Archive for the ‘Worker’s Party’ Category

DPRK super notes are of super quality

Saturday, July 22nd, 2006

From the New York Times (via NK Zone):

The counterfeits were nearly flawless. They featured the same high-tech color-shifting ink as genuine American bills and were printed on paper with the same precise composition of fibers. The engraved images were, if anything, finer than those produced by the United States Bureau of Engraving and Printing. Only when subjected to sophisticated forensic analysis could the bills be confirmed as imitations.

Counterfeits of this superior sort — known as supernotes — had been detected by law-enforcement officials before, elsewhere in the world, but the Newark shipment marked their first known appearance in the United States, at least in such large quantities. Federal agents soon seized more shipments. Three million dollars’ worth arrived on another ship in Newark two months later; and supernotes began showing up on the West Coast too, starting with a shipment of $700,000 that arrived by boat in Long Beach, Calif., in May 2005, sealed in plastic packages and wrapped mummy-style in bolts of cloth.

In the weeks and months that followed, federal investigators rounded up a handful of counterfeiting suspects in a series of operations code-named Royal Charm and Smoking Dragon. This past August, in the wake of the arrests, Justice Department officials unsealed indictments in New Jersey and California that revealed that the counterfeits were purchased and then seized as part of an operation that ensnared several individuals accused of being smugglers and arms traffickers, some of whom were suspected of having connections to international crime rings based in Southeast Asia.

The arrests also prompted a more momentous accusation. After the indictments were released, U.S. government and law-enforcement officials began to say in public something that they had long said in private: the counterfeits were being manufactured not by small-time crooks or even sophisticated criminal cartels but by the government of North Korea. “The North Koreans have denied that they are engaged in the distribution and manufacture of counterfeits, but the evidence is overwhelming that they are,” Daniel Glaser, deputy assistant secretary for terrorist financing and financial crimes in the Treasury Department, told me recently. “There’s no question of North Korea’s involvement.”

Last September, the Treasury Department took action to signal its displeasure. The department announced that it was designating Banco Delta Asia, a bank in Macao with close ties to North Korea, a “primary money-laundering concern,” a declaration that ultimately led to the shutting down of the bank and the freezing of several key overseas accounts belonging to members of North Korea’s ruling elite. In a public statement, Treasury officials accused Banco Delta Asia of facilitating North Korea’s illicit activities by, among other things, accepting “large deposits of cash” from North Korea, “including counterfeit U.S. currency, and agreeing to place that currency into circulation.”

The counterfeiting of American currency by North Korea might seem, to some, to be a minor provocation by that country’s standards. North Korea, after all, has exported missile technology in blatant disregard of international norms; engaged in a decades-long campaign of kidnapping citizens of other countries; abandoned pledges not to pursue nuclear weapons; and most recently, on July 4, launched ballistic missiles in defiance of warnings from several countries, including the United States.

But several current and former Bush administration officials whom I spoke with several months ago maintain that the counterfeiting is in important ways a comparable outrage. Michael Green, a former point man for Asia on the National Security Council, told me that in the past, counterfeiting has been seen as an “act of war.” A current senior administration official, who was granted anonymity because of the sensitivity of relations between the United States and North Korea, agreed that the counterfeiting could be construed by some as a hostile act against another nation under international law and added that the counterfeits, by creating mistrust in the American currency, posed a “threat to the American people.”

Whether counterfeiting constitutes an economic threat, the issue of North Korean counterfeiting is aggravating diplomatic relations between the two countries. According to some analysts, the freezing of North Korea’s bank accounts helps explain the regime’s decision to launch its missiles on July 4. Bill Richardson, the governor of New Mexico and a former U.S. ambassador to the United Nations, visited North Korea last fall, not long after the Treasury Department’s crackdown. When I spoke with him in mid-July, he said that the missile launch was in part a protest of the department’s actions. “When I was in Pyongyang in October,” he said, “my interlocutor raised the counterfeiting issue and the freezing of the assets as a major irritant for the government.” He continued, “The counterfeiting issue, and the crackdown on Banco Delta Asia, is a major factor which is contributing to Kim Jong Il’s posturing.”

How much of a concern should the counterfeiting be? Is it worth adding the issue to an already volatile diplomatic situation? The current South Korean government, which has made détente with North Korea a centerpiece of its foreign policy, has shied away from an open confrontation with the regime over the issue. Even many American law-enforcement officials who are upset that North Korea is counterfeiting nonetheless question the view that the counterfeiting poses an urgent threat. In Congressional testimony delivered in April, Michael Merritt, deputy assistant director of investigations for the Secret Service, which is responsible for protecting the nation’s currency from counterfeiters, said that the supernote was “unlikely to adversely impact the U.S. economy based on the comparatively low volume of notes passed.”

The Bush administration, though, is taking a hard line. In response to a question after a speech in Philadelphia in December, President Bush himself suggested that counterfeiting is among the regime’s gravest affronts. “North Korea’s a country that has declared boldly they’ve got nuclear weapons,” he said. “They counterfeit our money. And they’re starving their people to death.”

Funny Money

In December 1989, while counting a stack of $100 bills, an experienced money handler in the Central Bank of the Philippines became suspicious about one bill in particular. It passed the usual tests for authenticity but still felt a bit odd. The bill eventually found its way to the offices of the United States Secret Service. All counterfeits sent to the Secret Service headquarters, in Washington, are examined under a microscope, scrutinized in ultraviolet light and otherwise dissected to reveal their flaws and shortcomings, as well as the printing techniques used in their manufacture. This information is then cross-checked with a database of all known counterfeits.

As the mystery note underwent the usual scrutiny, it became apparent that this was no ordinary counterfeit. For starters, it was printed on paper made with the appropriate mix of three-quarters cotton and one-quarter linen of real U.S. currency. Making secure paper with this mix requires a special paper-making machine rarely seen outside the United States.

In addition, the note was manufactured using an intaglio press, the most advanced form of currency-printing technology available. These intaglio presses are far more expensive than ordinary offset, typographic or lithograhic presses, which yield inferior counterfeits. An intaglio press coats the printing plates with ink, and then wipes the surface clean, leaving behind ink in the recesses of the engraving. The press then brings paper and plate together under pressure, so that the ink is forced out of the recessed lines and deposited on the paper in relief. While counterfeits made using the intaglio process had been seen on rare occasions before, this note surpassed all of them in the quality of the engraving.

As with other new species of counterfeits arriving in the offices of the Secret Service, the bill was given its own flat-file drawer and christened with a sequential number: C-14342. In time, its remarkable quality earned it its more informal honorific: the supernote. But as soon became clear, the supernote was merely one member of a family of counterfeit notes. Technicians at the Secret Service soon linked it to another intaglio note detected around the same time, C-14403. This counterfeit had a few defects that the note from the Philippines did not, suggesting it was manufactured before C-14342. Nonetheless, C-14342 was soon known by the name Parent Note 14342, or PN-14342.

The Secret Service has drawn up what looks like a genealogical chart of these and related bills, which agents showed me during a visit to their Washington offices this spring. The chart displays the many members of the supernote clan: C-21555, for example, the first “big head” $100 (so-called because of the design of the most recent U.S. bills), which was initially identified in London; and C-22500, a more recent arrival that appeared in Macao. The family, which now has 19 members and remains unparalleled even in the world of high-quality counterfeits, also includes two $50 notes: C-20000, a small-head supernote that appeared in Athens, in June 1995; and C-22160, a big-head version, first sighted in Sofia, Bulgaria.

Thanks to sophisticated tools, including mass spectroscopy and near-infra-red analysis, along with old-fashioned visual inspection, the labs of the Secret Service have established genetic links between the family members. These links are not a matter of resemblance so much as they are an indication of a common ancestry: the notes in the PN-14342 family have been created by an individual or an organization using the same equipment and the same materials, and most likely operating from a single location.

As the number of supernotes multiplied, the question arose: who created them? In theory, only governments can buy intaglio printing presses used for making money, and only a handful of companies sell them. Those facts alone pointed toward government involvement, but for some time there was no consensus as to which nation was behind the counterfeiting. Many of the supernotes surfaced in the Middle East, notably in the Bekaa Valley of Lebanon and in Tehran. In 1992, Bill McCollum, a Florida congressman and chairman of the House Task Force on Terrorism and Unconventional Warfare, issued a report accusing Iran of printing the supernotes. The report estimated that the value of supernotes in circulation might eventually approach “billions.”

The Secret Service, however, distanced itself from this accusation. In a letter written in 1995 in response to a Government Accounting Office report on counterfeiting overseas, the Secret Service called the task force’s allegations “unsubstantiated” and characterized its conclusions as being based on “rumor and innuendo.” In reality, evidence was pointing elsewhere.

A Picture Emerges

With a country as closed and secretive as North Korea, information about government activities is hard to come by. But in the late 1990’s, a new source of information arrived in the form of defectors. Starvation, corruption and desperation had prompted thousands of North Koreans, many of them government officials, to flee the country. In 1997, two high-ranking bureaucrats — Hwang Jang Yop, a former secretary of the North Korean Workers’ Party, and Kim Duk Hong, head of a government trading company — sought political asylum at the South Korean Embassy in Beijing. They were the most prominent officials to defect, but they were hardly alone: thousands of North Koreans have fled to South Korea. Many thousands more have escaped to China.

In the international intelligence community, vetting accounts from defectors about activities in North Korea soon became a specialty — as well as a necessity, for the accounts were not always reliable. Raphael Perl, an analyst at the Congressional Research Service who has written extensively on North Korea’s counterfeiting operations, told me that “a lot of defectors or refugees give us information, but they tell us anything we want to know. You have to question the reliability of what they say.”

Nonetheless, the most trustworthy of these accounts, when combined with more traditional intelligence sources, permitted a best guess of what might be happening in North Korea. And as far as counterfeiting was concerned, the picture that emerged suggested that moneymaking had long been a passion for the country’s dictatorial ruler, Kim Jong Il, dating back to the 1970’s, years before he took over the reins of power from his father, the country’s founder and first president, Kim Il Sung.

Today, on Changgwang Street in Pyongyang, the capital of North Korea, there is a barricaded compound of government buildings. Judging from satellite photos, these are unremarkable, rectangular structures that suggest no special purpose. Yet according to a North Korean specialist based in Seoul whom I spoke with recently, and who has interviewed many high-ranking North Korean defectors, including Hwang Jang Yop and Kim Duk Hong, these buildings are the home of Office 39, a government bureau devoted to raising hard currency for Kim Jong Il. (The specialist was granted anonymity because of the sensitivity of relations between North and South Korea.)

While the operatives of Office 39 may well direct legitimate enterprises, including the export of exotic mushrooms, ginseng and seaweed, a substantial portion of the office’s revenue comes from its involvement in illicit activities: drug manufacturing and trafficking, sales of missile technology, counterfeit cigarettes and counterfeit $50 and $100 bills. According to Ken Gause, director of the Foreign Leadership Studies Program at the CNA Corporation, a policy group in Virginia that consults on national-security issues, the activities of Office 39 overlap with those of two other offices that occupy buildings in the same complex. The first, Office 38, manages the money acquired by Office 39, he said, while the second, Office 35, handles kidnappings, assassinations and other such activities.

All three divisions employ the same narrow coterie of elites, and all answer directly to Kim Jong Il, who lives in a villa less than a mile away. The history of the operations of Offices 39, 38 and 35, Gause told me, closely follows Kim Jong Il’s own rise to power through the party apparatus. In the early 70’s, after helping his father purge the ranks of the Korean Workers’ Party of competing factions, Kim Jong Il assumed control of North Korea’s covert operations, mostly involving South Korean targets.

In the mid-70’s, according to defector accounts related to me by the North Korean specialist, Kim Jong Il issued a directive to members of the Central Committee of the Korean Workers’ Party instructing that expenses for covert operations against South Korea be paid for by producing and using counterfeit dollars. Officials in charge of the operation supposedly brought back $1 bills from abroad, bleached the ink and then used the blank paper to print fairly sophisticated counterfeit $100 bills — though nothing close in quality to a supernote. Many of these notes were later used by North Korean agents implicated in attacks on South Korean targets, like the operatives arrested for the bombings of a South Korean government delegation in Rangoon in 1983 and a Korean Airlines jet in 1987.

According to the same defector accounts, Kim Jong Il endorsed counterfeiting not only as a way of paying for covert operations but also as a means of waging economic warfare against the United States, “a way to fight America, and screw up the American economic system,” as the North Korean specialist paraphrased it to me.

In a similar vein, according to Sheena Chestnut, a specialist on North Korea’s illicit activities who has also interviewed several key defectors, counterfeiting was seen as an expression of the guiding idea of the regime: the concept of juche. Often loosely translated as “self-reliance” or “sovereignty,” the idea of juche entails an aggressive repudiation of other nations’ sovereignty — a reaction to the many centuries in which Korea capitulated to its larger, more powerful neighbors. “It appears that counterfeiting actually contributed to the domestic legitimacy of the North Korean regime,” Chestnut told me. “It could be justified under the juche ideology and allowed the regime to advertise its anticapitalist, anti-American credentials.”

By 1984, as North Korea’s planned economy began to fall apart, Kim Jong Il, who by that time was effectively running much of the government, issued another directive, according to the North Korean specialist, who told me he has obtained a copy of the document. It explained that “producing and using counterfeit U.S. dollars” was a means, in part, for “overcoming economic crisis.” The economic crisis was twofold: not only the worsening conditions among the general population but also a growing financial discontent among the regime’s elite, who had come to expect certain perquisites of power. Counterfeiting offered the promise of raising hard currency to buy the elite the luxury items that they had come to expect: foreign-made cars, trips for their children, fine wine and cognac.

Laundering, Wholesaling and Redesigning

Earlier this year, I visited David Asher, a former senior adviser for East Asian and Pacific affairs in the State Department and an outspoken critic of the North Korean regime. In late 2001, he explained to me, Assistant Secretary of State James Kelly asked him to study why the North Korean regime had not collapsed, given that the country’s economy had declined even further over the previous decade, with industrial output alone falling by as much as three-quarters. Former Communist countries had ended their subsidies, Kim Il Sung had died, the country was stricken by floods and famine and the food-distribution system had collapsed. (Party slogans betrayed more than a hint of desperation: “Let’s Eat Two Meals a Day” was one of the era’s more uplifting exhortations.) Yet Kim Jong Il, defying all expectations, managed to cling to power.

“How this was happening was perplexing, given the huge trade gap, even with adjustments for aid flowing into the country,” Asher recalled. “Something just didn’t add up. It didn’t account for why Kim was driving around in brand new Mercedes-Benzes or handing out Rolexes at parties and purchasing truly large quantities of cognac.”

As Asher and his colleagues began amassing intelligence, evidence of an array of illicit activities began surfacing — everything from ivory smuggling to the production of high-grade methamphetamine. And counterfeiting was at the core. “The more we found out about this counterfeiting of dollars, the more we thought it was outrageous,” Asher told me. These activities provided what Asher calls “an alternative framework for existence” and “the palace economy of Kim Jong Il.”

In the spring of 2003, the State Department established the Illicit Activities Initiative, an interagency effort designed to investigate and counter North Korea’s criminal activities, and appointed Asher coordinator. The department began to systematically collect a variety of forensic and other evidence gathered by its own investigators, the Secret Service and elements of the intelligence community linking North Korea to the supernotes. (Asher declined to comment on the nature of the evidence, most of which remains classified.)

In addition, the department put together circumstantial evidence of North Korean counterfeiting that had been accumulating for more than a decade. In 1994, for example, authorities in Hong Kong and Macao apprehended five North Korean diplomats and trade-mission members carrying about $430,000 in bills that turned out to be counterfeits of the supernote variety. Additional North Korean diplomats, including an aide close to Kim Jong Il who was attached to Office 39, were caught trying to launder millions of dollars worth of supernotes over several years, prompting an increased scrutiny of North Korea’s diplomatic and trading missions.

Thwarted, the regime seems to have changed tactics, harnessing new distribution networks and wholesaling the counterfeits to third parties who would funnel them to criminal gangs. In the late 1990’s, for instance, British detectives began tracking Sean Garland, the leader of the Official Irish Republican Army, a Marxist splinter group of the I.R.A. According to an unsealed federal indictment in Washington, Garland began working with North Korean agents earlier in the decade, purchasing supernotes at wholesale prices before distributing them through an elaborate criminal network with outposts in Belarus and Russia, as well as Ireland. (Garland denies the charges and is currently fighting extradiction to the United States from Ireland.)

Details of the actual manufacture of counterfeit notes also began filtering into the State Department, much of the information derived from defector accounts. According to similar accounts compiled by Sheena Chestnut and the North Korean specialist in Seoul whom I spoke with, the regime obtained Swiss-made intaglio printing presses and installed them in a building called Printing House 62, part of the national-mint complex in Pyongsong, a city outside Pyongyang, where a separate team of workers manufactures the supernotes.

In 1996, frustrated by the high-quality imitations of its currency in worldwide circulation, the United States government redesigned the money for the first time since 1928. Out went the old-fashioned symmetrical designs, replaced by the big-head notes. Almost everything about the new design was aimed at frustrating potential counterfeiters, including a security thread embedded in the paper, a watermark featuring a shadow portrait of the figure on the bill and new “microprinting,” tiny lettering that is hard to imitate. The most significant addition was the use of optically variable ink, better known as O.V.I. Look at the bills in circulation today: all 10’s, 20’s, 50’s and 100’s now feature this counterfeiting deterrent in the denomination number on the lower-right-hand corner. Turn the bill one way, and it looks bronze-green; turn it the other way, and it looks black. O.V.I. is very expensive, costing many times more than conventional bank-note ink.

A Swiss company named SICPA is the major manufacturer of O.V.I., and the United States purchased the exclusive rights to green-to-black color-shifting ink in 1996. Other countries followed, purchasing color-shifting inks of different colors for their own currency. One of the first countries to do so, interestingly enough, was North Korea, whose currency, the won, counterfeiters ignore. North Korea purchased O.V.I. from SICPA that shifts from green to magenta. For the purposes of counterfeiting American currency, it would be a smart choice: magenta is the closest color on the spectrum to black. “The green-to-magenta ink can be manipulated to look very close to green-to-black ink,” Daniel Glaser of the Treasury Department told me. “They took this stuff the same year we went to O.V.I.” According to Glaser, the North Koreans managed to fiddle with the new ink, obtaining an approximation of the O.V.I. on the bills.

Though there is some dispute on the timing, the first counterfeit big-head supernotes might have arrived on the market as early as 1998. Like the earlier generation of supernotes, the big-head imitations show an ever-growing attention to detail. “They would certainly fool me,” said Glaser, who points out that the “defects” of the supernote are arguably improvements. He recalled looking at the back of a $100 supernote under a magnifying glass and noticing that the hands on the clock tower of Independence Hall were sharper on the counterfeit than on the genuine.

From all accounts, superb quality is a feature of much North Korean contraband: methamphetamine of extraordinarily high purity; counterfeit Viagra rumored to exceed the bona fide product in its potency; supernotes. It’s an impressive product line for a regime that can barely feed its people. When I discussed this with Asher, he let out a sigh. “I always say that if North Korea only produced conventional goods for export to the degree of quality and precision that they produce counterfeit United States currency, they would be a powerhouse like South Korea, not an industrial basket case.”

The Threat

How many supernotes are in circulation, and what sort of provocation do they represent?

Most government officials interviewed for this story declined to give an estimate, but several, including Michael Merritt of the Secret Service, noted that his agency has removed $50 million worth of supernotes from circulation. That is a far cry from the “billions” predicted by Representative Bill McCollum’s task force in the early 1990’s, and while it may still sound like a lot, it is insignificant relative to the $12 trillion dollar American G.D.P.

When supernotes are discovered in a smaller foreign economy that makes use of American currency, they can cause a local crisis of confidence in the dollar (this has happened in Taiwan and Ireland, for instance). But in the United States, the economic threat is minimal. For this reason, many analysts, particularly those outside the administration, like Raphael Perl of Congressional Research Service, express concern about making the issue into a diplomatic crisis. Perl, who agrees that the North Koreans are behind the counterfeiting, told me that because American government officials often view the violation of the currency as “a matter of national honor,” there is “an emotional factor that could get blown out of proportion.” In the process, he argued, counterfeiting can become conflated with other, more pressing problems posed by the North Korean regime, like its nuclear threat.

This conflation may also be deliberate. According to Kenneth Quinones, who was the North Korea country director in the State Department in the 1990’s, hawks in the current administration may be trying to use the counterfeiting issue to impede negotiations with the regime over its nuclear program. Critics of this approach note that the freezing of the North Korean bank accounts took place in the same month that participants in the six-party talks, the multination negotiations over North Korea’s nuclear program, hammered out an agreement that the regime would abandon its nuclear-weapons program. North Korea soon reneged on its promise to abandon its nuclear program and has since refused to rejoin the talks until the United States lifts the designation on Banco Delta Asia. The hawks, Quinones told me, “are attempting to use these sanctions” to help “bring down the regime.”

The senior administration official interviewed for this article dismissed that claim. “The notion that there was a grand conspiracy by hard-liners is just wrong,” he told me. “It’s not accurate. This was done as a law-enforcement action by appropriate U.S. government agencies based on the facts of the case.”

Even if the counterfeiting is not worthy of being a diplomatic issue unto itself, the fact that North Korea is counterfeiting may still serve as a grim reminder of the difficulty of good-faith negotiations with North Korea. Just consider that the supernotes that were seized by law-enforcement officials in New Jersey and California arrived in the United States while the six-party talks were going on. Asher, for one, was stunned by the audacity of the regime. “If they’re going to counterfeit our currency the entire time they’re engaged in diplomatic negotiations, what does that say about their sincerity?” he asked me. “How can they want normalization with a country whose currency they’re counterfeiting? How can they expect it?”

However the diplomatic standoff is resolved, Asher said that he believes North Korea won’t continue to counterfeit much longer. Next year, the Bureau of Engraving and Printing is issuing an updated version of the $100 bills. The notes will be expensive to manufacture, requiring the purchase of a new set of presses at a cost that Asher estimated in the “hundreds of millions” of dollars. The Treasury Department characterizes the next generation of notes as part of a routine redesign that it will undertake on a regular schedule every decade. But Asher has no illusions as to the timing. “It might be a routine update,” he said, “but it’s a routine update that’s being instigated by one country: North Korea.”

Stephen Mihm teaches history at the University of Georgia. He is at work on two books about the history of counterfeiting in the United States, one to be published by Harvard University Press and the other by HarperCollins.

Share

North Korea’s Military-First Policy: A Curse or a Blessing

Thursday, June 8th, 2006

Nautilus Institute
Alexander V. Vorontsov
6/8/2006

The “Songun Chongch’i” or military-first politics mantra adopted by North Korean leader Kim Jong-il as a guideline for domestic governance and foreign policy has elicited mostly negative responses from Korea-watchers. Many view songun as the final phase in the deterioration of North Korea and a serious threat to neighboring states saying that an impoverished country of 24 million inhabitants supporting a military of more than 1 million soldiers is incapable of modernization and economic reform. They argue that greater military participation in politics creates a dual-pronged threat: the army may appropriate a greater share of already-dwindling state funds to increase its readiness and effectiveness; and the generals, supposedly the most militant sector of the policy-making structure, will have a louder voice in foreign policy formulation, which could lead to hostile rhetoric towards South Korea.

A less alarmist interpretation of military-first politics is that Kim Jong-il is trying to maintain the existing order, to strengthen his regime based on personal authority, and consolidate control of military forces with the goal of preventing an overthrow of the state.

So, is military authority a curse or a blessing? The lessons from history are ambiguous, as states ruled by the military have experienced both prosperity and hardship. But some argue that South Korea represents a relatively positive example in which it has experienced a national revival because of a period of military rule.

In 1961, Park Chung-hee, a colonel in the ROK army, seized authority South Korea in a bloodless coup and established a rigid dictatorship with his military comrades. Though politics became more repressive, the national economy grew exponentially and General Park is remembered by many as the “father of the South Korean economic miracle.” Few dispute that this economic growth planted the seeds for the ensuing process of democratization. So it is hardly accidental that, in recent years, Kim Jong-il has started to speak favorably of General Park and his role in the modernization of the Republic of Korea.

The implementation of songun in the mid-1990s increased the role of the Korean People’s Army (KPA) in daily life. The army began to participate even more in social and economic decision-making, from large-scale infrastructure development to providing its own food. While military personnel are required to serve for ten years, they spend most of their service participating in different areas of the country’s socio-economic life. Thus, the army is now not as heavy economic burden, and is serves as an important resource and catalyst for developing the national economy.

The movement to the military-first policy has accompanied a gradual transformation of North Korea’s planned economy to the direction of a mixed economy. The result may eventually be a network of large, less state-controlled corporations that share close ties with government agencies, similar to the “chaebol” that Park Chung-hee created in South Korea. Because of this, the North Korean military is now involved in different spheres of economic activity, including foreign economic ties and trade operations, and will likely play a key role in this ongoing process of privatization.

With songun also come changes in ideology. This change and its underlying goal of building a powerful and prosperous state – “kangsong taeguk,” are justified by flexible and creative interpretations of the bedrock ideal of self-reliance – “juche,” a nationalist ideology developed by revolutionary leader Kim Il-sung. The songun concept replaces the proletariat and the vanguard Communist Party with the army as the driving force in society. This innovation is significant because the army is typically a less ideological and more pragmatic institution than the Party.

The army’s role in society is not the only example of Kim Jong-il’s liberation from orthodox ideologies. Since the early 1990s, North Korea has shifted its emphasis from socialist ideals to historical and spiritual values. This is reflected in the use of Confucian norms in public policy and everyday life, and legitimizing the state through reference ancient Korean kingdoms. Again, the parallels with Park Chung-hee are very strong. Kim Jong-il has also sought to reduce the prevalence of the personality cult. From early 2004, for example, there could be only one portrait of Kim Il-sung in public places. Similarly, Kim Jong-il is to be described only by his official positions, rather than the use of laudatory epithets such as “Dear Leader.”

Songun should not be automatically dismissed as an ideological dead-end. As the experience of South Korea under Park Chung-hee demonstrates, military rule can have positive effects on society under certain conditions.

Share

Are US economic restrictions hurting the DPRK?

Friday, April 21st, 2006

From the BBC:

A recent report for the US Congress estimated that $45m of the notes are in circulation worldwide. South Korean police this month uncovered a haul of 700 fake $100 bills. “They’re about 95% identical to the real thing,” said Suh Tae-suk, South Korea’s leading expert on counterfeit currency, “but there’s a slight difference in the texture of the paper and the make-up of the chemicals, so experts can still spot them.”

Most of the notes are brought in from China; and organised crime networks are reported to be distributing them in Asia, and through Russia into Europe. American officials say they have no doubt the notes are manufactured in North Korea.   High-level North Korean defectors back up some of Washington’s claims that Pyongyang is involved in counterfeiting and other illicit activities.

One former North Korean diplomat painted a picture of cash-strapped embassies that are expected to finance themselves, and of diplomats racking their brains for new ways to raise money. He asked not to be identified because he had left family behind in Pyongyang, who he now considers hostages of the regime. “We were each given a quota of foreign currency that we had to raise each year to show our loyalty to the state,” he explained. “I was expected to produce $100,000 a year and remit it to a bank in China”.

The former diplomat, who has lived in Seoul since his defection, said a superior once handed him fake US bank notes, mixed in with the real thing, to conduct a trade deal in South East Asia. He said he raised money from kick-backs on trade deals, but would also smuggle gold and “currency by the kilogramme” in diplomatic bags.

And there were other scams: Trading in tax-free cars, smuggling liquor into Islamic countries, and trafficking horns and ivory out of Africa to sell to Chinese businessmen.

At the centre of much of the trade is North Korea’s top-secret Bureau 39, which defectors say was set up in the 1970s to create a personal slush fund for Kim Jong-il.

“Bureau 39 has a monopoly on earning foreign currency,” said Kim Dok-hong, who worked for 17 years alongside the bureau’s agents at the North Korean Workers’ Party Central Committee.   “Bureau 39 has a monopoly of trade in high-quality agricultural products like pine mushrooms and red ginseng. They also control the drug trade. Opium is produced across the country and then refined into heroin. Their other main role was distributing the supernotes,” he said.

North Korea denies the charges of counterfeiting.  It accuses the US of counterfitting its own currency and trying to blame the DPRK. 

North Korea has also asked the government of Switzerland to investigate the authenticity of a U.S. claim that Pyongyang secretly keeps US$4 billion in Swiss bank accounts, and then release a report on its findings.

The North Korean embassy in Switzerland sent a statement to Yonhap News Agency, branding the U.S. allegation a “conventional scheme to damage the image of our republic.”
North Korea has “made an official request to the Swiss government to investigate this matter and release the results of the probe on purpose to guarantee objectivity,” the statement said.

Share

Smoke signals from BAT’s North Korea venture

Wednesday, February 8th, 2006

Asia Times
Lora Saalman
2/8/2006

On January 10, North Korean leader Kim Jong-il traveled in a luxury train to China’s Guangdong province to sample socialist-flavored capitalism. Just a few months earlier, the North Korean Workers Party introduced reform measures granting foreign investors tax cuts and allowing them to sell goods produced in North Korea without tariffs.

For an economy that ostensibly issued halting economic reforms in 1984, these new measures constitute a revolution, albeit one with Chinese characteristics. In accordance with its giant neighbor’s model, North Korean economic reform is predicated as an alternative to the instability of political liberalization. Unforeseen social and political shifts are to be cushioned by financial solvency to keep the regime intact. With China’s assistance and unofficial aid, sustainable growth may one day be achieved in North Korea. Yet a darker side to North Korea’s economic awakening remains.

Kim Jong-il’s visit comes on the heels of accounts of North Korean money-laundering in Macau and the US decision last June and again in October to freeze the assets of various North Korean companies and financial institutions. While many of these firms are beyond the reach of US sanctions, implied misconduct has already led to runs on the North Korean-affiliated financial institution Banco Delta Asia in Macau.

As allegations swirl of money-laundering through counterfeit cigarettes and currency, a less-known story has emerged on British American Tobacco’s previously undisclosed four-year-old joint venture in North Korea. It presents the dilemma of doing business in a country in desperate need of revenue but with a poor track record of allocating resources to its people. This cautionary tale begs the question as to where exactly Pyongyang’s joint-venture profits are going.

For North Korea, which lacks many of the basic laws for financial transparency and good governance, capital investments are more than economically precarious. Shared contact information and dubious management practices among North Korean companies are ubiquitous.

Daesong-BAT is one of a handful of Western joint ventures in North Korea. The far-reaching tentacles of its North Korean partner illustrate the complexity of verifying the background and connections of any North Korean entity. Like many of its compatriots, North Korea’s Sogyong General Trading Corp (Sogyong) boasts circuitous and often indirect ties to entities engaged in proliferation, international trade, shipping, and money-laundering. These indicators point to larger concerns as to whether joint ventures, particularly Western ones, can be manipulated by North Korea for illicit financing of the regime or even to sustain its alleged WMD (weapons of mass destruction) programs.

Joint ventures and front companies
In establishing Daesong-BAT, British American Tobacco teamed up with Sogyong General Trading Corp, a Pyongyang-based state trader best known for its carpet exports. Sogyong, however, also exports such products as handicrafts, furniture and agricultural produce, while importing machinery, electronics, fishing tackle, chemicals and fertilizer. It is not uncommon for North Korean state-run enterprises to deal in everything from machinery to fishing tackle. Yet eclectic product lists make trade in illicit drugs and weapons all the more difficult to track. Cigarettes are just one more product in the Sogyong export-import pantheon.

North Korean company product lists also rarely convey their full range of trade. Seemingly innocuous industries are often manipulated as front companies. Last year, for example, Japan’s Ministry of Economy, Trade and Industry (METI) listed what appeared to be an innocuous North Korean food manufacturer, Sosong Food Factory, for its participation in nuclear, missile, chemical and biological-weapons proliferation. Cigarettes, like food, have been used at times to mask the real objects being transferred. In one case, Japan in 2002 seized a Chinese vessel and found that the declared store of cigarettes on board actually contained drugs thought to have come from North Korea.

While not as licentious as drug or human trafficking, even the black-market trade of cigarettes could have a tangible impact on North Korea’s financing, as seen in Eastern European illegal cigarette rings. These factors highlight the danger of taking a North Korean food or even carpet manufacturer at face value.

North Korea’s network
Among the elements of obfuscation, the company name Daesong-BAT merits attention. Rather than combining or modifying the titles of the two partner companies to form Sogyong-BAT, Daesong-BAT combines British American Tobacco’s acronym with a name that could either point to North Korea’s Daesong district or Daesong General Trading Corp (Daesong). If it turns out to be the latter, Japan and other governments have prominently featured Daesong for its ties to missile and nuclear proliferation.

Incidentally, Daesong maintains one of the most extensive and convoluted North Korean networks, with more than 10 subsidiaries. It also is suspected of falling under Bureau 39, which earns foreign currency for North Korea. A direct connection between Daesong-BAT and the sinewy Daesong franchise has yet to be established but, as illustrated below, nothing is clear cut in North Korean business relations.

Because of the lack of transparency and convoluted nature of North Korean companies, contact information often serves as the first stencil for tracing overlap between industries. In the case of Daesong, the US Central Intelligence Agency’s Open Source Center follows the use of the same fax number to establish potential business and branch linkages. If the same logic is applied to Sogyong, another pattern emerges. Sogyong shares common fax numbers with at least two companies, Korea Foodstuffs Trading Corp (Foodstuffs) and Korea Kwail Trading Corp (Kwail). These companies in turn share fax numbers with nearly 100 companies in North Korea.

Among North Korean firms sharing contact information with Sogyong-linked entities, Japan’s METI and official European export monitors have listed at least six as end-users associated with North Korean WMD programs. In October, the US government targeted one in particular, Korea Ryonha Machinery Joint Venture Corp (Ryonha), freezing its assets under US jurisdiction and placing it on the US Specially Designated Nationals and Blocked Persons list. Ryonha is a prime example of the complex web of North Korean subsidiaries. Last June, the US Treasury Department also targeted the assets of its parent company Korea Ryonbong General Corp, formerly known as Lyongaksan, which heads five other US-designated entities.

Ryonha is not an aberration among companies converging with Sogyong. Among other Foodstuffs and Kwail-connected entities, Korean company databases list Korea Pyongyang Trading Corp as a distributor of methane gas derived from animal excrement. Apparently, effluent is not its only fetid source of income. The Japanese government has listed the very same company, along with subsidiaries of two other firms tracing back to Sogyong, namely Korea Ryonhap Trading Corp and Korea Jangsu Trading Corp, for nuclear, missile, chemical and biological weapons proliferation.

Proliferation networks may not be the only mechanisms at Sogyong’s fingertips. Contact information also links the two Sogyong-connected associates with at least four North Korean financial institutions. Among these, Koryo Bank and Korea Joint Bank have alleged ties to the now-infamous Banco Delta Asia in Macau. Banco Delta Asia’s own purported involvement in counterfeit-currency distribution and counterfeit-cigarette smuggling does not bode well for Daesong-BAT, no matter how convoluted their connections. Banco Delta Asia may have three degrees of separation between it and Sogyong, but in North Korea’s fishbowl of finance this does not preclude cooperation.

Banco Delta Asia is also reported to maintain a close business relationship with Macau-based Zokwang Trading, which its own vice general managing director claims is a part of North Korea’s Daesong General Trading Corp. Daesong, as mentioned earlier, has a pervasive proliferation record. It also has reported links to Changgwang Sinyong Corp (Changgwang), which has been repeatedly sanctioned by the United States for its missile-proliferation activities and sales to Iran and Pakistan. Zokwang in turn deals in missiles and nuclear-power-plant components, all the while maintaining a partnership with the notorious Changgwang. Combined with Sogyong’s branch in the joint \-venture hub Shenyang, China, even indirect ties to Macau suggest that Sogyong has the ability to tap into proliferation, industrial and financial networks in China and beyond.

Proliferation, industry and finance mean little without the means to transport goods and technology. Sogyong-associated entities Foodstuffs and Kwail share fax numbers with North Korea’s national airline Air Koryo, which has also been cited by official European monitors for proliferation. A 2003 Far Eastern Economic Review article even named Air Koryo as the transportation mechanism for Daesong’s suspected military assistance to Myanmar. Sogyong’s own shipping vessels Sogyong 1 and 2, which were detained in Japan on safety violations in December 2004 and January 2005, complete the final leg of the contact-linked proliferation, financing and shipment triangle. This network belies a much more intricate set of alliances than the domestic-consumption-based joint venture touted by British American Tobacco and Sogyong General Trading Corp.

Standards of business conduct
British American Tobacco’s website advocates transparency in international business and laudably eschews bribery, corruption, illicit trade, and money-laundering. In October, BAT executives further contended in The Guardian that the company’s North Korean cigarette joint venture fuels only domestic consumption, not exports to China or elsewhere. In spite of these reassurances, BAT is no stranger to the dangers of black-market cigarette production and transshipment. A February 2000 article in The Guardian even accuses BAT of complicity, by knowingly allowing illicit smuggling of its cigarettes to occur.

In the case of Daesong-BAT, British American Tobacco officials have admitted to knowing little of the company’s North Korean joint-venture operations. Ominously, BAT has stated that an unnamed Singapore division controls its North Korean joint venture. Lack of oversight combined with a dubious North Korean offshore mechanism for managing an ostensibly domestic industry raises significant warning signs. The incestuous relationship between state-run North Korean entities that share fax numbers of companies and banks listed for WMD procurement and money-laundering through counterfeit tobacco should also elicit concern. These are not simply dilemmas for British American Tobacco, but pose challenges to any companies forming joint ventures in North Korea.

Economic integration, as in China’s case, may bring North Korea more into step with international norms and standards. Ironically, engagement that is likely to lead to greater future transparency may also be manipulated for North Korea’s short-term illicit gains.

In 2003, the British government pressured BAT to close down its cigarette factory operations in the military dictatorship of Myanmar because of concerns over that country’s lack of human rights. Given the legion of obstacles impeding transparency in North Korea, BAT and other Western firms could be contributing to the worsening of more than human rights. They could be aiding and abetting illicit North Korean financing that is alleged to fuel Kim Jong-il’s slush fund and WMD programs.

Share

Efforts begun to hand over North’s Reins

Thursday, November 24th, 2005

Joong Ang Daily
Yoo Kwang-Jong
11/24/2005

Organized efforts are ongoing in North Korea to hand over the hereditary communist regime to a son of current leader Kim Jong-Il, doplomatic sources here with strong connections in Pyongyang said yesterday.

North Korea has reportedly founded a department inside the governing Workers’ Party to promote Kim Jong-chol, the second son of Mr. Kim, as his successor. “When the Workers’ Party reorganized its departments in 2004, two new bureaus were opened under the organizational guidance department,” a source well-informed about Pyongyang affairs said.  “The bureaus handle matters about the regime’s succession.”

According to the source, 10 officials in their 30s work at each bureau, and are in charge of educating Kim Jong-Chol about party governance affairs.  While the two bureaus are publicly under the control of Ri Je-gang, a senior party official, Kim jong Il’s National Defense Commission oversees their operations directly, the source added.

Antoher source said the third generation father-to-son hand-over was seriously resisted in North Korea, but Pyongyang appeared to have decided on its course.  “with the Workers’ Party backing, the succession has become more and more visible,” the source said. 

Kim Jong-chol, 24, studied in Switzerland in the late 1990s.

Meanwhile, South Korea said it was checking a recent German media report that Kim Jong chol attended a presidential dinner for the visiting Chinese leader Hu Jintao in late October.  

Share

Two Pillars of the North Korean Regime, Information Politics and the Reign of Terror

Monday, October 17th, 2005

Daily NK
Han Young Jin
10/17/2005

Many people wonder about how North Korea is maintains despite the chronic food crisis and many other difficulties it suffered for a long time.

In South Korea, people would have organized more than a dozen of popular riots.

What would be behind the silence in North Korea? The answer is the notorious two pillars in North Korea, information politics and the reign of terror.

The National Security Agency in North Korea is the core agency for information politics. Since the Chief of Agency Lee Jin Su died in August, 1987, no other head of the agency was appointed. The role was taken over by Jang Sung Taek, #1 vice director of Organization and Guidance Department, and Kim Young Ryong, the former National Security Agency #1 Director (deceased in 1998).

Kim Jong Il directs the agency himself, making them believe his right over the agency is that the agency is for the security of the Supreme Commander, which is himself.

There are about 50,000 employees under the National Security Agency and its branch offices. It is estimated that about 20,000 are directly involved in the information activities. This means there is one agent per 1,000 North Koreans.

The security agents secure their sources individually, train them and collect information in their secret places. Even among the peers and friends, all the people mistrust each other because they do not know who the sources are for the agents.

According to the agency principles, even among agents have double or triple layers of supervision. One of the main reasons why the anti-regime force did not become active remains in this very system of mistrust

The North Korean regime, through the collective living style, ▲encourages mutual criticism and self criticism and increases mistrust among them, ▲The agents keep watch of the people and arrest them, ▲ the safety agency (police) make sure people do not meet in group through the people’s department. This is the reality of North Korea.

Securing Sources, Training in Secret Places

Security sources and training is done according to the characteristics of the agent. The agency runs secret places especially for training.

In November 12, 1992, Kim Jong Il changed the name of the National Security Agency to the National Safety and Security Agency and ordered to strengthen the training in crack down the anti-party, anti-revolution forces.

It was in 1993 when such secret places were made. It was of course made in top secret. Those involved in building such secret places believe they must be apartments for high level officials, such as honorary revolutionists of the independent movement (against Japan) or war heroes. However, these “luxurious apartments” were for the people receiving training, who spend ten to fifteen days there.

Because there is danger of discovery of identification, only one person is trained at a time. Those who leave home for the training their wives they are leaving for work.

Training is done directly by the secretary of the agency or designated security agents. They give off the belief, saying, “With the trust of the Great Commander, 00 (name of the trainee) is to engage in the national security activities.”

The agent provides professional training to the trainee such as how to approach the targets, inducement to conversation, such reporting. After the training, they are sent back to their workplaces.

The persons in charge of the secret places are selected among the sources, and he is to cut of all the contact to the outside world. Looking at expensive cars going in and out of a remote place, people are only wonder about what kind of house it would be.

Even the Former Detention Camp Prisoners and Wanderers Selected

The security agents have their own ways of contacting each other such as leaving memos under a rock, between a crack on factory walls, or inside a rotten tree trunk. The agents even select former prisoners and wanderers as one of their sources, but they are not given the special training session.

This is because only through such sources information about anti-regime or anti-party forces could obtained. The agents use both credence and threat to manipulate their sources. Sometimes, they used to give compensation as much as 100Won (in 1990, average worker’s monthly wage was 70Won), but after the food crisis, such cash awards stopped altogether.

There also exist some conflicts between the agents and the sources. In local place, one of the sources asked his agent to issue him a travel permit. When he could not, the source spread a rumor that “the National Security Agency has less power than the Safety Agency” which made a big issue in the region.

There is no compensation for providing high level information while people get arrested for ambiguous things they commit, so the people who were selected as sources become distressed. Recently, there is an increase of the people who prefer to not cooperate with the agents.

Also it is known that the information agents (sources) and the security agents together take advantage of their status. The sources report the security agents of the people who do business with prohibited goods such video tapes from another country, and they make benefit themselves by confiscating of all such goods.

Share

Kim Jong Il Offers $20 Million Worth of Gifts

Saturday, October 8th, 2005

Daily NK
Han Young Jin
10/18/2005

Kim Jong Il’s politics of gift is a well-known practice. On only on the birthdays of Kim Il Sung and Kim Jong Il, but also on the day of party establishment and other national and traditional holidays.

The reason why Kim Jong Il distributes gifts to the people is to increase level of obedience and make them express gratitude towards “the Commander’s special grace.” Although it may look like a lousy way of convincing people to the South Koreans, to the North Korean people, it had been a long tradition. The reason why they offer gifts to the participants to the Arirang Performance lies along the same line. Although gift offering did exist in other former communist countries, but the level of practice is incomparably higher in North Korea.

Kim Jong Il sends to gifts to about 20,000 people every holiday, and the amount he spends on these gifts is about $20 million US dollars every year.

There was special food distribution on the day of 60th Anniversary of the Party Establishment. Apart from food distribution there is a separate group of people who receive special gifts. The number of them reach to 20,000, who are core members supporting the Kim Jong Il dictatorship.

The receivers include the family members of the liberation movement activists against Japanese colonialism, initial communists (palchisan), the party, high level officials and the military. The members of the initial communists are only about 300 in number. Kim Il Sung ordered, “The party must take care of the sons of the palchisan down to three generations” so they are entitled to special treatment.

The bereaved family department of the Worker’s Party takes care of these families. The sons and grandsons receive free education up to university, offered jobs and free cars as well as housing.

5,000 Entitled to Special Treatment

The people entitled to special treatment reach up to 5,000. The first level cadres such as of the Central Party, the People’s Arm Force, guard commanders and military commanders are entitled as main distribution everyday. The ministers of the cabinet and vise ministers are smaller in number and in a level lower than the military and party cadres.

The people entitled to gifts on the three main holidays (New Year’s Day, birthdays of Kim Il Sung and Kim Jong Il) number to 15,000. They are the cabinet cadres and military cadres above commanding officer level and cadres of different levels such as families of those sent abroad (for espionage and information gathering), foreign business workers and bereaved families.

The representatives of the Supreme People’s Assembly and provincial party secretaries, chiefs of the People’s Committee, Central Procurator’s Office, Central Court, National Security Agency, Security Office and other provincial level cadres also receive gifts from Kim Jong Il the three main national holidays. High level officials whose rank is as high as the central party secretaries in local cities and counties too are on the list of the gift receivers.

Managed by Keumsusan Accounting Department

Sending out of gifts under Kim Jong Il’s name is managed by the Keumsusan Accounting Department. All the cadres of secretarial level and above in the Central Organization and Guidance Department receive electronics, clothes and even food from Japan and South Korea. They always receive enough to eat that they prefer to receive more electronics than food.

The secretaries of the Worker’s Party and the cabinet ministers receive the most luxurious gifts they can possibly get. The gifts include two pairs of suits, two bottles of expensive imported liquor, expensive underwear, clocks with Kim Il Sung and Kim Jong Il’s names engraved, expensive refrigerators and color TV.

The workers of the Keumsusan Accounting Department visit each government agencies and offices with the gifts in refrigerating truck used specifically gift delivery. They call the receivers in secret and distribute the gifts with vouchers.

At the time, the receivers bow to the portrait of Kim Jong Il and say, “We will repay the high political confidence and grace of the Great Leader Commander Kim Jong Il with our loyalty (devotion).”

In case of the cabinet members or military officials where the receivers are only a small number, the truck of the Keumsusan Accounting Department delivers the gifts to the houses. In local places, they gather the receivers in one place and hold a small ceremony for the gift distribution. For the local receiver, the gifts include two bottles of expensive liquor, a box of tangerines, foreign sweets, one pair of suit, and a cartridge of cigarettes, “Pyongyang.”

20 Million USD on Gifts Every Year

The defector who has an expertise in the matter says the amount of money Kim Jong Il spends on gifts every year reaches up to 20 million US dollars. The Keumsusan Accounting Department had been taking 1% of the annual national budget and directly ordered gifts from foreign countries.

He says recently, the responsibility of purchasing gifts transferred to the United Front Department of the Central Party. “As it became responsibility of the United Front Department of the Central Party to purchase the gifts, some of the gifts sent from South Korea have turned into Kim Jong Il’s gifts to the cadres under his name,” he added.

Some gifts come back to Kim Jong Il in peasant, roe, honey and mountain (wild) ginseng from the people.

Cadres do not talk about what they have received. In sometime early 1980s, Kim Jong Il once offered Benz cars to the cadres of the United Front Department and Organization and Guidance Department of the Central Party, and the cadres fought over the color of the cars. After criticisms from Kim Jong Il, cadres are not allowed comment on the gifts they received.

However, the cadres who have received gifts do not hide that they received gifts. Some of them gather the people from the department to their offices or homes and share “the Commander’s gifts.”

The party notifies the worker’s about gift receivers to arouse more fidelity out of the people by letting the party workers know that responsible workers receive special treatment and to show off that Kim Jong Il love and trusts the workers.

Share

North Korea Reinstates Controls on Grain Sales

Monday, October 3rd, 2005

Los Angeles Times
Barbara Demick
10/3/2005

North Korea Reinstates Controls on Grain Sales Rice and other foods will be distributed by the government and banned at markets.

Rolling back some of its economic reforms, North Korea is banning the sale of rice and other grains at private markets and strengthening its old communist-style public distribution system under which all citizens are supposed to get rations, aid groups and North Korea experts say.

The changes were supposed to be implemented Oct. 10, a holiday in North Korea marking the 60th anniversary of the ruling Workers’ Party. But reports from the World Food Program office in Pyongyang, the capital, indicate that merchants have been told already that they can no longer sell grain.

The United Nations agency said in a statement on its website that “as of Oct. 1, reports are that cereal sales in the markets will cease and public distribution centers will take over countrywide distribution.”

North Korea experts say the moves do not necessarily indicate an abrupt U-turn in the impoverished country’s economic policies, so much as concern that change was taking place too quickly.

“I think it is a transitional necessity. You can’t move too fast into free—market economics without softening the blow for people who have grown up in a planned economy,” Richard Ragan, who heads the World Food Program office in Pyongyang, said in a recent telephone interview. “This is not that different from what you saw happening in China in the 1990s.”

Lee Young Hwa, a Japan—based human rights worker who has close contacts with traders at the Chinese—North Korean border, believes the new restrictions on markets are designed to boost the power of the Workers’ Party and curb the role of the military in the economy.

“The military people control the food sold at the market. Nobody else has the trucks or the access to gasoline to move food around the country. The leadership fears that their economic reforms aren’t working because everything is controlled by the military, and they want to take back control,” Lee said.

For years, there have been accusations that the military was pilfering humanitarian shipments of rice and other aid, keeping the best for its own and selling the rest at markets. Secretly taped video footage obtained last year by human rights workers shows apparently unopened sacks of rice given by the U.S. and other donors being sold illegally at a market in the northern city of Chongjin.

On the open market, a pound of rice costs 15 to 25 cents — an impossible sum for many North Koreans, whose average salary of $1 per month keeps them on the verge of starvation.

Under the new rules, rice, as well as other staples such as corn, is to be sold at public distribution centers at subsidized prices and in rationed quantities. Markets, which have been gradually legalized since 2002, will still be permitted to sell vegetables, produce, clothing and other goods.

Cho Myong Chol, a former North Korean economist who lives in Seoul, said he believed North Korea would continue with market reforms but at a slower pace. “Since the economic reforms in 2002, the gap between the haves and the have—nots has become so extreme that there is an imbalance that is causing social unrest and dissatisfaction. I think they needed to do something about food to keep control.”

It remains to be seen whether the changes will help ordinary North Koreans. The government recently informed U.N. aid officials that it was cutting back their operations and no longer needed large donations of rice and other foodstuffs. Experts believe North Korea is concerned about the U.N. ‘s monitoring requirements and prefers direct aid from countries such as South Korea and China, which place fewer restrictions on donations.

Until the 1990s, the public distribution system introduced by North Korean founder Kim Ii Sung was the hallmark of a nation that claimed to provide its people with everything from rice to shoes. But the system collapsed in the early l990s, exacerbating a famine that killed an estimated 2 million people — about 10% of the population. The public distribution system still operates, but at reduced capacity.

Although North Koreans today buy much of what they need at markets, the government doesn’t like to admit it and insists that the cradle—to—grave system of social welfare remains.

“We are still a communist country. Nothing has changed. I get everything I need through the public distribution system,” said Yoon So Jung, 25, a guide interviewed last week at Mt. Kumgang, one of the few areas of the country open for tourism.

But pressed about her pink windbreaker, Yoon admitted hesitantly, “Well that, I bought at the market.”

Share

NK’s Chang Song-taek Ousted Completely: Intelligence Sources

Tuesday, September 27th, 2005

Korea Times
Park Song-wu
9/27/2005

The Pyongyang regime has described Chang Song-taek, North Korean leader Kim Jong-il’s former right-hand man, as a “tree’’ that is now cut off, sources well-informed of the North’s power structure in Seoul said on Tuesday.

Chang, Kim’s brother-in-law and a confidant until purged in late 2004 for an alleged bid to enhance his power, was predicted to return to the Workers’ Party because the Dear Leader, 63, reportedly has a limited number of associates to rely on.

But such a possibility looks slim now as Kim has apparently changed his mind, according to sources in Seoul.

“(Chang) was predicted to make a comeback in the past because he was such a close confidant (of Kim Jong-il),’’ the Yonhap news agency quoted a source as saying. “But now almost all the people who, for example, have simply eaten naengmyon (or Korean cold noodles) together in the Yokryukwan restaurant (in Pyongyang) have been expelled to local areas. The likelihood of Chang’s comeback is near zero now.’’

Chang was formerly vice-director of the party’s exceptionally powerful bureau _ the Organization and Guidance Department. High-profile defector Hwang Jang-yop once described him as the “No. 2 man’’ in North Korea.

Now Ri Che-kang (phonetic), new vice-director of the potent department, is known to be in charge of removing Chang and his close allies from the political scene.

The intended purge of Chang, 60, is allegedly a result of his efforts to promote Kim Hyong-nam, an illegitimate son of Kim Il-sung, the founding father of North Korea, as a contender to Kim Jong-il.

Kim Hyong-nam, 33, was adopted at birth by a sibling of Chang, according to a country report on North Korea by the Economist Intelligence Unit.

The expulsion process resembles one that took place in the 1970s when the Pyongyang regime underwent a power struggle during which “side branches’’ of Kim Il-sung were trimmed away.

At that time, the regime purged Kim Il-sung’s uncle Kim Young-ju as well as others, including the leader’s second wife Kim Song-ae (phonetic) and her children. In 1976, Kim Young-ju disappeared from the political scene and did not re-appear until 1993 when he returned to the Party Central Committee.

Chang is reportedly in a bad state of health now. Even if Kim Jong-il reinstates him, he is unlikely to return to the party. Sources in Seoul predicted that the most likely scenario is that Chang will be named an ambassador _ a job which cannot influence domestic politics.

Kim Jong-il has not yet decided who will succeed him, even though his own ascension to power was carefully prepared over more than 20 years.

There are three known rival candidates for the succession _ all Kim Jong-il’s sons, by two mothers, neither of whom he married.

The eldest, Kim Jong-nam, 34, was reportedly the favorite until 2001 when he was caught visiting a theme park in Japan on a false passport, embarrassing the Pyongyang regime.

Kim Jong-nam’s two rivals are his younger half-brothers _ Kim Jong-chol, 24, and Kim Jong-woon, 22. Kim Jong-il is said to favor Kim Jong-woon, as the more manly of the two, the country report said. Their mother, Ko Young-hee, a former dancer who became his consort, died of cancer in 2004.

Her death triggered numerous media reports predicting an imminent power struggle in the Pyongyang regime, which is described by the Western media as a “Communist dynasty.’’

Share

The Dear Director

Tuesday, August 2nd, 2005

Korea Times
Andrei Lankov
8/2/2005

One of the few things known about Kim Jong-il in the West, from at least the 1980s, is that the North Korean dauphin is a movie fan, and that for a while he personally led the entire North Korean movie industry.

Indeed, movies titillated Kim Jong-il’s imagination when he was a student at the Kim Il-sung university in the early 1960s; he loved movies. Of course, his choice was not the boring North Korean films about exemplary steel workers and selfless military nurses who recited dreary monologues about their love for the party (not so for the Leader at that stage).

The young dauphin preferred Western movies, mostly imported from Europe or the U.S. via Moscow. Following the then Soviet approach, such ideologically suspicious movies were bought in very small quantities. They were not for public screening, but the private viewing of the top elite. It is well known that Stalin was a great movie fan.

Nothing like it has ever been heard about Kim Il-sung, but it seems that his eldest son spent long hours in a small viewing room of the Film Distribution Center, itself located on the second floor of an unremarkable apartment building in downtown Pyongyang.

This youthful passion for movies influenced his private life. The two major love affairs that Kim Jong-il had were with women from this theatrical-cinematographic milieu. But it also influenced his political career since the first job for the ‘rising son’ was to head the cinema production group in the Party Central Committee.

In a Communist party, the Central Committee is believed to be the center of everything, and the “ideological guidance” of the fine arts is one of its major tasks. In North Korea, following the Soviet prototype, this task was entrusted to the Agitation and Propaganda Department, which had a special arts section. Arts were seen as a part of propaganda, first and foremost. The cinema production group, headed by Kim Jong-il, belonged to this section.

Kim Jong-il assumed his leadership role in September 1967, when the cinema world was in turmoil. In September 1967, the North Korean Politburo, the party- state’s supreme council, held an urgent meeting on the premises of North Korea’s largest cinema studio. Movie industry leaders were subjected to sharp attacks because they allegedly condoned “anti-party activity” by producing a movie about Pak Kum-chol, a prominent statesman who had recently fallen from grace. Needless to say, this is the normal risk of being a movie producer or writer in a Stalinist society. You are required to worship heroes, but you never know if today’s hero will become tomorrow’s villain. The situation looked grim, praising the enemies of the people could not be taken lightly.

According to an apocryphal but perhaps true story, it was during the “studio” meeting of the Politburo that the then 25 year-old Kim Jong-il volunteered to take control of the cinema industry. Whatever his intentions, this decision saved many people in the industry from humiliation and death. Kim Jong-il staged large-scale self-criticism sessions, but more serious punishments were rare.

In fact, Kim Jong-il protected his beloved cinema world during the turbulent years of the “Kapsan purge,” which was probably the last large-scale purge of top leaders and their associates in North Korean history. After 1970, purges were largely isolated albeit frequent events, not large-scale campaigns as before.

Under Kim Jong-il’s guidance, the movie studios were refurbished. He arranged the best equipment to be imported from overseas. This sounds fine until one remembers that this meant the re-allocation of scarce hard currency reserves, which could be used for buying anything else, from medical supplies to new battle tanks. However, the crown prince loved cinema, and nobody dared question his demands. After all, new movie cameras are much cheaper than missile launchers.

Kim Jong-il’s years at the helm were marked by a serious improvement in the technical quality of North Korean cinema. The story lines remained as tedious as before, and perhaps even got worse: in general, the late 1960s was a period of increasing ideological repression in the North. But the same old boring stories of self-sacrificing workers, exemplary farm girls and, of course, selfless guerrillas were delivered with much better technical precision.

Guerrillas were particularly important since many major movies produced under Kim Jong-il’s guidance dealt with the anti-Japanese struggle of the 1930s. Sea of Blood, a guerrilla epic with a story line patterned after Gorky’s Mother, and Flower Girl were major examples of this trend. For Kim Jong-il this was important, since he reminded his father Kim Il-sung about the heroic days of anti-Japanese warfare, and by doing so he positioned himself as his father’s most trustworthy successor.

By the late 1960s, it became clear that a dynastic succession was in the offing, but there were few contenders who wanted to become heirs to the aging Great Leader. Kim Jong-il had the best chance from the very beginning, although he was not without rivals as well. But that is another story…

Share