North Korean House of Cards

Hong Kong, and Singapore. These businesses and banks became unwilling to engage
with North Korea even on legal business ventures for fear of being designated
complicit in North Korea’s illegal activities. 431
Since Banco Delta Asia served as a hub for funneling money from international
banks into the regime, closing this channel essentially “closed Kim Jong-il’s
wallet” in the words of one North Korean defector. The funding streams that had
been carefully constructed over decades to keep the Royal Economy alive were now
under threat. Any existing support for economic reform dried up. Kim Jong-il’s
thinking returned to what it had been in the 1990s. He needed to protect the “Party
Center” (Dang jung-ang). Over the next few years, the Royal Economy became
increasingly removed from channels that can be tracked through bank accounts. As
noted above, Office 39 moved away from supporting weapons sales and into less
detectable sectors, such as the precious metals market, only relying on cash for all
transactions. Reliance on diplomatic couriers to move gold and other metals out of
the country and hard currency into the country became common practice. 432
In 2006, Kim Jong-il brought Jang Song-taek back into the center of
politics. While this move was in part due to Kim Kyong-hui’s pleas, he also needed
someone with the skills to balance the regime’s need for international aid while also
containing internal dissent, which had begun to grow with the proliferation of the
markets. Jang had been tied to a number of attempts to secure foreign aid in the past
and had overseen the internal security apparatus in his role as First Vice Director of
the OGD. In addition, he was a member of the Kim family, albeit a “side branch.”
Despite the purge just years before, Kim Jong-il gave Jang Song-taek the portfolios for
China, the economy, and internal security. The Administrative Section was removed
from the OGD and remade a fully independent Central Committee department. In
October 2007, Jang was made Director of the new Administrative Department.
Almost immediately upon Jang’s return, the leadership was plunged into
crisis as the KWP OGD and the Administrative Department launched widespread
investigations of corruption. It is unclear whether this was the result of a power
struggle between the two Central Committee departments or an outright power
grab. Regardless, the subsequent arrests and purges created the space for Jang to
re-establish his ties to the Royal Economy and hard currency networks.
The purge was ostensibly aimed at officials responsible for relations with
South Korea and other foreign countries. The KWP UFD was the most obvious
target, and the KWP OGD oversaw the investigation. KWP UFD Vice Director
431 Bruce Klingner, “WebMemo #1389: Banco Delta Asia Ruling Complicates North Korean
Nuclear Deal,” The Heritage Foundation, March 15, 2007.
432 Author’s interviews in Seoul with North Korean defectors, 2013 and 2014.
Committee for Human Rights in North Korea
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