspected to have been involved in supplying missile-related goods to Iran’s Shahid Hemmat Industrial Group.

KOMID is Pyongyang’s premier arms dealer and main exporter of goods and equipment related to ballistic missiles and conventional weapons, with offices located in multiple countries around the world with the primary goal of facilitating weapons sales and seeking new customers for its weapons. It was listed in the Annex to E.O. 13382 of June 2005 and has been sanctioned by the United States repeatedly over the last 10 years for trading in missile technology. KOMID was also designated by the UNSCR 1718 Committee to be subject to the asset freeze provisions of UNSCR 1718.

Korea Taesong Trading Company was previously sanctioned by the U.S. Department of State in 2008 under the Iran, North Korea, and Syria Nonproliferation Act (INKSNA). INKSNA provides for the imposition of measures on entities or individuals for the transfer to or acquisition from Iran, Syria, or North Korea of equipment or technology controlled under multilateral export control lists or otherwise having the potential to make a material contribution to the proliferation of WMD or cruise or ballistic missile systems.

Second Economic Committee, Munitions Industry Department and Second Academy of Natural Sciences
The Munitions Industry Department and Second Economic Committee are involved in key aspects of North Korea’s missile program. The Munitions Industry Department is responsible for overseeing the development of North Korea’s ballistic missiles, including the Taepo Dong-2.

The Second Economic Committee is responsible for overseeing the production of North Korea’s ballistic missiles. The Second Economic Committee also directs the activities of KOMID.

The Second Academy of Natural Sciences is a national-level organization responsible for research and development of North Korea’s advanced weapons systems, including missiles and probably nuclear weapons. The Second Academy of Natural Sciences uses a number of subordinate organizations to obtain technology, equipment, and information from overseas, including Tangun Trading Corporation, for use in North Korea’s missile and probably nuclear weapons programs.

Tangun Trading Corporation is subordinate to the Second Academy of Natural Sciences and is primarily responsible for the procurement of commodities and technologies to support North Korea’s defense research and development programs and procurement, including materials that are controlled under the Missile Technology Control Regime (MTCR) or the Australia Group. Tangun Trading Corporation was designated by the Department of State pursuant to E.O. 13382 in September 2009. Tangun Trading Corporation was also designated by the UNSCR 1718 Committee to be subject to the asset freeze provisions of UNSCR 1718.

Ri Je-son and Ri Hong-sop
Ri Je-son and Ri Hong-sop act for or on behalf of the General Bureau of Atomic Energy (GBAE), which is responsible for North Korea’s nuclear program and manages operations at the Yongbyon Nuclear Research Center. GBAE was designated by the United Nations in July 2009 for its involvement in North Korea’s nuclear program and subsequently sanctioned by the Department of State under E.O. 13382 in September 2009.

Ri Je-son is the Director of GBAE and is responsible for facilitating several nuclear endeavors including GBAE’s management of Yongbyon Nuclear Research Center and Namchongang Trading Corporation.

Ri Hong-sop is a councilor for GBAE. He is also the former Director of Yongbyon Nuclear Research Center. In that capacity he oversaw the three core facilities that the DPRK used to produce of weapons-grade plutonium: the Fuel Fabrication Facility, the 5MWe Experimental Reactor, and the Radiological Laboratory (Reprocessing Plant).

Ri Je-son and Ri Hong-sop were also designated by the UNSCR 1718 Committee to be subject to the asset freeze and travel ban provisions of UNSCR 1718.

Yun Ho-lin
Yun Ho-jin acts for or on behalf of Namchongang Trading Corporation (NCG), a North Korean trading company subordinate to GBAE. NCG has been involved in the procurement of Japanese- origin vacuum pumps that were identified at a North Korean nuclear facility, as well as nuclear-related procurement associated with a German individual. NCG was designated by the State Department pursuant to E.O. 13382 in June 2009.

Yun Ho-jin has acted on behalf of NCG in various capacities since the 1980s. As a senior official at NCG, he oversaw the import of items needed for North Korea’s uranium enrichment program.

Through an NCG office in China, Yun Ho-jin was also involved in purchases of sensitive material linked to the construction of a nuclear reactor in Syria.

Yun Ho-jin was also designated by the UNSCR 1718 Committee to be subject to the asset freeze and travel ban provisions of UNSCR 1718.

Identifying Information:
Entity: Korea Taesong Trading Company
Location: Pyongyang, North Korea

Entity: Korea Heungjin Trading Company
AKA: Hunjin Trading Co.
Location: Pyongyang, North Korea

Entity: Second Economic Committee
Location: Kangdong, North Korea

Entity: Munitions Industry Department
AKA: Military Supplies Industry Department
Location: Pyongyang, North Korea

Entity: Second Academy of Natural Sciences
AKA: 2nd Academy of Natural Sciences
AKA: Che 2 Chayon Kwahak-Won
AKA: Academy of Natural Sciences
AKA: Chayon Kwahak-Won
AKA: National Defense Academy
AKA: Kukpang Kwahak-Won
AKA: Second Academy of Natural Sciences Research Institute SANSRI
Location: Pyongyang, North Korea

Individual: Ri Je-Son
AKA: Ri Che-Son
DOB: 1938

Individual: Ri Hong-Sop
DOB: 1940

Individual: Yun Ho-jin
AKA: Yun Ho-chin