VZCZCXRO0271
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHBK #6702/01 3100931
ZNR UUUUU ZZH
R 060931Z NOV 06
FM AMEMBASSY BANGKOK
TO RUEHC/SECSTATE WASHDC 2755
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHUL/AMEMBASSY SEOUL 2299
RUEHKO/AMEMBASSY TOKYO 8465
RUEHBJ/AMEMBASSY BEIJING 3177
RHHMUNA/HQ USPACOM HONOLULU HI
RUEKJCS/SECDEF WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 03 BANGKOK 006702 
 
SIPDIS 
 
SIPDIS 
 
PACOM FOR FPA HUSO 
 
SENSITIVE 
 
E.O. 12958:N/A 
TAGS: ECON ETRD PINR MARR MASS KN TH
 
SUBJECT:  THAILAND'S TRADE WITH NORTH KOREA:  DOING BUSINESS WITH 
THE HERMIT KINGDOM 
 
Sensitive but Unclassified, please handle accordingly. 
 
¶1.  (SBU) Summary:  U.N. economic sanctions against North Korea have 
met with high-level acceptance from Thai authorities who are moving 
toward implementing the Security Council resolution.  Thailand's 
unusual position as a top trading partner of North Korea gives it a 
potentially large role in helping carrying out sanctions.  Although 
trade with the DPRK is relatively insignificant for the Thais, for 
the North Koreans Thailand has become a growing source of both 
needed imports and an outlet for exports.  In many respects the 
trading relationship is normal, but unusual behavior by North Korean 
companies in Thailand raises some suspicions as to what other 
activities they may be up to.  End Summary. 
 
¶2.  (SBU) The RTG has shown support for UNSC Resolution 1718 placing 
sanctions on North Korea and is taking steps to comply with its 
provisions.  Foreign Minister Nitya Pibulsonggram said in a 
statement that the sanctions were a necessary and legitimate 
response by the international community.  Mr. Cherdchai Chaivaivid 
of the MFA's East Asia Division told Econoff that the MFA's 
International Organization bureau hosted an interagency meeting 
October 25 to coordinate on compliance with the UNSC resolution. 
MFA plans to submit a report to the Cabinet on November 7 outlining 
the RTG plan to begin sanctions, including what sanctions can be put 
in place immediately and which may have to wait due to legal 
difficulties. 
 
¶3.  (SBU) Cherdchai explained that a number of agencies present at 
the October 25 meeting noted they had run up against legal 
limitations on implementing the U.N. sanctions.  A Bank of Thailand 
official told Econoff the Bank had limited authority to surveil bank 
accounts linked to North Korea, except those with terrorism links. 
The MFA's legal office has proposed a new law be drafted to ensure 
the RTG would have sufficient legal authority to cover this and any 
other future sanctions regimes, a "blank check" as Cherdchai put it. 
 
 
Doing business with Kim Jong Il 
------------------------------- 
 
¶4.  (U) Despite little historical or other significant relationship 
with North Korea, Thailand has found itself one of the DPRK's 
leading international partners.  Japan's reduction in trade with 
North Korea over recent years has helped catapult Thailand into 
third place on the list of North Korea's largest trading partners 
behind China and South Korea.  Despite this standing, Thailand's 
trade with North Korea is miniscule by Thai and global standards. 
Thailand exported USD 222 million in goods and services to North 
Korea in 2005, less than 0.2 percent of its total exports.  Imports 
from North Korea totaled only $133 million last year, a tiny 0.1 
percent of Thailand's net imports. 
 
¶5.  (U) Exports to North Korea have been steady over the past few 
years, though export figures jumped nearly 35 percent this year 
through September.  Thai exports tend to be resource-based, led by 
rubber (up over 1300 percent in 2006 with USD 28 million in sales), 
and followed by wood, tin, copper and aluminum scrap.  Computer 
equipment and parts, including integrated circuits, make up a 
sizable percentage of exports as well.  Rice was the largest export 
in 2005 with nearly USD 30 million in sales, but to date this year 
Thai rice exporters have yet to fill an order to the DPRK. 
 
¶6.  (SBU) Imports from North Korea have climbed steadily in recent 
years and are on track this year to more than triple the level in 
¶2003.  Import levels have hit USD 163 million through September this 
year, up 82 percent over the same period in 2005.  North Korea's top 
export to Thailand thus far in 2006 has been gold, over USD 30 
million thus far and making up 20 percent of North Korea's total 
exports to Thailand.  Exports of gold in 2004 and 2005 were 
virtually nil, a massive increase for 2006, indicating perhaps a 
revival of the DPRK's mining industry.  However, gold from North 
Korea made up only one percent of Thailand's overall gold imports, 
and members of the Thai Gem and Jewelry Traders Association, 
consumers of a large amount of imported gold, told Econoff they had 
no recollection of having purchasing gold from North Korea.  Organic 
chemicals, particularly ethylene, accounted for another 20 percent 
of imports.  Seafood products, computer parts and other manufactures 
make up much of the rest. 
 
¶7.  (U) RTG export statistics show scant trade in items that U.N. 
 
BANGKOK 00006702  002 OF 003 
 
 
sanctions might affect.  Currently, there is no apparent trade in 
arms or ammunition, or nuclear-related material.  The vast majority 
of Thailand's exports to the DPRK would be described as raw 
materials, manufactures or consumer goods, but little in the way of 
luxury goods.  Statistics do include over USD 100,000 in jewelry 
exports in 2006 which were doubtfully headed to the average North 
Korean citizen.  Thailand has also supplied a couple other luxuries 
to the DPRK that might fit sanctions criteria:  USD 3,363 in beer 
and USD 75,000 in cigarettes so far this year. 
 
¶8.  (SBU) Rumors have circulated over the years that North Korea has 
re-exported donated rice and fertilizer through Thailand.  2003 
statistics from the Ministry of Commerce showed ammonium sulfate 
imports from North Korea that could have been re-exported 
fertilizer, but South Korean contacts say it was a mix-up with 
Customs; trade statistics since show no trade in those products. 
Rumors are stronger, however, that the North Korean embassy in Laos 
has been quietly making inquiries about reselling fertilizer in that 
country. 
 
Follow the money 
---------------- 
 
¶9.  (SBU) North Korea's trade relationship with Thailand is shrouded 
in a veil of mystery.  Thai Customs lists 720 Thai companies as 
having engaged in trade with North Korea, but calls to a random 
sample elicited nothing but confusion, and not a little apprehension 
that Embassy was calling regarding the DPRK.  Companies said they 
had no recollection of doing business with North Korea and insisted 
Customs must have confused the North with South Korea, a distinct 
possibility.  Embassy also speculates that North Korean businesses 
may be passing themselves off as generic "Koreans" to avoid 
controversy. 
 
¶10.  (SBU) A small window into North Korea's trading operation 
opened in 2002 after Slovakian police raided a North Korean trading 
company in Bratislava suspected of trafficking in nuclear machinery. 
 Documents seized included references to a trading company named 
Kotha Supply based in Bangkok.  Bertil Lintner, a Swedish journalist 
based in Thailand and a frequent writer on North Korea, tracked down 
business registration documents for Kotha Supply that showed that 
company officials carried North Korean diplomatic passports. 
 
¶11.  (SBU) Registration documents indicated Kotha Supply had changed 
its name to Star Bravo and changed addresses, but no office existed 
at the address given.  In fact, deception appears to be standard 
practice for North Korean companies located in Bangkok.  Addresses 
listed in business registration documents for Star Bravo and other 
companies obtained by Lintner were typically mail drops and not the 
actual location of the business.  Documents showed that Star Bravo 
had changed its listed address annually, but never to the actual 
office location.  The documents also listed names of Thai partners, 
but they appear to be silent partners and not actively involved in 
business operations.  Phone numbers for the Thai partners listed in 
registration documents were incorrect.  Financial statements 
indicated low initial investments, little business activity and 
almost inevitably recorded losses.  The North Korean companies are 
audited annually as per Thai law, but Board of Investment contacts 
told Lintner that the auditors listed on the company documents were 
not respected and "would approve anything for enough money." 
 
¶12.  (SBU) The Ministry of Commerce's Bureau of Business 
Documentation lists 10 companies with North Korean partners doing 
business in Thailand, ranging from mining interests to shipping and 
import/export activities.  Documents obtained by Embassy showed that 
four of the businesses were clustered around the North Korean 
Embassy, though names of the North Korean partners listed did not 
match MFA's diplomatic list for the DPRK mission.  Three of the 
companies shared a common telephone number despite listing separate 
addresses.  A couple calls placed to available phone numbers 
resulted in a brusque brush off from one North Korean, and a Thai 
employee at another company who insisted she had no idea what kind 
of business the company engaged in. 
 
¶13.  (SBU) The one acknowledged Thai trader with North Korea is 
Loxley Pacific, a division of telecommunications company Loxley 
Public Company, Ltd.  Loxley PCL established Loxley Pacific in 1995 
as their investment arm in North Korea after winning a telecom 
contract in the DPRK.  Loxley installed a fixed-line telephone 
system in the Rajin-Songbong free economic trade zone (FETZ) and 
 
BANGKOK 00006702  003 OF 003 
 
 
continues to operate approximately 10,000 lines.  Loxley later 
contracted in 2003 to build a cellular system, but the project was 
put on hold after North Korean suspicions that a massive blast in 
2004 that just missed Kim Jong Il may have been a bomb set off 
remotely by a cell phone. 
 
¶14.  (SBU) Loxley maintains a trading relationship with North Korea 
as well, exporting mostly consumer goods such as toiletries, coffee, 
snacks and detergent to the North Koreans.  Loxley Pacific's 
director, Mr. Sahayot, described the trading relationship as normal, 
though for many larger purchases the company requires payment up 
front in recognition of North Korea's rich history of welching on 
deals.  North Korean firms in Pyongyang call regularly with shopping 
lists for Loxley to fill; payment is handled directly from 
Pyongyang, though Sahayot declined to identify the banks involved or 
if they used accounts outside North Korea.  Sahayot was concerned 
that U.N. sanctions might affect sales but said he had yet to 
receive instructions from the RTG on how to proceed.  He noted that 
a prohibition on luxury goods, however they may be defined, likely 
wouldn't affect export business to the DPRK as Loxley shipped 
primarily low-market consumer goods. 
 
Keeping the government out of it 
-------------------------------- 
 
¶15.  (SBU) Thailand's official relationship with North Korea could 
hardly be described as active.  Although North Korea's embassy in 
Bangkok is its largest in Southeast Asia, MFA officials said they 
rarely had any contact with the DPRK and were not too familiar where 
their Embassy was even located.  The MFA has been apolitical on 
private trade with North Korea, but government-to-government 
economic links were effectively severed after a rice deal went awry 
in 2001, for which North Korea still owes the RTG around USD 47 
million.  A recent revelation (denied by the DPRK) that a Thai 
citizen may have been among several foreigners abducted by North 
Korea from Macau in 1978 has not helped advance the relationship by 
any means. 
 
No longer flying the friendly skies 
----------------------------------- 
 
¶16.  (U) North Korea's national airline, Air Koryo, previously 
operated weekly flights between Bangkok and Pyongyang through Macau, 
but has reduced flights to the occasional charter.  The new 
occupants of Air Koryo's local office said the office had closed two 
years previously and left no forwarding number.  Air Koryo's web 
site no longer lists a Bangkok office, nor offers assistance in 
arranging flights. 
 
Postscript - a night in Pyongyang 
-------------------------------- 
 
¶17.  (U) Econoff dined recently at Pyongyangkwan, the newest, and 
probably only, North Korean restaurant in Bangkok.  Opened in March 
this year and located just a few blocks from the DPRK Embassy, the 
restaurant serves up a host of Northern specialties.  Scenes from 
Mangyongdae, Kim Il Sung's birthplace, adorn the walls.  Six Korean 
girls wearing Kim Il Sung pins kept the small but lively crowd of 
Korean businessmen (presumably South) entertained with Korean songs, 
accompanying each other on accordions and electric guitars.  The 
show was lively, but the sizable restaurant had dozens of tables 
that stayed empty on a Friday night, and it is questionable whether 
the Koreans are making a profitable return on their investment. 
However, the staff were friendly and the Thai manager generously 
gave Econoff a VIP card good for 10 percent off at "all valid 
branches", of which there appears to be only one. 
 
ARVIZU