Many small countries in the world have
resorted to unorthodox methods of obtaining
much-needed currency. Although these methods may
be legal, they often assist unscrupulous
individuals and governments in conducting illegal
activities. One popular method of obtaining cash
is through flags of convenience (FOC). Countries,
even land-locked ones, register other nations'
ships under their flag for a price.
It is
a profitable industry that has no shortage of
customers. Shipowners choose to register their
ships under a foreign flag for a
number of reasons, including
tax advantages, cheap non-union crews, the ships'
conditions fail to meet the standards of the
owner's country, political reasons, or to
facilitate illegal activities.
Because
many of these ships often exchange flags and even
their names, it is difficult to trace them, thus
providing the anonymity they need to conduct their
illegal operations. According to a statement by
David Cockroft, general secretary of the
International Transport Workers' Federation (ITF):
"Arms smuggling, the ability to conceal large sums
of money, trafficking in goods and people and
other illegal activities can also thrive in the
unregulated havens which the flag of convenience
system provides."
Flying the Cambodian
flag One of the most notorious FOC
countries was Cambodia. In 1994, Cambodia
established its own ship registry - Cambodian
Shipping Corporation (CSC), based in Singapore -
and began immediately flagging ships of other
nations.
Although its beginnings were
modest (only 16 foreign ships registered with
Cambodia during the first year) the CSC rapidly
expanded. According to CSC, prior to its closing
in 2002, the number of ships registered with the
company was between 400 and 600, but according to
US investigators and Cambodian officials the
number was probably twice that.
CSC
offered basically what many other FOC countries
offered: registry for any ship, no questions
asked, under its (Cambodia's) flag for a low
price. But, unlike other FOC countries, it offered
to do the entire process online and within 24
hours. Despite Cambodia's relative lag in Internet
technology, its operation in Singapore enabled CSC
to pioneer online registration.
As more
and more foreign ships registered with CSC, it
soon became apparent that a large number of the
ships were involved in illegal activities.
Cigarette smuggling operations were discovered
near Crete and Albania; during the oil embargo of
Iraq, oil was smuggled out of that country; human
trafficking and prostitution operations were
discovered near Japan and Crete, and, of course,
drug trafficking.
All of these activities
were cause for concern and drew condemnation, but
there was one more criminal activity that
concerned many nations even more: allegations that
many of the ships were running arms. "Cambodia is
one of the highest-risk flags. It is particularly
murky and has got to be one of the first choices
if you are running arms," a spokesman for ITF
said.
When asked about CSC's alleged
illegal operations, Ahamd Yahya of the Cambodian
Ministry of Public Works and Transport was
reported to have told Fairplay: "We don't know or
care who owns the ships or whether they're doing
'white' or 'black' business ... it is not our
concern." (Fairplay, October 12, 2000.)
Unsafe ships In addition to
illicit activities, the condition of the ships
themselves was a concern. According to an article
in the Guardian of London, by 2002 the company had
about 450 registered ships, and out of this number
25 had suffered shipwrecks/strandings, 41
collisions, nine fires and 45 arrests. Nine
Cambodian-registered ships were deemed severely
hazardous and banned from entering European ports.
By the summer of 2002, many of the leading
shipping organizations were calling for action to
be taken against CSC. A spokesman for ITF
condemned CSC and Lloyds shipping intelligence
service wrote in an opinion piece: "The world
should join us in demanding that Cambodia shut
down this sleazy and pestilent offshore
registration. How many more people have to die in
incidents involving Cambodian-flagged vessels, or
its ships detained for illegal activities, before
something is actually done about it?"
The North Korean connection American and South Korean interests in CSC
were aroused when it was observed that a large
number of North Korean ships, at least a dozen
according to Michael Richardson, journalist and
author of A Time Bomb for Global Trade,
were registered with CSC and flying the Cambodian
flag.
It is no secret that the Cambodian
royal family had, and still maintains, a close
relationship with the North Korean regime. King
Norodom Sihamoni has often spoken of the Kim
regime in a favorable manner. Kim Il-sung provided
him with asylum during the turbulent years of
Cambodia's past and even built him an extensive
60-room palace outside Pyongyang. When the royal
family returned to Cambodia it was accompanied by
North Korean diplomats and bodyguards.
North Korea's involvement in Cambodia's
flag of convenience operation was suspected after
an investigation revealed that one of the primary
partners in CSC was Lim In-yong, a senior North
Korean diplomat who had served in Cambodia for
many years. His role with CSC was described as
being that of "a private citizen, [and] not as a
representative of the North Korean government".
Whether his role was purely that of an individual
or of a more sinister nature is unclear. But the
United States and several other countries became
increasingly suspicious of North Korea and the
company's motives.
Among several charges
of illegal operations by North Korean ships, one
was drug smuggling. When it was suggested in the
media that Cambodian-registered North Korean ships
may have been involved in drug smuggling, CSC
denied any knowledge.
Incidents of drug
smuggling involving ships from other nations
flagged by the company were apparent. In 2002, the
Greek-owned, but Cambodian-registered Winner was
seized by French forces and discovered to be
smuggling a large amount of cocaine. Interestingly
enough, Hun Sen, the prime minister of Cambodia,
gave his permission to the French government to
board the ship - an indication that he did not
support CSC. A short time later he revoked CSC's
authority to grant registry to foreign ships.
Perhaps the most infamous North Korean
drug smuggling operation took place in 2003. The
North Korean freighter Pong-su began its journey
from North Korea under its own flag, but on
arriving in Singapore changed its registration and
reflagged under Tuvulu. It then proceeded to
Australia where it was discovered trying to
smuggle in a large amount of heroin, and was
eventually seized after it tried to resist
Australian authorities. Although this incident did
not involve a Cambodian-flagged ship, it does give
some credence to speculation that North Korea had
smuggled drugs using CSC-flagged ships.
Weapons smuggling While North
Korea's attempts to gain badly needed hard
currency by smuggling drugs and tobacco were of
some concern to the United States, more important
were allegations that North Korea was smuggling
and selling advanced weapons technology to other
nations.
"Of most concern to the US and
indeed to South Korea was the clear evidence that
North Korean freighters flying the Cambodian flag
or on the Cambodian register were moving ballistic
missiles to clients in the Middle East and
Africa," noted journalist Richardson.
Perhaps the best-known of these
Cambodian-registered North Korean ships was the
Song Sang. In November 2002, a freighter believed
to be carrying weapons departed a North Korean
port and was tracked by American satellites and
American naval ships. In December, as it made its
way through the Indian Ocean, it was stopped by
American and Spanish naval forces and inspected.
The United States justified its actions by
claiming that it was flying no flag and thus was
considered a pirate ship. According to Richard
Boucher, the State Department's spokesman, "At
first we couldn't verify the nationality of the
ship because the ship's name and the indications
on the hull and the funnel were obscured. It was
flying no flag."
On investigation it was
found that the ship was the So San, which claimed
to have Cambodian registry. The So San's manifest
stated it was transporting cement to Yemen, but an
examination revealed 15 Scud missiles with 15
conventional warheads, 23 tanks of nitric acid
rocket propellant and 85 drums of unidentified
chemicals all hidden beneath the bags of cement.
It is believed that the North Koreans
tried to disguise the ship (Song Sang) by painting
over the last two letters in the first name and
the final letter in the second name (So San) to
help prevent identification. The ship was
eventually allowed to continue on its course after
it was determined that it had broken no laws.
World criticism Following the
World Trade Center and other terrorist attacks,
world opinion began to force the Cambodian
government to reconsider its policy of allowing
CSC to flag ships at will. The Cambodian
government felt compelled to take action before
one of the ships under its flag was found guilty
of terrorist activity.
"We are victims
because the company recklessly allows ships to use
the Cambodian flag without proper inspection or
control," said Hor Namhong, the foreign minister,
adding: "The company will be audited by the
government."
In July 2002, bowing to
international criticism over concern for
"Cambodia's maritime safety record", the Cambodian
government revoked CSC's authority to grant
registrations, giving that authority to the
Ministry of Public Works and Transportation.
Ironically, it was this ministry that had just two
years earlier declared disinterest into the
alleged illegal activities of ships registered
under its flag.
The Ministry of Public
Works and Transportation was only in control of
the registry for about six months before the
Cambodian government granted the authority to
register and flag ships to a new company,
International Ship Registry of Cambodia, and its
representatives in Busan, South Korea. According
to e-mail correspondence from the company's
managing director, Charles Bach, to New York Times
reporter Keith Bradsher, there are no longer any
North Korean ships registered under the Cambodian
flag.
But Marcus Hand, the Asian editor
for Lloyd's List, explained how difficult it is to
know for certain who owns what ship because so
many of them are owned by different companies
registered throughout the world and only the North
Koreans themselves know how many ships they own
and what flag they fly.
Not only does
North Korea purchase flags of convenience, it also
sells them for nearly three times the normal
asking price. According to ITF in 2006, out of 408
North Korean-flagged ships, only 187 of them were
actually owned by North Korea; the rest were owned
by other nations including Cambodia, Tonga,
Comoros and Sao Tome and Principe - nations that
are infamous for their own flags of convenience.
Prior to the United Nations Security
Council's resolution following North Korea's
nuclear test in October 2006, some of the ships
registered to North Korea may have done so to
avoid inspection while they carried out illegal
activities.
There is some question as to
the number of ships that were owned by United
States-based companies and registered and flagged
under North Korea. According to the American
Central Intelligence Agency's Fact Book, there
were three, but Bill Gertz, in an article
published with The Washington Times (June 8,
2006), listed nine ships owned by foreign
companies, such as Egypt and Syria, based in
Delaware, United States. One of these ships was
discovered in March 2006 engaged in smuggling
migrants off the coast of Europe. Under sanctions
that went into effect in May 2006, the companies
were required to cancel their registrations with
North Korea and seek new registrations with other
countries.
The new threat With
the CSC no longer able to grant registrations and
Cambodia and South Korea's progressively warmer
relationship, North Korea has been forced to look
elsewhere to register its ships. According to The
Straits Times, at least 40 nations in the world
engage in flags of convenience; many of them
willing to flag North Korean ships for a price.
North Korea does business with several of them,
but a surprising replacement for Cambodia has
apparently been found - Mongolia, a land-locked
nation.
However, following North Korea's
nuclear test in October of last year, Mongolia's
Ship Registry has urged ships under its flag to
abide by the United Nations resolution against
North Korea. It is unclear what effect this has
had on North Korean ships registered with
Mongolia.
In addition to the North Korean
threat of nuclear weapons, it has been speculated
that North Korea may have the ability to launch
modified missiles from its submarines and cargo
ships. North Korean-flagged ships would be more
susceptible to being stopped and searched by
United Nations forces, but ships under FOC might
pass unnoticed through surveillance and pose a
significant threat to the enemies of the Pyongyang
government and to the reputations of the
governments which flagged them.
Robert Neff is a former
columnist with the Korea Times. He is currently
doing research for several books dealing with
early Korean-Western relations from 1880-1910 and
also on the Western gold mines in Korea
(1882-1939). He has been based in Korea for about
20 years - first with the military and now as an
independent researcher.
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2007 Asia Times Online Ltd. All rights reserved.
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