DPRK opens borders; New sanctions on NKers tied to WMD programs; Iranian funds in Japan; Russian goods to Saudi Arabia via INSTC
Prohibited Transactions for the week of 28 Aug 2023 (#17)
North Korea
North Korea’s government officially opened its borders to North Korean citizens living abroad, and will require one week quarantine for all returnees. //Will the movement of people to and from the DPRK impact the operations of their illicit networks? Perhaps replacing some of their less efficient overseas operators?
Approximately 500 North Korean workers crossed the border via bus from Dandong, China, to Sinuiju, North Korea on Monday. Students, the sick, and persons accused of crimes were reportedly in the first wave of returnees. In total, 1,000 are expected to return to the DPRK by the end of the week.
An empty Air Koryo flight flew to Vladivostok, Russia, and returned to Pyongyang filled with returnees.
The US government accused Pyongyang and Moscow of advancing high level talks over a potential arms deal which would supply Russia with weapons that could be used in their invasion of Ukraine. A Russian spokesperson said that Moscow will continue to deepen ties with its neighbor.
South Korea sanctioned a North Korean company and five individuals tied to it for funding the DPRK’s weapons of mass destruction (WMD) programs. The US government also sanctioned two individuals and one entity for generating revenue used for North Korea’s WMD and ballistic missile programs. All three are based in Russia and the two individuals are accused of coordinating the use of North Korean construction workers in Russia, procuring parts used in the DPRK’s ship-building industry, and acquiring identity documents for use by North Korean IT teams when applying for jobs on freelance work platforms. //This is another reminder that whenever North Koreans earn money overseas, some — if not all of it — is going back to their WMD programs. There is a strong argument to be made that any and all North Korean illicit financial activities should be considered proliferation financing (PF) and dealt with accordingly.
Related to the complexities of banks trying to deal with PF, there was a report released last month, “Countering the Challenges of Proliferation Financing” which looks at the policy challenges of PF and its consequences. From someone who has worked in traditional financial institutions, the problems outlined in the report with implementing PF controls on an operational level by banks all ring true. But beyond the policy issues (such as there being no universal definition of PF), I’ve always found there to be a lack of conceptual understanding of what PF is, and the risks associated with it. People seem to more easily grasp the idea of money being funneled to drug cartels, or profits from human trafficking moving through the banking system, as opposed to funds being used to purchase valves, seals, and pipe lining materials used in the construction of a nuclear weapon.
Iran
Iran’s president Ebrahim Raisi issued contradictory statements regarding the possibility of more Iranian money being held overseas, first by saying that Japan held USD1.5 billion of blocked Iranian funds, and then later in the same press conference stating that any other overseas funds were available to the Central Bank of Iran.
Other news reports from earlier in the month stated that Iranian and Japanese leaders will meet in September during the UN General Assembly, and that Iran plans to request that Tokyo unfreeze approximately USD3 billion of Iranian money being held in Japan. //So anywhere from USD1.5 to 3 billion of Iranian funds could be frozen in Japanese banks, that Tehran may or may not have access to. The release of these funds would also likely be contingent on Washington’s approval, as with the case of the money in South Korean banks. Even with the release of these billions, it’s unlikely that Tehran would curtail any of their illicit financial activities.
Iranian officials acknowledged that the oil tanker seized by the US in April 2023 was carrying approximately USD56 million worth of Iranian oil (see Issue #16), and that recent unloading of the oil off the coast of Texas will not remain unanswered.
In an attempt to avoid Western sanctions, Moscow is turning to smaller, low-profile shipping companies based in southern Russia in order to transport Iranian-made drones across the Caspian Sea. Russian-flagged vessels travel to the Iranian port of Amirabad to receive drones and other military supplies. Experts suggest that it would be possible to put pressure on the vessel owners by cutting off access to international insurance markets, which would limit the cargo that the ships could take on from other nations.
Iran’s second largest car maker, Saipa, has signed a contract to export 120,000 passenger and commercial vehicles to Russia. //According to the article, this will include 30,000 Nissan pickups. In 2017 it appears that Nissan, and Kia, signed joint production deals with Saipa, though it is unclear if the deals continued following the 2018 US withdrawal from the Iran nuclear deal and reimposition of sanctions. As discussed in Issue #2, Saipa is planning to import 100,000 cars from China into Iran by March 2024.
For the first time, a train carrying Russian goods destined for Saudi Arabia used Iranian transport routes within the International North-South Transport Corridor (INSTC).