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PUBLISHED: Apr 21, 2017 9:04am

Air Koryo shrugs off US sanctions threat

An Air Koryo logo is displayed on a plane at the airport in Pyongyang, North Korea April 18, 2017.    REUTERS/Damir Sagolj

Source:
Reuters

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PYONGYANG, 21 April 2017: 

Even after disembarking from North Korea’s Air Koryo plane at Pyongyang airport, it’s difficult to miss the airline’s brand.

The Air Koryo conglomerate makes cigarettes and fizzy drinks, besides owning a taxi fleet and petrol stations – and all have the same flying crane logo as the carrier.

The military-controlled airline expanded into consumer products in earnest in recent months, visitors to the isolated country say.

It was not clear if the diversification into the domestic market was related to the loss of many international routes when the UN slapped economic sanctions on North Korea for its nuclear and ballistic missile programs.

Washington is now considering tougher measures, including a global ban on Air Koryo itself, to punish North Korea for continuing weapons tests, US officials have said.

But any US action on Air Koryo would not be binding on other nations and would have little effect unless joined by China and Russia – both of which have sought to introduce exceptions to UN sanctions on North Korea in the past.

“China may indeed agree to this kind of ban on Air Koryo since it seems like China and the US have reached an agreement that North Korea needs to be dealt with in some way.

“But the question is whether Russia will agree to sanctions against Air Koryo,” said Sun Xingjie, an associate professor at China’s Jilin University.

North Korean officials are rarely accessible to reporters, and it was not possible to get comment from Air Koryo or from the Pyongyang government.

Air Koryo now flies only to Beijing and three other cities in China, and to Vladivostok in Russia.

Flights to Bangkok, Kuala Lumpur and Kuwait were dropped last year but just last month, Air Koryo added a route from Pyongyang to the Chinese city of Dandong – the main transit point for trade between the two countries..

Air Koryo has 15 active planes on its fleet, either Russian or Ukrainian-made, and uses refuelling, maintenance and repair facilities in China and Russia, according to aviation databases and UN documents.

The airline has a number of domestic flights connecting the capital Pyongyang to Orang, Sondok and Samjiyon towns, according to a schedule available last year.

Businesses in secretive North Korea do not publicly share information about revenues or costs, so it was not possible to determine what effect any existing sanctions have had or may have in future.

But visitors to North Korea say the Air Koryo conglomerate, owned by the country’s air force, is clearly expanding.

In 2015, the conglomerate launched its own brand of sky-blue taxis – which now parade the streets of Pyongyang alongside cabs from at least eight other state-owned companies.

Air Koryo colas and cigarettes are available in shops across Pyongyang.

Air Koryo started branching into soft drinks late last year, said Simon Cockerell of Beijing-based Koryo Tours – which organises travel to North Korea.

It got into retail sales of petrol in January. “They have at least one petrol station in Pyongyang, perhaps two,” Cockerell said.

“I wouldn’t be surprised to see more Air Koryo products make it to market before too long”.

A UN panel which investigates North Korean sanctions infringements said in a report in February there was an “absence of boundaries” between Air Koryo and the air force.

“The airline’s assets are actively utilised for military purposes,” the report said.

“Outwardly, this seems like a commercial airline, but in effect, this is run by the government,” said Kim Yong-hyun, a professor of North Korean Studies at Dongguk University in South Korea.

The UN has not sanctioned Air Koryo, although it has accused it of being involved in the smuggling of banned goods.

Civilian aircraft are exempt from the UN ban on jet fuel exports to North Korea when refuelling overseas. Member states are required to inspect any cargo originating from North Korea, including on Air Koryo flights.

In December, the US designated Air Koryo, 16 of its aircraft and 10 of its offices as “sanctioned entities”, meaning that US citizens are generally prevented from engaging in transactions with them. It was not clear if the ban extended to Americans flying on the airline for tourism.

Officials at Pyongyang’s airport said they were unconcerned about any attempts by the global community to strengthen sanctions that could target Air Koryo directly.

“We are not afraid, we have our own counter actions prepared,” said a customs official, without elaborating, standing at the Air Koryo check-in counter.

Kim, the South Korean professor, said any sanctions on Air Koryo would have mostly a symbolic effect.

“It will not cause huge damage to the North Korean economy,” he said in the Korean language. “Air Koryo is not a ‘dollar box'(which makes a lot of foreign money)”.

A vendor adjusts cans of soft drinks made by Air Koryo, at the airport in Pyongyang, North Korea April 11, 2017. Picture taken April 11, 2017. REUTERS/Damir Sagolj
A vendor adjusts cans of soft drinks made by Air Koryo, at the airport in Pyongyang – Reuterspic

Wide-ranging sanctions

The UN Security Council has issued a wide range of sanctions against North Korea, including entities and individuals in the reclusive country, for pursuing nuclear and ballistic missile programmes in defiance of UN resolutions.

The US, Japan and South Korea have also issued sanctions on North Korea – but they are not binding on other countries.

The UN has blacklisted 39 North Korean individuals and 42 entities, which are subject to a travel ban and asset freeze.

UN member states are obliged to enforce the sanctions – which are far-reaching and comprehensive. However, many include grey areas and exceptions which are subject to interpretation.

The following UN sanctions are currently in force:

  • Arms

North Korea is under a total UN arms embargo. The sale of all arms and related materiel is banned. Any financial transactions related to the procurement of North Korean arms are also included under the sanctions.

The embargo has been in place since 2006 and was expanded in 2009 to include small arms and light weapons. North Korea is also prohibited from selling helicopters under UN sanctions.

  • Coal & minerals

Under UN sanctions, North Korea is banned or partially banned from selling coal, iron, iron ore, gold, titanium ore, vanadium ore, copper, nickel, silver, zinc and rare earth minerals.

Coal exports are allowed up to a maximum of US$400.87 million or 7,500,000 metric tonnes a year, whichever is lower, provided UN member states do not purchase the coal from a sanctioned entity, and can prove that the coal is for “livelihood purposes”.

China, North Korea’s biggest trade partner, said in February it would suspend all imports of coal from North Korea for the rest of the year as part of its efforts to implement the sanctions.

Externally-sourced coal which transits through the North Korean city of Rason, where Russia maintains a warm-water port, is exempt from the ban.

Sales of North Korean copper, nickel, silver and zinc are completely banned under UN sanctions.

  • Fuel

Only sales of aviation fuel, jet fuel and rocket fuel to North Korea are banned under UN sanctions. The ban does not apply to North Korean civilian aircraft, including state airline AirKoryo. There are no restrictions on crude oil or other oil products.

  • Banking 

Any financial services which contribute to North Korea’s banned missile and nuclear programmes, or help Pyongyang evade sanctions, are banned by the UN.

Member states are prohibited from opening branches, subsidiaries or offices of North Korean banks. Joint ventures, ownership, or correspondent banking relationships with North Korean banks is banned.

Member states are required to expel and repatriate any individuals working for a North Korean bank or institution on their territory, and limit the number of bank accounts for North Korean diplomatic missions.

  • Shipping

UN member states are required to de-register any vessel which is owned, operated or crewed by North Korea – meaning North Korean-owned ships cannot fly the flag of another country, which has been one way of evading detection. Member states are also not allowed to provide insurance services to North Korean ships.

North Korea is prohibited from selling its ships under UN sanctions. It also cannot provide North Korean crews to ships from other countries.

  • Aviation

The UN has not sanctioned North Korea’s state-owned airline Air Koryo. It has, however, banned the sale of aviation fuel, jet fuel and rocket fuel to North Korea, but Air Koryo and any North Korean civilian aircraft refuelling overseas are exempt from this.

UN member states are required to prohibit, inspect or deny landing of any North Korean aircraft within their territory they suspect to be carrying banned items, or taking part in any prohibited activities.

Separately, the US has unilaterally sanctioned Air Koryo – banning its citizens from doing business with the airline. It is unclear, however, if the sanctions cover US citizens using the airline to travel to North Korea for tourism.

  • Cargo

UN member states are required to inspect any cargo destined for, coming from or brokered by North Korea, whether by air, sea, road or rail. This includes the inspection of checked or carry-on baggage of people travelling to or from North Korea.

  • Luxury goods

It is illegal under UN sanctions to directly or indirectly supply luxury goods to North Korea. In the case of North Korea, the UN defines luxury goods as: Jewellery and precious stones, yachts, luxury cars, racing cars, luxury watches, snowmobiles, jet skis, recreational sports equipment, tableware worth more than US$100 and rugs or tapestries worth more than US$500.

  • Diplomats

The resolutions require member states to reduce the number of staff at North Korean diplomatic missions. North Korean diplomats or consular officials are only allowed one bank account each. The use of real estate for any non-diplomatic or consular activities in member states’ territories is banned.

  • Training

The training of or by North Koreans in military, police and paramilitary techniques is banned.

With the exception of medical exchanges, UN member states are not allowed to provide training or cooperation in the fields of nuclear science, aerospace, advanced manufacturing and advanced aeronautical, chemical, mechanical, electrical or industrial engineering.

  • Statues

The sale of North Korean statues is banned under UN sanctions.

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