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In-depth Business Intelligence
Books on North Korea
REPUBLICAN REFERENCE
Area (sq.km)
120,540
Population
22,224,195 (July 2002 est.)
Capital
Pyongyang
Currency
North Korean won (KPW)
Leader
Kim Jong-il
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Update No: 035 - (31/03/06)
Falling out
Six-party talks on the North Korean nuclear issue remained in abeyance
during March. A bilateral meeting in New York discussed US charges of DPRK
financial crimes - the latest excuse used by Pyongyang to stall the six-party
process - but failed to resolve the deadlock. A day later North Korea apparently
test-fired a missile, while a surprising court verdict in Australia highlighted
DPRK links - possibly official - to international drug trafficking. Plus, an
insider describes the US approach.
Inter-Korean ties were fractious, yet rows about family reunions and US-ROK war
games did not escalate out of control. Meanwhile a visit to China by Kim
Jong-il's brother in law presaged a further tightening of ties, especially in
business. Less clear is how many, if any North Koreans will get fed from now on
by a UN whom Pyongyang now partly spurns.
No progress with the US
Relations with the US remain deadlocked. Six-party talks (both Koreas,
China, US, Japan, Russia) on the nuclear issue have not met since November, and
show no sign of doing so. The main current obstacle, or excuse, remains
Washington's charge that Pyongyang is involved in financial crimes, including
counterfeiting US $100 'supernotes.' The DPRK angrily denies this, and refuses
to resume talks until the charge is withdrawn and sanctions against some of its
companies and a Macau-based bank lifted.
A meeting on March 7 had raised hopes of progress. Ri Gun, deputy director of
the DPRK foreign ministry's North American bureau and vice-head of its
delegation to the six-party talks, visiting New York ostensibly for an academic
seminar, had a 3-hour meeting with US officials. Ri made four suggestions,
including a joint task force to examine the issue; but all were rejected by a US
insistent that this was merely a briefing, and not a negotiation. Ri was quoted
as saying "We cannot go into the six-party talks with this hat over our
head."
What remains unclear, as discussed here before, is quite why the US is so keen
to make this cap fit right now. On March 29 South Korea's unification minister
Lee Jong-seok warned against "tacking" other matters onto the nuclear
issue. The DPRK has long been suspected of counterfeiting, but to suddenly
prioritize this now seems calculated to undermine the six-party process. Unless
it is coincidence that the US Treasury Dept's probe concluded when it did, the
suspicion must be that some in Washington simply do not want to negotiate with
Kim Jong-il, period. This view seems confirmed by reports of Bush administration
glee that its pressure - especially on the Macau-based Banco Delta Asia, which
has severed all links with the DPRK - is causing real inconvenience in
Pyongyang. But rather than a deliberate attempt to achieve a specific goal such
as forcing North Korea back to the conference table, this looks like sheer
pleasure in watching your enemy squirm - regardless of the outcome.
That this interpretation is not paranoid is implicitly confirmed in a remarkable
interview by Richard Armitage, who was deputy secretary of state in the first
Bush administration, given to The Oriental Economist in its March issue.
Armitage is worth quoting at a little length:
"The same splits that existed in the Bush administration when I was in
office still exist… Chris Hill, the State Department's new Asia chief ... is
doing a tremendous job. But he has the same problems that we faced when Jim
Kelly and I were there….There is a fundamental disagreement over how to
approach the North Korea problem. There is a fear in some quarters, particularly
the Pentagon and at times in the vice president's office, that if we were to
engage in discussions with the North Koreans, we might wind up with the bad end
of the deal. They believe that we should be able to pronounce our view, and
everyone else, including the North Koreans, should simply accept it. This is not
a reasonable approach."
Missile test
On March 8 North Korea apparently test-fired two missiles. Japanese reports
that they were launched towards China might mislead: this was within DPRK
territory. Such short-range missile tests (mostly at sea) are not rare, if often
deliberately timed; one, unkindly, marked the inauguration of Roh Moo-hyun as
ROK president in 2003. Coincidentally or not, this one came a day after Ri Gun's
fruitless meeting on financial disputes in New York. Also on March 7, the
commander of American forces in South Korea, General Burwell B Bell, told a
Senate Armed Forces committee hearing that North Korea had put on the back
burner efforts to develop the kind of long-range intercontinental missiles which
it launched over Japan in 1998 and which some claim could eventually reach the
US, focusing instead on short-range rockets. On March 22 the authoritative
Center for Nonproliferation Studies at Monterey Institute of International
Studies (CNS) released an overview of DPRK missile programmes and capabilities
(available at http://www.nautilus.org/fora/security/0623.pdf), including a
reminder of the proliferation aspect: both Pakistan's Ghauri and Iran's Shahab
are based on North Korean designs, the former suspectedly in exchange for HEU
materiel.
Does the DPRK do drugs?
While the US and others regard North Korean missile proliferation as
unhelpful, to say the least, it is not illegal since the DPRK is not a signatory
to the Missile Technology Control Regime (MTCR). It is thus in a different
category from counterfeiting and drug trafficking, also in the news of late. The
US State Department's annual International Narcotics Control and Strategy Report
2006 (INCSR), published on March 1, opined that "it is likely, but not
certain, that the North Korean government sponsors criminal activities,
including narcotics production and trafficking, in order to earn foreign
currency for the state and its leaders." This judgment is based on several
dozen separate busts of DPRK officials over many years, suggesting activity on a
scale which in such a society can hardly be sheer private enterprise.
The INCSR cites the Japanese government's belief that 30-40% of the
methamphetamines smuggled into Japan are refined and/or produced in North Korea,
although no such seizures occurred in 2005. But it notes that drugs made in the
DPRK may risk being misidentified as Chinese, in that ethnic Chinese criminals
are now working with North Korea in this field. A vivid example is the Pong Su,
a DPRK merchant ship seized off the south coast of Australia after a dramatic
chase in 2003. 125 kg of heroin with a street value of A$160m was found onshore,
and the crew were arrested. Charges against all but the four most senior were
later dropped. On March 5 a Supreme Court jury found the ship's captain, chief
engineer, first officer, and political secretary (whose presence particularly
sparked suspicion) not guilty, accepting their claim not to have known what was
done on and from their boat. Only then was it revealed that four other men had
pleaded guilty: three Chinese from the shore party who picked up the haul, and
one of two North Koreans (the other drowned) who brought it ashore in a dinghy
in heavy seas. Two received long jail terms; the others await sentencing.
Expertise on North Korea played a key if ambiguous role in this controversial
outcome. A leading DPRK specialist, Adrian Buzo, who in 1975 as a diplomat had
opened Australia's embassy in Pyongyang, testified that in so tightly controlled
a society such a venture must have been officially sanctioned. (The jury never
heard two US experts in similar vein, as the judge ruled their evidence
inadmissible.) But the defence turned this around, claiming that North Korea
operated on a 'need to know' basis; meaning that captain and crew could indeed
have been following orders without being apprised of the nature of their
mission.
Predictably pleading injured innocence, the DPRK government was wholly
uncooperative throughout; hence the dead man has yet to be identified. Radio
orders found on the Pong Su had told the crew to stop and fight; they in turn
radioed that "as soldier[s] for the greatest general we are determined to
fight to the last man." But they were also told to pretend to be from
Tuvalu, where the vessel had been reregistered a month earlier. It had been
fitted with extra large fuel tanks, and carried no other cargo. The Pong Su was
ordered forfeit, and on March 23 an Australian Air Force F-111 sank it 90 miles
off Sydney. Calling this a proper public demonstration of outrage, foreign
minister Alexander Downer did not let the verdict stop him voicing concern about
possible links between the ship and the DPRK government.
Japan tightens the screws
Similar suspicions over a range of issues, above all kidnappings, are
harboured in Japan. So while China and South Korea are increasing their business
and other ties with North Korea, its other major neighbour is taking an opposite
tack. After the failure of their latest bilateral talks in February, Tokyo plans
to tighten the screws in a bid to get to the bottom of the fate of all Japanese
abducted by DPRK agents in the 1970s and 1980s. The Yomiuri Shimbun reported on
March 5 that, while not yet ready to impose formal economic sanctions, a new
subcommittee of the abduction task force in the prime minister's office will
co-ordinate tighter enforcement of existing legislation, in order to check
illegal flows of commodities, people, and money across the Sea of Japan (or East
Sea, as Koreans insist it is called).
Thus the Japanese coastguard will increase both patrols and inspections of DPRK
vessels. Entry ports will now have more immigration and customs inspectors, plus
Korean-speaking police familiar with North Korean criminality. After the illegal
export of a freeze-drier that could be used to produce highly enriched uranium (HEU),
METI, the trade and industry ministry, will carry out surprise inspections this
year on some 100 firms dealing in dual-use products. The Financial Services
Agency will report any suspicious transfers. The source of such monies,
pro-North Koreans organized as Chongryun (Chosensoren), are also feeling the
heat, with scrutiny or denial of tax exemptions which their facilities had long
enjoyed.
Rows with South are controlled
By contrast, South Korea bends over backwards to be nice to the North. This
is not always reciprocated. Relations during March were brisk - in more than one
sense. There were quarrels, but Pyongyang's fairly measured reaction gives is
progress of a kind. These are now squabbles between partners, rather than the
DPRK stomping off for a prolonged sulk.
March 2-3 saw the first military talks between generals since 2004 and only the
third ever, held at Panmunjom in the Demilitarized Zone (DMZ). South Korea had
hoped to flesh out an earlier outline agreement for joint fishing in the West
(Yellow) Sea, scene of fatal naval clashes in 1999 and 2002. But the North
demanded that the sea border be first redrawn; it has never recognized the
Northern Limit Line (NLL), the de facto frontier since the 1953 Armistice. So
there was no agreement or joint statement, nor even a date to meet again.
Seoul was not too worried, hoping to raise this again at the regular quarterly
inter-Korean cabinet-level meeting - the 18th since June 2000's Pyongyang summit
- due in the Northern capital on March 28-31. But that hope was dashed, since on
March 11 the North postponed this meeting in protest against the joint US-ROK
Foal Eagle-RSO&I war games set to start on March 25. These are routine
annual defensive exercises; Foal Eagle dates back to 1961. Pyongyang's protests
are predictable too, but their vehemence varies; postponement for a month is a
fairly mild face-saving gesture. On March 30 the South suggested holding the
meeting on April 20. North Korea devotes April to events commemorating the
birthday of its founding leader and "eternal president" Kim Il-sung on
April 15, so this might not suit.
A third, more serious row erupted on March 20 at what are now routine family
reunions, held at the Mt. Kumgang resort on the east coast just north of the
DMZ. This was the 13th such since 2000. As usual, about 100 elderly South
Koreans went to meet, all too briefly and just this once, relatives most had not
seen for half a century. This time the Northern kin included the son of an ROK
prisoner of war, and Chon Mon-sook: a Southern fisherman kidnapped in 1969, who
was reunited with his wife. Seoul reckons North Korea is holding almost 1,000
ROK citizens, both POWs from the Korean War and later abductees (mostly
fishermen). It has raised this at joint Red Cross meetings, but Pyongyang has
stonewalled.
When a Southern reporter tried to file copy using the word "abductee",
Northern officials barged into the press room, seized tapes, and demanded that
the offender leave on the bus with the families, rather than stay for the second
half when 100 more Northerners were due to meet another batch of ROK relatives.
This stand-off held up the elderly Southerners' departure by 11 hours until
almost midnight. In the end the entire Southern press corps left in solidarity.
The second reunions thus passed unreported, but without further incident.
Deplorable as this episode is, in the past Pyongyang might well have cancelled
the whole thing on the spot, and not renewed it for months. Hence this is
progress, to some degree.
Foreign press visits Kaesong zone
Many hopes in Seoul are pinned on the Kaesong industrial zone, just an
hour's drive north of the ROK capital across the DMZ, where 15 (so far) ROK
firms employ 6,000 DPRK workers making goods for export. On February 27,
Seoul-based foreign journalists were allowed their first glimpse of this
flagship of North-South cooperation; a stream of articles followed in early
March. Most were broadly positive: at US$57.50 wages are low, but these are
shiny new plants, not sweatshops. Yet all remarked on constraints and contrasts.
They were not allowed to speak to the mainly female Northern workforce, though
some did try. The $57.50 is paid to the government; no one would say how much
the workers actually received. The zone's gleaming new buildings and brisk
construction seemed worlds apart from the surrounding dusty brown treeless
plains and decrepit hovels with plastic sheeting for windows. The Northern
workers who commute between the two daily must notice too.
Feed the hungry?
It remains unclear how many, if any, of North Korea's still largely
under-nourished people the UN World Food Programme (WFP) will be allowed to feed
this year and henceforth. WFP once had its largest operation worldwide here,
feeding up to 6 million of the DPRK's most vulnerable - young children, nursing
mothers and the elderly - although latterly donor fatigue meant this was not
fully funded. Late last year North Korea said it no longer needs humanitarian
help, but will accept development aid. WFP is striving to reposition its work
accordingly, and in mid-March went to Pyongyang to discuss this a limited
package worth US$100 million over two years. The fact that no result was
announced suggests the DPRK is still resisting WFP's monitoring requirements.
These of course are normal practice and required by donors; but a decade of
foreigners snooping around so secretive a country has upset especially the
Korean People's Army (KPA), who want them out.
In brother-in-law's footsteps
This new insouciance towards global and western aid rests on others'
readiness to bankroll North Korea without imposing tiresome conditions, notably
China and South Korea. Both political and business ties with China continue to
develop apace. Especially interesting was the ten-day visit (March 18-28) of a
30-strong delegation led by Kim Jong-il's brother-in-law Jang Song-taek. Jang
was the dear leader's right hand man till purged in 2004; for, it was rumoured,
building up an independent power base to press the succession claims of his
adopted son Kim Hyon-nam, whose real father (by a nurse) was the late Kim
Il-sung.
But Jang re-emerged in January, which suggests his brother-in-law needs him. His
always obscure formal bailiwick, as a vice-director of the central committee of
the ruling Workers' Party of Korea (WPK), has now shifted from the powerful
organization and guidance (OG) department to being in charge of mass
organization and construction of the capital. If that sounds like a demotion,
his China trip suggests otherwise. With typical secrecy it had not as of March
31 been reported in Pyongyang, while the Chinese press only mentioned it once it
was over. Curiously, according to Xinhua on March 29 Jang's itinerary seemed
identical to that followed by Kim Jong-il in January: taking in Wuhan and
Yichang (the Three Gorges) in Hubei province and Guangzhong and Shenzhen in
thriving southern Guangdong, before finishing in Beijing for talks with senior
Chinese leaders. While many in Seoul see this trip and Jang's return as
strengthening reform, earlier reports had linked his ouster not only to power
struggles but to his alleged opposition to opening; so perhaps this China trip
was to force him to see for himself. Then again, Jang once visited Seoul with a
team including Pak Pong-ju, later appointed premier and more reliably seen as
the main man pushing economic change in Pyongyang. As usual, the truth is that
no one outside really knows the nuances.
Other reports claim that plans are again afoot to create a special economic zone
in the drab northwestern border city of Sinuiju, across the Yalu river from
China's bustling Dandong. This was first announced in 2002, only for China to
arrest Yang Bin, the flamboyant Dutch-Chinese orchid millionaire named as
Sinuiju's first CEO, and jail him for corruption. Any new plans will doubtless
be better coordinated with Beijing. Further details may or may not emerge at the
brief annual meeting of the Supreme People's Assembly (SPA), the rubber-stamp
parliament, which it was announced on March 21 will be held on April 11. A
single day suffices for an agenda which includes an economic report on last year
and passing the new budget. Of late the latter has contained no numbers of any
kind. Such statistical blanks will have to be filled in, if reform in North
Korea is ever to become unambiguously real.
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