Thursday, October 8, 2009

U.S. Targets North Korea-Iran Industry Ties

Defense News


U.S. Targets North Korea-Iran Industry Ties

By Wendell Minnick

TAIPEI — The assets of a mysterious “Hong Kong” company based on an Iranian resort island in the Arabian Gulf have been frozen by the U.S. Treasury Department, which said June 30 that “Hong Kong Electronics” was part of a North Korean “missile prolifera­tion network.”

Little is known about the company except that its actual name is Hong Kong Electronics Kish Co., located on Kish Island. The island is just 15 kilometers off the Iranian coast in the Arabian Gulf and is a government-designated “free trade zone.”

“Hong Kong Electronics … has been designated for providing support to North Korea’s Tanchon Commercial Bank and Korea Mining Development Trading Corpora­tion (KOMID),” which have violated U.N. Security Council Resolution 1718, the Treasury Department said in a news release.

The U.S. State Department also noted the company’s activities.

“North Korea uses front companies like Hong Kong Electronics and a range of other deceptive practices to obscure the true nature of its financial dealings, making it nearly impossible for re­sponsible banks and governments to distinguish legitimate from illegitimate North Korean transactions,” said Stuart Levey, undersecretary of state for terrorism and financial intelligence.

The Treasury Department alleges that Hong Kong Electronics, since 2007, has transferred millions of dollars of proliferation materials for Tanchon Commercial Bank and the Korea Mining Development Trading Corp. to Iran.

“Hong Kong Electronics has also facilitated the movement of money from Iran to North Korea on behalf of KOMID. Tanchon, a commercial bank based in Pyongyang, North Korea, is the financial arm for KOMID — North Korea’s premier arms dealer and main exporter of goods and equipment related to ballistic missiles and conventional weapons,” Treasury said.

Through Iran’s Bank Sepah, Tanchon has financed sales of ballistic missiles for KOMID, including financing for missile sales to Iran’s Shahid Hemmat Industrial Group (SHIG), responsible for developing liquid-fueled missiles for the Iranian military.

The Treasury announcement could be the “first indication the Obama administration is going to target the other end of the North Korean proliferation pipeline and not just rely on the U.N. sanctions,” said Bruce Klingner, a specialist on Korean issues at the Washington­based Heritage Foundation.

“If that is the case and a precursor to similar action against other foreign companies, banks and government agencies complicit in North Korean proliferation, it will increase the effectiveness of punitive measures against Pyongyang,” Klingner said.

If the allegations are true, the Obama administration will have its hands full. North Korean embassies have been working with friendly countries in the Middle East and Southeast Asia for decades to create a spider web of front companies that are nearly impossible to identify.

There are about a dozen North Korean trading companies in Hong Kong and Singapore, said Bertil Lintner, author of the book “Great Leader, Dear Leader: Demystifying North Korea under the Kim Clan.”

“North Korea maintains front companies in several Asian countries, often with innocuous-sounding names, through which it acquires restricted and dual-use items for its [weapons of mass destruction] industries from a variety of sources,” he said.

“Some front companies are also used to export missiles and missile-related technologies from North Korea to countries such as Iran. End-user certificates are often falsified to conceal the final destination of such goods.”

These are normally connected to North Korean embassies in Southeast Asia and the Middle East. The effort has created a complicated “maze of supposedly privately owned trading companies,” Lintner said.

He pointed to Thailand as the center of much North Korean activity. North Korea has created trading companies in Bangkok, and in Laos and Myanmar there are North Korean mining operations searching for uranium and other strategic minerals.

Even where there is no North Korean Embassy, there are business deals. In Taiwan, sources point to Taipei­based Royal Team Corp.’s import-export arrangement with North Korea.

Royal Team has exported questionable items of a dual-use nature, Lintner said, including a refrigerator capable of handling temperatures of minus 70 degrees Celsius for North Korea’s WMD development.

A U.S. government source said that due to U.S. pressure on Taiwan, the Royal Team manager now lives in Beijing.

“It is easier to ship from Beijing than Taiwan. He also makes shipments from North Korea to Burma. The U.S. pressured him to stop shipping some items to North Korea, but did not try to shut Royal down,” the source said.

Another company of interest to the United States in Taiwan is Taichung-based Ching Hwee International Trading, which has been accused of selling machine tools to North Korea for making munitions. Due to pressure from the United States in 2007, the company now ships machine tools to North Korea from China-based Shen Yang Machinery, the U.S. source said.

The State Department also has targeted Namchongang Trading Corp., “a North Korean nuclear­related company in Pyongyang,” as being part of the proliferation network

“The North Koreans are gaining experience in doing business internationally, and their methods are becoming more sophisticated and convoluted to circumvent international rules and regulations,” Lintner said.

“They can be detected only through painstaking scrutiny of companies’ registries and import-export records, and even then, the shipments are not always illegal.” The North Koreans have become expert at dealing in dual-purpose goods, which are obtained from a variety of sources and sent to a variety of addresses, he added.

“Taken separately, there is usually nothing suspicious about these ship­ments; when put together, they form a complete picture,” Lintner said.

Klingner said recent U.N. Security Council resolutions are weak and that the United States should “initiate and coordinate a parallel, multilateral effort to sanction North Korean and other foreign entities engaged in North Korean missile and WMD development and proliferation.”