©Bre-TwoThree Designs; AFP/Getty Images
©Bre-TwoThree Designs; AFP/Getty Images

Smuggling, slavery and spying: North Korea's supply chain

1 December 2017

How Kim Jong-Un keeps his supply chain working

Where does North Korea buy its stuff? Not just dangerous stuff like nuclear rocket fuel, but everyday items. Kim Jong-Un’s itinerary is packed with visits to new, upgraded or refurbished factories. On recent tours, the 33-year-old Supreme Leader has visited mushroom, catfish and seafood plants and advised on the production of kimchi (traditional Korean vegetable pickles) and dental hygiene products. 

Although two million North Koreans live on a subsistence diet (according to the UN), the elite live well. James Montague, a journalist who recently visited the country for sports website Bleacher Report, tells SM: “There is a Chinese built and run mall in Pyongyang, with a supermarket and shops that sell electric bikes. Although only the middle class can shop there, the mall was well stocked.” The government seems well financed – it is modernising industries, runs a nuclear weapons programme worth $1-3bn, and manages an army of 5,900 cyberwarriors.

The cyberwarriors, who mainly work for North Korea’s intelligence agency, the Reconnaissance General Bureau (RGB), have earned their keep. They are widely credited with staging an attack in 2016 on the SWIFT banking network that stole $81m from the Bangladeshi government.

The regime used to generate around $10m a year in hard currency by exporting statues, primarily to African despots, but the UN has now sanctioned this trade. Again, the elite – and the capital Pyongyang – were the primary beneficiaries. Montague says: “Pyongyang is for those who have proven their ideological faith. You cannot enter or leave without permission. It is clean and fairly busy. Outside, on the road to the demilitarized zone, there are no cars on the potholed roads.”

As sanctions bite – especially with China banning imports of iron ore, coal and seafood – smuggling, slavery and selling arms have helped. Since the 1960s, when North Korea began manufacturing replicas of Soviet and Chinese weapons under license, its factories have exported arms for cash. Despite sanctions, the country has a secure market niche as, to quote the Washington Post, “a global eBay for vintage and refurbished Cold War-era weapons, often at prices far lower than prevailing rates”.

A 2017 report by the Global Initiative Against Transnational Organised Crime found that North Koreans were implicated in 18 of the 29 rhino-horn and ivory-smuggling cases involving diplomats since 1986, with one defector saying government departments focused on hard currency encourage the activities.

Drugs are more lucrative – especially methamphetamines, believed to be produced in state-run factories and exported, primarily, to China. In 2013 in a bizarre, one-off sales drive, diplomats were reportedly given 20kg of drugs and told to sell it overseas for $300,000 to mark the birthday of the country’s founder, Kim Il Sung (although this was strongly denied by North Korea). Even without such initiatives, drug sales net at least $200m a year, estimates South Korean newspaper Chosun Ilbo.

Exporting slave labour may make even more money. In Russia alone, between 30,000-50,000 North Koreans, mainly working in agriculture and construction, have 30-80% of their wages deducted by Kim Jong-Un’s government, a programme that experts say generates $120m a year.

North Korea’s textile sector made $752m in export revenue in 2016, second only to coal. Yet trade could be threatened by a UN ruling that firms employing North Koreans in their supply chain are effectively hiring forced labour. Many garments with “Made in China” labels are produced in North Korea, for up to 75% less. Last year, Australian sportswear brand Rip Curl had to apologise when it discovered that was the case in its supply chain.

These all help Kim Jong-Un finance his lavish lifestyle and the nuclear arms programme, but where does he get his materials?

Some are homemade. A study by the Middlebury Institute of International Studies suggests nuclear rocket fuel unsymmetrical dimethylhydrazine (UDMH) is produced near Hungnam port, in the heart of the country’s chemicals industry, using know-how acquired long ago from China or Russia. The Russians call UDMH “devil’s venom” because it is so explosively unstable.

North Korea’s missile development is unclear. The Musudan missiles tested in 2016 were based on the R27, a Soviet weapon of the 1960s. The Hwasong-14 intercontinental ballistic missile and Hwasong-12 intermediate range ballistic missile it fired in July 2017 used a variant of the Soviet R250 missile’s engine. Experts believe the regime is adapting historic technology for its own missiles – although, as two North Korean spies were arrested in Ukraine in September trying to photograph parts of the R250 engine, it still seems keen to update its technology.

It is like going back 40 years, says Montague, to when the Cold War was at its hottest. Yet the humble USB stick is challenging that time lag. Not-for-profit organisation Flashdrives For Freedom is smuggling tens of thousands of them, loaded with Western TV programmes (Desperate Housewives is very popular) and news, into North Korea, where they can be watched on cheap Chinese smartphones with USB ports. The organisers believe that eroding the state’s monopoly of truth may undermine the Supreme Leader more severely than sanctions.

That said, one sanction that would hurt Kim Jong-Un hasn’t been tried yet: cutting off his supply of Emmental cheese from Switzerland. In 2015, he binge-ate so much of it, he developed a bad limp – presumably from gout.

Canary Wharf, London (Greater)
£33,119 - £37,209 pa
Canary Wharf, London (Greater)
£41,673 - £45,337 pa
CIPS Knowledge
Find out more with CIPS Knowledge:
  • best practice insights
  • guidance
  • tools and templates