A North Korean Corleone

Sheena Chestnut Greitens writes in the New York Times:

What kind of deal do you make with a 20-something who just inherited not only a country, but also the mantle of one of the world’s most sophisticated crime families? When Kim Jong-un, who is thought to be 28 or 29, became North Korea’s leader in December after the death of his father, Kim Jong-il, he became the de facto head of a mafia state.

How the new leader combines the roles of head of state and mafia don will influence the regime’s future behavior. Crime bosses have different incentives, and dealing with them requires different policies. And any deal — including last week’s agreement by North Korea to suspend its nuclear program in exchange for American food aid — will eventually falter if that reality is ignored.

Kim Jong-un confronts the same problem faced by every dictator: how to generate enough money to pay off the small group of elite supporters — army generals, party and family — who keep him in power. Other autocrats use oil wealth or parcel out whole industries to cronies.

But whoever rules North Korea has less to work with than most. The country defaulted in the 1970s, losing access to international credit, and Soviet subsidies ended with the cold war. In the 1990s, the founder and “eternal president,” Kim Il-sung, died just as a series of natural disasters devastated food production. The country has been an economic and humanitarian basket case ever since.

Kim Jong-il, who began training to run the country in the 1970s and inherited it after his father’s death, came up with an unconventional solution: state-sponsored organized crime. Counterfeit cigarettes and medicine, drugs, insurance fraud, fake money, trafficking people and endangered species — for decades, the Kim regime has done it all. Its operations became so extensive and well coordinated that American officials nicknamed it the “Soprano state,” after the hit HBO television series.

In the 1970s, after the default, North Korea used diplomats as drug mules to keep embassies running. When that got them kicked out of multiple countries and the economy tanked in the 1990s, Kim Jong-il began producing drugs at home, thereby avoiding a major cost plaguing drug lords elsewhere: law enforcement.

He managed these operations through Bureau 39, a mysterious office under the Central Committee of the Korean Workers’ Party. But to create plausible deniability, he outsourced distribution to Russian mafia, Japanese yakuza and Chinese triad gangs, who met North Korean military forces for drug drops at sea. The regime also manufactured the world’s best counterfeit dollars — so good that they reportedly forced the Treasury to redesign the $100 bill — and used a crime ring connected to the Official Irish Republican Army, a Marxist offshoot of the I.R.A., to launder them in Europe. They even made fake Viagra.

The Agreed Framework that froze North Korea’s nuclear program in October 1994 didn’t stop these activities; they actually increased. Despite its other benefits, the framework didn’t address the fundamental hard currency needs of the North Korean leadership.

This criminal legacy means that Kim Jong-un has even more on his plate than one might think. In addition to running a country that is an economic and humanitarian disaster and a geopolitical hot spot, he also has to manage a global criminal racket. That’s a lot for any 20-something to handle. (As “Sopranos” fans know, A. J.’s taking over for Tony might not have been good for business.)

Despite the seemingly stable transition so far, Kim Jong-un is under pressure. Elite party members who supported his father will be skeptical of his untested ability to fulfill his side of their cash-for-support bargain. And North Korea needs more money than usual this year to celebrate the anniversaries of Kim Il-sung and Kim Jong-il. (In the ’70s, one of the first things Kim Jong-il used foreign currency for was a campaign to glorify his father.) Any sign that Kim Jong-un can’t satisfy supporters could crack the facade of elite solidarity.

What’s an aspiring kingpin to do?

First, find the money. Kim Jong-un seems to have done that. One of the last photos released of Kim Jong-il shows him riding a supermarket escalator. Behind him are Kim Jong-un and Jon Il-chun, manager of the infamous Bureau 39.

Second, control the people who earn the money. Illicit activity brings the risk of freelancing, especially when you’re forced to let others do the distribution. As North Korea outsourced the drug trade, its profit margins dropped — and more and more insiders skimmed off the system to line their pockets. Today, reports indicate that methamphetamine is widely used in North Korea (partly because it dulls hunger pains), and the state is cracking down on the trade it once monopolized. Even Kim Jong-il couldn’t maintain perfect control and had to send operatives abroad to retrieve misbehaving agents. These are delicate tasks easily botched by a novice.

Finally, keep the money coming. Criminal activity was never North Korea’s ultimate objective; the aim was always hard currency. Kim Jong-un needs cash without political conditions to stay in power. But there aren’t many good options for getting it these days, which is why North Korea is likely to pursue new and expanded forms of illicit activity.

Criminal activities are attractive because other sources of money have strings attached. Remittances from defectors, which have risen recently, don’t go to leaders, and they let in information. North Korea could bank on economic reform or Chinese aid, but reform won’t necessarily provide money for the elite, and aid makes Pyongyang uneasily dependent on Chinese patronage.

The cardinal fear of national security experts — which partly motivated last week’s agreement — is that Pyongyang will make money through nuclear proliferation. After all, North Korea is alleged to have helped build the Syrian nuclear reactor that Israel destroyed in 2007. But it may be hard for North Korea to find a buyer; tests of its plutonium warheads have been a questionable technical success, and their uranium-enrichment program may not be advanced enough to make them an attractive seller.

That leaves crime. Last week’s deal does not change the probability that North Korea will engage in it. And new lines of business probably won’t look like the old ones; North Korea’s schemes are creative and highly adaptable.

When drugs and counterfeit dollars got too much exposure, the regime shifted toward cigarettes and insurance fraud. Last summer, South Korean authorities discovered North Korea’s involvement in a hacking ring that exploited online gaming sites to win points and exchange them for cash, making $6 million in two years. Given that cybercriminals across the world gross over $100 billion annually, a country with decent cyberwarfare capabilities could probably do well for itself.

Or could North Korea go legit? Publicly at least, there haven’t been major seizures of its drugs or counterfeit currency in several years, leading analysts to speculate that targeting the country’s illicit finances successfully crippled those particular earning schemes. And Kim Jong-il’s death does give North Korea an opportunity to get out of the game.

BUT legitimacy won’t solve Kim Jong-un’s problem. Right now his survival is guaranteed by hard currency, and the best source of it is illicit activity. That’s why previous American efforts sought to shut off these activities: to convince the regime it had to reform itself to survive.

That didn’t go quite far enough. Shutting down those activities works only so long as North Korea can’t find new ones. The key to survival was not any one illicit activity but the ability to adapt from one to another — an ability that, with Kim Jong-il gone, likely rests with just a few trusted people. Those people, their loyalties and their relationships are now Kim Jong-un’s biggest vulnerability. If North Korea loses its capacity to adapt, it will lose the ability to make money illicitly — and will have to choose reform.

For America to make successful deals with North Korea, we must first grasp that its leader faces not just a dictator’s problems, but those of a mafia boss. And if you make a deal with the Godfather, you must not overlook the interests of the consigliere standing behind him.

Read the full story here:
A North Korean Corleone
New York Times


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