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N Korea at crossroads

North Korea flouts UN sanctions 3 years on

Spear-phishing on cryptocurrency exchanges now a key source of funds

North Korean leader Kim Jong Un has continued to pursue his country's weapons development program while evading sanctions.   © KCNA via Reuters

NEW YORK/SEOUL -- North Korea has evaded U.N. sanctions for the past three years with widespread smuggling operations, with the measures failing to bring Pyongyang back to the negotiating table for denuclearization talks, according to a draft U.N. report. 

Heavy restrictions on energy exports and imports, as well as other measures, put in place in 2017 came in response to missile and nuclear tests by the regime. The sanctions were a bid by the international community to compel North Korea to dismantle its nuclear weapons program, but the regime has continued with its weapons program.

The regime procures oil from a number of companies through ship-to-ship cargo transfers conducted on the open sea. This practice has especially become rampant since May, according to the report.

One of the main players that allowed Pyongyang to circumvent the fuel blockade was Singapore-based oil trader Winson Group, according to the draft report. Registration of vessels and the transaction processes involving North Korea used Winson's email address and physical addresses associated with the company.

North Korea told the U.N. that 2021 imports of refined petroleum products as of mid-July amounted to just 4.75% of the 500,000-barrel yearly ceiling defined by a Security Council resolution. But the actual volume is believed to far exceed the reported numbers due to illegal smuggling.

The Security Council's ban against coal exports, North Korea's staple resource, has been ignored. At least 364,000 tons of coal were shipped to China's Ningbo-Zhoushan area, near Shanghai, over 41 occasions between February and May, according to the draft report.

North Korea's army of hackers have also become a source of funds, the report says. The team conducts spear-phishing campaigns on cryptocurrency exchanges, and the stolen wealth is apparently maintaining Kim Jong Un's grip on power.

An expert panel working for U.N. sanctions committee on North Korea, which operates under the U.N. Security Council, submitted the draft report on Thursday. Nikkei obtained a copy before the official release of the report scheduled for next month.

On the other hand, the border between North Korea and China has been shut down due to the pandemic. The closure has paralyzed private-sector trade, according to the report.

The import of consumer products, including high-end goods, has virtually ceased. A range of goods were improperly shipped to Kim's family villa through sea routes, the report states.

North Korea's economic situation has deteriorated due to sanctions, stalled trade and damage from a series of floods. The country's real gross domestic product shrank 4.5% in 2020, according to the Bank of Korea, South Korea's central bank. The contraction is the worst since the late 1990s, when a famine shook the regime.

Linda Thomas-Greenfield, the U.S. ambassador to the U.N., told reporters Thursday that Washington is attuned to the humanitarian situation in North Korea.

"We're open to considering additional ways to facilitate humanitarian assistance, going forward as quickly as possible," she said.

Thomas-Greenfield is looking to encourage North Korea to return to dialogue. The regime, however, persistently makes one-sided demands to Washington to drop sanctions and other measures.

"It is... important to remember that sanctions did not create the humanitarian crisis," said Thomas-Greenfield, making it clear that the U.S. will keep the sanctions in place.

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