Archive for the ‘Foreign Trade Bank’ Category

UN, US, ROK, sanction DPRK arms companies–and partners

Tuesday, June 30th, 2009

On January 21, the day after the Obama administration took office, the White House approved certain trade sanctions–initiated by the Bush administration–to be printed in the Federal Register.  These sanctions targeted specific Chinese, Iranian, and North Korean companies that the US believes were/are violating arms export regulations governing missile technology and other proliferation activities.  [Read more, including Federal Register text, here]

After North Korea conducted a long-range missile test in April, the US pushed the UN Security Council to adopt a presidential statement which blacklists several additional North Korean firms. [Read more here].

After North Korea conducted a second nuclear test, in violation of UNSC resolution, the UNSC adopted a resolution which tightened sanctions on the DPRK. [Read more here]

In June, the South Korean government imposed sanctions on these DPRK companies for the first time [Read more here]

The US followed up the UNSC resolution by announcing an inter-agency team that will focus exclusively on enforcing DPRK sanctions [Read more here

Today, the US Treasury Department announced it was targeting Hong Kong Electronics (Kish Island, Iran) [from where a former FBI agent is still missing] for supporting the balcklisted North Korean organizations.  According to Market Watch:

The Treasury Department said Tuesday that it has targeted another player in North Korea’s missile proliferation network. The agency designated Hong Kong Electronics, located in Kish Island, Iran, for providing support to North Korea’s Tanchon Commercial Bank and Korea Mining Development Trading Corp. Those two firms have been targeted by the U.S. and the United Nations as part of North Korea’s nuclear proliferation network. “Today’s action is a part of our overall effort to prevent North Korea from misusing the international financial system to advance its nuclear and missile programs and to sell dangerous technology around the world,” said Stuart Levy, Treasury under-secretary for terrorism.

What does this mean? It means that any bank accounts or other financial assets found in the United States belonging to the company must be frozen. Americans also are forbidden from doing business with the firm. This probably does not amount to much economically, but is probably intended to discourage banks outside of the US from doing business with these firms.

UPDATE 1: It looks like the State Departmet is also going after a North Korean company believe to be involved in weapons proliferation today.  According to a statement by the Treasury Department:

The U.S. Department of the Treasury today targeted North Korea’s missile proliferation network by designating Hong Kong Electronics under Executive Order 13382.  E.O. 13382 freezes the assets of designated proliferators of weapons of mass destruction and their supporters and prohibits U.S. persons from engaging in any transactions with them, thereby isolating them from the U.S. financial and commercial systems.  Hong Kong Electronics, located in Kish Island, Iran, has been designated for providing support to North Korea’s Tanchon Commercial Bank (Tanchon) and Korea Mining Development Trading Corporation (KOMID).

Tanchon and KOMID have also been designated by the United States under E.O. 13382 and the UN Security Council under Resolution 1718. The Department of State also today targeted North Korea’s nuclear proliferation network by designating Namchongang Trading Corporation (NCG), a North Korean nuclear-related company in Pyongyang, under E.O. 13382. 

“North Korea uses front companies like Hong Kong Electronics and a range of other deceptive practices to obscure the true nature of its financial dealings, making it nearly impossible for responsible banks and governments to distinguish legitimate from illegitimate North Korean transactions,” said Stuart Levey, Under Secretary for Terrorism and Financial Intelligence. “Today’s action is a part of our overall effort to prevent North Korea from misusing the international financial system to advance its nuclear and missile programs and to sell dangerous technology around the world.”

Since 2007, Hong Kong Electronics has transferred millions of dollars of proliferation- related funds on behalf of Tanchon and KOMID. Hong Kong Electronics has also facilitated the movement of money from Iran to North Korea on behalf of KOMID. Tanchon, a commercial bank based in Pyongyang, North Korea, is the financial arm for KOMID – North Korea’s premier arms dealer and main exporter of goods and equipment related to ballistic missiles and conventional weapons.

Tanchon plays a key role in financing the sales of ballistic missiles for KOMID. Tanchon has also been involved in financing ballistic missile sales from KOMID to Iran’s Shahid Hemmat Industrial Group (SHIG), which is the Iranian organization responsible for developing liquid-fueled missiles. SHIG has been designated under E.O. 13382 and sanctioned by the United Nations under UN Security Council Resolution (UNSCR) 1737. Since 2005, Tanchon has maintained an active relationship with various branches of Iran’s Bank Sepah, an entity designated under E.O. 13382 and sanctioned by the United Nations under UNSCR 1747, for providing financial services to Iran’s missile program. The U.S. has reason to believe that the Tanchon-Bank Sepah relationship has been used for North Korea-Iran proliferation-related transactions.

Here is the press release by the State Department:

The U.S. Department of State today targeted North Korea’s nuclear proliferation network by designating Namchongang Trading Corporation (NCG) under Executive Order 13382. E.O. 13382 is an authority aimed at freezing the assets of proliferators of weapons of mass destruction and their supporters, and at isolating them from the U.S. financial and commercial systems. Entities designated under E.O. 13382 are prohibited from engaging in all transactions with any U.S. person and are subject to a U.S. asset freeze.

NCG is a North Korean nuclear-related company in Pyongyang. It has been involved in the purchase of aluminum tubes and other equipment specifically suitable for a uranium enrichment program since the late 1990s.

The Department of the Treasury also today designated Hong Kong Electronics, located in Kish Island, Iran, for providing support to North Korea’s Tanchon Commercial Bank (Tanchon) and Korea Mining Development Trading Corporation (KOMID). Tanchon and KOMID were designated by the United States under E.O. 13382 on June 28, 2005 and the UN Security Council under Resolution 1718 on April 24, 2009.

North Korea’s April 5, 2009 launch of a Taepo Dong-2 (TD-2) missile and May 25, 2009 nuclear test demonstrate a need for continued vigilance with respect to North Korea’s activities of proliferation concern. The designations add to continuing U.S. efforts to prevent North Korean entities of proliferation concern from accessing financial and commercial markets that could aid the regime’s efforts to develop nuclear weapons and the missiles capable of delivering them.

McClatchy has more here.


South Korea sanctions DPRK firms

Tuesday, June 9th, 2009

Earlier this year the UN Security Council issued a Presidential Statement in response to the DPRK’s April rocket (missile) test. In the Presidential Statement, three North Korean firms were blacklisted–Korea Mining Development Trading Corporation, Tanchon Commercial Bank, and Korea Ryongbong General Corporation–all of whom are suspected of having ties with the North’s missile and nuclear programs.

According to Yonhap, the South Korean government has also blacklisted these firms, though no South Korean firms have realtions with any of them:

This is the first time that South Korea has imposed financial sanctions on a North Korean company in relation to Pyongyang’s ballistic activity, the ministry said.

The ministry said that it will consider taking additional measures if the U.N. comes up with separate actions against the North for conducting its second nuclear test on May 25.

Read the full sotry here:
Seoul slaps sanctions on N. Korean firms for missile test
Koh Byung-joon


UNSC blacklists three DPRK companies

Friday, April 24th, 2009

In response to the DPRK’s rocket launch, the UN Security Council issued a presidential statement containing the following:

The Security Council reiterates that the DPRK must comply fully with its obligations under Security Council resolution 1718 (2006).

The Security Council demands that the DPRK not conduct any further launch.

The Security Council also calls upon all Member States to comply fully with their obligations under resolution 1718 (2006).

The Security Council agrees to adjust the measures imposed by paragraph 8 of resolution 1718 (2006) through the designation of entities and goods, and directs the Committee established pursuant to resolution 1718 (2006) to undertake its tasks to this effect and to report to the Security Council by 24 April 2009, and further agrees that, if the Committee has not acted, then the Security Council will complete action to adjust the measures by 30 April 2009.

(Read the full text of the statement here

Today the Security Council followed up this statement (and resolution 1718) by voting to blacklist three North Korean companies.  According to Reuters (via the Washington Post):

The North Korea sanctions committee met a Friday deadline set by the Security Council on April 13 to produce a list of goods and North Korean entities to be blacklisted under Security Council resolution 1718, passed after Pyongyang’s October 2006 nuclear test.

The three companies put on the list are Korea Mining Development Trading Corp., Korea Ryongbong General Corp. and Tranchon (Tanchon) Commercial Bank, according to a copy of the committee’s decision obtained by Reuters.

The decision said the three companies were linked to the military and active in procuring equipment and financing for North Korea’s ballistic missile and other weapons programs.

The blacklisting prohibits companies and nations around the world from doing business with the three firms, but the impact of the action might be largely symbolic.

One Western diplomat said the three blacklisted firms had subsidiaries that also would be subject to U.N. sanctions.

Committee members also decided to ban the import and export of items on an internationally recognized list of sensitive technologies used to build long-range missiles capable of delivering weapons of mass destruction.

The US imposed sanctions on three North Korean companies in the Federal Register earlier this year.  Of these three companies, one has made the UNSC list: the Korea Mining and Development Corporation.  I can only speculate as to the fate of the other two mentioned in the US Federal Register, Mokong Trading Corporation and the Sino-Ki company. 

Read more below:
UNSC Presidential Statement

U.N. committee puts 3 North Korea firms on blacklist
Reuters (via the Washington Post)
Louis Charbonneau


Orascom 3G wrap up

Friday, December 19th, 2008

UPDATE: Here is an older paper by Stacey Banks which I have not read: North Korean Telecommunication: On Hold.

ORIGINAL POST: On Monday the Orascom 3G mobile network launched in North Korea.  Just about everyone covered this story…so here are the highlights:

Telecommunications in North Korea: Has Orascom Made the Connection?
Working Paper: Marcus Noland

The topicality of the second paper, on the Egyptian firm Orascom’s role in North Korea’s telecommunications modernization, received a boost this week with the announcement in Pyongyang that Orascom was finally rolling out its cell phone service and creating a joint venture bank with a North Korean partner.  The planned Orascom investments are large: if actualized, they would be the largest non-Chinese or non-South Korean investments in North Korea, and would exceed total private investment in the Kaesong Industrial Complex to date

Financial Times

Orascom is confident North Korea is opening up its economy and says it has been assured by the ­government that everyone will be allowed to buy a mobile. However, experts think that such a volte-face is highly unlikely and reckon only senior military and government officials will be allowed access, and then only to a closed network.

When asked how many people would ultimately use the service, Orascom’s chairman Naguib Sawiris said: “We have a modest target of 5 to 10 per cent of the population.” The population is about 23m. Mr Sawiris expects 50,000 subscriptions in the first three-to-six months.

Jim Hoare, Britain’s former chargé d’affaires to Pyongyang, says the new network is bound to have severe restrictions.

“It’s unlikely that a country that doesn’t allow you to have a radio unless it’s set to the state frequency will suddenly allow everyone to have mobile phones. It’s more credible that there will be a limited network for officials in Pyongyang and Nampo.”

Dong Yong-sung, chief of the economic security team at the Samsung Economic Research Institute in Seoul, believes another obstacle to ordinary North Koreans owning phones will be the cost. “As far as I know, mobile phone registration costs about $1,000,” he said, a sum equivalent to the average annual income.

(NKeconWatch: Others put the price at $700…and there are many problems with asserting that the DPRK’s per capita income is $1,000 per year.)


The inauguration of Koryolink took place today in North Korea, Orascom Telecom said in an e-mailed statement. Orascom Telecom Chief Executive Officer and Chairman Sawiris attended the event, a company official said, requesting anonymity. The Cairo- based company got a 25-year license and exclusive access for four years in January. It plans to spend as much as $400 million on a high-speed network and the license for the first three years.

The North Korean venture is “in line with our strategy to penetrate countries with high population and low penetration by providing the first mobile telephony services,” Sawiris said in a statement earlier this year.

CHEO Technology JV Company, the North Korean unit that will operate under the Koryolink name, is 75 percent owned by Orascom Telecom and 25 percent by the state-owned Korea Post and Telecommunications Corporation.

The unit will see average revenue per user of $12 to $15 this year as Orascom Telecom targets three of the country’s biggest cities, according to company forecasts.

Koryolink has rolled out its so-called third-generation grid to initially cover Pyongyang, with a population of 2 million.

Orascom is counting on four potential markets in the Stalinist nation, according to a study by Marcus Noland of the Peterson Institute for International Economics.

The military and government officials are the top targets, followed by foreigners working for UN organizations and diplomats. The others are customers from South Korea, which has several economic projects with its neighbor, and local demand from rich North Koreans.

To protect its investment, Orascom “hedged its bet, committing only half of its investment at the outset and making additional investment conditional on its assessment of conditions going forward,” Noland said.

If the deal is threatened, Orascom may withdraw specialized equipment or technicians, reducing the value of the network to Pyongyang, Noland said in his study.

“Orascom may have spread the wealth informally, creating beneficiaries within the decision-making apparatus who would stand to lose if the agreement failed,” according to the study.


Orascom Telecom, the Middle East’s biggest wireless company, opened Ora Bank in Pyongyang in the presence of Chairman and Chief Executive Officer Naguib Sawiris, a company official said on condition of anonymity. Ezzeldine Heikal, who is also head of Koryolink, Orascom’s North Korean mobile-phone network, was appointed president of the bank, the official said without providing further details.

“This is a big deal, especially as far as North Korea is concerned, because the current banking system is virtually non- existent,” Marcus Noland of the Peterson Institute for International Economics said in a telephone interview from Washington, D.C. “It’s a ground that others have feared to tread and is perhaps an endorsement for North Korea that says ‘we’re open for business.’”

Ora Bank is a joint venture between Orascom Telecom and North Korea’s state-owned Foreign Trade Bank, North Korea’s official news agency reported today. The director of North Korea’s central bank Kim Chon Gyun and Egypt’s ambassador to Pyongyang Ismail Abdelrahman Ghoneim Hussein, were also present at the opening ceremony, the news agency said.

Radio Free Asia

Chinese traders who regularly travel back and forth to North Korea said local residents showed little enthusiasm for the new service, which cost more than U.S. $900 to set up before the Ryongchun explosion.

North Korean defector Kim Kwang-jin, a senior researcher at the Institute for National Security Strategy in Seoul, said the fact that the government had once pulled the plug on North Korean cell phones meant that it could easily do so again.

“In the beginning, people will be hesitant, because a few years ago many of them made a big investment in cell phones. But service was suspended abruptly, so they are still very concerned that might happen again,” Kim said.

“People are also worried that the ability to pay such a high amount of money for a cell phone may raise a red flag and bring them under scrutiny by the North Korean authorities.”

Most foreigners are banned from using cell phones while in North Korea, although a network for government officials is believed to exist in the capital, Pyongyang.

(NKeconWatch: I personally saw elite North Koreans use mobile phones and even some western journalists in 2005.)

The Guardan

North Korea first experimented with mobile phones in 2002, but recalled the handsets 18 months later after a mysterious train explosion that killed an estimated 160 people. Some experts argue that officials feared the incident was an attempt to assassinate the regime’s “dear leader”, Kim Jong-il, and that mobile phones were involved.


Some reports suggest that handsets for the new network will cost around $700 each, putting them far beyond the reach of the vast majority of people in the impoverished country.

Choson Ilbo

Although the technology would enable users to send and receive text messages and video content, North Korean customers will only be allowed to speak over their phones.

BMI Political Risk Analysis, Dec 16, 2008 (h/t Oliver)

BMI View: North Korea has officially begun third-generation (3G) mobile phone services, thanks to Egypt’s Orascom Telecom (OT). However, the growth of the network could be limited by the regime’s fear that mobile phones will increase the scope for anti-regime activities.

North Korea has officially commenced third-generation (3G) mobile phone services, thanks to an investment by Egypt’s Orascom Telecom (OT). The firm’s initial target is 100,000 subscribers in three major cities, including Pyongyang, and it eventually hopes to develop a nation-wide network connecting North Korea’s 23mn citizens. OT has promised to invest US$400mn in network infrastructure over the next four years. It has signed a 25-year contract with the North Korean government, and owns 75% of their joint-venture (known as Korealink). OT’s exclusivity rights will last for four years. Orascom’s foray is something of a coup, given that North Korea’s communications network is so rudimentary (for further background see December 8 2008, Industry Trend Analysis – North Korea Prepares For Mobile Network Launch).

Why Pyongyang Fears Mobile Phones
North Korea launched a mobile phone service operated by a Thai subsidiary firm in 2002, but reversed course in 2004, apparently because of a devastating bomb blast on a train in Ryongchon in April of that year. Given that North Korean leader Kim Jong Il’s personal train had passed through the area only a few hours earlier, there was speculation that the explosion had been an assassination attempt, possibly triggered by mobile phone. Since then, only those living in areas close to the border with China have had access to mobile phones, thanks to the proximity of the Chinese network.

Aside from the notion of mobile phones as bomb triggers, they can also make it easier for citizens to communicate with one another. This would increase citizens’ ability to organise anti-government activities – such as protests or sabotage. For example, the popular uprising that led to the overthrow of Philippine president Joseph Estrada in 2001 was dubbed the ‘text message revolution’, because that is how the marches were announced and coordinated. Admittedly, the Philippines is a far more open society than North Korea, but the subversive aspect has not been lost on the regime.

Mobile phones would also make it easier for North Koreans to communicate with the outside world, and thus allow the real-time transmission of information or intelligence to foreign media or spy agencies, and vice versa. They would also allow the North Korean elite to communicate more efficiently, allowing dissident elements to plot against the regime.

Thus, even something as basic as mobile phones are seen as potentially regime threatening.

Mobile Service Difficult To Spread
Consequently, Orascom will surely find it difficult to spread its mobile service across the country. For a start, registration will be tightly watched. Secondly, the cost of the handsets, at several hundred dollars, will mean that only the political and moneyed elites will be able to afford mobiles. Of course, elements of the elite can ‘misuse’ their phones to arrange subversive actions if they deem it worthy, but it seems that the regime are counting on loyalty. Indeed, depending on the sophistication of their equipment, the regime will probably be able to snoop in on the elite’s conversations and movements, giving them an additional layer of security.

Read the full articles below:
Orascom eyes North Korean network
Financial Times
Christian Oliver

Orascom Telecom’s Sawiris Signs North Korean Deal
Tarek Al-Issawi

Orascom Telecom of Egypt Opens Bank in North Korea
Tarek Al-Issawi

North Korea Brings Back Cell Phones
Radio Free Asia
Jung Young

Secretive North Korea launches restricted mobile phone service
The Guardian
Tania Branigan

N Korea launches 3G phone network
Steve Jackson

N.Korea Restarts Cell Phone Service
Choson Ilbo


US-NK Financial Talks Scheduled in New York Next Week

Wednesday, November 14th, 2007

Korea Times

U.S. and North Korean officials will meet in New York early next week to reopen talks on addressing Pyongyang’s alleged illicit financial activities, sources here said Tuesday.

Daniel Glaser, assistant treasury secretary in charge of terrorism financing, will lead the U.S. delegation to the talks scheduled Monday to Tuesday, according to the sources. It was not yet clear who will represent North Korea at the meeting. Previous sessions were led by O Kwang-chol, president of the Foreign Trade Bank of Korea.

The meeting is the first since the two countries resolved a banking issue that for over a year delayed North Korean denuclearization negotiations. The U.S. Treasury in September 2005 sanctioned Banco Delta Asia (BDA), a Macanese bank, for abetting North Korea’s laundering of money acquired through smuggling, counterfeiting and arms proliferation. The bank froze all North Korea-related accounts, and Pyongyang boycotted the denuclearization talks in protest.

The issue was settled with the release of some $25 million in North Korean money at the BDA early this year.

Sources said next week’s meeting will address North Korea’s suspected illicit activities that led to the Treasury’s sanctions, including Pyongyang’s counterfeiting of American currency.

North Korea has been accused of producing and circulating fake$100 bills, known as “supernotes” because of their near-authenticity, and smuggling contraband goods.


DPRK Emphasizes Training International Financial Experts

Monday, July 23rd, 2007

Institute for Far Eastern Studies (IFES)
NK Brief No. 07-7-23-1

North Korea is calling for training for financial specialists in order to protect against the pitfalls of credit transactions and currency exchanges. In a recently acquired copy of the latest issue of the North’s economic journal, “Economy Research”(2007, no.2), ‘bank risk’, the term applied to the hazard of potential losses, was explained in detail, stating, “In order to strengthen the improvements made in foreign currency trading, an important issue is that banks, such as the Trade Bank, dealing with overseas debts identify and thoroughly resolve potential threats.”

It is especially exceptional that the North Korean journal fully introduced the bank risk involved in financial transactions within a market-based economic system. This issue also reported on the events of May 20, when movement toward a resolution to the issue of frozen DPRK accounts in the Delta Banco Asia took place.

The journal divided ‘bank risk’ into three categories, ‘finance risk’, ‘credit risk’, and ‘management risk’. Finance risk was defined as, “the risk that a variety of changes within capitalist financial markets could carry with them adverse effects”. Further on, finance risk was divided into ‘foreign exchange risk’ caused by fluctuations in exchange rates, and ‘interest risk’ driven by changing interest rates.

In addition, “Economy Research” also carried pieces on rational management of the banking management system, subjective evaluation of bank risk, and establishing a strategy for preventing bank risk. “The outcome of [strategy for] prevention of bank risk rests entirely on the quality, skill, and roles of workers responsible for bank administration.”

The journal also stressed that even though quality information resources and materials on financial data are available, “if the quality and skill of workers in the banking sector cannot be raised,” then bank risk cannot be understood, analyzed, or evaluated, and an appropriate strategy cannot be implemented. “When workers constantly improve their quality and turn their attention to preventing bank risk…then an appropriate strategy can be set up.”

In one article, training in international financial transactions was called for, with the journal printing, “Even though today’s workers know how to use modern information resources and include financial experts with foreign language skills, they need to be well versed in the changing modern banking sector and international financial transactions.” From the 2002 “Foreign Investor Banking Law’ to last year’s ‘Commercial Banking Law’, established to stimulate private-sector financial transactions, North Korea continues to tweak its financial system. 


Fake North dollars used to cash UN check in ‘95

Monday, March 26th, 2007

Joong Ang Daily
Lee Sang-il

North Korean bank allegedly gave counterfeit U.S. $100 notes to a foreigner working for the United Nations Development Program when he cashed a check at a bank in Pyongyang in 1995, a diplomatic source in Washington told the JoongAng Ilbo.

A spokesman for the UN agency confirmed the suspicion, adding that the bills will be handed over to the U.S. Treasury Department for verification.

In 1995, the UNDP’s Pyongyang office issued a check to an Egyptian consultant for his services on a North Korea project.

The consultant claimed that he cashed the check at the Foreign Trade Bank in Pyongyang and that the bank gave him 35 $100 bills.

After returning home, the consultant attempted to exchange the bills for Egyptian currency, but the bills were rejected as fakes, the source said.

The Egyptian sent the bills back to the UNDP office in Pyongyang, and the UN officials confronted the Foreign Trade Bank and asked for real money, the source said. The request was turned down, and the UN agency has been holding the bogus bills for 12 years.

The revelation of the incident highlights charges by the American government that North Korea has been passing so-called “supernotes” ― fake $100 bills ― for many years. Washington’s claim that Banco Delta Asia in Macao was a conduit for the release of the notes was one reason for the freezing of $25 million in North Korean funds in September 2005.

That money is now due to be released as a precondition for progress in the six-party talks. The U.S. has cut the suspect bank’s access to the American financial system.

In an e-mail interview with the JoongAng Ilbo, David Morrison, spokesman for the United Nations Development Program, said the agency is in the process of giving the notes to the Treasury Department. Mr. Morrison said he was not aware of any other incidents.

Mr. Morrison added that the Egyptian consultant has not provided further evidence that the bills were passed by the Pyongyang bank. He also said that UNDP had used Banco Delta Asia to send money to the North to finance projects from January 2000 to December 2002. He said they chose the bank for its convenient financial services.

Asked if North Korea asked the agency to use Banco Delta Asia, Mr. Morrison said it was an independent decision. He said the UN body stopped transactions with the Macao bank when the settlement currency was changed from dollars to euros.

UNDP opened its office in Pyongyang in 1980 and has carried out public hygiene, agricultural, energy and environmental projects.


U.S., N.K. open talks on BDA

Tuesday, January 30th, 2007

Korea Herald
Lee Joo-Hee

Officials from Washington and Pyongyang are in Beijing today for their second round of talks on U.S. financial sanctions against North Korea.

The discussions are likely to set the tone for the upcoming round of six-party talks scheduled to resume early next month.

The agenda is thought to include North Korea’s acknowledgement of illicit financial activity, a pledge to prevent any reoccurrence, and the lifting of a U.S. embargo on North Korean accounts at a Macau bank.

Washington imposed financial restrictions against Banco Delta Asia after charging the bank with helping North Korea launder counterfeit dollars and funds raised from smuggling restricted goods. The move prompted Pyongyang to boycott the six-party talks process in 2005.

Upon returning to the six-party process in December last year, North Korea demanded it must first solve the financial issue before discussing the nuclear question.

The United States remains adamant that the financial measures were separate from the nuclear issue but has offered to discuss it on the sidelines of the nuclear talks.

The U.S. side is led by Daniel Glaser, the Treasury Department’s deputy assistant secretary for terrorist financing and financial crimes.

The North Korean team is led by Oh Gwang-chul, president of the Foreign Trade Bank of Korea, the reclusive regime’s window for foreign banking.

The two delegations are likely to discuss the technical aspects of the issue, which North Korea claims was a political gesture by the United States as part of its hostile policy.

On Sept. 15, 2005 the U.S. Treasury Department banned all American banks from dealing with Banco Delta Asia for allegedly helping North Korean companies launder money from smuggled cigarettes and counterfeit $100 bills.

Washington and Pyongyang have been exchanging questions and information regarding the measures since their first discussion in Beijing on the sidelines of the six-party talks last month.

N. Korean financial officials arrive in Beijing for talks on U.S. sanctions

A group of North Korean financial experts arrived in Beijing Tuesday for talks with their U.S. counterparts on removing U.S. financial sanctions on the North, a major hurdle to six-way negotiations on the communist nation’s nuclear weapons program.

The U.S.-North Korea financial talks come ahead of a new round of six-nation negotiations next week aimed at persuading North Korea to give up its nuclear weapons program.

The Chinese Foreign Ministry said Tuesday the new round of the nuclear disarmament talks will start Feb. 8.

The North Koreans, headed by O Kwang-chol, president of the North’s Foreign Trade Bank, arrived in the Chinese capital at 9:30 a.m. The North Koreans were expected to hold talks with a U.S. financial team led by Daniel Glaser, a deputy assistant secretary at the U.S. Treasury Department.

Upon arriving from Pyongyang, the head North Korean delegate said the sides would hold talks at their countries’ embassies here.

The two last met here on the sidelines of a December round of the nuclear talks, also held in Beijing. The working-group financial meeting seeks to remove U.S. sanctions imposed in September 2005 on a Macau bank suspected of laundering money for the North, which Pyongyang used as an excuse to stay away from the nuclear talks for 13 months.

Expectations of progress from the financial discussions, as well as the nuclear talks, have been significantly raised following a three-day meeting of top U.S. and North Korean nuclear negotiators in Berlin earlier in the month, at which the two agreed “on a number of issues,” according to Christopher Hill, the top U.S. nuclear envoy.

Hill said Monday (Washington time) that the next round of the nuclear talks could produce an agreement similar to a 1994 pact in which North Korea agreed to freeze its nuclear activities in return for economic and energy assistance. The 1994 Agreed Framework became defunct when the ongoing dispute over the North’s nuclear ambitions erupted in late 2002.

However, Hill made it clear that the goal of the six-party negotiations is to carry out a 2005 agreement in which Pyongyang agreed in principle to completely and verifiably dismantle its nuclear program in return for economic and diplomatic benefits.

“Whatever emerges in the next round, our job will not be finished until the full joint statement is finally realized and implemented,” Hill told Reuters in Washington.

“I am not too worried whether something might look like the Agreed Framework because we’re only looking at part of what we’re aiming at,” Hill added.

The top U.S. envoy to the financial talks Tuesday also expressed hope for progress.

“We are prepared to go through these talks as long as it takes for us to get through our agenda,” Glaser was quoted as telling reporters in Beijing. “I am hopeful we’ll make progress.”

Treasury officials have so far refused to confirm it, but recent reports said the United States may unfreeze part of North Korea’s assets at the Macau bank to help move the nuclear negotiations forward.

Pyongyang has about US$24 million in 50 accounts at the Macau bank, Banco Delta Asia, and as much as $13 million is believed to belong to legitimate accounts.


BDA Negotiations North Korea Representative Oh Kwang Chul to Visit Beijing

Monday, January 22nd, 2007

Daily NK
Yang Jung A

Oh Kwang Chul, President of the North Korea Trade Bank and North Korea’s chief delegate in the Banco Delta Asia financial sanction talks will visit Beijing on the 23rd, Asahi Newspaper reported on the 22nd.

The newspaper, informed by a source in North Korea-China, reported that President Oh is scheduled to travel from Beijing to Pyongyang on a direct route on the 23rd to speak with the Chinese.

Indifferent to the fact that the next financial talks were to reconvene in New York says the U.S., North Korea is requesting that the talks be resumed in Beijing similar to the former meeting. It appears that President Oh’s trip to China will be to explain North Korea’s position to the Chinese and gain understanding and cooperation from the Chinese, claimed the newspaper.

The source revealed that developments made in Berlin, where the chief delegates of the six party talks met to discuss the North Korea financial issues and related issues is linked to Oh Kwang Chul visiting China.

The source also predicted that the North will shortly announce the reconvening of the six party talks.

Contrastingly, China’s Foreign Minister Wu Dei and U.S. Assistant-Secretary Hill met in Beijing on the 21st inciting to the press, the possibility of the next financial talks being held after the 29th.


North Korea’s golden path to security

Thursday, January 18th, 2007

Asia Times
Bertil Lintner

While the West and Japan have targeted North Korea’s overseas bank accounts to curtail its weapons program, Pyongyang has recently turned to more ingenious ways of maintaining its international businesses through substantial exports of gold, silver and other valuable metals.

Pyongyang has apparently found a willing conduit to global buyers through its many business connections in Thailand, which has recently emerged as the isolated state’s third-largest trading partner after China and South Korea. According to official Thai Customs Department statistics, North Korea shipped 500 kilograms of gold worth 398 million baht (US$11 million) to Thailand last April.

The following month, another 800kg of gold worth 635 million baht landed in Thailand courtesy of North Korea. Also, in June, 10 tons of silver worth 148 million baht was sent from North Korea to Thailand, followed by 12 tons worth 166 million baht last October.

In sum, North Korea exported 1.35 billion baht – or nearly $40 million – worth of precious metals to Thailand last year.

That is a substantial figure for North Korea, a country with an estimated gross domestic product of about $22 billion and whose total exports amounted to just over $1 billion, according to official statistics. Thailand is bound by the international sanctions imposed last October against North Korea by the United Nations in response to Pyongyang’s exploding an atomic bomb.

According to official Thai statistics, the gold and first consignment of silver were shipped to Thailand before the UN sanctions were imposed. But there is nothing illegal in North Korea exporting precious metals, unless, of course, the income from the sale can be tied directly to the country’s controversial weapons programs, which anyway would be extremely hard to prove.

Untapped riches
North Korea’s gold and silver mines remain largely untapped. According to Tse Pui-kwan, a Chinese-American chemist who joined the US Bureau of Mines in 1990, North Korea has significant deposits of copper, gold, graphite, iron, lead, magnesite, tungsten and zinc. When the Cold War ended and North Korea lost large amounts of foreign aid from both the Soviet Union and China, its mining industry fell into disrepair and extraction activities sharply declined.

But with new foreign cooperation, production has resumed, which the recent exports to Thailand clearly demonstrate. North Korea’s main gold mine is in Unsan county in North Pyongan province, about 150 kilometers north of Pyongyang. It was originally opened by a US firm in 1896, when Korea was still an independent and unified kingdom, and was later taken over by a Japanese company when the peninsula became a colony ruled by Tokyo in 1910.

Nearly a century later, consultants from Clough Engineering of Australia in 2001 inspected the same mine under the sponsorship of the United Nations Office for Project Services. They estimated that Unsan held 1,000 tons of gold reserves, which if true would make it one of the world’s major gold mines. Silver is also mined in the same area, while iron ore and magnesite are found in North and South Hamgyong provinces in the northeast.

North Korea’s extraction techniques are sometimes controversial. According to witnesses interviewed by the US Committee for Human Rights in North Korea for its 2003 report “The Hidden Gulag: Exposing North Korea’s Prison Camps”, there is a gold-mining labor camp near Danchun in South Hamgyong province, where thousands of prisoners are being held and forced to work under abysmal conditions.

In that same report, several witnesses claimed that “some of the mine shafts dated back to the early days of the Japanese occupation of Korea in the early 1900s. Accessing the veins of minable gold required descending and, later, ascending a wooden staircase 500 meters in length, using gas lanterns for light. Deaths from mining accidents were a daily occurrence, including multiple deaths from the partial collapse of mine shafts.”

The first attempt to modernize North Korea’s gold-mining industry was made by an Italian financier and former Foreign Ministry official, Carlo Baeli, who traveled to the country in the early 1990s and claims to be the first Westerner to do business with Pyongyang since the Korean War. He later wrote a book called Kim Jong-il and the People’s Democratic Republic of Korea, which was published in Pyongyang in 1990, obviously with official permission as it was printed by the state-owned Foreign Languages Publishing House.

Apart from painting a flattering portrait of the North Korean leader, the book describes Baeli’s first trip to Pyongyang in 1990, of which he wrote, “We were interested in investing in the mining industry, mainly in the extraction of gold and granite.” Baeli later signed a contract for a loan of $118 million to purchase mining equipment, and the goal was to resurrect no fewer than six gold mines across North Korea. The money was to be provided by international banks such as Midland Bank and the Naples International Bank. He also arranged for the mining equipment to be shipped from Italy.

But heavy flooding in the mid-1990s damaged both the equipment and the mines and, according to a 2006 report in Forbes magazine, Baeli today works as an adviser to the Pyongyang government at a tire-recycling plant. The car and truck tires are imported from Japan, get ground into granulate in North Korea, and are sold to China for road resurfacing, car mats and shoe soles. A lucrative business, perhaps, but not quite the golden dream Baeli had when he first arrived in Pyongyang nearly 17 years ago.

Another unusual partner in North Korea’s gold trade may have been the late Philippine dictator Ferdinand Marcos. In August 2001, the right-wing South Korean newspaper Munhwa Ilbo published a story claiming that Marcos in September 1970 had deposited 940 tons of gold bars at a Swiss bank in the name of the late North Korean dictator, Kim Il-sung. The report came from a former Marcos aide, and Munhwa Ilbo carried a copy of the bank-account certificate on its front page. The alleged gold bars were part of what a Japanese army general had looted from Asia during World War II, Munhwa Ilbo claimed.

That report was never independently confirmed, but it nevertheless reflects the mystique and speculation that still surround North Korea’s gold industry – and how little the outside world actually knows about it.

Financial pressures
When the US took action against Banco Delta Asia in Macau in September 2005, labeling it a “primary money-laundering concern” for North Korean funds, very little evidence to substantiate the charges was ever produced. North Korea lost $24 million when the accounts it held with the bank in the name of a front company, Zokwang Trading, were frozen. Zokwang, which had been operating in Macau for decades, also closed its office and relocated to Zhuhai province across the border in China proper.

The action against Banco Delta Asia, a privately owned bank that the Macau government later had to prop up to prevent it from collapsing, was the second move against North Korea’s assets abroad. In a much less publicized action, North Korea’s only bank located in a foreign country – the Golden Star Bank in Vienna – was forced to suspend its operations in June 2004. The Golden Star was 100% owned by the Korea Daesong Bank, a state enterprise headquartered in Pyongyang, and was allowed to set up a branch in the Austrian capital in 1982.

For more than two decades, Austrian police kept a close eye on the bank, but there was no law that forbade the North Koreans from operating a bank in the country. Nevertheless, Austria’s police intelligence department stated in a 1997 report: “This bank [Golden Star] has been mentioned repeatedly in connection with everything from money-laundering and distribution of fake currency notes to involvement in the illegal trade in radioactive material.”

Eventually the international pressure to close the bank became too strong. Sources in Vienna believe the US played an important behind-the-scenes role in finally shuttering Golden Star’s modest office on 12 Kaiserstrasse in the Austrian capital. Until then, Vienna had been North Korea’s center for financial transactions in Europe and the Middle East. Visitors to North Korea have noted that euro coins in circulation in the country – the US dollar is not welcome in Pyongyang – invariably came from Austria. (Euro notes are the same in all European Union countries, but coins designate individual member countries.)

Last October, in response to Pyongyang’s nuclear tests, Japan froze a dollar-denominated account that North Korea’s Tanchon Commercial Bank held with an unnamed Japanese bank. The account had a balance of $1,000 and had not been active for nearly a decade, so the move was mainly symbolic: to demonstrate to North Korea that it cannot use banks in Japan for any deposits, big or small.

So it is hardly surprising that North Korea is looking for new ways to manage and maintain its international business interests and for new partners when it is increasingly locked out of most foreign countries. That is where Thailand apparently comes into the picture.

In 2004, trade between Thailand and North Korea for the first time overtook trade between Japan and North Korea. Previously, a string of North Korean-controlled front companies, managed by the Chosen Soren, or the Pyongyang General Association of Korean Residents in Japan, had supplied North Korea with computers, electronic goods and other vital items.

In 2003, North Korea’s total trade volume to Japan was just over $265 million and fell even lower in 2004. At the same time, trade between Thailand and North Korea rose to more than $331 million in 2004. Two-way trade between Thailand and North Korea totaled $328 million in 2005, with Thai exports to North Korea amounting to $207 million and North Korean imports to Thailand totaling $121 million.

During January-November 2006 – the latest statistics available from the Thai Customs Department – trade totaled about $345 million, with Thai exports accounting for $200 million and North Korean imports $145 million. Thai imports of gold and silver have pushed those trade figures higher.

North Korea’s trade with Thailand grew mainly under the previous government of Thaksin Shinawatra, who at one point proposed signing a free-trade agreement between the two countries. In August 2005, Thaksin was formally invited by Kim Jong-il to visit Pyongyang. The visit never materialized, and since Thaksin was ousted last year in a military coup, the future of Thai-North Korean relations is very much in doubt.

But gold and silver are highly fungible and North Korea apparently has lots of the commodities. It appears Kim Jong-il has for now found at least one golden path around the international sanctions imposed against his regime’s nuclear tests.