North Korea evades sanctions with help from ships of many names

By (Bloomberg)

As Washington and Seoul try to maintain a unified front against North Korea, the case of two cargo ships shows how Kim Jong Un’s regime keeps finding ways to evade increasingly tough international sanctions aimed at halting its nuclear weapons program.

Both vessels have gone through repeated changes of names and owners, part of an international shell game that has undercut the escalating sanctions led by the U.S. and backed by the United Nations. President Donald Trump’s administration has vowed to maintain its “maximum pressure” campaign on North Korea even as America’s ally, South Korean President Moon Jae-in, pursues a fragile detente sparked by the Olympics.

North Korea earned almost $200 million in the first nine months of last year from banned commodity exports, providing crucial foreign currency for the isolated regime, according to a confidential United Nations report, portions of which were seen by Bloomberg News. The panel of experts who wrote the study said Kim’s regime had shipped coal to ports in Russia, China, South Korea, and Vietnam, mainly using false paperwork and front companies that concealed the origin of the coal.

The banned exports and imports are transported on vessels flagged by countries in Africa, the Caribbean and Hong Kong. Sanctioned ships take on new flags, new companies are created to mask ownership and the vessels get new identities. Then they keep plying the same waters. That was the case with the two ships, the Jin Teng and the Jin Tai 7. The Jin Teng, sanctioned by the U.S. in March 2016, became the Shen Da 8 and then the Hang Yu 1 last November, according to Kharon, a Los Angeles-based firm that identifies sanctions risks for banks and companies. The Jin Tai 7, also sanctioned by the U.S. in March 2016, changed its name to Sheng Da 6 two months later and then to Bothwin 7 last November, Kharon said. That was before a new round of UN sanctions was agreed on in December. Both ships remain on the U.S.’s sanctions list despite the name changes.

The Bothwin 7 visited the port of Lianyungang, China, in January, the same month that the Hang Yu 1 stopped at the Port of Ningbo-Zhoushan, also in China. Both ships, once part of a fleet owned by Ocean Maritime Management Co., based in Pyongyang and sanctioned by the U.S. Treasury Department and the UN, changed their names to evade detection, according to Kharon, whose researchers drill down into company releases as well as court and corporate filings to establish links between front companies and sanctioned entities.

“Sanctions against North Korea are largely symbolic gestures of disapproval that do not demonstrate any capability to change the political behavior of the Kims,” said Robert Huish, an associate professor at Dalhousie University in Halifax, Canada, who has been monitoring the country’s shipping traffic.

Enforcing sanctions is the biggest challenge for the Trump administration, which has led efforts at the UN Security Council to impose an increasingly tight net of restrictions. Last week, Treasury Secretary Steven Mnuchin announced a raft of new sanctions against 27 entities and 28 vessels, which he said would “significantly hinder North Korea’s ability to conduct evasive maritime activities that facilitate illicit coal and fuel transports, and limit the regime’s ability to ship goods through international waters.” But finding and tracking North Korea’s joint ventures and covert relations is a difficult task for the Treasury and for UN investigators.

“One of the interesting aspects of the North Korean regime’s effort to evade sanctions and generate revenue is how diversified its trade is outside North Korea,” said Ben Davis, a former U.S. Treasury official and head of research at Kharon. “Some of these partner firms maintain dynamic commercial interests and supply chains with European and Asian firms.”