Category Archives: NK Economics

Jeffrey Fowle’s mission to N. Korea no dumber than the rest of them

In this age of click-bait listicles, The Atavist has published a rare example of real journalism, in which reporter Joshua Hunt traces the story of Jeffrey Fowle from its origins (in a dream!) to its anticlimax. Fowle, you will recall, is the Ohio municipal worker who went to North Korea, “certain that God had a plan for him,” left a Korean-language Bible next to a toilet in Chongjin, got himself arrested and detained for six months, and nearly lost both his job and his wife. Later, asked if it was all worth it, Fowle answers in the affirmative.

Fowle’s master plan was as follows: (1) smuggle one Korean-language Bible through customs at Sunan Airport, (2) lug it across North Korea, in his jacket pocket, under the watchful eyes of his minders; (3) leave it in some discreet place, to be found by some random person who is totally not a Ministry of Public Security Officer tracing his every step; (4) wait for said person to experience a miraculous conversion; (5) assume that said person will propagate the transformation of the world’s most controlled society into a clandestine house church; and (6) if caught, pretend he dropped his sole link to his spiritual life accidentally.

Through sheer luck, Fowle achieves steps 1 and 2, but things come badly unglued at step 3. To buy himself time, Fowle places the Bible under a wastebasket, rendering his whole cover story (see step 6) implausible. The reader is left with an impression of a man driven more by the best of intentions than by natural gifts of intellect or common sense.

At this point, Fowle quickly learns that North Korea has a unique gift for isolating the individual — in this case, a nearly friendless man who, thanks to a combination of flawed judgments and flawed relationships, soon finds that he has no friends at all. As we’ll soon see, Fowle’s relationship with Koryo Tours turns out especially badly for him. To anyone of at least average judgment, the ethical context foreshadows this.

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Admittedly, the idea that you can change a society — especially this one — by leaving a Bible next to a toilet for the janitorial staff sounds dumb enough. It might be the perfect story for coastal elites to titter at the Bible-thumping flyover loser.

To be sure, Fowle emerges from the story as a pathetic figure, but I can’t say that his master plan sounds any dumber than more secular messianic master plans that have gained widespread elite acceptance. Behind every flawed engagement theory lurks the premise that liberal white people (or liberal Koreans) radiate magical sunbeams of love that melt icy hearts. Their assumptions about the penetration of their ideas through the elaborate defenses of the State Security Department and the Ministry of Public Security are every bit as irrational as Fowle’s, and they’ve done far more then the likes of Fowle to perpetuate the very controls they claim to be subverting, though billions of dollars in aid and profitable trade.

We see these theories expressed in shallow or self-serving arguments that tourism is changing North Korea or improving the lives of its people, or that the Associated Press can teach KCNA propagandists to be objective journalists. Who is supposed to be changing who again?

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To me, the most laughable master plans are those of the messianic capitalists — many of whom come from the political left in their home countries — who think they have a lot to teach North Korean arms dealers and money launderers about profits, international banking, and the global economy.

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Predictably, and immediately after Fowle finishes “using the toilet,” the MPS minders have traced his every step and found his “lost” Bible, complete with a (legitimately) forgotten picture of his family. At this point, Koryo Tours’ Simon Cockerell becomes the first one to interrogate the tourists, and is the one who extracts the confession from Fowle that he dropped the Bible.

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Cockerell doesn’t admit that he immediately ratted Fowle out to the North Koreans, but any reader can infer as much. Depending on who was watching, Cockerell might have pulled Fowle aside and told him to shut his mouth, but he didn’t. Instead, he effectively became a willing interrogator — effectively, just another MPS minder. Cockerell and others in his industry often argue that their presence is changing North Korea, but the opposite seems closer to the truth.

Meanwhile, Fowle continued to dig himself into a deeper hole.
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I’ll let Robert J. Samuelson close this post.

Ever since World War II, our foreign policy has rested on an oft-silent presumption that shared prosperity is a powerful and benevolent force for social stability, peace and (often) democracy. All the emphasis on free trade and globalization is ultimately not a celebration of economic growth for its own sake. It’s a means to larger ends of social cohesion and political pluralism.

In this, we have mostly projected our own domestic experience onto the world at large. Americans’ obsession with material progress — which seems excessive and even vulgar to many — is largely what has enabled us to be a multiethnic, multicultural, multiracial and multireligious society. Everyone can strive to get ahead. There’s a large common denominator. [….]

The second defect is more unnerving and dangerous. It is the true Achilles’ heel of American foreign policy: Significant blocs of humanity ignore or repudiate our faith in the power of shared prosperity. They put other values and goals first. Nationalism is one obvious alternative — Putin’s Russia being a good example. The case of China is more complicated. Although it is obsessed with economic growth, it’s also indulging a nationalistic urge to reassert itself on the global stage. [Robert J. Samuelson, Washington Post]


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Of fools and their money: Martyn Williams on Orascom’s North Korea fiasco

Martyn Williams of the North Korea Tech blog has a must-read story at IT World about how Orascom’s investment in North Korea’s Koryolink mobile phone service “went horribly wrong.” That such a headline can be written is, by itself, a stunning reversal. During the early years of Kim Jong-Un’s reign, Koryolink was the poster child for more sanguine North Korea watchers, who believed that once a Swiss-educated reformer had taken the throne, a Pyongyang Spring must surely follow.

For the first few years, Koryolink really did look like a grand success, touting millions of customers, and ostensibly breaking down some of North Korea’s internal isolation. Optimistic observers assumed away, or perhaps beyond, a system architecture that facilitated state control, censorship, and eavesdropping, and the fact that cost alone put Koryolink out of reach of everyone but the elites. They held their tongues when Koryolink poured millions of dollars into white elephant projects like the Ryugyong Hotel while millions of North Koreans went hungry. They ignored the security forces’ use of Koryolink to shut down the very cross-border movement of people, information, and goods that has been the greatest driver of change by North Korea’s poor and underprivileged.

In the end, however, the fatal blow to Koryolink is more likely to be Pyongyang’s own greed than the moral, ethical, or legal, hazards of dealing with His Corpulency:

Orascom’s efforts to get its profits out of North Korea have been unsuccessful, partially because of international sanctions imposed on the country but mainly by the government’s refusal to let the money go.

To transfer money out of North Korea, Orascom needs permission from the government and it hasn’t been granted, despite it being a partner in the joint venture.

The government hasn’t acted because it can’t afford to.

The profits are held in North Korean won, but the currency isn’t traded internationally and the government’s official rate is set artificially high, at 100 won to the U.S. dollar. At that rate, Orascon’s holding at the end of last year was worth $585 million.

But at the black market exchange rate, which is effectively the real value of the currency in North Korea, the cash is worth only $7.2 million. And therein lies the problem. The government can’t afford to pay the money at the official rate, and it can’t be seen to officially recognize the black market rate. [IT World, Martyn Williams]

After months of negotiations between Pyongyang and Orascom deadlocked, Pyongyang set up a rival carrier to compete with its now-captive partner. Eventually, it even forced Orascom into merger talks in which it would be the majority partner.

That led to a dramatic statement from Orascom when it reported its financial results Monday — “in the group management’s view, control over Koryolink’s activities was lost.”

What are we to take from all of this? First, that His Corupulency has not made the decision that Burma’s rulers have, to open and reform the society he rules, or to deal fairly with foreign investors. The careful observer will perceive a cooling in the ardor of even such pro-engagement stalwarts as Andray Abrahamian, who was, until last year, one of the most enthusiastic promoters of commerce with Pyongyang. Judging by his Twitter feed, Abrahamian appears to be spending more time in Rangoon than Pyongyang lately.

Second, despite all of this evidence, there will always be an endless parade of gullible foreign investors who will follow in the footsteps of Hyundai Asan, Volvo, Yang Bin, David Chang and Robert Torricelli, Chung Mong-HunNigel Cowie, and Orascom, which I predicted back in 2008 would “eventually meet the same fate.” All of them have, to one extent or another, abandoned their investments in the Central Bank of the DPRK. The oil and gas company GeoExPro seems like a strong candidate to be next. Pyongyang, like the smarmy barkers of carnival midways, is counting on a small, yet endless, supply of suckers who are too greedy and ill-informed to know better.

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Tourists put $43M in Kim Jong-Un’s pockets last year

Despite a string of high-profile arrests of foreign tourists recently, Darwin’s light continues to draw slummers — and record hauls of their money — into Pyongyang:

North Korea earned tens of millions of dollars from foreign tourists in 2014, around half of the hard currency it won from the lucrative inter-Korean industrial park, a researcher said Sunday.

North Korea’s income from foreign tourists is estimated at US$30.6 million to $43.6 million last year, considering about 95,000 Chinese tourists and 5,000 tourists from Western countries visited the country, Yoon In-ju of the Korea Maritime Institute said in a paper.

North Korea’s annual income from the Kaesong Industrial Complex in the North’s border town of Kaesong, accommodating 124 South Korean firms that employ more than 50,000 North Korean workers, reached $86 million in 2014. [Yonhap]

For years, the peddlers of North Korea tours have fended off moral and ethical questions about their funding of a brutal, repressive regime by saying that their contribution to Pyongyang’s finances was negligible.

Trips aren’t cheap either – four nights can cost around £1,000 excluding flights – and it is a profitable enterprise for all involved. But those working in the industry argue that the money trickling through to the government is small – and if they were to cease operations tomorrow the impact on the regime would be negligible. [The Guardian]

Few journalists ever asked the tour companies to show us their books, but now we know that tourism is, in fact, a non-negligible source of income for the regime. It’s time to take a fresh look at whether the tour companies’ payments to Pyongyang violate U.N. Security Council sanctions, which prohibit the payment of funds that “could be used” for North Korea’s WMD programs or luxury goods purchases.

“11.  Decides that Member States shall, in addition to implementing their obligations pursuant to paragraphs 8 (d) and (e) of resolution 1718 (2006), prevent the provision of financial services or the transfer to, through, or from their territory, or to or by their nationals or entities organized under their laws (including branches abroad), or persons or financial institutions in their territory, of any financial or other assets or resources, including bulk cash, that could contribute to the DPRK’s nuclear or ballistic missile programmes, or other activities prohibited by resolutions 1718 (2006), 1874 (2009), 2087 (2013), or this resolution, or to the evasion of measures imposed by resolutions 1718 (2006), 1874 (2009), 2087 (2013), or this resolution, including by freezing any financial or other assets or resources on their territories or that hereafter come within their territories, or that are subject to their jurisdiction or that hereafter become subject to their jurisdiction, that are associated with such programmes or activities and applying enhanced monitoring to prevent all such transactions in accordance with their national authorities and legislation; [….]


“14.  Expresses concern that transfers to the DPRK of bulk cash may be used to evade the measures imposed in resolutions 1718 (2006), 1874 (2009), 2087 (2013), and this resolution, and clarifies that all States shall apply the measures set forth in paragraph 11 of this resolution to the transfers of cash, including through cash couriers, transiting to and from the DPRK so as to ensure such transfers of bulk cash do not contribute to the DPRK’s nuclear or ballistic missile programmes, or other activities prohibited by resolutions 1718 (2006), 1874 (2009), 2087 (2013), or this resolution, or to the evasion of measures imposed by resolutions 1718 (2006), 1874 (2009), 2087 (2013), or this resolution; [U.N. Security Council Resolution 2094]

Whether the tour companies are violating U.N. sanctions, and the domestic laws of the countries from which they operate, depends on the answers to questions that regulators and reporters aren’t asking: How do these tour companies pay Pyongyang? What currencies do they use? Most importantly, where does the money go, and what is it used for? Governments have ethical, moral, and legal obligations to ask those questions, and to demand clear answers backed by credible evidence. It’s past time for U.S., U.K., and EU authorities to audit the tour companies, and to block payments by any third-country tour companies that refuse to show that they’re complying with U.N. sanctions.

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The more North Korea trades, the more it reforms, right? Wrong.

Yesterday, I questioned the premises of economic engagement with Pyongyang — that Pyongyang is socialist, that trade is capitalism, that capitalism inexorably erodes socialism, and that capitalism (least of all, state capitalism) is inherently liberal and peaceful. I argued that Pyongyang adopted state capitalism decades ago, and that it has grown steadily more menacing and repressive ever since. It feigns socialism to feed our false hopes of reform and arguments against sanctions, to tempt investors, to recruit apologists who embrace its socialist pretenses, and to justify the economic totalitarianism it uses to starve and isolate the vast majority of its subjects. Pyongyang doesn’t practice socialism; it imposes it on the underclasses. The underclasses are the only ones who can change that.

Sincere advocates of changing North Korea by engaging Pyongyang may accept that their best intentions didn’t work, yet still not lose heart. If they’re willing to rethink engagement in terms of engaging the people rather than the state, they’ll find more reason than ever to believe that change is in sight. For example, it now seems likely that within the next five years, anyone, anywhere in the world, will be able to access the internet. The signal might come from Google’s Project Loon, or Facebook’s, or maybe some combination of both. Universal internet access will shatter Korea’s virtual DMZ; eventually, it can break the physical one, too. The day is coming when North Koreans will be able to attend South Korean classes, sermons, movies, clinics, lectures, and family reunions. There can be a revolution in the people-to-people engagement that the Sunshine Policy promised, but couldn’t deliver, if South Koreans have the vision and the courage to weave a virtual Ho Chi Minh Trail of clandestine communication from South to North. North and South Koreans can use this network to rebuild the North’s civil institutions from the ground up, to establish shadow governments, to build the capacity to resist the state’s most repressive policies, and to begin the process of reconstruction.

Today, however, the South Korean government remains too timid to broadcast to its northern countrymen on AM radio. My friend (and now, National Assemblyman) Ha Tae Kyung, interviewed by the Daily NK, calls for Seoul to make broadcasting a part of its unification policy, which at present desperately lacks a Phase 2. Ha wonders how the Blue House and the Unifiction Ministry can be serious about reunification when they haven’t called for radio broadcasts to the North, broadcasts that could play an important part in the cultural and social reunification.

Of course, Pyongyang will try to enforce the poverty and isolation of its subjects as if its survival depends on it. Just as it cracked down on its northern border, tracks down and arrests the users of Chinese cell phones, and sends distributors of foreign media to the gulag, it will try to arrest, imprison, terrorize, or kill anyone who listens to South-to-North broadcasts, or who makes inter-Korean phone calls. Yet the right policies on our part can give the people a fighting chance.

This picture taken on April 6, 2013 shows a Chinese border guard standing on a look out post by the bridge that crosses the Yalu river to the North Korean town of Sinuiju across from the city of Dandong. The US is pressuring China's new President Xi Jinping to crack down on the regime in North Korea or face an increased US military presence in the region, The New York Times reported late April 5, 2013. CHINA OUT AFP PHOTO (Photo credit should read STR/AFP/Getty Images)

[STR/AFP/Getty Images, via WaPo]

Isolating a country costs money, and with the decline in the Chinese economy, Pyongyang may be having more difficulty finding that money. The Wall Street Journal‘s Alastair Gale cites Chinese trade data showing that “[t]he value of North Korean exports to China … fell 9.8% through August from the year-earlier period … accelerating from a 2.4% decline last year.” Meanwhile, another report confirms what I’ve long suspected — that the security forces are funding themselves through some of this trade:

North Korea’s feared State Security Department (SSD) has established a new “trade organization” tasked with earning foreign currency from China, according to sources who say the branch will likely use its broad powers to tap into channels used by the impoverished nation’s subsistence smugglers.

The SSD, also known as the Ministry of State Security, set up the organization “very recently” with its headquarters in the capital Pyongyang and several satellite offices in “local areas” of North Korea, a source from North Hamgyong province, along the border with China, told RFA’s Korean Service.

“While the whole nation is aware of the shortage of foreign currency in North Korea, it seems strange to establish a new trade organization under the SSD, which traditionally monitors the population’s activities to ensure they do not contravene the rules of the regime,” said the source, who spoke to RFA on condition of anonymity, after recently visiting China.

In addition to keeping an eye on the political actions of the public in North Korea, the SSD’s secret police force keeps tabs on North Koreans who travel to and from China, as well as telephone communications in border areas.

Sources said the move will likely have implications for North Koreans who subsist on Chinese currency they earn by running smuggling operations over the border. [….]

A source based in China who maintains a close relationship with North Koreans earning foreign currency there told RFA that a “large number of people belonging to the SSD” had been dispatched across the border since spring to “monitor and control the activities of North Korean residents” in the country.

“Since they are ostensibly working for foreign currency, they are called ‘trade representatives,’ just like others [who have been sent to earn cash for the regime],” said the source, who also declined to provide his name. [Radio Free Asia]

The regime’s use of trade to finance this crackdown sets up a zero-sum competition between state capitalism and free-market capitalism, the kind that has genuine potential to transform North Korean society. The SSD’s profiteering is neither a quiet capitalist revolution nor a sign of reform that is washing away the foundations of socialism. It pays for the enforcement of isolationism, and makes North Korea more unequal, oligarchical, and totalitarian (read: fascist). This may also be true of Pyongyang’s other trade relations, too, but we can only guess, because its finances are so opaque that not even the Treasury Department knows how it uses the proceeds.

In addition to broadcasting and people-to-people engagement, then, sanctions targeting the SSD’s assets are an important part of a policy to protect North Koreans from censorship and help them liberalize their society. By starving the security forces of cash, anti-censorship sanctions would deny the SSD the means to equip and pay its officers. They would foster the corruption that facilitates smuggling, and preferentially support engagement through independent free markets. The use of sanctions to fight censorship and support freedom of expression is nothing new. Treasury has anti-censorship sanctions against Iran to “facilitate communications by the Iranian people.” Why not North Korea?

Ha is dismissive of sanctions, perhaps because he lumps all kinds of sanctions together, and (like most people) doesn’t know the significant gaps in their enforcement. It’s a common myth that sanctions against Pyongyang are still strong, although I’ve previously debunked this myth in detail. Ha argues that the trade sanctions Seoul imposed on Pyongyang in 2010, after the attack on the ROKS Cheonan, haven’t made Pyongyang apologize or come to the negotiating table. He concludes that “economic sanctions don’t have effects, but broadcasts do.”

Respectfully, I think Assemblyman Ha is missing a few key points, including the role sanctions can play in protecting his North Korean listeners. First, the lifting of these trade sanctions has been at the top of Pyongyang’s list of demands since 2010. If it can be argued that loudspeaker propaganda was effective because Pyongyang sounded desperate to switch it off, the same can be argued of the bilateral trade sanctions.

Second, by lumping all “sanctions” together, Ha overlooks what is beyond serious dispute — that financial sanctions hit Pyongyang where it hurt most:

Practically overnight, banks throughout the region, even in China, began turning away or throwing out North Korean government business. By this one simple act, Mr. Zarate writes, “the United States set powerful shock waves into motion across the banking world, isolating Pyongyang from the international financial system to an unprecedented degree.” [….]

Then, Mr. Zarate writes, a North Korean representative contacted the United States, seeking relief from the 311. At the State Department’s insistence, negotiations began in Beijing, and appeared to end when a Chinese bank volunteered to handle a measly $25 million of North Korean money the authorities in Macau had frozen.

Mr. Zarate writes that “the amount of money wasn’t the issue” and that the North Koreans “wanted the frozen assets returned so as to remove the scarlet letter from their reputation.”

Then, he says, something amazing happened. Despite its government’s support of North Korea, the Chinese central bank refused to approve this solution, indicating that it, too, wanted nothing to do with a bank hit by a 311. “Perhaps the most important lesson was that the Chinese could in fact be moved to follow the U.S. Treasury’s lead and act against their own stated foreign policy and political interests,” he writes. “The predominance of American market dominance had leapfrogged traditional notions of financial sanctions.” [N.Y. Times Review, “Treasury’s War,” by Juan Zarate]

Third, the May 24, 2010 sanctions are narrow sanctions with narrow purposes — they exclude Kaesong, after all. Ha has a vision for reunification and has articulated it; Park Geun-Hye doesn’t and hasn’t. Still, even Park’s limited goals can be valid ones. Trade sanctions deter Pyongyang by imposing a (small) price for murdering South Koreans with premeditation and malice aforethought. They’re also consistent with U.N. Security Council resolutions, which prohibit member states from providing “public financial support for trade with the DPRK (including the granting of export credits, guarantees or insurance to their nationals or entities involved in such trade) where such financial support could contribute to the DPRK’s nuclear or ballistic missile programmes.” South Korea voted for those sanctions when it was a member of the Security Council. The other members of the Security Council approved them, in large part for South Korea’s own protection. Seoul can’t very well ignore them now.

We now have evidence that regime-controlled trade funds the oppression that isolates North Koreans, retards change, and helps Pyongyang repress the people who would listen to the broadcasts Ha supports. If the world wants North Korea to change, it has to give free markets — North Korea’s only independent institutions, on which most North Koreans depend for their survival — a fighting chance to survive. As long as Pyongyang’s oligarchy has unrestricted access to our financial system, it will use it to isolate and repress its people. We should seek to shift North Korea’s internal balance of power away from the ones with the guns and food toward those without. That means giving North Korea’s people information and access to markets. That, in turn, means blocking the funds that pay for Pyongyang’s policy of isolation and oppression.

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The Myth of North Korean Socialism: How Pyongyang’s Profiteers Fooled the World

Over this long weekend, I’ve been reading Brian R. Myers’s new book, “North Korea’s Juche Myth,” a copy of which Prof. Myers was kind enough to send. Myers argues that juche, that cryptic ideology reporters often mention but never explain, is a sham ideology that is both overblown and seldom understood, by foreigners as well as North Koreans. Very roughly translated, juche means that man must be the master of his own destiny (in contrast to North Korea’s reality, in which individuality is uniquely suppressed). Myers argues that juche is a loanword from the Japanese zhuti, first seen in an 1887 Japanese discussion of Kant, and became a term of common usage in both Koreas. Pyongyang built the Juche Myth to give Kim Il-Sung ideological gravitas, and to decoy naive foreigners away from its real — and more implacable — ideology of racism, nationalism, and xenophobia, which Myers described in “The Cleanest Race.” (You can hear Myers explain his argument here, in an interview with Chad O’Carroll.) Myers argues that Pyongyang maintains this duality (triality?) by code-switching between its foreign propaganda, its propaganda for its elites, and its propaganda for its underprivileged classes. (As we have seen.)

I’m not prepared to declare myself convinced of the entire argument before I finish the book, but I’m already mulling my own companion volume: “North Korea’s Socialist Myth.” The thesis of this book (or rather, this post) will be that Pyongyang’s claims of socialism are a sham, meant to lure naive or self-serving foreigners with more money than good sense, with a mirage that its profiteering represents progress toward ever-receding reforms. In recent years, that mirage has gained Pyongyang $7 billion dollars in South Korean aid, perhaps billions more from other gullible investors, and probably billions in sanctions relief from those who did not want to interfere with these phantom reforms.

By feigning socialism, Pyongyang also gains a small, fanatical, and almost influential following of apologists on the far left — apologists who are themselves willing to overlook not only its gross inequality, but also its racism (Barack Obama: “a wicked black monkey … an ugly sub-human … suitable to live among a troop of monkeys in the world’s largest African animal park, licking at the crumbs tossed by onlookers“), its homophobia (Michael Kirby: “a disgusting old lecher with 40-odd-year-long career of homosexuality”), its misogyny (Park Geun-Hye: “a whore [who] lifts her skirt to lure strangers“), its acts of war, its crimes against humanity, and the violence of their own allies.

Socialist ideology also justifies the economic totalitarianism by which Pyongyang prevents its subjects from achieving economic independence, and the other forms of independence (of thought, of movement, from want, from fear) that would inevitably follow. Socialism is not something that Pyongyang practices, it’s something that Pyongyang imposes on the weak and vulnerable. Its real economic policy is — and has long been — unrestrained state capitalism,* shielded by deceptive financial practices, and revealed only when its agents are caught carrying it out. Which is often, for those who are paying attention. (* See comments.)

Pyongyang has long been a profiteer from the un-socialist vices of gambling (both online and in pachinko parlors), narcotics smuggling, slaverymoney laundering, cigarette smuggling, currency counterfeiting, gold smuggling, pharmaceutical counterfeiting, the trade in endangered species, and even prostitution. For decades, it has permitted as much capitalism as necessary to maintain its elites, its security forces, and its weapons programs, but never enough to allow meaningful interaction between foreign ideas and non-elite North Koreans. The long-predicted penetration of capitalism into North Korean society did happen — not because the regime accepted reforms, but despite Pyongyang’s best efforts to suppress it. (Since the succession of Kim Jong-Un, once touted as a Swiss-educated reformer, the regime has made significant progress toward stanching the flow of goods and information into the peoples’ economy.)

Pyongyang’s controlled isolation was not a difficult thing to foresee, for those who read Nicholas Eberstadt’s quotations of past North Korean policy pronouncements. A sample:

It is the imperialist’s old trick to carry out ideological and cultural infiltration prior to their launching of an aggression openly. Their bourgeois ideology and culture are reactionary toxins to paralyze people’s ideological consciousness. Through such infiltration, they try to paralyze the independent consciousness of other nations and make them spineless. At the same time, they work to create illusions about capitalism and promote lifestyles among them based on the law of the jungle, in an attempt to induce the collapse of socialist and progressive nations. The ideological and cultural infiltration is their silent, crafty and villainous method of aggression, intervention and domination….

As a reflection of Pyongyang’s doctrine, this statement is as true of North Korea’s peoples’ economy as it is irrelevant to Pyongyang’s palace economy. In North Korea, socialism is for little people. For decades, Pyongyang sustained itself on state capitalism while enforcing socialism on the expendable underclasses, wallowing in bacchanalian luxury while a million or two people starved to death. North Korea remains one of the world’s least equal societies.

KJU ski kju airport

This week’s reporting on North Korea’s big parade reenforces the evidence of widening inequality, showing us both the relative prosperity of Pyongyang (James Pearson, Reuters), but also the unabated poverty of the rural provinces (AP, Eric Talmadge), and the hardships of those who must still evade tightened border controls to work in China illegally, to support their families at home (Anna Fifield, Washington Post).

Pyongyang, by contrast, has now had decades of exposure to capitalism, but capitalism has not pacified North Korea, any more than it pacified Hitler’s Germany, Imperial Japan, Baathist Iraq, or Xi Jinping’s China. Rather, in all of these cases, state capitalism fueled each state’s military-industrial complex. The experience of the last two decades provides no basis to believe that capitalism on Pyongyang’s terms will transform North Korea into anything but a more stable, more repressive, and better-armed version of itself.

Of course, to accept what should be obvious by now, one must abandon the hope which sustained a fading generation of American and South Korean policymakers — that Pyongyang will eventually allow more than minimal economic reforms, and that trade (beyond enriching the state and perpetuating its policies of repression at home and extortion abroad) will eventually lead to broad economic, social, and political reforms. Pyongyang’s construction boom, cell phones, traffic jams, and Mickey Mouse merchandise have become the slender reed on which the Sunshine school sustains itself. But so what?

For years, I’ve challenged advocates of “engagement” with Pyongyang — as opposed to engagement with the North Korean people — to name a significant and positive change their policies have brought about. I have yet to hear an answer. The comments are open.

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N. Korea’s expatriate labor needs ethical and financial limits

N. Korea increasingly relies on expat labor for hard currency

A series of new reports suggests that the export of labor has become a major source of income for Pyongyang. The Financial Times cites an NGO estimate that the regime earns $1.5 to $2.3 billion a year from contract labor, in line with educated estimates of its annual revenue from missile sales ($1.5 billion) or arms deals with Iran ($1.5 billion to $2 billion). (Update: Marcus Noland questions that estimate, and thinks the more likely figure is between $150 million and $200 million, which is still a lot of bling.) Ahn Myeong-Cheol, a former prison camp guard and leader of the NGO NK Watch, says that there are now 100,000 North Koreans working overseas, double the number it had posted overseas in 2012. Ahn believes North Korea is increasing its use of contract labor to compensate for arms revenue lost to U.N. Security Council sanctions. Marzuki Darusman gives the lower estimate of 20,000. In testimony appended to the end of this post, Greg Scarlatoiu of the Committee for Human Rights in North Korea puts the figure at around 53,000. He also offers this very specific breakdown:

Currently, 16 countries reportedly host workers sent by the North Korean regime: Russia (20,000), China (19,000), Mongolia (1,300), Kuwait 5,000), UAE (2,000), Qatar (1,800), Angola (1,000), Poland (400-500), Malaysia (300), Oman (300), Libya (300), Myanmar (200), Nigeria (200), Algeria (200), Equatorial Guinea (200) and Ethiopia (100).4 Although North Korea is not a member of the International Labor Organization (ILO), all but two of the 16 states officially hosting North Korean workers are ILO members.

Scarlatiou cites this study by the Asan Institute, which I haven’t read, as the source of these figures.* For years, North Korean workers have been sent to stitch BMW headrests in Europe; build political monuments in Africa (at costs that are suspiciously above market value); mine coal in Malaysia; and cut down trees in the 40-below cold of Siberia without proper winter clothing or safety equipment. Recently, Radio Free Asia reported that North Korean managers were deported for pimping out female textile workers in China. Needless to say, such working conditions fall far short of ILO standards.

Media scrutiny causes Qatar to fire N. Koreans over labor violations

Recently, Qatar became a target for criticism by human rights groups for using North Korean labor to build venues for the 2022 World Cup. Pressure on Qatar has led one construction company to fire 90 North Korean workers, or half of its North Korean work force, for “a series of violations and misconduct by the North Korean workers and their supervisors.” A North Korean company called Genco (not to be confused with that other shady front company of literary infamy) employs the workers.

“The Korean supervisors responsible for the wellbeing of their workers have been continuously forcing them to work more than 12 hours a day. The food provided to their workforce is below standards. Site health and safety procedures are ignored regularly,” said one representative of the company, according to the document. [VOA News]

UPI adds that at least one North Korean worker died due to violations of safety standards. A hundred other North Korean workers continue to work at the company’s construction projects in Qatar. The report did not make clear whether the projects were related to the World Cup. The FT found severe conditions at one Gulf State construction project, where North Korean managers forced their workers to keep toiling in the 120-degree heat, when foreign laborers from other Asian countries took shelter.

As a result of this scrutiny, North Korea has tried to impose information blockades around its expatriated workers. In April, Radio Free Asia reported that the regime has directed its workers to physically assault reporters who try to cover them, and smash their cameras. New Focus also reported that the regime had forbidden its workers in China, where dubbed South Korean dramas are broadcast regularly, from watching TV. Workers were previously “allowed some degree of freedom” if they moved in groups of two or three. Now, they’re forbidden from leaving the work area except in groups of 15 or more. Those who break the rules are sent back to North Korea. God only knows what happens to them (and their families) after that.

Workers receive little or none of their “wages”

Whether you define North Korea’s labor arrangements as slave labor may depend on how you define the term, and on the circumstances of each project. How much of their wages North Korean overseas laborers get to keep varies from project to project:

Current and former North Korean overseas workers describe how the vast majority of their nominal wage is lost to management fees and contributions to the ruling Korean Workers’ Party. Their testimonies suggest a common system where managers agree to send a set monthly sum back to North Korea. If funds are short, the workers may be denied their wages or made to contribute to the remittance.

Yet workers can still earn $1,000 for a year’s work — a significant sum in North Korea, where most rely on the black market for sustenance and where bribery can be a crucial means of obtaining professional or other opportunities, such as securing education for their children. “The bribes to get into a good university are expensive — Kim Il Sung University is about $10,000,” says one former overseas worker. [Financial Times]

In some cases, defectors reported that they were left with nothing after party contributions were deducted; their bosses told them to be thankful they got two meals a day. The FT’s sources reported that they received either a small percentage of their nominal wages, or in one case, most of a $4-a-month pittance. One said that the money was enough to buy a decent apartment at home. Another, quoted in The Chosun Ilbo, said he was allowed to keep $100 out of a nominal salary of $750. The fact that North Korean workers in Muslim countries are regularly caught bootlegging alcohol suggests that their take-home earnings are insufficient to feed themselves, and their families. At Kaesong, arguably the most-scrutinized of all these arrangements, it still isn’t clear whether the workers receive any cash wages at all.

Defenders of these labor-export arrangements argue that the North Korean workers there earn more and live better than those who remain behind, but the same justification might also be true of a child prostitute in Cambodia, or other human trafficking victims of any number of nationalities and circumstances. It still doesn’t justify exploitative and dangerous working conditions, which are harmful to the North Korean workers, to workers in the host countries, and ultimately, to those imprisoned inside North Korea by a system perpetuated by exploitation.

Toward a More Ethical Model of Engagement

There are two possible approaches to this problem. One approach is suggested by the conduct of the Qatari firm that fired half its North Korean work force, and warned that the rest would be fired if they failed to comply with labor standards. In this 2014 paper, Marcus Noland argued that Kaesong and other consumers of North Korean labor should agree to a code of ethics, akin to the Sullivan Principles, which were used to pressure South Africa to treat its African work force more fairly. But as Noland notes, the adoption of the Sullivan principles “did not occur in isolation;” companies adopted them under the threat of boycotts, divestment campaigns, shareholder resolutions, and eventually, U.S. sanctions laws. Users of North Korean labor must also comply with the financial transparency requirements of U.N. Security Council Resolution 2094, which prohibits the provision to North Korea of economic resources that could be used for prohibited weapons programs.

If users of North Korean labor agreed on a similar code of conduct, there would be far fewer objections to these arrangements, and the balance of equities in this debate might shift. That code would have to include basic worker safety protections, and guarantees that the workers would receive, spend, and repatriate a living wage. The regime could receive the remaining proceeds to purchase food, medicine, and other humanitarian needs and services in kind.

Because moral suasion doesn’t work on everyone, standards that conflict with profit motives need hammers. In the case of South Africa, the hammers included the fear of reputational harm, and eventually, sanctions. Under Section 104(a)(1)(F) of the North Korea Sanctions Enforcement Act, those who engage in transactions in forced labor or human trafficking would be subject to the blocking of their assets in the dollar-based financial system.

Greg Scarlatoiu’s testimony here: Testimony of Greg Scarlatoiu Final

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* This is my cue to unburden my soul of something. Some months ago, I bruised an Asan scholar and OFK reader by writing (on reflection, unjustly) that Asan “largely” (then changed to “sometimes”) “reflects the views of, and serves the interests of, the South Korean government.” I’ll keep the original basis for that conclusion to myself, but Asan’s work since then has convinced me that it simply isn’t true. I don’t think there’s any question that Asan is the foremost Korean think tank publishing work on North Korea today. I apologize for the slight.

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Why legal investments in North Korea are a money laundering risk

You’ve often seen me write about the importance of “financial transparency” in transactions with North Korea. For a decade, economic engagement has mostly been done by one of two models: (1) controlled interactions with members of the elite, the actual effects of which are negligible at best; and (2) barbed-wire capitalism, where a few North Korean officials relay orders from foreign managers to hand-picked workers, and where the regime seals the whole enterprise off to prevent it from influencing the local community.

The former are, for the most part, of little financial significance. The latter may represent a significant source of income for illegitimate uses, and may also help the regime hide its flows of dirty money.

It wasn’t supposed to be this way by now. The idea behind economic engagement was to gradually draw North Korea into compliance with the rules that the civilized world lives by. Yet ten years later, the South Korean Unification Ministry can’t tell us how much (if anything) Kaesong’s workers receive after the regime takes its cut from their wages, and the Undersecretary of the Treasury recently expressed his concern about just how North Korea is spending that money.

The U.N. Panel of Experts now expresses a related worry — that North Korea could be using its ostensibly legal businesses to conceal and launder the proceeds of illicit activity:Screen Shot 2015-03-03 at 7.32.53 AMScreen Shot 2015-03-03 at 7.33.11 AMA few days ago, we saw that North Korean diplomats have been smuggling gold to earn hard currency for Pyongyang. That’s not just of concern because of how North Korea spends the earnings, but also because of concerns about conditions in which the gold is mined. As noted here, however, North Korea continues to run most of this business through the dollar system.

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Hence, the renewal of FATF’s warning about “countermeasures.”

Recently, a scholar friend emailed me that his opponent in a debate had criticized the effrontery of blocking North Korean assets that are the co-mingled proceeds of legal and illicit activity. In fact, that is standard law enforcement practice, because co-mingling is the essence of how criminal organizations conceal the illicit origin of their earnings.

Defendants often commingle SUA proceeds with legitimate funds. The government need not prove that all proceeds in a transaction were unlawfully derived, but must be able to trace some of the proceeds to a SUA. Criminally derived proceeds deposited with legal funds are considered to be withdrawn last unless the account/business is deemed to be permeated with fraud. This implies that the business operations are so intertwined with fraud that to segregate the legitimate operation and profits is impossible. Special agents should work closely with the attorney for the government when investigations involve commingled funds to ensure the elements of the crime are met. [IRS]

That’s why Congress, and many third-country parliaments, have long given their law enforcement agencies the authority to seize co-mingled funds.

The Treasury Department could do a great deal to regulate transactions with North Korea — and perhaps, put more food into empty bellies and drive the development of a true market economy — simply by requiring OFAC to license them. As a condition of each license, the Treasury Department could ask the applicant for assurances that the ultimate end-use of the funds would be for items that would benefit the people: food, clothing, medicine, consumer goods, materials for civilian construction projects, or electronic items like desktop computers that help to open up information flows.

To make this requirement truly effective, the EU Central Bank could impose similar requirements for Euro-clearing transactions. If Canada, Britain, Australia, and Switzerland joined, they would collectively cover just about all of the world’s convertible currencies, leaving only trades in Chinese Yuan unregulated. Of the latter, the Treasury Department could still target the most egregious with secondary sanctions.

In his paper about labor conditions in Kaesong, Marcus Noland called for investors in North Korea to adhere to a single set of minimal standards, akin to the Sullivan Principles. What I’m calling for here is a financial analogue to the Sullivan Principles — a requirement that investors ensure that their money will be used to better the lives of the North Korean people, rather than being wasted on weapons and luxury goods.

The real flaw in the engagement argument today, ten years after it began, is that it can’t show any significant, enduring, positive impact on North Korea, its treatment of its people, or its relations with the wider world.

It’s unfortunate that so many advocates of engagement are too focused on making nice with their minders to insist that the regime make any of the changes they once promised. Two good places to begin would be transparency in their labor and financial arrangements. If they did, they might strengthen their argument by showing that they’ve made legitimate, positive change in how North Korea does business.

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Somehow, I don’t think this will encourage Kim Jong Un to engage with us.

I think Marzuki Darusman is a good man who means well, but it’s difficult to derive a coherent policy from this:

“This is a new thing, spotlighting the leadership and ridiculing the leadership. In any authoritarian, totalitarian system, that is an Achilles’ heel,” Darusman said in an interview in Tokyo, where he held talks with the government on an investigation into North Korea’s abductions of Japanese citizens.

If this kind of ridicule seeps into North Korea, it could become lethal for the regime, he said. “If they want to preserve their system, the only way to do that is not to close themselves off from the international community but to actively engage,” he said. [Washington Post, Anna Fifield]

OK, so they need “engagement”–presumably, trade–to preserve the system, which we all agree should not be preserved. So should we cut off trade?

But the world also should be actively engaging with the Kim regime to draw it out of its self-imposed isolation, Marzuki Darusman said Friday, calling the United States’ increasingly aggressive approach toward North Korea “unfortunate.”

“In the overall picture, I think much hinges on the way the U.S. acts,” said Darusman, a former attorney general of Indonesia. A harder line against North Korea could “stall or delay the process that needs to be put into place,” he said.

I don’t get it. If ridicule of His Porcine Majesty scares the bejeezus out of the little gray men in Pyongyang, and if we’re supposed to use engagement to mock His Porcine Majesty mercilessly, why does Marzuki suppose that Kim Jong Un would widen engagement rather than stick with the current, controllable kinds of engagement that are serving North Korea’s priorities rather nicely? Meanwhile, Kim Jong Un continues to succeed at smothering the penetration of real capitalism.

Marzuki is a distinguished jurist who has done a great service to humanity by the facts he’s helped to establish. Maybe that’s enough for one man for one lifetime.

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Reports: Musan mine to lay off 10,000 workers; coal exports halted

At the end of last year, the Daily NK reported that North Korea’s iron ore exports to China had stopped, but offered two different explanations for that — a price dispute with China, and a shortage of hydroelectric power caused by drought. One of the reports claimed that the power cuts halted the massive iron ore mine at Musan, which had caused “major disruptions” at the Kim Chaek and Songjin steel mills. All three facilities are propaganda showpieces of North Korean industry.

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[The massive Musan mine. The yellow line on the left is the border with China]

In a follow-up report, the Daily NK now blames electricity shortages and a price dispute with China for plans by North Korea to lay off 10,000 of the 23,000 workers at Musan. The decision isn’t going over well with the workers:

For most, the focal concern is what happens next, as no jobs are guaranteed to those laid off. “Officials at the mine may say that they’re struggling with deciding on whose names to add to the list, and workers are irate, saying that ‘they can’t get away with this!’” the source said, noting that the surrounding village has been cast into a state of “unrest” because of the cutbacks. [Daily NK]

According to last year’s reports, however, labor shortages in the coal mines have caused North Korea to send inexperienced convicts to work there, causing a high rate of disabling and fatal accidents. One would think that the regime could find work for these men, even if that work is in Malaysia.

But now, Radio Free Asia reports that North Korea’s coal exports to China have also “dropped off dramatically,” and that the North has exported “little if any” coal to China this year. According to the report, North Korean coal has a high sulfur content and can’t pass China’s new air quality standards. RFA also links North Korea’s troubles to lack of hydroelectric power, indirectly. North Korea can’t export its coal, because it has to send it to thermal power plants, to keep the lights on in Pyongyang.

(Me: on top of all that, North Korea’s railroads and the locomotives that run on them are poorly maintained, and they’re mostly powered by electricity. Putting a lot of coal trains on the network will further strain the infrastructure.)

With mineral products accounting for more than 60% of North Korea’s exports to China, and with China being the destination for 90% of North Korea’s exports, one might expect to see these disruptions (if they’re sustained) reflected in Pyongyang’s luxury goods imports for 2015.

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Hard times for North Korean mines, and miners

Please pardon me for taking a few days of rest with my family during the holidays. I’ll have much to say about The Interview, Nate Thayer’s intrepid reporting on the AP, and other exigent matters after we’re all played out on Legos and board games. Meanwhile, I have a few posts that I’d written last weekend and had planned to publish when North Korea hit the front pages. Here is the first of them.

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A series of possibly conflicting reports from North Korea’s outer provinces claims that North Korea’s mining industry is under unusual strain, due to commodity price disputes with China, or due to drought causing a lack of hydroelectric power to pump water and run hoists. Despite promises of ten-fold wage increases for miners, those increases have failed to materialize, and the payment of baseline wages is unsteady:

“These days, because of a dispute over prices with China, iron ore exports have been halted, and in many cases salaries go unpaid,” the source said. “With operations suspended at the mine due to the extreme power shortage in the country, people are worried that they won’t even receive their 30,000 KPW.” [Daily NK]

Yet copper demand has risen … due to a “recent order for copper to produce bronze statues of the son and father Kims all across the country.” Imagine that.

Separately, the Daily NK reported on November 25th that operations at Musan, North Korea’s largest iron ore mine, had halted due to power shortages caused by low rainfall, and that this had caused “major disruptions” to the Kim Chaek and Songjin steel mills. (The report makes no reference to a price dispute with China. It seems improbable that both stories are true.)

Meanwhile, the regime is trying to raise coal production, perhaps to offset its lost iron ore revenue, by drafting slave labor from prisoners sentenced for “minor” offenses like selling smuggled CDs, and “conducting illegal business operations.”

“Upon orders to produce more coal, the state has been forcing male prisoners, who have been sent to labor training camps for misdemeanors, to coal mines,” a source in South Pyongan Province told the Daily NK on Friday.

Labor training camps refer to correctional facilities under the Ministry of People’s Security that hold criminals who have committed less serious crimes. They are held in these camps from anywhere between one to six months, where they carry out intense labor. Usually prisoners of these camps are mobilized to construction sites or farm areas, and coal mine work is considered an extreme exception,  reflecting the serious rate of power deficiency currently facing the North.

The prisoners are worked day and night at coal towns some kilometers away, eating and sleeping on site. [Daily NK]

The article goes on to detail a long list of occupational hazards (collapses, accidents due to lack of lighting) that either kill the miners or drain away their lives (malnutrition, exhaustion, beatings, and respiratory problems due to coal dust and poor ventilation).

She explained once such case, “A few days ago, a prisoner in his 40s fell unconscious from suffocation and then died from the added malnutrition. He then received ‘parole,’” going on to add, “With more residents learning about the conditions at coal mines for those in labor training camps, rumors are spreading that if you land yourself in a training camp, you come out dead.”

“Women who have their husbands in these camps are passing on bribes to security officials and trying everything they can to get them out,” she asserted. “As they get to know of how the inmates are working, not even because of a serious crime, people are saying even during the Japanese colonial period they did exploit people this much.” 

Although the drafting of prisoners as unskilled labor suggests a labor shortage, some (other?) part of the North Korean government is exporting (skilled?) mine laborers to Malaysia, where the conditions sound hardly better than inside North Korea itself.

Malaysia has defended the use of North Korean labourers in its mining industry, saying they are particularly good workers because of their dedication, strength and bravery.

After a North Korean was among those killed in a mine explosion at the weekend, Malaysia’s deputy home minister, Datuk Seri Wan Junaidi Tuanku Jaafar, told reporters that the men had been working legally under a special agreement between Pyongyang and authorities in the Malaysian state of Sarawak.

“When it comes to industries such as coal mines, the jobs are very dangerous and tough,” Wan Junaidi said. “No local or Sarawakian will dare to take up such jobs — that is why [we] need foreign workers. In the coal-mining sector, only Britain, China and North Korea have highly-skilled workers.” [….]

The minister’s comments come just two days after three men — Tun Tun Win, 36, from Burma; Kardianto, 38, from Indonesia; and Pang Chung-hyok, 29, from North Korea — were killed after a blast ripped through the mine on Saturday morning. Another 29 men were injured, seven of them from North Korea. Forty-nine of the 119 foreign workers at the Sarawak mine were North Koreans. [The Guardian]

The report quotes “defectors’ groups” as saying there may be as many as 65,000 North Koreans working abroad now. The usual suspicions arise that the workers in Malaysia are receiving anywhere from zero to 15% of their salaries, as at the Kaesong Industrial Park, the Siberian logging camps, and Qatar’s new World Cup construction sites.

Collectively, mineral products constitute North Korea’s largest legal exports. The trend bears watching, not only because of its potential effects on North Korea’s economy and society, but also because the regime may feel tempted to substitute falling mineral exports with illicit exports, or by exporting more food.

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What if the capitalist North Korea is just as bad as the communist North Korea?

There are many reasons why the Sunshine Policy failed, most of them rooted in the character of the men who rule in Pyongyang, and in the character of the men in Seoul who conceived and executed it. And in that conception, the flaw that was obvious to some of us from the very beginning was that Sunshine — and its surviving derivatives — invested its monotheistic faith in economic reform, yet in practice (and to a large extent, in theory, too) it was agnostic about political reform and disarmament.

I have always held something closer to the opposite priorities. Personally, I believe that capitalism, with just enough regulation to maintain a peaceful society, is a superior economic system to any form of statism, but I’m not messianic or Hegelian about it, as long as the system doesn’t deny its people the right to live. Of course, North Korea does deny its people the right to live, but things like privatizing agriculture and local markets have never been the principal focus of Sunshine advocates, either. They have always invested their passion in top-down capitalism — specifically, projects like Kaesong, Kumgang, and any sign that the regime was interested in trade and money.

Which, of course, it has been all along. Pyongyang has consistently allowed just enough trade to feed, equip, and maintain the military, and buy swag for the elite. The Washington Post‘s Anna Fifield reports from Pyongyang that the elite are getting more swag, but this does not mean that North Korea is reforming.

Cars, for instance. A recent visitor, in the capital for the first time since 2008, found many more of them on the streets — and not just the locally produced “Pyonghwa” brand or Chinese BYDs, but Lexus sport-utility vehicles and late-model BMWs and Audis.

And shoes. Many women are dressing more fashionably, and brightly colored, shiny high heels, often with jewels, appear to be the trend du jour.

Changjon Street, in the heart of the city, near Kim Il Sung Square, is unrecognizable from a few years ago. Rows of round apartment towers line the street. Lit up at night, they are festooned with neon bands, giving them the appearance of giant fireworks. By day, the towers are reflected in the glittering river, making the city look “just like Dubai,” in the words of one government-appointed minder. [Washington Post, Anna Fifield]

I’m far more likely to accept these representations from Fifield than from, say, Jean Lee, because Fifield is no one’s cheerleader.

But the situation in the cities outside the capital, and even more so in the countryside, remains extremely dire. The state does not provide anything like the kinds of rations it once did, and hunger remains widespread.

Even in Pyongyang, there are still many more signs of extreme poverty than wealth. Bent-over elderly women carry huge sacks on their backs, men with weathered faces sit on their haunches by the roadside, and North Korean children appear noticeably smaller than their South Korean peers.

Foreign visitors to Pyongyang are driven along the same routes from their hotels, no matter where they are going, leading them to conclude that only certain streets are fit for foreign consumption.

We see reflections of the same thing in Pyongyang’s military belligerence, its continued weapons development, its spurning of the U.N. Commission of Inquiry, its retrograde crackdowns on information, agriculture and trade by non-elite North Koreans, and its new foray into hostage-taking. The rich are getting richer, but the people in charge are still psychopaths.

The most interesting question Fifield’s report raises is where all that money is coming from. An easier question to answer is where North Korea is getting all the luxury goods that it’s banned by U.N. resolutions from buying.

But indirectly, Fifield raises a more fundamental policy question. What if we accept, for the sake of argument, that Kim Jong Un has abandoned socialism for state capitalism, without disarming or altering its essential contempt for humanity? Did economic reforms in China necessarily equate to political reforms? Was Nazi Germany less of a menace despite being state-capitalist? If North Korea’s de facto abandonment of socialism means that Sunshine has succeeded, it’s an awfully hollow victory.

Derivatives of Sunshine still live, of course, as do a surprising number of die-hard adherents. But whenever I ask them why they adhere, they confess that it isn’t really because they believe, but because they can conceive of no better ideas.


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Of fools and their money: Volvo sold North Korea 1,000 cars. On credit.

As a tool of economic isolation, North Korea’s business ethics have proven to be far more effective than U.N. sanctions.

See also Yang Bin, Senator Robert Torricelli and David Chang, Chung Mong Hun, Nigel Cowie, Roh Jeong-Ho, Albert Yeung Sau Shing and the Emperor Group, the Xiyang Group, and Lloyd’s of London. There’s actually a whole market in North Korea’s defaulted sovereign debt “involving more than 100 banks from 17 countries” dating back to the 1970s and 1980s.

And still, the lemmings keep coming.

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RFA: N. Korea tells overseas trade reps not to use the internet

In our latest of edition of North Korea Perestroika Watch, Radio Free Asia, citing identified sources speaking on condition of anonymity, reports that Pyongyang has instructed its overseas money-men to stop using the internet. The regime is even threatening to seize their work and personal laptaps to enforce the order. The trade workers tell RFA that the order, which even includes the use of e-mail, is impeding their ability to do their jobs and earn foreign currency.

A source living in China along the border with North Korea said the order was issued verbally by senior officials in Pyongyang recently. It is causing great inconvenience to the trade officials, most of whom are based in China with others living in Europe, Russia, and Africa, the source said.

“The order discouraging trade workers abroad from using the Internet by the North Korean government is actually a warning to not [disseminate] outside information,” said the source, who is linked to trading of goods with North Korea. “Trade workers abroad are used to contacting the North Korean authorities at home by email,” the source said. [Radio Free Asia]

According to the report, most of the North Koreans overseas save enough to buy laptops, which they then use to access South Korean web sites. Presumably, many of these people understand enough English to all kinds of sites, including this one. Which could mean I’m going to stop getting all those hits from Cambodia, Singapore, Malaysia, Tanzania, and Ethiopia.

If the report is accurate — and it seems like something that could be confirmed through multiple sources — then it suggests that the regime must have enough fear of the internet’s subversive power to incur some economic harm from the imposition of this inefficiency.

The regime has gone so far as asking trade workers to communicate by fax, presuming anyone else still has a fax machine.

The U.N. Panel of Experts recently printed documents showing that North Korean trading companies used e-mail with .silibank domains to facilitate the weapons transactions with Cuba that were uncovered by the seizure of the Chong Chon Gang last year. Years ago, Sili Bank was the false-dawn perestroika sighting of the week when it set up a pay-for-message e-mail system for foreigners. Curiously, and unlike many other North Korean banks, Sili Bank does not have a SWIFT number, suggesting that if it really does operate as a bank, it doesn’t operate internationally.

Personally, it’s hard for me to imagine that this order will last much longer than North Korea’s ban of the U.S. dollar, or South Korean clothing. It will be a huge hassle for a few weeks, after which all those affected will have that much less respect for the state’s authority.

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N. Korea Perestroika Watch: Man executed for calling China

The Daily NK provides us some updates on Kim Jong Un’s ongoing crackdown on unauthorized contact with the outside world, via sources in North Hamgyeong Province, in the far northeast:

The North Korean authorities recently added five extra clauses to Article 60 of the country’s criminal code, which pertains to attempts to overthrow the state. The additional clauses codify harsh punishments for acts including illicit communication with the outside world, which could in principle now incur the death penalty. [….]

The newly re-codified offenses include: ? Illegal phone contact with foreigners, including South Koreans; ? Viewing South Korean dramas or DVDs and listening to [foreign] radio broadcasts; ? Using or dealing in drugs; ? Transnational human and sex trafficking; and ? Aiding and abetting defectors and leaking state secrets.

In criminal code revisions made in mid-May of last year, harsh punishments were decreed for a loose basket of acts deemed to be seditious, including political agitation, rioting, and public demonstration. Sedition was one of a litany of charges thrown at Kim Jong Eun’s uncle Jang Song Taek before his execution in December last year.

If North Korea is as stable as some “experts” suggest it is, then why is it necessary for its government to raise the penalties for such unthinkable acts as “political agitation, rioting, and public demonstration?” In fact, we’ve seen fragmentary reports of demonstrations in North Korea in the past, mostly by female traders protesting market restrictions.

The nature of the revised punishments provides a stark reflection of the regime’s anxiety at the nature and scale of cross-border activities, the source explained. A minimum of five years “reeducation” or the death penalty can be decreed for those caught communicating with the outside world, a minimum of ten years reeducation is the maximum punishment for simply watching South Korean media or listening to foreign radio, and a minimum of five years reeducation is possible for drug smuggling. [Daily NK]

Separately, the Daily NK reports that the regime is using its traditional methods for showing its subjects that it’s more serious about enforcing these rules that it had been in the past, when it was possible to bribe one’s way out of enforcement.

The victim, a 49-year old stage lighting engineer called Ri Kyung Ho, was executed in March. His execution, though not public, was used as an example to others, and his family has been incarcerated in a State Security Department (SSD) facility.

The latest report is that North Korea is making examples of those caught, but isn’t executing them in public, perhaps because it fears that video may leak out again. So were there posters, or other announcements of the execution? The report doesn’t say.

“Ri Kyung Ho was caught out of town by an SSD agent with a signal detector. He’d been calling his family in South Chosun” the source said, explaining the background to the man’s arrest. “He probably didn’t have time to take the phone apart and hide it before SSD agents got to his house.”

Ri was reportedly involved in North Korea’s emerging black-market banking system, a system that got a big push from North Korea’s 2009 currency “reform,” which wiped out the savings of millions of members of the country’s rising non-elite middle class. That system has not only stocked North Korea’s markets with food to fill the void left by a non-functional state distribution system, it has also helped many poor North Koreans pay for that food with money sent home by relatives in China and South Korea.

In the course of Ri’s subsequent interrogation, it reportedly emerged that not only had he been making regular phone calls, but had also been involved in remittance transfers from South Korea and aiding and abetting defections.

“He seems to have started by conveying money from defectors to their families, but then began to help people who asked him to send their families to China,” the source said. “Some people are asking why he was killed just because of the money thing, but there are a few who were close to him and his wife, and they say it was because he had been helping defections.”

“In times gone by you could bribe your way out of this, but right now they’re sure to punish you. Nobody knows when or why they might get caught up in it, so everyone is nervous,” she said. “Anyone who uses a cellphone to call ‘that way’ or ‘the other way’ [meaning South Korea or China] is scared.” [Daily NK]

The report only cites a single unnamed source. If it’s is true, expect to see more sources corroborate it, or tell us about more executions from more cities, particularly along the border.

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And now, a brief Marxist-style criticism of North Korea’s class struggle and internal contradictions (Updated)

Yonhap reports that North Korea has cut its grain imports from China by more than in half in the first quarter of this year “due to an increase in the country’s grain production last year.” A fall in market prices for corn corroborates that there is a greater supply of corn than usual; ordinarily, spring is the leanest time of year for poor North Koreans.

Despite Pyongyang’s decision to buy and import less grain, the World Food Program, which recently found that 84% of North Korean households have borderline or poor food consumption, continues to ask foreign donors to contribute $200 million to a program intended to feed the people Kim Jong Un won’t. (Humanitarian aid accounted for 95% of U.S. exports to North Korea, which also rose sharply last year.) So, either the WFP is overestimating hunger and should reevaluate its aid programs, or Pyongyang is accepting — and gaming — international aid to allow it to fund other priorities (an allegation that has been made before by others, here). It’s also possible that both alternatives are true.

Just in case you’re tempted to say that the drop in food imports means China is cracking down on North Korea, trade statistics released earlier this month by the Korea International Trade Association show that “North Korea exported 16.5 million tons of anthracite [coal] to China in 2013 … a year-on-year increase of 39.7%. Those exports earned Pyongyang “approximately US$ 1.373bn, a 15.5% increase over 2012.” Yonhap also reports, however, that starting in January, Pyongyang “significantly stepped up checks on its coal exports to China,” a development that’s said to be related to the purge of Jang Song Taek, who was accused of selling off North Korea’s resources too cheaply. We’ll soon see if second-quarter figures show any decrease, or whether this is just ChiCom disinformation.

Partially as a result of this, North Korea’s GDP grew by nearly 5% last year, according to the Hyundai Research Institute. Some of that money was invested in the “railroads, metal, and power generation sectors” — and yes, North Korea still has the world’s highest military spending as a percentage of GDP. The beneficiaries of this wealth do not include North Korea’s health care system, whose failure The Guardian tries to hang on sanctions, either out of bias or ignorance about the bigger picture. The data, taken with other data suggesting that North Korea recently began showing a current account surplus, hardly suggest that Pyongyang is feeling a cash squeeze. It’s just setting its own priorities, as usual.

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Who is feeling a cash squeeze, aside from the poor who can’t afford to buy food? The Outer Party elites in Pyongyang. After several months of strict enforcement, the regime has finally relaxed that order confiscating their foreign currency. According to the Daily NK, plenty of people who were terrorized by the purge of Jang Song Thaek handed over their savings out of fear that much more than their savings was at stake:

High-rise apartment buildings, streets lined with stores selling expensive products and high-end restaurants are cropping up in Pyongyang since North Korean leader Kim Jong-un focused state spending on the capital. But that modernizing drive has come at a heavy cost to the provinces, which are languishing in backwardness and poverty. 

“In December of 2011, after he just came to power, Kim Jong-un issued an order to populate Pyongyang by the end of 2012 with the cream of North Korean society in terms of political and ideological beliefs,” a source recalls. [Daily NK]

From a nominally egalitarian and Marxist perspective, Pyongyang’s confiscatory impulse is almost understandable, or at least easy to rationalize. Pyongyang residents aren’t keeping those high-end stores in business on the salaries of civil servants.

[See, AP? This reporter told us about the minders, and that this was
not a typical North Korean shopping experience. It isn’t so hard!]

In the provinces, by contrast, food rations have stopped, and officials there have to squeeze and extort the proles to survive, and prosper:

Central Party cadres dispatched to October 18th Cooperative Farm in Baekam County, Yangkang Province are drawing the ire of local residents as they prove enduringly corrupt, Daily NK has learned.

A source located in the region reported on the 22nd, “It’s the lean spring period and food is quite scarce, but these three cadres sent from Section 4 of the Central Party Agriculture Department still eat pork almost everyday. People are really unhappy. There are these kids of people who might get meat just once or twice a year out there in front of their lodgings just to smell it cooking.”

Cadres were first dispatched to the farm in 2008 to oversee the potato harvest, the source explained. In addition to having their own housekeeper, they regularly order the manager of their accommodation to purchase piglets, which they then raise.

“At a time when more and more people in the Okcheon Unit are running out of rice, the cadres can continue to live in their own world. People attack them, pointing out that ‘workers starve while the ones ordering them around are living well. They can eat till their stomachs stick out,” the source went on.

“Just last month a man in the unit starved to death,” she continued. “People say that he couldn’t harvest last autumn, so his wife went to get frozen potatoes out of the ground and tried to make a living by making food out of their skins. He passed away while his wife was left behind to try and sell what she had made.”

“When [cadres] go to Pyongyang they take a ton of potato starch with them, and tens of farmers are mobilized for the indignity of loading the freight,” she alleged. “They don’t care; they just say, ‘When going back, you shouldn’t go empty handed. If you want to get help with things like farming equipment, there’s no choice; you have to give something before you can get anything.’” [Daily NK]

The regime can confiscate away some of the more ostentatious trappings of this widening class divide, but that widening class divide is one of the distinguishing characteristics of Kim Jong Un’s North Korea, and a case of Kim leading by example. Class barriers are now so strong that it has become difficult to marry across them. According to the reports, the confiscation is concentrated around Pyongyang, where there are few low-songbun people to see that divide. The regime’s more likely motive is probably just to rake hard currency in from the Outer Party to the Inner Party.

I wonder to what extent this confiscation has driven elite money into North Korea’s housing market, which is said to have boomed right around the time the confiscation was announced (yes, it’s possible to buy land and houses in North Korea). A regime that’s sustained by money laundering must eventually produce some accomplished money-launders and tax evaders. Coinciding with this, state enterprises have begun leasing out unused land to those who can afford to lease it. If the result is more sotoji agriculture and higher food production, that would be a good thing for the people, even if that isn’t a consequence the regime had intended.

(The reverse appears to be ongoing in the border city of Sinuiju, where the regime, or perhaps corrupt regime officials, are said to be selling real estate to Chinese investors.)

Given the extent to which the elites have leveraged their status to enrich themselves through corruption and trade (legal and otherwise), one can infer that this mass confiscation raked in millions of dollars in hard currency. I hope that the cost will be paid, eventually, in lost loyalty by the elites to the regime. In the meantime, if she ever cared to do so, Hazel Smith could fill volumes with “critical” studies about the intensifying class struggle between North Korea’s Outer Party, Inner Party, Capitalist Class, and Proletariat. Here is the perfect laboratory for Marxist crisis theory, and all the critical studies journals are missing out.

Update: More related thoughts from the Daily NK, which entitles its story, “May 1st a Reminder of Class Divide,” and reports that some workers are more equal than others:

Now, May 1st serves as a clear reminder of North Korea’s widening class gap amid the increasing prominence of the market economy. 

A former worker at a foreign currency earning enterprise based in Songnim, North Hwanghae Province explained to Daily NK, “A class system between workers began to form a few years ago. How one celebrates the May 1st holiday depends on their membership in either the lower or upper class, and mistrust has formed between the two.”

“State factory workers spend the day cultivating their vegetable gardens or just keeping busy at home. But workers at individually-run trading companies attend sports games put on by their employer. They even get high-end gifts like televisions and bicycles,” the defector said.

Moreover, “Even if they don’t win the game the employees still get a new set of underclothes, and this makes the state workers quite envious.  Now even children belong to a class based solely on the occupation of their parents.”

A former manager of a commercial enterprise management office in North Pyongan Province added, “The state workers really have a rough time in comparison.  Many of them can’t even get one bottle of alcohol.”

The story reports that factory workers, once glorified as pioneers of the workers’ paradise, no longer bring home income or rations, and are looked at as incompetent providers in their own homes. That must be a source of deep resentment in the factory towns int he provinces.

Speaking of those high-end gifts, we have fresh information about their origin:

North Korea increased imports of vehicles and alcoholic beverages from Hong Kong in 2013, despite an overall drop in bilateral trade, a South Korean report showed Thursday.

The trade representative office for Korea Trade-Investment Promotion Agency (KOTRA) in Hong Kong said Pyongyang spent US$4.36 million to buy vehicles, up 27.5 percent from the year before, a large number of them with over 3-liter engine and seating capacity for more than 10 people.

Cars were the second-largest single product imported by North Korea from Hong Kong after electronic components, the office said.

“The cars were made in other countries and shipped through Hong Kong,” it said.

North Korean imports of alcoholic beverages shot up 51.3 percent last year from 2012, with whiskey and vodka making up the bulk of products shipped. Though liquor products only accounted for 1.4 percent of goods shipped from the former British colony to Pyongyang, its annual growth rate surpassed that of all others last year.

This trend continued into 2014, with North Korea’s purchase of alcoholic beverages soaring 758.8 percent in January and February vis-a-vis the previous year, according to the KOTRA office.

The latest report showed that two-way trade dropped 57.2 percent on-year to $26.99 million, with Hong Kong’s exports falling 53.7 percent. It said no crude oil, grain and fertilizers were shipped to the North. [Yonhap]

Most of these items are what U.N. Security Council sanctions resolutions refer to as “luxury items,” and ban North Korea from importing. This is just more evidence of China’s disregard for and non-enforcement of those resolutions. If the Obama Administration is serious about enforcement, it would identify the companies in Hong Kong involved in this trade, leak the names of their banks, and identify a few good targets for a first round of sanctions that would block them out of the dollar system.

And not for nothing, but the U.N. Development Program, whose work in North Korea was the subject of a major diversion scandal a few years ago, is now allocating another $2 million “for projects to help ease energy and food shortages in North Korea.” Lest any apparatchik lack for gas for his new Benz.

If ever a country screamed for class warfare, North Korea is that country.

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North Korea’s circular firing squad

The reaper has come for two more key North Korean diplomats:

South Korea’s Yonhap news agency said that Pak Kwang-Chol, an associate of the young supremo’s uncle and political regent Jang Song-Thaek, was seen returning home after making a brief stopover in Beijing. The envoy and his wife were reportedly escorted by North Korean officials onto a flight to Pyongyang.

Sweden is an influential diplomatic player in Pyongyang, AFP said. Since the United States and North Korea have no diplomatic ties, the Swedish Embassy represents US interests in the country, acting as a kind of go-between. [link]

And this:

Hong Yong, the North’s deputy permanent delegate to UNESCO, and his wife were spotted at Beijing airport on Monday before taking the flight to Pyongyang, South Korea’s Yonhap news agency said. Hong, one of Jang’s associates, took the post only six months ago, it said, quoting a diplomatic source in Beijing. [AFP]

Pyongyang had previously recalled its ambassadors to Malaysia and Cuba, presumably also as part of the purge. North Korea has historically used Malaysian banks for money laundering, and Cuba has recently emerged as a North Korean arms supplier.

In addition, the Joongang Ilbo now reports that “two Workers’ Party executives, two cabinet members, two soldiers and one corporate manager” (a total of seven others) were also executed with Jang. The South Koreans are saying that for now, the purge has only reached Jang’s highest-level supporters:

“We are seeing signs that those who were deeply involved with Jang are being recalled and purged,” Ryoo Kihl-Jae, South Korea’s unification minister in charge of cross-border affairs, told lawmakers. 

The purge however appears to be targeting a relatively small circle of officials, Ryoo said, rejecting speculation of a sweeping clear-out of party and military ranks. “We do not see that it (the purge) is being carried out on a large scale, though it still needs to be seen to what direction it would develop,” he told members of parliament’s foreign affairs committee. [AFP]

I’m not sure I believe that. As early as December 6, The Daily NK reported that “municipal and provincial Chosun Workers’ Party secretaries and cadres from judicial and security organs have been summoned en masse to Pyongyang,” although it’s not clear how many were purged, and how many were simply called in to observe the festivities in which Jang was denounced and purged.

The same appears to be the case with North Korea’s cadres in China, who are more visible to us. In mid-December, it was reported that North Korea had recalled large numbers of China-based cadres who were involved in enterprises earning and laundering foreign currency. The subscription news site East Asia Intel also reports that Pyongyang is recalling “large numbers of North Korean businessmen” who worked in Shenyang and Dandong, “to facilitate trade” with China, and “attract Chinese investment.” Without getting behind the paywall, I can’t tell whether the report is based on new information, or simply regurgitates what South Korean sources had previously reported. Taken together, these reports suggest that the purge won’t be confined to the top echelons.

North Korea’s ongoing crackdown on cross-border movements, in an apparent attempt to prevent defections by potential targets of the purge, is circumstantial evidence of the purge’s potential to affect a significant number of North Koreans. Pyongyang has assigned more guards to patrol the border and asked four Chinese companies to suspend their tours of the North (a Chinese tour bus seems like an unlikely way to escape North Korea; it seems more likely that Pyongyang is afraid of what the tourists might see).

North Korea’s lower and middle castes will feel the most immediate impact of this crackdown. They are the most likely to rely on illicit cross-border trade, or try to cross the border to find work or defect. Reports from inside North Korea tell a mixed story. Although the regime has cracked down on cross-border movements since the purge, Chris Green writes that the regime isn’t cracking down on markets and trade internally. Domestically, the regime is sending a business-as-usual message, while discouraging any unauthorized discussion about Jang’s purge. For once, the regime shows signs of trying to mitigate (perhaps “calibrate” is a better word) the impact of its brutality on lower-caste North Koreans.

In the longer term, however, this will inevitably disrupt the regime’s own finances, possibly severely. North Korea’s ambassadors play an important role in financing the regime, by making both legal and illegal business deals. The diplomatic corps’s mercenary nature is so notorious that the U.N. Security Council’s latest resolution begins by referring to “the illicit activities of diplomatic personnel” and “transfers of bulk cash.”

It also seems increasingly clear that Jang was purged as part of a struggle over North Korea’s resources, and who gets to use them for everything other than feeding the hungry. North Korea’s mineral industries are most often mentioned as in contention. Fighting over those resources is affecting Pyongyang’s ability to profit from them. According to the Daily NK, as early as October, North Korea took the extreme measure of halting gold mining and exports to reassert control of that income stream. (That is extremely interesting, in light of other reports that the North’s agents in China were selling off gold. The continued sale of gold after the purge could suggest that officials in China were defying orders from Pyongyang and preparing to go to ground, consistent with what we read here.) North Korea’s “special economic zones” and its overseas restaurant operations have also been associated with Jang, and will probably be affected. In the background, the North is hinting at a general tightening of the North’s economic restrictions. That will be another drag on efficiency and investor confidence.

Everything this regime prioritizes relies on the business relationships that are now being questioned, and on the overseas currency-earning operations staffed by the people who are being purged today. If my guess is right, we’ll soon see data showing a drop-off in North Korea’s imports and exports (although those data are certainly questionable). That will inevitably affect Pyongyang’s ability to buy the loyalty of a new Inner Party, to finance its WMD programs, to control the borders, and to feed its army. It might even affect the pace of construction at showpiece projects, like water parks and ski resorts. Anyone but an impulsive psychopath would have to realize that.

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North Korea’s overseas money men, called home, go to ground instead

After the news broke that Jang Song Thaek has been purged, The Daily NK reported that the regime was summoning party cadres from other parts of North Korea to Pyongyang. Now, new reports tell us that North Koreans in China are also being called back, possibly to be purged themselves. The Joongang Ilbo carries a fascinating interview with Lee Keum-Ryong, a defector and Free North Korea Radio correspondent, and obviously a very brave man. Lee defied the risk of abduction, or perhaps a curbside injection of neostigmine bromide, to get close to many of these North Koreans in Beijing. He reports that many of them have since vanished, but not all of them went home.

“I went to an office building where North Korean officials in the business of trade, whom I have personally known for some years, used to work. Stuff had been removed from all three rooms and [North Korean] strangers were standing guard. I waited for hours for North Korean officials to show up, but they didn’t. A source in China told me ‘a whole group of team members seemed to have disappeared’ and those who were standing guard at the office were an arrest squad [sent from Pyongyang].

“I [finally] reached a North Korean official in hiding through a go-between. The man, who worked for a trading company under the North Korean administrative department previously led by Jang Song-thaek, said, ‘I was able to flee [from arrest]. And I expect others [with ties to Jang] have done the same. I don’t know what to do next.’” 

The official told Lee he was mulling fleeing to another country, possible the United States or a European country. When asked how many North Koreans fled from arrest, the North Korean said he did not know. 

The Joongang Ilbo adds that about 70 to 80 North Koreans in Europe, who also had ties to Jang, may also have to decide whether to defect or return.

Pyongyang usually keeps the wives and children of its overseas agents at home, as hostages. The fact that any significant number of them refuse to return home suggests that cohesion and discipline are breaking down. It may also reflect the sentiments of officials in Pyongyang, although the choices there are more stark.

One of Lee’s Chinese sources told him a majority of North Korean workers [in Beijing] “are frightened and desperate.” “In Beijing alone, there are about 30 North Korean workers, and they are now nowhere to be seen … We don’t know whether they went back [to Pyongyang] voluntarily,” said the source. 

Most of those who disappeared are senior ranking members of North Korea’s trading companies who have worked with Jang over many years and have transferred foreign currency to Pyongyang. Lee quoted his Chinese source as saying there was an arrest squad dispatched from the North, fueling speculation that those who returned to their country did it involuntarily. 

“I bet their [North Koreans in China] position is that there is nothing to hope for after the execution of Jang Song-thaek,” said a Chinese businessman. “[Those who have disappeared] are North Koreans stationed in Beijing, Shenyang and Guangzhou. Those who were in Guangzhou are the people who looked after Kim Jong-nam, the eldest son of Kim Jong-il,” he said. 

Many of these North Koreans were “in China to enhance bilateral trade and investment.” Some analysts interpret the order as a sign that the regime disapproves of Chinese-style reforms.

NK office

[via Yonhap]

At a minimum, removing these deal-makers will necessarily have some adverse effects on the deals they were making, or made. That will undo a great deal of connection-building and negotiation, and will damage economic relations between China and North Korea. The regime’s denunciation of Jang for “instruct[ing] his stooges to sell coal and other precious underground resources at random” and “selling off the land of the Rason economic and trade zone” will certainly chill new investment deals, and scare cadres into reinterpreting existing ones, causing more conflicts with investors. Regime banks accounts could even be lost if the only people who know where it is die without telling where they are.

Not that any of these things would be bad, mind you.

It’s hard to imagine that this purge could fail to cause a significant disruption in Pyongyang’s money flows. Could they really be dumb enough to do that to themselves? If they were dumb enough to destroy their own currency, then I suppose they are.

For what it’s worth, a North Korean official interviewed by the AP says that Pyongyang’s economic policies won’t change, that North Korea welcomes foreign investment, and that Pyongyang will proceed with its special economic zones. Not that I suppose this is really about me, but the interview answers my swipe that the AP hasn’t interviewed any North Korean officials or adding any useful information to our speculation about the purge. Whether these assertions are useful information is a question I’ll leave to you, to time, and to the boys at the Inmin Poan-Bu to tell, but they are exclusive and newsworthy. Good for the AP reporters for making the effort.

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