April 15, 2010 | Forbes

Kim Jong Il’s ‘Cashbox’

Despite all the pomp and nuclear summitry, North Korea keeps sliding down President Barack Obama's to-do list. Yet something must be done. The threat here is not solely North Korea's own arsenal, or its role, despite U.S. and United Nations sanctions, as a 24/7 convenience store for rogue regimes interested in weapons of mass destruction plus delivery systems. The further problem is that North Korea provides perverse inspiration for other despotisms.

While Obama talks about a world without nuclear weapons, Kim Jong Il sets tyrants everywhere a swaggering example of how to build the bomb and get away with it. Indeed, if recluse weirdo Kim can have the bomb, how on earth could Iran's ayatollahs face themselves in the mirror every morning if they don't have one too?

In the new millennium, Pyongyang has been blazing a proliferation trail that includes illicit nuclear tests in 2006 and 2009; illicit tests of ballistic missiles; and such extravagant stuff as help for Syria in building a secret nuclear reactor (which might even now be cranking out plutonium for bombs, had the Israelis not destroyed it with an air strike in 2007). Coupled with such North Korean habits as vending missiles and munitions to the likes of Syria, Iran and Iran's Lebanon-based terrorist clients, Hezbollah, all this is a wildly dangerous mix.

So what to do about North Korea? Over the past 16 years, nuclear talks and freeze deals have repeatedly failed, under both presidents George W. Bush and Bill Clinton. Asked about North Korea in a press conference at the close of this week's nuclear summit in Washington, Obama gave the vague reply that he hoped economic pressure would lead to a resumption of the six-party talks. But he ducked the question of why sanctions have failed to halt North Korea's nuclear program, saying “I'm not going to give you a full dissertation on North Korean behavior.”

OK, it's not Obama's job to deliver dissertations on North Korea. But he missed a fat opportunity to say something genuinely informed and useful. The president–and his entire foreign policy team–ought to be reading and talking (loudly) about the material contained in a highly readable 36-page monograph published just last month by the Strategic Studies Institute of the Army War College: “Criminal Sovereignty: Understanding North Korea's Illicit International Activities.”

This study is co-authored by three men who share an unusually clear-eyed interest in exploring the nitty-gritty of North Korea's inner workings, Paul Rexton Kan, Bruce E. Bechtol Jr. and Robert Collins. Among them, going back more than three decades, they have more experience observing North Korea than some of the high-profile diplomats who have parleyed with Pyongyang in recent years from the five-star hotels of Beijing and Berlin. For this publication the three analysts draw on congressional testimony, press reports from around Asia and interviews with North Korean defectors (a resource too often ignored or underutilized by Washington officialdom).

“Criminal Sovereignty” focuses not on proliferation per se, but on a curious institution within North Korea's government, usually referred to as Bureau No, 39. And what, exactly, is Bureau No. 39?

Located in a heavily guarded concrete building in downtown Pyongyang, Bureau No. 39 is the nerve center of North Korea's state-run network of international crime. Its official name is Central Committee Bureau 39 of the Korean Workers' Party. The authors refer to it by what Bechtol says is the more accurately nuanced translation of “Office No. 39.”

The mission of Office No. 39 is to generate torrents of cash for North Korean ruler Kim Jong Il, by way of illicit activities abroad. Favorite rackets include international trafficking of drugs produced under state supervision in North Korea, and state production and laundering into world markets of counterfeit U.S. currency, and cigarettes. Such activities are tied directly to the survival of Kim's regime. The authors report “the crimes organized by Office No. 39 are committed beyond the borders of North Korea by the regime itself, not solely for the personal enrichment of the leadership, but to prop up its armed forces and to fund its military programs.”

What sets Office No. 39 apart from more pedestrian political corruption or organized crime is that this operation is not some wayward private gang or unauthorized appendage of government. It is an integral and institutionalized part of the North Korean regime. As such, it enjoys the perquisites and protective trappings of the modern nation-state, including the use of North Korean embassies and state-run businesses abroad, and the reluctance of other nations to intervene in the sovereign affairs of North Korea.

Office No. 39 is directly tied to Kim himself, who set it up way back in 1974, when his father, Kim Il Sung, was still in power. The authors explain: “This office was established for the explicit purpose of running illegal activities to generate currency for the North Korean government.” Since the 1991 Soviet collapse, which ended subsidies from Moscow, Office No. 39 has become ever more important, and especially over the past 10 years, its activities have become more prolific.

Office No. 39 continues to report directly to Kim, who took charge of the regime when his father died in 1994. According to a North Korean defector interviewed by the authors, Kim Kwang-Jin, who has firsthand knowledge of North Korean financial practices, Office No. 39 is also known to North Korean insiders as “the keeper of Kim's cashbox.” Organized into 10 departments, specializing in various illicit activities, Office No. 39 serves as a slush fund through which billions of dollars have flowed over the years. In a bizarre personal touch, these funds are collected and presented periodically to Kim in aggregate amounts, labeled “revolutionary funds,” on such special occasions as his official birthday, Feb. 12, or the birthday of his late father, Kim Il Sung, April 15th.

This money is not spent on easing the miseries of millions of repressed and famished North Koreans. That effort–from which Kim also has a record of appropriating resources to sustain his regime–is left to the likes of international donors, contributing via outfits such as the United Nations. The authors explain that the profits of Bureau 39 help swell the offshore bank accounts of Kim's regime, used not only to pay for his luxurious lifestyle, but to buy the loyalties and materials that underpin his totalitarian, nuclear-entwined military state.

If Office No. 39 enjoys the amenities of operating as part of the North Korean state, it is by the same token an avenue of vulnerability leading straight to Kim Jong Il. That was evident back in 2005, when the U.S. Treasury caused clear pain for Kim by targeting a major hub of Office No. 39 financial activities in Macau–only to be yanked off the case by a State Department desperate to coddle Kim into a nuclear freeze deal, which then flopped.

These days U.S. and U.N. efforts to corral North Korea seem focused narrowly on activities tied directly to nuclear proliferation. It's been a while since Washington complained loudly about the rest of Kim's rackets. Obama needs to think bigger, speak up and solicit the world's help in cracking down much harder on the all the networks of Office No. 39. Emptying Kim's cashbox could go farther toward ending the North Korean nuclear threat than any amount of six-party talks or summits.

Claudia Rosett, a journalist in residence with the Foundation for Defense of Democracies, writes a weekly column on foreign affairs for Forbes.


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