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NORTH KOREA NEWSLETTER NO. 119 (August 12, 2010)

North Korea Avoids U.S. List As State Sponsor of Terrorism

WASHINGTON (Yonhap) -- The United States on Aug. 5 announced a new list of state sponsors of terrorism that does not include North Korea despite concerns over Pyongyang's suspected delivery of weapons to militant groups in the Middle East.

   Iran, Syria, Sudan and Cuba are still listed under the annual congressionally mandated Country Reports on Terrorism 2009.

   "The Democratic People's Republic of Korea (DPRK/ North Korea) was not known to have sponsored any terrorist acts since the bombing of a Korean Airlines flight in 1987," the report said. "On October 11, 2008, the United States removed the designation of the DPRK as a state sponsor of terrorism in accordance with criteria set forth in U.S. law, including a certification that the government of the DPRK had not provided any support for international terrorism during the preceding six-month period and the provision by the DPRK of assurances that it will not support acts of international terrorism in the future."

   North Korea was first put on the list after the downing of the Korean Air flight over Myanmar in 1987, which killed all 115 people aboard. Its delisting came in October 2008 under the Bush administration, which saw progress in the six-party talks on ending the North's nuclear weapons programs.

   The report comes amid allegations of North Korea's involvement in the provision of weapons to some Asian and Middle Eastern countries.

   U.S. officials have raised concerns over North Korea's alleged nuclear and missile technology transfer to Myanmar, formerly Burma.

   Israel said in May that the 35 tons of North Korean arms seized at the Bangkok airport in December were destined for the Hamas and Hizbullah militant groups via Syria.

   Dennis Blair, then U.S. director of national intelligence, said only that the cargo was bound for the Middle East.

   Daniel Benjamin, coordinator of the State Department's Office for Counterterrorism, told reporters that the department has been "looking into" those allegations.

   "The secretary and others in the administration have been clear that if we find that Korea is, indeed, sponsoring terrorism, obviously we will revisit the issue of the listing as a state sponsor," he said. "But North Korea was de-listed in accordance with U.S. law in 2008 and it was at that time certified that North Korea had not supported any terrorism in the previous six months."

   Arms sales are believed to be one of the major sources of revenue for North Korea, suspected of being behind nuclear and missile proliferation in Syria, Iran, Pakistan and several other countries. For its nuclear and missile tests, Pyongyang has been under strict U.N. resolutions banning the trade of conventional arms as well as weapons of mass destruction.

   The State Department, meanwhile, noted that the U.S. in May last year re-certified North Korea as "not cooperating fully" with U.S. counterterrorism efforts under the Arms Export and Control Act.

   "Pursuant to this certification, defense articles and services may not be sold or licensed for export to North Korea from October 1, 2009 to September 30, 2010," the report said. "This certification will lapse unless it is renewed by the Secretary of State by May 15, 2010."


N.K. Bank Loses Lawsuit for Defaulting on Loan in U.S. Court

NEW YORK (Yonhap) -- A state-run North Korean bank has lost a lawsuit for not paying back a loan it borrowed from a Taiwanese bank nine years ago, the New York district court said on Aug. 6.

   The District Court of New York confirmed it ordered the Foreign Trade Bank of Korea to pay compensations of just under US$6.77 million to the Mega International Commercial Bank (MICB) in a ruling made earlier in the week.

   The North Korean bank is widely viewed as Pyongyang's main foreign exchange earner with branch offices in Europe, the Middle East and Hong Kong.

   The ruling follows formal legal action taken by MICB on Jan. 14 after the North Korean financial institution did not pay the $5 million it borrowed in 2001 and missed its interest payments.

   Under the loan agreement the North Korean bank should have returned the principle and interest by Sept. 15 2004, but only paid a total of $462,000 in backlogged interests from late 2008 through May 2009.

   A source at the South Korean consulate in New York said it is very rare for a North Korea-related commercial dispute to be settled in a U.S. court.

   He added that the latest ruling will probably have negative consequences on the communist country's effort to borrow money from abroad and will further hurt its credibility in the international business community.

   Other legal sources said that while there is no way to tell if the trade bank will pay the compensation, MICB may try to freeze any assets held by the North Korean financial institution in the United States in an effort to recoup its loans.


North Korea Could Face Inflation from Fiscal Expansion: Report

SEOUL (Yonhap) -- North Korea could face inflation as its regime may seek to expand fiscal spending to assuage complaints of salaried workers and to stabilize markets amid a protracted slump of its economy, a report said on Aug. 6.

   "If prices of products continue to fluctuate and transactions freeze in the market amid instability after the North's recent currency reform, the possibility is high that even salaried workers at state-run companies will be much affected," the Korea Development Institute in Seoul said in the report.

   To assuage the complaints of those people, a key supporting group for the regime, Pyongyang might seek to print and supply more money to the workers, which the report said could result in inflation, prompted by budgetary deficit.

   "If this turns out to be the case, deficit-sparked inflation will take place, worsening price fluctuations that the North has already been undergoing," the report said.

   Caused by a protracted economic slump, the shortage of dollars in the North will make it tougher to cope with its currency market instability, another factor that could push the regime to print out money to shore up its economic system.

   Last year, the North conducted a reform of its currency by knocking two zeros off its currency in a way to curb soaring inflation. The reform, however, is regarded as a failure by experts as it rather pushed up prices and increased confusion in the market.

   A recent report from the Unification Ministry here showed that North Korea's consumer prices have surged in the past five months, attributing the hike to the failed currency reform and the appreciation of China's yuan.


North Korea Goes YouTube-savvy in Its Propaganda Offensive

SEOUL (Yonhap) -- North Korea has apparently registered an account with the iconic U.S. video-sharing site YouTube, uploading clips that praise the isolated regime and defend itself against accusations that it attacked a South Korean warship.

   At least 10 clips were found on Aug. 10 under the name of uriminzokkiri, which represents the North's Web site. The name in Korean means "on our own as a nation" and was registered July 14.

   The uploaded footage contain regurgitations of official cant that honor the North's leader, Kim Jong-il, and the usual South Korea bashing. The Aug. 2 upload contained an elaborately produced three-minute clip lashing out at South Korea's foreign minister.

   Another clip, uploaded the same day and also produced in Korean, ridicules Seoul for its failure to stop the U.N. Security Council from placing Pyongyang's denial in its statement deploring the deadly March sinking of the Cheonan warship.

   Forty-six South Korean sailors died in the sinking that a multinational investigation found the North responsible for in May. Military tensions have since soared between the two countries, which remain technically at war after the 1950-53 Korean War ended in a truce rather than a peace treaty.

   North Korea has been expanding the use of the Internet in its propaganda offensive, observers say. In June, a North Korean woman believed to be an agent uploaded a clip praising her communist country on YouTube, drawing media attention here and abroad.

   North Korea is also believed to be operating a unit dedicated to hacking foreign Web sites, including those of the United States and South Korea. Early this year, South Korea set up a cyber defense command to deal with such threats from the North.


Teenage U.S. Environmentalist to Visit N.K. on Bold Peace Mission

SEOUL (Yonhap) -- A teenage American boy is traveling to North Korea with his parents this week with a letter urging the socialist country's leader Kim Jong-il to allow the creation of a "peace" forest that would grow over the heavily armed inter-Korean border, the world's last cold-war frontier, his father said on Aug. 10.

   Jonathan Lee's eight-day trip to North Korea by way of China is scheduled to start Aug. 12 and will include a meeting with a North Korean government official, his father, Kyoung Lee, told Yonhap News Agency before leaving Seoul with his son.

   Jonathan's father said the trip, which is highly unusual, has been sanctioned by North Korea, despite there being diplomatic relations with Pyongyang and Washington. Since January, a U.S. citizen named Aijalon Gomes has been held in North Korea for illegal entry.

   "You may be wondering why a 13-year-old boy wants to go into North Korea, especially right now when there are a lot of problems," Jonathan Lee, a Korean-American from Mississippi, wrote in his letter addressed to the North Korean leader.

   "Well, I've been talking about planting chestnut trees in North Korea for the past three years. The reason I have is because I want to help the environment and help the people at the same time. Now is the right time because many wish for peace right now on the Korean peninsula."

   Jonathan's father said he believe that the safety of his family in North Korea won't be a problem, because the visit was made possible through the socialist regime's U.N. representative office in New York.

   Jonathan's family was scheduled to leave Seoul for China on Aug. 10, where Jonathan will deliver the same letter to Chinese President Hu Jintao, the father said. The boy also wrote to South Korean President Lee Myung-bak and U.S. President Barack Obama in which he discussed his trip and proposal, said his father.

   The family says that they also requested a meeting between Jonathan and the 68-year-old North Korean leader, Kim Jong-il. But the North has only mentioned the possibility of a meeting with a "senior" official.

   If Jonathan's wish to plant a forest of chestnut trees in Panmunjom, along the border between the two Koreas, did come true, it would be a stark contrast to the surrounding area heavily fortified with barbed wire and military personnel, he believes.

   Panmunjom, the village where the truce that ended the 1950-53 Korean War was signed, lies within the Demilitarized Zone, a four-kilometer-wide swath of land bisecting the peninsula.