Archive for the ‘Mining/Minerals’ Category

Paul White published September 2010 DPRK Business Monthly

Monday, September 27th, 2010

You can download the PDF here.

Topics discussed include:
Kim Jong Il Praises China’s Economic Advance
“NK Keen on Investment in Mining”
DPRK Pavilion Day Marked at Shanghai Expo
NGO Initiatives in DPRK: Triangle Génération Humanitaire (France)
Choson Exchangers Train NK in Finance, Economics, Law
ROK Civic Bodies Seek to Help NK Flood Victims
Seoul’s NK Trade Ban Hits ROK Firms Hard
Can North Korea embrace Chinese-style reforms?
Pyongyang Night Life Buzzing
Hamhung Makes Economic Strides
Pomhyanggi Cosmetics Enjoy Popularity
P’yang Hosts International Film Festival
New Numerical-control Machine Tool
Climate Map to Aid Agriculture
New Rice Strain Suitable for Double Cropping
Online Medical Service Working Well
NK’s New Money-Making Venture: Video Games
Day-care Center Opens for Kaesong Complex Children
Seoul to Allow More of its Citizens to Work at Kaesong

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DPRK seeks to repay debt in ginseng

Wednesday, July 28th, 2010

UPDATE: This story was picked up by the Financial Times (8/11/2010):

North Korea has offered the Czech Republic 20 tonnes of ginseng in lieu of payment for some of its debts.

However, Prague has turned down the deal, instead suggesting that Pyongyang pays in the valuable mineral zinc, which can be resold on international markets.

North Korea owes the Czech Republic $10m from the days when the Czech Republic was under communist rule and the two countries traded with each other regularly. Communist Czechoslovakia was a leading supplier of trucks, trams and machinery to North Korea, creating a large pile of debt.

Pyongyang reportedly offered $500,000 worth of ginseng, a root which is reputed to boost memory, stamina and libido, as a down payment.

However, consumption of ginseng in the European country is low, with just 1.4 tonnes used each year.

North Korea’s economy is struggling as international sanctions tighten and it hopes to be able to barter its way out of handing over valuable cash.

Non-cash transactions between socialist countries is common, with Cuba sending Venezuela doctors in exchange for discounted oil.

A Czech government spokesman has said that the countries were in negotiation over how the debt would be paid.

“We have been trying to convince them to send, for instance, a shipment of zinc,” the deputy finance minister told the MF Dnes newspaper.

ORIGINAL POST: According to the Korea Times:

North Korea has offered to pay its debt to the Czech government with ginseng, according to a local Czech daily newspaper.

MF DNES, a daily newspaper based in Prague, reported last Saturday that North Korea has recently suggested to the Czech Finance Ministry that it would pay 5 percent of its debt — approximately $500,000 — with ginseng.

“We are trying to persuade them (North Korea) to give us, for example a bulk of Zinc instead, so that we could sell it to someone else,” Tomas Zidek, deputy finance minister, told the newspaper in Czech.

North Korea is believed to have a significant amount of zinc in deposits.

The paper went on to say the consumption of ginseng in the Czech Republic is very small, and it only imported 1.4 tons last year. The amount of ginseng worth $500,000 will be roughly 400 tons, securing the supply for more than 200 years.

But, to Czech’s disappointment, North Korea seemed to have made up its mind, as it sent a delegation with samples of ginseng.

North Korea is known to be Czech’s 10th biggest debtor, which goes back to the communist governments. The North bought many trams and vehicles from former Czechoslovakia.

Read the full story here:
North Korea wants to pay back debt in ginseng
Korea Times
Kim Se-jeong
7/26/2010

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Burma-North Korea Ties: Escalating Over Two Decades

Wednesday, July 7th, 2010

According to the Irrawaddy:

A recent New York Times op-ed article by Aung Lynn Htut, formerly a high-ranking Burmese military intelligence officer who defected in 2005 while he served as an attaché at the Burmese embassy in Washington, shed new light on the history of the still murky relationship between Burma and North Korea, two of the world’s most isolated, secretive and oppressive regimes.

Burma broke diplomatic relations with North Korea in 1983, when North Korean agents attempted to assassinate the South Korean president on Burmese soil. But according to Aung Lynn Htut, shortly after current junta-chief Snr-Gen Than Shwe assumed power in 1992, he surreptitiously moved to renew ties with Pyongyang.

“Than Shwe secretly made contact with Pyongyang. Posing as South Korean businessmen, North Korean weapon experts began arriving in Burma. I remember these visitors. They were given special treatment at the Rangoon airport,” Aung Lynn Htut said in his June 18 article.

The junta kept its renewed ties with North Korea secret for more than a decade because it was working to establish relationships with Japanese and South Korean businesses, Aung Lynn Htut said. By 2006, however, “the junta’s generals felt either desperate or confident enough to publicly resume diplomatic relations with North Korea.” 

In November 2008, the junta’s No 3, Gen Shwe Mann, visited North Korea and signed a memorandum of understanding, officially formalizing military cooperation between Burma and North Korea. Photographs showed him touring secret tunnel complexes built into the sides of mountains thought to store and protect jet aircraft, missiles, tanks and nuclear and chemical weapons.

According to Aung Lynn Htut, Lt-Gen Tin Aye, the No.5 in the Burma armed forces and the chief of Military Ordnance, is now the main liaison in the relationship with Pyongyang. Tin Aye has often traveled to North Korea as well as attended ceremonies at the North Korean embassy in Rangoon.

In September 2009, The New Light of Myanmar reported that Tin Aye went to the anniversary celebration of the Democratic People’s Republic of Korea (DPRK), held in a hotel in Rangoon. In February, Tin Aye, along with other senior officials, attended the birthday event of the Dear Leader of North Korea at the embassy.

Flights and ships from North Korea to Burma have been carrying more than just Burmese generals. Analysts, including Burma military expert Andrew Selth, say that for years Burma and North Korea have used a barter system whereby Burma exchanges primary products for North Korean military technologies.

In June 2009, a North Korean ship, the Kang Nam I, was diverted from going to Burma after being trailed by the US navy. Then in April, another North Korean ship, the Chong Gen, docked in Burma carrying suspicious cargo, allegedly in violation of the UN Security Council Resolution 1874, which restricts North Korea from arms deals and from trading in technology that could be used for nuclear weapons.

In May, the seven-member UN panel monitoring the implementation of sanctions against North Korea said in a report that Pyongyang is involved in banned nuclear and ballistic activities in Iran, Syria and Burma with the aid of front companies around the world.

According to the UN report, a North Korean company, Namchongang Trading, which is known to be associated with illicit procurement for Burma’s nuclear and military program and is on the US sanctions list, was involved in suspicious activities in Burma.

The report also noted three individuals were arrested in Japan in 2009 for attempting to illegally export a magnetometer—a dual-use instrument that can be employed in making missile control system magnets and gas centrifuge magnets—to Burma via Malaysia allegedly under the direction of another company known to be associated with illicit procurement for North Korea’s nuclear and military programs.

The UN experts also said that the Korea Kwangson Banking Corporation has handled several transactions involving millions of dollars directly related to deals between Burma and the Korea Mining Development Trading Corporation.
 
With this string of events and the suspicions surrounding them as a dramatic lead in, on June 4, Al Jazeera aired a news documentary prepared by the Democratic Voice of Burma (DVB) which was written by Robert Kelley, a nuclear scientist and former director of the International Atomic Energy Agency (IAEA). The DVB report claimed that the ruling military junta in Burma is “mining uranium, converting it to uranium compounds for reactors and bombs, and is trying to build a reactor and/or an enrichment plant that could only be useful for a bomb.”

The IAEA wrote to Burma’s agency representative, Tin Win, on June 14 and asked whether the information provided in the DVB report was true. Burma, which is a member of the IAEA, a party to the Nuclear Non-Proliferation Treaty and a signatory to the Southeast Asia Nuclear-Weapon-Free Zone Treaty, responded with a letter stating that the DVB report allegations are “groundless and unfounded.”

“No activity related to uranium conversion, enrichment, reactor construction or operation has been carried out in the past, is ongoing or is planned for the future in Myanmar [Burma],” the letter said.

The letter also noted that Burma is a signatory of the Nuclear Non-Proliferation Treaty and the agency’s so-called safeguards agreement. “As stated in the safeguards agreement, Myanmar will notify the agency if it plans to carry out any nuclear activities,” the letter said.

The regime, however, has not signed the IAEA’s Additional Protocol, meaning that the agency has no power to set up an inspection of Burma’s nuclear facilities under the existing mechanism known as the Small Quantities Protocol.

Previously, on June 11, Burma’s state radio and television news had reported the Foreign Ministry’s denial of the allegations in the DVB report. The denial claimed that anti-government groups in collusion with the media had launched the allegations with the goal of “hindering Burma’s democratic process and to tarnish the political image of the government.”

The Foreign Ministry denial also addressed Nyapyidaw’s relationship with Pyongyang. “Following the re-establishment of diplomatic relations, Myanmar [Burma] and the DPRK, as independent sovereign states, have been engaging in promoting trade and cooperation between the two countries in the same way Myanmar is dealing with others,” the ministry said in its statement.

The regime did acknowledge that the Chong Gen docked at Thilawa Port near Rangoon in April. But the statement said the North Korean vessel was involved in importing cement from North Korea and exporting rice from Burma.

But in an article for Asia Times online, Burma analyst Bertil Linter noted that, “if carrying only innocuous civilian goods, as the statement maintains, there would seemingly have been no reason for authorities to cut electricity around the area when the Chong Gen, a North Korean ship flying the Mongolian flag of convenience, docked on the outskirts of Yangon.”

“According to intelligence sources, security was tight as military personnel offloaded heavy material, including Korean-made air defense radars. The ship left the port with a return cargo of rice and sugar, which could mean that it was, at least in part, a barter deal. On January 31 this year, another North Korean ship, the Yang M V Han A, reportedly delivered missile components also at Yangon’s Thilawa port,” Linter said.

Strategypage.com, a military affairs website covering armed forces worldwide, said, “Indications are that the North Korean ship that delivered a mysterious cargo four months ago, was carrying air defense radars (which are now being placed on hills up north) and ballistic missile manufacturing equipment. Dozens of North Korean technicians have entered the country in the last few months, and have been seen working at a military facility outside Mandalay. It’s unclear what this is for. Burma has no external enemies, and ballistic missiles are of no use against internal opposition.”

In his Asia Times online story, Lintner noted that on June 24, the DVB reported that a new radar and missile base had been completed near Mohnyin in Myanmar’s northern Kachin State, and he reported that work on similar radar and missile bases has been reported from Kengtung in eastern Shan State,160 kilometers north of the Thai border town of Mae Sai.

“Since Myanmar is not known to have imported radars and missile components from any country other than North Korea, the installations would appear to be one of the first visible outcomes of a decade of military cooperation,” Lintner said.

Lintner also reported that Western intelligence sources know that 30 to 40 North Korean missile technicians are currently working at a facility near Minhla on the Irrawaddy River in Magwe Division, and that some of the technicians may have arrived overland by bus from China to give the appearance of being Chinese tourists. 

North Korea has also issued adamant denials with respect to allegations regarding its relationship with Burma.

According to the Korean Central News Agency (KCNA), on June 21 Pyongyang said, “The US is now making much fuss, floating the sheer fiction that the DPRK is helping Myanmar [Burma] in its nuclear development.”

The KCNA often highlights the close relationship between North Korea and Burma.

On June 20, the Pyongyang news agency reported that ex-Col Than Tun, deputy chairman of the Union of Myanmar Economic Holding Ltd., sent a statement cheering Kim Jong Il’s 46th anniversary at the Central Committee of the ruling Workers’ Party of Korea.

On April 18, Korean state-run- media reported that Than Tun also issued a statement cheering the 17th anniversary of Kim Jong Il’s chairing of North Korea’s National Defense Commission.

“Kim Jong Il’s field inspection of KPA [Korean People’s Army] units served as a main source that helped bolster [North Korea’s] self-reliant defense capability in every way,” the statement noted.

Military sources said the Union of Myanmar Economic Holding Ltd, managed by the junta, is responsible for purchasing imported weapons for Burma’s armed forces, including transferring money to overseas banks such as Korea Kwangson Banking Corporation.

Meanwhile, in addition to its escalating relationship with North Korea, the Burmese military regime has recently boosted ties with Iran, which according to the UN report is also allegedly receiving nuclear and missile technologies from North Korea.

In recent years, Burmese and Iranian officials visited their counterparts homeland for the purported purpose of improving economic ties. Observers, however, said Than Shwe has made a tactical decision to develop relationships with other “pariah states,” particularly enemies of the US, to relieve Western pressure on his regime.

Iranian Deputy Foreign Minister Mohammad Ali Fathollahi met Burmese Foreign Minister Nyan Win and Minister of Energy Lun Thi during his trip to Burma on June 15-17.

“The two sides reiterated their desire to further expand the ties of friendship and economic cooperation and to increase cooperation in the regional international forums such as [the] United Nations and Non-Aligned Movement,” The New Light of Myanmar reported on June 18.

Fathollahi’s visit came three months after Maung Myint’s visit to Iran on March 8-11, when he met Iranian Foreign Minister Manochehr Mottaki and Deputy Minister of Petroleum H. Noghrehkar Shirazi.

Read the full story below:
Burma-North Korea Ties: Escalating Over Two Decades
Irrawaddy
Wai Moe
7/7/2010

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Room (Bureau) 38 allegedly restored

Wednesday, June 23rd, 2010

According ot the Choson Ilbo:

North Korea in March restored a special department in the Workers Party codenamed Room 38 which manages leader Kim Jong-il’s coffers and personal slush funds, it emerged Monday. The North last fall merged Room 38 with Room 39, which manages party slush funds.

“Rooms 38 and 39 were merged to simplify Kim Jong-il’s slush funds,” said a North Korean source. “But when it became difficult to secure hard currency due to international sanctions, Room 38 seems to have been restored because there was a feeling that Room 39 alone can’t meet the need.”

Room 38 is reportedly led by Kim Tong-il, who heads three regional departments in charge of earning hard currency.

Room 39 tries to maximize earnings from gold and zinc mining and farming and fisheries. It also manages stores and hotels exclusively for foreigners in Pyongyang. Room 39 seems to have suffered badly due to the recent suspension of inter-Korean trade. “Taesong Bank and Zokwang Trading, which received remittances from Mt. Kumgang tourism, are both controlled by Room 39, and is also in charge of the exports of agricultural and fisheries products,” said a government source.

Kim Jong-il needs dollars to maintain the party elite’s loyalty to him and his heir presumptive. He is said to have told party bigwigs in February, “From now on I will judge your loyalty based on the amount you contribute to the fund.” His son Jong-un is also said to be amassing separate slush funds for his own use.

But international sanctions on exports of weapons, counterfeit dollars, fake cigarettes and drugs remain in place, and the United States is pushing ahead with additional financial sanctions over the North’s sinking of the South Korean Navy corvette Cheonan in March. Pyongyang was dealt a heavy blow in 2005 when the U.S. froze US$25 million in the Banco Delta Asia in Macao which was apparently for Kim’s personal use.

Kim earlier this year appointed his high school friend Jon Il-chun head of Room 39. Jon was also named chairman of the National Development Bank, established early this year with a view to conducting normal international financial transactions to induce foreign investment. “North Korea seems to be planning to divert part of foreign investment to Kim’s slush fund,” said a government official.

NK Leadership Watch has more

Read the full story here:
Kim Jong-il Restores Special Department to Swell Coffers
Choson Ilbo
6/24/2010

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Aminex to begin oil exploration in the DPRK

Thursday, June 3rd, 2010

UPDATE 2: According to Yonhap:

North Korea has inked a 10-year contract with British oil and gas company Aminex to explore and extract oil on the seabed off the country’s east coast, the Financial Times (FT) in London reported on June 1.

For the deal, North Korea presented Singapore-registered Chosun Energy as its representative to establish a 50-50 joint venture, Korex, with Aminex, the FT said, noting a filing with Singapore’s Accounting and Corporate Regulatory Authority.

Chosun Energy is an investment holding company operated by North Korea with a paid-up capital of US$1.2 million, according to the newspaper. But the newspaper did not elaborate further details on the company.

Korex will search for oil in an area of 50,681 square kilometers (20,272 square miles) in parts of North Korea’s east coast, Aminex said in a statement.

The contract with the British company, which is listed in London and Dublin, was signed around mid-May in London by officials from the North’s oil company and a head official for Aminex.

“Officials from North Korea’s state oil company traveled to London two weeks ago to conclude the 10-year contract. Lord Alton, chairman of Britain’s parliamentary North Korea group, says he showed the officials around parliament,” the FT added.

North Korea has contacted foreign companies and investors to attract foreign capital for searching for its rich natural resources, including crude oil. In 1997, the North claimed it had reserves of 5 to 40 billion barrels of oil.

North Korea has maintained ties with Animex since 1998. Aminex has been hunting for potential oil reserves in the North Korean portion of the Yellow sea since it signed with the country for joint oil and gas development in January 2005.

UPDATE 1: According to the AFP:

The head of a London-based energy firm that signed a deal to search for oil off North Korea said on Thursday he hoped to start exploring in a year but was closely monitoring tensions on the peninsula.

Aminex PLC executive chairman Brian Hall told AFP he expected “field work in about a year” off the communist nation’s east coast and aimed to “find substantial reserves”.

However, relations on the peninsula have become strained after North Korea was accused of carrying out a torpedo attack on a South Korean warship in March that left 46 sailors dead and stoked fears of an armed conflict.

Pyongyang has denied involvement in the sinking and threatened war in response to a trade suspension and other reprisals by the South.

Asked about the timing of the North Korea contract, Hall said “we have been working with (the) North Koreans for over a decade and an agreement such as the one we have recently signed takes many months to negotiate”.

He added: “Naturally we will keep a very close eye on the tensions on the peninsula, as we have done during previous incidents, but our project is of a long-term nature and well thought through.”

Aminex announced last week that an associate company had signed a 10-year contract with North Korea to search for oil in an area of about 50,681 square kilometres (20,272 square miles) in the Korean East Sea.

Hall declined to give an estimate of the potential deposits.

The contract was signed by Korex — a 50-50 venture between Aminex and Singapore-registered Chosun Energy — and the Korean Oil Exploration Company, the North’s state oil firm.

Victor Shum, an analyst with energy consultancy Purvin and Gertz, said there was every chance that oil would be found in the area but stressed the reserves must be of a significant size in order for exploration to progress further.

“The question is whether any oil reserves that may be discovered there are going to be economically viable to extract,” Singapore-based Shum told AFP.

“I think there has been interest certainly by oil companies so there is therefore a possibility of something there … So far the production isn’t large,” he said.

Aminex, with listings on the London and Irish stock exchanges, describes itself as an upstream oil and gas company with concessions in several countries including the United States, Kenya and Egypt.

According to a filing with Singapore’s Accounting and Corporate Regulatory Authority obtained by AFP, Aminex’s partner Chosun Energy is an investment holding company with a paid-up capital of 1.2 million dollars.

It listed its address as the German Centre in Singapore, a building that hosts small and medium-sized foreign companies, and named three directors — an American, one Briton and a Singaporean.

But staff at the German Centre told AFP the company had moved out.

Singapore is a major financial centre and corporate hub, attracting companies from all over the world because of the ease of doing business and access to funding.

North Korea, one of the world’s most impoverished countries, is starved of energy and foreign exchange after decades of isolation as well as economic sanctions, but is believed by US officials to have up to six nuclear weapons.

South Korea’s ban on most trade with North Korea in response to the ship sinking will cost the communist state hundreds of millions of dollars a year, according to figures from the Seoul-based Korea Development Institute.

ORIGINAL POST: According to the Financial Times:

Aminex, listed in London and Dublin, has formed a company, Korex, to pursue the project jointly with Chosun Energy, a Singapore-listed company that identifies James Passin as one of its directors, according to a filing with Singapore’s Accounting and Corporate Regulatory Authority.

Mr Passin is a New York-based fund manager. His Firebird Global Master Fund II half owns Chosun Energy and targets resource deals in frontier markets.

Officials from North Korea’s state oil company travelled to London two weeks ago to conclude the 10-year contract. Lord Alton, chairman of Britain’s parliamentary North Korea group, says he showed the officials around parliament.

Brian Hall, chairman of Aminex, acknowledged the contract had been concluded at a sensitive time given the rising tensions between Seoul and Pyongyang, but stressed he had opened ties with energy-starved North Korea in 1998. Since then, securing output rights from an exploration block had been “stop-go”.

Additional Information/thoughts: 
1. Here is a previous short post on Aminex.

2. The economics literature overwhelmingly suggests that natural resource windfalls are generally bad news for weak states/developing countries—often fueling corruption, repression, and violence.  The windfall almost never translates into better general working conditions or increases in general income (Botswana being an exception).  There are plenty of papers out there making this point (“Natural Resource Curse”), so feel free to refer to your favorite.

3. I would be weary of building an offshore oil rig in the DPRK.

4.  If oil is discovered in Korea’s East Sea, look for Japan, South Korea, and Russia to begin “drinking from their milkshake”.

Read the full stories here:
Oil firm says N.Korea exploration to start in a year
AFP
Bernice Han
6/2/2010

Anglo-Irish group seeks North Korean oil
Financial Times
Christian Oliver, Kevin Brown
6/1/2010

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Brazil, North Korea: Brothers in trade

Wednesday, June 2nd, 2010

Bertil Lintner wrties in the Asia Times:

For more than a decade, the world around North Korea has been shrinking. In the wake of its missile and nuclear tests and recent accusations that it torpedoed a South Korean naval vessel, the list of internationally imposed sanctions and trade restrictions aimed at isolating the reclusive state has grown ever longer.

But the North Koreans, who have been in a state of war for more than half a century, have often found ingenious ways around those restrictions and added pressures from the United States, Japan and other countries, most visibly seen in the string of front companies and bank accounts it maintains across Asia.

Recent indications are that Pyongyang has sought willing trade partners outside of Asia and its new closest commercial ally appears to be Brazil. Relations between the two countries have warmed considerably since leftist Luiz Inacio Lula da Silva became president in January 2003.

The official Chinese news agency Xinhua reported in October 2004 that North Korea planned to open an embassy in Brasilia, its fourth in the Latin and South American region after Havana, Cuba, Lima, Peru and Mexico City. On May 23, 2006, the official Korean Central News Agency (KCNA) and the Brazilian media reported that the two countries had signed a trade agreement.

More recently, the KCNA reported last December that a “protocol on the amendment to the trade agreement” had been signed in the capital Pyongyang. “Present at the signing ceremony from the DPRK [Democratic People’s Republic of Korea, or North Korea] side were Ri Ryong Nam, minister of foreign trade, and officials concerned and from the Brazilian side Arnaldo Carrilho, Brazilian ambassador to the DPRK, and embassy officials,” according to the news report.

China’s role in facilitating trade between Brazil and North Korea remains a matter of conjecture, but it is significant that the state mouthpiece Xinhua has eagerly reported on the warming of relations between the two countries. China remains Pyongyang’s most important base for all kinds of foreign trade – legitimate as well as more convoluted business transactions through front companies in Beijing and elsewhere.

But North Korea also needs more discreet trading partners, as China is often criticized in international forums for its close relations with the North Korean regime and is undoubtedly closely watched by Western intelligence agencies. And it is hardly surprising that Brazil, which is known to harbor its own nuclear ambitions, albeit for stated peaceful purposes, has emerged as such a friendly nation to Pyongyang.

Significantly, Brazil has established what appears to be an understanding with another aspiring nuclear power: Iran. “Also like Iran, Brazil has cloaked key aspects of its nuclear technology in secrecy while insisting the program is for peaceful purposes, claims nuclear weapons experts have debunked,” according to an April 20, 2006 Associated Press report.

While Brazil is more cooperative than Iran on international inspections, some worry its new enrichment capability – which eventually will create more fuel than is needed for its two nuclear plants [1] – suggests that South America’s biggest nation may be rethinking its commitment to nuclear non-proliferation.

”Brazil is following a path very similar to Iran, but Iran is getting all the attention,” said Marshall Eakin, a Brazil expert at Vanderbilt University in the United States. ”In effect, Brazil is benefiting from Iran’s problems.”

In September 2009, Lula declared before the United Nations General Assembly: “Iran is entitled to the same rights as any other country in its use of nuclear energy for peaceful purposes.” He added to reporters outside the UN General Assembly, “I defend for Iran the same rights with respect to nuclear energy that I do for Brazil.” He added: “If anyone is ashamed of having relations with Iran, it’s not Brazil.”

But it is Lula’s budding cooperation with North Korea that is especially worrying to some Western observers. According to one longtime observer of the North Korean scene, “Both nations have long-standing ambitions to develop a nuclear capability as well as missiles and space-launched vehicles. Both have been the subject of intense US political pressure at times, Brazil on-and-off, North Korea all the time. And Brazil has access to technology that North Korea can only dream about.”

Because Brazil is not on any international sanctions list, it is easier for it to obtain dual-use materials. It remains to be proven, however, that Brazil has served as a conduit for such goods ultimately destined for North Korea.

According to official trade statistics, available at www.stat-trade.com, North Korea’s largest trading partner in 2009 was China, with two-way commerce totaling US$2.67 billion. That was followed by South-North Korean trade worth $1.68 billion. A surprising third on the list was Brazil with US$221 million in two-way trade, well ahead of Singapore, Hong Kong and North Korea’s other traditional Asian trading partners.

The nominal figure may not be impressive in an international context, but it is substantial for North Korea, a country with an estimated total gross domestic product of about $22 billion. North Korea’s trade with Brazil has recently increased almost at the pace it has decreased with Thailand, from where it previously sourced dual-use chemicals, raw materials and machinery. Thailand no longer figures prominently in recent trade statistics, which is noteworthy given that their two-way trade reached a record US$331 million in 2004.

Those deals were done under the government of Thaksin Shinawatra, who at one point even proposed signing a full-blown free-trade agreement with North Korea. In August 2005, the former Thai premier was formally invited by North Korean leader Kim Jong-il to visit Pyongyang. The visit never materialized, however, and when Thaksin was ousted in a September 2006 military coup, Thai-North Korean relations began to deteriorate. By 2008, bilateral trade between Thailand and North Korea fell to $76 million and in 2009 dipped further to $47.1 million.

Among North Korea’s more remarkable export items before the September 2006 coup in Thailand were 1.3 tons of gold and 10 tons of silver. Another pre-arranged shipment of 12 tons of silver arrived in Bangkok in October of that year. However, business is now reportedly sluggish at the two main trading companies that North Korea is known to maintain in Bangkok, Star Bravo and Kosun Export Import.

Successive Thai governments that have ruled the country since Thaksin’s overthrow are believed to have complied more strictly with international pressure to restrict dealings with North Korea. In Brazil, however, North Korea has a long history of involvement with various leftist groups, the distant offshoots of which are now in power in Brasilia.

North Korea expert Joseph S Bermudez wrote in his 1990 study “Terrorism: The North Korean Connection”:

From 1968 to 1971 the DPRK provided financial and military assistance to several leftist organizations in Brazil, most notably to Carlos Marighella’s National Liberating Action (Acao Libertadora Nacional – ALN) and the Revolutionary Popular Vanguard (Vanguarda Popular Revolucionaria – VPR). By November 1970, the DPRK established a training base in the Porto Alegre area, where a small number of guerrillas were given guerrilla warfare, small arms, and ideological training. A small number of ALN and VPR personnel is believed to have also received training within the DPRK.

Marighella – a Marxist, writer and founder of the ALN – was the leader of a militant movement that fought against Brazil’s US-supported, authoritarian right-wing governments in the 1960s. In September 1969, the guerrillas even managed to kidnap US ambassador Charles Burke Elbrick for 78 hours. After his release in exchange for 15 imprisoned leftists, Elbrick remarked, “Being an ambassador is not always a bed or roses.” Two months later, Marighella was killed in an encounter with Brazil’s police. But on November 4, 2009, the 40th anniversary of the death of Marighella, Lula declared him a “national hero”.

Although ideology may be less important than profits in today’s capitalist world, there are old emotional bonds between North Korea and Brazil under Lula that should not be entirely discounted. Brazil may be among the countries which have condemned North Korea’s nuclear program, as was shown when, in May 2009, the Brazilian government called on North Korea “to sign the Comprehensive Nuclear Test Ban Treaty and to strictly observe the moratorium on nuclear tests”.

But bilateral trade between the two sides is nevertheless – in relative terms – now booming. In May last year, North Korea’s Foreign Affairs Minister Pak Ui-chun arrived in Brazil to meet with his Brazilian counterpart, Celso Amorim. Pak expressed Pyongyang’s interest in receiving assistance in its deep-water oil prospecting efforts from PETROBRAS (Brazilian Petroleum Corporation), while Amorim said his country was reportedly interested in exporting what he referred to as “farm” machinery.

So far no military hardware, or material that could have military applications, is known to have changed hands between North Korea and Brazil. But Pyongyang has found at least one new trading partner which could potentially replace some of its former business allies in Asia. It’s a budding relationship that will be closely monitored by North Korea watchers in Japan and the West.

Read the full story here:
Brazil, North Korea: Brothers in trade
Asia Times
Bertil Lintner
Asia Times
6/3/2010

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The short life of the Sunchon Vinalon Complex area

Tuesday, May 25th, 2010

UPDATE (2011-5-31): New Google Earth imagery, dated 2009-5-27, reveals the Sunchon Vinalon Complex area continues to shrink:

Here is an overview of the facilities in question.  Note the two yellow boxes:

Below are images from the complex in the yellow box on the left (March 2004 – May 2009):

Below are images from the complex in the yellow box on the right (March 2004 – May 2009):

ORIGINAL POST (2010-5-25): The Sunchon Vinalon Complex was launched in 1985.  It was intended to produce 100,000 tons of Vinalon as well as methanol, vinyl chloride, sodim carbonate, caustic soda, nitrogenous fertilizers, albuminous feed.  In October 1989 the government announced that the first-stage had gone into production (50,000 tons of vinalon).

Using Google Earth imagery and clandestine video footage we can see, however, that much of the Sunchon Vinalon Complex, what I believe is that largest industrial complex in the DPRK (in terms of geographic size), is now a shrinking pile of scrap materials.

Below is an overview of the Sunchon industrial area.  It is composed not only of the Sunchon Vinalon Complex, but also the Sunchon Thermal Power Plant and Sunchon Cement Complex.  I believe the Sunchon Vinalon Complex is actually composed of three distinct hubs. The two I will be looking at are highlighted in red in the below satellite overview image:

sunchon-overview-2004.JPG

The  red box on the right has seen the most changes.  Between 2004 and 2006 it was nearly entirely stripped:

sunchon-area1-2004.JPG sunchon-area1-2006.JPG

The red box on the left has been stripped as well–though not nearly to the same extent:

sunchon-area2-2004.JPG sunchon-area2-2006.JPG

Recently KBS broadcast clandestine video shot at the Sunchon complex and someone posted a short clip on the web.  You can watch it here.  Below I have matched the clandestine video segments with the satellite imagery which shows just how derelict the facility has become. Satellite image dates are in the upper right hand corner.

sunchon-vinalon-video1.JPG sunchon-sattelite-video1.JPG

sunchon-vinalon-video2.JPG sunchon-sattelite-video2.JPG

sunchon-sattelite-video3.JPG sunchon-vinalon-video3.JPG

sunchon-vinalon-video4.JPG sunchon-sattelite-video4.JPG

sunchon-vinalon-video5.JPG sunchon-sattelite-video5.JPG

The third zone of the complex seems unaffected over the years.  You can see it here.  I suspect this is the successfully launched “first stage”.

Additional Information:

1. Google Books has a blurb about the complex from North Korea: A Strange Socialist FortressSee the blurb here. I own this book and recommend it.

2.  Global Security asserts that the facility produces chemical weapons.

3. Here are all of the KCNA stories that mention the Sunchon Vinalon Complex (Courtesy of the invaluable STALIN Search Engine)

4. The Sunchon Vinalon Complex is the second vinalon facility to be constructed in the DPRK.  The first is the 2.8 Vinalon Complex in Hamhung.  This facility was recently reconstructed and opened after falling into disrepair during the Arduous March.

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RoK halts sand imports from DPRK

Wednesday, May 19th, 2010

According to Yonhap:

South Korean companies have suspended their sand imports from North Korea, one of the longest-running economic cooperation projects between the countries, as tension mounted over the March sinking of a South Korean warship, a Seoul official said Tuesday.

Seven South Korean companies have stopped sending cargo vessels to North Korea since Monday, Unification Ministry spokesman Chun Hae-sung said.

“We warned them to be careful about the safety of their employees” because political tension is rising between the Koreas, Chun told reporters.

He denied that the government pressured the companies into suspending their imports, saying they “voluntarily” halted their operations after the warning.

“There are fears that further deterioration in the inter-Korean ties may undermine their businesses,” he said.

The suspension is the latest in a series of developments that indicate worsening ties between the Koreas after the warship sank near the border with the North, killing dozens of seamen.

South Korea suspects the North was behind the tragedy and is set to announce the results of its weeks-long probe into the sinking later this week, vowing a stern response to those found responsible. Pyongyang denies any role in it.

The cargo companies have brought more than 38 million tons of sand from North Korea since 2004, the ministry said in a statement. Most of the sand came from the western coastal city of Haeju.

The trade, despite its small scale, was considered a symbol of reconciliation because it was seen as mitigating tension along the maritime border between the Koreas.

Their navies have clashed three times near the Yellow Sea border since 1999, the latest in November of last year.

Since last week, South Korea has also stopped funding government-level exchanges with North Korea and urged hundreds of companies to refrain from starting new ventures with Pyongyang.

The countries remain technically at war after the 1950-53 Korean War ended in a truce rather than a peace treaty.

Read the full story here:
S. Korea halts sand imports from N. Korea amid tension
Yonahp
http://english.yonhapnews.co.kr/northkorea/2010/05/18/88/0401000000AEN20100518007600315F.HTML
Sam Kim
5/18/2010

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Chinese Take Complete Control of Mines

Tuesday, May 11th, 2010

Daily NK
Min Cho Hee
5/11/2010

In a move sure to add weight to suspicions that North Korean industry is in the midst of a very serious funding crisis, a source has reported to The Daily NK that the Chinese partner has taken unprecedented power in a new mining joint venture in North Hamkyung Province.

The inside source reported on Sunday that when Saebyul Coal Mining Complex, a North Korean mining management organization, sealed a contract between Gogunwon Coal Mine, Ryongbuk Youth Coal Mine and a Chinese enterprise, it agreed to hand over an unheard of degree of discretion in affairs of personnel management, materials and working methods to the Chinese enterprise.

The source explained, “Now, the Chinese enterprise has authority over staffing, food distribution, wages and materials. Accordingly, it has reduced the administrative staff and drastically improved productivity.

According to the source, the Chinese are guaranteed operational independence free from the control and instruction of the Saebyul Party committee, and take 60% of net profits. If true, this is a new model of collaboration and cooperation in business between China and North Korea.

The source added, though, “The number of people in the Party committee has also been reduced, though it is unlikely to be got rid of completely due to the nature of the North Korean system.”

He said, “Since last year, North Korea has been trying to attract Chinese investment and three or four Chinese companies have been in negotiations over mine development in this way.”

The Chinese enterprise plans to convey the lignite produced in the mines to China, process it there and sell it domestically.

The source noted, “North Korean workers are delighted with this method of collaboration. They get guaranteed wages and food, and the working environment has also improved thanks to new, stronger mining timbers, so productivity has increase.”

In the cafeterias at the mines, they serve 900g of rice to everyone, and pork and eggs, which workers like. According to the source, “Workers want to take meals served in the cafeteria home for their family members. In this worker-friendly mood, Party cadres are unable to complain.”

Gogunwon Coal Mine and Ryongbuk Youth Coal Mine are both located in the “Gogunwon Workers” district of Saebyul, North Hamkyung Province. They both contain good quality coal seams, and are among the best coal mines in North Korea.

Another source from North Korea suggested on Monday that North Korea is losing a lot of control of the economy in its northern provinces, saying, “The purse strings in the border regions of our country have basically been handed over to China, and ‘our socialist pride’ is in the hands of China. Any factory where they produce even a small amount of goods has been invested in by the Chinese”

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DPRK looking for Chinese investors in Taebong gold mine

Tuesday, May 4th, 2010

According to the Daily NK:

The chairman of North Korea’s State Development Bank, Jeon Il Chun visited China on April 8, reportedly to try and bring Chinese investment to Daebong Mine, located near Hyesan, Yangkang Province.

Daebong Mine is one of North Korea’s major gold mines, managed under the auspices of the No. 39 Department of the Central Committee, a special department charged with raising funds for Kim Jong Il’s personal use. Jeon Il Chun is the person in charge of the No. 39 Department.

Attempts to sell shares in a gold mine directly controlled by the 39 Department, Kim Jong Il’s own private safe, to China seem to indirectly imply that Kim is suffering from a debilitating foreign currency supply crisis.

One Daily NK source in China who is well-acquainted with North Korean affairs reported that while Jeon was in China, he met with the management of three or four Chinese enterprises which already have investments in North Korea, and suggested investment conditions under which the North could transfer some of its mineral rights to them and receive capital investments in return.

The source said, “For now, as far as I know, executive managers of the No. 39 Department have been in contact with Chinese enterprises. Since the Workers’ Party is trying to sell shares in a gold mine, it seems the funding of the Party might be serious.”

“It is not clear whether or not this attempt was done on Kim Jong Il’s instructions, but attracting foreign investment in a gold mine is not a commonplace affair,” the source pointed out, adding that an investor has not yet been put in place.

What is the Daebong Mine for?

The Daebong Mine is a relatively large gold mine on the border of Woonheung and Gapsan in Yangkang Province. Until 2001, a Yangkang provincial foreign currency earning enterprise and the foreign currency earning department of the People’s Safety Agency jointly managed it. However, in May, 2002, it became a No. 39 Department affiliated enterprise.

The No. 39 Department has been raising private funds for the leader and Party operations under the Finance and Accounting Department of the Central Committee since the mid-1970s. According to defectors, it has the highest authority and the largest funds of all North Korea’s foreign currency earning enterprises. Especially, it has the ability to mobilize tremendous financial resources since it manages and controls supplies of gold and silver and rare non-ferrous metals.

A source from Yangkang Province explained, “According to Chongjin University of Mining and Metals and Kim Chaek University of Technology, the purity of the gold from the Daebong Mine is more than 76 percent, while production from Hoichang and Eunsan in South Pyongang Province is 63 percent and 61 percent respectively. More than 150kg of solid gold is produced annually, so this mine is known as the ‘loyalty mine’.”

“People say that the government earns four or five million dollars a year through this mine. Neither Yangkang Provincial Committee nor Hyesan Municipal Committee is involved with the business of the mine.”

The source added, “Since the No. 39 Department deals with the mine, only those discharged soldiers with good family backgrounds are dispatched there by the Central Committee. In October of last year, around 200 discharged soldiers with good family backgrounds came to the mine.”

Almost all the gold produced in the Daebong Mine is stored in Swiss and Austrian banks in gold bars.

A Chinese company had a contract with the DPRK’s Musan Mine which has been canceled for an unknown reason.

Click here to see what I believe is the mine’s location.

Read the full article here:
No. 39 Department Hawking Shares in Key Gold Mine
Daily NK
5/3/010
Lee Sung Jin

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