In a sign of the continuing decline in relations between North Korea and China, Pyongyang moved a number of tanks and armored vehicles away from South Korea to the Chinese border, according to The Chosun Ilbo, citing an anonymous source.
Kim Jong-un had warned in January that Pyongyang would carry out a long-range missile test in the near future.
US Secretary of Defense James Mattis warned North Korea on Friday (3 February) that Pyongyang would face an “effective and overwhelming” response if it used its nuclear weapons.
North Korean sources say Yoon Tae Huyng disappeared with $5 million
Senior-level banking official Yoon Tae Hyung, the man in charge of handling Kim Jong Un’s “revolutionary funds”, has gone missing in Russia with 5 million U.S. dollars, according to South Korean media.
Yoon Tae-Hyung is the head of the DPRK’s Korea Daesong Bank, an international trading bank whose primary role is to bring foreign currency into North Korea in conjunction with Korea Daesong General Trading Corporation.
“Yoon Tae Hyung acted as a bank manager abroad, having been in charge of Kim Jong Un’s slush fund in the far east of Russia,” a source in North Korea told the Seoul based Joongang Daily.
The unnamed source added that North Korea requested cooperation from Russian authorities in arresting Yoon.
Though high level defector cases of this kind often turn out to be untrue, experts believe that this particular incident is relatively plausible, when interpreted in the context of Jang Song Thaek’s execution late last year.
“Because Jang was known to be close to many banking officials working abroad, these types were themselves potential targets after Jang’s execution,” Andrei Lankov, a North Korea expert and professor at Kookmin University told NK News, adding that many similar defections may have gone “unreported”.
Although it is currently unknown if Yoon had ties to Jang, Lankov believes a defection to South Korea might be likely in this case.
“It’s impossible to know right now whether Yoon had connections to Jang but given the circumstances, defecting could be an attracting alternative especially since they are handling lots of cash and it’s not so hard to run away to the South.” Lankov continued.
The possibility of Yoon’s defection is real enough for South Korean authorities to be on alert, according toThe Joongang Daily.
Given his major role in North Korea’s economic activities, Yoon’s insider knowledge would undoubtedly be valuable to outside authorities.
“We can certainly assume that Yoon has a lot of privileged information regarding Kim Jong Un’s slush fund management, banking habits and account information,” said Park Hyeong Jung, director of the Korea Institute for National Unification (KINU) North Korea Research Center.
“North Korea is likely taking measures to protect any sensitive information and assess the extent of the damage done,” he added.
Kim’s “revolutionary fund” has been linked to illegal drug smuggling projects, though whether or not it’s a bona fide slush fund is up for debate.
“I think the term ‘slush fund’ is a little bit of an exaggeration. Although Daesong General Trading Corporation has been known to engage in illegal activities, a significant percentage of their profits come from legitimate trading,” Lankov told NK News.
In November 2010, the U.S. Department of the Treasury blacklisted Daesong Bank and Daesong General Trading Corporation for their affiliation with North Korea’s Office 39, a top-secret financial arm of the DPRK leadership which has been implicated in a variety of illicit economic activities.
North Korean leader Kim Jong Un has executed 70 officials since taking power in late 2011 in a “reign of terror” which far exceeds the bloodshed of his dictator father’s early rule, South Korean officials have said.
South Korean foreign minister Yun Byung-se, at a forum in Seoul, compared Kim Jong Un’s 70 executions with those of his late father, Kim Jong Il, who, he said, executed about 10 people during his first years in power.
An official from South Korea’s National Intelligence Service confirmed the spy agency believes the younger Kim has executed about 70 officials but would not reveal how it obtained the information.
Mr Yun also said the younger Kim’s “reign of terror affects significantly” North Koreans working overseas by inspiring them to defect to the South.
North Korea, an authoritarian nation ruled by the Kim family since 1948, is secretive about its government’s inner workings, and information, even that collected by South Korean intelligence officials, is often impossible to confirm.
Kim Jong Un has removed key members of the old guard through a series of purges since taking over after the death of Kim Jong Il.
The most spectacular purge to date was the 2013 execution of his uncle, Jang Song Thaek, for alleged treason. Mr Jang was married to Kim Jong Il’s sister and was once considered the second most powerful man in North Korea.
South Korea’s spy agency told politicians in May that Kim ordered his then-defence chief, Hyon Yong Chol, to be executed with an anti-aircraft gun for complaining about the young ruler, talking back to him and sleeping during a meeting
The minister was reported to have been put to death on a firing range in front of a large crowd. Experts say Kim could be using fear to solidify his leadership, but those efforts could fail if he does not improve the country’s shattered economy.
The North regularly suffers from widespread food shortages and said last month it was facing its worse drought in a century.
A shadowy organisation’s alliance with the Queensway Group helps Pyongyang bring in cash
In the middle of last year, the residents of Pyongyang began to notice a new fleet of taxis operating in the North Korean capital. With their maroon and gold bodywork, the gleaming sedans were easy to spot as they cruised the city’s orderly streets. The cars bore the taxi company’s logo: KKG.
The same logo has been spotted on 4x4s, on a billboard displaying a planned riverside property development and on buses at Pyongyang airport. Like other North Korean cabbies, the drivers of the KKG taxis asked their fares to pay in foreign currency: mainly Chinese renminbi, but also euros or dollars. And therein lay a clue.
For all their rhetoric about the paramount need to develop a nuclear arsenal, North Korea’s rulers have no more pressing task than bringing in foreign exchange.
Without it, experts say, the regime would be at risk of crumbling under international sanctions. Taxi fares alone could hardly fill the gap. But the KKG cabs are just a small part of a much larger endeavour.
The KKG taxi fleet is one product of a partnership between a group of Hong Kong-based investors and a secretive arm of the North Korean state that seeks to cut international business deals, a Financial Times investigation has found.
The North Korean government’s alliance with the so-called Queensway Group, a syndicate of businesspeople with a record of forging ties with pariah states, is opaque. But it seems clear that it is one of a handful of crucial business ventures that allow the world’s most isolated regime to sustain itself.
“KKG is one of several joint ventures in North Korea and it’s one of the biggest ones,” says an Asian official who asked not to be named because of the sensitivity of the matter. “Most North Korean companies are under US or EU or UN sanctions.
They always change names, like their ships change flags. But most of the companies belong to military leaders or the ruling Workers’ party of Korea. And they are on the sanctions list. So they need any foreign company that could give them an opportunity to trade with foreign countries.”
While western powers’ relations with Iran and Cuba appear to be thawing, the hermit kingdom’s political isolation is as deep as ever. Even China, long an ally, has grown frostier with Pyongyang in recent years. A UN investigation last year described “unspeakable atrocities” perpetrated against the inmates of its prison camps.
The sabre-rattling under Kim Jong Un — including a cyber attack against Sony that Washington blamed on Pyongyang and last month’s test-firing of a ballistic missile from a submarine — has added fresh impetus to efforts to understand how the regime plugs itself into the world economy.
The domestic economy has either contracted or grown at 1 per cent in recent years, according to South Korean government estimates based on limited data, with annual exports of about $3bn falling well short of the import bill.
As prices for the coal and other commodities that North Korea exports to China fall, business networks such as the one behind KKG are likely to become increasingly vital in garnering crucial foreign exchange for the regime.
The North Korean end of the KKG network leads to a shadowy organisation called Office 39 of the Workers’ party, according to Asian and US officials.
The US has described Office 39 as “a secretive branch of the government . . . that provides critical support to [the] North Korean leadership in part through engaging in illicit economic activities and managing slush funds, and generating revenues for the leadership”.
North Korea’s rulers have had to resort to such tactics after years of international sanctions. Imposed in response to nuclear tests in 2006, 2009 and 2013, the sanctions comprise an arms embargo designed to stop North Korea trading weapons and sourcing parts for its atomic programme;
an asset freeze to apply financial pressure to the leadership; and a ban on luxury goods that is meant to deprive senior figures of the trappings of power, from lobster and cigarillos to furs and yachts. The UN sets the overall structure of sanctions; states decide what to prohibit.
But annual reports by a UN panel that monitors the sanctions describe a game of cat-and-mouse, as North Korea’s rulers use an ever-shifting web of subterfuge to disguise commercial activities abroad.
The most recent UN report, sent to the Security Council in February, documents arms sales in Africa and the use of “flags of convenience” to conceal North Korean control of shipping.
The UN report also suggests that “legitimate business structures have been used for illegitimate activities”. In 2010, the US added Office 39 to its sanctions list. The EU followed suit.
North Korea has brought in foreign exchange by exporting guns, methamphetamines, mushrooms and indentured labourers. Perhaps most lucratively, it also sends textiles, coal and minerals across its border with China. Andrea Berger, a North Korea expert at the UK’s Royal United Services Institute, a think-tank, says:
“Office 39 is extremely important. It’s generally regarded as the regime slush fund.”
The EU says Office 39 reported directly to Kim Jong Il, North Korea’s ruler from 1994 until his death in 2011, when his son, Kim Jong Un, took over. Office 39 is “among the most important organisations assigned with currency and merchandise acquisition”, the EU says. The US and the EU also imposed sanctions on what they said were Office 39 front companies.
One, which is known as Korea Daesong General Trading Corporation and several similar names, “is used to facilitate foreign transactions on behalf of Office 39”, the US Treasury said. The company did not respond to a request for comment. The EU describes it as part of the broader Daesong group, “the largest company group of the country”.
According to the Asian official and JR Mailey, a researcher at the Pentagon’s Africa Center for Strategic Studies, Daesong is one of the backers behind KKG.
Another, according to these people and court documents from Hong Kong, is the business network known informally to those who have studied it as Queensway Group, after the address of its headquarters at 88 Queensway in Hong Kong’s financial district.
Over the past decade, the Queensway Group has built a multi-billion-dollar corporate empire that stretches from Zimbabwe to Manhattan.
The precise nature of the KKG partnership is unclear — whether it is an incorporated joint venture or a more informal arrangement. Searches by the FT yielded no records for a company called KKG that matched the profile of the one active in North Korea.
Nor did searches in English and Korean for Kumgang Economic Development Corporation, KKG’s name when written in Korean characters. That suggests that KKG is either simply a brand, or, if it is a company, it is registered within North Korea, which does not keep company records online. The FT was unable to find contact details for KKG.
The relationship between KKG’s backers was formed around the end of 2006. According to the Asian official, details of whose account were corroborated by others, the Queensway Group’s foray into North Korea was spearheaded by the frontman who has advanced its interests in Africa and elsewhere. He goes by at least seven names — but is best known as Sam Pa.
An FT investigation last year found that Mr Pa and his fellow founders of the Queensway Group have connections to powerful interests in Beijing, including Chinese intelligence and state-owned companies. They also have ties to big western groups: Queensway Group companies are in business with BP in Angola, Glencore in Guinea and others.
Mr Pa did not respond to requests for comment. Only one of the Queensway Group figures and companies contacted for comment replied. Jee Kin Wee, group head of legal at China Sonangol’s arm in Singapore, says his company and KKG “are separate and unrelated companies”. He did not clarify the link between his company in Singapore and its sister company,
China Sonangol International Holding, registered at the Queensway address in Hong Kong. That company is jointly owned by Mr Pa’s business associates and Angola’s state oil group.
It is named in Hong Kong court documents as having made payments related to KKG projects.
Mr Wee did not answer specific questions about the Queensway Group’s dealings in North Korea. But he stressed that “China enjoys full diplomatic and economic relations with North Korea and . . . scores of countries around the world, including EU countries, have bilateral diplomatic relations with North Korea”.
Mr Pa is said to have met senior North Korean officials as he began his courtship of the regime in 2006. At the time, Pyongyang needed new partners. It had found itself increasingly locked out of the global financial system.
A year earlier, the US had accused Macau-based Banco Delta Asia of laundering money for the regime, causing the near-collapse of that bank and prompting others to avoid North Korea.
Mr Pa struck a deal with Daesong for an eclectic range of North Korean projects, the Asian official says, ranging from power plants to mining to fisheries. Money started to flow — although it is unclear how much flowed directly into North Korea.
A ledger published in a 2013 Hong Kong high court ruling in a dispute between some of Mr Pa’s business associates refers to Queensway Group payments including “Pyongyang city bus system”, “Korea airport”, “Korea: 5,000 tons of soyabean oil” and “exhibition sponsored by the Korean consul”. There are no further details. But the list of payments also contains references to KKG.
KKG first came to the attention of Pyongyang’s residents around 2008. That year, photographs posted online showed a billboard displaying a spectacular image of a planned property development close to the Pyongyang Mullet Soup Restaurant.
Located by a bend in the Taedong River, the planned properties included a pair of shimmering skyscrapers that would not have looked out of place in London’s riverside Canary Wharf business district. The new development was to be called KKG Avenue and bore the same KKG logo that would appear on Pyongyang taxis.
KKG Avenue made little headway beyond some rickety hoardings and preliminary work on foundations, according to foreign officials, visitors to Pyongyang, photos and satellite images.
Despite such setbacks, KKG has been described at least once as a major North Korean company. A 2014 presentation by Hawtai Motor Group, a privately owned Chinese carmaker based in Tianjin, indicates that the company supplied the vehicles for the KKG taxi fleet. The presentation describes KKG as one of “North Korea’s largest state-owned enterprises”. Hawtai declined to comment.
Some who have observed Queensway’s thrust into North Korea say it is seeking to replicate a model it pioneered in Africa: striking infrastructure-for-natural resources deals with oppressive governments such as Angola’s, Zimbabwe’s and a military junta that briefly ruled Guinea. The group appears to have set its sights on North Korea’s untapped potential for oil.
Mr Mailey, who was one of the authors of a 2009 US congressional report who recently published a second detailed study of the group, says:
“The KKG taxis might earn the regime some foreign currency from tourists visiting Pyongyang, but most signs point to the oil and mining sectors as the Queensway Group’s true target.”
A 2009 report by the UK’s Chatham House think-tank said Queensway’s China Sonangol in 2007 lined up a Chinese state-owned group to carry out seismic explorations on two oil prospects in North Korea. A China Sonangol jet was spotted in Pyongyang in 2013.
Like the taxi venture and the Pyongyang property project, the search for oil appears to be taking place at least in part via KKG, the Queensway partnership with Office 39. According to the Asian official and an oil industry insider familiar with North Korea, KKG has looked for oil in several parts of the country, so far without success.
In November 2013, North Korean state television broadcast footage of an event in the city of Kaesong, close to the demilitarised zone between North and South Korea established in 1953.
Dignitaries hailed the start of work on a “high-tech industrial park”. According to state media, the park was to house an information technology centre, a hotel, houses, a school and a power plant.
One of the speakers was a man in a dark suit with a neat haircut, identified by local media as Jang Su Nam. He is described as the representative of the “Peace and Economy Development Group”. Mr Mailey says Mr Jang once worked for Daesong. Mr Jang could not be reached for comment.
The camera panned across the other honoured guests. Among them was Lo Fong-hung, a petite Chinese businesswoman. According to interviews and court documents, she is Mr Pa’s principal business partner in the Queensway Group. Also present were ambassadors from African countries where the Queensway Group has interests.
Standing beside them was Nik Zuks, the Australian founder of a London-listed miner of west African iron ore called Bellzone, in which China Sonangol has built a majority stake. Neither Ms Lo nor Mr Zuks responded to requests for comment.
Mr Pa was not present for the groundbreaking ceremony. But since Mr Kim assumed the leadership in 2011, Mr Pa appears to have maintained his relationship with North Korea’s regime.
The unpredictable ruler’s most high-profile visitor to date has been Dennis Rodman, the former US basketball star who first turned up in Pyongyang to attend a game in 2013, shortly after North Korea’s most recent nuclear test.
According to the Asian official, Mr Pa visited Pyongyang as recently as December and sent the North Korean leader a personal birthday letter in January.
The pair have something else in common apart from an urge to do business: Mr Pa was placed under US sanctions last year in relation to his dealings in Zimbabwe, where he has been accused of funding Robert Mugabe’s secret police in exchange for rights to trade diamonds. Mr Pa has called the allegations “baseless”.
“Sam Pa’s role is to be a window for the Pyongyang regime to capitalist markets,” the Asian official says. “I think his future is bright in that regard.”
Additional reporting by Tae-jun Kang in Seoul
Who is he?
Vice Marshal Hwang Pyong-so is the Director of the Korean People’s Army (KPA) General Political Department (GPD) and was recently confirmed as a standing member of the Political Bureau Standing Committee of the Workers’ Party of Korea (WPK).
He is widely seen as the number 2 figure in North Korea because of these two powerful positions in both the party and the military.
In his party role his office is in charge of overseeing overall state affairs and in his military post he is responsible for the political management of the KPA.
Vice Marshal Hwang is concurrently a member of the WPK Central Military Commission (CMC), a member of the WPK Political Bureau, a member of the WPK Central Committee and a deputy to the 13th Supreme People’s Assembly (SPA).
Prior to his official promotion as the Director of the KPA GPD in May 2014, Hwang had served as the deputy director of the WPK’s Organization and Guidance Department (OGD) since 2005.
He has risen quickly through the military ranks in the past few years, promoted to the rank of colonel general in April 2011, to the rank of four-star general on April 15, 2014, and finally to the rank of vice-marshal, one of only six to hold that title in the country on April 28, 2014.
Hwang has featured prominently with Kim Jong-un in the past few years during his guidance tours. He was part of the high ranking three-member group that surprisingly attended the closing ceremony of the Asian Games in Incheon in October 2014.
He first emerged onto the Pyongyang political elite scene when he began accompanying Kim Jong-il on guidance tours in 2005. Vice Marshal Hwang was born in 1946 and attended Mangyongdae Revolutionary School. He is a graduate of the Kim Il Sung University,where he was reportedly a classmate of Kim Kyong-hui, Kim Jong-un’s aunt.
Why has he been in the news?
On April 9, 2015, the Korean Central Television (KCTV) officially referred to Hwang as a standing member of the Political Bureau Standing Committee of the WPK for the first time. This key post was previously held by only three people, President of the Supreme People’s Assembly Presidium Kim Yong-nam, WPK Secretary Choe Ryong-hae and Kim Jong-un himself.
Analysts believe that his selection may have been made earlier in February 2015 when Kim Jong-un convened an expended WPK Political Bureau meeting to discuss personnel issues.
The KCTV confirmation coincides with the third session of the 13th SPA, which began on April 9. Under the North Korean Constitution the SPA meeting, held twice a year, is responsible for approving North Korea’s agenda and priorities for the year. Hwang, as a deputy to the SPA, will likely be featured prominently during the session.
What can we expect from him?
This official confirmation resolves the back and forth on the number 2 position in Pyongyang for the past year, where Hwang and ChoeRyong-hae were both seen as the likely number 2 because of their highly publicized activities. However, do not expect radical changes in policy with this appointment.
The recent history of appointments under Kim Jong-un demonstrates a predictable pattern where newly appointed senior individuals do little more than carry out the young leader’s policies. Indeed, previous high level officials with deep patronage networks like the executed Jang Song-thaek have been seen as threatening and not included in the power structure.
North Korean leader selecting attractive young women to perform for him personally. Kim Jong-un, the North Korean leader, has ordered the creation of a new “pleasure troupe” of young women to entertain him.
Mr Kim ordered the group of women that was hand-picked by authorities loyal to his father and predecessor, Kim Jong-il, to be disbanded shortly after his death in December 2011, according to South Korea’s Chosun Ilbo newspaper.
He has now decided, however, to resurrect a source of entertainment that has become a tradition for North Korean leaders.
“After he came to power, Mr Kim trusted no-one and ordered thorough investigations into every official in the regime, from the highest to the lowest”, Toshimitsu Shigemura, a professor at Tokyo’s Waseda University and an authority on North Korean affairs, told The Telegraph.
With that process now completed, as well as the conclusion of the three-year official mourning period after the death of Kim Jong-il, the new North Korean dictator is free to select a new generation of female companions, Prof. Shigemura said.
“The women who entertained his father knew many secrets and they have now been ordered to promise not to reveal any information before being sent back to their home towns”, Prof Shigemura said.
The women who were employed as entertainers were given pay-offs of $4,000 – a huge sum in impoverished North Korea – and home appliances.
Women who were employed as maids and cleaners at Kim Jong-il’s palaces received about half that amount, the Chosun Ilbo reported.
With the departure of the “old guard” of entertainers, Mr Kim, “Can have a new entertainment group who only have loyalty to him”, Prof Shigemura added.
“Pleasure troupes” were initially introduced by Kim Il-sung, the founder of North Korea and still revered as the nation’s Eternal President.
His officials were sent to scour the countryside for the prettiest young women, who were selected to serve as dancers or singers. Others were employed as maids, but the very prettiest were obliged to become concubines to the elite.
Kim Jong-un with his wife Ri Sol-ju in Pyongyang (AP)
Often as young as 13 or 14, the recruiters would tell their parents that their daughters were being taken away on a government mission to serve the nation’s leader.
As with everything in North Korean society, the parents had no say in the matter, even if they did have suspicions over what was really happening to their daughters.
Stationed at the leaders’ mansions, the women were available whenever they were required. Many “retired” while still in their 20s and were married off to military officers looking for brides.
“This has been going on under three generations of the Kim family ruling North Korea and it has become a tradition that is also a demonstration of the leader’s power over the people and his sexual power,” Prof. Shigemura said.
Mr Kim married Ri Sol-ju, a former singer with the Unhasu Orchestra, in 2013 and the couple has a daughter.