North Korean state firms turn to drug sales to deal with sanctions

Coal exports from North Korea have been banned in the latest round of UN sanctions. To compensate, North Korea’s state trading companies have begun to focus on the production and sale of illicit drugs. These companies have been ordered to earn foreign currency by the regime, and as legitimate forms of trade have been rendered impossible due to the new sanctions, the firms are turning to drug manufacturing at an industrial scale.  
Inside reports suggest that the production, sale, and consumption of drugs in North Korea has increased since the introduction of UN Security Council Resolution 2371, which bans the export of mineral products like coal. 
“North Korean state companies and merchants have been waiting for the export markets to re-open ever since sanctions began having a significant impact in February this year,” said a South Pyongan Province source in a telephone call with Daily NK on August 10. “But now trade has been shut down for the coal exporters due to the country’s missile launches, and they are turning to drug production and smuggling as a replacement.”   
In order to circumvent sanctions, the regime is encouraging the growth of an illicit market within its own borders. As the country becomes more dependent on these drugs for revenue, the country is likely to become more vulnerable to social instability.
When faced with sanctions limiting trade between North Korea and China, the regime turns to alternate avenues to generate foreign currency. The regime’s heavy emphasis on self-sufficiency in such circumstances is often viewed as an indirect order from the top to ramp up drug sales to generate money for the regime.
It is generally thought to be impossible to engage in drug production without the knowledge of the government in North Korea. Cadres are complicit in every step of the process, from production, to manufacturing and distribution. These networks spread out across the country and extend to the border with China.
According to Daily NK’s sources, the primary base material used in the manufacture of methamphetamines is called “paecho” in North Korea, but is known as phenylacetic acid elsewhere. The white crystals that make up the raw material are labeled and disguised as flour and taken through the customs office between China’s Dandong and North Korea’s Sinuiju city. It is said to be generally easy to pass through customs this way.
“The base ingredient is smuggled in from China and then sold to producers in North Korea, who make the “ice” (meth). When customs procedures become more stringent and it gets harder to bring paecho in through the customs office, the materials are acquired from the Pyongsong College of Science and sold on the black market,” the source explained.
 
When they are unable to import the material from China, cyanbenzyline produced by the Pyongsong College of Science is used as an alternative. This is another precursor that scientists at the college have learned how to synthesize to make the final product.
Hamheung City and Sunchon City are centers of drug production in North Korea. Both are also cities that host significant scientific industries. Sunchon is near the Pyongsong College of Science and hosts a university dedicated to chemistry, while Hamheung also has a center for scientific research and a university dedicated to chemistry. 
Reports suggest that the primary ingredients and additives are sourced from Sunchon Pharmaceutical Factory and the Heungnam Pharmaceutical Factory. These sites have also become involved in the distribution of the precursors.
 
According to a separate South Pyongan source, cyanbenzyline from the Pyongson Institute of Science is sold in 200 kilogram drums. Purchasing direct from the institute, a single drum costs US $10,000. Buying from a wholesaler is more expensive, at about $15,000.
The cadres assigned to these science institutes are in collusion with black market vendors and producers to secure the primary materials needed to synthesize the drugs. Bribes must also be paid in the form of kickbacks to ensure that State Security Department and local prosecutors turn a blind eye. Different echelons of the drug trade are separated according to social strata. The cadres and the donju (newly affluent middle class) generally control production, while sales operations go to the middle class, and consumption is widespread amongst ordinary residents.
As Kim Jong Un continues to focus on developing nuclear weapons and missiles, sanctions are likely to continue. The Kim regime will therefore face even greater pressure to maintain its cash flows. In this context, the production and sale of drugs consumed by North Korea’s residents has emerged as an all-too-convenient solution. 
As production levels continue to rise, serious public health issues are likely to become endemic in the impoverished nation. 
After North Korea’s missile launches, the country has become isolated and self-sufficiency a central focus of the regime’s propaganda. In order to bring in foreign currency, the state-run companies have had no choice but to resort to illicit methods. 
“Government officials use the drug supply chain as an opportunity to take bribes, resulting in pronounced levels of corruption and bribery,” an additional source in South Pyongan Province concluded.
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