Ben Hills

Last May a sting operation in the port city of Vladivostok by a government anti-narcotics squad bagged two drug dealers and a stash of 8.5 kilograms of heroin, worth millions on the street. Nothing surprising about that – drugs, extortion, contract killing and general mayhem are commonplace in Russia’s wild east, where police are fighting a losing battle against crime gangs.

Except this wasn’t a Russian Mafia operation – the men arrested were identified as officials of the North Korean Public Security Ministry (the equivalent of the KGB), according to the Russian daily Komsomolskaya Pravda.

The arrest was just the latest outrage involving diplomats from the isolated, near-bankrupt regime of Kim Jong II which has turned, in desperation, to State-sponsored crime to try to fix its balance of payments. They will even take the pathetically devalued Russian rouble.

North Korea has been cut off from international loans since 1987 when a consortium of banks from around the world – including Australia – declared the country in default on $A14 billion which it borrowed in the early ’70s for a bungled industrialisation program.

In the past four years the economy has, says the Bank of Korea, shrunk by one-fifth, and trade has dwindled to less than $A3 billion. The per capita GDP of North Koreans has slid to about $A1,200 – one-eighth that of their cousins in the south, and on a par with Myanmar.

However, using an amazing variety of legal and illegal stunts, the “hermit kingdom” has managed to stave off the total collapse that some economists have been forecasting for years.

The Vladivostok arrests follow a string of other drug seizures in many of the 40-odd countries with which North Korea still has diplomatic relations. Diplomats, businessmen and military officers have been arrested in Indonesia, Japan, Sweden, Uganda and Hong Kong.

Although it will never be in the same league as the Golden Triangle -because of its climate and geography – North Korea is being closely watched by international enforcement agencies. A diplomat from the Beijing embassy was expelled last year for trying to sell an enormous shipment of 700 kilograms of opium to a Chinese trader.

South Korean intelligence sources, citing information from defectors, say that the Pyongyang leadership recently ordered the area under cultivation for opium poppies to be increased from about four to 40 square kilometres. They say a new Government processing plant was recently commissioned, producing 30 tonnes of exportquality opium and heroin.

In Macao, the Portugese enclave across the Pearl River from Hong Kong, police last June busted a North Korean operation which they believe had laundered $A2 million in almost undetectable fake $US100 bills printed on a high-quality press in Pyongyang.

The Portugese news agency Lusa said that $US250,000 was seized and five North Koreans were arrested, including the head of the Chogwang Trading Company, Pyongyang’s trade and diplomatic mission in the city. The office was closed down, and its staff of 30 expelled.

In Africa, Europe and Asia, North Korean diplomats have become notorious for smuggling in contraband under diplomatic cover.

The goods seized – obviously only a fraction of the total – range from diamonds and gold ingots to VCRs and other electrical appliances.

Of even more concern, an East German diplomat revealed that North Korea has been attempting to trade in high-tech equipment with military applications. On one occasion a few years ago, the Polish Government was offered a US supercomputer which was banned from export under the rules of the Co-ordinating Committee for Multilateral Export Controls (COCOM); it had been”laundered” through a Japanese trading house.

As well as these criminal operations, North Korea has come up with an ingenious range of legal enterprises that make it unlikely economic sanctions would have worked if diplomacy failed to persuade it to give up its nuclear ambitions – even if its last ally and largest trading partner, China, could be persuaded to comply.

They were already at rock bottom and seem to have some pretty effective survival strategies,” says an English trader with North Korean connections. “When you are eating grass, not much worse can happen to you.”

In spite of an official ban on trade between the two Koreas, foreign-flagged ships ply the sea lanes between Namp’o in the north and Seoul’s port of Inch’on, bearing cargoes from steel plate to men’s suits, mushrooms and Chinese children’s toys. The two-way trade is worth about $A20 million a month, with false bills of lading showing the goods originated in ports such as Hong Kong.

On top of this, there are new attempts to kick-start the Rajin-Sonbong trade enterprise zone, in the bleak north-east of the country, previously used as North Korea’s equivalent of Stalin’s salt mines. The latest plan is to surround the area with an 80 km fence so that investment money can get in, but foreign ideas can’t escape to contaminate North Koreans.

Postage stamps are another unlikely source of revenue. North Korea has become famous among philatelists for highly prized special editions, including some celebrating Italian soccer teams, the 100th anniversary of the Mercedes-Benz car company, and the marriage of Prince Charles and Diana.

And – irony of ironies – the North Koreans have even found a way to make the US Defence Department, which maintains a massive military force on the peninsula to guard against attack from the North, subsidise the regime it reviles. Since 1990, they have been digging up and handing over the remains of US servicemen who were killed during the 1950-53 war; the US Government has 8,140 men still listed as missing in action.

Recently the North Koreans handed the Defence Department a bill for$A996,600 expenses for recovering 46 sets of remains it has turned over -about $A21,000 each. The US Army’s Central Identification Laboratory in Hawaii says it has only managed to positively identify one set, and “some of the remains include animal bones”. South Korea is, naturally, extremely concerned about these cottage industries springing up.

Concerned because it means less leverage in persuading the north to pull down the “Berlin Wall” of barbed wire that divides the peninsula and normalise relations, and because it makes a mockery of President Kim Young Sam’s claims that the North Korean regime is “on the verge of an economic and political crisis that will sweep them from power”. Right up to the deadline for signing the North Korean-US agreement yesterday, Mr Kim expressed concern that US negotiators in Geneva – who have promised everything from billions of dollars of compensation to diplomatic recognition and a new, safer nuclear reactor -would come up with “a half-baked compromise which would bring more danger and peril”. In the three months since the death of Kim Il Sung, the North’s Marxist dictator for nearly half a century, South Korea has been taking an increasingly hard line against any attempt at reconciliation.

More than 100 people, most of them pro-North Korean students, are still in jail in Seoul following police raids in which posters mourning Kim Il Sung’s death were torn down, and makeshift Buddhist altars smashed. Instead of sending his condolences for the man he was to have met for a historic summit just a few days later, Kim Young Sam denounced him as a war criminal.

However, in spite of the belligerent rhetoric from both sides, the Cold War’s last frontier has become a few degrees warmer this past week. The nightmare scenario of economic ruin, civil war and millions of refugees fleeing south has been postponed, perhaps indefinitely.

Refugee numbers are up, but not dramatically. Two thousand people are reported to have crossed the river border into China, and so far this year a record 39 have managed to make their way to Seoul – one of them taking advantage of the fact that, because of power shortages, the border fence can only be electrified a few hours a day.

This has caused an unexpected budget problem. South Korea rewards defectors with a house and a cash bounty of up to $A70,000, depending on how good a story they tell. But these payments have had to be suspended because the $A1 million budget for the year has been exhausted.

But even if there is no starvation, there is no doubt, from accounts by the refugees, that things are pretty grim. When the harvest failed last year, many North Koreans were reduced to two meals a day – breakfast was the water in which rice is boiled.

Most goods are not available in the shops, only through workplaces – it is a barter economy in which soap and toilet paper are traded for food. During nightly brown-outs, people cluster under street-lamps to read.

“We all laughed when Jimmy Carter said how impressed he was by a department store they took him to in Pyongyang,” says an East European who travels frequently to the North. “It is just propaganda. They stock up the store and get people to pretend to buy things – but as soon as the show is over, they have to give it all back. Normally, you can’t buy even a toothbrush.”

Towering over the Potemkin city of Pyongyang is the hulk of Asia’s tallest building – a 103-storey hotel which should have been ready for an international youth conference in 1989.

Foreign consultants say it would cost $A600 million to complete, including building a new power station because Pyongyang does not have enough spare electricity to make its lights work.

That is $A600 million that, in spite of its crime spree, North Korea does not have.

Publishing Info

Pub: Sydney Morning Herald
Pub date: Saturday 22 October 1994
Edition: Late
Section: News and Features
Sub section: News Review
Page: 36
Word count: 1723
Caption: Tall order….There is no money to complete the 103-storey Ryugyong Hotel.