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2 North Korea bites a golden
bullet By Donald Kirk
SEOUL - Gold fever is rampaging through
the ruling elite of North Korea in the quest for
relief from seemingly incurable economic malaise
exacerbated by more than a year as a total outcast
from the international financial community.
Word from Pyongyang is that trading
companies and even individuals are offering
payments in gold for imports from across the
border with China and also in barter deals for
products imported from elsewhere. Gold also has
become a form of currency in the internal reward
system of payoffs and bribes
manipulated by Dear Leader
Kim Jong-il to guarantee the loyalty of
high-ranking officials.
The
rush to sell gold - and, to a lesser extent,
silver - has sharply escalated in the 16 months
since the US Treasury Department
blacklisted Banco Delta Asia
(BDA) in Macau, banning all firms doing business
with US firms from dealings with that bank. The
Treasury Department charged that the BDA had been
the principal conduit through which North Korea
was shipping counterfeit US$100 "supernotes"
printed on a highly sophisticated Swiss-made press
in Pyongyang.
It's well known that the US
ban forced the BDA to impose a freeze on North
Korean accounts totaling $24 million, but less
well known that the bank also stopped purchasing
gold produced by North Korea's historic gold
mines, in operation, sporadically, since the late
19th century.
Output of the mines, in
mountains about 160 kilometers north of Pyongyang,
fell sharply in the late 1990s as a result of
flood and famine but, with foreign expertise, has
begun to pick up in the past few years.
The impact of the ban, moreover, goes far
beyond a single bank in Macau. Although North
Korea last spring sold $38 million in gold and
silver in Thailand, Pyongyang has been frustrated
in reviving its presence on the London bullion
market, the world's largest marketplace for
precious metals, amid increased US pressure on the
large international banks that are the major
buyers of gold.
It was in the aftermath of
the ban on the BDA that North Korea's Chosun
Central Bank coughed up the information required
by the London Bullion Markets Association (LBMA)
for listing as a "good deliverer" of gold. North
Korea from 1983 to 1993 had been in the LBMA's
good graces, averaging a ton a month in sales to
London buyers that included some of the world's
leading banks, but had slipped off the list after
failing to keep up deliveries.
The fact
that the Chosun Central Bank again is listed with
the LBMA, however, is no guarantee North Korea
will be able to sell its gold. The US Treasury ban
on dealings with the BDA - as well as sanctions
unanimously imposed by the United Nations Security
Council after North Korea conducted an underground
nuclear test in October - has spooked buyers in
London.
While the LBMA disavows "political
criteria" in deciding on eligibility for its "good
delivery list", an LBMA memorandum leaves no doubt
how buyers are likely to respond to overtures from
a country or company on an international
blacklist. None of them, according to Stewart
Murray, the LBMA's chief executive, is willing to
take delivery from a company or country that is
subject to sanctions.
Or, as the LBMA
memorandum puts it, "If, for instance, a bullion
custodian considered that it was bound by national
or international sanctions that were in force
against a particular country, it would have to
refuse to accept bars from a refiner in that
country."
The memorandum, moreover, does
not mince words when it comes to stating the
importance of a "good deliverer" rating. "Given
the status of London as the world's leading center
for bullion trading," it says, "the LBMA List has
become the de facto world list of quality refiners
and Good Delivery accreditation is a highly
sought-after accolade."
In recent years,
"the List" - capitalized in the memo - "has grown
primarily due to the listing of refiners in China
and Russia" and now totals 77 refiners in 31
countries.
Investors see North Korea as
competing on a world stage once sanctions are
lifted. "What we're doing is normal business,"
said Roger Barrett, whose firm, Korea Business
Consultants, operates in North Korea from
headquarters in Beijing. By reviving old
mines
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
blacklisted Banco Delta Asia
(BDA) in Macau, banning all firms doing business
with US firms from dealings with that bank. The
Treasury Department charged that the BDA had been
the principal conduit through which North Korea
was shipping counterfeit US$100 "supernotes"
printed on a highly sophisticated Swiss-made press
in Pyongyang. 
