N. Korea Cashes In on Mineral Riches

Chinese trucks head to an iron ore mine in North Korea, which in recent years has sharply increased its export of minerals such as coal, zinc and gold.
Chinese trucks head to an iron ore mine in North Korea, which in recent years has sharply increased its export of minerals such as coal, zinc and gold. (By Stephen Shaver -- Bloomberg News)
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By Blaine Harden and Ariana Eunjung Cha
Washington Post Foreign Service
Sunday, February 24, 2008

SEOUL -- North Korea's Kim Jong Il has a chronic cash-flow problem.

In the 1990s, his Stalinist state nearly capsized -- and millions starved -- for want of subsidies from China and the defunct Soviet Union. Since then, despite arms dealing and the receipt of international aid in return for talking about abandoning nuclear weapons, North Korea has often gone without rice, fuel and medicine.

In the past couple of years, though, Kim's government has quietly begun to milk a long-neglected cash cow: deposits of coal, minerals and precious metals that are among the largest in Asia.

As mineral prices soar on world markets, foreign access to mines in the North is accelerating at a rate unseen in the more than five decades since the division of the Korean Peninsula, according to South Korean government officials, Chinese mining experts and scholars who study North Korea.

They say that Kim's government is increasingly willing to lease mines to outside companies and to negotiate joint ventures with foreign governments.

"North Korea is trading what she has for what she hasn't," said Xu Wenji, a professor of East Asian studies at Jilin University in Changchun, China.

At the same time, mining operations have been delayed and derailed by erratic, maddening and corrupt behavior on the part of North Korean officials, according to businessmen in South Korea and China.

"North Korea -- they are a country of scoundrels," said Sun Demao, a manager at Zhaoyuan Gold, a Chinese company that has canceled all its contracts with mines in the North because of chronic delivery troubles.

Still, exports of North Korean coal and zinc to China have jumped sharply in the past three years, as have zinc exports to South Korea and gold exports to Thailand.

For the first time, North Korea agreed last May to a long-term joint mining deal with the South Korean government, and more deals are in the works, said Jeong Dong-moon, director of the inter-Korean industrial team in the South's Ministry of Unification.

Officials from the two countries met seven times last year, including three inspection trips to a large zinc- and magnesite-mining complex in the North.

"The North Korean leadership now realizes that mining is a realistic tool for getting dollars," said a senior South Korean official who attended the meetings and spoke on condition of anonymity to protect his job. "We could feel their passion. They were really into it."


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