North Korean Economy Watch

Joong Ang Daily
Brian Lee
3/24/2007

The messy knot of North Korean funds frozen in a Macao bank is proving difficult to untangle despite Washington’s assurances that the money will be returned to Pyongyang.
As a result, the six-party nuclear talks, which recessed Thursday over the issue, remain on hold while a solution is sought. North Korea demands that it have the money in hand before sitting down again.

South Korean Foreign Minister Song Min-soon said yesterday that the problem of returning the $25 million in funds frozen in Macao’s Banco Delta Asia would be resolved next week and the talks would resume soon. Seoul’s top negotiator, Chun Young-woo, however, said on the same day that resolving the issue will be difficult.

“Next week we will resolve it and expect to move forward in implementation measures,” Mr Song said in a news conference.

Mr. Chun said that the Bank of China, despite pressure by the Chinese government, has refused to put the money into North Korean accounts but is working with Washington to find a way to relay the money to a bank in a third country.

A government official said yesterday that the Bank of China, which is listed on the Hong Kong Stock Exchange, has foreign shareholders and is not willing to risk alienating itself from the international financial community by associating itself with money branded illicit by Washington.

In September 2005, Washington declared Banco Delta Asia a prime money launderer on behalf of North Korea, a move which caused the funds to be frozen.

Furious, North Korea backed away from nuclear negotiations and demanded the money back as a precondition for substantive talks. Recently, Washington agreed to the release of the funds but it has ordered all ties between the rogue bank and the U.S. financial system cut.

Meanwhile, the U.S. State Department said that Treasury Department official Daniel Glaser will go to Beijing soon to consult with the Bank of China on the issue.

Sources said that providing written assurances to the bank from American regulators that it would not face scrutiny over relaying the money might be one way to resolve the issue.
Mr. Chun said that finding a bank willing to accept the money is the key. “North Korea has to designate a bank in a third country,” said the official. “North Korea does not want cash.”

A government official said yesterday that Pyongyang wants contact with an overseas bank and is also unwilling to have the money wired to a North Korean bank.

“Any bank will think that there could be problems with its credit rating when dealing with money stamped illicit by Washington,” the official said. “Finding a bank to receive the money will be a difficult task.”

Mr. Chun remained cautiously optimistic. While he admitted that little progress was made in the latest round of talks, he said that from a long term perspective Pyongyang has learned a lesson that would help it understand its current position of isolation in the international community. “Even if there is the political will to resolve the issue, North Korea has seen the cold reality of the international financial world,” he said.

Korea Herald
3/20/2007

‘Pyongyang pledges to use funds for education, humanitarian purposes’

The United States and North Korea have resolved a dispute over $25 million in frozen North Korean funds, clearing the way for progress in dismantling the North’s nuclear programs, U.S. officials said Monday.

The U.S. nuclear envoy, Christopher Hill, said six-party talks - which resumed Monday - could now “move on to the next problem, of which there are many.”

U.S. Deputy Assistant Treasury Secretary Daniel Glaser said the funds would be transferred into a North Korean account at the Bank of China in Beijing to be used for education and humanitarian purposes. Glaser said Pyongyang had proposed the arrangement.

The funds, some of which U.S. authorities suspect may be linked to counterfeiting or money laundering by cash-starved North Korea, had held up progress in nuclear disarmament talks.

“North Korea has pledged … that these funds will be used solely for the betterment of the North Korean people,” Glaser said.

“We believe this resolves the issue of the DPRK-related frozen funds,” Glaser said using the acronym for North Korea’s formal name, the Democratic People’s Republic of Korea.

Under last month’s deal, North Korea - which conducted its first atomic test in October last year - would get badly needed energy aid and diplomatic concessions in return for shutting down its nuclear programs.

North Korea was given 60 days from the signing of the agreement to close its main nuclear reactor at Yongbyon and allow International Atomic Energy Agency (IAEA) inspectors back into the country to supervise.

In return, North Korea would initially receive 50,000 tons of heavy fuel for energy.

The impoverished state would eventually receive 1 million tons of heavy fuel or equivalent energy aid if it permanently disbanded its atomic weapons program.

Hill said he now expected the initial provisions of the February accord to be implemented on schedule.

“We look forward to that process continuing in the next 30 days, so that we will have the shutdown of the Yongbyon facility and the sealing of it and the monitoring of it by IAEA personnel,” he said.

Hill also insisted that the United States had achieved its goals in taking action against North Korea for money laundering and counterfeiting, despite allowing the $25 million to go back to Pyongyang.

“What this means is that the North Koreans understood our concerns (and were) prepared to cooperate with us to make sure the money is used appropriately,” he said.

South Korea, which has already said it will provide the initial batch of 50,000 tons of fuel oil, welcomed Monday’s development.

“Since the issue has been resolved, there will be no big obstacles… during the initial 60-day stage for disabling North Korea’s nuclear facilities,” chief South Korean envoy Chun Yung-woo told reporters.

Japan’s chief envoy, Kenichiro Sasae, expressed similar optimism but cautioned that the focus should remain on the much tougher task of permanently putting an end to North Korea’s nuclear program.

“What is important is that this is not the end… we must work by holding a broad view, a long-term view. We must not be caught up on day-to-day movement,” Sasae said.

NY Times
Steven R. Weisman
3/14/2007

The Treasury Department is expected to move formally this week to bar American banks from engaging in transactions with a bank in Macao linked to North Korea, clearing the way for North Korea to regain possession of money at the bank frozen since 2005, a Bush administration official said Tuesday.

American officials see such a step by the Treasury, which has been expected for weeks, as a crucial part of the recent deal to disarm North Korea’s nuclear program. The deal, announced last month, requires North Korea to disarm its nuclear facilities in return for economic and energy benefits.

The Chinese government effectively froze about $25 million connected to North Korea a year and a half ago, when the Treasury Department listed Banco Delta Asia, a small family-owned bank in Macao, as a “primary money laundering concern.” As much as half of the money is expected to be returned to North Korea.

American officials charged in 2005 that the bank was helping North Korea conduct counterfeiting, narcotics trafficking and transactions related to its nuclear weapons program, a charge that North Korea and the bank denied.

The initial Treasury announcement put American banks on notice that after further investigation, the department would decide whether to bar United States banks formally from facilitating transactions with the bank.

However, the practical effect was to make all United States banks voluntarily cease transactions with Banco Delta Asia.

Without the ability to acquire dollars, Banco Delta Asia collapsed. Macao froze all its funds related to North Korea, and most of its other customers withdrew their money in a run on the bank. The bank was then taken over by the authorities in Macao, a semiautonomous province of China.

Subsequently, American and Chinese authorities pored over more than 300,000 documents describing the transactions with North Korea. These included accounts of 20 North Korean banks, 11 North Korean trading companies, 9 North Korean citizens and 8 Macao-based companies that did business with North Korea, according to bank records filed with the Treasury Department.

The Treasury announcement expected this week would formalize what is already in place. It would probably mean that the bank could do only a modest amount of business, without the benefit of dollar transactions.

But it would mean that the Chinese government would be in a position to return some of the funds to North Korea that are not linked to counterfeiting, drugs, nuclear arms or other illicit activities.

For example, some of the funds belong to a North Korean unit of British American Tobacco, American officials say, and those funds are expected to be returned to the company, which is owned by British interests.

When the North Korea nuclear deal was announced last month, no mention was made of returning funds to North Korea from the bank, but American officials now say that the return of those funds was a major incentive for North Korea to reach an accord.

The disarmament agreement was negotiated with the United States, China, South Korea, Japan and Russia as part of what were called six-party talks.

Christopher R. Hill, the assistant secretary of state for East Asian and Pacific affairs and the central envoy in the talks, said this month that North Korea was “concerned about the fact that we were able to go after an important node of their financing” but that the United States would continue to monitor its illicit activities.

Korea Times
2/27/2007

U.S. officials said Monday they had wound up their probe into a Macau bank accused of laundering millions of dollars of illicit North Korean funds, Agence France-Presse reported.

The U.S. move raised expectations that sanctions placed on the lender may soon be lifted, AFP said in its dispatch from Hong Kong.

AFP quoted Daniel Glaser, an assistant to the U.S. Treasury Department’s deputy secretary, as saying that a team of U.S. officials had met Macau financial authorities during their one-day visit.

“We’ve completed our investigation,’’ Glaser was quoted as telling reporters at a hastily convened press briefing in nearby Hong Kong hours after the talks ended.

“Everything that we have seen throughout this investigation has confirmed and reinforced the concerns we initially expressed in September 2005,’’ he added.

The talks follow a deal announced two weeks ago between the U.S., the two Koreas, Japan and Russia on initial steps towards dismantling Pyongyang’s nuclear program.

As part of the agreement, the U.S. Treasury team probing Banco Delta Asia (BDA) and other banks believed to have links to North Korea said they would begin talks that would lead to the lifting of sanctions.

“All of this work has put us in a position where we can begin to take steps resolve the BDA matter,’’ Glaser was quoted as saying, adding that he had discussed the matter with North Korean and Macanese authorities.

However, he would not say when a decision would be made on lifting the sanctions, nor on what would happen to some $24 million worth of bank assets frozen by the Treasury.

“I don’t think it would be responsible for me to get into a specific timetable, but we do intend to take steps to resolve the matter and we do intend to do that in a timely fashion and to do it as soon as possible,’’ Glaser said.

BDA has been under administration in Macau since the Treasury announced its inclusion on the watch list in 2005.

The government stepped in after fearful depositors began withdrawing funds at a rate that threatened to destabilize the southern Chinese territory’s financial system.

AFP said that in December the bank admitted to buying gold bullion produced by North Korea.

According to the AFP report, the bank also admitted to continued dealings with Tanchon Commercial Bank for three months after the North Korean lender was blacklisted.

Promising never again to deal with North Korea, BDA has appointed an outside compliance officer and hired Hong Kong-based consultants to upgrade its computer system.

Macau’s authorities, meanwhile, with the backing of China’s central government in Beijing, have instituted tough new laws against money laundering and counterfeit currency.

Korea Times
1/13/2007

Kim Jong-nam, believed to be the eldest son of North Korean leader Kim Jong-il, has taken charge of the overseas sales of North Korean military weapons.

The junior Kim, 35, went back to Pyongyang via a Koryo Air flight from Beijing on Tuesday after getting a lot of media attention during his three-day stay in the Chinese capital.

According to the Segye Times, a vernacular daily, Jong-nam has made profits for his country by selling military weapons such as Scud medium-range missiles and SA-16 surface-to-air missiles overseas.

He invested money in real estate and overseas banks offering high interest rates in several countries including Britain, Switzerland, Hong Kong, Macau and Singapore, said the report based on comments from an expert on North Korean affairs in Japan.

On Sunday Kim was spotted by Japanese television crews at Beijing International Airport. His appearance in Beijing sparked interest among North Korea watchers, as the six-party talks over the North’s nuclear weapons programs were being held there.

Reports said Kim was on a three-day layover on his way back home to attend his father’s 65th birthday party, which falls on Friday.

Wearing a Reebok baseball cap and blue jeans as well as a gold necklace, Kim showed off his foreign language skills in brief interviews with the news media including Japan’s Fuji television.

Asked whether he speaks Japanese, he answered in Japanese that he didn’t understand the language. He also said he speaks a little bit of English and French as he studied in Europe for several years.

Kim said he meets with his father “sometimes” but did not elaborate on their relationship.

According to reports Kim stayed at his favorite hotel, the Kempinski Hotel located adjacent to the South Korean embassy in Beijing during his short visit.

The Toronto Globe and Mail reported earlier this month that the North Korean leader’s son has been spending most of his time for the past three years at casinos, saunas and luxury hotels in Macau, the former Portuguese enclave near Hong Kong.

Kim was photographed in the city by a newspaper as he left his favorite hotel, the Mandarin Oriental.

According to the South China Morning Post, he has frequently visited Macau’s casinos and often goes out drinking late at night.

There have been rumors that fell out of favor with his father in 2001 when he embarrassed the regime in a bizarre incident in Japan.

Kim was briefly detained at Tokyo’s airport where he tried to enter Japan on a fake Dominican Republic passport. He was on his way to visit Tokyo Disneyland, reports said.

Korea Times
Chang Se-moon
1/23/2007

Obviously, it is important to know the correct answer to this question. Sanctions that have no impact on North Korea’s economy will not change the behavior of North Korean leaders. If sanctions do have a significant impact, the possibility that North Korean leaders may be tempted to resolve the pending security issues through negotiations exists.
In answering the question, however, we need to keep in mind what the British economist John Maynard Keynes (1883-1946) said: “The theory of economics does not furnish a body of settled conclusions immediately applicable to policy. It is a method rather than a doctrine, an apparatus of the mind, a technique of thinking which helps its possessor draw correct conclusions.’’ In plain English, Keynes stressed an unbiased economic way of thinking that could help us draw correct conclusions. In other words, until we review all the facts with an open mind we should not make up our minds.

This is exactly what we will do by assessing the impacts of economic sanctions on North Korea.

The first question that comes to mind is which sanctions are we talking about. If we review U.S. sanctions on North Korea since the outbreak of the Korean War in 1950, there would be too many sanctions imposed on North Korea to be practical. There are three important sanctions that are still in effect, however. One is the U.S. denial of a Most Favored Nation (MFN) trade status on North Korea’s exports.

This sanction was imposed on North Korea’s exports to the United States on September 1, 1951, following the outbreak of the Korean War. MFN tariffs are the lowest tariffs that are levied on imports to the U.S. Over 99 percent of imports to the United States qualify for the MFN tariffs. Without MFN status, tariffs on North Korean exports to the United States are so high that North Korea simply cannot even imagine exporting anything to the United States.

The second of the three important sanctions stemmed from the bombing of Korean Air 858 by North Korean agents on November 29, 1987. The explosion killed 115 innocent passengers and crew members. On January 20, 1988, North Korea was placed on the list of countries that supported international terrorism according to the U.S. Export Administration Act of 1979.

The importance of this sanction is that placement on the list has made it impossible for North Korea to borrow money from international financial institutions including the World Bank and the International Monetary Fund. Like the denial of MFN status, the placement of North Korea on the list of countries supporting international terrorism continues to this date.

The third of these three key sanctions relates to tightening of North Korea’s illegal financial transactions, which culminated in Banco Delta Asia’s termination of business dealings with North Korea as of February 16, 2006. You may know that Banco Delta Asia had long been suspected of handling North Korea’s illicit activities overseas such as laundering of counterfeit U.S. dollars and sales of illegal drugs

Banco Delta Asia is located in Macao, which is a Special Administrative District of China. Tightening of North Korean financial transactions was extended to North Korean trade during 2006. This added pressure on North Korea originated from U.N. Resolution 1540 following North Korea’s test-launching of long-range missiles on July 5, 2006, as well as from U.N. Resolution 1718 which followed North Korea’s nuclear test on October 9, 2006.

Are these sanctions having an impact on North Korea’s economy? Perhaps, a more accurate question is whether these sanctions are placing enough pressure on North Korean leaders to reconsider the possibility of returning to the negotiation table?

One aspect is the status of North Korea’s trade deficit. As you probably know, North Korea buys from other countries much more than it sells to other countries. When the amount of imports exceeds the amount of exports it’s called a trade deficit. North Korea’s annual trade deficit averaged about $800 million from 2003 to 2005. This figure does not include North Korea’s trade deficit against South Korea, since South Korea appears to consider any financial support to the North as a long-term investment rather than a trade deficit.

How has North Korea been paying for the trade deficit? The ways have been unique. Almost the entire deficit appears to have been financed by weapons sales, illicit activities, and funds flowing from South Korea through joint projects.

In fact, a study by the Korean Institute for Defense Analysis indicates that full implementation of U.N. Resolution 1718 would cause North Korea to lose just about the same amount ($700 million to $1 billion) by stopping exports of weapons and illegal drugs and counterfeit money.

The Economist Intelligence Unit is quoted to have estimated in 2003 that “North Korea earned as much as $100 million a year from counterfeit money, while in 2005, a U.S. task force estimated that “$45 million to $60 million in Pyongyang’s counterfeit currency (primarily in U.S. $100 bills) is in circulation,’’ reportedly, including some in Seoul’s Namdaemun Market.

Assuming that recently added sanctions will cause North Korea to lose about $800 million that it has been earning overseas each year, the next interesting question is how North Korea will pay for the annual trade deficit of $800 million in the future? If North Korea does not pay for its imports, other countries will refuse to sell products to North Korea and the North Korean economy will suffer.

North Korea cannot borrow from world financial institutions because of the 1988 U.S. sanctions that branded North Korea as one of countries supporting international terrorism. They cannot use the money from foreign direct investment because China and Korea are the only two countries that have been willing to invest in North Korea, but the combined amount is not even close to paying for the annual trade deficit.

Think of it this way. If you borrow money every year, and lenders believe that your ability to pay off the debt is rapidly declining, will lenders continue to lend you money? Not likely. With sanctions adversely affecting North Korea’s ability to pay for imports, North Korea will find it increasingly difficult to buy what it needs. The breaking point may not be imminent, but the future is predictable.

This is what I think will happen. North Korea will ask China to increase its foreign direct investment in North Korea by giving China more incentives for such investment. These incentives may include low taxes and free land. North Korea will ask South Korea to send more money.

For instance, as of July 1, 2004, Hyundai Asan and North Korea set the entrance fee to Mt. Kumkang at $10 for a day trip, $25 for a two-day trip and $50 for a three-day trip. On May 1, 2005, these fees were raised to $15, $35, and $70. On July 1, 2006, these fees were raised again to $30, $48, and $80. This is just one way.

North Korea may also ask South Korea to lend it a large sum of money with an empty promise of paying it back. This explains in part why it is so important for North Korea to have leaders of the South Korean government who are friendly to North Korea.

These desperate acts are likely to be very short of paying for the majority of the annual trade deficit. If sanctions continue to be effective, the likelihood of North Korea returning to the negotiation table increases. Economics is rarely boring, especially when it deals with real problems.

Heritage 2007 Index of Economic Freedom

North Korea’s economy is 3% free, according to our 2007 assessment, which makes it the world’s least free economy, or 157th out of 157 countries. North Korea is ranked 30th out of 30 countries in the Asia–Pacific region, and its overall score is the lowest in the world.

North Korea does not score well in a single area of economic freedom, although it does score 10 percent in investment freedom and property rights. The opening of the Kaesong industrial venture in cooperation with South Korea has been a start in foreign investment.

Business freedom, investment freedom, trade freedom, financial freedom, freedom from corruption, and labor freedom are nonexistent. All aspects of business operations are totally controlled and dominated by the government. Normal foreign trade is almost zero. No courts are independent of political interference, and private property (particularly land) is strictly regulated by the state. Corruption is virtually immeasurable and, in the case of North Korea, hard to distinguish from necessity. Much of North Korea’s economy cannot be measured, and world bodies like the International Monetary Fund and World Bank are not permitted to gather information. Our policy is to give countries low marks for specific freedoms when it is country policy to restrict measurement of those freedoms.

Background:
The Democratic People’s Republic of Korea has maintained its Communist system since its founding in 1948. A serious economic decline began in the early 1990s with the end of economic support from the Soviet Union and other Communist-bloc countries, including China. Floods and droughts all but destroyed the agricultural infrastructure and led to severe famine and dislocation of the population during the 1990s. South Korean and Chinese investments in the economy have alleviated dire conditions. The government continues to rely on counterfeiting foreign currency and sales of missiles for money. That and the nuclear ambitions and isolationism of Kim Jong Il reinforce North Korea’s status as the hermit kingdom.

Business Freedom - 0.0%
The state regulates the economy heavily through central planning. The economic reforms implemented in 2002 allegedly brought some changes at the enterprise and industrial level, but government regulations make the creation of any entrepreneurial activities virtually impossible. The overall freedom to start, operate, and close a business is extremely restricted by the national regulatory environment.

Trade Freedom - 0.0%
The government controls all imports and exports, and formal trade is minimal. Data on North Korean trade are limited and compiled from trading partners’ statistics. Most North Korean trade is de facto aid, mainly from North Korea’s two main trading partners, China and South Korea. Non-tariff barriers are significant. Inter-Korean trade remains constrained in scope by North Korea’s difficulties with implementing needed reform. Given the lack of necessary tariff data, a score of zero is assigned.

Fiscal Freedom - 0.0%
No data on income or corporate tax rates are available. Given the absence of published official macroeconomic data, such figures as are available with respect to North Korea’s government expenditures are highly suspect and outdated.

Freedom from Government - 0.0%
The government owns all property and sets production levels for most products, and state-owned industries account for nearly all GDP. The state directs all significant economic activity. The government implemented limited economic reforms, such as changes in foreign investment codes and restructuring in industry and management, in 2002.

Monetary Freedom - 0.0%
In July 2002, North Korea introduced price and wage reforms that consisted of reducing government subsidies and telling producers to charge prices that more closely reflect costs. However, without matching supply-side measures to boost output, the result of these measures has been rampant inflation for many staple goods. With the ongoing crisis in agriculture, the government has banned sales of grain at markets and returned to a rationing system. Given the lack of necessary inflation data, a score of zero is assigned.

Investment Freedom - 10.0%
North Korea does not welcome foreign investment. One attempt to open the economy to foreigners was its first special economic zone, located at Rajin-Sonbong in the northeast. However, Rajin-Sonbong is remote and still lacks basic infrastructure. Wage rates in the special zone are unrealistically high, as the state controls the labor supply and insists on taking its share. More recent special zones at Mt. Kumgang and Kaesong are more enticing. Aside from these few economic zones where investment is approved on a case-by-case basis, foreign investment is prohibited.

Financial Freedom - 0.0%
North Korea is a Communist command economy and lacks a private financial sector. The central bank also serves as a commercial bank with a network of local branches. The government provides most funding for industries and takes a percentage from enterprises. There is an increasing preference for foreign currency. Foreign aid agencies have set up microcredit schemes to lend to farmers and small businesses. A rumored overhaul of the financial system to permit firms to borrow from banks has not materialized. Because of debts dating back to the 1970s, most foreign banks will not consider entering North Korea. A South Korean bank has opened a branch in the Kaesong zone. The state holds a monopoly on insurance, and there are no equity markets.

Property Rights - 10.0%
Property rights are not guaranteed in North Korea. Almost all property belongs to the state, and the judiciary is not independent.

Freedom from Corruption - 10.0%
North Korea’s informal market is immense, especially in agricultural goods, as a result of famines and oppressive government policies. There is also an active informal market in currency and in trade with China.

Labor Freedom - 0.0%
The government controls and determines all wages. Since the 2002 economic reforms, factory managers have had more autonomy to set wages and offer incentives, but the labor market still operates under highly restrictive employment regulations that seriously hinder employment and productivity growth.

Kyodo News
1/3/2007

Singapore has banned the export of luxury items and military equipment to North Korea as of the beginning of this year in line with U.N. Security Council sanctions, Singapore Customs said Wednesday on its website.

In addition, it has also curbed the use of the city-state as a transhipment hub in Asia for such exports.

The notice said the government has banned the export of 14 luxury items to North Korea, including cigars, wines, luxury cars, perfume, plasma televisions, personal digital music players and musical instruments.

It said the export and transit of military equipment and goods and technology related to nuclear programs, ballistic missiles and other weapons of mass destruction have also been prohibited.

Traders here have been ordered to declare to the agency details of their exports to North Korea at least three working days before shipment.

The agency has warned that those who breach the rule could be slapped with hefty fines of up to S$100,000 (about $65,000) or three times the value of the goods, whichever is greater, or sent to jail for up to two years, or both.

Multiple offenders could be fined up to S$200,000 or four times the value of goods, whichever is greater, or jailed up to three years or both.

The U.N. Security Council in October imposed weapons and financial sanctions on North Korea under resolution 1718, which was adopted after the North’s claimed nuclear tests.

Yonhap
12/6/2006

South Korea is set to announce its participation in a U.S.-led campaign to stop container-borne radioactive materials after refusing to help interdict North Korean ships suspected of carrying weapons of mass destruction.

A Foreign Ministry official confirmed Wednesday that Seoul decided to join the International Container Scanning Network, or ICSN.

“The government plans to formally announce the decision later this week,” the official said, asking not to be identified.

The ICSN calls for its members to install state-of-the-art radioactivity detectors at their major ports so customs officials can screen the contents of containers without opening them.

International efforts to curb the flow of nuclear materials have gained more urgency since North Korea conducted a nuclear test in October.

Seoul’s decision to join the ICSN was widely interpreted as designed to offset its limited participation in the Proliferation Security Initiative (PSI).

South Korea said last month that it would stay away from any PSI-related activity in the vicinity of the Korean Peninsula, citing its unique geopolitical situation. South Korea remains technically at war with the communist North and the two sides are vulnerable to military clashes especially in the poorly-demarcated West Sea.

South Korea described its position in the PSI as “special status,” as it kept the door open for PSI activities in remote areas.

Government officials, however, said the PSI was not considered when it made the decision to join the ICSN, a project still being tested.

From the Korea Times
10/30/2006

North May Have Been Selling Missiles

North Korea was selling its missiles to the Near East as recently as 2003-2004, according to inferences made in the latest report by the U.S. Congressional Research Service (CRS).

The annual report, titled “ Conventional Arms Transfers to Developing Nations,” says 40 surface-to-surface missiles were sold to the Near East by “other suppliers” that exclude the United States, Russia, China, and European countries.

The New York Times, quoting Pentagon and other U.S. administration officials, said North Korea is the unnamed supplier.

CRS reports are written for congressmen and their aides.

Dated Oct. 20, the report tallies and analyzes general weapons transfers between 1998-2005. The missile sales figures were for 2001-2005.

The number of missiles sold by “other suppliers” is the same as that of the previous report that covered the period between 2001-2004, suggesting North Korea did not export more missiles in 2005.

But in a report for the 2000- 2003 period, the other suppliers were believed to have sold 20 surface-to-surface missiles to the Near East, indicating there were additional exports of the weapons to the region between 2003 and 2004.

The year 2004 was when the U.S.-led Proliferation Security Initiative (PSI) got under way to interdict shipments of weapons of mass destruction.