Moscow may be trying to help Pyongyang with access to the international financial system in exchange for missiles and ammunition, U.S.-allied intelligence officials suggest.
Russia has allowed the release of millions of dollars in frozen North Korean assets and may be helping its isolated ally with access to international banking networks, assistance that has come after the North’s transfer of weapons to Moscow for use against Ukraine, according to American-allied intelligence officials.
The White House said last month that it had evidence that North Korea had provided ballistic missiles to Russia, and that the North was seeking military hardware in return. Pyongyang also appears to have shipped up to 2.5 million rounds of ammunition, according to an analysis by a British security think tank.
While it is unclear whether Russia has given North Korea the military technology it may want, new banking ties would be another sign of the steady advancement in relations between the two countries. The expanding partnership has most likely emboldened the North, as it has issued a stream of belligerent threats in recent months, U.S. officials say.
Russia has allowed the release of $9 million out of $30 million in frozen North Korean assets deposited in a Russian financial institution, according to the intelligence officials, money that they say the impoverished North will use to buy crude oil.
In addition, a North Korean front company recently opened an account at another Russian bank, the intelligence officials say, evidence that Moscow may be helping Pyongyang get around U.N. sanctions that prohibit most banks from doing business with North Korea. Those sanctions have choked the North’s economy and largely shut the country off from international financial networks.
The new bank account is held in South Ossetia, a self-proclaimed independent state in the Caucasus region that has close connections with Russia, according to the officials, who spoke on the condition of anonymity to discuss sensitive intelligence matters.
American officials said they could not confirm the specifics of the banking arrangements. But one senior official, who also requested anonymity to speak about intelligence matters, said that the arrangements fit which U.S. expectations of what North Korea would seek from Russia for its weapon transfers.
Access to financial networks is just one item in North Korea’s wish list, according to experts. What the North most wants from Russia, they say, is advanced military hardware, such as satellite technology and nuclear-powered submarines.
The closer ties have already yielded diplomatic payoffs. After the North Korean leader, Kim Jong-un, met with his Russian counterpart, Vladimir V. Putin, in eastern Russia last fall, Mr. Putin met in January with the North’s foreign minister, Choe Sin-hui, in Moscow.
During that meeting, Mr. Putin signaled that he might soon visit Pyongyang, his first trip to North Korea’s capital in nearly 25 years, according to the North’s state media.
The banking arrangements could be significant for North Korea, which relies on imports to sustain much of its economy. The relationships could facilitate transactions not only within Russia but also outside the country. North Korea could leverage Moscow’s connections to a handful of countries, including Turkey and South Africa, that still conduct trade with Russia after it was hit with international sanctions over the Ukraine war.
If Moscow is allowing North Korea to use Russian banks or is releasing frozen assets, the government will have “crossed the Rubicon of willingness to deal with North Korea and to be a financial and commercial rogue,” said Juan C. Zarate, a former assistant Treasury secretary and expert on financial crimes.
While Russia’s release of $9 million in frozen assets is relatively small, the North Koreans “welcome any alternative ways of accessing capital,” Mr. Zarate said.
The United Nations and the United States have imposed a range of sanctions on North Korea in response to its prohibited nuclear weapons tests. Banking sanctions have “been one of the challenges for the North Koreans and the reason they’ve frankly been creative in how they’ve established their financial networks,” including the use of cryptocurrencies, Mr. Zarate said.
For Russia, the financial transactions may be more palatable than supplying military expertise and nuclear and other technology.
Even though the two countries “could be friends with benefits now,” said Soo Kim, a former C.I.A. analyst on North Korea, their trust is not so great that Russia would “give away its valued secrets.”
Experts said that Russia would move cautiously because it was still mindful of U.N. sanctions as a permanent member of the Security Council. Russia, they said, may believe it can sidestep the sanctions in a deniable way.
“They can always say, ‘Oh, well, this is a private bank and our investigators will look into it,’ and it will never go any further,” said James D.J. Brown, a professor of political science at the Tokyo campus of Temple University who specializes in relations between Russia and East Asia.
Beyond the banking relationships, Russia may simply barter goods that the North needs in exchange for its weapons.
“What would be logical for North Korea is to be engaging in swaps of grain and agricultural technology like tractors, which are banned through sanctions,” said Hazel Smith, a professor of Korean studies at the School of Oriental and African Studies at the University of London.
“Given the precariousness of the ruble and the complete lack of value of the North Korean won. It’s very difficult to see why major transactions for either Russia or North Korea would be conducted in rubles,” she added.
As much as anything, by sending missiles and ammunition to Russia, North Korea has gained the attention of the world and diplomatic perks from Moscow.
“I think they value that quite a lot,” said Joseph Byrne, a research fellow who specializes in North Korea at the Royal United Services Institute, a British security think tank. “The ceremony of it, the legitimacy of it.”
“It just makes North Korea that much stronger,” Mr. Byrne said, “if it looks like they have the full support of Russia.”
(NYT)
