North Korean Economy Watch

UPDATE 2: Here is the actual Treasury Department Press Release (11/18/2010):

Treasury Designates Key Nodes of the Illicit Financing Network of North Korea’s Office 39

11/18/2010
WASHINGTON – The U.S. Department of the Treasury today designated Korea Daesong Bank and Korea Daesong General Trading Corporation pursuant to Executive Order (E.O.) 13551 for being owned or controlled by Office 39 of the Korean Workers’ Party.  Office 39 is a secretive branch of the government of the Democratic People’s Republic of Korea (North Korea) that provides critical support to North Korean leadership in part through engaging in illicit economic activities and managing slush funds and generating revenues for the leadership. Office 39 was named in the Annex to E.O. 13551, issued by President Obama on August 30, 2010, in response to the U.S. government’s longstanding concerns regarding North Korea’s involvement in a range of illicit activities, many of which are conducted through government agencies and associated front companies. Korea Daesong Bank is involved in facilitating North Korea’s illicit financing projects, and Korea Daesong General Trading Corporation is used to facilitate foreign transactions on behalf of Office 39.

“Korea Daesong Bank and Korea Daesong General Trading Corporation are key components of Office 39’s financial network supporting North Korea’s illicit and dangerous activities,” said Under Secretary for Terrorism and Financial Intelligence Stuart Levey.  “Treasury will continue to use its authorities to target and disrupt the financial networks of entities involved in North Korean proliferation and other illicit activities.”

E.O. 13551 targets for sanctions individuals and entities facilitating North Korean trafficking in arms and related materiel; procurement of luxury goods; and engagement in certain illicit economic activities, such as money laundering, the counterfeiting of goods and currency, bulk cash smuggling and narcotics trafficking. As a result of today’s action, any assets of the designated entities that are within U.S. jurisdiction are frozen and U.S. persons are prohibited from conducting financial or commercial transactions with these entities.

UPDATE 1: Here is the US Treasury Department’s web page on North Korea.

ORIGINAL POST: According to Reuters:

The United States sanctioned on Thursday two North Korean companies linked to a group it accuses of drug smuggling and other “illicit” activities to support the nation’s secretive leadership.

U.S. sanctions against North Korea aim in part to persuade Pyongyang to abandon its nuclear programs, which the United States views as a threat to its allies South Korea and Japan. The North tested nuclear devices in 2006 and 2009.

The Treasury Department’s moves against Korea Daesong Bank and Korea Daesong General Trading Corporation will freeze any assets belonging to them that fall within U.S. jurisdiction as well as bar U.S. companies from dealing with them.

Their main aim is not to block North Korean assets in U.S. banks — analysts say there are unlikely to be any — but to discourage other banks from dealing with North Korea, thereby cutting off its access to foreign currency and luxury imports.

Perks and luxuries such as jewelry, fancy cars and yachts derived from North Korea’s shadowy network of overseas interests are believed to be one of the main tools Pyongyang uses to ensure loyalty among top military and party leaders to North Korean leader Kim Jong-il.

The Treasury described the two entities as “key nodes of the illicit financing network” of Office 39 of the Korean Workers’ Party, which it accuses of producing and smuggling narcotics to earn foreign exchange for the government.

“Korea Daesong Bank and Korea Daesong General Trading Corporation are key components of Office 39’s financial network supporting North Korea’s illicit and dangerous activities,” Treasury Under Secretary Stuart Levey said in a statement.

Heroin Production?
The Treasury designated the two under a recent executive order that targets entities that support North Korea’s arms trafficking, facilitate its luxury goods purchases and engage in illicit economic activities such as money laundering, drug and bulk cash smuggling and counterfeiting goods and currency.

President Barack Obama signed the executive order on August 30 allowing the Treasury to block the U.S. assets of North Korean entities that trade in arms or luxury goods, counterfeit currency or engage in money laundering, drug smuggling or other “illicit” activity to support the government or its leaders.

When that executive order was announced, the Treasury accused Office 39 of producing opium and heroin and of smuggling narcotics such as methamphetamine.

U.S.-North Korean relations have deteriorated since Obama took office, with his aides deeply unhappy about Pyongyang’s decision to conduct nuclear and missile tests last year as well as the March 26 sinking of the South Korean corvette Cheonan.

Forty-six South Korean sailors were killed in the incident, which the United States, South Korea and other nations blame squarely on North Korea. Pyongyang denies responsibility.

In the August 30 executive order, Obama cited the Cheonan’s sinking as well as 2009 nuclear and missile tests by North Korea as evidence it poses “an unusual and extraordinary threat” to U.S. national security, foreign policy and economy.

The Obama administration has been skeptical about returning to so-called six-party negotiations with the two Koreas, China, Japan and Russia under which Pyongyang committed in 2005 to abandon its nuclear programs.

U.S. officials say they do not want to talk for the sake of talking and North Korea must show some commitment to abandoning its nuclear programs.
Read the full story here:
U.S. sanctions two North Korean entities
Reuters
Arshad Mohammed
11/18/2010

According to Voice of America:

The South Korean Unification Ministry’s annual report calls the Sunshine Policy of peaceful engagement with North Korea a failure.

The ministry’s white paper, issued Thursday, contends a decade of cooperation, cross-border exchanges and billions of dollars in aid did not change Pyongyang’s behavior or improve the lives of North Korean citizens.

Lee Jong-joo, a ministry spokeswoman, says South Korea’s goal is to see North Korea prosper, but Seoul must respond appropriately to any provocations from Pyongyang.

Compared with the previous two administrations here, North-South relations have significantly cooled under President Lee Myung-bak.

Mr. Lee, since taking office in 2008, has insisted North Korea give up its pursuit of nuclear weapons if it wants badly needed food and other aid from Seoul.

His conservative government points to North Korea’s continued nuclear programs and this year’s sinking of a South Korean warship as examples of deception by Pyongyang.

The white paper’s publication was delayed six months to include information on the sinking of the Cheonan navy ship in March.

Pyongyang denies responsibility for the sinking. An international investigation concluded the ship was hit by a North Korean torpedo.

Park Young-Ho is a senior research fellow at the government-funded Korea Institute for National Unification. He says Mr. Lee’s administration is trying to establish a relationship based on rules with the North.

Park says this is a shift, in response to four decades of Pyongyang’s questionable attitude towards inter-Korean engagement.

The ministry’s report complains about the lack of progress on other critical issues, including reuniting separated families and the release or information about South Korean prisoners of war, as well as citizens abducted by the North’s agents.

Referring to huge payments Seoul secretly made to Pyongyang to bring about a 2000 summit of the countries’ leaders, the Unification Ministry says any future engagement must be done transparently.

The policy document does stress the importance of dialogue between Seoul and Pyongyang.

On Thursday, Pyongyang sent a message to Seoul saying it is prepared to discuss the status of a jointly run resort in the North when their Red Cross societies hold talks next week.

South Korea’s government has asked Pyongyang to release assets it seized in Seoul’s portion of the Mount Kumgang resort.

Tours to the resort were a rare source of hard currency for the impoverished North. Seoul suspended the program in 2008 when a North Korean guard shot and killed a South Korean tourist near the resort.

Read the full story here:
South Korea Formally Declares End to Sunshine Policy
Voice of America
11/18/2010

Acording to Reuters:

North Korea is facing a grain deficit of 542,000 tonnes in the 2010/11 marketing year after the government only partially provided for grain import cover, the United Nations’ food agencies said on Tuesday.

North Korea’s cereal import requirement in 2010/11 is estimated at 867,000 tonnes, while the government plans to import commercially only about 325,000 tonnes, the Food and Agriculture Organisation and the World Food Programme said .

“The mission recommended to provide some 305,000 tonnes of international food assistance to the most vulnerable population,” the FAO and WFP said in a report after a joint mission to the country.

According to the New York Times:

Despite a relatively good autumn harvest in North Korea, the reclusive communist nation remains in dire need of food aid, especially for its youngest children, pregnant women and the elderly, according to two United Nations agencies.

In a new joint report, the World Food Program and the Food and Agriculture Organization said that North Korea, even after substantial imports, would have a shortfall in staple crops — mostly rice, grains and soybeans — of more than half a million tons.

The 2010 harvest was 3 percent higher than last year, the agencies said, despite an unusually harsh winter and alternating drought and flood conditions over the summer.

But even in the best of years North Korea is unable to feed itself. Government food distribution provides only half the necessary daily calories, the report said. People are thus left to fend for themselves with small hillside plots, kitchen gardens and the buying of or bartering for food on the black market.

Aid officials have estimated that the food aid program for North Korea was 80 percent underfunded and that nearly half the country’s children are malnourished.

“I saw a lot of children already losing the battle against malnutrition,” said Josette Sheeran, executive director of the World Food Program, after a visit to North Korea earlier this month.

“Their bodies and minds are stunted, and so we really feel the need there,” she said. , Agriculture is “the main contributor to the national income” in the North, the agencies said, although its percentage of gross domestic product has declined in the past decade to 21 percent from 30 percent. A lack of foreign currency and credit, made worse by international sanctions against the regime, prevented significant imports of fertilizer and pesticides as well as tires and spare parts for farm trucks and tractors.

In remarks before the Group of 20 summit meeting in Seoul last week, U.N. Secretary General Ban Ki-moon said he had “very serious concerns about the humanitarian situation” in North Korea, “especially for the very young children.”

Mr. Ban said the South Korean president, Lee Myung-bak, had pledged to him that the South would provide humanitarian assistance to the North’s children.

…

The two U.N. agencies said their report, which was released Tuesday, was produced by teams that went to most of North Korea’s principal agricultural regions.

As the teams traveled around, the report said, “it was evident that there were no cereals in stock in the warehouses visited.”

…

Additional Information:
1. Here is a link to stories about South Korean aid provided this year. 

2. The DPRK has recently expressed skepticism over the motivations of foreign aid agencies.

3. Here is a PDF of the UN Special Report.  It is full of data and has been added to my Economic Statistics Page.

4. Here is a link to the UN report which you can read on line.

Read the full sotries here:
N.Korea faces 542,000 t grain deficit in 2010/11-UN
Reuters
11/16/2010

U.N. Urges Food Aid for North Korea
New York Times
Mark McDonald and Kevin Drew
11/17/2010

According to the Donga Ilbo:

North Korea has re-frozen and re-seized South Korean facilities at the Mount Kumgang resort that were reopened in the latest reunions of inter-Korean separated families.

An official at the South Korean Unification Ministry said Sunday that the North attached “frozen” labels on dining and container-type lodging facilities and a vehicle maintenance plant at the resort owned by Hyundai Asan Corp. of South Korea.

Pyongyang will also likely attach “seized” labels on a family reunion center owned by the South Korean government where the reunions took place.

You can read about the family reunions here.

Read the full story here:
NK Re-freezes S. Korean Facilities at Mount Kumgang
Donga Ilbo
11/15/2010

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-11-13-1
11/13/2010

The construction cost for six inter-Korean cooperative industrial parks like the Kaesong Industrial Complex would carry a construction bill of 44 billion Won. According to “Analysis of Examples of Inter-Korean Cooperation in the Construction Field and the Direction of Industrial Park Development within North Korea,” a recent report by the Construction Economy Research Institute of Korea, “Promotion of the North Korean construction market by the [South Korean] construction industry would not only increase the limited demand for the South Korean construction [field], but will also provide new growth to our economy.”

According to the report, there has been almost no cooperative construction project within the construction field since 1988. On the other hand, tourism, industrial parks, physical fitness and religious projects have provided opportunities for construction companies. These projects generally call for construction equipment, materials, technicians and designs from South Korea, and land, labor, aggregate, etc. from the North. If six industrial parks on the same scale as the KIC were to be built, it would cost 43.09 billion Won. Of this, 4.07 billion won would cover government costs, while the actual cost of construction would be 39.02 billion won.

If the KIC, currently undergoing the first phase of construction, were to complete all three phases of the original plan, the 19.9 square-kilometer complex would house 2,000 businesses. The research institute calls for the completion of phases 2 and 3 in the KIC, as well as the construction of industrial parks at Rajin-Sonbong, Sinuiju, Haeju, Nampo, and Wonsan.

Rajin-Sonbong and Sinuiju are both ‘Free Economic Trade Zones’, and as special administrative zones, they offer large-scale industrial plots in an effort to attract foreign capital. In addition, it was agreed at the second inter-Korean summit, in October 2007, that Haeju would be developed. Furthermore, a light-industrial complex in Nampo, on the West Sea, and a heavy and chemical industry in Wonsan have been established.

The industrial zones, however, constitute only part of the construction demand. Roads and rails connecting the complexes, port facilities, power generation plants, cities to support production workers, and other derivative projects would also need to be constructed. In other words, the building of an industrial zone would lead to significant peripheral construction demand, as well.

Assuming that inter-Korean tensions were eased and North Korea decided to open itself up to the South, if construction on the six industrial zones could begin by the middle of next year, it is expected that they could all be completed by 2021. In addition, the construction and operation of the six zones could provide the impetus for quickly improving the North Korean economy, while also boosting the importance of South Korea to the North’s economy.

In order to see this accomplished, the research institute found that the government needs to boost activity in the KIC; expand the distribution network between the KIC, Kimpo, and Kangwa; guarantee free management authority in the KIC; iron out customs and transportation procedures; ensure a steady supply of North Korean laborers; and strengthen the ties between the KIC and North Korea’s domestic economy.

If, in the future, North Korea is to open its doors to cooperation, it is expected that foreign companies will also participate. Therefore, when considering long-term profits, it is necessary to spur interest in North Korea’s construction market. The research institute suggested that it was also necessary to construct a training center to teach North Korean construction workers the technical skills needed to ensure maximum potential.

According to Yonhap:

A former North Korean spy accused of collecting information on defectors from the communist state was sentenced Friday to five years in jail.

Prosecutors had charged the 63-year-old defendant, identified only by his surname Han, with handing over information about North Korean defectors to Pyongyang’s agents from 1996 until recently.

The Seoul Central District Court said harsh punishment was required in this case because if the court were to be lenient, “there may be other crimes and North Korea may try to take advantage.”

It said that there was consideration, however, for the fact that the defendant committed the crime out of longing for the family he left behind in North Korea.

The former spy from North Korea had switched sides in 1969 when he was arrested for infiltrating into the South on espionage missions. But the prosecution’s investigation discovered that he had been hired back by the North’s military in the process of trying to contact his family.

South Korea’s National Security Law prohibits its citizens from contacting North Koreans without government approval and engaging in activities benefiting the North.

Nearly 20,000 North Koreans, many of them women, have defected to South Korea as of the end of August this year since the 1950-53 Korean War, according to the Unification Ministry.

Read the full story here:
Former N. Korean spy sentenced to five years for espionage
Yonhap
Kim Eun-jung
11/12/2010

According to TradingMarkets.com:

Top South Korean steelmaker POSCO pledged Thursday to provide more jobs to North Korean defectors struggling to settle in their newfound capitalist homeland.

Under a memorandum of understanding (MOU) signed with the Unification Ministry, POSCO promised to hire more defectors at its “social enterprise” subsidiaries set up in part to help the underprivileged.

POSCO’s Songdo SE, one such firm, now employees 105 people from the needy classes of society, including 35 defectors from North Korea, and plans to increase the number of defector employees to 50 by next year.

The firm is in charge of building maintenance for POSCO Engineering & Construction’s new headquarters and POSCO Global R&D Center located in Songdo Free Economic Zone in the western port city of Incheon.

“What is most important for North Korean defectors is to help them to stand on their own economically,” Unification Minister Hyun In-taek said in a speech at the MOU signing ceremony attended by some 200 people, including the 35 defectors employed at Songdo SE and POSCO CEO Chung Joon-yang.

Chung said that Songdo SE will put priority on hiring North Korean defectors living in Incheon.

Since the 1950-53 Korean War, nearly 20,000 North Koreans have defected to the South to escape from hunger and political suppression in their communist homeland. But many of them have a hard time getting decent jobs due to their lack of South Korean-style education and social discrimination.

Read the full story here:
POSCO pledges to provide more jobs to North Korean defectors
TradingMarkets.com
11/9/2010

According to the Daily NK:

A source has reported that the North Korean authorities are allowing ordinary people to visit China again, while claiming it as an example of “Kim Jong Eun’s consideration” for the people.

A lengthy ban on cross border visits was imposed in late August to cover the anniversary of the regime founding on September 9th, Party Delegates’ Conference on September 28th and anniversary of the Workers’ Party founding on October 10th. This has now been lifted.

The source said, “Visiting relatives in China has been allowed since the 5th.“ According to his explanation, the propaganda department of provincial committees of the Party held a lecture on the 5th targeting those requesting permits to visit China so as to educate them on things to keep in mind. During which, a cadre in one lecture reportedly claimed, “Thanks to the consideration of Comrade Youth Captain, private tours to China are to be allowed, and in future will progress in the form of state business.”

The National Security Agency is responsible for preparatory lectures for would-be North Korean tourists; the NSA makes them sign an oath not to reveal any national secrets, not to have any connection with South Koreans or Chinese religious organizations in China, and to submit items that they cannot bring back into North Korea.

However, the source sought to emphasize, “The propaganda department of the Party has carried this out this time in an attempt to let the North Korean tourists know that it is part of “Kim Jong Eun’s consideration.”

Additionally, the source said that the lecturing cadres were keen to encourage tourists to “receive actively and willingly help from Chinese relatives” and told them “there is no limit, so bring as many products and as much money as you want.” However, there was one limitation, “You should not meet South Chosun people or bring South Chosun products.”

The source added also, “The department demanded that would-be tourists offer donations,” saying, “Since the Comrade Youth Captain has done you a special favor, it is reasonable for you to prepare the necessary goods for local kindergartens, schools or other social facilities.”

Interestingly, the process of issuing passports, visas and permits has apparently been significantly quickened.

Normally, when a North Korean who has relatives in China submits an application form to a municipal or provincial office of the National Security Agency, the application goes to Pyongyang NSA via the foreign affairs section in each city or province. The NSA confirms that the applicant has relatives in China through the Chinese authorities, and then the authorities issue permits and visas.

Going through the whole process generally takes between three and six months. Of course, bribes are needed to keep an application moving along, and the process can be expedited depending on the value of the bribe.

However, this time the process, from submitting the application form to receiving the permit, is only 15 to 20 days.

Looking at the situation, the source added wryly, “Since the authorities are encouraging people to take trips to China and therefore tourist numbers will increase, cadres in foreign affairs sections of the local NSA will be in a favorable situation.”

Read the full article here:
North Korean Tourists Back in China
Daily NK
Im Jeong Jin
11/10/2010

Leaked version of the report here (PDF).  Thanks to a reader who apparently got it from Arms Control Wonk.

Information on the report below:

UPDATE 2 (11/10/2010): According ot the Washington Post:

The U.N. Security Council was preparing Tuesday to release a long-delayed report alleging that North Korea may have transferred ballistic-missile and nuclear technology to Syria, Iran and Burma, according to diplomats.

The 75-page report, whose release has been blocked for six months by China, an ally of Pyongyang, reinforces U.S. claims that North Korea has emerged as a key supplier of banned weapons materials to Washington’s greatest rivals.

A copy of the report was seen by The Washington Post.

The findings are based on interviews with several foreign governments, U.N. nuclear inspectors and news media reports.

Those accounts, according to the U.N. report, indicate North Korean “involvement in nuclear ballistic missile related activities in certain other countries, including Iran, Syria and Myanmar,” Burma’s official name.

Nonproliferation experts have been concerned about North Korea for years. In his new memoir, “Decision Points,” former president George W. Bush reveals that, in 2007, U.S. intelligence determined that Syria had built a nuclear reactor with North Korean help. (Israeli jets destroyed the reactor, after then-Prime Minister Ehud Olmert’s request that the United States bomb the facility was rebuffed, Bush recounts, adding that Olmert “hadn’t asked for a green light.”)

In addition to voicing alarm over the reactor in Syria, the seven-member panel that produced the U.N. report said it was investigating “suspicious activity” by a sanctioned North Korean firm in Burma, as well as reports that Japan had arrested three individuals last year for “attempting to illegally export a magnetometer to Myanmar.”

A magnetometer – which has civilian and military uses – is one of numerous items that can be used in the production of a ring magnet, a component in a centrifuge. It can also be used in a missile guidance system.

An earlier version of the U.N. panel report’s findings was reported by the blog Arms Control Wonk. But David Albright, a nuclear weapons expert, said the report’s formal release will be important because it places a U.N. imprimatur on allegations by Western intelligence agencies and independent experts.

“It’s significant that they are saying it,” Albright said.

The earlier move by China to block the report underscores the country’s increasing efforts to prevent the Security Council from vigorously enforcing a broad range of global sanctions that have targeted key Chinese allies, and in some cases, turned up awkward evidence of Chinese arms in some of the world’s most deadly conflict zones. China recently sought to block the release of another U.N. panel report showing that Chinese ammunition has found its way into Darfur, in violation of U.N. sanctions.

Its decision to lift the hold on the report comes two days before President Obama is due to meet Chinese President Hu Jintao in Seoul, where the two leaders are attending a summit of the Group of 20 major economies. The United States has been the strongest proponent of imposing tough U.N. sanctions against North Korea in an effort to persuade the hermetic communist regime to curtail its nuclear ambitions.

China’s press spokesman, Yutong Liu, did not respond to a request for comment.

The Security Council expanded U.N. sanctions against North Korea last year and revived a moribund sanctions panel to ensure the enforcement of measures aimed at curbing North Korean trade in nuclear and ballistic-missile technology. China supported the resolution’s adoption, but it has voiced concern privately over the public disclosure of highly sensitive findings.

UPDATE  1 (11/9/2010): According to Reuters:

After months in limbo due to Chinese objections, a U.N. report suggesting North Korea may have supplied Syria, Iran and Myanmar with banned nuclear technology is heading to the Security Council.

The latest report by the so-called Panel of Experts on Pyongyang’s compliance with U.N. sanctions was delivered to the Security Council’s North Korea sanctions committee in May.

Normally such a report would be reviewed and passed to the council for consideration of possible action. But the report on North Korea did not move for nearly six months due to Chinese objections and its fate was unclear until Friday, council diplomats told Reuters on Monday.

The North Korea report should be published on the sanction committee’s website as early as Tuesday, they said.

The attempt to prevent the report’s transfer to the Security Council and release to the public, envoys said, was emblematic of China’s increasingly self-confident approach to international diplomacy as it seeks to protect states like North Korea and Sudan to which it has close ties.

Reuters reported in May that the report said there was reason to suspect North Korea — under U.N. sanctions for testing nuclear devices in 2006 and 2009 — has become a proliferator of banned technology.

The 75-page document, obtained by Reuters, said the panel was concerned about reports of “continuing DPRK (North Korea) involvement in nuclear and ballistic missile related activities in certain countries including Iran, Syria and Myanmar.”

Last week, China chose to keep silent when the sanctions committee asked its members — the 15 nations on the Security Council — if they had any objections to the report. That allowed it to formally move to the council.

“China has suddenly decided to allow this very damning report to go to the Security Council,” one diplomat said on condition of anonymity. “I think Syria and Myanmar were happy the Chinese were blocking it. Now China has other priorities.”

But China is unlikely to allow the report to be used for further sanctions against Pyongyang, envoys said.

CHINESE FURY

China’s other priorities, diplomats said, include blocking a similar report by another U.N. panel of experts on compliance with an arms embargo for Sudan’s conflict-torn western Darfur region. That report, unlike the one on North Korea, directly implicates China by raising concerns that Chinese firms may have been violating the Darfur arms embargo.

The Sudan report has infuriated China, which for weeks has prevented the Sudan sanctions committee from passing it to the Security Council to consider the panel’s recommendations.

Sanctions committees work on the basis of consensus, which means each member has a virtual veto.

In its report, the Sudan expert panel said Chinese bullets were found at the site of attacks against U.N.-African Union peacekeepers in Darfur, although it did not suggest the government was in any way responsible.

It is unclear when and if the Sudan report will be published.

Diplomats said they had feared China was trying to put the brakes on activities of all Security Council sanctions committees overseeing compliance with U.N. measures imposed on states China is friendly with, like Sudan and Iran.

“Maybe China has decided not to block all sanctions reports and they’ve got to have some give and take,” a diplomat said.

While China has allowed the council to impose sanctions on Iran and North Korea, it has refused to expand the 2005 arms embargo in Sudan and joined Russia in vetoing a 2008 attempt by Britain and the United States to sanction Zimbabwe’s leaders.

It has also blocked all attempts to sanction Myanmar, a country the United States and Britain have suggested deserves to be sanctioned for human rights abuses.

U.N. Secretary-General Ban Ki-moon said Myanmar’s first election in 20 years on Sunday was “insufficiently inclusive, participatory and transparent.”

ORIGINAL POST (10/28/2010): (Thanks to a reader)  Here is the final report of the “Panel of Experts” to the UN Security Council pursuant to Resolution 1874.

I post the executive summary followed by a link to the PDF of the entire report.

Executive Summary:
1. On 12 June 2009, the Security Council unanimously adopted resolution 1874 (2009) in which it requested the Secretary-General to establish a Panel of Experts mandated to: gather, examine and analyze information regarding the implementation of the measures imposed by the Council in resolutions 1718 (2006) and 1874 (2009), in particular incidents of non-compliance; make recommendations on actions the Council, the Committee or Member States may consider to improve implementation of those measures; and, assist the 1718 Committee in carrying out its functions.

2. The measures imposed by resolution 1718 (2006) and strengthened by resolution 1874 (2009) include: (a) a ban on the provision to and the procurement from DPRK of nuclear-related, other weapons of mass destruction-related and ballistic missile-related items as well as all arms and related materiel, except for small arms and light weapons and their related materiel provided to the DPRK; (b) a ban on the transfer to or from the DPRK of services and assistance related to the provision, manufacture, maintenance or use of the proscribed items; and (c) a ban on the provision of luxury goods to the DPRK.

3. Resolution 1874 (2009) also introduced a strong interdiction system, which calls upon all Member States to inspect all cargo to and from the DPRK in their territory and to inspect vessels with the consent of the flag State on the high seas, if the Member State concerned has information that provides reasonable grounds to believe the cargo contains proscribed items. A Member State discovering such items is required to seize and dispose of them. The inspecting Member State is also required to submit a detailed report on such cases to the 1718 Committee.

4. No official allegations have been presented to the Committee since the adoption of resolution 1718 (2006) concerning the provision of proscribed nuclear-related or ballistic missile-related items, technology or know-how to or from the DPRK. Nevertheless, the Panel of Experts has reviewed several government assessments, IAEA reports, research papers and media reports indicating continuing DPRK involvement in nuclear and ballistic missile related activities in certain countries including Iran, Syria and Myanmar. The Panel of Experts believes that special attention should be given by all Member States to inhibit such activities. Further study of these suspected activities by the DPRK should be conducted for a more thorough understanding of the facts.

5. The 1718 Committee has been notified, since the adoption of resolution 1874 (2009), of four non-compliance cases involving arms exports. An analysis of these cases indicates that the DPRK continues to engage in exporting such proscribed items. In these cases, the DPRK has used a number of masking techniques in order to circumvent the Security Council measures, including false description and mislabeling of the content of the containers, falsification of the manifest covering the shipment, alteration and falsification of the information concerning the original consignor and ultimate consignee, and use of multiple layers of intermediaries, shell companies, and financial institutions. The Panel of Experts recommends in this regard that extra vigilance be exercised in accordance with local norms at the first overseas maritime port handling such DPRK shipments or transshipments with regard to containers carrying cargo originating from the DPRK. The Panel also recommends that consideration be given to introducing procedures that, without overburdening international maritime commerce, would assure that onward transshipment ports are aware of the cargo’s DPRK origin so that they could also apply extra vigilance.

6. The Panel of Experts also notes that air cargo poses certain other issues and vulnerabilities. Difficulties involved in the inspection of cargo in an aircraft in transit and inability to subject direct flights to inspection leaves in place important vulnerabilities with respect to the implementation of the resolutions. The Panel recommends that consideration be given by Member States over whose territory such aircraft may fly, stop or transit, that efforts be undertaken in those cases to closely monitor air traffic to and from Sunan and other DPRK airports, and that cargoes to and from the DPRK be declared before over flight clearance is provided.

7. The Committee has also received two reports of seizure of luxury goods. There was a clear understanding in both of these cases that the goods involved were proscribed luxury items. However, such understanding is not always present. Most national implementation reports omit any mention of luxury goods. National definitions of luxury goods vary and associated national export controls are implemented in an uneven manner, which risks undercutting the effectiveness of this measure vis-à-vis the DPRK. To close these potential gaps, the Panel of Experts proposes in this report basic principles and important factors that should be considered in designating luxury goods.

8.The DPRK also employs a broad range of techniques to mask its financial transactions, including the use of overseas entities, shell companies, informal transfer mechanisms, cash couriers and barter arrangements. However, it must still, in most cases, rely on access to the international financial system to complete its financial operations. In structuring these transactions, attempts are made to mix illicit transactions with otherwise legitimate business activities in such a way as to hide the illicit activity. Therefore, the Panel of Experts underscores the importance of exercising extra vigilance to assure that financial transactions and services do not contribute to the DPRK’s proscribed activities. Special attention is drawn, in this regard, to non proliferation and anti-money laundering and combating the financing of terrorism (AML/CFT) principles and guidelines published by the Financial Action Task Force (FATF) and to FATF’s Typologies Report on Proliferation Financing.

9. The Committee has designated eight entities and five individuals for financial (and travel in the case of individuals) sanctions. These few designations seriously understate the number of known entities and individuals engaged in proscribed activities, and are inadequate to the task of effectively inhibiting key DPRK parties from engaging in proscribed activities. No account has yet been made also to deal with those substituting for or acting for or on behalf of these entities and individuals. Thus, all Member States should be invited to provide to the Committee for its consideration the names of entities and individuals who are believed to be engaged in proscribed activities, and especially those that have been implicated in non-compliance cases reported to the Committee. Consideration should also be given to making sure that those entities and individuals that are already designated are not able to avoid the Security Council measures through the use of aliases.

10. Special attention is drawn also to the fact that a substantial number of Member States have not yet filed the national implementation reports called for in the resolutions. These reports are essential to an overall evaluation of the steps being taken to implement the Security Council measures and to ensure they are implemented effectively.

Here is a link to the full report (PDF).

The report is full of data and I have added it to my Economic Statistics Page (with many other great sources of data).  You can see them all here.

According ot the Daily NK:

The rapid ascent of Kim Jong Eun and the building of a new ruling cast in Pyongyang is causing ripples to be felt in North Korea’s foreign currency earning apparatus. In Beijing, it is clear that anyone considered a supporter of Kim Jong Nam or Oh Keuk Ryul faces a rough ride.

One of the most prominent cases is that of Kang, a pro-Kim Jong Nam foreign currency earner who has distinguished himself in various ways, including by installing air conditioning in the Mansudae Assembly Hall. He is noteworthy among North Korea trade workers in China, and was mentioned in articles released by The Daily NK in June on the subject of emergency inspections over North Korean trade departments.

According to the testimony of Kang’s acquaintances, Kang was supposedly summoned to Pyongyang in early July, whereupon he was violently beaten by agents of the National Security Agency. The alleged reason behind the summons was that Kang was guilty of embezzling national assets and corruption; however, trade workers in China generally assume that it was a part of systematically “taking care” of Kim Jong Nam‘s closest associates.

In North Korean diplomatic circles in Beijing, the general interpretation is that Kim Jong Nam‘s outspoken negativity towards North Korea‘s third generation succession has helped to bring trouble upon his supporters.

One Chinese building contractor, Jwa, who sells construction materials to North Korean traders, commented, “Kang pledged allegiance to Kim Jong Nam and received a lot of favors as his affiliate. But a battle between Kim Jong Eun and Kim Jong Nam is taking place, and trade workers are suffering.”

However, the more surprising fact was the return of Kang to Beijing in October. It is highly unusual for someone from a privileged office to be so severely “investigated” by the National Security Agency but then return to their former seat in a foreign trade office.

According to one of Kang’s acquaintances, this was down to the fact that he is actually the person in charge of the North Korean Liaison Office in Beijing.

One Chinese trader who has done business directly with Kang told The Daily NK, “Kang, who is well known as a famous trade worker, was really in charge of North Korean maneuvers for more than ten years while maintaining the identity of a trade worker. This fact has been confirmed through several sources.”

However, South Korean intelligence has neither confirmed nor denied Kang’s true role.

The North Korean Liaison Office is an organization said to be responsible for maneuvers against South Korea, and is thought to have pulled the strings in the South Korean Chosun Workers‘ Party incident of 1992, in which the largest spy ring since the liberation was uncovered, that of Kim Dong Sik, an armed espionage agent arrested in 1995, Choi Jung Nam and Kang Yeon Jung, an agent couple who committed suicide in 1997, the assassination of Lee Han Young, Kim Jong Il’s nephew, in 1997, and the 2006 Ilsimheo spy ring incident.

Mr. Kang also owns a well-appointed villa, recent sedan and VIP membership of the fitness center at a five-star hotel.

Generally, North Korean employees abroad have to leave one of their children in Pyongyang as what can only be described as hostages to loyalty. However, the testimony of Kang’s acquaintances states that he is permitted to live in Beijing with his wife, daughter and son, who has studied in England. This is due to Kim Jong Nam’s full support, an extraordinary level of operational funding and the superior status of a person in charge of a covert operation.

He has avoided being outright purged, despite the fact that he is an affiliate of Kim Jong Nam, thanks to the fact that he is the person in charge of operations against the South. However, other trade workers in China who are also affiliated with Kim Jong Nam are desperate to forge new connections in Pyongyang to secure their positions, and, as such, many seem to have been absorbed by the Jang Sung Taek camp.

Other overseas officials are also on the back foot. Not only are affiliates of Kim Jong Nam being called into Pyongyang, but affiliates of Oh Keuk Ryul, a Vice Chairman of the National Defense Commission who is also actively involved in bringing foreign capital into North Korea in de facto competition with Jang Sung Taek, are also being summoned. Oh Keuk Ryul was shut out of the recent process of realigning the Chosun Workers’ Party and has lost a lot of his former influence as a result.

North Korean foreign trade departments are a target of veneration within North Korea. However, trade workers must strive to preserve their status with bribes like supplies which are hard to find within North Korea or large amounts of money. Now the dynamic is changing, so it is proving difficult to preserve their desirable positions.

Read the full story here:
Traders Living in Fear of Pyongyang Summons
Daily NK
Shin Joo-hyun
11/8/2010