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NORTH KOREA NEWSLETTER NO. 99 (March 25, 2010)

N. Korean Technocrat Executed for Bungled Currency Reform: Sources

SEOUL (Yonhap) -- North Korea has executed the former top finance official held responsible for the country's catastrophic currency reform, which has reportedly worsened food shortages, caused massive inflation and dented leader Kim Jong-il's efforts to transfer power to his son, sources said on March 18.

   Pak Nam-gi, who was reportedly sacked in January as chief of the planning and finance department of the ruling Workers' Party, was executed at a shooting range in Pyongyang earlier this month, multiple sources privy to North Korean internal affairs told Yonhap News Agency.

   "All the blame has been poured on Pak after the currency reform failure exacerbated public sentiment and had a bad effect" on leader Kim Jong-il's plan to hand power over to his third son Jong-un, one source said on condition of anonymity.

   Pak, a 77-year-old technocrat, was charged with "deliberately ruining the national economy" as a "son of a big landowner," the sources said.

   But an overwhelming number of people believe the charge serves only to scapegoat Pak for the currency revaluation, which fueled already-bad inflation and dried up supplies of food and basic necessities, the sources said.

   Pak, a graduate of engineering colleges in the former Soviet Union and one of its satellite states, disappeared from North Korea's official media reports in January after having accompanied Kim Jong-il on a number of his field inspections.

   Pak's execution is the latest in a series of punishments the North has reportedly meted out to its elite for failed economic reforms. South Korean officials and analysts believe North Korean leader Kim has been pushing a series of bold economic drives in recent months to pave the ground for a power transfer, after the regime shored up confidence in the military by conducting its second nuclear test in May last year.

   Pak visited South Korea in 2002 as head of a committee overseeing economic planning, leading a delegation of bureaucrats and inspecting South Korean industrial facilities.


U.S. Advises Enhanced Precaution against Money Laundering by N. Korean Banks

WASHINGTON (Yonhap) -- The U.S. Treasury Department on March 18 advised American financial institutions to take enhanced precautions against North Korea and several other countries trying to launder money and engage in other illicit financial transactions.

   In an advisory, the department's Financial Crimes Enforcement Network (FinCEN) said: "U.S. financial institutions should apply enhanced due diligence … when maintaining correspondent accounts for foreign banks operating under a banking license issued by Angola, DPRK, Ecuador, and Ethiopia."

   DPRK is North Korea's official name, the Democratic People's Republic of Korea.

   The advisory said this was to "inform banks and other financial institutions operating in the United States of the risks associated with jurisdictions identified by the Financial Action Task Force (FATF) on February 18 as having deficiencies in their anti-money laundering and counter-terrorist (AML/CFT) financing regimes."

   The FATF statement was issued last month in response to a call by the leaders of the G-20 economies for the FATF to reinvigorate its process for assessing the compliance of 35 member countries with international AML/CFT standards and to identify high risk jurisdictions.

   U.N. financial sanctions, slapped on Pyongyang after its nuclear and missile tests early last year, call for an overall arms embargo on North Korea except for light weapons and small arms, and imposes financial sanctions to prevent the flow of funds that could benefit North Korea's missile, nuclear or any other proliferation activities.

   Under the resolutions, U.N. member states are also required to reduce or refrain from providing any further financial aid to North Korea except for humanitarian purposes.

   The Treasury Department has blacklisted several North Korean banks, companies and individuals for their involvement in the proliferation of ballistic missiles, freezing the assets of designated proliferators of weapons of mass destruction and their supporters and prohibiting U.S. persons from engaging in any transactions with them.

   "As long as North Korea continues to try to evade sanctions and obscure its illicit proliferation transactions, we will take steps to combat that activity and protect the integrity of the international financial system," Under Secretary of Treasury for Terrorism and Financial Intelligence Stuart Levey said late last year.

   In a previous advisory issued last summer, FinCEN listed 17 North Korean banks to help "assist in applying enhanced scrutiny" by U.S. and overseas financial institutions, saying it "remains concerned about North Korean production and distribution of high-quality counterfeit U.S. currency."

   The U.S. said that North Korea last year circulated about US$1 million worth of "supernotes," counterfeit $100 notes, at a South Korean port.

   Washington also slapped financial sanctions on a Macau bank in 2005 to freeze US$25 million worth of North Korean assets, effectively cutting off Pyongyang's access to the international financial system. Banco Delta Asia had been accused of helping North Korea launder money it earned by circulating supernotes.


N. Korea Rejects U.N. Recommendations on Human Rights

GENEVA (Yonhap) -- North Korea on March 19 rejected an array of U.N. recommendations on how to improve its human rights conditions, including putting an end to public executions, claiming the suggestions are aimed at undermining the communist regime and sullying its image.

   The North's ambassador to Geneva, Ri Chol, made the remarks at a U.N. Human Rights Council meeting Thursday, rebuffing 50 of the 169 recommendations that council members made in December. The meeting was convened to review Pyongyang's human rights situation and adopt a report.

   The rejected suggestions included a moratorium on capital punishment and an end to public executions, torture and other inhumane punishment, forced labor and military training for children. They also included a call for Pyongyang to allow a U.N. human rights envoy to visit the North to have a first-hand look at the situation.

   Ri claimed the suggestions stem from a deeply ingrained sense of animosity toward North Korea and are aimed at pursuing goals unrelated to human rights, such as overthrowing the regime and tainting the image of the country. The envoy also said the North does not recognize the U.N. human rights envoy.

   Ri gave non-specific responses to the other recommendations and stopped short of making a commitment to any of them. The 117 suggestions included improving the human rights of the socially weak, joining international human rights pacts and allowing reunions of families separated by the Korean War.

   South Korea, the United States, Japan and France expressed disappointment at the North's response.

   North Korea has long been labeled one of the worst human rights violators in the world. The totalitarian regime of leader Kim Jong-il does not tolerate dissent and holds hundreds of thousands of people in political prison camps across the nation.

   Pyongyang has bristled at any talk of its human rights conditions, calling it an attempt to overthrow the regime.


U.S. Hopes Kim Jong-il's Trip Will Lead to 6-way Talks Reopening

WASHINGTON (Yonhap) -- The United States expressed hope on March 22 that any visit to China by North Korean leader Kim Jong-il will lead to a resumption of the six-party talks on ending its nuclear ambitions, stalled over international sanctions against the reclusive communist state.

   "I hope when he arrives in Beijing, he'll announce that North Korea's willing to come back to the six-party process and take affirmative action steps towards denuclearization," State Department spokesman Philip Crowley said. "We wish him safe travels."

   Crowley was responding to reports that Kim Jong-il will visit Beijing later this month to discuss reopening the multilateral nuclear talks and to appeal for economic aid.

   Pyongyang is said to be feeling the pinch of sanctions imposed after its nuclear and missile tests last year, especially after the recent devaluation of its currency, which worsened its economic plight and created rare unrest in the tightly controlled state.

   The currency devaluation, aimed at shutting down private markets and regaining state control of the economy, disrupted people's lives and led to skyrocketing inflation. As a result, authorities had to allow the private markets to reopen, according to reports and sources well informed on North Korean society.

   Kim Jong-il's trip will also likely see him seek Chinese support for his effort to install his youngest son, Jong-un, as heir apparent. Kim apparently suffered a stroke in 2008.

   Kim's trip would be his fifth. He traveled China in 2000, 2001, 2004 and 2006.

   The North Korean leader's trip could mean the impending resumption of the six-party talks, as he needs food, energy and other economic aid from China, the North's biggest benefactor and the host of the six-party talks. However, the revival of the talks would not necessarily mean substantial progress toward North Korea's denuclearization, according to some analysts.

   The nuclear talks, involving the two Koreas, the U.S., China, Japan and Russia, have been on and off since their inception in 2003, with some skeptics saying China prefers the status quo -- even a nuclear-armed North Korea -- to any instability.

   Since the December visit to Pyongyang by Stephen Bosworth, U.S. special representative for North Korea policy, the North has demanded preconditions for a new round of the talks, including the lifting of sanctions and a peace treaty to formally end the 1950-53 Korean War.


U.S. to Consider Resuming Food Aid to N. Korea: State Dept.

WASHINGTON (Yonhap) -- The United States said on March 23 that it will consider restarting food aid to North Korea, which was suspended early last year amid heightened tensions over Pyongyang's nuclear and missile tests.

   "There are profound needs for the North Korean population," State Department spokesman Philip Crowley said. "And to the extent that North Korea wants to accept aid from the international community, including the United States, we will be willing to consider that."

   Crowley was responding to a demand by former U.S. President Jimmy Carter made in Seoul earlier in the day that Washington have unconditional direct talks with North Korea and provide humanitarian aid to help denuclearize the North.

   Food aid was suspended in March last year when North Korea refused to issue visas to Korean-speaking monitors, whose mission was to assure that the food was not funneled to the military and government elite.

   "We have provided humanitarian assistance to North Korea before through the World Food Program," Crowley said. "The fact that aid is not flowing there now is not a decision by the United States. It was a decision by North Korea."

   The U.S. will continue to seek transparency in the food distribution once food aid resumes, the spokesman said.

   "If we do that in the future, just as we've done that in the past, our efforts will be to make sure that the aid actually goes to the North Korean people who need it most and is not diverted to other groups such as the military," he said.

   The U.S., which had provided more than 2 million tons of food aid to the North over the past decade or so, delivered 169,000 tons of food to North Korea from May 2008 to March 2009.

   International relief organizations suspended humanitarian food aid to North Korea early last year as the North Korean government expelled international monitors amid escalating tensions over its rocket test launch.

   The conservative South Korean government of Lee Myung-bak has also stopped shipping food to the North, demanding as a quid pro quo that the North make progress in the six-nation nuclear talks. Lee's liberal predecessors had each year shipped about 400,000 tons of food and as much fertilizer to North Korea without conditions.

   Relief organizations have said that North Korea will need at least 1 million tons of food from abroad to feed its 24 million people this year. Reports indicate thousands have already starved to death this winter due to the sanctions and soaring inflation.

   Robert King, U.S. special envoy for North Korean human rights, said last month humanitarian assistance would not be linked to any political considerations, although no specific steps have been taken for the resumption of the food aid.

   "If we are able to reach agreement on being able to monitor humanitarian assistance, and if the need is there, and if the resources are on our side and the competing demands are met, we would be willing to look at providing assistance again," King said.

   On Carter's call for unconditional direct talks with North Korea, Crowley said, "We have kept open the prospect of robust bilateral dialogue with North Korea. Our simple conditions are that North Korea has to come back to the six-party process, because ultimately this is not just about the United States."

   The spokesman called on the North to return to the multilateral nuclear talks first, which also involve South Korea, China, Japan and Russia.

   "If North Korea is going to advance in the future, it has to have a relationship with South Korea. It has to have a relationship with China. It has to have a relationship with Japan, with Russia," he said. "If North Korea comes back to the six-party process and begins to live up to its previous commitments, then there is room for a bilateral dialogue."

   North Korea recently said it was ready to return to the six-nation forum, which it has boycotted since early last year.

   As a condition to rejoining the talks, however, Pyongyang wants U.N. sanctions removed and a peace treaty to replace the armistice that ended the 1950-53 Korean War.

   Reports said that North Korean leader Kim Jong-il will visit Beijing later this month to pave the way for the reopening the nuclear talks and to appeal for economic aid. The nation's economic plight worsened after the recent devaluation of its currency, apparently to tighten the state control of the economy.

   Kim's China trip, the fifth since 2000 but the first in four years, will likely lead to the resumption of the six-party talks, as he needs food, energy and other economic aid from China, the North's biggest benefactor and the host of the six-party talks.

   However, the talks' revival would not necessarily mean substantial progress in the nuclear negotiations, according to some analysts.

   Kim's trip, if any, will also likely see him seek Chinese support for his effort to install his youngest son, Jong-un, as heir apparent. Kim apparently suffered a stroke in 2008.


Kim Jong-il Is Pushing Son as Heir Apparent: Gen. Sharp

WASHINGTON (Yonhap) -- North Korean leader Kim Jong-il has tried hard for the past year to establish his third and youngest son as heir apparent amid growing complaints over a worsening economy, a top U.S. military officer said on March 24.

   "Kim Jong-il appears to have recovered from an apparent stroke in the summer of 2008 and remains in full control of North Korea," Gen. Walter Sharp, commander of U.S. forces in Korea, testified before a House Appropriations Committee hearing. "Over the past year, Kim has systematically introduced his third and youngest son, Kim Jong-un, as the heir apparent."

   Sharp is the first U.S. official to publicly acknowledge the power transition, although rumors have abounded that Kim Jong-il is grooming Jong-un, 27, to assume leadership, just as Kim was groomed for 20 years by his father, Kim Il-sung, the founding father of the communist North, who died in 1994.

   The commander also said that North Korea's ruling elite "appears unwavering" in its loyalty to Kim Jong-il, given that its "privileged position apparently rests upon continuance of the status quo." He said that "the role of the military in Pyongyang's decision-making apparatus appears to be more prominent as highlighted by last year's expansion of the National Defense Commission authorities."

   He was referring to the appointment last year of several key military officers to the commission, which has the constitutional right to rule the communist North. The move is seen as an attempt to position confidants of the senior Kim within the commission to help the junior Kim consolidate power.

   Sharp, however, did not preclude the possibility of North Korea collapsing.

   "We would also be mindful of the potential for instability in North Korea," he said. "Combined with the country's disastrous centralized economy, dilapidated industrial sector, insufficient agricultural base, malnourished military and populace, and developing nuclear programs, the possibility of a sudden leadership change in the North could be destabilizing and unpredictable."

   He also warned of more provocative actions by North Korea to divert the attention of discontented people.

   "The regime manufactures the perception of an external threat, primarily from the U.S., to maintain internal control and justify its 'military first' policy," he said. "In the future, Pyongyang may continue its strategy of periodically heightening tensions. We must never be complacent about the possibility that North Korea might take additional provocative steps or even launch an attack on the ROK." ROK stands for South Korea's official name, the Republic of Korea.