Geopolitics

How Kim Jong-un Gets His Hands On Western Luxury Goods

Embargo? Ha! The North Korean leader relies on an entire black-market system dedicated to getting around UN sanctions so he can enjoy the best the West has to sell.

Kim Jong-un likes his German wheels...
Kim Jong-un likes his German wheels...
Torsten Krauel

PYONGYANG — On a visit to a factory last month, North Korean leader Kim Jong-un flaunted another victory over the United Nations embargo when he posed next to a machine from a German manufacturer. The company in question did not respond to Die Welt's query about how the machine arrived in North Korea.

In September 2013, Kim caused a stir on a visit to another factory, when pictures showed him standing next to rotating cylinders, a piece of technology used in the manufacture of car rims, but also necessary for making missiles.That technology most likely came from China, as the pieces shown in the photograph look similar to a Chinese model.

UN inspectors going through rubble from the Unha-3 long-distance missile found 14 components including high-pressure pumps, computer chips and ball bearings from China, Britain, Switzerland, Russia and the United States. They established that a firm in Taiwan had sourced the pumps, but efforts to trace the other components are ongoing.

But it's not only potentially dangerous technology that finds its way through the trade embargo into North Korea. Kim's means of transport to these factory visits was a new Mercedes-Benz S-Class, a luxury car that is included on the UN's list of banned goods. Despite this, in April 2012 two generals opened a military parade in brand new Mercedes-Benz 600 Landaulets with elongated wheelbases and convertible roofs.

Nice wheels

The cars did not come from the Stuttgart-based manufacturer — Daimler cut all trade relations with Pyongyang 15 years ago. A company spokesperson said in a statement: "In compliance with the UN's request last year, we renewed our efforts to discover how the cars with the Mercedes-Benz logo came to be in North Korea. Despite our concerted efforts, we were unable to find any concrete results, particularly because we have no chassis numbers for the cars in question."

Pyongyang's streets are full of Audis, BMWs and Hummers. The gym at the new luxury development on the Taedong river boasts exercise machines made by an American company. Kim Jong-un's wife Ri Sol-ju wears Western designer clothing, while the North Korean leader uses the webcam on his Apple computer to liaise with his military commanders.

How do all these goods get past the trade embargo? The same way as the 8-axle transporters used for the KN-08 intercontinental missile: through false documents and underhanded deals. The transporters in question originally came from a Chinese company and bear some similarities to a Russian model. They were labelled as wood transporters for difficult terrain and upgraded with an American engine and a German gearbox.

North Korea's Forest Ministry promptly ordered eight transporters. The vehicles were delivered on a ship chartered by a Chinese firm. It stopped in Osaka, where Japan checked the cargo and let it continue, as wood transporters are not on the embargo list. It was only discovered later, once Pyongyang had revealed the true purpose of the vehicles, that the charter company had the same name as a North Korean military company.

One problem is that the list of banned goods varies from country to country, especially when it comes to luxury items. Australia rules out everything that comes under clothing, leather and furs, while the European Union bans high-quality scarves, accessories, shoes (no matter what the material), high-quality leather, riding gear, handbags and the like. Canada does not allow companies to trade designer clothes and furs with North Korea, while Russia exports everything apart from furs worth more than 250,000 rubles ($7,000). Even for a high-ranking North Korean official, that's serious money.

When it comes to consumer electronic appliances, Australia and Canada keep everything on the blacklist, while the EU only outlaws trading high-value items to be used in the home and high-value audiovisual recording devices. Singaporean companies are banned from exporting plasma TVs and portable music players to North Korea, but Russia and China place no restrictions on this type of trade.

In 2012, inspectors discovered twelve breaches of the embargo in Japan, including a delivery of 698 used Notebook laptops, 22 used keyboards and 673 cosmetics. All of these goods went from Japan via South Korea and China to North Korea. A footnote from the inspectors explains that most of these items are not considered luxury goods in China.

If there's a will

If the West really wanted to enforce the embargo on luxury goods, it would have to check each and every delivery of cameras or scarves, as it does for nuclear technology. There is simply not enough money, resources or political will to do so.

Inspectors say there are fewer cases recently where they can prove that exporters are deliberately breaching the embargo. In 2008, an Austrian sold eight Mercedes-Benz S-Class to Pyongyang and a small Italian firm delivered two high-end loudspeakers for cinemas directly to North Korea.

But most exports to North Korea are not so blatant. UN inspectors write sarcastically that North Korea's foreign trade is long past the stage when it was two colleagues with a fax machine.

In southwest Pyongyang, the regime trains students in the intricacies of the global market. Enforcing the embargo has turned into a worldwide game of cat-and-mouse. Despite the variations, trade deals always follow the same basic pattern. Inconspicuous buyers order goods for inconspicuous customers, who are naturally not based in North Korea but work as middlemen for further middlemen. The firms continually change their names and often use different spellings of their Korean and Chinese names, or adopt a name that is phonetically similar to that of a large, well-known company.

The deals are either paid for in cash or through multiple small payments to banks that are set up for the sole purpose of processing such transactions. The UN inspectors also suspect that Pyongyang uses legal trades to test out new ways of getting illicit goods into the country. North Korea paid for legal Russian passenger jets via 11 different channels in Hong Kong, presumably testing the water for illegal imports.

Aside from the military, almost nothing in North Korea is as shrouded in secrecy as the exact structure of the country's banking industry. There are countless specialized firms working for companies that have links to the military or the party. As soon as they come to the UN inspectors' attention, they disappear and a new company appears under a different name. The UN then has to prove that these new banks have carried out illegal trades. But, as they wrote in their 2012 report, North Korea can create new cover names more quickly than the sanctions committee can identify them.

Via Japan and China

It is no coincidence that most embargo breaches take place in Japan and China. Hundreds of thousands of Koreans emigrated or were taken to Japan during the Japanese occupation and many supported the North after the civil war. Those Koreans loyal to Kim have created Chongryon, an organization that has been supplying North Korea's top dogs with goods since Japan became a major player in the international consumer electronics industry.

In China, there is an established tradition of trading through middlemen, dating back to the imperial age. Cities like Guangzhou and the former Portuguese colony of Macau owe their success to this kind of trade, and used it to circumvent the embargo placed on China after Mao seized power.

Now Kim is emulating China, helping its traders by any means necessary. This became clear in March when U.S. commandos boarded a ship sailing under North Korea's flag. The Morning Glory had taken on cargo illegally at an oil port occupied by Libyan rebels. The ship had been registered in North Korea for six months and during this time it had been assigned to a new operating company in Egypt. After the U.S. marines' operation, a company from Sharjah in the UAE came forward and claimed that the ship belonged to them. North Korea denied all knowledge and retracted the registration.

This story is all too familiar for UN inspectors, who have seen North Korean ships sailing under many different flags. However, these may soon be irrelevant, as Pyongyang has discovered the real hole in the UN fence: the land routes through China and Russia.

In their 2012 report, the UN inspectors wrote that there has not been a single case where the sanctions committee was able to inspect goods crossing these borders. It seems that Kim Jong-un has found the safest way to get his luxury cars and designer clothes — not to mention the military technology the world fears he may acquire.

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Geopolitics

Erdogan And Boris Johnson: A New Global Power Duo?

As Turkey fears the EU closing ranks over defense, Turkish President Erdogan is looking to Boris Johnson as a post-Brexit ally, especially as Angela Merkel steps aside. This could undermine the deal where Ankara limits refugee entry into Europe, and other dossiers too.

Johnson and Erdogan in NYC on Sept. 20

Carolina Drüten and Gregor Schwung

-Analysis-

BERLIN — According to the Elysée Palace, the French presidency "can't understand" why Turkey would overreact, since the defense pact that France recently signed in Paris with Greece is not aimed at Ankara. The agreement covers billions of euros' worth of military equipment, and the two countries have committed to come to each other's aid if they are attacked.

Although Paris denies this, it is difficult to see the agreement as anything other than a message, perhaps even a provocation, targeted at Turkey.

Officially, the Turkish government is unruffled, saying the pact doesn't represent a military threat. But the symbolism is clear: with the U.S., UK and Australia recently announcing the Aukus security pact, Ankara fears the EU may be closing ranks when it comes to all military issues.

What will Aukus mean for NATO?

Turkey has long felt left out in the cold, at odds with the European Union over a number of issues. Yet now President Recep Tayyip Erdogan is setting his sights on another country, which also wants to become more independent from Europe: the UK.

Europe's approach to security and defense is changing dramatically. Over the past few months, while the U.S. was negotiating the Aukus pact with Britain and Australia behind the EU's back, a submarine deal between Australia and France, which would have been worth billions, was scrapped.

The EU is happy to keep Erdogan waiting

Officially, Turkey is keeping its cards close to its chest. Addressing foreign journalists in Istanbul, Erdogan's chief advisor Ibrahim Kalin said the country was not involved in Aukus, but they hope it doesn't have a negative impact on NATO. However, the agreement will have a significant effect on Turkey.

"Before Aukus, the Turks thought that the U.S. would prevent the EU from adopting a defense policy that was independent of NATO," says Sinan Ülgen, an expert on Turkey at the Brussels think tank Carnegie Europe. "Now they are afraid that Washington may make concessions for France, which could change things."

Macron sees post-Merkel power vacuum

Turkey's concerns may well prove to be justified. Outgoing German Chancellor Angela Merkel always argued for closer collaboration with Turkey, partly because it is an important trading partner and partly because it has a direct influence on the influx of migrants from Asia and the Middle East to Europe.

Merkel consistently thwarted France's plans for a stricter approach from Brussels towards Turkey, and she never supported Emmanuel Macron's ideas about greater strategic autonomy for countries within the EU.

But now she that she's leaving office, Macron is keen to make the most of the power vacuum Merkel will leave behind. The prospect of France's growing influence is "not especially good news for Turkey," says Ian Lesser, vice president of the think tank German Marshall Fund.

Ankara fears the defense pact between France and Greece could be a sign of what is to come. According to a statement from the Turkish Foreign Ministry, the agreement is aimed "at NATO member Turkey" and is damaging to the alliance. Observers also assume the agreement means that France is supporting Greece's claims to certain territories in the Mediterranean which remain disputed under international law, with Turkey's own sovereignty claims.

Paris is a close ally of Athens. In the summer of 2020, Greece and Turkey were poised on the threshold of a military conflict in the eastern Mediterranean. Since then, Athens has ordered 24 Rafale fighter jets from France, and the new pact includes a deal for France to supply them with three frigates.

Photo of French President Emmanuel Macron and Greek Prime Minister Kyriakos Mitsotakis on September 27 in Paris

French President Emmanuel Macron and Greek Prime Minister Kyriakos Mitsotakis on September 27 in Paris

Sadak Souici/Le Pictorium Agency/ZUMA

Erdogan’s EU wish list

It's not the first time that Ankara has felt snubbed by the EU. Since Donald Trump left the White House, Turkey has been making a considerable effort to improve relations with Brussels. "The situation in the eastern Mediterranean is peaceful and the migrant problem is under control," says Kalin. Now it is "high time" that Europe does something for Turkey.

Erdogan's wish list is extensive: making it easier for Turks to get EU visas, renegotiating the refugee deal, making more funds available to Turkey as it continues the process of joining the EU, and moderniszing the customs union. But there is no movement on any of these issues in Brussels. They're happy to keep Erdogan waiting.

Britain consistently supported Turkey's ambition to join the EU

Now he is starting to look elsewhere. At the UN summit in September, Erdogan had a meeting with British Prime Minister Boris Johnson at the recently opened Turkish House in New York. Kalin says it was a "very good meeting" and that the two countries are "closely allied strategic partners." He says they plan to work together more closely on trade, but with a particular focus on defense.

 Turkey's second largest export market

The groundwork for collaboration was already in place. Britain consistently supported Turkey's ambition to join the EU, and gave an ultimate proof of friendship after the failed coup in 2016. Unlike other European capitals, London reacted quickly, calling the coup an "attack on Turkish democracy," and its government has generally held back in its criticism of Turkey.

At the end of last year, Johnson and Erdogan signed a new free trade agreement, which will govern commerce between the two countries post-Brexit. Erdogan has called it "the most important treaty for Turkey since the customs agreement with the EU in 1995."

After Germany, Britain is Turkey's second largest export market. "Turkey now has the opportunity to build a new partnership with the United Kingdom and it must make the most of it," says economist Ali Kücükcolak from the Istanbul Commerce University.

Erdogan is well aware of this, as Turkey is in desperate need of an economic boost. Inflation currently stands at 19%, and the currency's value is consistently falling. Turks are feeling the impact on their daily lives: food and rent are becoming increasingly expensive, while salaries remain unchanged.

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