North Korean Conglomerates
Their Arms Connection, and Sanction Busting Activities
By Kathrin Kranz
1. Introduction
Conglomerates are large corporations formed by the merging of separate and diverse firms. North Korea’s conglomerates are well organized and funded, and are characterized by increasing sophistication in their methods of violating sanctions. Conglomerates are a crucial part of DPRK foreign policy as well as a means to procure hard cash. The North Korean government has established and/or supported the growth of conglomerates with the explicit purpose of developing ties with other countries through the sale of DPRK products, including arms and related goods and training. In turn, conglomerates have helped the government obtain the hard cash and parts required for its nuclear proliferation program.
Trading with North Korea is thus a double-edged sword. On the one hand, purchasing DPRK goods and services offers a reliable and affordable option for many developing states. On the other hand, it entails significant reputational risks for countries, in particular in the sensitive area of the arms and nuclear weapons trade. Since DPRK conglomerates cooperate with other actors with poor international reputations, such as Iran, the risks of being associated with them are grave. It is almost certain that DPRK conglomerates are here to stay. For example, during the summit between the DPRK and the United States in Hanoi in February 2019, senior members of the North Korean delegation visited the Vietnamese largest conglomerate Vingroup. According to media reports, the DPRK was studying ways to improve its own economy. As DPRK conglomerates continue their operations, they will work to find ways for shielding their activities in order to evade sanctions. A better understanding of DPRK conglomerates, their services and goods, particularly their activities abroad, is thus crucial for states and companies who have relationships with North Korea, and wish to comply with all UN sanctions measures.
2. North Korean Conglomerates and the arms connection
North Korean conglomerates are best described as “private-public partnerships.” Under North Korean law, the government is the sole economic operator and nominally owns all companies. While mainly run privately, and in part relying on private funding from North Korea’s affluent elites, conglomerates have close ties to the state and the Workers’ Party of North Korea. These conglomerates seem to be growing in importance, not least as there has been a trend toward “diversification and conglomeratization” of some of North Korea’s more prominent brand names, which is evidenced by a growing number of North Korean-made products in DPRK stores.
For example, Naegohyang, a DPRK army-owned corporation, has evolved from selling cigarettes to products such as electronics, baked goods, and drinks. Other DPRK companies that are growing into conglomerates are Air Koryo (airline, taxis, gas stations, soft drinks) and Korea Kumgang Group (taxis, banking, real estate). The activities of domestic conglomerates are supported through the efforts of DPRK conglomerates abroad, which in this context both serve as a source of foreign exchange income for the DPRK and help procure resources necessary for domestic production of goods. Given the sophisticated and comprehensive nature of United Nations (UN) sanctions, conglomerates’ activities will almost certainly involve the violation of UN sanctions, or venture close to the grey areas of sanctions-relevant activities.
This is especially the case as North Korea’s globally active conglomerates are often involved in the trade in arms and related goods and services. Due to their sensitive nature, activities related to the trade in arms and related goods and services pose significant reputational costs for countries found to be working with the DPRK. The 2019 UN Panel of Experts report notes that the DPRK ”has attempted to supply small arms and light weapons and other military equipment to [Iranian-backed] Houthi rebels in Yemen, as well as to Libya and the Sudan, via foreign intermediaries, including Syrian arms trafficker Hussein al-Ali". According to reports, North Korea has also collaborated with Syria and Iran to establish Syrian facilities that manufactured chemical weapons, which were likely used by the Syrian regime against the Syrian people.
Particularly noteworthy is the relationship with Iran, which has been described as the DPRK’s best customer. During the Iran-Iraq War alone, the DPRK transferred some $1 billion in conventional arms, training, and military assistance to Iran. More recently, the countries have cooperated on their nuclear programs. KOMID has transferred DPRK-devised ballistic missile technology and components to counterparts in Iran. DPRK conglomerates KOMID/Green Pine, designated for sanctions by the UN, have offices in Iran. Green Pine, with support of the DPRK intelligence agency Reconnaissance General Bureau, has also been involved in arms trafficking with and to Iran. In turn, the presence of conglomerates KOMID/Green Pine in Iran has supported activities in other nations, including in Africa.
The DPRK’s relationships with African countries often involve military and/or arms-related cooperation and construction services. For example, it has been alleged that an arms production and repair facility in Nakasongola, Uganda, for which China had provided assistance originally when it was established, has been supported by the DPRK. In recent years, the Uganda-DPRK relationship appears to have involved training and expertise for Ugandan internal security forces and the provision of “non-lethal” equipment. The relationship has involved DPRK conglomerate KOMID (a UN designated entity) and in turn, cooperation that ventures close to grey areas of sanctions-related activities.
3. The Conglomerates
3.1 Green Pine Associated Corporation (Green Pine)/Korea Mining Development Trading Corporation (KOMID)
Green Pine Associated Corporation (Green Pine) replaced the Korea Mining Development Trading Corporation (KOMID) after KOMID was designated on 24 April 2009. Green Pine was subsequently designated on 2 May 2012. Green Pine/KOMID is the primary arms dealer and main exporter of goods and equipment related to ballistic missiles and conventional weapons. It operates under the direction of the Reconnaissance General Bureau, North Korea’s primary foreign intelligence service.
Green Pine, and KOMID before it, have several affiliated entities, operate under aliases abroad, and cooperate with other companies which may or may not be direct parts of their conglomerates. In light of the complexities of the Green Pine/KOMID conglomerates and their operations, it is useful to consider some of the networks that Green Pine/KOMID established.
For example, KOMID cooperated with Mansudae Overseas Project Group of Companies (Mansudae), a DPRK construction company. Mansudae has run construction operations in at least 14 African states, “building everything from ammunition factories, to presidential palaces, to apartment blocks.” Mansudae, until recently, had headquarters in Namibia, where its Managing Director was Kim Tong Chol. It was listed on 5 August 2017 for engaging in, facilitating, or being responsible for the exportation of workers from the DPRK to other nations, including Algeria, Angola, Botswana, Benin, Chad, the Democratic Republic of the Congo, Equatorial Guinea, Mozambique, Namibia, Togo and Zimbabwe. Together, KOMID and Mansudae were implicated in the construction of a munitions factory in Namibia.
KOMID’s financial organization also relied on other entities, themselves implicated in sanctions violations. Tanchon Commercial Bank (previously known as Changwang Credit Bank FKA: Korea Changwang Credit Banking) was the main financial arm of KOMID. It is associated with a number of other designated entities, including Amroggang Development Bank and Korea Kwangson Banking Corporation, which also conduct financial transactions on behalf of KOMID.
Green Pine, meanwhile, operates under numerous aliases, such as Natural Resources Development and Investment Corporation or General Precious Metal. Bank of East Land facilitates weapons-related transactions for, and other support to, Green Pine. It was listed on 29 October 2014 and “has actively worked with Green Pine to transfer funds in a manner that circumvents sanctions.” The Green Pine president is Ri Hak Chol, who has traveled to Angola, Egypt, and the Islamic Republic of Iran, despite sanctions intended to restrict such international movements.
3.2 Glocom
Glocom is a Reconnaissance General Bureau-directed international commercial network that sells prohibited military communications technology and is based in Malaysia. It acts as a front company of DPRK Pan Systems Pyongyang, which has played a major role in procurement and financing of sensitive and dual-use goods on behalf of the DPRK. Glocom has multiple overseas accounts in four countries set up through two Malaysia-based front companies (International Golden Services and International Global System). Glocom’s payments to suppliers and transfers around the network involve movement of deposits from North Korea, China, Malaysia, Singapore, and the United States, middlemen, and a front company in Hong Kong. Recipients see only the payment from the front company. Such strategies of sanctions evasion and deception have allowed Glocom to participate in prominent regional arms fairs and to sell high-end arms and related material in multiple countries. Indeed, the openness with which it has conducted its business in part accounts for its success: openly advertising goods affords Glocom some degree of legitimacy.
4. Key Sanctions Violations in africa
Several sanctions violations can be documented based on UN and media reporting. Various sanctions, including travel bans, and arms, military cooperation, trade and financial embargoes, have been circumvented.
4.1 KOMID/ Green Pine
4.1.1 KOMID
4.1.1.1 Namibia
KOMID provided key components for construction of the Namibian Oamites munitions factory in cooperation with, or using the alias of, Mansudae Overseas Project Group companies. Mansudae used laborers from the DPRK. Namibia confirmed that Mansudae was involved in several military construction projects, including the military academy and the headquarters of the Ministry of Defense, but it denied knowledge of links between Mansudae and KOMID.
In addition, KOMID supplied various types of pressure tanks and machinery to Namibia that can be used for military explosives and the production of propellants.
The DPRK Embassy in South Africa supported KOMID officials in whose names they established a bank account in Namibia.
4.1.1.2 Uganda
KOMID reportedly provided training to the Ugandan military and police forces, and in particular the Ugandan air force. These activities were supported by DPRK national and designated individual Ryu Jin. He used both the Tosong Technology Trading Corporation and the Tanchon Commercial Bank as subsidiaries to circumvent sanctions against him. He is believed to have traveled under an alias.
It has also been reported that the military attaché’s office at the DPRK Embassy in Kampala, Uganda, attempted to provide prohibited military services. In December 2018, a media report alleged that KOMID continued its activities in Uganda, and that various weapons deliveries to Uganda were completed the same year. The 2019 Panel of Experts report noted that Ugandan officials may be aware of the KOMID connection. It also noted that other prohibited joint ventures continued to operate.
4.1.1.3 Sudan
The two KOMID officials in Sudan are Kim Song Chol, who also operates under the alias Kim Hak Song, and Song Jong Hyok, who also uses the alias Son Min. Both operatives were previously evicted from Egypt, and according to reports, are at the center of a connection between the Sudan and the DPRK. Allegedly, KOMID engages with the Sudanese State-controlled Military Industrial Corporation. In addition, a number of air and sea shipments from the DPRK to the Sudan that are related to KOMID are being investigated.
The DPRK also supplied one hundred 122-mm precision guided rocket control sections and eighty air attack satellite guided missiles to Sudan Master Technology Engineering Company. The contracts for the sales were signed by KOMID president Kang Myong Chol (alias Pak Han Se), using KOMID front company, Chosun Keunchon Technology Trade Company. Kim Song Chol, then based in Egypt, traveled to Khartoum as part of the deal, and was accompanied by 13 KOMID staff.
According to a US Department of the Treasury press release, KOMID representative Jang Song Chol, is “working with individuals in Sudan who are procuring materials from him,” further suggesting military dealings between Sudan and North Korea.
4.1.2 Green Pine
4.1.2.1 Angola
The UN Panel of Experts investigated DPRK diplomats accredited in Angola working on behalf of Green Pine who had previously engaged in prohibited arms-related activities.
The Panel also continues its investigation into the training of the Angolan presidential guard by DPRK personnel and diplomats accredited in Angola who are working on behalf of Green Pine. One diplomat, Kim Hyok Chan, was responsible for the refurbishment by the DPRK of Angolan naval vessels in violation of sanctions. He, together with Green Pine representative Jon Chol Yong, traveled to Sri Lanka three times to discuss shipbuilding projects. According to Angola, Jon Chol Yong is no longer in Angola.
Angola reported that Green Pine delivered military patrol boats to the country until 2012. Chinese custom records also show that a Beijing-based company associated with Green Pine exported maritime-related dual-used products to Angola, including boat engines, motors, and radar systems. In February and July 2011, Austrian national Josef Schwartz assisted Green Pine in shipping items for military patrol boats and submarine parts to Angola.
4.1.2.2 Egypt
Saeng Pil Trading Corporation, an alias of Green Pine, has been active in Cairo. A DPRK diplomat, An Jong Hyuk, was appointed as the representative of the Corporation, and on 18 December 2013, was authorized to conduct all types of business, including implementing contracts and banking business. An Jong Hyuk reportedly left Egypt permanently.
4.1.2.3 Eritrea
The Panel of Experts corroborated military-related links between Green Pine and the Department of Governmental Garages (which is responsible for the maintenance and refurbishment of weapons systems).
4.1.2.4 Libya
Multiple attempts at military cooperation between the DPRK and various Libyan authorities involving Green Pine are being investigated by the Panel of Experts. A UN member state alleges that a 2015 letter from O Chol Su, DPRK Deputy Minister of the Ministry of Military Equipment, to the then Libyan Chief of the Supreme Council of Defense included information on a sales/purchase agreement for defense systems and ammunition. Green Pine, described as a “commercial establishment belonging to our ministry”, was to provide the necessary documents.
4.1.2.5 Mozambique
The Panel of Experts received information about travel between 2012 and 2017 to and within Mozambique by five DPRK nationals working on behalf of KOMID and Green Pine who have been associated with conventional arms trade and arms trafficking in other African countries. DPRK nationals traveled to remote civil-military airfields with nearby military bases.
4.1.2.6 Zimbabwe
The Panel of Experts is investigating activities of DPRK nationals in Zimbabwe, who are associated with Green Pine and involved in trading arms in Africa and the Middle East.
4.2 Glocom
4.2.1 Eritrea
Eritech Computer Assembly & Comunications Technology PLC, which operates under the authority or at the direction of the Eritrean Defence Forces, was implicated in working with Glocom when a shipment for Eritech of 45 boxes of military radio communications products was interdicted. Boxes were labelled “Glocom” and almost all items had been advertised by Glocom on its website. The shipment originated in China.
5. Challenges in Recognizing and Preventing North Korean Sanctions Violations
The examples of sanctions violations explained in section three identify several strategies that the DPRK conglomerates have used—and likely will continue to use—in circumventing sanctions.
5.1.1 Aliases
Representatives of DPRK conglomerates frequently use aliases to conceal their identity and to circumvent sanctions that restrict them from traveling internationally. For example, KOMID President Kang Myong Chol in 2013 and Green Pine Associated Corporation President Ri Hak Chol in 2014 have traveled to Iran using multiple passports and aliases.
Likewise, conglomerates use aliases to allow them to continue operating abroad without detection. Green Pine is noteworthy in this regard, and, using aliases, its staff has established numerous offices abroad, including in Iran and China.
5.1.2 Diplomats, representatives, and embassies
Conglomerate representatives operate in embassies, cooperate directly with diplomats and embassy staff, and are accredited as diplomats in order to facilitate operations abroad.
For example, the media has reported on KOMID officials working in DPRK embassies to facilitate sales. According to The New York Times, KOMID representative Son Jong Hyok worked with Ambassador Pak Chol Il of the North Korean Embassy in Cairo, Egypt, to sell North Korean arms to African countries. The embassy itself was described as “doubl[ing] as a regional arms dealership” and “a bustling arms bazaar for covert sales of North Korean missiles and cut-price Soviet-era military hardware across a band of North Africa and the Middle East”.
The Panel of Experts has also noted a pattern whereby the DPRK accredits Green Pine overseas representatives as diplomats. In Angola, for example, Kim Hyok Chan, a diplomat and representative of Green Pine, negotiated contracts, sourced spare parts, and oversaw the refurbishment of Angolan navy patrol boats. The case of Kim Hyok Chan was not isolated. There is evidence that a second diplomat, Jol Chol Young, also conducted business on behalf of Green Pine.
5.1.3 Travel arrangements
To hide their journeys and destinations, DPRK representatives transit through a number of countries, for example China, Ethiopia, Iran, the United Arab Emirates, Russia, and have purchased airfare in other countries, including the Syrian Arab Republic and Egypt. Officials and conglomerate representatives also travel with multiple passports, making sanctions implementation—based on passports numbers included in UN Security Council sanctions lists—difficult.
5.1.4 Decentralized corporate models
Decentralized corporate models define DPRK conglomerates, and allow for the establishment of networks that help to distance individual companies from their beneficiaries in the DPRK and from non-DPRK nationals that cooperate with DPRK companies in other countries. For example, Mansudae, discussed above in relation to KOMID, was on a list of more than ten companies linked to a Panel’s investigation of the Malaysia-Korea Group (MKP) of Companies. The Panel uncovered a conglomerate of enlisted companies that included Mansudae, MKP, the Reconnaissance General Bureau, Korea Kwangson Banking Corporation, and others.
5.2 Front companies and branches
In conjunction with decentralized corporate models, front companies are used to conceal the involvement of DPRK companies. For example, an Egyptian branch of KOMID was established with the active support of Pak Chun II, then DPRK Ambassador to Egypt. Likewise, KOMID established front companies in China, such as Beijing New Technology Trading Company, while Glocom works through front companies in Malaysia.
5.3 Friendly countries
DPRK sanctions violations are aided by friendly governments who offer direct and indirect support of, or turn a blind eye to, North Korean activities. Egypt in particular has been perceived as a close ally to the DPRK, and has been public about its support of North Korea. KOMID officials have been active in Iran and the Russian Federation. Shipments of goods prohibited from trading also originated in China.
4.7 Use of foreigners
There are cases of specific foreigners assisting the DPRK to circumvent sanctions without their country’s support. One notable example is that of Austrian national Josef Schwartz, who, through his company, Schwartz Motorbootservice & Handel GmbH, shipped items for military patrol boats to Angola.
6. Recommendations
6.1 Pay close attention to travel documents and arrangements
As explained in section 5.3, there have been instances of DPRK officials traveling with more than one passport on behalf of conglomerates. As such, the passport numbers listed in UN Security Council sanctions list may not be the one an official is actually traveling with. It is thus imperative to pay close attention to travel documents in order to identify DPRK nationals banned from international travel. Unusual and complex travel routes (in particular through friendly countries such as Iran, Syria and China) may be used as an indicator for identifying individuals banned from international travel.
6.2 Investigate connections to other companies
The strategies of decentralized corporate models, front companies and branches, and embedding companies within other countries’ corporations, underline the importance of investigating connections to other companies. It is recommended that close attention is paid to the UN List of Designated Individuals, Entities and other Organizations to determine whether there are links between a company and a designated corporation. This is especially important since some DPRK actors have become more emboldened to continue their activities despite being outed by the UN. This is the case for Glocom, which, as of 2018, continued to advertise its products on social media.
6.3 Be Wary of Offers of Military Goods, Related Assistance, and Construction Services
In exercising due diligence with companies that may be affiliated with North Korea, it is important to pay close attention to individuals and entities who are offering to sell military goods, related assistance, or construction services. The lack of conclusive due diligence bears the significant risk of being associated with the DPRK’s nuclear weapons program, other rogue actors such as Iran, and the threat they, collectively, pose to international security.
6.4 Improve reporting on compliance with UN sanctions on North Korea
The various strategies used by conglomerates to circumvent sanctions rely on secrecy and deception. Perhaps one of the most effective ways to lessening the effectiveness of their strategies is to increase reporting on suspected DPRK activities to the UN. Increased transparency allows for the UN to provide better information to its member states, and can assist in identifying DPRK attempts to violate sanctions.
About Kathrin Kranz
Kathrin Kranz holds a Ph.D. in Peace Studies and Political Science from the University of Notre Dame, and an LL.M. in Public International Law from the London School of Economics and Political Science. Her research focuses on the international arms trade, economic sanctions, and international institutions.