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How to Skirt an Arms Embargo -- DPRK-Style!

Let's say you're the supreme leader of a pariah state. You're looking to move a few hundred tons of Soviet-era arms across international boundaries, but you've been slapped by a harsh arms embargo. You'd like to quietly transport a weapons shipment across the globe, but you'd really rather avoid detection. So what's a Dear Leader to do?

Thanks to a new U.N. report, you don't have to guess. On Tuesday, a panel of eight experts concluded that, despite nearly a decade of U.N. sanctions, North Korea's illicit arms trade is thriving and remains a major source of revenue for the heavily sanctioned country. Its secret for success? A sophisticated system for evading sanctions that makes clever use of foreign embassies, shell companies, flags of convenience, secret cargo holds, and -- of course -- code words.

As the crew of the Chong Chon Gang learned in July 2013, when the North Korean-flagged ship was caught transporting a large cache of Cuban weapons, these tactics don't always work. But even the best of criminals won't get away every time.

The U.N. report includes a detailed look at that ship's seizure, which the panel of experts say provides "an unrivalled insight" into the "multiple and tiered circumvention techniques" used by North Korea. So if you're looking to tear a page out of the hermit kingdom's playbook, contravene international arms sanctions, and ship weapons around the globe, here's how it's done.

1. Create a vast web of shell companies to own and operate your illicit trade fleet

You'll want some distance between yourself and the fleet carrying your weapons-- even if, as in the case of the Chong Chon Gang, the ships bear your national flag. As the report explains, "the maritime industry is characterized by complex ownership and operator arrangements." This is something you can use to your advantage.

A web of private shell companies that purportedly own or operate the ships in question will, the report says, "deflect scrutiny with a veneer of legitimate trading." And, in the event that the ship's illicit cargo is discovered, this approach offers a few other advantages. First, you, Dear Leader, can always argue that the company, being privately owned, is solely responsible for violating the law. Second, if the company's assets are seized or frozen, its financial impact can be contained, allowing the larger trade to continue more or less uninterrupted. Once the seized ship is released, you can always rename, reflag, and declare it the property of a brand new company.

2. Make good use of your foreign embassies

The U.N. report alleges that North Korea's embassies in Singapore and Cuba facilitated the country's illicit trade deals -- remember, diplomatic protection is your friend. The embassy in Singapore shared facilities with a company that acted as the shipping agent for the company that owned the Chong Chon Gang. Meanwhile, the North Korean embassy in Cuba is believed to have arranged the shipment.

3. Come up with some code words (but don't write them down)

In the case of the Chong Chon Gang, the ship's captain had "secret" instructions for smuggling the arms, as well as special phrases he should use when referring to the shipment. For example, the captain was ordered to refer to "containers" as "mechanical parts" and told to watch out for the message "Payment arranged for 26K," which would indicate that he should make a false declaration of his shipment in Panama. Conversely, the message "Payment was not arranged for 26K" would indicate that he need not declare the shipment at all. Unfortunately, the captain kept the instructions on paper, making it all the easier for the U.N. to get their hands on the evidence.

Lesson: Don't write down your secret codes.

4. Conceal the illicit cargo by any means necessary

Following the example of the Chong Chon Gong, modify your ships so they can accommodate 40-foot containers deep within their cargo holds. The illicit freight should be placed at the bottom of the holds, covered with some innocuous cargo (like thousands of bags of sugar), closed, then covered with another layer of innocent cargo (like more sugar).  Containers should also have false walls and bottoms to add another level of security. Create false stowage plans and customs declarations to fool everyone.

5. Conceal your position as you move through open waters

If you want to avoid unnecessary attention from less friendly nations, turn off your ship's automatic identification system and falsify your shipping logs, so no one can track your location. But don't take it too far. As the Chong Chon Gang's crew learned the hard way, these tactics are also sure to generate suspicion. So if your ship does gain the attention of the authorities, do not ignore calls from nearby ports! Just show your falsified documents, and hope for the best.

Here's the full U.N. report, with the complete rundown of North Korea's illicit trade strategies.

Happy smuggling!

RODRIGO ARANGUA/AFP/Getty Images

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Is North Korea Shopping For Oil in Libya?

The bizarre tale of the North Korean-flagged oil tanker that has been trying to escape the clutches of Libya's fragile central government has prompted days of conflicting news coverage, precipitated the fall of the country's prime minister, and underscored the continued threat posed by its patchwork of heavily armed militias. But the tangled saga also raises a more basic question: Why on earth would a North Korean-flagged ship risk being bombed "into scrap," as one official threatened, in order to load up on Libyan crude?

It's a question that has puzzled North Korea watchers, and prompted some to speculate about deteriorating commercial relations with China or even Pyongyang's desire to shore up its energy resources ahead of a possible rocket test. Others viewed the episode as a predictable outgrowth of North Korea's growing energy needs -- and lack of scruples when it comes to bargain hunting.

"It signifies how much risk North Korea is willing to take," said John Park, a North Korea specialist at Harvard's Kennedy School of Government, who emphasized that nothing can be said for certain in the absence of more information about the tanker. "The risk is much higher than just paying a Chinese broker and then shipping oil a shorter distance."

China is North Korea's primary trading partner and the supplier of as much as 90 percent of its energy. But several recent provocations have strained the relationship, from Pyongyang conducting its third nuclear test in Feb. 2013 to its missiles fired in early March that came dangerously close to a China Southern passenger jet.

Little is known about the vessel at the heart of the current standoff, the Morning Glory, beyond that it was previously flagged in Liberia. Libya's National Oil Company has said that it belongs to Saudi Arabia, but few experts think the ship is flying the North Korean flag of convenience (if anything, flying the Hermit Kingdom's flag all but insures surveillance and inspection.) Saudi Arabia has issued a statement denying government ownership of the vessel, and some experts believe that it could belong to Pyongyang. 

"It just implies that there is a strong DPRK interest in this," said Hazel Smith, a professor of Korean studies at the University of Central Lancashire in Britain. Smith also emphasized that she was speculating with very little information. "My guess is that the ownership [of the ship] has been transferred to the DPRK recently, so the record may not have caught up with it yet."

It is also possible that a North Korean trading company is leasing a Saudi Arabian ship. "Anything much bigger than 37,000 tons would be too expensive for DPRK," said Smith. "They don't have big tankers that can carry large amounts of oil, but they can lease them, of course."

Other experts have expressed doubt about direct North Korean involvement, suggesting that the Morning Glory's crew most likely planned to sell the stolen oil on the black market. The idea that Pyongyang would attempt to purchase crude owned by Waha Oil, a joint venture between Libya's National Oil Company and Hess, Marathon, and ConocoPhillips struck some as far-fetched because of its potential to antagonize Washington.

The United States has made it clear that it views rebel oil sales as illegitimate. "This action is counter to law and amounts to theft from the Libyan people. The oil belongs to the Libyan National Oil Company and its joint venture partners," said State Department spokesperson Jen Psaki, who added that those partners include U.S. companies. 

Assuming North Korea was willing to openly flout Washington, however, why go shopping in Libya? The answer may have to do with the December execution of Jang Song-thaek, Kim's uncle and North Korea's most prominent business liaison with China. "Jang Song-thaek was a critical connection," said Park. "He was someone you could do a deal with on oil and coal. He was in the middle of all these transactions, and the fact that he is gone from the scene could explain" why Pyongyang is trying to diversify its energy sources. Trade between the two countries reached an estimated $6.45 billion in 2013 -- the highest on record, including Pyongyang's purchases of $598.1 million in crude oil.

But with Jang gone, Pyongyang may be having difficulties purchasing that quantity of oil from China. "This is an act of desperation to go all the way to Libya. Is it a matter of wanting to diversify, or is it something bigger in the Chinese relationship," Park said, adding that North Korea could also be bracing for the international reaction to yet another rocket launch. "If they are able to amass even modest reserves in North Korea, they could be inoculating themselves if they go ahead with another nuclear test."

The bid to score cheaper oil -- before its capture, the Morning Glory likely engaged in an oil-for-weapons deal -- may also be motivated by the expansion of North Korean energy needs. Since China reportedly charges Pyongyang above-market rates, it makes sense that North Korea's competitive trading companies would go elsewhere in search of energy inputs.

"They are resource short," explained Smith. "They need oil for their industry and agriculture, and their major source is China, which is not willing to be as accommodating economically as it has been in the past, so they need to think imaginatively about where they are going to get oil."

Of course, it could also simply be that the blockaded Libyan oil was the cheapest available. "The North Koreans are always looking for a bargain," said Christopher Hill, who as assistant secretary of state for East Asian and Pacific affairs headed the U.S. delegation to the Six Party Talks on the North Korean nuclear issue. "It could be simply that this rebel group was anxious for a sale and that they offered a price that was too good for the North Koreans to pass up."

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