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N. Korea urges implementation of inter-Korean economic accord

Thursday, January 25th, 2007

Yonhap
1/25/2007

North Korea has called upon South Korea to implement an earlier agreement to help revive its light industry in return for tapping into the communist nation’s natural resources, a senior unification official said Thursday.

During Unification Minister Lee Jae-joung’s first visit to the Kaesong Industrial Complex since he took office in December, Ju Dong-chan, head of the North’s Kaesong development agency “asked the minister to honor the agreement, saying it is not an aid, but only swapping of natural resources and raw materials,” the official said anonymously.

In July 2005, South Korea agreed to provide the North with US$80 million worth of raw materials to help it produce clothing, footwear and soap starting in 2006. In return, the North was to provide the South with minerals such as zinc and magnesite, after the mines are developed with South Korean investments, guaranteed by the Pyongyang government.

But the agreement was never carried out as North Korea abruptly cancelled scheduled tests of two cross-border railways in May 2006. North Korea’s subsequent missile and nuclear weapons tests further clouded hopes to implement the accord.

“Lee agreed in principle to honor the accord, but he held the position it is more important to create a favorable environment for carrying out the agreement,” the official told reporters.

Asked about the North’s denial of reports that it scrapped plans to change its partner for tours of Kaesong, the official said it is purely a matter of business, which does not require the intervention of the government.

Just hours after Lee returned to Seoul from Kaesong, an unidentified spokesman for the Korean Asia-Pacific Peace Committee (KAPPC) said the North “has no formal agreement with the Hyundai side over the issue of tour of Kaesong.”

Despite its earlier contract with Hyundai Asan, North Korea requested a new deal with Lotte Tours Co. in 2005. However, the South Korean government said the change can happen only when Hyundai Asan voluntarily concedes or pulls out of the business.

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Posted in Asia-Pacific Peace Committee, Copper, Gold, Graphite, International trade, Iron Ore, Kaesong Development Agency, Light Industry, Lumber, Manufacturing, Mining/Minerals, Railways, South Korea, Tourism, Transportation | Comments Closed

North Korea bites a golden bullet

Wednesday, January 24th, 2007

Korea Times
Donald Kirk
1/24/2007

Gold fever is rampaging through the ruling elite of North Korea in the quest for relief from seemingly incurable economic malaise exacerbated by more than a year as a total outcast from the international financial community.

Word from Pyongyang is that trading companies and even individuals are offering payments in gold for imports from across the border with China and also in barter deals for products imported from elsewhere. Gold also has become a form of currency in the internal reward system of payoffs and bribes manipulated by Dear Leader Kim Jong-il to guarantee the loyalty of high-ranking officials.

The rush to sell gold – and, to a lesser extent, silver – has sharply escalated in the 16 months since the US Treasury Department blacklisted Banco Delta Asia (BDA) in Macau, banning all firms doing business with US firms from dealings with that bank. The Treasury Department charged that the BDA had been the principal conduit through which North Korea was shipping counterfeit US$100 “supernotes” printed on a highly sophisticated Swiss-made press in Pyongyang.

It’s well known that the US ban forced the BDA to impose a freeze on North Korean accounts totaling $24 million, but less well known that the bank also stopped purchasing gold produced by North Korea’s historic gold mines, in operation, sporadically, since the late 19th century.

Output of the mines, in mountains about 160 kilometers north of Pyongyang, fell sharply in the late 1990s as a result of flood and famine but, with foreign expertise, has begun to pick up in the past few years.

The impact of the ban, moreover, goes far beyond a single bank in Macau. Although North Korea last spring sold $38 million in gold and silver in Thailand, Pyongyang has been frustrated in reviving its presence on the London bullion market, the world’s largest marketplace for precious metals, amid increased US pressure on the large international banks that are the major buyers of gold.

It was in the aftermath of the ban on the BDA that North Korea’s Chosun Central Bank coughed up the information required by the London Bullion Markets Association (LBMA) for listing as a “good deliverer” of gold. North Korea from 1983 to 1993 had been in the LBMA’s good graces, averaging a ton a month in sales to London buyers that included some of the world’s leading banks, but had slipped off the list after failing to keep up deliveries.

The fact that the Chosun Central Bank again is listed with the LBMA, however, is no guarantee North Korea will be able to sell its gold. The US Treasury ban on dealings with the BDA – as well as sanctions unanimously imposed by the United Nations Security Council after North Korea conducted an underground nuclear test in October – has spooked buyers in London.

While the LBMA disavows “political criteria” in deciding on eligibility for its “good delivery list”, an LBMA memorandum leaves no doubt how buyers are likely to respond to overtures from a country or company on an international blacklist. None of them, according to Stewart Murray, the LBMA’s chief executive, is willing to take delivery from a company or country that is subject to sanctions.

Or, as the LBMA memorandum puts it, “If, for instance, a bullion custodian considered that it was bound by national or international sanctions that were in force against a particular country, it would have to refuse to accept bars from a refiner in that country.”

The memorandum, moreover, does not mince words when it comes to stating the importance of a “good deliverer” rating. “Given the status of London as the world’s leading center for bullion trading,” it says, “the LBMA List has become the de facto world list of quality refiners and Good Delivery accreditation is a highly sought-after accolade.”

In recent years, “the List” – capitalized in the memo – “has grown primarily due to the listing of refiners in China and Russia” and now totals 77 refiners in 31 countries.

Investors see North Korea as competing on a world stage once sanctions are lifted. “What we’re doing is normal business,” said Roger Barrett, whose firm, Korea Business Consultants, operates in North Korea from headquarters in Beijing. By reviving old minesand developing new ones, he argued, “We’re creating jobs for people, in line with the UN basic charter, in line with economic growth.”

Barrett also believes North Korea may somehow get around the sanctions by finding new markets. “Why would you go to the trouble of going to London?” he asked. “They’re totally entitled to sell their gold.” The fact is, however, that London remains the place to sell gold in significant quantities on a regular basis.

Under the circumstances, Colin McAskill, chairman of Hong Kong’s Koryo Asia Ltd and the guiding light of the Chosun Development and Investment Fund, dedicated to investing in North Korea, accused top US Treasury officials of waging a campaign to make sure the ban on banks dealing with the BDA extends to gold and silver.

McAskill accused US officials, led by Treasury Secretary Henry Paulson and Stuart Levey, under secretary for terrorism and financial intelligence, of “using coercion, innuendo and sheer force to intimidate banks from dealing with North Korea”.

Among the victims of the US campaign is one of Koryo Asia’s projects, the Daedong Credit Bank, the only foreign bank based in North Korea, set up primarily to deal with accounts of foreign firms and embassies in Pyongyang. The freeze of North Korean accounts in the BDA, according to McAskill, includes about $7 million funds of Daedong Bank customers.

McAskill avidly supports North Korean demands for the US to lift the ban on the BDA – a move that would not only open up the frozen North Korean accounts but would provide the opening needed for Pyongyang to trade in a wide range of products around the world.

The financial issue is assumed to have ranked at the top of an agenda discussed in meetings in Berlin between the chief US envoy, Christopher Hill, and his North Korean counterpart, Kim Kye-gwan. Hill, reporting on the Berlin talks in stop-offs in Seoul, in Tokyo and Beijing, seemed hopeful about “progress” in the next round of six-party talks on North Korea’s nuclear weapons, expected to open in Beijing next month, after the failure of negotiators to get anywhere in the last round before Christmas.

South Korean media said North Korea had agreed to shut down its five-megawatt reactor at its nuclear complex Yongbyon in return for the US promise of massive aid, the crux of the 1994 Geneva Framework Agreement that blew up in 2002 amid US charges of a separate, secret North Korean program for developing warheads from enriched uranium.

There was no assurance, however, that the US is ready to relent on the BDA or that the UN Security Council will consider lifting its own sanction – enough to dissuade banks in London from buying North Korean gold regardless of the US ban on the BDA.

McAskill believes the rationale for the crackdown on the BDA is flawed. He questions the validity of the counterfeit charge and, in any case, says most of the frozen funds are not those of the North Korean government, even though they’re tired up in North Korean accounts. “We want to get a breakthrough on the six-party talks by getting the sanctions eased or lifted entirely,” he said. “We’re at a very delicate stage.”

Whatever happens, McAskill sees North Korea as ripe for investment, with precious metals high on the list of potential exports. “North Korea wants to move back into legitimate business,” he said. “They have a wealth of minerals – gold, silver, zinc, magnesite, copper, uranium, platinum – that needs investment to extract.”

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Posted in Central Bank, Copper, Gold, Graphite, Iron Ore, Korea Business Consultants, Koryo Asia Ltd., Lumber, Mining/Minerals, Thailand | Comments Closed

US Geological Survey of DPRK

Thursday, January 18th, 2007

Everything you wanted to know about minerals in the DPRK and their export  can be found in these USGS reports (In PDF format):

 1994 | 1995 | 1996 | 1997 | 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 |

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Posted in Copper, Gold, Graphite, International trade, Iron Ore, Lumber, Mining/Minerals, South Korea | Comments Closed

North Korean Loggers in Siberia

Monday, November 13th, 2006

Korea Times:
11/13/2006
Andrei Lankov

For the last few decades a visitor to Eastern Siberia would sometimes come across unusual logging camps: fenced off with barbed wire, they sported the telltale portraits of Kim Ilsung and Kim Jong-il. These are North Korean camps: from the late 1960s, North Korean loggers have been working in Russia’s Far East.

In the 1960s the timber shortage was felt both in North Korea and the USSR, but the reasons for the shortages were different.

The Russians had plenty of forest, but lacked labor. When the gulags were emptied after Stalin’s death, few people were willing to up and fell trees in remote corners of Siberia.

The North Koreans had an abundance of cheap labor, but almost no good timber. Thus, the two Communist states had a potential match made in heaven.

In March 1967, when the relations between the two countries began to recover after a serious chill, the logging agreement was signed.

According to the agreement North Korean loggers were allowed to work in designated areas of the Russian Far East.

They were housed in special labor camps, run by the North Korean administration. The timber was to be divided between the two sides: the Russians 60 percent and the North Koreans 40 percent.

At their peak in the mid-1980s the Far East joint logging projects employed over 20,000 North Korean workers. This means that some 0.5 percent of all North Korean able-bodied men labored there. Nowadays, the operations are smaller in scale, with some 8,000 workers employed. An additional 3,000 North Korean workers are employed in other joint projects in Russia (construction industry, vegetable gardening etc.). Since the workers were rotated every three years, it is likely that up to a quarter of a million North Koreans have taken part in this project over the decades.

Politically, this was not as dangerous as it might seem. Even in the 1960s, the Soviet Union had far higher standards of living and was much more liberal and permissive society than the North.

However, the North Korean workers were in the middle of nowhere, and kept under the watchful eyes of their supervisors in the nearly isolated camps. People who broke the rules were arrested and sent back to the North. If it was deemed too difficult or impractical, they could be killed on the spot _ the Siberian forests provided more than enough space for unknown burials.

The Soviets usually turned a blind eye to everything the North Korean administrators did. In the early 1990s the situation changed. During the heyday of perestroika, investigative journalists began to report on the conditions of the North Korean workers.

An expose of the prison maintained by the North Korean security police in one of the logging camps led to a particular public outcry. In those days the Russians felt a nearly universal enthusiasm for democracy and believed that Kim Il-sung’s regime would soon collapse.

There were also publications about the secret opium plantations and illegal harvesting of protected species of plants and animals _ both, frankly, long established pillars of North Korea’s foreign currency earning programs.

On top of that, some loggers used the change in the international situation to defect to the South. In those days, defectors were still rare and thus welcomed in Seoul.

In 1992-1994 it appeared that the entire timber project would be discontinued owing to political considerations. However, the situation changed. The events of 1992-2005 made Russians quite skeptical about democracy, and very suspicious of idealistic crusades of any kind.

Thus, the North Korean camps were left alone to the great relief of the local Russian administrators and businessmen who make good money out of these projects.

For them, the North Koreans were but a source of cheap labor, and they did not care how these “Orientals” were treated by their supervisors.

When the initial Russian enthusiasm for a free press died out, the local politicians learned how to keep journalists away.

By the late 1990s, it also became clear that South Korea was not going to encourage the defection of the loggers. On the contrary, anecdotal evidence indicates that loggers who approach the local South Korean consulate are unceremoniously turned away.

Seoul does not need these impoverished and potentially troublesome brethren in our sunshiny days! Of course, some loggers run away, but largely in order to find better job opportunities in Russia’s black economy.

There are about a thousand such runaways hiding in Russia now, but the authorities tend to ignore their presence.

But what was the incentive for the North Koreans workers? The short answer is: money.

Really good money _ at least, by North Korean standards.

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Posted in Agriculture, Illicit activities, International trade, Lumber, Russia | 2 Comments »

N Korean loggers flee Russian ‘slave’ camps

Sunday, March 13th, 1994

The Independent
Terry McCarthy Helen Womack
3/13/1994

SEVERAL hundred North Koreans have escaped from gulag- style logging camps in Siberia. The mass break-out turns a spotlight on the shadowy camps where, Russian journalists say, North Koreans are kept as ‘virtual slaves’ to cut timber in a shameful deal that is profitable to Moscow and Pyongyang.

As many as 150 of the loggers are trying to defect to South Korea, according to government
 sources in Seoul. North Korea angrily denies the reports, describing them as ‘rumour, unfounded propaganda and sheer fabrication’. But one of the escapees, contacted this week in the Russian Far East city of Vladivostok, said economic hardship at home and bad living conditions in the camps were driving many of the loggers to think seriously of defecting.

Park Dong Bok, who comes from the northern part of North Korea, close to the Chinese border, had been working for two years in one of the Siberian timber camps close to the city of Khabarovsk. Although on Russian territory, the 16 camps are run entirely by North Koreans, watched over by Pyongyang’s notorious security police who confiscate passports so workers cannot travel, even within Russia. Russian officials are not allowed inside the camps, despite reports of serious abuses, but they tolerate this because the North Koreans are an exceedingly cheap labour force. A portion of the timber is given to Russia and the rest goes to North Korea.

Mr Park is 36, and like all the lumberjacks in Siberia – estimated at between 15,000 and 20,000 – he has a wife and family back in North Korea. The loggers’ families act as virtual hostages to discourage defection attempts.

Though the workers initially volunteer to come to Russia, conditions are reminiscent of Stalin’s forced labour camps of the 1950s. Life is unpleasant, particularly in the winter when there is no heating – though food rations were better than at home, said Mr Park: the loggers received rice every day, meat twice a month – usually pork imported from China – and grew their own vegetables. In North Korea most people receive meat only on a few feast days, and rice is often replaced with low-quality cornmeal.

But discipline in the camps was harsh, he said. There were frequent beatings by camp guards, and two types of prison: a log house for minor infractions and solitary confinement cells for ‘ideological crimes’, such as criticising the government of Kim Il Sung. The loggers dreaded these prisons: sleep was impossible, rations were reduced, beatings were commonplace and not all prisoners got out alive. The work day began at 5am, and continued until 8pm in the summer, 5pm in the shorter winter days. Rest days were rare. Each logger received one new set of clothes per year, and most worked for three years before returning home. They earned an average of dollars 25 a month (paid in North Korean won), and those able to cut 50 per cent more than their target could earn a maximum of dollars 40 a month.

To supplement their income, some of the loggers secretly distilled alcohol in the forest and sold it to Russians who came to the perimeter fences at night. Russian prostitutes also arrived at night.

Mr Park was driven to defect by news from home. Because his father had retired, his family’s food ration had been reduced, and to supplement their diet his mother started dealing on the black market. She was discovered, and the family was deported to a poor mountain area as punishment. His wife divorced him and took her two children with her.

With nothing to hold him back, Mr Park decided to escape and seek asylum in South Korea. Other North Koreans he worked with escaped because of hardship at home, and the news about the outside world that they received from illicit contacts with Russians. Since South Korea opened a consulate in Vladivostok last year, the North Koreans have made this city their first destination: it is several hundred miles from the logging camps, compared with the 5,000-mile journey to the next South Korean diplomatic post in Moscow.

Mr Park, who speaks a little Russian, is hiding in Vladivostok until his asylum request is processed. He is afraid North Korean agents will track him down. The South Korean government is still debating whether to accept the asylum requests. Normally Seoul receives only a handful every year, from North Korean diplomats in Africa or Asia.

Officials are concerned that, if all the loggers are accepted, many more may flee the camps, upsetting relations with Moscow and the tentative peace talks with Pyongyang.

Russian journalists first brought the plight of the North Koreans to light in 1991. The existence of the camps, which first started operating in the 1950s, has been kept secret, and few Russians know about them.

North Korea’s official news agency betrayed the government’s embarrassment, saying reports of defecting loggers were ‘a malicious abuse and slander’ and ‘an unpardonable insult to the Korean working class, who are masters of the country’.

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Posted in Forestry, Labor conditions/wages, Lumber, Russia | Comments Closed

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