The US ambassador to Myanmar was one of dozens of US envoys to get the same directions from Washington this spring: uncover North Korean sources of income, then cut them off.
Ambassador Scot Marciel’s work with local officials shut down a North Korean restaurant in Yangon, one of many across southeast Asia where young waitresses sing, dance, serve moderately priced dishes and offer souvenir Kim Jong Un lapel pins in the gift shop. More than 80 percent of the servers’ salaries is taken to support their country, where citizens are starving.
The Yangon restaurant closure and its workers’ expulsion is one success story in an ongoing and uphill US campaign to end the overseas work of hundreds of thousands of North Korean laborers and to choke off the estimated $500 million a year they provide the regime.
“Every embassy was told to identify North Korean sources of income and stymie them,” said one former NSC official who worked on the initiative that encompasses workers spread across Europe, the Middle East, Africa and Asia.
Excuses to ease restrictions
The US effort to crack down on Pyongyang’s itinerant workforce at restaurants, on construction sites and in military and medical units overseas is part of the maximum pressure campaign that may have helped bring Kim Jong Un to the table to discuss denuclearization with President Donald Trump at their June 12 summit.
But North Korean work abroad, particularly in Russia, China and Southeast Asia, continues apace. And there are growing concerns that some countries are lax in enforcing sanctions, while others may be using the summit and the warming ties between the US and the Democratic People’s Republic of Korea as an excuse to ease restrictions on Pyongyang.
In Chinese river towns bordering North Korea, workers are trickling back to the restaurants again, with some in operation and others looking set to re-open their doors, local businessmen say.
“We are already receiving reports that Chinese border controls have been relaxed,” Greg Scarlatoiu, the executive director of The Committee for Human Rights in North Korea, told CNN. “I think that China, Russia and others seized the warming of US-DPRK relations as an opportunity to resume or continue economic exchanges with the DPRK with impunity.”
As the US and UN levied sanctions on North Korea over the years to pressure the ruling family to end its nuclear and missile development, Pyongyang discovered that shipping citizens overseas to earn cash created a reliable stream of revenue.
‘Nice’ but ‘very odd’
The State Department has compared the migrants to a slave labor workforce, one that nets Pyongyang around $500 million a year, the UN says. Workers are kept under close watch by regime “minders” and forced to pay remittances and loyalty fees to the government back home, almost always more than half their check.
Waitresses in the restaurants are occasionally allowed to go shopping with minders and often come from families of a high social class, according to Rosa Park, the director of programs at the Committee for Human Rights in North Korea.
“The restaurants are run by a network of North Korean expats, likely the same ones involved in other illicit revenue-generating activities and are part of this diverse set of tools used by the regime to raise hard currency,” Priscilla Moriuchi, director of strategic threat development at the security firm Recorded Future.
“These tools include smuggling drugs, liquor, and precious stones, counterfeiting US dollars and cigarettes and exploiting diplomatic immunity,” said Moriuchi, a former top National Security Agency official on East Asia.
The businesses might be fronts for intelligence operations or illicit businesses, particularly in Laos and Thailand, US intelligence sources said. One said the outlets are “meant … to promote [North Korea], but are certainly more involved in corruption, espionage,” and described them as “nice,” but “very odd.”
The restaurant in Mongolia’s Ulaanbaatar, for example, is decorated like a birch forest, where servers watch diners with hawk-like intensity before changing into flashy costumes to perform dance routines. The North Korean beer and food, like traditional bibimbap and beef soup, get good reviews.
The cash from overseas workers and businesses like these restaurants is not the regime’s “lifeblood,” said Mark Tokola, the Vice President of the Korea Economic Institute of America, but it’s “not an insignificant amount by North Korean standards.”
As part of its maximum pressure campaign, the US shepherded tough new sanctions through the UN in December 2017 that specifically targeted North Korean workers, requiring most of them to return home by 2019.
Enforcement has varied, but two countries are of particular concern.
Tens of thousands of North Koreans have worked in Russia and China, two of the few remaining places their airline Air Koryo still visits. Large numbers of laborers work in logging and construction in Russian cities like Vladivostok, while the bulk of North Korean restaurants are in Chinese cities, particularly on the border.
In the bustling river town of Dandong, a local businessman told CNN that North Korean tourism and business took a hit after Beijing ordered all North Korean-owned businesses to close in January, but things slowly seem to be coming back to life.
“I expect things to become better,” said Mr. Lee, a South Korean who asked to be identified only by his surname. “North Korean restaurant workers are beginning to arrive,” he said. “Some small restaurants have opened while large ones like Koryo, by the river, seem to be getting ready for reopening.”
He notes that the number of trucks passing between his city, which is just across the river from Sinuiu, North Korea, is about 30% compared to the busiest period before sanctions hit. “We are all waiting for things to become better,” he said.
China, North Korea’s largest trading partner, is crucial to any attempt to squeeze Pyongyang economically and experts say it’s clear Beijing is complying. But President Xi Jinping may see strategic benefits in cozying up to North Korea, and looking the other way on sanctions, particularly as President Donald Trump continues to slap trade tariffs on China.
A spokesperson for the Chinese embassy told CNN the government “has been comprehensively, accurately, faithfully and strictly implementing” the UN’s North Korea resolutions.
Russian officials, according to local press, have promised to expel North Korean workers. One foreign official familiar with the issue said Russia alone has about 20,000 people “working in slave-like conditions.”
The Kremlin declined to comment, but earlier this year Alexander Matsegora, the Russian ambassador to North Korea, told Russian news agencies that authorities had begun to expel North Korean labor migrants in accordance with December’s UN sanctions.
The US has had more clear cut successes squeezing North Korea’s overseas revenues.
Former CIA official Bruce Klingner told Congress in March 2017 that “at least 30 of North Korea’s overseas restaurants have closed” due to sanctions, China’s anti-hedonism rules and the South Korean government calling on its citizens to avoid them.
German officials shut down a Berlin hostel funneling cash to Pyongyang in May 2017. Mongolia publicly declared the expulsion of some North Korean contract laborers December. And countries around the world have proclaimed an end to visa renewals.
“Detailed plans were drawn up to identify and eliminate North Korea’s sources of revenue at every level,” said Abigail Grace, a research associate on Asia-Pacific security for the Center for a New American Security and a former National Security Council staffer for Trump.
But there are gaping loopholes. Intelligence community sources familiar with restaurants in Asia told CNN many remain open, though customers rarely visit them. The number of workers overseas has shrunk, but many countries have industries that rely on North Korean labor.
Pyongyang has workers scattered across Gulf countries like the United Arab Emirates, Qatar, Oman and Kuwait, though most have said they will stop issuing new visas.
The outside world
There is at least one North Korean restaurant in Dubai. Past press reports have linked North Korean workers to dangerous construction for the World Cup in 2022 in Qatar, and North Korean laborers have been linked to palace building projects in the Gulf, though governments there have vehemently denied it.
In Asia, North Korean workers can be found in Thailand, Indonesia, Laos, Malaysia, Mongolia, Burma, Nepal and Vietnam. In Africa, including Algeria and Ethiopia, North Koreans often work in construction or provide military or medical services. Some reports suggest North Korean fisherman work in Uruguay.
Some Korea watchers argue there could be unintended humanitarian consequences to the US push to repatriate workers and close North Korean businesses.
“Inevitably, the sanctions would pose restrictions on the amount and type of items or cash that could be sent into North Korea, making humanitarians groups that were working under restrictive conditions to face even more constraints,” said Arnold Fang, a North Korea researcher at Amnesty International.
Tokola of the Korea Economic Institute of America, said others believe North Korean restaurants and other legitimate businesses should be allowed to remain open. They provide workers with a rare glimpse of the outside world, Tokola said, and more money than they could ever make at home.
CNN’s Nathan Hodge in Moscow and Yoonjung Seo in Seoul contributed to this report
