Page 1 of 2 North Korea's golden path to security By Bertil Lintner
BANGKOK - While the West and Japan have targeted North Korea's overseas bank
accounts to curtail its weapons program, Pyongyang has recently turned to more
ingenious ways of maintaining its international businesses through substantial
exports of gold, silver and other valuable metals.
Pyongyang has apparently found a willing conduit to global buyers through its
many business connections in Thailand, which has recently emerged as the
isolated state's third-largest trading partner after China and South Korea.
According to official Thai
Customs Department statistics, North Korea shipped 500 kilograms of gold worth
398 million baht (US$11 million) to Thailand last April.
The following month, another 800kg of gold worth 635 million baht landed in
Thailand courtesy of North Korea. Also, in June, 10 tons of silver worth 148
million baht was sent from North Korea to Thailand, followed by 12 tons worth
166 million baht last October.
In sum, North Korea exported 1.35 billion baht - or nearly $40 million - worth
of precious metals to Thailand last year.
That is a substantial figure for North Korea, a country with an estimated gross
domestic product of about $22 billion and whose total exports amounted to just
over $1 billion, according to official statistics. Thailand is bound by the
international sanctions imposed last October against North Korea by the United
Nations in response to Pyongyang's exploding an atomic bomb.
According to official Thai statistics, the gold and first consignment of silver
were shipped to Thailand before the UN sanctions were imposed. But there is
nothing illegal in North Korea exporting precious metals, unless, of course,
the income from the sale can be tied directly to the country's controversial
weapons programs, which anyway would be extremely hard to prove.
North Korea's gold and silver mines remain largely untapped. According to Tse
Pui-kwan, a Chinese-American chemist who joined the US Bureau of Mines in 1990,
North Korea has significant deposits of copper, gold, graphite, iron, lead,
magnesite, tungsten and zinc. When the Cold War ended and North Korea lost
large amounts of foreign aid from both the Soviet Union and China, its mining
industry fell into disrepair and extraction activities sharply declined.
But with new foreign cooperation, production has resumed, which the recent
exports to Thailand clearly demonstrate. North Korea's main gold mine is in
Unsan county in North Pyongan province, about 150 kilometers north of
Pyongyang. It was originally opened by a US firm in 1896, when Korea was still
an independent and unified kingdom, and was later taken over by a Japanese
company when the peninsula became a colony ruled by Tokyo in 1910.
Nearly a century later, consultants from Clough Engineering of Australia in
2001 inspected the same mine under the sponsorship of the United Nations Office
for Project Services. They estimated that Unsan held 1,000 tons of gold
reserves, which if true would make it one of the world's major gold mines.
Silver is also mined in the same area, while iron ore and magnesite are found
in North and South Hamgyong provinces in the northeast.
North Korea's extraction techniques are sometimes controversial. According to
witnesses interviewed by the US Committee for Human Rights in North Korea for
its 2003 report "The Hidden Gulag: Exposing North Korea's Prison Camps", there
is a gold-mining labor camp near Danchun in South Hamgyong province, where
thousands of prisoners are being held and forced to work under abysmal
In that same report, several witnesses claimed that "some of the mine shafts
dated back to the early days of the Japanese occupation of Korea in the early
1900s. Accessing the veins of minable gold required descending and, later,
ascending a wooden staircase 500 meters in length, using gas lanterns for
light. Deaths from mining accidents were a daily occurrence, including multiple
deaths from the partial collapse of mine shafts."
The first attempt to modernize North Korea's gold-mining industry was made by
an Italian financier and former Foreign Ministry official, Carlo Baeli, who
traveled to the country in the early 1990s and claims to be the first Westerner
to do business with Pyongyang since the Korean War. He later wrote a book
called Kim Jong-il and the People's Democratic Republic of Korea, which
was published in Pyongyang in 1990, obviously with official permission as it
was printed by the state-owned Foreign Languages Publishing House.
Apart from painting a flattering portrait of the North Korean leader, the book
describes Baeli's first trip to Pyongyang in 1990, of which he wrote, "We were
interested in investing in the mining industry, mainly in the extraction of
gold and granite." Baeli later signed a contract for a loan of $118 million to
purchase mining equipment, and the goal was to resurrect no fewer than six gold
mines across North Korea. The money was to be provided by international banks
such as Midland Bank and the Naples International Bank. He also arranged for
the mining equipment to be shipped from Italy.
But heavy flooding in the mid-1990s damaged both the equipment and the mines
and, according to a 2006 report in Forbes magazine, Baeli today works as an
adviser to the Pyongyang government at a tire-recycling plant. The car and
truck tires are imported from Japan, get ground into granulate in North Korea,
and are sold to China for road resurfacing, car mats and shoe soles. A
lucrative business, perhaps, but not quite the golden dream Baeli had when he
first arrived in Pyongyang nearly 17 years ago.
Another unusual partner in North Korea's gold trade may have been the late
Philippine dictator Ferdinand Marcos. In August 2001, the right-wing South
Korean newspaper Munhwa Ilbo published a story claiming that Marcos in
September 1970 had deposited 940 tons of gold bars at a Swiss bank in the name