Countersanctions from NK; Wonsan tourism; Tehran & Moscow joint declaration; Iranian free trade zones attracting investment
Prohibited Transactions for the week of 4 Dec 2023 (#29)
North Korea
Following last week’s sanctions — by Australia, Japan, South Korea and the US — in response to North Korea’s recent launch of a military reconnaissance satellite, Pyongyang declared they “will apply countermeasures to individuals, institutions and organizations of the U.S. and its vassal forces involved in the drawing and execution of the sanction policy toward the DPRK.” //They appear to be taking a page out of Beijing’s countersanctions playbook. Though any future countersanctions won’t deter Western governments, is there a chance some PRC banks will abide by North Korea’s “countermeasures”?
The US sanctions include designations of North Koreans raising and laundering funds in Iran, the PRC, and Russia, in addition to Kimsuky, a North Korean cyber intelligence group that supports the country’s “strategic and nuclear ambitions.”
According to covert reporting from inside North Korea, in an attempt to revitalize the nation’s tourism industry, the government is trying to attract foreign investment from the PRC and Russia for the Wonsan-Kalma Coastal Tourism Zone. //Supposedly a Kim Jong-un pet project. North Korean officials will also be promoting travel to the country at a March 2024 travel and hospitality trade show in Russia.
The Russian government may also use tourism as a cover for North Korean workers to enter the country, which is otherwise prohibited under a UN Security Council resolution.
By registering vessels with island nations in the Pacific — such as Palau, Niue, Cook Islands and Tuvalu — North Korean illicit actors continue to attempt to obfuscate their ties to these cargo ships, which usually deliver fuel directly or indirectly to the DPRK.
Cross border trade between the PRC and North Korea appears to be increasing, as more cargo trucks have been seen bringing goods into the DPRK. Though the volume of trade is low compared to pre-COVID-19 activity, the rise in activity follows increases in maritime and freight train trade over the past few months.
Andariel, a North Korean hacking group — identified as being part of Lazarus Group — is accused of stealing defense data from South Korean firms, as well as transferring USD360,000 worth of virtual currencies to North Korean control. Some of the funds were reportedly transferred to a Chinese bank and withdrawn from a branch near the Sino-North Korean border. //The US government identified Andariel as being involved in “cybercrime to generate revenue and targets South Korea’s government and infrastructure in order to collect information and to create disorder.” It would be interesting to learn more about the person accused of withdrawing funds on the border, since both news articles make it seem like the South Korean police are investigating this person. Does this mean the person is no longer in the PRC, as I find it hard to believe that the Chinese police would assist with this kind of investigation.
Seoul is accusing the DPRK of illegally operating 30 South Korean-owned factories in the Kaesong Industrial Complex, the now closed inter-Korean joint industrial park.
The DPRK is closing its embassies in Senegal and Guinea, making them the eighth and ninth missions to close since October, following closures in the Democratic Republic of the Congo, Bangladesh, Spain, Hong Kong, Uganda, Angola and Nepal. Additionally, North Korea’s ambassador to Switzerland is being recalled amidst claims he is involved in elephant tusk smuggling. //The closures and recall are reminders of the role that North Korean diplomatic missions and diplomats play in raising funds for the government. Historically, embassy officials are known to be involved in illicit activities in their host countries, so the activities of the ambassador in Switzerland are no real surprise, especially as he was accused of smuggling in the early 1990s when posted to Zimbabwe.
Iran
Tehran and Moscow signed a joint declaration on “the Ways and Means to Counter, Mitigate and Redress the Adverse Impacts of Unilateral Coercive Measures,” which they define as any sanctions implemented outside of the UN Security Council. //The declaration generally mirrors previous statements by both governments on the need to move away from using US dollars in international trade, and creating regional financial institutions to bypass ones that adhere to US or EU sanctions. It says that “private property and assets, including bank accounts…shall be immune from and not subject to freezing, forfeiture or any other form of confiscation or restriction arising from the implementation of unilateral coercive measures by any authorities.” It will be interesting to see if this gains any traction, perhaps among BRICS or SCO member states.
Iran and Cuba will work together to “neutralize” US sanctions and “stand against the system of domination.”
According to the Iranian government, cargo transit via the International North-South Transport Corridor (INSTC) exceeded 10 million tons this year. There appears to be some interest in having the INSTC extend into Armenia. //As noted by an Iranian official, custom fees from an increased number of goods transiting through the country could generate more money than from oil revenues. These transit routes can blunt the impact of sanctions not only by the fees raised, but because of increased road and rail connections allow for the movement of illicit goods in and out of the country.
Iran and Türkiye are setting a goal of transporting one million tons of cargo by rail between the two countries in 2024.
An Iranian government official stated that Iran’s free trade and special economic zones have attracted approximately USD740 million of investment between March 2023 and now, and that investors are looking to invest another USD8.6 billion into 1,400 projects in seven separate free trade zones throughout the country. //The article notes that these free trade zones have “become one of the major economic approaches of the Iranian government.”
What else I’m reading:
“The Private Companies Propelling Iran’s Drone Industry” from the Wisconsin Project on Nuclear Arms Control. //For folks interested in better understanding the domestic companies in Iran supporting the country’s drone ecosystem.
“Is Biden Ignoring Iran’s Sanctions Evasion?” from Foreign Policy. //Insightful analysis as to why the increase in Iranian oil exports of late isn’t due to an easing of sanctions pressure from the Biden administration, but instead part of a longer trend that actually started at the end of the Trump administration.