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NORTH KOREA NEWSLETTER NO. 118 (August 5, 2010)

N. Korea Replacing S. Korea with China on Consignment Trade

SEOUL (Yonhap) -- North Korea has been able to make up for losses in consignment trade from Seoul's ban on cross-border trade by finding new partners in China, sources in Seoul said on Aug. 1, weakening the impact of measures imposed to punish the communist neighbor.

   South Korea severed nearly all economic cooperation and trade with North Korea in May after a Seoul-led multinational investigation team concluded that Pyongyang was responsible for the sinking of the South Korean warship Cheonan that killed 46 sailors.

   Firms that had contracts with North Koreans for consignment, in which companies in the South send raw materials to the North and get back manufactured products, have been hurt the most by the ban.
"After the South Korean companies became unable to send the raw materials, North Korean factories have been manufacturing products ordered by China," a source here said, speaking on condition of anonymity.

   "Most of the goods made on consignment trade with China are for exports to Europe."

   Seoul's Unification Ministry, which handles inter-Korean affairs, partially lifted the ban to allow South Korean firms to proceed on deals that were signed before the government announced the punitive measures.

   "North Koreans said they already signed contracts with Chinese firms and told us they will manufacture the orders from the Chinese side first," the source said.

   More than 500 South Korean companies were involved in consignment trade with the North, which amounted to US$254 million in 2009.


U.S. Contacted N.K. Directly to Free American Citizen Held for Illegal Entry

WASHINGTON (Yonhap) -- The United States said on Aug. 2 it had directly contacted North Korea for the release of an American citizen held there for illegal entry.

   State Department spokesman Philip Crowley, however, said Washington has no immediate plans to send an envoy to secure the release of Aijalon Gomes, 30, of Boston, who was sentenced in May to eight years in a labor and reeducation camp and fined about US$700,000 for illegal entry on Jan. 25.

   "We have communicated directly with North Korean officials about Mr. Gomes's case," Crowley said. "On multiple occasions we had the ability to communicate with North Korea. The question was, are we contemplating taking that step at this time? The answer is no, not at this time."

   The spokesman urged North Korea to release Gomes "on humanitarian grounds," saying "We continue to press his case, as do Swedish authorities on our behalf."

   The Swedish embassy in Pyongyang handles consular affairs involving American citizens in North Korea, which does not have diplomatic ties with the U.S.

   Reports said that Gomes was on a hunger strike in North Korea.

   Crowley would neither confirm nor deny that, citing privacy regulations.

   "As to what's happening inside the prison, I'm not at liberty to comment on its condition," Crowley said. "He is still in prison. I can check and see when is the last time Swedish authorities had access to him -- really, the last 10 days or so. We have specific health concerns, but I can't say whether Privacy Act considerations allow me to talk about his current condition."

   North Korea in June threatened to increase punishment for Gomes under a wartime law, citing what it called the U.S. campaign to condemn North Korea for the sinking of the South Korean warship Cheonan that killed 46 sailors in the Yellow Sea in March.

   Gomes, who taught English in South Korea, is the fourth American held in the North since early last year.

   He reportedly sympathized with another American, Robert Park, 28, who was released in February after crossing the Chinese border on Christmas Day to draw international attention to North Korea's poor human rights record.


Love Song in S. Korea Turns into Hymn to Dear Leader in N. Korea

SEOUL (Yonhap) -- In South Korea, it's a song about your beloved, but in North Korea, it is a bombastic paean to the Dear Leader who rules the socialist country with an iron fist.

   Daily NK, a Seoul-based Internet news outlet specializing in North Korean affairs, this week released a video clip of a woman singing the popular 1983 South Korean song "The Maze of Love."

   Nothing is unusual about the woman singing to the rhythm of her guitar until the viewer notices that this performance is taking place at a restaurant in Pyongyang and that the lyrics are not as run-of-the-mill as those describing the pain and joy of love.

   "Oh, Mt. Paektu, where the image of our general will shine and rise eternally until the end of this world," she sings. "Oh, the sunshine that shines on my little heart."

   Daily NK said in its report that the lyrics were completely reworked to sing the praises of Kim Jong-il, the North Korean leader, and that it had obtained the video clip from a Chinese tourist who had recently visited the North Korean capital.

   Kim, 68, runs a massive cult of personality that his father and North Korea founder Kim Il-sung started around their family. Daily NK said the South Korean song, originally sung by Choi Jin-hee -- who held a joint concert in Pyongyang in 2002 amid thawing inter-Korean ties -- demonstrates how South Korea's popular culture has penetrated into North Korean society despite tight controls.

   "The song is sung after its lyrics are changed into those that express love for Kim Jong-il, due to fears of inspection raids," the report said, adding South Korean songs are widely performed at restaurants in Pyongyang.

   The socialist North tightly controls the flow of information in and out of its territory, fearing foreign influence on its population may lead to the erosion of its grip on power.

   Kim Jong-il himself is reported to be a fan of South Korean movies and songs. In 2000 and 2007 when he held summit meetings with the South Korean presidents at the time, he was presented with a series of pop culture products as gifts from Seoul.


U.S. Urges Int'l Community to Join Forces in Sanctioning N. Korea

WASHINGTON (Yonhap) -- The United States on Aug. 3 called on the international community to join forces in sanctioning North Korea and Iran under U.N. resolutions banning arms sales and other illegal transactions.

   "It can't be just one part of the world but not another part of the world," State Department spokesman Philip Crowley said. "This has to be done effectively across the international community to have the effect that we want to and convince the leaders of Iran or North Korea to change course."

   Crowley's remarks came soon after the U.S. Treasury Department announced a new list of 21 Iranian companies and several Iranian officials for their alleged support of terror groups and transfer of weapons prohibited by U.N. resolution. The resolution was adopted in June in light of Tehran's failure to get rid of its uranium fuel, suspected of being used for making nuclear bombs.

   Robert Einhorn, the State Department's special adviser for nonproliferation and arms control who oversees U.S. sanctions on North Korea and Iran, said on Aug. 2 Washington will soon list North Korean entities and individuals involved in trading weapons, luxury goods, counterfeit money, cigarettes, drugs and other illegal activities banned by U.N. resolutions adopted after the North's nuclear and missile tests early last year.

   The U.S. currently blacklists more than 20 North Korean entities and individuals.

   Washington has said it will establish "new executive authorities" to that effect and try to persuade the international community to voluntarily cut off ties with listed North Korean entities and individuals.

   The sanctions on North Korea are seen as less stringent than those on Iran, as Washington does not intend to craft legislation to sanction foreign companies and banks involved in transactions with blacklisted North Korean entities and individuals, unlike the case with Iran.

   "Among the central elements of both international and national sanctions will be dialogue that we have with countries and within the financial industry to try to make sure that, whether it's insurance, whether it's capital, to have the kind of impact we want to see have," Crowley said.

   "So in light of these additional steps, we're going back and talking to these countries and these sectors," he said. "At the heart of it, companies and sectors that value their reputations, they will not want to assume the risk of wondering, for a particular entity, is this a front company for North Korea? Is it a front company for Iran?"


N. Korean Consumer Prices Surge in the Last Five Months: Report

SEOUL (Yonhap) -- North Korea's consumer prices have surged in the past five months due to the country's failed currency reform, a South Korean government report said on Aug. 3.

   The Unificaton Ministry report claimed that prices of farm products such as beans, chickens, cabbages, corn and rice have shot up two to three times as of July compared to February.

   The prices for manufactured goods have also risen five to six times in the five month period, it said.

   The report said the findings were based on so-called "limit" prices set by the North Korean government and that actual prices may be higher.

   The Seoul government said the sharp price increases can be attributed to the failed currency reform carried out last year and the appreciation of the Chinese yuan.

   Because North Korea imports many of its products from China, the rise of the yuan's value can affect the purchasing power of North Korea.


New Battleship Detected in North Korea

SEOUL (Yonhap) -- A North Korean air cushioned battleship, a modified version of its older air cushioned landing craft, has been captured in a satellite picture for the first time.

   A Google Earth photo on Aug. 4 showed the ship stationed at the western port city of Nampho near the Taedong River. The normal landing craft is about 20 meters long, and the battleship appeared to be about 34 meters in length.

   In the photo, the ship is equipped with a 57-millimeter machine gun on the bow and a 30-mm machine gun on the stern. A military source said the new vessel can travel at up to 90 kilometers per hour.

   Sources have said the air cushioned ship is capable of launching quick, sudden strikes on South Korean vessels.

   South Korea plans to launch its five-day, anti-submarine drills near the western sea border starting Thursday. The exercises are designed to be the latest response to the deadly sinking of the warship Cheonan, which is blamed on North Korea. Pyongyang has balked at the drills in the Yellow Sea and has threatened to make a physical response.

   Rear Adm. Kim Kyung-sik of the Joint Chiefs of Staff said on the same day that the South Korean military will try to respond to the enemy's "asymmetric forces," and preparations against air cushioned ships will be part of the drills.


Staple Foods Traded in Pyongyang As Rationing Apparently Falters

SEOUL (Yonhap) -- North Korea has added corn and rice to the list of items to be monitored for price hikes at markets in Pyongyang, a South Korean official said on Aug. 4, suggesting the staples are increasingly traded privately in the capital as its rationing system falters.

   According to the Unification Ministry official who spoke on the condition of anonymity because the information is classified, North Korean authorities have recently introduced price caps on the two staple foods at markets in Pyongyang.

   "The regime appears to be increasingly allowing markets to take over the role its rationing system once played," the official said, adding the two items were absent from the monitor list when his ministry obtained a copy of the document in February this year.

   North Korea allows a limited number of markets to operate under strict rules. It apparently cracked down on its growing merchant class when it conducted a sweeping currency reform late last year.

   Observers say the botched reform has worsened food shortages by making merchants hoard food stocks, even triggering rare social unrest in some parts of the country. Pyongyang has so far been generally considered walled from the food shortages.

   In addition to the food woes, North Korea is placed under tough U.S.-led sanctions for its nuclear testing. The U.S. said this week that it is considering more measures to make the North correct its provocative behavior and abandon its nuclear arms programs.

   In a related development, a Unification Ministry report said earlier this week that the prices of farm products such as beans, chickens, corn and rice shot up two to three times from February to July this year in North Korea.

   The report said the sharp price increases can also be attributed to the appreciation of the Chinese yuan. Because North Korea imports many of its products from China, the rise of the yuan's value can affect the purchasing power of North Korea.