North Korea Sells Even 'Sand', Focuses on Earning Foreign Currency to Evade High-Intensity Sanctions... Actively Utilizing Coal and Cryptocurrency

UN Security Council North Korea Sanctions Committee Report... Estimated $600 Million Revenue from Selling Sand, Coal, Fishing Rights
More Brazen Sanctions Violations Including Direct Maritime Transshipment and Transport
'Destination Concealment' Chinese Vessel Receives Refined Oil Transshipment from Korean Ship to North Korea
Close Monitoring of Cyber Foreign Currency Earnings, Likely Led by Reconnaissance General Bureau

[Image source=Yonhap News]

[Asia Economy Reporter Lim Cheol-young] North Korea, under intense sanctions, is actively earning foreign currency by selling coal and sand while evading international monitoring. There have been increasingly bold cases of sanctions violations, including transshipment of goods on the high seas and direct exchanges at ports. It is also known that North Korea is actively utilizing cyber hacking and virtual currencies to supplement the reduced foreign currency income caused by international sanctions.

On the 18th, the annual report of the UN Security Council's Panel of Experts under the North Korea Sanctions Committee revealed such cases of North Korea's sanctions violations. It is estimated that North Korea earned approximately $500 million to $600 million last year by selling sand and coal, which are export-prohibited items. The disclosed annual report was approved by the 15 Security Council member states after the expert panel conducted its own investigation based on member states' reports.

It is the first time that sand has been detected being extracted and exported. As the traditional method of dispatching labor overseas to earn foreign currency has become difficult due to international sanctions, North Korea appears to be exploiting everything it can sell while evading surveillance.

The report states that since May last year, river sand extracted in North Korea has been exported to China at least 100 times. The sand export sites were Haeju in Hwanghae Province and Sinchang in South Hamgyong Province, with an estimated export volume of at least 1 million tons, worth approximately $22 million. The price was about $22 per ton. Sand falls under HS code 25, which is a prohibited export item under UN Security Council Resolution 2397 adopted in 2017.

Along with the first confirmed sand exports, there have been continued sanctions violations involving the sale of coal and fishing rights to China. The annual report estimated that at least 3.7 million tons of coal were exported from January to August last year, earning North Korea about $370 million, equivalent to approximately 450 billion Korean won. The export volume was 928,000 tons from January to April but nearly doubled to 2.7 million tons from May to August,

Satellite images captured coal export scenes at Nampo Port and Songrim Port in November and December as well. According to the report, at least 16 vessels were spotted at the Nampo Port pier, with 87 more nearby, and at least 17 vessels at the Songrim Port pier, with another 17 nearby involved in coal exports. The North Korea Sanctions Committee stated that the number of confirmed vessels was conservatively counted to avoid duplication.

Coal exports involved Chinese-owned North Korean barges with their own propulsion, and since May last year, Chinese-owned barges loaded with coal at Nampo Port and Taean Port reportedly moved to Hangzhou Bay in Zhejiang Province. During May to August last year, 540,000 tons of coal were exported in 47 shipments, and 37 barges were used from May to September. Numerous cases of North Korean vessels directly entering Chinese ports were also detected.

Violations involving the sale of fishing rights to Chinese vessels to raise foreign currency also continued. Although the report did not provide specific figures for last year, it cited an interview with a crew member stating that a three-month fishing right was worth about $57,600.

◆Cryptocurrency Actively Used as a New Foreign Currency Earning Method= Another foreign currency earning method that the North Korea Sanctions Committee is continuously monitoring is cryptocurrency. The sanctions committee believes that North Korea's cyber capabilities are increasingly strengthening and that it is earning foreign currency through these means. Since it can aim for low-risk, high-return profits, North Korea continues to mine cryptocurrencies and conduct cyberattacks targeting financial markets.

According to American expert Virgil Griffith, who attended an international cryptocurrency conference held in Pyongyang in April last year, the conference focused on evading sanctions and money laundering using cryptocurrency and blockchain technology. Griffith is currently imprisoned on charges of violating the International Emergency Economic Powers Act (IEEPA). Additionally, the sanctions committee estimates that North Korean hacking group Lazarus is linked with the Eastern European cybercrime group Trickbot and is recently believed to be using the so-called 'Anchor Project' technology.

The sanctions committee particularly believes that North Korea's Reconnaissance General Bureau (RGB) is involved in cyberattacks. It is judged that the spear-phishing attacks targeting the North Korea Sanctions Committee in 2016 and 2017 were led by the Reconnaissance General Bureau. However, the current report did not provide figures on North Korea's cyber earnings. Previously, the sanctions committee estimated in a midterm report last September that the 121 Bureau hacker unit under the Reconnaissance General Bureau attempted at least 35 cyberattacks from December 2015 to May 2019, earning up to $2 billion.

◆Estimated Refined Petroleum Product Imports Up to Eight Times the Annual Quota= The North Korea Sanctions Committee estimated that the volume of refined petroleum products imported by North Korea is up to eight times the annual quota of 500,000 barrels. The volume was analyzed to be as high as 3.89 million barrels from January to October last year, based on assumptions of shipment rates at 33%, 50%, and 90%.

In particular, multiple cases were detected where foreign vessels directly entered Nampo Port to transport refined petroleum products. From January to October last year, foreign tankers transported refined petroleum products 64 times, through which North Korea imported between 560,000 and 1.53 million barrels. From June to October, the frequency of foreign vessels' transportation was higher than that of North Korean vessels. This is interpreted as North Korea judging that direct transportation is more effective than transshipment.

Supply of refined petroleum products through transshipment between third-country vessels also continued. Third-country vessels transship refined petroleum products on the high seas to enter North Korea. Due to North Korea evading surveillance by using third-country vessels, South Korean and Indian vessels were unknowingly involved.

South Korean vessels transshipped refined petroleum products to the Chinese-flagged vessel Yoonhong 8 four times in July and August last year. Indian vessels also transferred refined petroleum products to Yoonhong 8 on the high seas from September to November last year. In this process, Yoonhong 8's port call at Nampo Port occurred after transshipment and just before entry. Although a pledge was signed not to supply products to UN-sanctioned countries, it was not actually implemented. Foreign vessels, which unknowingly followed normal procedures, supplied products and risked being involved in sanctions violations.

Accordingly, the North Korea Sanctions Committee advised caution regarding maritime transshipment between third-country vessels, stating that if transshipment was not directly to North Korean vessels, it does not violate sanctions resolutions.

◆'Kim Jong-un's Maybach' Smuggled into Pyongyang via Six Countries; Luxury Goods Imports Continue= The North Korea Sanctions Committee estimated that two Mercedes-Maybach S600 vehicles, exclusively used by North Korean Supreme Leader Kim Jong-un, traveled through six countries over eight months before entering Pyongyang. Toyota Lexus LX 570 models were also brought into North Korea. These vehicles are prohibited export items under North Korea sanctions resolutions.

The sanctions committee listed the identification numbers of the 'armored Maybach' vehicles (WDD222 1761A355444 and WDD2221761A356398) in the report. The vehicles were initially purchased from the Italian exterior company 'European Cars & More, S.R.L.' These vehicles were moved from a German factory to the Italian company in February 2018 and registered in Italy. However, four months later, vehicles with the same identification numbers were loaded into containers at the Port of Rotterdam in the Netherlands. Another Italian logistics company, which had contact with North Korea, handled the shipment. The destination was Dalian Port in China.

However, the consignee changed twice, and the Dalian port authorities did not approve the transshipment of the vehicles on the ship, according to the sanctions committee. Subsequently, the consignee changed to a Japanese Osaka company (Zuisyo), and the vehicles moved back to Osaka. On July 1, a sales contract between the Italian logistics company and the Osaka company listed the price for two Mercedes S600 Sedan Long Guard VR 9 vehicles as 900,000 euros (about 1.2 billion Korean won), approximately 600 million won each.

The ship carrying the vehicles arrived at Osaka Port on August 31 but departed for Busan on September 27 due to typhoon-related delays. The containers were transferred to the Togo-flagged cargo ship DN5505 at Busan Port, heading to Russia's Nakhodka Port. DN5505 departed Busan in early October but soon disappeared from tracking by turning off its Automatic Identification System (AIS). Although Nakhodka Port stated there was no record of DN5505's arrival, the sanctions committee estimated it arrived around October 5.

The sanctions committee also reported continuous imports of alcoholic beverages such as whiskey and wine, and that 90,000 bottles of Russian vodka were seized in February last year. Furthermore, they are tracking the route of three robots produced by the Swiss company ABB that were brought into North Korea. In November last year, Korean Central News Agency broadcast footage of Kim Jong-un inspecting a fisheries enterprise and a fish processing plant in Tongchon, where robots bearing the ABB logo were spotted. ABB explained that the models were produced at their Shanghai factory between April 2017 and November 2018 and noted the existence of a secondary market for used robots.

[Image source=Yonhap News]

This content was produced with the assistance of AI translation services.