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A number of stories over the last several weeks have financial themes; we collate them here.
Back in 2012 we covered the negotiations over the resolution of DPRK’s debt to the Soviet Union/Russia and considered the issue settled. A short piece in the Moscow Times suggests that the deal needs Duma approval, and a bill is being readied for its consideration.
Somehow, we don’t expect a lengthy floor fight. But the story is germane because of the unusual structure of the deal. The total stock of debt was valued at $11 billion at highly overvalued exchange rates, but the agreement only forgave $10 billion of it; the remaining $1 billion will be not be returned to the Russian treasury, but will supposedly be used for North Korean health care, education and energy projects over a 20 year period as "debt for aid."
We have no idea how they will calculate the exchange rate on the outstanding $1 billion, but the domestic funding could go into projects in which the Russians are invested, such as in Rason. At the Park-Putin summit in November, the South Korean government found a way around post-Cheonan sanctions on the North by permitting investment in the Rason-Khasan logistics project because it was a Russian joint venture. However, Yonhap suggests that this deal is far from done. Representatives of three South Korean companies -- the state-run railroad Korea Railroad Corp. (KORAIL), POSCO and Hyundai Merchant Marine Co—recently visited the site and sounded cautious about their participation.
On to Panama. We covered the release of the Chong Chon Gang, the North Korean ship carrying dated Cuban military equipment under a load of sugar and 32 of its 35 sailors; the remaining three officers are being held on charges of weapons smuggling. But now details on the financial arrangements are emerging. Pyongyang was forced to pay at least two-thirds of the $1 million fine to get the ship released, and you can bet that the reported $700,000 payment was in cash. The Panamanian government said it would sell or give away the sugar, but the lawyer representing the North Koreans is going to sue for the price of the sugar--$573,000—because it was declared legitimate cargo.
Finally, two more frivolous but amusing stories. According to Yonhap, the South Korean Embassy in Beijing issued a warning that Indonesian scammers are peddling pre-currency reform North Korean banknotes at a steep discount. The only problem is that after the disastrous 2009 reform, the old bank notes were removed from circulation and thus have no value whatsoever, except perhaps as a numismatic curiosity. If anyone could think there was a currency play of this sort on the North Korean won probably deserves to be scammed.
And finally, the perspicacity of North Korean diplomats in looking for ways to earn foreign exchange always amazes us. But the Commission of Inquiry (p. 201) heard testimony on one which tops the beef-slaughtering abattoir in the New Delhi embassy: the sale of alcohol in Islamic countries, presumably in the Middle East. Gun bae!
