Kim and Putin agreements shrouded in secrecy; NK restaurants abroad; Sanctions waivers for the USD6 billion; Iran-UAE trade increasing
Prohibited Transactions for the week of 11 Sep 2023 (#19)
North Korea
North Korea’s leader Kim Jong-un is visiting Russia and held five hours of talks with Russian president Vladimir Putin. No specifics about any agreements were released, though a Russian commentator noted that the talks were “substantially rich and non-standard.” Putin said military and technical cooperation with the DPRK was possible despite international sanctions, and could include helping Pyongyang build its own satellites. The US has threatened sanctions if any arms transfers occur, and South Korea has warned Russia about entering into any deals with the DPRK. //With all the attention focused on the Russian Far East, this is one of those weeks where North Korean illicit actors could get away with a lot more than usual. Though the meeting between Kim and Putin is very public, any agreements will likely be quietly implemented so as to avoid outside scrutiny for as long as possible. Other than offering up more sanctions, it’s unclear what else South Korea or the US would be willing to do in an attempt to prevent any arms trade. The PRC may be the only party with enough influence to stop any deals from going through.
There remains less than 20 North Korean restaurants operating overseas in the PRC, Russia, Laos, and Vietnam. In the past, the restaurants themselves provided revenue for Pyongyang, but they now likely operate as money laundering fronts for overseas North Korean IT workers who are engaging in cybercrime, as well as serving as a base of operations for other North Korean foreign workers. //Very informative article which puts into context the role these overseas restaurants play in the DPRK’s illicit networks. Also, who are the suppliers providing the food and other equipment needed to keep these restaurants going?
Iran
The US government issued sanctions waivers allowing the transfer of approximately USD6 billion of Iranian funds from South Korean banks to Qatar. The US also confirmed a prisoner swap with Iran, with Washington freeing five Iranian nationals who have been charged with violating US sanctions against Iran, or providing Tehran with other kinds of illicit help. Though US government officials continue to emphasize that the released funds can only be used for humanitarian trade, Iran’s president said that the money will be used “wherever we need it.” //This is just bluster by Raisi, as it seems unlikely that Qatar’s central bank would want trouble from the US by allowing Iran to use the funds on anything Tehran wants.
The Russian bank Sber announced a service allowing clients to transfer money to Iran. This follows VTB’s offering of a similar service at the end of 2022.
Trade between the UAE and Iran has surged in recent months, with Iranian officials hoping to increase bilateral trade to approximately USD30 billion in the next two years. Trade between the two countries was valued at USD24 billion in the 12 months ending in March 2023. In the past, some Iranian banks and companies have used trustees in the UAE to act as proxies in cross-border transactions, in particular with Western markets. Some of the banks are now approaching their UAE counterparts asking to formalize the previously grey nature of their business relations. //The UAE has historically been known as a place that Iran can launder money, and increased commercial ties will just make it easier for the illicit actors to hide their funds among legitimate transaction flows.
The US, UAE, India, Saudi Arabia and the European Union agreed to create transport corridor — the “India, Middle East, Europe Corridor” (IMEC) — which would bypass Iran, and could be competition for the International North-South Transport Corridor (INSTC).