October 1, 2017 at 9:24 PM
Last August, a secret message was passed from Washington to Cairo warning about a mysterious vessel steaming toward the Suez Canal. The bulk freighter named Jie Shun was flying Cambodian colors but had sailed from North Korea, the warning said, with a North Korean crew and an unknown cargo shrouded by heavy tarps.
Armed with this tip, customs agents were waiting when the ship entered Egyptian waters. They swarmed the vessel and discovered, concealed under bins of iron ore, a cache of more than 30,000 rocket-propelled grenades. It was, as a United Nations report later concluded, the "largest seizure of ammunition in the history of sanctions against the Democratic People's Republic of Korea."
But who were the rockets for? The Jie Shun's final secret would take months to resolve and would yield perhaps the biggest surprise of all: The buyers were the Egyptians themselves.
A U.N. investigation uncovered a complex arrangement in which Egyptian business executives ordered millions of dollars worth of North Korean rockets for the country's military while also taking pains to keep the transaction hidden, according to U.S. officials and Western diplomats familiar with the findings. The incident, many details of which were never publicly revealed, prompted the latest in a series of intense, if private, U.S. complaints over Egyptian efforts to obtain banned military hardware from Pyongyang, the officials said.
It also shed light on a little-understood global arms trade that has become an increasingly vital financial lifeline for North Korean leader Kim Jong Un in the wake of unprecedented economic sanctions.
A statement from the Egyptian Embassy in Washington pointed to Egypt's "transparency" and cooperation with U.N. officials in finding and destroying the contraband.
"Egypt will continue to abide by all Security Council resolutions and will always be in conformity with these resolutions as they restrain military purchases from North Korea," the statement said.
But U.S. officials confirmed that delivery of the rockets was foiled only when U.S. intelligence agencies spotted the vessel and alerted Egyptian authorities through diplomatic channels — essentially forcing them to take action — said current and former U.S. officials and diplomats briefed on the events. The officials, who spoke on the condition of anonymity to discuss U.S. and U.N. findings, said the Jie Shun episode was one of a series of clandestine deals that led the Trump administration to freeze or delay nearly $300 million in military aid to Egypt over the summer.
Whether North Korea was ever paid for the estimated $23 million rocket shipment is unclear. But the episode illustrates one of the key challenges faced by world leaders in seeking to change North Korea's behavior through economic pressure. Even as the United States and its allies pile on the sanctions, Kim continues to quietly reap profits from selling cheap conventional weapons and military hardware to a list of customers and beneficiaries that has at times included Iran, Burma, Cuba, Syria, Eritrea and at least two terrorist groups, as well as key U.S. allies such as Egypt, analysts said.
Some customers have long-standing military ties with Pyongyang, while others have sought to take advantage of the unique market niche created by North Korea: a kind of global eBay for vintage and refurbished Cold War-era weapons, often at prices far lower than the prevailing rates.
Over time, the small-arms trade has emerged as a reliable source of cash for a regime with considerable expertise in the tactics of running contraband, including the use of "false flag" shipping and the clever concealment of illegal cargo in bulk shipments of legitimate goods such as sugar or — as in the case of the Jie Shun — a giant mound of loose iron ore.
"These cover materials not only act to obfuscate shipments, but really highlights the way that licit North Korean businesses are being used to facilitate North Korean illicit activity," said David Thompson, a senior analyst and investigator of North Korean financial schemes for the Center for Advanced Defense Studies, a nonprofit research organization based in Washington. "It is this nesting which makes this illicit activity so hard to identify."
With North Korea's other profitable enterprises being hurt by international sanctions, Thompson said, such exports are now "likely more important than ever."
Beneath yellow rocks
Even by North Korean standards, the Jie Shun was a veritable rust bucket. The freighter's steel frame was corroded from bow to stern, and its fixtures caked with coal dust from previous voyages, U.N. investigators would later report. The desalination system had stopped working, judging from crates of water bottles officials would find strewn around the crew compartments. Whether its weapons were discovered or not, the ship's 8,000-mile voyage last summer was probably destined to be its last.
"The ship was in terrible shape," said a Western diplomat familiar with confidential reports from the official U.N. inquest. "This was a one-shot voyage, and the boat was probably intended for the scrap yard afterward."
Seaworthy or not, the ship set sail from the port city of Haeju, North Korea, on July 23, 2016, with a 23-member North Korean crew that included a captain and a political officer to ensure Communist Party discipline on board. Although North Korean-owned, the vessel had been registered in Cambodia, allowing it to fly a Cambodian flag and claim Phnom Penh as its home port. Using a "flag of convenience," as the tactic is called, allows North Korean ships to avoid drawing unwanted attention in international waters. So does the practice of routinely shutting off a vessel's transponder, behavior documented in a February U.N. report that described the Jie Shun's voyage.
"The vessel's automatic identification system was off for the majority of the voyage," the report said, "except in busy sea lanes where such behavior could be noticed and assessed as a safety threat."
Still, a 300-foot-long freighter big enough to hold 2,400 passenger cars is not easily concealed. U.S. intelligence agencies tracked the ship as it left North Korea, and then monitored it as it steamed around the Malay Peninsula and sailed westward across the Arabian Sea and the Gulf of Aden. The vessel was heading northward through the Red Sea in early August when the warning was passed to Egyptian authorities about a suspicious North Korean vessel that appeared bound for the Suez Canal.
"They were notified by our side," said a former senior U.S. official with direct knowledge of the events. "I give their foreign ministry credit for taking it seriously."
The Jie Shun had not yet reached the canal when an Egyptian naval vessel ordered the crew to halt for an inspection. At first, the cargo hold appeared to match the description on the manifest: 2,300 tons of loose yellow rocks called limonite, a kind of iron ore. But digging beneath stone and tarp, the inspectors found wooden crates — stacks of them.
Asked about the boxes, the crew produced a bill of lading listing the contents, in awkward English, as "assembly parts of the underwater pump." But after the last of the 79 crates was unloaded and opened at Egypt's al-Adabiyah port, it was clear that this was a weapons shipment like none other: more than 24,000 rocket-propelled grenades, and completed components for 6,000 more. All were North Korean copies of a rocket warhead known as the PG-7, a variant of a Soviet munition first built in the 1960s.
A closer examination by U.N. experts would reveal yet another deception, this one apparently intended to fool the weapons' Egyptian recipients: Each of the rockets bore a stamp with a manufacturing date of March 2016, just a few months before the Jie Shun sailed. But the label, like the manifest, was false.
"On-site analysis revealed that they were not of recent production," the U.N. report said, "but rather had been stockpiled for some time."
A worldwide customer base
North Korea's booming illicit arms trade is an outgrowth of a legitimate business that began decades ago. In the 1960s and '70s, the Soviet Union gave away conventional weapons — and, in some cases, entire factories for producing them — to developing countries as a way of winning allies and creating markets for Soviet military technology. Many of these client states would standardize the use of communist-bloc munitions and weapons systems in their armies, thus ensuring a steady demand for replacement parts and ammunition that would continue well into the future.
Sensing an opportunity, North Korea obtained licenses to manufacture replicas of Soviet and Chinese weapons, ranging from assault rifles and artillery rockets to naval frigates and battle tanks. Arms factories sprouted in the 1960s that soon produced enough weapons to supply North Korea's vast military, as well as a surplus that could be sold for cash.
By the end of the Cold War, North Korea's customer base spanned four continents and included dozens of countries, as well as armed insurgencies. The demand for discount North Korean weapons would continue long after the Soviet Union collapsed, and even after North Korea came under international censure and economic isolation because of its nuclear weapons program, said Andrea Berger, a North Korea specialist and senior research associate at the Middlebury Institute of International Studies at Monterey, Calif.
"North Korea's assistance created a legacy of dependency," said Berger, author of "Target Markets," a 2015 monograph on the history of Pyongyang's arms exports. "The type of weaponry that these [client] countries still have in service is largely based on communist-bloc designs from the Cold War era. North Korea has started to innovate and move beyond those designs, but it is still willing to provide spare parts and maintenance. As the Russians and Chinese have moved away from this market, the North Koreans have stuck around."
As a succession of harsh U.N. sanctions threatened to chase away customers, North Korea simply changed tactics. Ships that ferried artillery rockets and tank parts to distant ports changed their names and registry papers so they could sail under a foreign flag. New front companies sprang up in China and Malaysia to handle transactions free of any visible connection to Pyongyang. A mysterious online weapons vendor called Glocom — jokingly dubbed the "Samsung of North Korean proliferators" by some Western investigators — began posting slick videos hawking a variety of wares ranging from military radios to guidance systems for drones, never mentioning North Korea as the source.
The sanctions stigma inevitably scared away some potential buyers, but the trading in the shadows remains brisk, intelligence officials and Western diplomats say. Some remaining clients are fellow pariah states such as Syria, whose recent purchases have included chemical-weapons protective gear. Other long-term customers are nonstate actors such as the militant group Hezbollah, which has acquired North Korean rockets and missiles from arms smugglers and sympathetic regimes. North Korean-made rifles have even been recovered from the bodies of Islamic State fighters in Iraq and Syria, although U.S. officials believe the guns were probably looted from stocks sold to the late Libyan leader Moammar Gaddafi years earlier.
Still other customers look to North Korea as one of the last suppliers of low-cost parts and ammunition for older weapons systems that are scarcely found in commercial markets. The list includes sub-Saharan African countries such as Uganda and Congo, which for decades relied on North Korea to train and equip their armies.
The list also includes Egypt, a major U.S. aid recipient that still maintains diplomatic ties and has a history of military-to-military ties dating back to the 1970s with Pyongyang, said Berger, the Middlebury researcher. Although Cairo has publicly sworn off dealing with North Korea, she said, incidents such as the Jie Shun show how hard it is to break old habits, especially for military managers seeking to extend the life of costly weapons systems.
Egypt's army today still has dozens of weapons systems that were originally of Soviet design. Among them are at least six types of antitank weapons, including the RPG-7, the 1960s-era grenade-launcher that uses the same PG-7 warhead as those discovered on the Jie Shun. The number of Egyptian RPG-7 tubes in active service has been estimated at nearly 180,000.
"Egypt was a consistent North Korean customer in the past," Berger said. "I would call them a 'resilient' customer today."
When Egyptian officials were first confronted about their country's possible ties to the Jie Shun's rockets, the response was denial, followed by obfuscation, Western diplomats said.
At the time of the discovery, Egypt was a newly elected nonpermanent member of the U.N. Security Council, and its delegation resisted including information in official reports linking Egyptian officials or businesses to illicit North Korean weapons, said U.S. officials and diplomats familiar with the discussions. The embassy statement said Egyptian officials sought only minor delays to ensure that their views on the events were properly reflected. It noted that Security Council officials had "recognized and praised Egypt's role" in assisting the investigation.
In any case, the February U.N. report on the incident sidesteps the question of who was meant to receive the rockets, saying only that the munitions were destroyed by Egypt under U.N. supervision, and that "the destination and end user of the equipment was investigated by the Egyptian general prosecutor."
But evidence gathered by U.N. investigators and later shared with diplomats left little doubt about where the rockets were bound. An early clue was the nature of the rockets themselves: All were practice rounds — fitted with removable, nonlethal warheads of the type used in military training — and the large quantity suggested that the purchaser had a sizable army with many thousands of recruits. Egypt's active-duty military is 438,000 strong, with another 479,000 reservists.
The most damning evidence was discovered on the crates. Each had been stenciled with the name of an Egyptian company, but someone had taken trouble of covering the lettering with a canvas patch. Diplomats familiar with the investigation confirmed the involvement of the Egyptian company, but declined to name it.
Likewise, the Egyptian company is identified nowhere in the U.N. report. A single footnote states, cryptically: "National authorities closed the private company and revoked its license."
While U.S. officials have declined to publicly criticize Egypt, the Jie Shun incident — coming on top of other reported weapons deals with North Korea in recent years — contributed to the diplomatic turbulence that defined relations between Cairo and the Obama and Trump administrations. U.S. officials confirmed that the rockets were among the factors leading to the Trump administration's decision in July to freeze or delay $290 million in military aid to Egypt.
During Egyptian President Abdel Fatah al-Sissi's visit to Washington that month, President Trump praised the military strongman before TV cameras for "doing a fantastic job." But a White House statement released afterward made clear that a warning had been delivered in private.
"President Trump stressed the need for all countries to fully implement U.N. Security Council resolutions on North Korea," said the official statement, including the need to "stop providing economic or military benefits to North Korea."