Kim's Rackets — page 3

Drug trafficking is just a part of commerce that keeps the Dear Leader in sunglasses and boiler suits. Other profitable ventures are car smuggling and counterfeiting. State-owned companies—there are no other kind—snap up used automobiles from Japan, where strict emission controls make them quickly obsolete, and roll them across the border to China to satisfy the mainland's raging demand for foreign makes. Counterfeiting is equally lucrative. North Korea uses presses from central Europe to churn out crisp $100 bills, ships them out through courier or uses them to pay part of its import bills. As with its methamphetamines, the North's greenback quality control is impressive. "They're the best in the world at it," says Balbina Hwang, a policy analyst at the Heritage Foundation in Washington, D.C.

Because North Korea's manufacturing infrastructure is tiny, its government for years has gone to extraordinary lengths to obtain a supply of goods that could be sold overseas. To that end, the D.P.R.K. routinely shakes down its own desperately impoverished citizens. In the early 1970s, the regime began forcing its subjects to collect and contribute just about anything that could be sold abroad for dollars and yen, material referred to euphemistically as "loyalty foreign currency." At first, citizens donated gold and silver. These ran out quickly, so they foraged for mushrooms, clams, aralia shoots and the roots of wild ginger plants. Over the years, quotas have been instituted. University teachers today have to contribute at least $10 yearly, according to North Korean defector Ju Song Ha. The country's 200,000-250,000 political prisoners gather wild mushrooms, and old folks raise silkworms, pull out their threads and tithe them to the Dear Leader. All this is collected by Department No. 5—a branch of Bureau 39.

Few commodities are as convertible as gold, and that has lots of North Koreans combing rivers, particularly in Unsan, Hoichang and Yodok regions. They prospect with approximately 1.5-sq-m wooden frames covered with a woolen fabric, usually a winter coat, to sluice sand and gravel for gold particles, according to Lee Joo Il, a defector who is now a North Korea human-rights activist. Groups of three to five work together, processing up to two tons of sand in a day, producing 0.1-0.2 grams of gold. Once you've contributed a nugget or two to the government, you are allowed to shop at special stores run by Department No. 5, which stock hard-to-find consumer goods. Ten grams of gold gives you the right to buy a color TV, five grams a sewing machine. With 0.1 grams of gold you get a pair of nylon socks. You still have to pay in cash for the goods: the gold simply gets you in the door.

But drugs are the ultimate proof of loyalty. They cost little to produce, and make Kim the most money of all. According to estimates, North Korea has anywhere from 4,200 to 7,000 hectares under poppy cultivation. An anonymous North Korean defector testified to a U.S. congressional committee two weeks ago that in 1997 Kim ordered each of the D.P.R.K.'s collective farms to grow 25 acres of poppies.

Kim Young Chul, 34, was a cog in the North's drug industry in the late 1990s, working as a driver in a military unit. The poppies came from farms as large as 10 sq km in North Hamgyong and Yanggang provinces. Farmers extracted the resin and fashioned it into balls the size of oranges. "It would be wrapped in leaves and paper and taken to the factory in boxes to be boiled," says Kim. His job was to drive refined heroin to the docks of Chongjin, his hometown, a large port city on North Korea's northeast coast. "I'd pick it up and drive it to the harbor, and it would be taken out to sea to be picked up by ships heading for Singapore, Hong Kong, Cambodia and Macau." Kim says his unit sold between three and five kilos of heroin a month, earning about $3,000 a kilo; the money was deposited in Pyongyang banks controlled by Kim Jong Il, he says. "We never asked questions," says Kim, who defected to South Korea last year. "We thought we were showing our loyalty to Kim Jong Il. We thought he would use the money to improve our lives."

Methamphetamine production was expanded in the late '90s, partly to make up for a drought-induced slump in opium production but also to satisfy demand from Japan. Methamphetamine, a chemical product, is simpler to produce than heroin. But it also relies on the import of expensive raw materials such as the chemical ephedrine. In 1998, Thai police stopped an Indian shipment of 2.5 tons of ephedrine—also used in allergy drugs—bound for Pyongyang. A North Korean diplomat familiar with the case says the batch was seized because Thai customs officials were suspicious that a country such as North Korea would need so much cough medicine. The diplomat, who now lives in Seoul, says the Thais allowed the 2.5 tons through after six months of wrangling. Few people believed the compound was being used to solve a hay fever crisis in North Korea. "That was enough ephedrine to last North Korea 100 years," says a former North Korean diplomat.

The world has already been introduced to Kim Jong Il the saber-rattling tyrant, Kim the kidnapping megalomaniac, and Kim the brutal Stalinist strongman. Now, as worried nations continue to try to figure out how to persuade North Korea to give up nukes, Kim is taking on a new guise: the Al Capone of the Hermit Kingdom. As the Dear Leader, he can spend those narco-dollars—and fake dollars—however he wants, for the French wine or porno tapes he is reputed to enjoy—or, more chillingly for the rest of the world, to add a few more nuclear bombs to his arsenal. Not even Al Capone at the height of his power had the Bomb.

—Reported by Perry Bacon Jr./Washington, Lisa Clausen/Sydney, Ilya Garger and Toko Sekiguchi/Tokyo and Mingi Hyun, Kim Yooseung, John Larkin and Donald Macintyre/Seoul

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