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NORTH KOREA

Paper Trail Exposes Missile Merchants

When Slovakian police raided a luxury apartment in Bratislava the occupants had fled. But a trove of documents left behind by the North Korean couple who lived there indicated that they were missile-trade agents for their country.

By Bertil Lintner/BANGKOK and Steve Stecklow/CAIRO

THEY SEEMED TO BE just another Asian couple who had moved to Eastern Europe to take advantage of business opportunities in the former socialist bloc. They drove a black Mercedes-Benz and lived in a luxury apartment in a posh part of the Slovakian capital Bratislava, where they counted among their neighbours the city's mayor and a cabinet minister.

A TRAIL OF EVIDENCE

  • New World Trading Slovakia is set up in March 2001
  • Slovak police find documents indicating missiles and related parts were its real business
  • New World traded with Egypt. Other Korean clients were Pakistan, Iran, Libya, Yemen and Syria
  • New World sourced its goods from China, Russia, Belarus and other countries

But Kim Kum Jin and Sun Hui Ri were no ordinary business people. The Slovak authorities say they were North Korean agents arranging the sale of millions of dollars worth of missile components to a surprising customer--Egypt, one of the United States' closest allies in the Middle East.

By the time Slovakia's secret service realized last August what was going on and raided the North Koreans' apartment, the couple had vanished. But they left behind a trove of invoices and other documents that provides a rare inside look at North Korea's lucrative ballistic missile and military technology business, a critical source of earnings keeping the communist country afloat.

"They are the No. 1 proliferator of missiles, and also of conventional weapons," Gen. Thomas A. Schwartz, former commander-in-chief of United Nations and U.S. forces in South Korea, told the U.S. Senate Armed Services Committee last year. "That is how they have kept their economy alive, and they are actively pursuing those interests around the world."

If proof was needed, the interception in December of a ship carrying North Korean-made ballistic missiles provided it. The buyer turned out to be Yemen, another U.S. ally, and the ship was released after Spanish marines searched it at U.S. request. Yemen is believed to be a relatively new buyer of North Korean weaponry. In addition to Egypt, other North Korean customers for missiles or related technology over the years include Iran, Syria, Libya, Pakistan and Vietnam, say U.S. officials and Korean defectors.

U.S. military officials in South Korea say missile sales play a vital role in propping up the Pyongyang regime, with exports of $560 million in 2001 alone. That's a substantial figure for a country with an estimated annual GDP of just around $17 billion. Kim Dok Hong, a defector who ran a company involved in the arms trade, reckons the sales make up as much as 40% of North Korea's exports.

FRONT COMPANIES AND FALSE TRAILS

Joseph Bermudez, an American researcher and author who has studied the North Korean military for years, says that "the methods by which North Korea has conducted these sales have become more convoluted over the years. Deliveries are routed through a host of front companies, cut-outs, and false end users, to avoid detection." He adds that North Korea has openly and covertly obtained, and is continuously seeking to obtain, ballistic-missile technologies, components and materials from Europe, Japan, Russia and China.

Slovak investigators believe that scores of documents seized in the Bratislava apartment, including bills of lading, packing lists and invoices, prove that Kim and Sun were part of the subterfuge. "This businessman was not doing business in the field stated in his application for a long-term residence," a senior police officer told Bratislava's Sme newspaper, which broke the news in September.

They may be just the tip of the iceberg. "There may be many more teams like Kim and Sun out there, making money for the North Korean state and circumventing international rules to provide countries with missile components and technology," says a Western diplomat based in Asia who follows the issue.

Kim, who previously worked as economic counsellor at the North Korean embassy in Cairo, visited Slovakia in 1999 with a top official from North Korea's intelligence service, claim the investigators and Western diplomats.

The sources believe the two came to see if Bratislava would be a suitable location to set up an arms-dealing business. Slovakia is centrally located between Western Europe and the states of the former Soviet Union. It's also considered a more discreet locale for covert operations than neighbouring Hungary or the Czech Republic, in part because its domestic intelligence network is less established.

Investigations by the Slovak secret service determined that Kim and his wife moved to Bratislava in November 2000. In March 2001, the couple set up a company called New World Trading Slovakia. According to the Slovak Companies' Registry, it was engaged in "retail and wholesale trade, advertising, promotion activities, and market surveys." In fact, investigators say, New World was part of a secret North Korean network spanning Europe, the Middle East, China, Thailand and Singapore.

The records show its main customer was the Kader Factory for Developed Industries, an Egyptian government-funded military complex in Cairo. Bermudez says Egypt's military ties to North Korea date back to the 1970s. Both countries were attempting on their own to produce ballistic missiles and they eventually struck a deal to develop them jointly, adds the author. Neither the Egyptians, Kader nor the North Koreans would answer questions about their missile cooperation, with one Egyptian official saying the subject was "sensitive." Cairo receives more than $1 billion in military aid each year from the U.S., but Washington has been pragmatic about its ally's North Korean missile connection.

According to a U.S. government official, in the early 1980s the Egyptians provided North Korea with Soviet-made Scud B missiles--liquid-fuelled, surface-to-surface missiles that can deliver a 1,000-kilogram payload up to 300 kilometres away. The Soviet Union apparently would not supply North Korea with the missiles, which can carry nuclear warheads.

The North Koreans reverse-engineered the short-range Scuds and soon began to manufacture them as the Hwasong 5 and the updated Hwasong 6. They became the foundation for its missile programme, including its controversial work to develop intercontinental ballistic missiles. "Part of the deal was the North Koreans would set up in Egypt a production capability for Scud-type missiles," the U.S. official says, adding that they also helped purchase materials and components.

But Kim's purchases, detailed in the documents he left behind, indicate that Egypt is trying to develop a medium-range missile with North Korean help. "Egypt is looking for a missile in the Ghauri range," says the Western diplomat, referring to a Pakistani missile modelled on North Korea's Nodong missile. The Ghauri has a range of 1,500 kilometres.

Documents found in Bratislava and examined by the REVIEW show that between 1999 and mid-2001, Kim ordered more than $10 million worth of products--including chemicals, trucks, pumps, measuring devices, a high-speed camera and heavy vehicle parts--and billed them to Kader. His sources were in China, Russia, Belarus and elsewhere.

Kader is part of the Arab Organization for Industrialization, an Egyptian conglomerate producing both civilian and military goods. According to the umbrella organization's Web site, the military goods its factories produce include rocket and anti-tank missile systems, helicopters and electronics. There is no mention of Scuds or other ballistic missiles.

Four year ago, the U.S. State Department imposed trade sanctions on Kader and two other companies in the Arab Organization for Industrialization for engaging "in missile technology proliferation activities." Bermudez asserts they were sanctioned for trading with North Korea. Asked if that was the reason, a U.S. official would not comment, saying that the information was classified.

Most of the materials Kim shipped to Kader are considered dual-use--they can be used in the manufacture of civilian or military products. The Bratislava records, for example, show that in December 2000, the Crocus Group--a North Korean company that has an office address in Beijing--shipped to Kader a chemical called hydroxyl-terminated polybutadiene, or HTPB. The chemical--its sale is restricted by many countries--can be used in ordinary rubber products but also is a standard ingredient in solid propellants for rockets and missiles other than Scuds.

Western investigators believe Kim tried to disguise what he was shipping. While the invoice to Kader lists HTPB, the shipping document uses another name for the chemical, and lists it among a group of mundane materials including grit and silicon rubber. The documents also show that in June 2001, Crocus shipped 8,100 kilograms of a chemical called dioctylazelate to a Cairo address. The low-temperature plasticizer can be used to seal swimming pools and as a binder in rocket and missile propellants.

Kim and his wife used Crocus and two other North Korean companies--New World Trading and Golden Star Trading--to procure many of the items. Company letterheads show all three firms shared the same Beijing address. The address was located in a city hotel, where staff denied knowledge of the companies.

Kim also ordered Dynemar HX-752--a propellant-bonding agent--from a Singapore company, the records show. The company responded with a fax saying the item was "restricted by the U.S. government." He had better success ordering 10 chassis for MAZ-543 Russian multi-axle vehicles. One use for these is as a base for cranes, and Egypt's Ministry of Housing approved the order for construction use. But the heavy chassis also can be used to build mobile missile launchers. Significantly, a separate invoice for tyres for the vehicles says they are "of military standard."

Records say the MAZ-543 vehicle parts were shipped from Odessa, Ukraine, to a Cairo construction company called Arab Contractors Osman Ahmed Osman & Co. A spokesman for the contracting company said it hadn't ordered the parts and did no business with North Korean companies. Other records show the parts were billed to the Kader military complex.

Slovak authorities watched the North Korean couple for months, suspicious both about their lavish lifestyle and about a discrepancy between their registered business address and where they actually did business. But when Slovak police finally raided their apartment last summer, it appears they had only just missed the two. Left behind in the rush to escape were not only their business records, but also their black Mercedes.

Jay Solomon in Seoul contributed to this article.

This article first appeared in the Far Eastern Economic Review, February 13, 2003

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