North Korean Economy Watch

Choson Ilbo
3/10/2010

Curbing North Korea’s illicit arms trade is difficult since the renegade country launders containers carrying weapons three or four times, a defector who was in charge of illicit arms deals told the Chosun Ilbo on Monday.

The defector revealed that a factory in Jagang Province, which is believed to produce tractors, is the center of the communist country’s weapons production, including chemical warheads. The defector, who is under police protection, did not want his identity to be revealed fearing reprisal attacks against family members still in the North.

Foreign Forwarders Transport Weapons
Five departments of the North Korean government are involved in arms exports: the military arms production wing of the Workers’ Party, the Second Academy of Natural Sciences, the Surveillance Division of the People’s Armed Forces, Operational Department of the Workers’ Party and the Second Economic Committee. He said the Economic Committee, which is directly under the control of the powerful National Defense Commission, is the biggest.

The military arms production wing procures materials for the Yongbyon nuclear plant and North Korea’s nuclear weapons program. “The General Bureau of Atomic Energy only produces yellow cake [the seed material for higher-grade nuclear enrichment], while the arms production wing is in charge of the Yongbyon facility,” the defector said. The Second Academy of Natural Sciences exports missiles and also provides after-sales service for exported products by upgrading performance and exchanging components.

“The main client is the research center of Iran’s Revolutionary Guard, while experiments are conducted in unison,” he said. Iran successfully test-fired a rocket on Feb. 3 which is believed to have been powered by the same engine as North Korean Rodong missiles.

But international sanctions against North Korea make it difficult to export weapons by conventional means. “This is where the Surveillance Division of the People’s Armed Forces comes in,” the defector said. Its “traders,” who studied at Pyongyang University of Foreign Studies, are fluent in English and Chinese and sign deals with “forwarders” from other countries. Through this process, North Korea sends containers across the Apnok (or Yalu) River to China one third or half filled with weapons. “The forwarder who received this cargo enters a port in a third country, where the containers are filled with freight unrelated to weapons and the paperwork is completed,” he said.

These “laundered” containers are laundered again in Hong Kong, Singapore or other ports. “The containers are mixed with other cargo in those transit points. They are searched, but not thoroughly,” the defector added. “Even if customs or other officials roll their sleeves up and search for weapons, how can they possibly find the arms among the mountains of other containers headed to other countries?”

‘Tractor Factory’ Is Weapons Production Base
North Korea’s main weapons production base is Kanggye General Tractor Plant No. 26. Before the Korean War, the plant was based in Pyongyang and made Soviet-designed PPSh 41 submachine guns but has since been relocated. Over 10,000 workers there manufacture ammunition and even chemical weapons. The People’s Armed Forces is in charge of chemical weapons production. “The Bio-chemical research center affiliated with the military is located next to the Kanggye plant,” the defector said. “The toxic gases produced at the research center are loaded onto warheads manufactured at the plant.”

North Korean leader Kim Jong-il makes a point of visiting the factory two to three times a year. He last paid a visit on Dec. 9, 2009.

AK-47 Rifles and Ammunition Are Top Sellers
“Small arms ammunition are hot export items and the Second Economic Committee even built a factory in Ethiopia,” the defector said. The rugged AK-47s, which can operate flawlessly even in the sand-filled battlefields of the Middle East, are extremely popular, he said.

Anti-tank missiles are more complicated to manufacture, so the blueprints are in Russia, while North Korean factories are merely subcontractors. North Korean arms are believed to be exported to Bangladesh, Indonesia, Pakistan and the Philippines. “North Korean weapons with engines [such as tanks] are extremely poor quality, but those carrying warheads are not bad,” the defector said. Around 20 percent of the parts used to make export versions of missiles are imported. But missiles for domestic use are made using mostly North Korean-made parts, so there is a difference in performance. “North Korea tried to import Harpoon anti-ship missiles from Taiwan,” he added. “This probably has something to do with the South Korean Navy’s use of the Harpoon missiles.”

Dear Choson Ilbo: We have very good satellite imagery of Kanggye. Please tell us where the Kanggye General Tractor Plant is!  Here are three guesses as to where the plant is: guess 1, guess 2, guess 3.  Kim Jong Il has a villa in Kanggye here.  Here is his private train station near Kanggye.

According to the Washington Post:

The Obama administration, concerned that Burma is expanding its military relationship with North Korea, has launched an aggressive campaign to persuade Burma’s junta to stop buying North Korean military technology, U.S. officials said.

Concerns about the relationship — which encompass the sale of small arms, missile components and technology possibly related to nuclear weapons — in part prompted the Obama administration in October to end the George W. Bush-era policy of isolating the military junta, said a senior State Department official, speaking on the condition of anonymity because of the sensitivity of the subject.

Senior U.S. officials have since had four meetings with their Burmese counterparts, with a fifth expected soon. “Our most decisive interactions have been around North Korea,” the official said. “We’ve been very clear to Burma. We’ll see over time if it’s been heard.”

…

Underlining the administration’s concerns about Burma is a desire to avoid a repeat of events that unfolded in Syria in 2007. North Korea is thought to have helped Syria secretly build a nuclear reactor there capable of producing plutonium. The facility was reportedly only weeks or months away from being functional when Israeli warplanes bombed it in September of that year.

“The lesson here is the Syrian one,” said David Albright, president of the nongovernmental Institute for Science and International Security and an expert on nuclear proliferation. “That was such a massive intelligence failure. You can’t be sure that North Korea isn’t doing it someplace else. The U.S. government can’t afford to be blindsided again.”

Burma is thought to have started a military relationship with North Korea in 2007. But with the passage of a U.N. Security Council resolution last June banning all weapons exports from North Korea, Burma has emerged “as a much bigger player than it was,” the senior U.S. official said.

In a report Albright co-wrote in January, titled “Burma: A Nuclear Wannabe,” he outlined the case for concern about Burma’s relations with North Korea. First, Burma has signed a deal with Russia for the supply of a 10-megawatt thermal research reactor, although construction of the facility had not started as of September.

Second, although many claims from dissident groups about covert nuclear sites in Burma are still unverified, the report said that “there remain legitimate reasons to suspect the existence of undeclared nuclear activities in Burma, particularly in the context of North Korean cooperation.”

Previous posts about the Myanmar-DPRK relationship can be found here. 

Read the full story here:
U.S. increasingly wary as Burma deepens military relationship with North Korea
Washington Post
John Pomfret
3/4/2010

The International Narcotics Control Strategy Report (INCSR) is an annual report by the Department of State to Congress prepared in accordance with the Foreign Assistance Act. It describes the efforts of key countries to attack all aspects of the international drug trade in Calendar Year 2009. Volume I (PDF) covers drug and chemical control activities, and beginning on page 488, there is a profile on the DPRK:

North Korea

I. Summary
There is insufficient evidence to say with certainty that state-sponsored trafficking by the Democratic People’s Republic of Korea (DPRK or North Korea) has stopped entirely in 2009. Nonetheless, the paucity of public reports of drug trafficking with a direct DPRK connection suggests strongly that such high-profile drug trafficking has either ceased, or has been reduced very sharply. Trafficking of methamphetamine along the DPRK-China border continues. There are indications that international drug traffickers can purchase methamphetamine in kilogram quantities in some of the major towns on the Chinese side of the DPRK-China border. Other criminality involving DPRK territory, such as counterfeit cigarette smuggling and counterfeiting/passing of U.S. currency (supernotes), continues.

II. Status of Country
No confirmed instances of large-scale drug trafficking involving the DPRK state or its nationals were reported in 2009. This is the seventh consecutive year that there were no known instances of large-scale methamphetamine or heroin trafficking to either Japan or Taiwan with direct DPRK state institution involvement. From the mid- 1990s through to 2002/2003, numerous instances of narcotics trafficking involving DPRK persons and important state assets, such as sea-going vessels and military patrol boats, were recorded in Taiwan and Japan.

Press reporting suggests that methamphetamine trafficking along the DPRK-China border continues. These reports detail the activities of organized criminal groups arranging methamphetamine shipments to destinations in Asia from the major towns near the DPRK-China border (e.g., Dandong, Yanji).

III. Country Actions Against Drugs in 2009
Law Enforcement Efforts. The source of relatively small quantities of methamphetamine seized elsewhere in Asia can occasionally be traced back to the China-DPRK border area. Local press reports in Asia describe apprehensions of traffickers smuggling methamphetamine and indicate that arrangements to purchase that methamphetamine were made in towns near the China-DPRK border. These reports suggest that trafficking of methamphetamine continues along the China-DPRK border and they raise the question of whether or not local DPRK officials might be aware or even complicit in the drug trade. There is no clear evidence of a central role for DPRK state institutions in selling methamphetamine or organizing the trafficking of methamphetamine. Evidence of direct DPRK state involvement in drug trafficking to
Taiwan and Japan emerged regularly in the past.

Reports of non-narcotics related acts of criminality in the DPRK suggest that DPRK tolerance of criminal behavior may exist on a larger, organized scale, even if no large-scale narcotics trafficking incidents involving the state itself have come to light. Press, industry, and law enforcement reports of DPRK links to large-scale counterfeit cigarette trafficking in the North Korean Export Processing Zone at Rajiin (or Najin) continue. It is unclear the extent to which DPRK authorities are complicit in this illegal activity, although it is likely that they are aware of it, given the relatively high-profile media reports. In addition, counterfeit $100 U.S. notes called “supernotes” (because they are so difficult to detect), continue to turn up in various countries, including in the United States. There are reports, for example, of supernote seizures in San Francisco and a very large supernote seizure in Pusan, South Korea during 2008 and 2009. Supernotes are uniquely associated with the DPRK, but it is not clear if recent seizures are notes which have been circulating for some time, or if they are recently-counterfeited new notes.

Agreements and Treaties. The DPRK is a party to the 1988 United Nations (UN) Drug Convention, the 1961 UN Single Convention as amended by the 1972 Protocol, and the 1971 UN Convention on Psychotropic Substances.

Cultivation/Production. For many years, it has been alleged that poppies are cultivated in the DPRK, with the opium converted into heroin and then trafficked by state organs for profit. However, it has not been possible to confirm such illicit cultivation, and there has not been a heroin trafficking incident with a DPRK connection for many years. There are also several known factories in the DPRK that could produce very pure heroin and methamphetamine drugs, and there have been cases of large-scale smuggling of pure methamphetamine drugs from the DPRK to Japan and Taiwan as recently as 2002.

IV. U.S. Initiatives and Programs
The Department of State has no evidence to support a clear finding that DPRK state narco-trafficking has either stopped or is continuing. The absence of any seizures linked directly to DPRK state institutions, especially after a period in which seizures of very large quantities of drugs regularly occurred, does suggest considerably less state trafficking, and perhaps a complete end to it.

On the other hand, press reports of continuing seizures of methamphetamine in Asia, which can be traced back to an apparent DPRK source, suggest continuing manufacture and sale of DPRK methamphetamine to criminal traffickers. Large-scale trafficking of counterfeit cigarettes from the DPRK territory also continues and suggests that enforcement against notorious organized criminality in the DPRK is lax.

It is likely that the North Korean government has sponsored narcotics trafficking and other criminal activities in the past. The Department of State has insufficient information to confirm that the DPRK-state is no longer involved in manufacture and trafficking of illicit drugs, but if such activity persists, it is certainly on a much smaller scale.

UPDATE 2: According to the Los Angeles Times:

In the report, obtained Thursday by The Associated Press, the South African government said the two containers are currently stored in a state-secured warehouse in Durban while its investigation continues. It estimated the value of the conventional arms at 6 million rand (about $770,000)

The shipment’s final destination, according to the bill of lading, was the port of Pointe Noire in the Republic of Congo, the small oil-rich country often overshadowed by its larger neighbor, Congo. The Republic of Congo, whose capital is Brazzaville, has reportedly experienced a wave of recent violence.
…
The report to the Security Council committee monitoring sanctions against North Korea is entitled “breach of the Security Council resolutions…”

It traced the shipment from the DGE Corporation via the “Machinery Expand Imp Corp (cq),” both established to be in North Korea, to the Chinese port of Dalian where it was put on board the CGM Musca on Oct. 20.

The bill of lading described the contents of the two containers as “spare parts of bulldozer,” according to the report.

At Port Klang, Malaysia, the shipment was transferred to another vessel, the Westerhever, which was chartered by Delmas Shipping, a subsidiary of the French shipping company, CMA-CGM, the report said. Delmas requested that CMA-CGM Shipping Agencies South Africa (Pty) Ltd. represent the Westerhever on its voyage to South Africa.

The captain was instructed to refuel in Durban on Nov. 28-29, but due to fuel shortages in Durban, the Westerhever was ordered to take on fuel in Walvis Bay, the report said.

While en route to Walvis Bay on Nov. 27, the captain “received an email instruction from Delmas to make a U-turn and discharge the two containers in Durban, the report said.

A U.N. diplomat familiar with the report, speaking on condition of anonymity because he was not authorized to speak publicly, said the email informed the captain that the ship was carrying suspicious cargo which should be turned over for inspection to South African authorities in Durban.

Martin Baxendale, a spokesman for CMA-CGM, said in Paris that the company was in contact with South African authorities but said “we cannot enter into discussions relating to any details in regard to this matter.”

According to the report, “a large quantity of rice grains in sacks lined the containers and was utilized as protective buffers for the conveyance of the conventional arms.”

UPDATE 1: According to the Wall Street Journal:

According a terse, two-page account delivered by the Pretoria government earlier this month to the U.N. committee overseeing the enforcement of U.N. Security Council sanctions imposed on North Korea, South African authorities in November seized two containers filled with tank parts and other military equipment from North Korea. The report said the containers, which were loaded on a ship in the Chinese port of Dalian and bound for the Republic of the Congo, contained gun sights, tracks and other spare parts for T-54 and T-55 tanks and other war material valued at an estimated $750,000.

The military equipment was concealed in containers lined with sacks of rice, said the confidential South African report, which was reviewed by The Wall Street Journal. Shipping documents identified the cargo as spare parts for a “bulldozer,” according to the report, which said the goods were shipped by a North Korean company.

ORIGINAL POST: According to Reuters (via Yahoo):

South Africa has told a U.N. Security Council committee it intercepted a North Korean weapons shipment bound for Central Africa, which diplomats said was a violation of a U.N. ban on arms sales by Pyongyang.

The seizure took place in November, when South African authorities received information that a ship headed for Congo Republic was carrying containers with suspicious cargo, according to a letter sent by South Africa to the Security Council’s North Korea sanctions committee.

Several Western diplomats described the incident as a “clear-cut violation” of Security Council resolution 1874, which bans all North Korean arms exports and most weapons-related imports in response to its nuclear program.

The letter, parts of which were seen by Reuters on Monday, said a North Korean company was the shipping agent and the cargo was first loaded onto a ship in China, then transferred to a vessel owned by French shipping firm CMA CGM in Malaysia.

Diplomats said the French company alerted authorities to the fact it had suspicious cargo on board and was not believed to have done anything wrong. The South Africans intercepted the vessel and seized the containers, which held tank parts.

The letter, which the committee received last week, said the South Africans discovered “that the contents fell within the definition of conventional arms in that the contents consisted of components of a military tank T-54/T-55.”

The letter said the documentation for the containers described the cargo as “spare parts of bulldozer.” T-54 and T-55 tanks were designed and produced in the Soviet Union in the 1940s and 1950s but were later upgraded and made in other countries.

Neither the French company nor the countries involved had any immediate comment.

Congo Republic, which borders Democratic Republic of Congo, has suffered a wave of violence in the Pool region between the capital Brazzaville and the oil port town of Pointe Noire that has broken a period of calm after a decade of instability.

COMMITTEE TO DECIDE
The diplomats said the committee was planning to send letters to countries involved in the case — such as North Korea, Republic of Congo, Malaysia and France — seeking more information so it can decide whether the North Koreans or any other nations were in breach of U.N. sanctions.

Resolution 1874, approved in June 2009, was passed in response to Pyongyang’s second nuclear test in May 2009 and expanded the punitive measures the Security Council had imposed on North Korea after its first atomic test in October 2006.

Last year’s resolution also authorized countries to inspect suspicious North Korean air, land and sea cargo and to seize any banned goods.

“The latest incident shows that the sanctions are working,” one Western diplomat told Reuters. “But it also shows that we have to be vigilant. The DPRK (North Korea) is still trying to violate the sanctions.”

Last week I mentioned that the UN Security Council was investigating four cases of alleged DPRK sanctions violations–but I only knew what three of the cases were:

Case 1: A North Korean shipment of chemical-safety suits that may have been destined for Syria’s military.

Case 2: Italy’s seizure of two luxury yachts allegedly bound for North Korea

Case 3: Thailand’s interdiction of North Korean arms aboard a plane allegedly bound for Iran

And now we know Case 4: Shipping of contraband to Central Africa.

According to the Daily NK:

Since the redenomination on November 30 last year, the cost of crossing the Tumen River has risen as high as 10,000 Yuan on the back of tighter border regulations.

A source from North Hamkyung Province told the Daily NK on Thursday, “Since border security was strengthened in February, it has cost at least 10,000 Yuan to cross the border into China.” This is equal to around 400,000 North Korean won at the black market exchange rate, or $1400.

In 2006, the cost of crossing the Tumen River around Musan and Onsung in North Hamkyung Province was just 500 Yuan.

The reason is because now there is an alliance of brokers monopolizing the crossing business, and a number of regulations designed to both circumscribe the ability of citizens to cross and limit the relationship between guard companies and local citizens.

In the distant past, if people wanted to cross the river, they approached guards and haggled over the price directly. However, now people have to rely on professional brokers who put them in contact with guards and guides in China. One pays a price to the broker, who shares it with North Korean border guards and Chinese guides respectively at a ratio of 4:3:3.

The North Korean authorities designated the period from February 5th until Kim Jong Il’s birthday on the 16th as a period of “special vigilance,” handing down special instructions to strengthen the border guard and regulations covering migration in border cities.

According to a Daily NK source, this measure is primarily intended to limit the ability of those suffering since the redenomination to smuggle or cross the border to make money in China, as well as to regulate citizens in advance of Kim Jong Il’s birthday, which is customary.

The source emphasized, “Since December last year, the number of citizens using human networks in China to make money has been increasing. Therefore, agents of the National Security Agency and the People’s Safety Agency have been watching those people closely.”

The source further explained, “Now, the authorities are forcing border guards to observe each other in order to track down those doing business with brokers and border crossers. In January, in Yusun-dong, Hoiryeong, one company commander was dismissed after a platoon commander informed on him for assisting border crossers.”

In the mid-2000s, along the border near settlements such as Namyang, Sambong, and Jongsung in North Hamkyung Province, the authorities set up nail boards and extra barbed wire along the Tumen River in order to inhibit defection. However, as these physical measures were not as effective as hoped, in 2006 the authorities took to switching guard posts between different guard companies without notice and awarding a prize, membership of the Party, to guards who caught people crossing the border. These measures were designed to break down connections between individual guards and the local populace

Therefore, the source added, “These days, no border guards are helping people cross the river, and the cost is soaring.”

Read the full story here:
Tight Rules Make Border Costs Soar
Daily NK
Lee Sung Jin
2/19/2010

UPDATE:  It looks like case 4 was a shipment of contraband to central Africa.

ORIGINAL POST: Ertugrul Apakan, Chair of the 1718 Sanctions Committee, is reported to be investigating four cases of UNSC sanctions violations by the DPRK. I have listed 3 of the 4 cases below with links (as identified by Business Week):

Case 1: A North Korean shipment of chemical-safety suits that may have been destined for Syria’s military.

Case 2: Italy’s seizure of two luxury yachts allegedly bound for North Korea

Case 3: Thailand’s interdiction of North Korean arms aboard a plane allegedly bound for Iran

Case 4: ?

According to Business Week:

Apakan told a closed session yesterday that South Korea said the suits were from North Korea and that his committee had received an unsolicited letter from Syria denying any involvement, according to diplomats who attended the briefing. They asked not to be identified.

Bashar Ja’afari, Syria’s ambassador to the UN, said his government sent the letter because South Korea’s report of the incident stated that the suits were bound for his nation. He said Syria conducted a “deep inquiry” and concluded it had nothing to do with the case.

Syria and the DPRK were also allegely working on a nuclear reactor together and Syria’s Tishreen War Museum was built by the North Koreans.

Security Council Report, an independent not-for-profit organisation in affiliation with Columbia University’s Center on International Organization, published a February 2010 report on the DPRK which contains additional information.  See it here.

The Marmot’s Hole posted some great information on the DPRK-Malta relationship.  I encourage you to read his full post, but below I have posted information he provided from the Malta Independent:

With the Labour Party trying to project an image of a progressive and moderate all-inclusive party with new ideas, this newspaper asked Dr Sceberras Trigona, a former Foreign Minister in the Labour 1981-1987 government, for his views on the agreement he had signed with North Korea in July 1982.

At the time North Korea’s regime had, and still has, few ties with other countries due to its policy of self-reliance. However, Malta under Labour had close connections with the Asian country, with Kim Jong-Il, son of then dictator Kim Il-Sung, studying English at the University of Malta and reportedly visiting frequently with then Prime Minister Dom Mintoff.

Contact with Dr Sceberras Trigona was first made via telephone on Thursday, and he asked that the questions be sent by e-mail. The questions were as follows: 1) Given the political climate of the time, what led the Labour government to sign such an agreement with North Korea? 2) Why was a clause included in the agreement stipulating that the agreement should be kept a secret? 3) Would you sign such an agreement again if you were given the chance?

The answer to these questions received on Friday was two words: “Times change,” Dr Sceberras Trigona said tersely.

The signing of the agreement in 1982 had sparked off a political controversy after it was revealed by then Opposition Leader Eddie Fenech Adami during a Nationalist Party mass meeting in Floriana on 4 December 1983.

Newspaper reports later said that a high-level investigation had been started in the Foreign Affairs Ministry to find out who had leaked the information to Dr Fenech Adami.

In actual fact, two agreements had been signed for “a free offer of military assistance” with North Korea. The first agreement was signed in Valletta on 25 March 1982, three months after the perverse result of an election that returned the Labour Party to government in spite of obtaining fewer votes.

A second agreement, this time signed in Pyongyang in July of that same year, superseded the first, changing only the number of weapons and ammunitions that North Korea agreed to donate to Malta.

For Malta, the first agreement was signed by then Interior Minister Lorry Sant at the specific request of Dr Sceberras Trigona, who then signed the second agreement.

The agreement stipulated that North Korea “will, free of charge, provide (Malta) with weapons and ammunitions”.

The difference between the first and second agreement was in the number of weapons and amount of ammunition that North Korea agreed to give Malta – the number was increased in the second agreement.

Otherwise, the agreements were more or less the same. North Korea was responsible for the transportation of weapons and ammunition, and dispatched military instructors to train and teach local military personnel. Four instructors were sent for three months and were paid according to their military rank equivalent to those of Maltese officers.

The agreement stipulated that the Maltese government had to provide a one way ticket from Malta to Pyongyang to the instructors and “subsistence expenditure during the flight and expenses for lodging, meals, medical treatment, transport means (including the driver) and salaries during their stay in Malta, and training equipment needed in the education of the Maltese military personnel”.

The Maltese government had also agreed to “protect” the Korean instructors and “ensure their safety, and exempt them from Customs duties and taxes”.

Both sides also agreed to “observe strict secrecy in respect of all transaction made pursuant to this agreement and shall not disclose any matter hereof to any third country”.

Read the Marmot’s Hole post here.

Read the Malta Independent article here:
1982 Labour government “secret” agreement with North Korea
Malta Independent
Stephen Calleja
Date unknown

According to the Choson Ilbo:

Christian Dietrich, a member of the UN Security Council committee investigating Congo, told VOA that the North Korean ship Birobong arrived in the port of Boma, Congo on Jan. 21, where it unloaded some 3,400 tons of weapons, 100 times the amount seized in Thailand earlier this month.

Dietrich said the committee was told the weapons were “modern” but was unable to find out any details. Assuming all the weapons were AK rifles, the weight would be equivalent to about 800,000 of them, he added.

North Korea in May also sent military instructors to train Congolese government soldiers for about four weeks, around the time the North conducted its second nuclear test.

Dietrich said there are indications that North Korea was the source of state-of-the-art weapons carried by insurgents in eastern Congo. In some cases, Congolese government soldiers have sold their arms to neighboring countries such as Zimbabwe, he said.

Under UN Resolution 1807, adopted in 2008, the UN must be informed in advance of all arms transactions with and military training for Congo, but North Korea did not. The UNSC committee is a watchdog that oversees implementation of the UN resolution.

Additional information:

1. Here is a link to the story about the arms intercepted in Thailand (Including updates).

2. The DPRK has long been involved in African political, economic, military, and cultural affairs.  When I read this story I immediately thought of Zimbabwe’s 5 Brigade which was trained by the North Koreans.  Here are a few stories which are related to the DPRK and Zimbabwe.

3.  The North Koreans also constructed the statue of Laurent Kabila in Kinshasa. The statue is located here.

UPDATE:  According to the Boston Herald, the diplomats were sentenced to eight months in prison.

ORIGINAL POST: It is no secret that North Korean diplomats and embassies are self-financing.  In fact, they are profit earning and they must remit funds back to Pyongyang.  While this means that DPRK diplomatic relations are not a drain on the treasury, as is typically the case with other countries, it does mean that the DPRK’s official representatives are more likely to make headlines for their business dealings rather than political statements.

And so here is the latest installment in this saga from Reuters:

Swedish police have arrested two North Korean diplomats on suspicion of smuggling 230,000 cigarettes into the Nordic country, the Swedish Customs Office said Friday.

The pair, a man and a woman who have diplomatic status in Russia, were stopped by Swedish customs officers Wednesday morning as they drove off a ferry from Helsinki, the Finnish capital.

Customs officials discovered Russian cigarettes in the car driven by the couple, Swedish Customs spokeswoman Monica Magnusson told Reuters.

The two North Koreans claimed diplomatic immunity.

“They were accredited as diplomats in Russia, but had no accreditation in Sweden,” she said. “They were arrested on suspicion of smuggling.”

Magnusson added that the pair were still being held by Swedish police and that she was not aware of them having any contact with North Korean officials since their arrest.

Sweden’s Foreign Ministry said it had been informed of the arrests but would not comment directly on the matter, saying it was a criminal case and was being handled by the police.

Foreign Ministry spokeswoman Cecilia Julin said foreign diplomats are only immune from criminal prosecution in countries where they have been accredited with the authorities.

“If you come to Sweden and commit a crime, you’re just like any other foreign national,” she said.

Sweden is one of only seven countries to have an embassy in North Korea, treated by much of the world as a rogue state due to human rights abuses and its possession of nuclear weapons despite opposition by the international community.

The Foreign Ministry said the arrests were primarily a police matter, but that the North Korean embassy in Sweden was in contact with the ministry over the matter.

An official at the North Korean embassy in Stockholm said earlier he had no knowledge of the arrests.

North Korean diplomatic staff were expelled from Sweden and two other countries in 1976 after a “massive” smuggling scheme was uncovered.  According to Time Magazine (in 1976):

Not in years have so many diplomatic persona suddenly been declared non grata. In Oslo, members of North Korea’s diplomatic mission—three bureaucrats and a chauffeur—were given six days to pack up and get out. Foreign Ministry officials frostily informed North Korea’s Ambassador to Stockholm, Kil Jae Gyong, who is also accredited to Oslo, that he was no longer welcome in Norway. Similar scenes took place in Helsinki and Copenhagen, and as of last week, twelve North Korean embassy staffers had been unceremoniously ordered home to Pyongyang.

International politics had nothing to do with the abrupt action by the Scandinavian governments. What had happened was that North Koreans in all three countries* had been caught red-handed in a massive smuggling racket involving liquor, cigarettes and dope —apparently instigated by the financially hard-pressed government of President Kim II Sung. Officials in Norway estimated that their branch of the Kim gang had smuggled into the country at least 4,000 bottles of booze (mostly Polish vodka) and 140,000 cigarettes, which were then given surreptitiously to Norwegian wholesalers for distribution on the black market. In Denmark, the illegal goodies impounded so far included 400 bottles of liquor, 4.5 million cigarettes and 147 kilos of hashish, which police confiscated two weeks ago from two Danes who had just bought the drug from North Korean embassy staffers.

Personal Use. How long the North Koreans have been into smuggling as a sideline remains unclear, but Scandinavian officials have been closely watching their business dealings for about five months. In Norway, neighbors of the neat brick North Korean embassy in Oslo’s West End had long been puzzled by the constant movement of cars in and out of the compound and by the sight of mission staffers struggling in the backyard with huge mysterious boxes. In Denmark, customs officials got suspicious last month when the North Koreans imported 2.5 million duty-free cigarettes, allegedly for the “personal use” of one staffer.

The discovery of illegal activity by the North Koreans in Scandinavia may be only the iceberg’s tip. Five months ago in Cairo, Egyptian officials caught two North Korean diplomats with 400 kilos of hashish in their luggage. A North Korean official assigned to Malaysia has also been recalled after dealing in smuggled goods.

The North Koreans have protested their innocence, and mission staffers in Finland insisted that they would not leave the country. Nonetheless, Scandinavian officials have little doubt that the smuggling was ordered by Pyongyang as a desperate measure to help resolve the government’s horrendous financial crisis. Western experts estimate that North Korea, with a G.N.P. of only $4.5 billion, has a foreign debt of more than $2 billion, at least $500 million of which is owed to the capitalist world. North Korea not only maintains some 60 expensive missions abroad but also buys millions of dollars’ worth of advertising space in newspapers round the world every year to publicize the latest speeches of Kim II Sung. Faced with a severe shortage of hard Western currency, officials speculate, North Korean diplomats turned to smuggling to support their missions and pay for the ads, sending any excess profits home to Pyongyang.

The DPRK embassy has also been accused of smuggling in Pakistan.

Sometimes the DPRK embassy staff make “good” business decisions.

Good article here with further info (h/t OneFreeKorea).

2007 CRS report: Drug Trafficking and North Korea: Issues for U.S. Policy

You could probably write a series of books on the DPRK embassies in Russia and  China.

And just for the record: Sweden–the North Koreans are not the only ones doing this–everyone is.  When I lived in Europe over 15 years ago I talked with fellow teenagers about doing this!  If you want to increase people’s incomes, increase tax receipts, and lower the incomes of mobsters and bootleggers–lower your cigarette taxes!

Read the full stories here:
Diplomats arrested for cigarette smuggling
Reuters
Jens Hansegard
11/20/2009

SCANDINAVIA: Smuggling Diplomats
Time Magazine
11/1/1976

Institute for Far Eastern Studies (IFES)
NK Brief No.09-11-20-1
11/20/2009

The recent hike in narcotics prices in North Korea appears to be due to rising prices on homes and in markets.

According to Daily NK, “Recent narcotics prices have grown considerably,” and, “If narcotics prices rise, market prices rise across the board.”

As North Korean officials crack down on narcotics production and distribution, the availability of Philopon and other narcotics has been sharply reduced. This reduction in supply is driving up prices.

Drug prices in North Korea first jumped sharply in February of last year, as officials began cracking down on production centers in Hamheung and Pyeongseong.

These raids were said to sharply reduce narcotics production, and in the same month the price of one kilogram of “Ice” shot up to 1,000 won (approx. 2,700 USD), and then again to as much as 2,000 won in April. As soon as narcotics prices rose, housing prices also increased and the price of all factory-produced goods in markets went up. It is as if inside North Korea, the rise in narcotics prices causes the price of everything to increase.

As late as fall 2007, a kilogram of Philopon ran for 5 million won, and could be easily found by those who were looking. By 2008, however, as officials cracked down harder on Philopon producers and dealers, the price had risen exponentially.

Another factor impacting drug prices in North Korea is the sharply growing number of users in China. Despite the efforts of Chinese police, they have been unable to curb the growing flow of narcotics across the border and into the border regions.

In October 2009, one kilogram of Philopon ran from between 50-70 million won, depending on the quality. When smuggled into China, the drugs bring between 150-200 thousand yen (80-100 thousand DPRK won), which when exchanged for ROK currency equals between 30-40 thousand won.

In North Korea, drugs determine housing prices, with the most expensive house in an average city going for the price of one kilogram of Ice. Rising housing costs drive up prices in markets, so that now a kilogram of rice sells for 2200 won.

The price of rice generally falls after the harvest season, but this year remained relatively unchanged. In April of last year, food prices shot up from 2000 to 3000 won for a kilogram of rice, and while this was also related to food shortages, the rising cost of narcotics played a large role.

The reason narcotics prices have such an impact is due to the particular nature of drug sales in North Korea. Drug peddlers deal in cash with narcotics producers, but as cash can be hard to come by, these dealers put up houses as collateral before taking the drugs to China.

In addition, most Chinese renminbi and U.S. dollars circulating in North Korean markets are from the cross-border drug trade, and the fees charged by money-handlers in North Korean markets drive prices up considerably.