North Korean trading companies are defying international nuclear sanctions to sell coal to energy-hungry neighbor China, smuggling the fuel in small ships and offloading it at sea, sources in the country told RFA.
The Chinese shortages are a result of a reduction in coal imports and decreased domestic production, as Beijing tries to balance its growing energy demand with a desire to curb pollution and reduce carbon emissions.
In China’s heavily industrialized northeast, rolling blackouts and rationing have forced many factories to shut down, weighing on China’s industrial output.
North Korea desperately needs foreign currency, but coal exports were banned in 2017 under UN Security Council Resolution 2371, designed to crimp the country’s source of funds for its nuclear weapons programs.
The trading companies that smuggle the coal are run by powerful government organizations, a trade official from North Pyongan province in North Korea’s northwest told RFA’s Korean Service.
“Vessels from the Kumgang Management Bureau Trading Company under Office 39 are loading coal from Jinhung Wharf in Ryongchon county and exporting it to China,” said the source. Top-secret Office 39 oversees leader Kim Jong Un’s slush funds and foreign currency.
“But instead of going directly to a Chinese port, the coal is transferred to a Chinese ship on the open waters of the West Sea,” said the source, using Korea’s name for the Yellow Sea.
Evading surveillance
The ship-to-ship transfers help smugglers evade U.S. satellite image surveillance of North Korean ships, according to the source.
“They wait until it gets dark to let the ships depart. If they can navigate on the dark sea without turning on too many large lights on the ship, they will not be caught by the satellite network,” said the source, who requested anonymity to speak freely.
“Ships from the most powerful trading companies have been exporting minerals and fishery products to China on the West Sea for several decades, so it is not difficult for them to operate the vessel without bright lights,” said the source.
North Korean coal is known to be inexpensive and high quality, according to the source, so many Chinese trading firms are buying up as much as they can.
The coal can fetch U.S. $50-60 per ton and each of the Kumgang Company’s ships can carry between 1,000 and 2,000 tons, cording to the source, much cheaper than the $200 per ton it costs for China to get coal on the international market.
“Since two or three ships depart every four or five days, we think that they transfer 3,000 to 5,000 tons of coal each time,” said the source.
A source from North Pyongan’s Sinuiju city, across the Yalu River from the China’s Dandong, told RFA that Ryongchon county also had ships operating under the Ministry of State Security, and these ships were able to export coal directly to Chinese ports.
“They export coal in smaller, more mobile ships, that can carry about 100 to 500 tons, so even if they load the coal in broad daylight … they will not be caught by satellite… because it looks like a more general ship,” said the second source, who requested anonymity for security reasons.
“The ships… are loaded with coal and depart for China, then return two days later. If five ships each transport 100 tons of coal then they can earn a lot of foreign currency by selling more than 10,000 tons each month,” the second source said.
North Korea’s land border with China has been closed since the beginning of the coronavirus pandemic in Jan. 2020.
In an effort to prevent the coronavirus from spreading across the border, authorities have publicly executed convicted smugglers and warned citizens that anyone found within one-kilometer (0.6-mile) of the border would be shot on site.
The General Bureau of Border Security, however, is under orders from the Ministry of State Security to assist the companies smuggling the coal to China, sources told RFA.
A third North Pyongan source told RFA that the wharfs at Jinhung and Yongampo, on the mouth of the Yalu River, are relatively close to China’s Donggang Port, and thus have been used as smuggling channels by the party and military-affiliated trading companies since 2017, when the U.S. tightened sanctions.
“But since cross-border trade was completely stopped by the pandemic, the party, the military, and the Ministry of State Security have faced funding difficulties,” said the third source, who declined to be named.
“But, these days, so many Chinese companies are clamoring to buy North Korean coal, so the North Korean companies under the powerful organizations are eager to break the law to sell it.”
Reported by Hyemin Son for RFA’s Korean Service. Translated by Leejin Jun. Written in English by Eugene Whong.