North Korea  

For current reports go to EASY FINDER

North Korea



In-depth Business Intelligence

Books on North Korea


Area (


22,224,195 (July 2002 est.)


North Korean won (KPW)

Kim Jong-il

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 The DPRK angrily denies this, and refuses to resume talks until the charge is withdrawn and sanctions against some of its companies and a Macau-based bank lifted.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, 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.

 « Top  

« Back


Published by 
Newnations (a not-for-profit company)
PO Box 12 Monmouth 
United Kingdom NP25 3UW 
Fax: UK +44 (0)1600 890774