UN Official: ‘We were being used completely as an ATM machine for the regime.’
Since it looks like we’re about to unfreeze a few million in North Korean funds from Banco Delta Asia, it’s worth remembering that another easy source of cash, representing about as many millions in annual income, has just been abruptly terminated.
The United Nations Development Programme office in Pyongyang, North Korea, sits in a Soviet-style compound. Like clockwork, a North Korean official wearing a standard-issue dark windbreaker and slacks would come to the door each business day.
He would take a manila envelope stuffed with cash–a healthy portion of the UN’s disbursements for aid projects in the country–and leave without ever providing receipts.
According to sources at the UN, this went on for years, resulting in the transfer of up to $150 million in hard foreign currency to the Kim Jong Il government at a time when the United States was trying to keep North Korea from receiving hard currency as part of its sanctions against the Kim regime.
“At the end, we were being used completely as an ATM machine for the regime,” said one UN official with extensive knowledge of the program. “We were completely a cash cow, the only cash cow in town. The money was going to the regime whenever they wanted it.” [Chicago Tribune]
Failing to end this would have meant that the UNDP was itself in violation of the spirit of U.N. Security Council Resolution 1718. That resolution has a humanitarian exception, but that exception is pretty hard to apply to cash when you have no idea where the money goes. For example, in the year 2005, one of the years for which audits were made available to U.S. officials, UNDP officials never visited 10 of the 11 “monitorable” projects they funded. Let’s hope this wasn’t the eleventh:
[UNDP’s non-North Korean personnel] were not allowed to go outside Pyongyang without receiving special permission from the military at least a week in advance. They were not allowed to set foot in a bank. And under no circumstances were they allowed to make unrestricted visits to the projects they were supposed to be funding.
….One of the UNDP projects, sources said, involved the purchase of 300 computers for Kim Il Sung University. The computers supposedly arrived in Pyongyang, but the international staff was not allowed to see the equipment it had donated.
Finally, after a month and a half of pressuring their North Korean handlers, staffers were led to a room in which two computers sat. They were told the others were packed in boxes, which they were not allowed to open.
Anyone see broader implications for arms control? Or for the millions in WFP food aid that goes God-only-knows-where? Note that the UNDP administered every other UN aid program in North Korea.
UN officials privately describe a vivid scene playing out at the agency’s compound each day.
A driver in a UN-issued Toyota Corolla would pull out of the compound’s gate, taking UN checks to the bank. A short time later the driver, a North Korean employed by UNDP, would return with manila envelopes stuffed with tens of thousands of dollars in hard currency.
Then the windbreaker-clad North Korean official would show up and take the cash away.
If you were hoping that this would be the first opportunity Ban Ki Moon would seize to improve U.N. transparency, things are not looking good. First, the audit depends on the review of documents that are stored inside North Korea, and that means the auditors will have to get North Korean visas, and be permitted to move the documents to a secure location. Second, the audit is being done by an internal U.N. audit agency with a rather checkered past of its own. Third, the audit is off to a slow start. Finally, the audit is expected to wrap up by mid-April.
“I don’t think this is an audit you can whip through in 30 days; this may take some time,” John Bolton, the U.S. ambassador to the UN until the end of last year and a staunch critic of the world body, said when contacted by the Tribune for a reaction to the newspaper’s reporting of the cash payments. “But I think for the reputation and integrity of the UN system, it’s critical that it proceed without delay.”
Reuters on 25 Jan reported that the DPRK accused the US of a “smear campaign” after Washington said UNDP money may have been diverted to build nuclear weapons. Mark Wallace, the U.S. envoy for U.N. financial management, accused the UNDP in a letter of violating rules by hiring North Korean government officials and by paying salaries in cash through the government.
Then swiftly it developed into a scandal that had the UN closing its offices that appeared to me to be a deliberate action to impede the UN internal audits through eliminating the source of documentation (North Korean officials).
It is interesting that there is a correlation between the UNDP events — slamming the door on the free money UNDP source — and six-party agreement related items dealing with the Berlin agreement on release of the “legitimate” DPRK assets — and then the DPRK making it a “prerequisite” before it starts denuclearization.
It is starting to look like there is a financial squeeze play going on in North Korea. This makes one wonder whether the power elite in North Korea are starting to hedge their bets and preparing for a quick getaway.
Our wishful thinking says that the DPRK’s calling the diplomats’ kids home to prevent mass defections coupled with this latest locking up of UNDP funds means the Kim Jong-il regime is running out of money to keep the power elite loyal. In late 2006, there were reports that a gold-fever was going on with the DPRK political elite converting assets into gold and buying up expensive property in China. This makes one leery as gold — a world medium — can be tucked away in China banks for future retrieval — and the high-value apartments in China allow them a place of refuge if the DPRK implodes. (NOTE: All along we have been angered by the refusal of the world media to pay any attention to this powerful group with lavish lifestyles in China and Europe — like Kim Jong-nam’s — while the masses in the DPRK starve. The worst is the ROK media who don’t want to offend the pro-DPRK Roh administration.)
As soon as this UNDP cash cow officially stopped in Mar, the DPRK started making demands that its money be released from the Bank de Macao as a PREREQUISITE to its denuclearization steps. DPRK Vice Foreign Minister Kim Kye Gwan said, “The United States promised to resolve the problem of sanctions against our country within 30 days. If this promise is kept, then we will shut down our nuclear facilities in 60 days,” said Kim, the chief negotiator to the disarmament talks, the Yomiuri reported.
This is a confrontation statement that may unravel the entire six-party agreement. The US promise from Christopher Hill was that a portion MIGHT be released, but the sanctions may take time. (NOTE: There appears to be a full-court press on these funds as the Macao bank says there has been no evidence of money laundering. Huh??? American lawyers of Banco Delta Asia said that a review of all the bank’s accounts related to the DPRK failed to turn up anything other than lax record-keeping. Thus said the fox as he counted the chickens.)
It also looks suspicious that the lame duck ROK President Roh would publicly declare he was willing to give away the entire farm to the DPRK to foster rapproachement — even before the ink on the ambiguous six-party agreement was dry. In fact, the ROK paid for the initial 50,000 barrels of oil that was to be sent immediately.
Then the ROK Unification Ministry — after a ROK-DPRK inter-ministerial meeting that no one could explain why it had to be held with such haste — pushed through its massive “humanitarian” giveaways. These were made despite the fact that the DPRK never made the first step to denuclearization. What made it even more suspicious was the speed with which the “humanitarian aid” was being shipped — NLT Apr 2007. Previously the ROK said it wouldn’t do such a thing, but now it simply pretends that it never said it. The ROK is calling it “humanitarian aid” but has never fully explained why this aid had to be in “lump sum.” One stupid ROK news release explained that by sending lump sums more would reach the masses AFTER the military and privileged hierarchy took their cut.
Now the Unification Ministry is giving a $300 million “humanitarian” DIRECT payment for family reunions — to be used for video facilities at the DPRK hotel or some such nonsense excuse. Though it is an election year and no presidential candidate wants to touch the reunification issue, it may pop up soon when the giveaways get to the National Assembly for approval — even though the Unification Ministry claims these current giveaways were budgeted for and approved in the 2007 budget in Dec 2006.
I view this UNDP collapse as the catalyst to all the other strange goings-ons by the ROK Unification Ministry to shovel free money and “humanitarian aid” at the DPRK. This ROK money to me is the replacement funds for the cut-off UNDP golden goose to keep the power elite quiet.
BUT THE REALITY IS THAT NO ONE WANTS THE DPRK TO COLLAPSE SO BUYING OFF THE POWER ELITE MAKES PERFECT SENSE. BUT WHAT CAN WE DO WITHOUT THE UNDP PIGGY BANK??? ANY SUGGESTIONS???
From the latest remarks of the DPRK negotiator in the New York session, China could not be trusted … which I interpreted to mean that the PRC didn’t want to pay off the DPRK for being a good boy. Vice Foreign Minister Kim Kye Gwan supposedly said in New York that the PRC is “only trying to use” the DPRK. Though China doesn’t want a DPRK collapse, it may settle for an internal change in the DPRK power structure. This makes it is all the more important for the DPRK to “pay off” its power elite to keep them loyal.
The largesse of the ROK progressive government can only go so far. They have just stretched it to the limit with the fertilizer, rice and $300 million “humanitarian” donation. The NGO groups are shoveling aid to the DPRK as fast as they can with medical aid and other support — they never stopped actually — but this aid is miniscule compared to what the DPRK would need to keep its elite in check. The DPRK needs its trade opened quickly — and this means removal from the US terrorism sponsor list.
We believe the DPRK needs its “legitimate” trade accounts freed up so more trade (legitimate or illicit) can reach the DPRK coffers. This is why the Chinese banks — not only in Macao — need to be unfrozen.
Do not look to Japan to bankroll the DPRK. It stated emphatically that “no abductee resolution — no yen or normalization treaty.” The DPRK wants to talk about WWII history leading to compensation and normalization. End of discussions with two sides talking to different walls. (NOTE: It is interesting that the North Korean Chongryon in Japan are up in arms over the Japanese government’s trade restrictions on the DPRK starting in Jan and getting more violent in Mar.)
SO WHO WILL HELP PROP UP THE DPRK ELITE NOW THAT THE UNDP FUNDS ARE GONE??? I DON’T KNOW…
JUST THE RAMBLINGS OF A CRAZY OLD MAN, BUT IT SURE SEEMS TO ME THAT THE UNDP FUNDS WAS THE CATALYST TO A LOT OF THINGS THAT MAY BE HAPPENING IN THE FUTURE.
I am convinced that the strong stance being taken by Tokyo will eventually prove to be the ‘regime breaker’.
If only the other parties at the table would get some spine … this entire game should have been over last year.
Hear, hear, Michael. While trawling Youtube, I couldn’t help but notice the vast material on North Korea that’s been sourced from Japanese television – good stuff, too. I wonder if Japan’s tough stance reflects that fact that Japan seems to feel the most threatened by the regime.
The types of things Kalani mentioned were some of the factors that went into my prediction late last year that NK would collapse before 2009. I also looked at the ICBM test and the nuke test, and how they came so close on the heels of each other, as signs that the regime is hurting and fears if it does not do something to get regime-sustaining aid flowing in, it will lurch toward collapse.
That gut feeling is also why I hate the new deal, because even if it falls through, it has clearly given South Korea an excuse to pour aid back in, and if the deal falls through, I bet it takes a significant period of time to get enough pressure on South Korea (and possibly China) to return to the amount of strangulation they were willing to go along with pre-new agreement.