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Kim Jong Un seeks to increase firepower 0:31
Hong Kong (CNN Business) - It was in May last year that Lucas Kuo and Lauren Sung noticed something strange: More than 100 ships gathered in the waters near Haeju, North Korea.
As part of their work at the Washington-based Center for Advanced Defense Studies (C4ADS), a non-profit organization that analyzes and investigates security issues using big data, the two analysts monitor traffic in Korean waters. North and beyond in Northeast Asia.
They do so because Pyongyang has been accused of selling coal and other valuable goods, sometimes in large quantities, at sea, to avoid the prying eyes of customs officials, who must enforce United Nations sanctions against North Korea. Rather than moving goods to a port before trading, the North Koreans allegedly simply move them from one ship to another at sea and lie about their origins.
These "ship-to-ship transfers" can generate tens of millions of dollars in cash for the Kim Jong Un regime, depending on what is being sold.
They are intended to be fast and discreet, and generally involve a few ships at most. But Sung and Kuo continued to see dozens of ships mysteriously sailing to North Korea.
Something was going on.
What Kuo and Sung discovered was a massive operation that was reportedly worth millions of dollars and involved 279 ships that appeared to evade international sanctions against North Korea.
But these ships were not being used to pass weapons, traffic drugs, unload counterfeit cash or smuggle endangered species, crimes in which North Korea is notorious worldwide. They did not even transport coal, Pyongyang's most profitable export.
LOOK : Kim Jong Un reinforces North Korea's firepower
They were being used to dredge and transport sand. It may seem innocuous, but North Korea cannot export land and stone under United Nations sanctions, passed in December 2017. North Korea's sand trade is in violation of international law.
Despite those measures, North Korea raised at least $ 22 million last year using "a substantial sand export operation," UN researchers said in a report published in April. An unidentified country provided the Panel of Experts on North Korea, as the investigators are formally known, with intelligence reporting that Pyongyang shipped a million tons of sand abroad, from May 2019 to the end of the year.
The scheme was highlighted in the panel's annual report. Alastair Morgan, who coordinates the UN panel that monitors sanctions against North Korea, said in an email that the report's authors showed "the large scale and importance" of the top-billing operation.
The UN report did not cite C4ADS data. Morgan said her team submitted their draft in February, before Kuo and Sung published their research in March.
Putting together the tracks
Kuo and Sung observed the ships for several weeks before noticing a pattern. Everyone who showed up in North Korean waters had a link to China. Some waved Chinese flags. Others had Chinese names.
Ship-to-ship transfers generally involve registered ships in small countries where regulation is cheap and supervision is lax - ships that fly the so-called flag of convenience.
But maybe it wasn't ship-to-ship transfers, they both thought. They realized that they needed more information before reaching any conclusion.
So they turned to satellite imagery, perhaps the most important tool among the growing open source intelligence community. The photographs they held showed sand clouds below what appears to be dozens of barges and dredgers, evidence that the land was being massively lifted from the seabed in North Korean waters.
Sung did some research on North Korea's sand dredging and sales history, and everything clicked rapidly.
"We found many reports, from the early 1990s to the present, indicating that, instead of being something new, North Korea has always been exporting sand to many of its neighboring countries," Sung said.
Sung said it now appeared that "there was a conscious effort to do this under the radar."
Image courtesy of C4ADS.
The importance of sand
Modern civilization is built on different types of sand. It's a key ingredient in concrete, glass, and even the processors that power the electronic device you're reading this on. Humanity consumes around 50,000 million tons of sand per year, more than any other natural resource on the planet, except water.
Its supply may seem limitless, but only digging and digging it up can have environmental consequences.
The sand that covers the world's deserts is too fine to use in construction because it does not adhere well. River sand is typically the best for making cement. The ocean floor sand works, too, but it must be washed and desalinated before it can be used.
Pyongyang has apparently cashed in on the sand trade for years. Years ago, when North and South Korea did major business together, the sand was Pyongyang's most valuable export to its southern neighbor, according to media reports at the time. North Korea sold $ 73.35 million in sand to the Republic of Korea in 2008, although South Korea stopped buying sand from North Korea soon after.
But there is an even more important client that borders North Korea: China, the world's most voracious consumer of sand.
During the 2010s, the country experienced a construction boom unprecedented in world history: Beijing used more concrete between 2011 and 2013 than the United States throughout the 20th century. Although the construction boom has slowed today compared to its peak, China still uses more concrete than the rest of the world combined.
What's going on?
Neither Sung nor Kuo know what happened to the million tons of sand after it was shipped to various Chinese ports on the country's coast. Sand smuggling is a major problem in China and trade is notoriously opaque.
The Chinese Ministry of Public Security, which did not respond to CNN's request for comment on this article, launched a campaign, early last year, to crack down on illegal sand operations along the Yangtze River. By October, authorities had investigated 90 groups in 10 different provinces and confiscated $ 251 million, 305 sand mining vessels and 2.88 million cubic meters of sand, Chinese state media reported.
North Korean leader Kim Jong Un and Chinese President Xi Jinping.
Beijing has so far denied allegations of wrongdoing in regards to the North Korean operation. The Chinese Foreign Ministry said in a statement to CNN that the country "has always fulfilled its international obligations" and complies with UN sanctions.
In the UN report, China responded to the allegations by saying that the country "attached great importance to the clues provided by the panel in relation to the smuggling of sand," but that the authorities in the country were "unable to confirm that the sand had been transported to Chinese ports. "
North Korea has not publicly responded to these specific allegations, but it often refers to the sanctions as "hostile acts" and questions their legitimacy.
It is also unclear who was excavating the sand and why they were doing so.
The question of who is the most difficult to determine. None of the 279 of the ships involved in the scheme identified by C4ADS had an International Maritime Organization (IMO) number, a unique identifier that is linked to an on-board tracking device. Ships captured without them or hiding them are often stripped of their registration in their home countries, making it nearly impossible to enter a port. But without IMO numbers, it is difficult to link these ships to private companies or individuals.
The question about why has some possible answers.
North Korea may have sold the dredging rights to a Chinese company, Sung and Kuo said. Sand is not particularly difficult to mine, but it is a logistical nightmare. The cost of washing ocean sand, storing it, and transporting such a heavy product increases rapidly.
"Unless you're really working at scale, it's not something that's particularly profitable," Sung said.
But there is another possibility: that Pyongyang was less interested in the arena itself and instead wanted to deepen or expand the port of Haeju. North Korea could have hired a company with a China-based fleet of ships to do the dredging and let them keep the sand as payment.
Whatever the purpose, it is up to each country to comply with UN sanctions: the international body does not have a law enforcement arm.
Kuo said he is still surprised that the operation has remained hidden for so long, despite the fact that so many ships, and possibly people, were involved.
"This is one of the most unique cases of North Korean sanctions evasion we have seen," said Kuo.
"We are still stumped."
CNN's Shawn Deng contributed to this report.