Black Market Bombsquad: How North Korea Gets Around UN Sanctions
AP Photo/ credited to APBusiness01:56 18.09.2017(updated 10:35 18.09.2017) Get short URL62458276
Sanctions against Pyongyang have barely stopped the nation from going on with the development of weapons of mass destruction, as well as the sale of its own military hardware to other countries. In a detailed report, the South China Morning Post summarized several means by which Pyongyang avoids the international obstacles to trade and commerce.
Earlier this week, the US Treasury Department disclosed before Congress that the People’s Democratic Republic of Korea (DPRK) used a spy-movie scheme to sell coal as international trade is increasingly constrained by UN sanctions. According to the US Treasury, Russia plays a major role in Pyongyang’s sanction workarounds, while China is seen to be backing away from its unruly neighbor.
SCMP reporter Liu Zhen outlined eight primary tools that allow the DPRK to continue functioning as a viable nation-state.
First, North Korea has developed a practice of direct barter, instead of using currency payments. DPRK coal, the nation’s primary export, substitutes for currency in many transactions as. where there is no currency payment, there is no record of an exchange. This also comes in handy as the North Korean national currency — the won (KPW): trading about 1000 to one US dollar — has been devalued to the point that some Pyongyang department stores insist on payment in dollars, euros or Chinese renminbi, according to the Washington Post.
According to the US Treasury, Chinese businessman Chi Yupeng allegedly used his company Dandong Zhicheng Metallic Materials to buy steel and anthracite coal from North Korea in exchange for nuclear and missile components.
But before the Koreans can trade the coal, they need to have it delivered. Testifying before US House Foreign Affairs Committee, Assistant Treasury Secretary for Terrorist Financing Marshall Billingsley unveiled a smuggling scheme that would make a cool movie.
According to their report, Chinese vessels turn off navigational transponders that allow them to be tracked remotely halfway to North Korea. Then the ships go to Korean ports and load coal, which the US Treasury allegedly proved using satellite photos. After that, ships return to the same point where they switched their transponders off, re-activate them and head toward Russia.
Pyongyang also allegedly resorts to falsifying ship registrations. Of 21 vessels of Pyongyang’s Ocean Maritime Management company (OMM), 18 are listed as domestic ships, despite some enter international waters occasionally, the report says.
According to the Philippines’ Manila Bulletin news website, South Pacific nations took action after Fiji claimed that it had identified at least 20 ships flying Fijian flags but with no registration. The Bulletin quoted New Zealand’s Foreign Affairs Minister Gerry Brownlee saying that Pacific countries, including his own, are concerned that the DPRK is using falsely-flagged cargo ships as an avenue to trade goods to get around sanctions. Now 18 states are set to launch a joint audit of every ship registered in the Pacific, searching for ties to Pyongyang.
“What we do know is that declared North Korean GDP (gross domestic product) is not big enough to support the nuclear program that they’re running so there has to be significant black market or offbook revenue going into the country,” Brownlee said.
Aside from maritime trading, there are about 100,000 North Korean nationals who work abroad and generate a stable income of about $500 million for their motherland.
The SCMP report describes the Mansudae Overseas Project, a group of construction companies noted by the UN as generating dollar revenue for Pyongyang.
In addition, the DPRK uses front companies that set up bank accounts, enabling Pyongyang to obscure international bank transfers. The SCMP quotes a UN report claiming that Glocom, a North Korean company that manufactures military communications devices, used a number of front companies that have themselves been used to make payments to clients.
“A single invoice was often settled through a series of small transactions,” the report noted.
A variation of this method involves diplomatic workers opening multiple bank accounts — sometimes for themselves, sometimes in the name of the front companies.
Pyongyang has been surprisingly successful in international weapons sales. According to the SCMP, North Korea manufactures and sells weapons, and even provides military training services to many nations, particularly on the African continent.
“A United Nations investigation said buyers included Angola, the Democratic Republic of Congo, Eritrea, Mozambique, Namibia, Syria, Uganda and Tanzania. Benin, Botswana, Mali and Zimbabwe were also investigated for their ties with North Korean companies,” the report read.
Pyongyang is also suspected of modifying non-military equipment, legally enabled for trade, to military purposes. According to the media outlet, photos and video from a military parade in Pyongyang in April show that trucks purportedly carrying nuclear missiles displayed Sinotruk logo on the fuel tank.
Sinotruk is a Chinese truck manufacturer that confirmed the sale of civilian trucks to the DPRK, but denied allegations of military cooperation.