March 22, 2021
By: Lucas Kuo Lauren Sung
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The Bottom Line Up Front

Black Gold finds that North Korea has been engaging organized criminal networks and participating in a regional fuel smuggling market in violation of international sanctions, and that the nation is demonstrating increasingly sophisticated and previously unseen tactics to evade detection.

Black Gold is a joint investigation by C4ADS and RUSI’s Project Sandstone that lifts the veil on the networks providing oil to North Korea in violation of UNSC resolutions.

Executive Summary #

North Korea relies on the outside world to import fuel. With no demonstrated oil reserves and limited domestic refinery capacity, imports of refined petroleum products are vital to the regime’s stability and survival. As in all modern economies, energy — predicated on a constant flow of fuel into the country — underpins North Korea’s domestic and export economy, as well as Pyongyang’s capacity to train and field armed forces and develop weapons of mass destruction (WMD).

The international community’s efforts to cap North Korea’s oil and petroleum products imports in 2017 forced Pyongyang to adapt its fuel-procurement strategy. This report finds that North Korea has been engaging organized criminal networks and participating in a regional fuel smuggling market in violation of international sanctions, and that the nation is demonstrating increasingly sophisticated and previously unseen tactics to evade detection.

Even by conservative estimates, Pyongyang appears to have successfully bypassed fuel sanctions and exceeded the cap imposed by the United Nations Security Council (UNSC) each year since the introduction of the limit. Despite the challenges posed by the coronavirus pandemic and by North Korea’s restrictions on port traffic, analysis of high-resolution satellite imagery of oil terminals and import facilities suggests North Korea has once again breached the import cap in 2020. Through analysis of AIS data and satellite imagery, the authors found that the proportion of fuel deliveries to North Korean ports by foreign-flagged tankers is significant and has been increasing. This phenomenon raises important questions about the entities behind these sanctions violations, and it calls for scrutiny of how smugglers continue to evade detection and identification while transporting fuel within some of the most heavily monitored waters in the world.

Key Findings #

  1. North Korea has tapped into an existing fuel smuggling economy in East Asia to procure fuel at volume. Different national-level regulatory and pricing regimes for fuel in the region create arbitrage opportunities that smugglers have long exploited to generate immense profit. These smugglers divert fuel from the licit market to sell to various customers, one of which is North Korea.
  2. Taiwan appears to be a key locus in this regional black market for fuel. The country’s preferential fuel policies price refined petroleum products lower than those of its neighbors, creating opportunities for arbitrage and offering smugglers a cheap and readily available source of fuel. Additionally, several of the networks and entities engaged in DPRK–related fuel smuggling operate from or out of addresses or ports in Taiwan. The country’s waters are also being exploited by illicit actors conducting DPRK-related, ship-to-ship (STS) transfers of fuel in a multilayered shuttle system that bisects both “dirty” vessels traveling directly to North Korea and “clean” vessels discreetly supplying those direct-delivery tankers with fuel on the high seas.
  3. North Korea’s illicit fuel supply chain has links to organized crime. Several of the key actors in North Korea’s fuel procurement originate from, and maintain connections to, Fujian province, China and, in particular, the city of Shishi. Shishi and the nearby coastal cities of Fujian province have long been a regional smuggling hub for illicit goods, such as cigarettes, wildlife products, drugs, and fuel. These actors appear to constitute a loose criminal federation whose interests and activities intersect to smuggle fuel to North Korea.
  4. A key node in this DPRK fuel procurement network appears to be the Winson Group, a major regional oil trader. The Winson Group is headquartered in Singapore and has offices across East Asia; it has links to several shipping and oil trading companies in the region, as well as businesses registered in secrecy jurisdictions, through which it has connections to possible STS transfers of fuel that ultimately end up in North Korea. The founder of the Winson Group also has a documented history of cigarette and fuel smuggling and alleged connections to illicit DPRK-related commercial activities. This report finds that North Korea’s shipping and maritime sanctions evasion tactics are highly adaptive and growing increasingly sophisticated in response to pressure from and enforcement by the international community. While these outcomes indicate the sanctions regime has complicated and increased the cost of illicit business for North Korea, the demonstrated adaptability of the country’s maritime trade networks also underscores, in dramatic fashion, the growing cost of monitoring, detection, and enforcement. This report also highlights the need for authorities to better explore the connections between North Korea, underground economies, and transnational organized crime, and it adds to the existing but under-explored literature of the country’s links to organized criminal networks. Relying on sanctions to block North Korea’s licit avenues of procurement creates a supply-and-demand dynamic between providers of illicit goods and services—often criminal organizations — and Pyongyang. To stay abreast of North Korea’s evolving tactics for evading sanctions, this report recommends that international, government, and civil regulators proactively monitor criminal networks that provide the country with contraband goods and services, while closing regulatory loopholes in the international sanctions regime, rather than reactively investigating instances of sanctions evasion.

NYT Visual Investigations Video #

How a Mysterious Ship Helps North Korea Evade Oil Sanctions | Visual Investigations | New York Times

Webinar #

Big Powers, Unusual Activities

As part of the Planet Explore 2021 Conference, the analysts behind Black Gold got together to discuss how North Korea has proved adept at evading international sanctions, especially those aimed at capping the country’s ability to import refined petroleum products. Satellite imagery, in tandem with ship-tracking data, is an essential tool for documenting and monitoring North Korea’s illicit procurement networks, as seen in UN Panel of Experts reports and explosive reporting from the New York Times. This session delves into specific instances where satellite imagery was critical to uncovering North Korea’s ever-evolving sanctions evasion tactics.

In the News #