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How North Korea's leader gets his luxury cars

High-end Western goods are making their way to North Korea's elite through a complex system of port transfers, secret high-seas shipping and shadowy front companies

By Edward Wong and Christoph Koettl
Published: Jul 17, 2019

How North Korea's leader gets his luxury carsNorth Korean Leader Kim Jong Un waves from a car as he departs the Inter-Korean Summit held in the truce village of Panmunjom, South Korea, April 27, 2018. Kim parades around in Mercedes-Benzes and a Rolls-Royce, despite sanctions intended to keep North Korea from importing luxury goods
Image: Korea Summit Press Pool via The New York Times

WASHINGTON — The armored black limousines appear everywhere with Kim Jong Un, sleek Western chariots for the young dictator of North Korea.

Flown in from the North Korean capital of Pyongyang on a cargo plane, the sedans carried Kim through the streets of Singapore; Hanoi, Vietnam; and Vladivostok, Russia, during summit meetings with President Donald Trump and President Vladimir Putin of Russia. Sometimes a phalanx of bodyguards jogs beside them.

The cars are top-of-the-line Mercedes-Benzes popular with world leaders — the Maybach S62 and Maybach S600 Pullman Guard, which cost $500,000 to $1.6 million each. And Kim is using them in open defiance of United Nations sanctions intended to ban luxury goods from North Korea.

High-end Western goods are making their way to North Korea’s elite through a complex system of port transfers, secret high-seas shipping and shadowy front companies, according to research by the Center for Advanced Defense Studies, a nonprofit Washington group that looks at smuggling networks, and an investigation by The New York Times.

The evasions point to potential limits of sanctions as a tool for the Trump administration to pressure Pyongyang into serious negotiations to end its nuclear weapons program. U.S. officials say their only real leverage with North Korea is tough sanctions. During the failed summit in Hanoi in February, Kim’s main demand of Trump was to lift major sanctions, which have been tightened since late 2016.

At the request of President George W. Bush’s administration, the United Nations imposed sanctions in 2006 to keep luxury goods out of North Korea.

But from 2015 to 2017, as many as 90 countries served as the sources of luxury goods for North Koreans, according to a report released Tuesday by the Center for Advanced Defense Studies. Moreover, the networks and supply chains run through the territories of some U.N. Security Council member nations and U.S. allies — China, Russia, Japan and South Korea among them.

Both President Xi Jinping of China and President Moon Jae-in of South Korea rode with Kim in Mercedes-Benz sedans on recent visits to Pyongyang.

For officials seeking to enforce the sanctions, it is important to track the smuggling of luxury goods — especially of rare items such as armored cars — because North Korea uses similar techniques to obtain dual-use technology for its nuclear weapons program, sanctions experts say. Analysts say North Korea continues to enrich uranium to increase its arsenal of an estimated 30 to 60 warheads.

“When it comes to sanctions evasions, North Korea relies on a sophisticated but small group of trusted individuals that move any goods required by the state, whether it’s luxury goods or components for missiles, or whether it’s arranging for trade of resources,” Neil Watts, a maritime expert and former member of the U.N. panel on North Korea sanctions enforcement, said, speaking generally about patterns of illicit trade into the country.

The U.N. panel noted in its annual report this year the appearance of limousines made by Mercedes-Benz and Rolls-Royce in Pyongyang. In October, in Pyongyang, Kim got out of a Rolls-Royce Phantom limousine to greet Secretary of State Mike Pompeo.

The journey taken by a pair of armored Mercedes Maybach S600 sedans from Europe to East Asia illustrates how one of the luxury-goods transportation networks operated. The Center for Advanced Defense Studies and The Times traced their path through five countries using open-source material, including shipping records and satellite images.

Interviews with officials and business executives confirmed some of the details of the network. In February, South Korean officials seized a Russian-owned ship that had transported the cars.

The globe-spanning voyage began in the port of Rotterdam, the Netherlands. In June 2018, two sealed containers, each holding a Mercedes worth $500,000, were brought by truck into a shipping terminal, according to cargo tracking records. They were in the custody of China Cosco Shipping Corp. It was unclear who had first purchased the cars. Daimler, the parent company of Mercedes, says Mercedes runs background checks on potential buyers of the vehicles to ensure the company is not selling to sanctions violators.

The cars traveled by ship for 41 days to Dalian, in northeast China. The containers were offloaded after the ship’s arrival July 31. They remained in the port until Aug. 26. They were then put on a ship for Osaka, Japan. From there, they were put on a vessel for a three-day voyage to Busan, South Korea, where they arrived Sept. 30.

Then came the most mysterious part of the passage. The containers were transferred within one day of arrival to the DN5505, a cargo ship sailing under the flag of Togo, a West African nation, and bound for the port of Nakhodka in the far east of Russia. At this point, the cars were consigned to Do Young Shipping, a company registered in the Marshall Islands that owns the DN5505 and one other ship, the Panama-flagged oil tanker Katrin.

Do Young’s ownership is not clear from its registration but appears to be tied to a Russian businessman, Danil Kazachuk, documents and interviews show. Executives at Han Trade and AIP Korea, the South Korean shipping agencies that worked with the two ships, said Kazachuk was the ships’ owner. Documents obtained by the Center for Advanced Defense Studies show Kazachuk was listed as the owner of the Katrin for about one month in 2018.

The ship with the cars, the DN5505, was originally called Xiang Jin, but it was renamed DN5505 and its ownership transferred from a Hong Kong-registered company to Do Young on July 27, just days before the two sedans arrived in Dalian.

After leaving Busan on Oct. 1 with the sedans, the ship went dark — its automatic identification system stopped transmitting a signal. That is common practice among ships evading sanctions.

The signal stayed off for 18 days. When it came back on again, the ship was in South Korean waters. Now it was on a return trip to Busan, but laden with 2,588 metric tons of coal, which it later unloaded in another South Korean port, Pohang. Customs records in South Korea showed that the ship had taken on the coal in Nakhodka, the report from the Center for Advanced Defense Studies said.

That port city is next to Vladivostok, where Kazachuk is based. Ship traffic data and shipping agency executives said the ship had reported Nakhodka as its destination after leaving Busan with the cars.

The center’s report did not say with certainty what happened there with the sedans. But the researchers say the cars might have been flown from Russia to North Korea. On Oct. 7, three cargo jets from Air Koryo, North Korea’s state-run airline, arrived in Vladivostok, according to a video online and flight tracking data. (That happened to be the same day Kim drove in a Rolls-Royce through Pyongyang to meet with Pompeo.)

It is rare for North Korean cargo planes to fly to Vladivostok. The jets are the exact same airplanes used to transport Kim’s vehicles outside North Korea, according to tail numbers.

“Given the heavy lift cargo capacity of the planes and their role in transporting Kim Jong Un’s armored limousines, it is possible that the cargo jets could have loaded the Mercedes,” the report said.

Four months later, on Jan. 31, 2019, the same model of Mercedes drove through the streets of Pyongyang to the headquarters of the central committee of the Workers’ Party of Korea, according to video footage analyzed by NK Pro. The sedans also appeared that day alongside Kim in a photo session with an art delegation.

In a telephone interview, Kazachuk acknowledged that he was responsible for the DN5505, but declined to give details about the shipment of the cars or say how or whether he had transferred them to North Korea.

“This is my company’s business secret,” he said. “Why do I need to tell everybody where I bought these cars and to whom I sold the cars?”

There is no evidence tying Kazachuk to the movement of military technology or goods to North Korea, but international sanctions experts say the Russian far east is a common transit point for smuggled goods going to and from North Korea.

In February, South Korean authorities seized the DN5505 and the Katrin in separate actions because of suspected sanctions violations. The DN5505 had docked in Pohang, South Korea, carrying more than 3,200 tons of coal after sailing from Nakhodka. Officials told employees of the South Korea shipping agency handling the ship that it was being investigated for carrying North Korean coal. The other ship, the Katrin, was accused of bringing petroleum products to North Korea.

Kazachuk said he as a shipowner was not responsible for what the ships carried. He also said South Korean authorities were engaged in a “state racket” and might have planted evidence on the ships.

“The South Korean police spit from a high bell tower on basic human rights,” he said.

There is another tie between his ships and suspected sanctions violations. Last fall, when the DN5505 dropped off its shipment of coal in Pohang, on the return trip after having unloaded the two sedans, a company called Enermax Korea took possession of the coal.

The U.N. panel has been investigating Enermax, registered in South Korea, for sanctions violations.

The panel’s 2019 report said Enermax appeared to be the final recipient of North Korean coal that was intended to be transferred in April 2018 in Indonesian waters by a North Korean-flagged ship, the Wise Honest, to a Russian cargo ship. Indonesian authorities detained the Wise Honest around April 1.

Enermax had signed a contract to buy the coal from a Hong Kong-registered company, yet told the panel that it was buying Indonesian coal from someone who appeared to be a local broker in Indonesia.

The sales contract valued the coal at nearly $3 million.

In May, the United States announced it was seizing the Wise Honest.

In an interview, Enermax executives said the deal with the Indonesian broker fell apart and no money exchanged hands. They also said they had thought the coal delivered to South Korea by the DN5505 both in October — right after the Mercedes-Benzes were unloaded — and in February was Russian in origin. They said Kazachuk had told them the coal was from Russia.

South Korean authorities have seized at least six ships since late 2017 on suspicion of sanctions violations. In June, it began scrapping the Katrin. Officials said the dismantling was done at the request of Kazachuk, who did not want to continue accruing docking fees for the seized ship.

©2019 New York Times News Service