How North Korea pays for a nuclear program and lavish parties while under the tightest sanctions on Earth

Kim Jong-Un, leader of North Korea. Photo: Getty Images

North Korea has managed to conduct costly nuclear and ballistic missile development projects while under some of the strictest, most widely-endorsed sanctions under the sun for decades.

Now, Kim Jong-un stands within a few years of completing a credible intercontinental ballistic missile the US would very much struggle to defend against.

Despite the UN and key players like China and the US consistently voting in favour of sanctions on North Korea, the regime still finds way to slip around them.

Much like their nuclear warheads and missiles, North Korea’s sanction evasion techniques are “increasing in scale, scope and sophistication,” according to a UN report, which also states that UN member states’ implementation of sanctions remains “insufficient and highly inconsistent.”

Experts have told Business Insider that while some countries, like China, may have political interests in keeping the Kim regime from collapsing without trade or prosperity, other countries are simply fooled by North Korea’s intricate and effective network of front companies and tricks.

False flags

One tactic North Korea has used for shipping missile components and military equipment is sailing under false flags. Though it’s illegal to trade military goods with North Korea, a North Korean ship, the ‘Jie Shun,’ was seized in Egypt carrying tens of thousands of North Korean-made explosives while sailing under a Cambodian flag.

For small Asian countries who cannot afford arms and equipment from China and can’t get past US and European arms regulations, North Korea offers cheap, accessible gear.

Even if the smaller countries had the means to search every ship and track goods that have both civilian and military applications, for a country like Malaysia, North Korea can be a valuable partner while the false flags keep authorities guessing and off the trail.

North korea

But earning money illicitly only works if you can move it, and North Korea needs to move a lot of money to fund its missile program under tight banking sanctions.

North Korea injects uncertainty into the paper trail of its banking system by using facilitators “well trained in moving money, people and goods, including arms and related materials, across borders,” according to a UN report.

The UN noted that North Korea works with non-national facilitators with “varying degrees of complicity” on their part, suggesting some could have been blackmailed.

North Korea employs numerous front companies for agents and foreign banks to move money through, that leave little to no paper trail to the regime, and when that won’t do they hold large reserves of foreign cash.

But even the most well-intentioned states sometimes fall victim to North Korea’s trickery. A recent joint report from Arms Control Wonk and Reuters found the regime uses a system of false addresses and fake names to confuse countries into accidentally doing business with them. Taking advantage of their shared Korean language, North Korean businessmen sometimes take the same name as South Korean businessman. Flubbed addresses that refer to North Korea as the “Korean Republic” rather than the DPRK, or “PY city” instead of Pyongyang only add to the confusion.

If a merchant isn’t careful, it’s entirely possible they could place an order with the wrong Korea and have it filled by the opportunistic Kim regime.

Money to burn

The money made off beating sanctions seems to go to North Korea’s expensive missile programs, lavish parties, and palaces for Kim and his inner circle, while the World Food Program still provides tons of food aid to North Korea and estimates 70% of citizens are food-insecure.

In 2012, North Korea spent $US1.3 billion funding its expansive ballistic missile program. In addition to military funding, North Korea’s leader, Kim Jong-un, has expensive tastes and multiple compounds and private airstrips to maintain. In 2013, Kim was estimated to have spent $US644 million in luxury purchases, according to South Korean lawmaker Yoon Sang-Hyun.

Kim Jung Il, the current leader’s father, was said to have spent 20% of the nation’s budget on things like Omega watches and Martell Cognac.

The Kim regime’s ability to beat the sanctions and support one of the world’s most hostile regimes shows the impotency of UN resolutions without real political will behind them. For every time North Korea is caught flouting sanctions, there’s no way to know how many times it slips past secretly — or who is keeping those secrets.

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