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Russian port city exits lucrative sanctions-dodging North Korean coal trade

Port in Nakhodka Bay of Sea of Japan, Russia. (pauk/Wikimedia Commons)
December 14, 2018
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This article was originally published by Radio Free Asia and is reprinted with permission.

The Russian Far Eastern port city of Nakhodka was very recently the center of the North Korean coal trade, where North Korean coal went to be laundered—disguised as Russian in origin—prior to export to other destinations.

Pyongyang turned to laundering after the United Nations last year banned the export of several commodities of North Korean origin, in an effort to deprive North Korea’s regime of money that could be used to further develop its nuclear program.

But after the UN Sanctions Committee on North Korea announced in a report in September that Pyongyang violated sanctions, the international community is getting more serious about its compliance.

The U.N. report documented North Korean actors formed banned joint ventures to flout sanctions with nearly 300 foreign businesses and individuals, including 215 from China and 39 from Russia, according to Foreign Policy, a U.S. magazine.

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The report said smuggling of refined oil was the most prominent sanctions-busting activity by Russians and others, but the coal ban was widely violated.

Now, North Korean coal has all but disappeared from Nakhodka as enforcement was stepped up, coal traders say.

When asked about North Korean coal by an RFA Korean Service reporter on Nov 23, Oleg Mikhailovish, a Russian coal broker asked, “How are you going to pay for it?”

“The problem in North Korea is that they don’t have SWIFT,” Mikhailovish said.

SWIFT (Society for Worldwide Interbank Financial Telecommunication) codes are unique identifiers for financial institutions and businesses that are used when transferring money internationally.

The Belgium-based Society stopped doing business with North Korean banks in March 2017 following a U.N. report released a month earlier which detailed how North Korea was able to dodge sanctions by relying on the international banking system.

Following the banking co-operative’s decision, North Korea could still flout sanctions by sending cash to a third party to have them make the transactions.

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Authorities have since sought measures to stop these third party transactions.

Sanctions have now all but killed North Korean coal’s once thriving presence in Nakhoda.

Mikhailovish said it was impossible that any of the coal currently in the port could be North Korean.

“No ships carrying North Korean coal can come into port because of sanctions,” he said.

“North Korean coal is cheap, but it is good, hard coal. We sent two ships to North Korea to bring some back, but they got caught during their return trip,” said Mikhailovish, adding, “The ships’ captains are now in prison and the ships are on sanctions lists.”

He said there were similar incidents recently.

“We tried to bring in some North Korean coal twice last year, but we got caught both times and those ships are now prohibited from entering the port,” he said.

“It’s all because of the sanctions. Since then, nobody’s been trying to bring in any North Korean coal.”

Reported by Sangmin Lee and Jieun Kim for RFA’s Korean Service. Translated by Leejin Jun. Written in English by Eugene Whong.

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