THE NORTH KOREAN CONNECTION

U.S. Says Cash-Strapped Pyongyang Sponsors Heroin Production

Last January, Interpol officials at Moscow's international airport
spotted two North Korean diplomats arriving from Mexico, an unusual
event because that impoverished Asian nation had little money for its
diplomats to travel. An inspection of their luggage showed the two
were carrying 77 pounds of cocaine, worth about $4.5 million, which
they hoped to sell in Russia.

A few months earlier, Japanese police had seized almost $100 million
worth of methamphetamines aboard a North Korean cargo ship. The cargo
was discovered, according to a U.S. official familiar with the case,
because the containers were labeled "honey," and "officials asked
themselves why a country in the midst of a massive famine would be
exporting food."

Isolated diplomatically, short of resources, facing widespread famine
and desperate for hard currency, North Korea is rapidly expanding
state involvement in the production and distribution of heroin and
methamphetamines, in addition to a host of other criminal enterprises,
according to U.S. and international drug officials.

U.S. concerns about North Korea's state-sponsored drug trafficking
have been overshadowed by the West's preoccupation with North Korea's
clandestine development of nuclear arms and its rapidly advancing
missile programs.

"Everything can't be priority one or priority two or even priority
four and five, you know, and narcotics is way down the list," said a
U.S. official.

U.S. officials admit their information is sketchy because Washington
has no diplomatic ties with Pyongyang, and they rely heavily on South
Korean intelligence services. But anecdotal evidence such as the
sudden jump in the past three years of arrests of North Korean
diplomats and the accounts of defectors consistently say the illegal
activities are carried out with the direct authorization of the North
Korean government.

"The state is the mafia," said James Lilley, former U.S. ambassador to
South Korea, adding that North Koreans routinely use their diplomatic
pouch, immune to search, to ship drugs and other contraband.

A February report by the Congressional Research Service said
"conservative estimates" of North Korea's criminal activity,
"carefully targeted to meet specific needs," generated about $86
million in 1997 -- $71 million from drugs and $15 million from
counterfeiting.

Requests for comment by North Koreans at the United Nations were not
answered, but in the past North Koreans have insisted that any
criminal activities were the work of individuals, not the state.

U.S. intelligence officials said that in about 1994 the government
created the Korean Workers Party Bureau 39, a special office to
generate hard currency that is under the direct control of North
Korean leader Kim Jong Il.

At about the same time, officials said, North Korea shut down many of
its embassies because of the financial crisis, and their remaining
diplomats overseas were told they would have to start earning enough
hard currency to pay the cost of operating their diplomatic posts and
remit some home.

"So these poor guys are sitting there trying to spin gold from straw,"
said one official. "I suspect that is where you get some of the drug
dealing."

In 1990, U.S. officials said, there have been at least 26 documented
incidents of North Korean diplomats being arrested on drug trafficking
charges, and many more involving other smuggled goods.

U.S. officials said much of the bureau money is channeled through the
Kaesong Bank for hard-currency purchases abroad.

"These two offices, office 39 and Kaesong Bank, are Kim Jong Il's
personal finance secretariat, [and the money is] basically
discretionary income for Kim Jong Il to spend it on whatever the heck
he wants to spend it on," said a U.S. official. "He can spend it on
bicycles or Mercedes or watches."

The growing concern that North Korea is using drug trafficking
proceeds to fund its weapons program and maintain its military, the
fifth largest in the world, is leading many in Congress to question
U.S. policy toward North Korea. At the behest of Congress, the Clinton
administration asked former defense secretary William J. Perry to
review all aspects of U.S. policy toward North Korea.

On March 5 senior House Republicans, including international relations
committee chairman Benjamin A. Gilman (N.Y.), and Majority Leader
Richard K. Armey (Tex.) wrote to Perry, saying, "Your report needs to
clearly highlight the reality that North Korea has entered the illicit
narcotic production and trafficking business, especially the
production of opium and methamphetamine."

Sens. Charles E. Grassley (R-Iowa) and Jesse Helms (R-N.C.) last year
demanded that the State Department include North Korea in its annual
worldwide drug trafficking report. This year's report, released March
1, did, concluding that, in North Korea, "estimates of the area under
poppy cultivation range from 10,378 acres to 17,300 acres and
estimates of opium production range from 30 metric tons to 44 metric
tons annually. This would yield from 3 to 4.5 metric tons of heroin,
if all the opium were refined into heroin."

But Grassley, chairman of the Caucus on International Narcotics
Control, said in an interview that the State Department's report was
unsatisfactory.

"We want to know why, with the indications we are getting the North
Korean government is implicated in drug production, there is not more
of an effort to confront the issue." Grassley said. "We have got to
stop ignoring drug trafficking and treating North Korea like a 'most
favored rogue state' in the hopes they will unilaterally stop
producing drugs."

The greatest concern, according to Barry R. McCaffrey, the Clinton
administration's drug policy director, is methamphetamine production,
which requires much less expertise and fewer precursor chemicals than
heroin production.

U.S. officials trace the rise in methamphetamine production to 1997,
after rains destroyed much of the opium crop.

"The target appears to be Japan and Thailand," McCaffrey said. "Meth
is worth their attention as a technique to generate international
cash, and it takes no skill."

[SIDEBAR]

Aid to N. Korea

North Korea has become the largest recipient of U.S. aid in Asia in
recent years.

U.S. aid since 1994:

Purpose Amount

(in millions)

Fuel oil $79.5

Storage of nuclear material 27.0

Food aid 140.0

Tracking down U.S. servicemen 3.1

Total $249.6

In fiscal year 1999, North Korea is slated to receive 300,000 tons of
wheat valued at $100 million.

Above data from: Congressional Research Service