Tuesday, March 2, 2010

North Korea sacks Kim Jong-il's financier after sanctions

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Head of 'Room 39' replaced after foreign travel bans, South Korean agency claims

It is the nerve centre of North Korea's money-making operations, the department dedicated to raising hard currency for Kim Jong-il while his country teeters on the brink of collapse.

Room 39 is responsible for some legal ventures, such as the country's limited exports of ginseng and other items. But according to defectors, most of its energy goes into drug-trafficking, sales of weapons and missile technology, and the production of counterfeit US dollar bills.

Today, it was reported the department's head – Kim Jong-il's personal finance manager – has been sacked, possibly in response to international action against the alleged illegal moneymaking. South Korea's Yonhap news agency said Kim Dong-un was dismissed because he had been blacklisted by so many foreign governments, including the EU in December, leaving him unable to travel on behalf of Room 39's legal companies. He has been replaced by his deputy, Jon Il-chun, Yonhap said, citing an unidentified source.

Housed in an unremarkable government compound in Pyongyang, Room 39 oversees 120 companies and mines, accounting for a quarter of all North Korean trade and employing 50,000 people, according to Lim Soo-ho, a research fellow at the Samsung Economic Research Institute. He said Kim's dismissal may be part of attempts to get around international sanctions.

While its inner workings remain a mystery to all but its occupants and the family they serve, Room 39's role in enabling the regime to survive even in times of widespread famine and international pressure, has come under greater scrutiny since the imposition last year of tough UN sanctions over its nuclear programme.

At the time Lim Eul-chul, an expert on North Korea at Kyungnam University in Seoul, told the Associated Press that new UN sanctions would be "very, very effective and have a big impact on North Korea's secret funds."

He said money generated by the bureau was "a very useful tool to control high-ranking officials in the party, the cabinet and the military," whose loyalty had been secured with gifts such as luxury cars.

Some of the money generated by Room 39 is used to buy the loyalty of senior party officials, a role that may take on greater prominence as Kim Jong-il, who suffered a stroke in 2008, prepares to hand over power to his third son, Kim Jong-un. Analysts have estimated that illegal activities account for up to 40% of all North Korean trade and an even higher share of total cash earnings.

Bruce Klingner, a former Korea analyst for the CIA who is currently at the Heritage Foundation, said: "North Korea is is heavily isolated so it uses whatever means necessary to make money. Room 39 is Kim Jong il's personal banker. It has bank accounts overseas, it is involved in money laundering and other nefarious activities."

The UN sanctions ban North Korea from exporting arms, call for the freezing of assets, and forbid travel abroad for companies and individuals involved in nuclear and weapons programmes.

North Korea is under mounting pressure to end its boycott of nuclear disarmament talks.

North Korea wants the US to formally end the 1950-53 Korean War and lift sanctions, as preconditions to returning to the six-party talks it abandoned last year.

But the assistant US secretary of state, Kurt Campbell, said this week that sanctions would only be eased if the North returned to the talks and honoured promises to dismantle its nuclear programme.

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