Silent Partners: Chinese Joint Ventures in North Korea - US-Korea ...

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Silent Partners: Chinese Joint Ventures in North Korea Transcript 28 cable but basically, you’ve got a desperate North Korea that’s looking to get whatever advantage they have. One of the takeaways from interviews with not just North Koreans, but I also spoke to a couple of people who are traders with North Korea who are not really captured in this report but they do give you a sense of what it’s like to do business with North Korea, and these guys don’t think long-term. They’ll have something that they’ve looted, scrap metal or maybe they’ve got a shipment of ore that they’ve somehow wrestled from somebody, so they have something of value, hard currency value, that they then shop to their sources in, most often, Dandong. And basically, and this guy says, “And then the cell phones start ringing on our side.” And he’s like, “This is not a big town, I know all the guys that are doing business with them, these guys, they change their name, they change their company, but by and large, within a few minutes, you can figure who they’re representing, never seen this guy before but you know he’s KPA or he’s Cabinet or he’s Party.” You pretty much know whatever it is that they’re selling, where they got it from, and who their backing is. And he says, “Yeah, we play this game where they try to collect deposits from everybody.” So they’ve now collected, you know, 15 percent of that shipment from 10 different people, which means they’re now good, but then they want to get the other 85 percent for actually delivering. So this guy will say, yeah, so, I end up being the winner and I get this trainload of whatever it was he just paid for, I think he was getting gold ore was the story he was telling me, so he just got this trainload of rocks containing some percentage of gold that he’s now going to ship off to a refiner. And he says, you know, and it’s like, you know, transaction at the border as I’m counting the trains crossing the bridge and then handing over duffle bag after duffle bag until eventually there are no more cars and, you know, they stopped bringing duffle bags. And then he said the next day, I’ve got phone calls from all these very angry friends of mine who also paid 15 percent down for this trainload. And he says, the next time, I’ll be one of those guys. You know, in other words, I can build a relationship with them U.S.-Korea Institute at SAIS | 1717 Massachusetts Avenue NW, 6 th Floor | Washington, DC 20036 202.663.5830 | www.uskoreainstitute.org
Silent Partners: Chinese Joint Ventures in North Korea Transcript 29 and it’s not going to change. The example of the zinc miner was the same: He’s like, “Alright, I’ve invested, I’m now a jointventure partner, my return on investment is supposed to be the ore but there’s nothing to stop them from shipping out, from shopping that ore around.” He said, “The only way I can stop it is with these other payments that I make and this rolling credit process where, if there was a functioning banking system, they’d have a letter of credit.” But without that you can’t have letters of credit; you can’t build trust into your transactions so it ends up looking like Miami Vice. You know, you’ve got the two cars pulling up in the middle of the night and guns tucked away and “show me yours, I’ll show you mine” then we’ll make a transaction and hope it doesn’t end badly. But, that doesn’t lead towards long-term, sustainable or large-scale investments either. So you got that. You have the North Koreans, of course, overselling what they’ve got in order to collect. So, Rajin Port’s a good example. How many times have they sold that, never mind Yeonpyeong, how many times have they sold Rajin Port on these MOUs But when you think about it, how valuable an asset is it It’s not a deep port; it’s only about 30 feet deep, which limits you to a fairly small size of ship. There’s like four classes of bulk cargo, and you’re only going to be talking bulk cargo here, we’re not talking light industrial products, we’re talking the products of Northeast China, heavy steel, ores, refined products, heavy industrial products. You’ve got what they call handy-size, which are these smaller ships, maybe they’re about 200 meters long, they can fit into the port. The next size up is called handy-max and you know, it’s bigger and deeper, but they can’t call at the port. Now the difference between shipping on that handy class and handy-max class, the bigger ship, is about 30 percent cheaper per unit, per ton, or whatever you’re shipping. The next level up is Panamax, the biggest ship you can put through the Panama Canal, it’s another 30 percent cheaper than the previous class. So, then there’s post-Panamax, U.S.-Korea Institute at SAIS | 1717 Massachusetts Avenue NW, 6 th Floor | Washington, DC 20036 202.663.5830 | www.uskoreainstitute.org
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