The Magazine

Cash for Kim

From drugs to contraband to U.N. aid-the many rackets of North Korea.

Feb 19, 2007, Vol. 12, No. 22 • By CLAUDIA ROSETT
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In recent years, Kim's regime has been wallowing in profits on counterfeit cigarettes. A tobacco industry study in 2005 estimated the gross revenues from these sales to be $520 to $720 million per year. (Cigarette smuggling is highly profitable because a pack costs just pennies to produce; most of the retail price is excise taxes.) Though North Korean refugees find it almost impossible to reach the United States, North Korean contraband fares better. In testimony before a Senate panel last year, a State Department official dealing with drug enforcement, Peter Prahar, referred to federal indictments alleging that North Korea-sourced counterfeit cigarettes had been entering the United States at a rate of one 40-foot container per month

North Korea also sells missiles and missile technology, not always illicitly. Estimating the income from the traffic is, once again, extremely difficult. A number often cited is $560 million in sales for the year 2001 alone. A former Pentagon aide and author of a book on North Korea's negotiating strategy, Chuck Downs, explains that this was the amount North Korean officials presented to the Clinton administration around 2000 as the cost of giving up their missile traffic--so it is probably inflated. But in selling missiles and missile technology over the years to such places as Venezuela, Egypt, Libya, Pakistan, Syria, and Iran, North Korea has by some educated guesses earned $1 billion or more.

A number of seasoned observers of North Korea, including American Enterprise Institute scholar Nicholas Eberstadt, estimate that, in his commerce with the world, Kim faces a shortfall of about $1 billion per year, which he makes up with criminal activities of one kind or another. Over the past dozen years, China, South Korea, and even the United States have poured billions' worth of aid into North Korea. By many accounts, much of that has ended up supporting the government rather than feeding the hungry. And none of it has swayed the basic criminal bent of Kim's regime. Instead, we have the bizarre spectacle in which U.N. agencies purport to be dishing out food and instructing North Koreans in the rudiments of development, while down the road North Koreans as part of state policy are cranking out top-quality counterfeit U.S. banknotes and tooling missile and nuclear bomb components.

Clearly there is no dearth of entrepreneurial talent in North Korea. But under this regime, the name of the game is violence, fakery, and extortion. The fate of any promise offered by Kim Jong Il is perhaps best summed up by a look at his cash. The list above is necessarily approximate and incomplete, but the bottom line is clear.

Claudia Rosett is a journalist-in-residence with the Foundation for Defense of Democracies, and blogs at