By Takayuki Nakagawa in Shenyang
North Korea’s smuggling of refined petroleum products in international waters involves a complex network extending from China to Russia. Testimonies by an informed source revealed the clever methods used to evade surveillance by the international community.
Since the flow of funds is easy to monitor, money used to purchase the oil products is paid by transporting a large amount of cash dollars by international train from Pyongyang to Dandong, Liaoning Province. Settlement of accounts is done by the Chinese trading firm’s remittances to the Russian oil companies in yuan. It is said that there were even cases where several million dollars packed in suitcases was brought to Dandong by heavily guarded North Korean officials.
This payment method is used because the Trump administration is closely monitoring remittances from Dandong, since this city is seen as the operational base of illicit transactions between China and North Korea.
Dollar remittances by Chinese banks overseas are easily detected by the U.S. government’s surveillance network. In 2017, the U.S. put several trading firms in Dandong and the leading bank in the city, Dandong Bank, on its sanctions list based on dollar remittance records.
It is also possible that the involvement of several suspicious companies is meant to prevent the smuggling operations from being detected.
Based on the contracts and related documents it obtained, Yomiuri Shimbun reporters visited in late December the trading firm that served as the intermediary for account settlement between Russia and North Korea at its listed address in central Dandong, a well-known transit point for China-North Korea trade. They found an apartment building, but the caretaker said: “There is no trading company office in this building.”
The Russian oil company found in a related document is located in oil-producing Tyumen Oblast in Western Siberia. This document was certified by a notary public in Moscow and designated as “classified.” However, the Russian government’s records show that a company of this name went bankrupt and there has been no record of any transactions since 2016.
The two North Korean companies listed as the importers in the documents “are affiliated with the Korean People’s Army’s naval headquarters,” according to an informed North Korean source, so there is no doubt that the smuggled goods are used for military purposes. It is reckoned that the attempt to smuggle some 100,000 tons of diesel oil annually is meant to supply fuel for military vessels.
In December 2017, North Korea informed a Chinese company, “Fuel imports (smuggling) are going well and our tanks are full.”
The prices of gasoline and other oil products spiraled in North Korea as a result of the Chinese government’s restrictions on oil product exports around April 2017. The Kim Jong Un regime panicked and it reportedly issued orders for emergency stockpiling. It is believed that this crisis was “averted temporarily” through rampant smuggling in international waters, according to a source on China-DPRK relations.
In a news conference on Dec. 29, the Chinese foreign ministry denied any involvement by Chinese companies and individuals with North Korea’s smuggling activities in international waters.
However, the documents obtained by Yomiuri show that the trading firm in Dandong makes a profit of over $100 for every ton of oil. The above North Korean source said, “Even with the imposition of tougher sanctions, numerous smuggling methods can be devised.”