How North Korea relies on China to funnel cash into the country

To inject life into an economy made moribund by the fall of the Iron Curtain, failed centralized policies and sanctions, Kim Jong Un needs foreign currency to pay for equipment from abroad, such as the recent purchase of Russian jets to upgrade the national airline.

For decades North Korea has built networks of front companies and foreign intermediaries to channel currency in and out, circumventing attempts to isolate it over its nuclear-weapons program. Court documents and interviews with investigators, banks and prosecutors show the cornerstone of those networks is China. “China is a very important piece in making sure that blockages work,” said William Newcomb, a former member of a panel of experts assisting the United Nations’ North Korea sanctions committee.

North Korea relies on China, its biggest trading partner, for food, arms and energy. The countries describe their ties as “friendship forged by blood” during the 1950-1953 Korean War where the U.S. was a common foe. China has criticized North Korea for provocative actions but historically opposed harsh sanctions that might precipitate a regime collapse and a flood of refugees across its 870-mile (1,400 kilometer) shared border.

About 70 percent to 80 percent of North Korea’s foreign earnings have in the past come via China, said Kim Kwang Jin, who ran the Singapore branch of North Korea’s North East Asia Bank before defecting in 2003. “That huge trade volume means there are more people in China who are willing to cooperate with the regime,” Kim said by phone from Seoul.

But China is no longer turning a blind eye to illicit North Korean activities, according to Richard Nephew, a former principal deputy coordinator for sanctions policy at the State Department until last year. “In the last 10-15 years, they actually really do care about trying to prevent some of these bad acts.”

David Asher, a former George W. Bush administration official who was involved in freezing North Korean assets at Banco Delta Asia, said sanctions can only be effective when China is coerced into cooperating. “The only way to cut off North Korea’s illicit cash flow is by interdicting these intermediaries,” said Asher, now an adjunct senior fellow at the Center for a New American Security. “That requires the cooperation of China, the biggest domicile for this type of integrated, clandestine, business-to-business relationship with North Korea.”

[Bloomberg]

South Korea and the power of words

Consider how many verbal red lines South Korea’s president stomped across Tuesday when she let fly against North Korean leader Kim Jong Un.

She warned, in the bluntest possible way, of the authoritarian North’s worst nightmare–“regime collapse.” She invoked the North Korean leader’s “extreme reign of terror.” Extraordinarily, President Park Geun-hye even used Kim’s name three times in her speech to parliament, something usually avoided at her level.

These words signal a tough new stance from South Korea in an already anxious standoff that began with North Korea’s nuclear test last month.

To make the combination of jabs sting even more, Park’s comments came on the birthday of Kim’s late dictator father, Kim Jong Il, a revered national holiday in the North. Happy birthday, Kim family.

The brusque tone of Park’s comments directly challenge the powerful, ubiquitous North Korean propaganda machine’s portrayal of the dictators who have run the country since its founding in 1948 as infallible and able to stand up to the vicious enemies that surround the tiny, proud North.

Any high-level talk of regime collapse by the conservative president of rival South Korea–and by the daughter of one of the North’s most hated enemies, late South Korean dictator Park Chung-hee–amounts to fighting words.

As always, the animosity, both between the Koreas and within divided South Korea, also points to a bitter truth at the heart of the divided peninsula. Both authoritarian Pyongyang and democratic Seoul cherish the notion of eventual reunification; each, however, sees that new single Korea with its own government in charge.

[AP]

Former North Korean Army officer tells of his dramatic escape – Part 1

Forced to witness public executions and beaten for 15 days after his first escape attempt, a former North Korean soldier speaks to Sky News about the horrors of life under Kim Jong-Un. After more than two decades serving in North Korea’s military, he escaped from the country last year.

I asked him about the TV pictures we see from Pyongyang – the vast celebrations, the resounding applause for the country’s leader. “When people are clapping,” he says, “if you don’t clap, if you nod off, you’re marked as not following Kim Jong-Un’s doctrine. …You chant ‘Long Live’ and clap because you don’t want to die.”

For all of the very public displays of ‎devotion, he says the reality is a brutal dictatorship.‎ He describes public executions, and a regime that demands total loyalty. “In our unit, when I was a lieutenant, we saw one of our own soldiers executed by gunfire. Public executions … I have seen a lot of public executions.”

Under Mr Kim, he says, people are more afraid‎. “In North Korea, if you watch South Korean dramas, then they can take you away, in extreme cases you can be executed. They watch it themselves first, and if it’s ‎fun, they keep it.”   Read more

Former North Korean Army officer tells of his dramatic escape – Part 2

His defection last year was driven by desperation. His family was struggling for food, and the only way he could see to provide for them was to cross the border to China and earn money to send back. During his first attempt he was caught, but before it was clear he intended to cross the border. He says he was beaten for 15 days, his family rounded up and questioned, the friend he had been traveling with taken away.

He resolved to ‎try again, but this time he knew it would be his last chance. He told his family to deny all knowledge and blame everything on him.

He set out in the dead of night, inching his way down a 150-metre cliff and wading a‎cross a river in the dark. “The waters were this high,” he said, gesturing above his head. “Where the water was deep, the surveillance wasn’t so strong.”

He’s now working long shifts in Seoul and saving up to try to get his family out. He knows they are alive, and has managed to get some money to them, but he ‎misses them terribly, and constantly re-lives how he said goodbye.

[Sky News – Read full article]

North Korean Groundhog Day

Unacceptable. Won’t be tolerated. Serious consequences. Those are just a handful of the scolding phrases uttered over the past two decades at every bend on North Korea’s road to becoming a nuclear state to its more recent advances in weapons and missile technology.

There have been sanctions designed to stop North Korea from acquiring weapons technology and conventional arms, sanctions to block its ability to move money around the world and sanctions to prevent the ruling Kim family and its cronies from getting personal watercraft and fancy watches.

The United Nations was already considering a new round of measures to punish Pyongyang for its fourth nuclear test, conducted last month, when leader Kim Jong Un ordered the latest launch of a long-range rocket thought to be part of his country’s ballistic missile program.

Denunciations of North Korea’s behavior and pleas for China–a veto-wielding member of the U.N. Security Council–to get tough on the regime followed immediately, prompting a familiar sense of deja vu.

Although sanctions have no doubt made it harder for Pyongyang to do business, they clearly have not forced the regime to change its behavior or prevented significant advances in the North’s nuclear weapons program. Indeed, no matter how strong any sanctions may be, they count for almost nothing if China is not on board.

[Washington Post]

Why cracking down on North Korea is difficult

Cracking down on Pyongyang is much tougher than it sounds. Here’s why.

1. Sanctions – Much of the talk about North Korean sanctions comes from Seoul and Washington, but it’s Beijing that holds most of the cards. While additional sanctions will hurt, North Korea has long been economically insulated by its relationship with China, its northern neighbor and main trade partner, which fears that strict sanctions could undermine the Pyongyang government, unleashing chaos. While North Korea’s economic isolation and the international financial system make it tricky to identify sanction targets and prove violations, new US legislation could hit companies in China that deal with the North, including those that buy its main exports — coal and minerals.

2. Diplomacy – Is North Korea a nuclear state? That question has largely paralyzed major diplomatic efforts on the Korean Peninsula for years. The main diplomatic forum to try to get Pyongyang to abandon its nuclear program, the so-called six-party talks, hasn’t met since 2008. Some in the international community now believe that North Korea will never abandon its nuclear program, and say the only way to negotiate with the North is to accept it as a nuclear power and work on a freeze, and then gradual arms reductions. But with Washington steadfastly refusing to accept North Korea as a nuclear state — and North Korea steadfastly insisting it is one — diplomacy remains frozen.

3. Military response – What about simply erasing North Korea’s weapons programs, launching missiles to destroy its weapons facilities? Since the 1950s, South Korea and the United States have wrestled — both internally and sometimes with each other — over how to respond to North Korean aggressions. Again and again, the decision has been made to avoid military action. The immense danger on the Korean Peninsula is that any military response from the South could quickly spiral into all-out war. And with nearly half of South Korea’s 50 million people living in or around Seoul — just 50 kilometers (35 miles) from the border and within range of the North’s artillery batteries —— Pyongyang could inflict immense damage on its rival in just minutes. The potential risks are simply too high.

[Times of India]

UN to notify North Korea’s Kim of probe for crimes against humanity?

A UN expert on human rights in North Korea has asked the United Nations to officially notify North Korean leader Kim Jong Un that he may be investigated for crimes against humanity.

A landmark 2014 report on North Korean human rights, co-authored by Marzuki Darusman, concluded that North Korean security chiefs and possibly Kim himself should face justice for overseeing a system of Nazi-style atrocities.

In a report to the U.N. Human Rights Council, Darusman recommended that the Council arrange an official communication, sent directly to Kim and signed by Darusman or U.N. High Commissioner for Human Rights Zeid Ra’ad al-Hussein.

His report, dated Jan. 19 but published on Monday, also said three experts should be appointed to find the best legal path to hold North Korea to account and find “creative and practical” ways to establish the truth and ensure justice for victims. Darusman stressed the importance of using the International Criminal Court but said it was “able to handle only the uppermost leadership”.

Only the U.N. Security Council can involve the court, but North Korea’s sole ally, China, a veto-wielding member of the top U.N. body, has repeatedly rejected calls for the Security Council to tackle human rights in North Korea. However, China said on Friday it would back a U.N. resolution to make North Korea “pay the necessary price” for recent North Korean rocket launches, with the aim of bringing Pyongyang back to the negotiating table.

[Reuters]

Defiant North Korean animosity toward America

The United States and Japan have already announced plans for new sanctions over North Korea’s recent nuclear test and rocket launch, and the U.N. Security Council is likely to deliver more soon. Cross-border tensions with Seoul are escalating quickly and even China is starting to sound more like an angry neighbor than a comrade-in-arms.

But with a storm brewing all around them, North Koreans have their own take on things — and it’s decidedly unapologetic.

Pyongyang started off the new year with what it claims was its first hydrogen bomb test and followed that up with the launch of a satellite on a rocket. When Seoul responded by closing down an industrial park that is the last symbol of cooperation between the two rivals, Pyongyang lashed back, expelling all South Koreans from the site just north of the Demilitarized Zone and putting it under military control.

Each move brought a new round of international outrage. But ask a North Korean what’s going on and the reply is swift, indignant and well-practiced. It’s America’s fault.

“It’s not right for the U.S. to tell our country not to have nuclear bombs,” Pak Mi Hyang, a 22-year-old children’s camp worker, told The Associated Press as she walked with a friend near Kim Il Sung Square in Pyongyang on Sunday. “The U.S. has a lot of them and tells us not to have any. It’s not fair. We’ve been living with sanctions for a long time and we are not afraid.”

“We have a lot of hatred toward Americans,” Pak said, politely, before walking on.

But anti-U.S. sentiment in this country does run deep, for good reason. That is partly because the relentless propaganda that depicts Washington — which has made no secret of its desire for regime change — as its biggest existential threat. But it also reflects the brutality of the Korean War, which left millions of Koreans dead and most of North Korea’s cities and industrial base in ruins. Though called the “Forgotten War” in America, it is anything but forgotten in North Korea. And since the 1950-53 war ended in an armistice, not a peace treaty, the U.S. is still technically and literally “the enemy.”

[AP]

How impoverished North Korea earns its money

Seoul and Washington want more stringent trade and financial sanctions to punish the North’s nuclear and missile adventures, but some question whether sanctions will ever meaningfully influence one of the least trade-dependent economies on the planet.

North Korea’s main exports to China, Pyongyang’s last major ally and by far its largest trading partner, include coal, minerals, clothing and textile, and foodstuff.  Transactions with China accounted for more than 74 percent of North Korea’s trade in 2014.

The South’s Unification Ministry says the Kaesong Industrial Park has provided $560 million of cash to the North since its establishment in 2004.

Outside experts say that North Korea since the mid-2000s has been increasing the number of workers sent for contract labor overseas in an attempt to bring in more hard currency. South Korea’s government-funded Korea Trade-Investment Promotion Agency estimates that there are about 60,000 to 100,000 North Koreans working in 40 different countries.

Marzuki Darusman, a U.N. special rapporteur on human rights in North Korea, said in a report last year that more than 50,000 North Korean are working overseas and earning the country something between $1.2 billion and $2.3 billion annually in foreign currency. North Korean workers overseas often face harsh working conditions and abuse, said the U.N. report.

And what of the North Korean  economy? South Korea’s central bank has been publishing estimates of North Korea’s economy since 1991. In its latest report, it said it believes the North’s economy grew by 1 percent in 2014 to $28.5 billion, or about 2 percent of South Korea’s economy.

[The Times of India]

North Korean markets thrive

Private markets began taking hold in North Korea following a devastating famine in the 1990s, when the state distribution system broke down.

Since 2004, the size of spaces used as markets has significantly expanded, as have bus depots supporting the delivery network, says Curtis Melvin, a researcher who studies publicly available satellite imagery of the country at the Johns Hopkins School for Advanced International Studies in Washington.

“This didn’t start under Kim Jong Un, but there’s been a lot of growth under him,” said Melvin, referring to North Korea’s young leader, who took power following the death in 2011 of his father, Kim Jong Il.

Using servi-cha, a rice vendor who needs to replenish supplies when none are locally available can phone a wholesaler in another city and place an order. The wholesaler delivers rice to the local depot, where a bus ships it to the buyer’s town.

To pay for the rice, the buyer visits a small money transfer business, which takes the payment and calls a partner business in the seller’s town – one in 10 North Koreans has a cellphone – who confirms the deal and hands cash to the seller.

By reliably accepting cash in advance, servi-cha have helped foster the concept of trust in business in North Korea, said another defector who stays in touch with family in the North and asked to be anonymous for the safety of her relatives still living there.

“Logistics with buses are like vessels which keep pumping blood around the country and stop people from starving to death,” says a defector. “This is something that the planned economy can’t do.”

[Reuters]