North Korean Economy Watch

Anyone who has spent time visiting North Korea on Google Earth will have noticed the acute shortage of trees.  I am not alone in this observation.  Dr. Lankov recently reported that South Korean tourists to Kaesong also sense this.

Donating trees to the North might sound like a particularly harmless form of aid–all the symbolism of inter-Korean cooperation without the messy politics of monitoring food aid or investment.  But the reality is far more pragmatic:

[H]elping North Korea to plant more trees is one of President Lee’s campaign pledges.

He said the South will send seedlings to the North but no details were given as to whether or when the two Koreas will meet for the forestry project.

The spokesman said when the Kyoto Protocol takes effect, the South can buy the right to emit CO2 from North Korea.(Korea Times)

The South Korean government is not alone in hoping to make money off increasing North Korea’s stock of trees.   Singaporean entrepreneur Richard Savage started a tree farm in the DPRK back in 2002:

Richard Savage kneels in the rich brown earth of a field on the outskirts of Pyongyang and reverentially spreads out the broad, green leaf of a young paulownia tree. The saplings have been in the ground for only a month but already they are a meter high; the first harvest could take place in just five years. Eyes shaded by his black cowboy hat, the Singaporean native gazes down the rows of juvenile trees, each worth thousands of dollars at maturity, with a satisfied grin. The experimental lumber crop has survived the harsh North Korean winter and is flourishing in the loamy soil. “The paulownia loves this,” he says. Glancing at another leafy plant, a new hybrid, he confides, “We’re going to let the Dear Leader name it.” (Time)

UPDATE 2002 (Via Werner Koidl):

The IHT wrote on Oct. 27th, 2006:
“Richard Savage, executive director of Maxgro, a company based in Singapore, is probably one of the most ambitious foreigners in North Korea. He is developing a hardwood plantation on 1,500 hectares, or 3,700 acres, manufactures Snow Pine cigarettes for the local market and is building an eight-story financial center in Pyongyang in a joint venture with the government and other investors.”

Even the North Korean government, though, has noticed that the forests are not as dense as they used to be.  Bradley Martin reported in Bloomberg that Kim Jong il has been pushing a reforestation program for some time:

North Korea’s deforestation program dates back to a 1961 speech by Kim Il Sung. In a mostly mountainous country, he proclaimed, “it is necessary to obtain more land through the remaking of nature.” Not only tidelands but “hills throughout the country and plateaus” should be “brought under the plough,” he said.

“The hills and mountains still had trees, and I never heard of floods,” said Hiroko Saito, a Japanese woman who moved with her Korean husband to North Korea in 1961. Her husband joined one of Kim’s vast mountain work teams in the early 1970s, said Saito, now 66 and back in Japan.

…

Following Kim’s death in 1994 — just before a flood-linked famine gripped the nation — his son and successor Kim Jong Il continued the sacrifice of forest cover until 2000, when he began encouraging reforestation. But the shift hasn’t reversed the damage, and some analysts warn that another famine, close to the scale of the 1990s disaster that may have killed millions of people, might occur as soon as next year.

The government’s agricultural policies launched a cycle of events that lead to greater and greater numbers of trees being culled.  Clearing the forests contributed to seasonal flooding.  The floods exacerbated the food shortage, and pushed people to adopt coping mechanisms to meet their minimum caloric intake for survival.  These coping mechanisms take a toll on what remains of the forests–which exacerbates the flooding.  Repeat annually. This  cycle of destruction has seemingly frustrated Mr. Kim’s plans to bring back the forests:

“For the past few years, I have been telling you to work hard afforestation and have encouraged you at every opportunity.”

“However, an forestation has not met the criteria of authorities and is not going according to plan.”

What Kim Jong Il is trying to say is that, “The reason afforestation is not working is because of the people’s reckless slash-and-burn cultivation, as well as the inefficiency of officers unable to block it.”

After the food crisis in ’95, people uprooted vines and trees to suffice their underfed diets, as well as cultivating illegal farms for food. Further, to save themselves from freezing to death, people used trees as firewood.(Daily NK)

Spontaneous coping mechanisms aside, efforts at increasing forrest cover might prove more difficult than the government expects.  Even if it resolves the food shortage (which does not seem likely in the near term), it has seemingly lost control of its technocrats who have no problem selling DPRK lumber overseas:

…Oh Moon-hyuk, branch manager of the Ruengra 888 trading company in Yunsa, North Hamkyung Province, was executed after being implicated in the smuggling of timber. The trading company was responsible for the export of timber, and operates under the control of the Party’s accounting bureau. The inside contact stated that because of this incident, North Korean authorities carried out further inspections, leading in October of last year to the dismissal of one official receiving vice-minister pay, and the broadening of the inspections nationwide. (Institute for Far Eastern Studies)

The full articles can be found here:
S. Korea to Help N. Korea Plant More Trees
Korea Times
Kim Yon-se
3/5/2008

Kims’ Clear-Cutting of Korean Forests Risks Triggering Famine
Bloomberg
Bradley Martin
Hideko Takayama
11/21/2007

Cause of Barren Mountains: Imperialism-Natural Disaster-Officers
Daily NK
Han Young Jin
3/16/2007

Institute for Far Eastern Studies (IFES)
NK Bfrief No. 08-2-5-2
2/5/2008

Light from the North?
Time
Donald MacIntyre
8/11/2002

Institute for Far Eastern Studies (IFES)
NK Bfrief No. 08-2-5-2
2/5/2008

It appears that from the end of last year through this January, North Korean Party, regional, cabinet and People’s Committee officials have been carrying out inspections of trading companies, ordering massive layoffs and closings of companies where mis-management or other abnormalities are found.

In Yonhap News, a North Korean insider in Beijing, China was quoted on the 31st as saying, “Since November of last year, North Korean authorities have carried out inspections on trading companies under the control of each organization, with layoffs at most trading firms with abnormalities, deficits, or other mismanagement.”

According to the source, over 100 trading companies are registered in Chungjin, South Hamkyung Province, but after the current housecleaning measures are enforced, only around 15 will remain in operation, with practically all problematic offices being closed down.

Another North Korean source in Shenyang, China reported, “These inspections include trading offices run by the Party, military, and other so-called ‘powerful institutions’, so across the board, there are no exceptions, and as to the growing intensity [of the inspections], they are much stronger and wider in scope than formal annual inspections that have been carried out in the past.” “The order handed down at the end of last year to greatly reduce staff in the Party, military and Cabinet happens every year, but this year massive lay-offs in the workforce at trading companies appears to related to a different kind of personnel liquidation.”

These inspections reportedly stem from an incident at the end of last July in which Oh Moon-hyuk, branch manager of the Ruengra 888 trading company in Yunsa, North Hamkyung Province, was executed after being implicated in the smuggling of timber. The trading company was responsible for the export of timber, and operates under the control of the Party’s accounting bureau. The inside contact stated that because of this incident, North Korean authorities carried out further inspections, leading in October of last year to the dismissal of one official receiving vice-minister pay, and the broadening of the inspections nationwide.

Through the inspection-broadening measures, trade officials under the North Pyungan Province trade office also received an inspection party from the central government, causing many problems for Chinese traders who could not travel in from Dandong. Through these inspections, North Korean authorities reportedly uncovered several cases of embezzlement and misappropriation of company finances while the trading companies were exporting marine products or coal, iron ore, and other mining materials.

The goal of these inspections appears to have been the restoration of public order, just as the recent measures preventing women under the age of 45 from working in markets was a reaction to diminishing public discipline. In the future, price controls, regulations on export goods, or other government regulations regarding international trade are likely to be strengthened.

The most authoritative map of North Korea on Google Earth
North Korea Uncovered v.7
Download it here

This map covers North Korea’s agriculture, aviation, cultural locations, manufacturing facilities, railroad, energy infrastructure, politics, sports venues, military establishments, religious facilities, leisure destinations, and national parks. It is continually expanding and undergoing revisions. This is the sixth version.

Additions to the latest version of “North Korea Uncovered” include: A Korean War folder featuring overlays of US attacks on the Sui Ho Dam, Yalu Bridge, and Nakwon Munitians Plant (before/after), plus other locations such as the Hoeryong Revolutionary Site, Ponghwa Revolutionary Site, Taechon reactor (overlay), Pyongyang Railway Museum, Kwangmyong Salt Works, Woljong Temple, Sansong Revolutionary Site, Jongbansan Fort and park, Jangsan Cape, Yongbyon House of Culture, Chongsokjong, Lake Yonpung, Nortern Limit Line (NLL), Sinuiju Old Fort Walls, Pyongyang open air market, and confirmed Pyongyang Intranet nodes.

Disclaimer: I cannot vouch for the authenticity of many locations since I have not seen or been to them, but great efforts have been made to check for authenticity. These efforts include pouring over books, maps, conducting interviews, and keeping up with other peoples’ discoveries. In many cases, I have posted sources, though not for all. This is a thorough compilation of lots of material, but I will leave it up to the reader to make up their own minds as to what they see. I cannot catch everything and I welcome contributions.

Bloomberg
Bradley Martin
Hideko Takayama
11/21/2007

In some parts of the world, floods and famine are acts of God. In North Korea, they’re acts of government.

For decades, the late North Korean dictator Kim Il Sung mobilized vast work teams to fell trees and turn the mountainsides into farmland, allowing rainwater to wreck roads, power lines and agricultural fields.

Following Kim’s death in 1994 — just before a flood- linked famine gripped the nation — his son and successor Kim Jong Il continued the sacrifice of forest cover until 2000, when he began encouraging reforestation. But the shift hasn’t reversed the damage, and some analysts warn that another famine, close to the scale of the 1990s disaster that may have killed millions of people, might occur as soon as next year.

“Next year’s food situation is quite serious,” said Kwon Tae Jin, a researcher at the Korea Rural Economic Institute in Seoul. The famine risk is greatest starting next spring, after the current harvest is used up, he said; North Korea’s best hope may be for more food aid from abroad as a result of its agreement to begin dismantling its nuclear-weapons program.

Floods in August and September left 600 people dead or missing by official count, and 270,000 homeless. “Corpses were dug out of the silt” still clutching vinyl-wrapped photos of the Kims, the official Korean Central News Agency reported.

`Bad Governance’

South Korea has similar rainfall but has largely avoided such calamities. The North’s flooding “is a product of bad governance, economic mismanagement, poor agricultural policy and haphazard short-term survival strategies of the starving, desperate population,” Alexandre Y. Mansourov, a Korea specialist at the Asia-Pacific Center for Security Studies in Honolulu, said in a study.

North Korea’s deforestation program dates back to a 1961 speech by Kim Il Sung. In a mostly mountainous country, he proclaimed, “it is necessary to obtain more land through the remaking of nature.” Not only tidelands but “hills throughout the country and plateaus” should be “brought under the plough,” he said.

“The hills and mountains still had trees, and I never heard of floods,” said Hiroko Saito, a Japanese woman who moved with her Korean husband to North Korea in 1961. Her husband joined one of Kim’s vast mountain work teams in the early 1970s, said Saito, now 66 and back in Japan.

Workers and Soldiers

The crews included “city workers, students, soldiers of the Korean People’s Army and anybody else who could move,” said Lee Wo Hong, a pro-communist Korean agricultural expert living in Japan who began spending time in North Korea as a teacher and adviser in 1981.

What he saw there turned him into a critic of Kim Il Sung’s agricultural policy, he said. The country “was filled with bald mountains” on which the North Koreans had planted fast-growing maize; even relatively light rain would wash the crop away.

Reclaiming marginal land appeared successful for a while as North Korea’s overall crop yields increased, agriculture specialist Edward Reed wrote in a 2001 University of Wisconsin study. “Yet from the mid-1980s on, there appears to have been a slow decline in production, probably due to soil depletion from overintensive production,” he said.

By the early 1990s, yields dropped so low that hungry North Koreans went to the mountains to bring even more land under cultivation. Meanwhile, increased demand for firewood — the result of an energy shortage caused when former communist trading partners halted cut-rate fuel exports — added a new incentive to strip the mountainsides.

Death Toll

The results came to the world’s attention in 1995, with the worst floods in a century. The lost farmland contributed to a famine — already under way — that killed somewhere between 600,000 and 1 million North Koreans, according to “Famine in North Korea: Markets, Aid, and Reform,” by Stephen Haggard and Marcus Noland. Other estimates put the death toll as high as 4 million.

As floodwaters poured into coal mines, the energy shortage worsened and the state-run economy all but collapsed. Economic recovery — which didn’t begin until 1998 — was halted by further catastrophic floods in 2006, when the economy again shrank, according to an estimate by South Korea’s central bank.

A report on North Korea’s environment as of 2003, jointly prepared by North Korean government agencies, the United Nations Environment Program and the United Nations Development Program, blamed severe “land degradation” on “conversion of forest land in hilly areas to agricultural land.”

Enthusiast

The report portrayed Kim Il Sung as a forest-planting enthusiast from as early as six decades ago. Nick Nuttall, a spokesperson at UNEP headquarters in Nairobi, said the agency was “not in a position to comment” on why the report didn’t mention Kim’s mountain-clearing policy.

While the report said reversing the environmental damage through reforestation has become “an all-out campaign,” hungry people have continued cultivating crops between the tree seedlings, according to Han Young Jin, a defector from the North who lives in South Korea.

As the branches spread, “people would tie the sprigs together so the trees could not grow,” Han wrote on a defector-staffed Web site, Daily NK. “When the trees inevitably died, new saplings would be planted.”

Korea Times
Jane Han
10/2/2007

Economic cooperation topping the agenda for the inter-Korean summit, plus the van of corporate decision makers traveling to the North together, begs the question: Will the trip bear fruit for two-way business?

Chung Mong-koo of Hyundai-Kia Automotive Group, Chey Tae-won of SK Group, Koo Bon-moo of LG Group and Hyun Jeong-eun of Hyundai Group, who are among the 18 CEOs accompanying President Roh Moo-hyun as part of a special entourage, showed signs of hope as they departed for Pyongyang on their three-day trip that started Tuesday.

“I hope the talks will go well and further the ongoing business between the two Koreas, while opening doors to new areas as well,” said Hyundai Chairwoman Hyun.

Unification Minister Lee Jae-joung was also optimistic as he detailed some of the items, including North Korea’s expansion of social overhead capital (SOC) and construction of railroads, which may be discussed among leaders of both sides.

“As there has been much progress in the peninsula over the past seven years, we’re hoping that this experience will set a milestone in history,” he said in a television interview.

These hopes may be translated into reality through at least two scheduled business leader meetings during the summit period.

“The definition of economic cooperation between the two Koreas, so far, has implied one-way support from Seoul,” said Koh Il-dong, a research fellow of the Korea Development Institute (KDI). “But now, it’s time to break free of that old understanding and move toward real cooperation.”

And “real cooperation” is what the North bound corporate executives are looking to, as they hint some of the possibilities they have in mind.

Among the top three business topics expected for discussion _ natural resource developments, roadway and railway distribution system expansions and dockyard construction _ Hyundai-Kia Automotive Group is said to be interested in building railroad cars through its shipping affiliate Glovis, and also measure the feasibility of SOC businesses, while POSCO showed interest in forestation.

Although company officials said forestation is just a possibility, as the steel maker has shown its interest in securing carbon credit overseas, industry insiders say the opportunity will be advantageous for POSCO if cooperation comes through.

And as speculations rose that SK Group may be considering communication and energy projects in the North, company officials said plans are open for review if the right offer is made.

LG and Samsung, which are said to be mulling over their specialty areas of electronics, seem to be in the same scouting stages as others.

“Each company needs to be given the time and circumstances to carry out through market research,” said Dong Yong-sueng, a research fellow of the Samsung Economic Research Institute (SERI), implying that those are some of the accommodations that must be worked out if business is to happen.

Contrary to the high hopes, economic experts pointed out that some corporations would be wary of cooperating with North Korea, as it may ruin their reputation in the global market.

Daily NK
Jeong Jae Sung
9/18/2007

North Korea has requested for negotiations to begin at the Inter-Korean Summit Talks on the co-development of the Kaema Plateau, also known as “the roof of Korea.” The request was taken into consideration by the Ministry of Unification.

In light of North Korea’s request, the Ministry has recently conducted a survey of North Korean defectors from South Hamkyung, Yangkang and Jagang, where the Kaema Plateau is located, regarding the significant geographical features, the status of current development at the plateau, and the intentions of the North Korean government.

Kim Hyung Seh (pseudonym), a North Korean defector from Yangkang, stated that “I was told by interested parties at the Ministry of Unification that right after the Summit Talks North Korea will deliberate the Kaema Plateau development issue and that they needed my cooperation for a sound investigation.”

According to Kim, the questions asked focused on the North Korean government’s purpose in developing the Kaema Plateau, the potential value of this site as a tourist resort, and wether or not there is enough possibility for tourism given the ever increasing number of visitors from Mongolia.

He asserted that “the Kaema Plateau is a huge forest which has no value as a tourist attraction at the moment. All the particular tourist attractions in North Korea retain villas owned by Kim Il Sung and Kim Jong Il, but there are none at Kaema Plateau, which speaks for itself.”

Kim also added that the affiliates of the Ministry of Unification did not know where the Kaema Plateau was.

“It is difficult for North Korea to develop the area around Kaema Plateau, which is why they followed the shoreline to develop their railways. In order to make this project possible, the basic transportation infrastructure such as airline facilities, roads and railroads must be established first” advised Kim.

The Ministry of Unification has denied every having conducted these surveys. Regarding the interviews with defectors, one affiliate of the Ministery said “We have not held such meetings,” and another said that “We have met [with the defectors], but we never asked about the Kaema Plateau issue.”

Kim Joong Tae, the Director of the Ministry of Unification’s Inter-Korean Economic Cooperation Team, who interviewed Kim, told the DailyNK that “North Korea has never suggested the development of Kaema Plateau. The Ministry merely asked North Korean Defectors about tourism development at Mt. Baekdu.”

The Kaema Plateau is situated across the Middle and Southern region of Yangkang Province, South of Northwest Hamgkyung and East of Jagang. The total area is 14,300 km2 and the height is 1,340m. It is the highest and widest plateau in the entire peninsula, also known as “the roof of Korea.”

Kaema Plateau has abundant forest resources which provide avariety of material lumber. There is also a rich supply of mineral resources, including steel, magnesite, gold, apatite, and copper.

The only source of transportation infrastructure is the military airfields in Pungseo and Jangjin.

It is probable that North Korea’s reason for suggesting the development of Kaema Plateau is to make it tourist site, showcasing various amusment parks and ski resorts. As it is now, this area is completely restricted to civilian traffic. If transportation in the high region is developed, this could be applied for military purposes.

Lee Jin Young (pseudonym), a defector currently residing in South Korea’s Yangcheon district, explained that “the Kaema Plateau is so treacherous that it is only used as a military training field for Special Forces. This was the one area that allied forces could not get control of, even during the Korean War.”

She also added that, “rather than developing Kaema Plateau as a tourist attraction, they should develop the Baekmoo Plateau which includes Mt. Baekdu. The suggestion to develop the Kaema Plateau can only be seen as their intention to construct a better transportation infrastructure.”

Therefore, even if South Korea were to agree to the co-development of Kaema Plateau, there will be huge difficulties regarding the expansion of the social infrastructure and compromising with the military. In particular, the construction of Korean roads, railroads and airfields in the region is sure to cost a lot of money.

The most authoritative, publicly available map of North Korea
Version 4: August 29, 2007

Download it here 

This map covers North Korea’s agriculture, aviation, cultural locations, manufacturing facilities, railroad, energy infrastructure, politics, sports venues, military establishments, religious facilities, leisure destinations, and national parks. It is continually expanding and undergoing revisions. This is the fourth version.

Additions to the latest version of “North Korea Uncovered” include the city of Manpo along the Chinese border, KEDO, Kumgang Resort expansion, Kaesong Industrial Zone, as well as a few more parks, antiaircraft sites, dams, mines, canals, etc. I have also added more links in the menu which will tell the viewer a bit about the locations themselves. I have also changed the color scheme to make the collage easier to view.

Disclaimer: I cannot vouch for the authenticity of many locations since I have not seen or been to them, but great efforts have been made to check for authenticity. These efforts include pouring over books, maps, conducting interviews, and keeping up with other peoples’ discoveries. In many cases, I have posted sources, though not for all. This is a thorough compilation of lots of material, but I will leave it up to the reader to make up their own minds as to what they see. I cannot catch everything and I welcome contributions.

I hope this map will increase interest in North Korea. There is still plenty more to learn, and I look forward to receiving your additions to this project.

Yonhap
1/25/2007

North Korea has called upon South Korea to implement an earlier agreement to help revive its light industry in return for tapping into the communist nation’s natural resources, a senior unification official said Thursday.

During Unification Minister Lee Jae-joung’s first visit to the Kaesong Industrial Complex since he took office in December, Ju Dong-chan, head of the North’s Kaesong development agency “asked the minister to honor the agreement, saying it is not an aid, but only swapping of natural resources and raw materials,” the official said anonymously.

In July 2005, South Korea agreed to provide the North with US$80 million worth of raw materials to help it produce clothing, footwear and soap starting in 2006. In return, the North was to provide the South with minerals such as zinc and magnesite, after the mines are developed with South Korean investments, guaranteed by the Pyongyang government.

But the agreement was never carried out as North Korea abruptly cancelled scheduled tests of two cross-border railways in May 2006. North Korea’s subsequent missile and nuclear weapons tests further clouded hopes to implement the accord.

“Lee agreed in principle to honor the accord, but he held the position it is more important to create a favorable environment for carrying out the agreement,” the official told reporters.

Asked about the North’s denial of reports that it scrapped plans to change its partner for tours of Kaesong, the official said it is purely a matter of business, which does not require the intervention of the government.

Just hours after Lee returned to Seoul from Kaesong, an unidentified spokesman for the Korean Asia-Pacific Peace Committee (KAPPC) said the North “has no formal agreement with the Hyundai side over the issue of tour of Kaesong.”

Despite its earlier contract with Hyundai Asan, North Korea requested a new deal with Lotte Tours Co. in 2005. However, the South Korean government said the change can happen only when Hyundai Asan voluntarily concedes or pulls out of the business.

Korea Times
Donald Kirk
1/24/2007

Gold fever is rampaging through the ruling elite of North Korea in the quest for relief from seemingly incurable economic malaise exacerbated by more than a year as a total outcast from the international financial community.

Word from Pyongyang is that trading companies and even individuals are offering payments in gold for imports from across the border with China and also in barter deals for products imported from elsewhere. Gold also has become a form of currency in the internal reward system of payoffs and bribes manipulated by Dear Leader Kim Jong-il to guarantee the loyalty of high-ranking officials.

The rush to sell gold - and, to a lesser extent, silver - has sharply escalated in the 16 months since the US Treasury Department blacklisted Banco Delta Asia (BDA) in Macau, banning all firms doing business with US firms from dealings with that bank. The Treasury Department charged that the BDA had been the principal conduit through which North Korea was shipping counterfeit US$100 “supernotes” printed on a highly sophisticated Swiss-made press in Pyongyang.

It’s well known that the US ban forced the BDA to impose a freeze on North Korean accounts totaling $24 million, but less well known that the bank also stopped purchasing gold produced by North Korea’s historic gold mines, in operation, sporadically, since the late 19th century.

Output of the mines, in mountains about 160 kilometers north of Pyongyang, fell sharply in the late 1990s as a result of flood and famine but, with foreign expertise, has begun to pick up in the past few years.

The impact of the ban, moreover, goes far beyond a single bank in Macau. Although North Korea last spring sold $38 million in gold and silver in Thailand, Pyongyang has been frustrated in reviving its presence on the London bullion market, the world’s largest marketplace for precious metals, amid increased US pressure on the large international banks that are the major buyers of gold.

It was in the aftermath of the ban on the BDA that North Korea’s Chosun Central Bank coughed up the information required by the London Bullion Markets Association (LBMA) for listing as a “good deliverer” of gold. North Korea from 1983 to 1993 had been in the LBMA’s good graces, averaging a ton a month in sales to London buyers that included some of the world’s leading banks, but had slipped off the list after failing to keep up deliveries.

The fact that the Chosun Central Bank again is listed with the LBMA, however, is no guarantee North Korea will be able to sell its gold. The US Treasury ban on dealings with the BDA - as well as sanctions unanimously imposed by the United Nations Security Council after North Korea conducted an underground nuclear test in October - has spooked buyers in London.

While the LBMA disavows “political criteria” in deciding on eligibility for its “good delivery list”, an LBMA memorandum leaves no doubt how buyers are likely to respond to overtures from a country or company on an international blacklist. None of them, according to Stewart Murray, the LBMA’s chief executive, is willing to take delivery from a company or country that is subject to sanctions.

Or, as the LBMA memorandum puts it, “If, for instance, a bullion custodian considered that it was bound by national or international sanctions that were in force against a particular country, it would have to refuse to accept bars from a refiner in that country.”

The memorandum, moreover, does not mince words when it comes to stating the importance of a “good deliverer” rating. “Given the status of London as the world’s leading center for bullion trading,” it says, “the LBMA List has become the de facto world list of quality refiners and Good Delivery accreditation is a highly sought-after accolade.”

In recent years, “the List” - capitalized in the memo - “has grown primarily due to the listing of refiners in China and Russia” and now totals 77 refiners in 31 countries.

Investors see North Korea as competing on a world stage once sanctions are lifted. “What we’re doing is normal business,” said Roger Barrett, whose firm, Korea Business Consultants, operates in North Korea from headquarters in Beijing. By reviving old minesand developing new ones, he argued, “We’re creating jobs for people, in line with the UN basic charter, in line with economic growth.”

Barrett also believes North Korea may somehow get around the sanctions by finding new markets. “Why would you go to the trouble of going to London?” he asked. “They’re totally entitled to sell their gold.” The fact is, however, that London remains the place to sell gold in significant quantities on a regular basis.

Under the circumstances, Colin McAskill, chairman of Hong Kong’s Koryo Asia Ltd and the guiding light of the Chosun Development and Investment Fund, dedicated to investing in North Korea, accused top US Treasury officials of waging a campaign to make sure the ban on banks dealing with the BDA extends to gold and silver.

McAskill accused US officials, led by Treasury Secretary Henry Paulson and Stuart Levey, under secretary for terrorism and financial intelligence, of “using coercion, innuendo and sheer force to intimidate banks from dealing with North Korea”.

Among the victims of the US campaign is one of Koryo Asia’s projects, the Daedong Credit Bank, the only foreign bank based in North Korea, set up primarily to deal with accounts of foreign firms and embassies in Pyongyang. The freeze of North Korean accounts in the BDA, according to McAskill, includes about $7 million funds of Daedong Bank customers.

McAskill avidly supports North Korean demands for the US to lift the ban on the BDA - a move that would not only open up the frozen North Korean accounts but would provide the opening needed for Pyongyang to trade in a wide range of products around the world.

The financial issue is assumed to have ranked at the top of an agenda discussed in meetings in Berlin between the chief US envoy, Christopher Hill, and his North Korean counterpart, Kim Kye-gwan. Hill, reporting on the Berlin talks in stop-offs in Seoul, in Tokyo and Beijing, seemed hopeful about “progress” in the next round of six-party talks on North Korea’s nuclear weapons, expected to open in Beijing next month, after the failure of negotiators to get anywhere in the last round before Christmas.

South Korean media said North Korea had agreed to shut down its five-megawatt reactor at its nuclear complex Yongbyon in return for the US promise of massive aid, the crux of the 1994 Geneva Framework Agreement that blew up in 2002 amid US charges of a separate, secret North Korean program for developing warheads from enriched uranium.

There was no assurance, however, that the US is ready to relent on the BDA or that the UN Security Council will consider lifting its own sanction - enough to dissuade banks in London from buying North Korean gold regardless of the US ban on the BDA.

McAskill believes the rationale for the crackdown on the BDA is flawed. He questions the validity of the counterfeit charge and, in any case, says most of the frozen funds are not those of the North Korean government, even though they’re tired up in North Korean accounts. “We want to get a breakthrough on the six-party talks by getting the sanctions eased or lifted entirely,” he said. “We’re at a very delicate stage.”

Whatever happens, McAskill sees North Korea as ripe for investment, with precious metals high on the list of potential exports. “North Korea wants to move back into legitimate business,” he said. “They have a wealth of minerals - gold, silver, zinc, magnesite, copper, uranium, platinum - that needs investment to extract.”

Everything you wanted to know about minerals in the DPRK and their export  can be found in these USGS reports (In PDF format):

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