VZCZCXRO8563
OO RUEHFK RUEHGH RUEHKSO RUEHNAG RUEHNH
DE RUEHOK #0526/01 2680747
ZNR UUUUU ZZH
O 250747Z SEP 06
FM AMCONSUL OSAKA KOBE
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0498
INFO RUEHKO/AMEMBASSY TOKYO IMMEDIATE 7724
RUEHKSO/AMCONSUL SAPPORO IMMEDIATE 0146
RUEHNAG/AMCONSUL NAGOYA IMMEDIATE 2250
RUEHFK/AMCONSUL FUKUOKA IMMEDIATE 0134
RUEHNH/AMCONSUL NAHA IMMEDIATE 0156
RUEHBJ/AMEMBASSY BEIJING IMMEDIATE 0391
RUEHUL/AMEMBASSY SEOUL IMMEDIATE 1081
RUEHSH/AMCONSUL SHENYANG IMMEDIATE 0042
RUEHGH/AMCONSUL SHANGHAI IMMEDIATE 0008
RUEHGZ/AMCONSUL GUANGZHOU IMMEDIATE 0100
RUEHHK/AMCONSUL HONG KONG IMMEDIATE 0193
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RUYNJDK/COMNAVFORJAPAN YOKOSUKA JA PRIORITY
RHHMUNA/HQ USPACOM HONOLULU HI PRIORITY
RUEKJCS/SECDEF WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 OSAKA KOBE 000526 
 
SIPDIS 
 
DEPT OF TREASURY FOR AMIT SHARMA 
DEPT OF TREASURY FOR BILL MURDEN 
DEPT OF TREASURY FOR IVY KOSIMIDES 
 
SENSITIVE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ETRD EFIN EFIS PREL KN JA
SUBJECT: NORTH KOREAN SUPERNOTES SEIZED IN WESTERN 
JAPAN 
 
 
¶1.  (SBU) On September 23, Kobe Customs officials and 
Tottori Prefectural Police raided the DPRK-flagged Kum 
Gang 1 freighter, which had entered the port of 
Sakaiminato in Tottori on the Japan Sea coast on 
September 19.  The Japanese authorities took this 
unusual measure after two counterfeit super-K 100 USD 
notes were discovered among the cash paid by the Kum 
Gang 1's captain to a ROK-passport-holding Japanese 
broker on board the vessel.  Since the July 5 DPRK 
launch of missiles into the Sea of Japan (SOJ), North 
Korean ship crew have been confined to their ships when 
making port calls to Japan. 
 
¶2. (SBU) The forged money was found among a total of 
300 USD 100 bills used to reportedly pay the broker, 
either for the cargo of seafood and seasonal delicacy 
"matsutake" mushrooms or, as the broker claimed, for 
previously rendered services.  The broker had failed to 
declare the payment after disembarking from the ship, 
raising the suspicion of the Kobe Customs officials, 
who have jurisdiction over the port.  After discovering 
that two of the bills in the broker's bag were fakes, 
the Japanese searched the ship and its hold for an hour, 
finding no other contraband. 
 
¶3. (SBU) Sakaiminato Port Authority officials told 
econoff that given the number of the bills, they 
discounted the possibility that this was a case of 
deliberate money laundering.  In contrast, last year 11 
forged USD 100 bills were found in Sakaiminato among 
6,500 bills used by a different North Korean freight 
vessel.  Additional information from local Japanese 
authorities will be reported as it arises. 
 
¶4. (SBU) This seizure draws into sharp focus the 
peculiarities arising from the current Japan-DPRK ad 
hoc trading system, even after the GOJ imposed economic 
sanctions against the North Korean regime.  Through 
2005, Sakaiminato's port had the second-largest volume 
of DPRK ship visits in Japan and a 1.3 billion yen (USD 
11.8 million) trade deficit with the North.  Nearby 
Maizuru Port, in northern Kyoto Prefecture, was top in 
terms of vessels and volume of trade. 
 
¶5. (SBU) Notwithstanding nominal GOJ control over 
Japanese ports, in cities like Maizuru and Sakaiminato 
local port councils and businesses exert more influence 
over specific port policies than do governmental 
agencies, even in the current hostile environment 
across the SOJ.  There is anecdotal evidence that local 
governments do not even have the authority to deny 
entry to certain ships.  The volume of North Korean 
vessels visiting Maizuru has plummeted since July, not 
because of official fiat, but because the local loading 
companies, fearing damage to their reputations, have 
refused to service the ships.  As a result, more North 
Korean ships are diverting to Sakaiminato, whose 
economy is more dependent on trade with the North.  The 
city is host to many canning and seafood processing 
plants, which need the cheap North Korean imports more 
than Maizuru, whose economy is more robust and 
diversified. 
 
RUSSEL 
 
 
UNCLASSIFIED 2 
 
SIPDIS 
 
          UNCLASSIFIED 
 
OSAKA KOBE 00000526  002 OF 002 
 
 
 
           UNCLASSIFIED