[The country, courted by President Trump, is selling coal and sand to Chinese companies to raise millions for its nuclear program, analysts say. It is also importing luxury goods for the ruling elite.]
By Edward Wong, Christoph Koettl, Whitney Hurst and Elisabetta Povoledo
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North Korea has continued to carry out tests of short-range ballistic missiles and
rocket systems. Credit Jung Yeon-Je/Agence France-Presse — Getty Images
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WASHINGTON — North Korea has evaded United Nations sanctions for many months by exporting coal, sand and petroleum, and importing luxury goods including armored sedans, alcohol and robotic machinery. The findings are based on an upcoming U.N. report, other assessments using satellite images and shipping data, and interviews with analysts.
The exports provide North Korea with money to continue developing its nuclear weapons and ballistic missile programs, analysts say. And the imports of luxury goods show techniques that North Korea might also be using to procure dual-use technology for those programs, they say. The efforts to raise money are aided by the country’s sophisticated cybercrime operations that target financial institutions and cryptocurrency exchanges.
The upcoming annual report from the United Nations Panel of Experts gives more detail on the smuggling of two armored Mercedes sedans that were shipped from the Netherlands to East Asia in 2018 and that were the subject of an investigation by The New York Times and the Center for Advanced Defense Studies in July.
The U.N. panel did its own investigation after the article and video appeared, and concluded that the cars were shipped from Europe after they were in the possession of two Italian companies — apparently the start of the supply chain, according to a draft of the report seen by The Times. The United Nations is expected to release the report this month.
In interviews, Sandro Cianci, a top executive at one of the Italian companies, confirmed that the company had bought two armored Mercedes sedans that were eventually shipped to Asia, but said they had not engaged in illegal activity and had no knowledge of the cars ending up in North Korea.
Over all, China and Russia have weakened the sanctions and are aiding the illegal smuggling, say American officials, analysts and the reports. In December, the two nations proposed to the United Nations an easing of sanctions.
American officials and analysts cite satellite images that show transfers involving North Korean ships in Chinese territorial waters as evidence of efforts to evade the sanctions.
“The Chinese have to enforce the sanctions against North Korea. They’ve got to stop the ship-to-ship transfers,” Robert C. O’Brien, President Trump’s national security adviser, said last month. “We need the Chinese to assist us as we pressure the North Koreans to come to the table,” he added.
The United States has pushed the United Nations to pass five rounds of sanctions resolutions since 2016.
Mr. Trump has made diplomacy with North Korea a signature foreign policy initiative. But American officials are frustrated that the North’s leader, Kim Jong-un, has rejected outreach from Washington since a round of talks between negotiators ended abruptly in Stockholm last October. That came after the failure of the second summit between Mr. Trump and Mr. Kim in Hanoi, Vietnam, in February 2019.
The porous sanctions mean the Trump administration’s pressure campaign against North Korea is far from effective, and American officials are losing what they say is their only real leverage. That could help explain Pyongyang’s recent cold shoulder toward Washington, experts say.
Mr. Kim surprised American officials this winter by not sending what North Korean officials had called a potential “Christmas gift” to Mr. Trump — possibly a test of a nuclear weapon or an intercontinental ballistic missile. In early 2019, Mr. Kim had given Mr. Trump a year-end deadline to lift sanctions.
The successful evasion of sanctions might mean less urgency on Mr. Kim’s part in getting the penalties lifted. He continues to get revenue while building up his stockpile of fissile material, adding to the amount he already has for about 38 nuclear warheads, according to a recent estimate by Siegfried S. Hecker, the former director of the Los Alamos National Laboratory.
North Korea has continued to carry out tests of short-range ballistic missiles and rocket systems, with no admonishment from Mr. Trump. On Monday, North Korea launched multiple projectiles off its east coast in the country’s second weapons test in a week. Before Monday’s tests, it fired two short-range projectiles off its east coast on March 2, its first weapons test in three months.
The draft of the U.N. report says North Korea conducted 13 missile tests and launched 25 missiles in 2019. (Reuters first reported on parts of the U.N. study last month.)
It is unclear how the global crisis over the new coronavirus, which began in China, will affect North Korea. The country has not reported any cases, but experts say there most likely are some. North Korea has closed almost all border entry points and put foreigners in the country under quarantine, but is now asking them to leave. Last month, the United States approved the transfer of humanitarian aid, and the United Nations has allowed some exemptions to sanctions for aid.
“On the North Korean side, they have asked for assistance and will need to coordinate points of entry for the urgent supplies with the aid organizations,” said Kee Park, a Korean-American doctor who regularly leads medical delegations to North Korea.
North Korean leaders might have to use some of the revenue accrued from smuggling for social welfare needs, if they are not doing so already.
Some analysts say the visit to North Korea in June by President Xi Jinping of China might have marked a turning point in sanctions enforcement.
“Given the deterioration of U.S.-China ties, Beijing’s leaders are in no mood to cooperate with Washington on North Korea issues,” said Jung H. Pak, a former C.I.A. analyst on North Korea who is now at the Brookings Institution. “And judging from the opening of new resort and tourism areas and robust department store offerings, the regime and the elite are successfully finding loopholes.”
The armored Mercedes sedans used by Mr. Kim in North Korea and on his overseas trips are prominent signs of that.
In the draft of its new report, the U.N. panel lists the vehicle identification numbers of the two armored Mercedes sedans shipped to North Korea in the summer of 2018. The numbers allowed investigators to ferret out additional details on the shipment and the companies involved.
The report names two Italian companies as procurers, but did not accuse them of illegal activity.
Mr. Cianci, a sales manager for European Cars and More SRL, the Italian company that bought the cars from Mercedes-Benz in early 2018, said in lengthy interviews that he had not violated any export regulations and expressed frustration that Mercedes-Benz had cut business ties with him in December 2019.
He did not provide the name of the client for whom he bought the cars. “My client is Italian. He has an import-export business in Rome,” Mr. Cianci said. “The client is someone with not only diplomatic connections to China, but also other countries.”
The second Italian company named in the report is LS Logistica e Spedizioni SRL, based in Rome. It was responsible for shipping the cars to Dalian, China, and then onward to Japan. The company did not respond to an emailed request for comment.
Daimler, the parent company of Mercedes-Benz, was not able to provide additional details on the specific cars, but released a statement that said the “sales of vehicles by third parties, especially of used vehicles, are beyond our control and responsibility.”
“For many years, we have only received photos of cars, which gave us no possibility to identify any of the vehicles. Only in 2019, we received VIN numbers of vehicles mentioned in the C4ADS report from a journalist of an Asian television network,” the statement continued, using the abbreviation for the Center for Advanced Defense Studies. “We then proactively approached the U.N. and connected the journalists directly with the authority to make sure that the information could be subject matter of investigations.”
The holes in sanctions go well beyond the importing of luxury goods. North Korea is raising millions of dollars through the smuggling of commodities, the U.N. report says.
Last October, Stephanie Kleine-Ahlbrandt, a member of the United Nations Panel of Experts from 2014 to 2019, wrote on the 38 North website that the “maximum pressure” campaign on North Korea was “on its last legs.”
“The Trump administration bears special responsibility for this situation,” she wrote. “It has been its own worst enemy in the maximum-pressure campaign.”
She asserted that Mr. Trump “remains unwilling to admit fault or failure for the lack of progress on denuclearization or to change the U.S. approach to negotiations with the North.”
North Korea has been creative in its sources of revenue. Both the upcoming U.N. report and a separate post this month by the Center for Advanced Defense Studies noted an increase in sand-dredging activity by North Korean ships in 2019. A center of the operation was in Haeju Bay, North Korea, from March to August. Chinese companies are the main buyer of the sand, an important material in construction projects and in making silicon chips.
“The activity in Haeju demonstrates scale, and a level of sophistication unlike other known cases of North Korean sanctions evasion at sea, providing renewed evidence of the D.P.R.K.’s evolving abilities to coordinate and execute complex operations with facilitators abroad,” the report said, using the formal abbreviation for North Korea.
Another new report, this one by the Royal United Services Institute, a research group in Britain, said North Korean ships have been transporting coal to the area of the Chinese islands of Zhoushan. The ships began this activity in January 2019, and they transmit false data over their Automatic Identification System transponders to try to evade surveillance. The “phantom fleet,” as the report calls it, is doing this in “unprecedented numbers.”
Edward Wong reported from Washington, Christoph Koettl and Whitney Hurst from New York, and Elisabetta Povoledo from Rome.
