Wall Street Journal: Russia and North Korea Ties

THE WALL STREET JOURNAL, YUZHNO-SAKHALINSK, Russia: United Nations sanctions are forcing Yuri Dyakov to disband his team of 200 North Korean construction workers in Russia’s Far East. His planned solution: fly dozens of the laborers to an unrecognized statelet backed by Moscow 7,000 miles away. Mr. Dyakov is part of a small but committed group of Russian business owners and ethnic Koreans braving U.S. ire to maintain business ties with Pyongyang. They are waiting as long as possible to comply with sanctions deadlines and lobbying Russian officials to pull Moscow out of U.N. resolutions aimed at bringing North Korea to heel.

For these entrepreneurs, Russian President Vladimir Putin’s surprise decision in 2017 to join the West and China in punishing North Korea for its nuclear program goes against Russia’s economic and political interests. By severing economic ties with Pyongyang, Russia is hurting its economy and reducing its geopolitical clout in Asia, they say. “These are our friends, regardless of what regime they have,” said Mr. Dyakov, whose father was among thousands of Soviet servicemen who fought alongside the Asian communists in the Korean War. “What we’re doing is betrayal.”

Under U.N. resolutions Russia has signed on to, employers were supposed to stop hiring new North Korean workers as of Dec. 2017 and need to send all of them home by the end of this year. The Kremlin, however, has been slow in codifying the resolutions into law. This has sowed confusion among regional authorities and employers on how to implement the sanctions and punish transgressions, and given some hope that they can dodge the system.

There were still some 13,000 North Korean workers left in Russia by October, according to the national statistical agency, roughly the maximum allowed Russia under the sanctions implementation timetable.

Some Western diplomats view Moscow’s implementation of the sanctions as overly liberal. That lax oversight is a policy decision, those diplomats say, giving succor to Pyongyang by allowing it to continue earning foreign currency and sourcing vital supplies in Russia and undermining U.S. attempts to strong-arm the country into giving up its weapons of mass destruction.

For example, Russian customs data show North Korea imported about $1 million worth of gas condensates from Russia last year, despite the U.N. ban on selling such products to Pyongyang. Mr. Dyakov says he has employed North Korean workers at his numerous businesses, where they have cut timber, driven garbage trucks and labored at building sites.

He plans to fly 50 of them to Abkhazia, a subtropical breakaway region of neighboring Georgia backed by Russia and unrepresented in the U.N. By employing them there to build a hotel, he has a chance to keep contacts with Pyongyang and keep money flowing to the workers’ families, he says. He says his other North Korean workers will return home by the deadline.

Malvina Galitsyna, who runs a clothing company making camouflage fatigues in Novosibirsk, says she would prefer to keep the dozens of North Korean workers she has employed since 2013, though she says they will also return home by the deadline. “It’s hard to find good Russian workers here,” Ms. Galitsyna said. “North Koreans work hard, they never call in sick and they don’t drink.” She lamented that some of her workers have already been denied visa extensions by the Russian Labor Ministry and gone back home.

Like Ms. Galitsyna, many Russian business owners who have cultivated ties with North Korea hope sanctions will be a temporary setback that can be overcome in talks between North Korean leader Kim Jong Un and President Trump.

For now, Russian measures are squeezing official economic relations with Pyongyang, according to analysts, officials and businessmen in Russia’s eastern regions, near the North Korean border. Cargo and train traffic have all but halted along the only road connecting the two countries, as The Wall Street Journal witnessed during a business day in late November in the border area.

Russia has shut down Agrosoyuz, a bank accused by the U.S. of laundering millions of dollars for North Korean agents, and closed an illegal casino operating in North Korea’s embassy, according to local media. Agrosoyuz owners and the North Korean embassy in Moscow didn’t respond to requests for comment.

Some Russian businessmen said they stopped working with North Koreans because local banks cut credit lines or they lost sales, rather than in response to official orders from Moscow.

For those who don’t work with Russia’s ministries and state agencies, it is easier to keep business alive, even as some apparently violate sanctions. Under the sanctions, any cooperation with North Korean entities is illegal, unless specifically exempted by the U.N. No such exemptions were issued in Russia.

A subsidiary of U.N.-sanctioned Korea Pugang Trading Corp. has joined with Russian businessmen in Moscow to sell an alternative medical treatment which advertisements claim can cure everything from cancer to a hangover. Deliveries are still being made and ads appear on Russian social-networking sites. The company didn’t respond to requests for comment.

Another Pyongyang joint venture with a Russian firm owns a Korean restaurant in the remote Far Eastern city of Komsomolsk-on-Amur, though the Russian partner said the premises are closed until the sanctions are lifted.

At the beginning of the 20th century, ethnic Koreans made up a third of the population in Russia’s Far East. Today, they remain a bridge between the Korean Peninsula and Moscow.

On Russia’s Sakhalin Island, which had a large ethnic Korean population before it rejoined Russia after World War II, maintaining ties with Pyongyang is a matter of helping ethnic kin, keeping economic stability in the region and serving Russia’s national interests, said Li Ku Ul, a local businessman who travels around Russia trying to lobby officials to end sanctions. His efforts have yielded little reward. By embracing U.N. sanctions, he said, Russia risks losing out on megaprojects like a railway and gas pipeline through North and South Korea, which could become viable if the thaw between the two countries continues. “There are a lot of things that I don’t like in North Korea, but it doesn’t mean that we have to bully them,” Mr. Li said. “Russia can’t close the door to North Korea. We helped to create them.”

Anatoly Kurmanaev is a reporter for the Wall Street Journal. Thomas Grove is a reporter for the Wall Street Journal in Moscow.

Ksenia Barakovskaya in Moscow, Lyubov Barabashova in Yuzhno-Sakhalinsk and Ian Talley in Washington contributed to this article.