Unless you are a brave smoker of cut-price North Korean cigarettes, you’ve probably never heard of the Ryugyong Corporation.
We hadn’t heard of it either. But a new Pyongyang Papers investigation can reveal that this state-controlled company sits at the heart of an illicit global network of North Korean sanctions evaders, generating funds for the DPRK regime. This network includes Turkish and Greek tobacco suppliers, Cambodian front companies, shady North Korean middlemen and Chinese freight forwarders. As sanctions cut off North Korea’s other avenues for earning money, this tobacco network appears to be growing in importance as a way to finance Kim’s ballistic missile pet project and the lifestyles of North Korean elites. What more could an enthusiastic DPRK-watcher need?
Ryugyong Corporation Revenue Generation
As a company, the Ryugyong Corporation sits firmly at the center of the DPRKs revenue generating machine. It is an arm of the central government, subordinate to the Korea Worker’s Party Finance and Accounting Department (Bureau 125), which handles budget and accounting matters for the Kim regime.
Ryugyong imports leaf tobacco, filters and papers from suppliers, using a mix of cover companies and North Korean front-men, often working out of DPRK embassies overseas. These front-men source supplies from all over the world including Argentina, India, South Africa, Vietnam, the UAE, Zimbabwe and China. A recent NK News article highlighted the rise in tobacco imports from China. Once purchased, the tobacco products are typically routed through Dalian in China and onto Nampho port in North Korea.
Once the tobacco and papers have arrived in North Korea by sea, Ryugyong assembles the various components into cigarettes. They do this using cheap North Korea labor in large factories (one of the benefits of a slave labor economy?). Once produced, the cigarettes are sold in stores run by the Ryugyong on behalf of the state, where luxury goods like cigarettes and imported alcohol are provided for the wealthy and well connected in Pyongyang. Read Pyongyang Papers previous article on luxury goods here.
Ryugyong’s main source of income comes from foreign rather than domestic sales. In addition to selling cigarettes to North Koreans, Ryugyong is also involved in a massive counterfeiting and cigarette export operation, generating large sums for the regime. They cover their cheap cigarettes with the names and colors of well known cigarette brands, package these up and ship them out of the country to unsuspecting smokers. Mostly, we suspect, in China.
Why is This a Problem?
Apart from the fact that this state-run counterfeiting operation puts a giant hole in the wallet of global tobacco brands (we have limited sympathy there) – why is this problem? Well the funds generated by selling these counterfeit cigarettes directly contribute to the DPRK’s nuclear and ballistic missile programs through Bureau 125. Importing or facilitating the import of luxury goods (like tobacco) into North Korea is also contrary to UN sanctions when it generates revenue for the regime. There’s also something of an ethical issue here. Without wanting to comment on the quality of North Korean cigarettes, we’d be surprised if these poorly made products weren’t also killing quite a few Chinese smokers at the same time.
Pyongyang Papers has looked into some specific parts of the Ryugyong import/export network that we’ve been unable to uncover thanks to a friendly contact in Dalian. Many of the threads we’ve unpicked through online research and ship tracking platforms seem to begin in Cambodia, where North Korean involvement in the tobacco trade has become well-known among the small network of suppliers there.
What Companies Are Involved?
A central hub of the Cambodia supply network is a particularly busy North Korean frontman called Myong Chol Min. Myong is the operations manager at a Cambodian company called Phal Eng Lim Import Export Co., Ltd (PELCO). Myong is also the managing director of a Thailand based company called MCM International Trading.
Pyongyang Papers believes that both PELCO and MCM are fronts for the Ryugyong Corporation, and that Myong is a key supplier of tobacco and cigarette products who works directly for the DPRK regime. According to company records, PELCO is registered at 91 Street, Sangkang Kampong Cham, Kampong Cham City, Cambodia. It’s also listed on www.tobacco1.com with the phone number+855966662595. We haven’t had any luck getting through thought!
Myong has reportedly been involved in hundreds of tobacco deals with PELCO and MCM over the years but we can highlight one in particular that illustrates the kind of activity that takes place. In September 2018, Myong used PELCO to set up and pay for a 50 tonne shipment of ML1-Grade tobacco leaf from the Sihanoukville in Cambodia, to Dalian, China. It appears that the containers were shipped from Cambodia on a Liberian-flagged freighter. From Dalian, as far as we can work out, this particular shipment was transported onwards towards North Korea on the DPRK flagged container vessel the Tong Myong 9.
Myong and PELCO have also been involved in deals for tobacco papers and filters worth hundreds of thousands of dollars. One of PELCO’s principle suppliers is a Turkish company called Tobacco Solutions Asia Limited (TSAL). Myong has had many dealings with TSAL and with Star Agritech International, its parent company, often liasing through a TSAL manager called Gokhan Akca. Acka’s colleague Afsaneh Gorbani, a sales supervisor at TSAL, has also had dealings with Myong and the North Koreans.
Myong’s globetrotting business dealings don’t end in Turkey and Cambodia. Another company that looks like it has suspect business dealings with Ryugyong is a Greek trading house called Zafiris Naxiades – Tobacco in Leaves – S.A. Naxiades, located in Thessaloniki, looks like it has a long history of trading tobacco and has an attractive image of their old warehouse on the website. Quite why such a venerable company has resorted to supplying the North Koreans with tobacco is unclear. We would guess that times are tough at Naxiades but Greece is one of the few European countries where the smoking ban hasn’t had much effect on cigarette consumption. They should be rolling in money!
Ryugyong is another symptom of a state that has lost its moral compass. We’re no longer surprised at the behavior of North Korean state companies – what is surprising is the number of international firms, like Naxiades and Star Agritech, that are willing to risk their reputations for what are, on the face of it, quite small deals. Given that these supply companies rely of a functioning international tobacco market to survive, it’s also surprising that they are willing to go against the interests of their industry to supply a company like Ryugyong, which has become infamous for the mass counterfeiting of cigarettes.