Shafted: Winners, Losers, and Casualties of the North Korean Mines

As the North Korean regime struggles to sustain an already marginal economy that actually shrank in 2006, it is accelerating its sell-off of its mineral resources. Again, China appears to be the main buyer, again, corruption is throttling the state’s earning potential.

As mineral prices soar on world markets, foreign access to mines in the North is accelerating at a rate unseen in the more than five decades since the division of the Korean Peninsula, according to South Korean government officials, Chinese mining experts and scholars who study North Korea. They say that Kim’s government is increasingly willing to lease mines to outside companies and to negotiate joint ventures with foreign governments. [….]

At the same time, mining operations have been delayed and derailed by erratic, maddening and corrupt behavior on the part of North Korean officials, according to businessmen in South Korea and China. “North Korea — they are a country of scoundrels,” said Sun Demao, a manager at Zhaoyuan Gold, a Chinese company that has canceled all its contracts with mines in the North because of chronic delivery troubles.

Still, exports of North Korean coal and zinc to China have jumped sharply in the past three years, as have zinc exports to South Korea and gold exports to Thailand. [Washington Post, Blaine Harden and Ariana Eunjung Cha]

This raises difficult questions for Kim Jong Il, for potential investors, and for the rest of the world.  For Kim Jong Il, the question is whether to make the choice to maximize profits by allowing more efficient foreign management and  control, or retaining local  control, which comes with the parasitic drag of corruption.  And guess what?

More important are Kim’s conflicted feelings about mining, said [Andrei] Lankov, a Russian who studied in the North and is a periodic visitor there. “He sees the money now,” Lankov said. “But he believes that by reforming, he would be committing suicide. So he wants mining done under strict control of North Korean managers.”

The choice for potential investors then becomes whether  they’re  willing to  gamble their fortunes on North Korean business ethics,  and that must be as good an example of  Economic Darwinism as I’ve ever seen.   

Interestingly, the article  reports that  although Chinese investment has  soared and  North Korean coal  and zinc exports have risen sharply in recent years, the North’s overall  mineral exports have not increased significantly.  This shouldn’t come as too much of a shock.  Writing about China’s lease of the Rajin Port in 2005, I predicted that corruption and poor infrastructure would hamper the development of North Korea’s mining industry.  Yet North Korea can barely manage to keep its own mines working without foreign help.  A case in point would be the somewhat humorous story of how North Korea accidentally flooded its largest copper mine.

The WaPo does not bother to impress some other significant  points on its readers.  The first of these has to do with the conditions under which North Korea’s mines are worked.  For example, I’ve previously noted that at least three of North Korea’s gold mines, which are increasingly important to sustaining Kim Jong Il’s regime financially,  also happen to be concentration camps.  We have another recent example of this problem at a coal mine:

An accident at a mine near Jeongeu-ri in Hoiryeong, North Hamkyung Province left 22 people dead and more than 20 critically injured. Among the injured is the mine supervisor. The mine where the incident occurred is part of the “No. 12 Reeducation Camp.”

According to a North Korean source, a mineshaft caved in after a blasting operation, crushing all those inside. Signs of danger were evident once the explosives were detonated as fissures appeared in the rock foundation. Despite this, prisoners were sent back into the mine. Fifty prisoners were helplessly buried under a mound of rocks and dirt as a result of this negligence.  [Daily NK]

It’s also likely that a number of prisoners weren’t accounted for, and that rudimentary  medical care will fail to save the lives of many of those injured.  Camp 12 is located somewhere in the same vicinity as Camp 22, which also contains a large coal mine.

The No. 12 Reeducation Camp was built at the end of the 1970s with the name “No. 22 Youth Educational Center (ì œ22호 청년교양소)” and simple criminals or economic offenders were incarcerated. But in the mid 1980s, the name was changed to “No. 12 Reeducation Camp.” The camp currently houses a variety of inmates who have committed crimes like illegal border-crossing, viewing of foreign films, murder, theft, and violence. Sentences range from a minimum of one year to imprisonment for life.

The Daily NK also reports that Camp 12’s products are used to generate export revenue  through the international crime syndicate known as Bureau 39.  Satellite imagery and survivor accounts also reveal that there are  plenty of  other mines of various sizes in other North Korean concentration camps.   Mining is probably the largest single industry that’s evident in the camps.  Mining  is an inherently dangerous business under the best of circumstances, but a work assignment in  a mine in one of these camps is  a death sentence.

This being Washington, I’m sure someone out there can try to make the argument that letting Kim Jong Il ply these wares somehow leads to openness and reform.  As they said in the original German, arbeit macht frei.

Then there is the sacred, yet oddly untended, flame of multilateralism.  Not that anyone still cares, but  U.N. Security Council Resolution 1718,  now just over  a year old, requires all member states and their entities to “ensure” that the funds they use to pay for North Korea’s minerals are not used for WMD programs.  That makes these mines arguably the most socially irresponsible  industry since I.G. Farben.  And yet, the Washington Post saw no cause to breathe a word about any of this.