North Korea's Economic Strategies: How Office 39 Fuels the Kim Regime
North Korea’s military expenditures are exorbitant, approximately $1 billion annually, consuming a staggering 30-40% of the country’s total production. With the world’s fifth-largest army and one of the few nuclear-armed nations, the military plays a crucial role in the public image of this communist monarchy. But the core question remains: how does a nation largely ostracized from the global economy finance its military ambitions and maintain the regime?
The answer lies in the clandestine workings of Office 39, a unit specifically tasked with managing North Korea’s foreign currency earnings. Given the country’s limited business taxation capabilities and the harsh international sanctions it faces, the office has resorted to unconventional revenue-generating tactics. Some of these methods are bizarre intricacies of a government desperate for funds, including training hackers to steal cryptocurrency, producing counterfeit goods, and initiating global restaurant chains, as well as deploying agents to casino floors.
North Korea's strategy has largely been dependent on the export of various goods, primarily raw materials such as coal, iron, and electricity—supplies essential to China's industrial needs. Notably, this trade flow persisted even in the face of rigorous sanctions. In 2017, a significant vote by the UN Security Council aimed to ban the export of coal, iron, and seafood from North Korea generated catastrophic consequences for the nation’s economy.
Before sanctions, trade with China amounted to a robust $2.5 billion; post-sanctions, this figure plummeted to a mere $300 million. In an unexpected twist, North Korea has increasingly resorted to exporting peculiar items. By 2023, wigs, fake beards, and fake eyelashes constituted nearly 60% of their exports to China.
Despite the debilitating sanctions, North Korea has successfully maintained its trading operations through innovative circumvention tactics. Satellite imagery has revealed cargo vessels allegedly transporting coal to ships offshore for oil exchanges, a tactic designed to evade scrutiny. This complex web of subsidiaries and shell companies, leveraging shady financial networks, ensures that North Korea continues to operate outside the bounds of international law.
Amidst these turbulent financial waters, North Korea has permitted some cities to open to foreign investment as a beacon of economic possibility. Since the end of the Soviet Union, the country has established 29 development zones, with the most notable being the Rason Economic and Trade Zone. Here, foreign businesses can engage meaningfully, benefiting from privileges like a dedicated mobile network and even an International Trade Fair.
Another joint investment initiative, the Mount Kumgang tourist area, once attracted millions of South Korean visitors. However, following tense political events, many such areas face closure, severely impacting foreign return.
As traditional avenues of economic sustenance dwindle, cybercrime has emerged as a highly profitable endeavor for the regime. North Korea has built a cadre of “IT warriors,” training them in various forms of cybercrime, from stealing cryptocurrency to hacking major corporations. A striking case was the theft of nearly $1 billion from the Bangladeshi Central Bank in 2016, showcasing the reach and capabilities of North Korea's cyber operations.
In 2024 alone, it's reported that they generated $1.3 billion through cryptocurrency heists, funding nearly 40% of their nuclear weapons program through these illicit activities. As cryptocurrencies remain volatile and poorly regulated, they present fertile ground for North Korean cyber agents.
Outside of cybercrime, North Korea has a long-standing history with narcotics. State involvement in drug manufacturing—opium, methamphetamine, and other illicit substances—has persisted since the 1970s. While state-sponsored drug labs have been downsized, independent operations carry on, illustrating the country’s enduring drug trade model.
Moreover, recent interactions with Russia have allowed North Korea to further engage in arms trading. Following meetings with President Putin, there's strong speculation that North Korea could supply ammunition to Russia amidst its conflicts, thus pivoting towards a new ally for economic support.
North Koreans have been sent abroad as laborers for construction projects, especially in strategic markets like Russia and China. However, recent sanctions have limited the reach of these efforts. North Korean workers must remit vast portions of their meager earnings back home, surrendering significant percentages to government-sanctioned brokers.
Interestingly, despite extreme sanctions, North Korean defectors have found ways to send money back home through networks of brokers. Approximately 33,000 individuals have escaped the regime, navigating a complex and dangerous path to maintain contact with and support their families. Yet, brokers often take hefty cuts, exacerbating the hardships faced by families in North Korea—where an annual sustenance budget for three is just $400.
Through a robust combination of dubious trade practices, innovative cybercrime, and limited avenues for foreign investments, North Korea continues to fund its military endeavors under the regime of Kim Jong-un. However, this financial juggernaut operates under a precarious balance—sanctions threaten its highly dependent economy, yet the regime remains resourceful in navigating these challenges.
Ultimately, while the state apparatus seeks avenues to bolster military might and fend off international pressures, the harsh reality for everyday North Koreans reveals a stark contrast: their struggles are intertwined with the regime's efforts to stay afloat amidst global isolation. North Korea's complex economic landscape is marked by the desperate measures employed to prop up a regime, often at the cost of its people’s well-being.
Part 1/11:
North Korea's Economic Strategies: How Office 39 Fuels the Kim Regime
North Korea’s military expenditures are exorbitant, approximately $1 billion annually, consuming a staggering 30-40% of the country’s total production. With the world’s fifth-largest army and one of the few nuclear-armed nations, the military plays a crucial role in the public image of this communist monarchy. But the core question remains: how does a nation largely ostracized from the global economy finance its military ambitions and maintain the regime?
Understanding Office 39
Part 2/11:
The answer lies in the clandestine workings of Office 39, a unit specifically tasked with managing North Korea’s foreign currency earnings. Given the country’s limited business taxation capabilities and the harsh international sanctions it faces, the office has resorted to unconventional revenue-generating tactics. Some of these methods are bizarre intricacies of a government desperate for funds, including training hackers to steal cryptocurrency, producing counterfeit goods, and initiating global restaurant chains, as well as deploying agents to casino floors.
The Reality of Sanctions
Part 3/11:
North Korea's strategy has largely been dependent on the export of various goods, primarily raw materials such as coal, iron, and electricity—supplies essential to China's industrial needs. Notably, this trade flow persisted even in the face of rigorous sanctions. In 2017, a significant vote by the UN Security Council aimed to ban the export of coal, iron, and seafood from North Korea generated catastrophic consequences for the nation’s economy.
Before sanctions, trade with China amounted to a robust $2.5 billion; post-sanctions, this figure plummeted to a mere $300 million. In an unexpected twist, North Korea has increasingly resorted to exporting peculiar items. By 2023, wigs, fake beards, and fake eyelashes constituted nearly 60% of their exports to China.
Part 4/11:
Deceptive Trade Practices
Despite the debilitating sanctions, North Korea has successfully maintained its trading operations through innovative circumvention tactics. Satellite imagery has revealed cargo vessels allegedly transporting coal to ships offshore for oil exchanges, a tactic designed to evade scrutiny. This complex web of subsidiaries and shell companies, leveraging shady financial networks, ensures that North Korea continues to operate outside the bounds of international law.
Development Zones: A Glimpse of Openness
Part 5/11:
Amidst these turbulent financial waters, North Korea has permitted some cities to open to foreign investment as a beacon of economic possibility. Since the end of the Soviet Union, the country has established 29 development zones, with the most notable being the Rason Economic and Trade Zone. Here, foreign businesses can engage meaningfully, benefiting from privileges like a dedicated mobile network and even an International Trade Fair.
Another joint investment initiative, the Mount Kumgang tourist area, once attracted millions of South Korean visitors. However, following tense political events, many such areas face closure, severely impacting foreign return.
Cybercrime: The New Frontier
Part 6/11:
As traditional avenues of economic sustenance dwindle, cybercrime has emerged as a highly profitable endeavor for the regime. North Korea has built a cadre of “IT warriors,” training them in various forms of cybercrime, from stealing cryptocurrency to hacking major corporations. A striking case was the theft of nearly $1 billion from the Bangladeshi Central Bank in 2016, showcasing the reach and capabilities of North Korea's cyber operations.
In 2024 alone, it's reported that they generated $1.3 billion through cryptocurrency heists, funding nearly 40% of their nuclear weapons program through these illicit activities. As cryptocurrencies remain volatile and poorly regulated, they present fertile ground for North Korean cyber agents.
A Continuing Cycle of Narcotics and Arms Trade
Part 7/11:
Outside of cybercrime, North Korea has a long-standing history with narcotics. State involvement in drug manufacturing—opium, methamphetamine, and other illicit substances—has persisted since the 1970s. While state-sponsored drug labs have been downsized, independent operations carry on, illustrating the country’s enduring drug trade model.
Moreover, recent interactions with Russia have allowed North Korea to further engage in arms trading. Following meetings with President Putin, there's strong speculation that North Korea could supply ammunition to Russia amidst its conflicts, thus pivoting towards a new ally for economic support.
Labor Exports and Their Challenges
Part 8/11:
North Koreans have been sent abroad as laborers for construction projects, especially in strategic markets like Russia and China. However, recent sanctions have limited the reach of these efforts. North Korean workers must remit vast portions of their meager earnings back home, surrendering significant percentages to government-sanctioned brokers.
Remittances and Family Ties
Part 9/11:
Interestingly, despite extreme sanctions, North Korean defectors have found ways to send money back home through networks of brokers. Approximately 33,000 individuals have escaped the regime, navigating a complex and dangerous path to maintain contact with and support their families. Yet, brokers often take hefty cuts, exacerbating the hardships faced by families in North Korea—where an annual sustenance budget for three is just $400.
Conclusion: A Nation's Struggle for Survival
Part 10/11:
Through a robust combination of dubious trade practices, innovative cybercrime, and limited avenues for foreign investments, North Korea continues to fund its military endeavors under the regime of Kim Jong-un. However, this financial juggernaut operates under a precarious balance—sanctions threaten its highly dependent economy, yet the regime remains resourceful in navigating these challenges.
Part 11/11:
Ultimately, while the state apparatus seeks avenues to bolster military might and fend off international pressures, the harsh reality for everyday North Koreans reveals a stark contrast: their struggles are intertwined with the regime's efforts to stay afloat amidst global isolation. North Korea's complex economic landscape is marked by the desperate measures employed to prop up a regime, often at the cost of its people’s well-being.