North Korean House of Cards

connection with efforts to modernize Pyongyang, 427 which followed Kim Jong-il’s
directive to make the capital a world-class city, Jang’s opponents took the opportunity
to move against him.
For Ri Yong-chol and Ri Je-gang, who were supporting Ko Yong-hui’s
efforts to push for the designation of one of her sons as heir apparent against the
objections of Jang Song-taek and Kim Kyong-hui, the timing could not have been
better. They reportedly provided the Premier with information that allowed him
to construct a dossier for Kim Jong-il. This dossier outlined cases where the KWP
OGD infringed upon the state economy in the name of earning foreign currency,
as well as the arbitrary actions of state entities in the economic sector. 428 Kim
responded by supporting Pak, granting him executive authority over the economy.
He also ordered the return of all state enterprises to the Cabinet and mandated
against external interference. 429 Within a few months, he sent Jang Song-taek
into exile. In 2005, several other revenue-generating bodies under the now defunct
Administrative Section were moved to other parts of the Royal Economy. 430
d. Jang Song-taek’s Return
Soon after the OGD had been stripped of many of its ties to the Royal
Economy, the regime suffered an enormous blow to its finances, especially Kim
Jong-il’s personal funding streams. In September 2005, the U.S. Treasury designated
Banco Delta Asia, a Macau-based bank, as a primary money laundering concern
due to its role in assisting North Korean companies in laundering money from
counterfeiting and drug smuggling. Under Section 311 of the USA PATRIOT Act,
Washington banned all U.S. banks from dealing with Banco Delta Asia. Macau
banking authorities froze fifty North Korean accounts worth $24 million. The U.S.
action had a chilling effect on foreign businesses and banks, primarily in Europe,
427 Sin Il-nam claimed that Pak’s orders interfered with prior tasking of the Capital Construction
Committee by the KWP OGD.
428 Hyon Song-il, North Korea’s National Strategy and Power Elite, op. cit.
429 It is important to note that Kim Jong-il’s decision came at a time of economic reform inside
the regime. His decision might have stemmed from the concern that raising the cost of maintaining the
regime was threatening the regime by ruining the state economy. Pak Pong-ju made the argument that
the state economy had become impoverished to the extent that there was no longer any room for further
infringement by the Party economy. Unlike during the period after Kim Il-sung’s death, Kim Jong-il
may have felt that he could begin to reverse some of the funding flows within the regime in order to take
care of the overall state economy. But in the interest of the “Military First” (Songun) policy, this thinking
only went so far. Kim also ordered that production and trade units that belonged to the Cabinet in the
past, but had been transferred to the munitions economy, be left alone and that state assistance to the
munitions industry be further strengthened.
430 Kim Kwang-jin, op. cit.
Ken E. Gause
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