N. Korea’s Growing Drug Trade Seen in Botched Heroin Delivery

For a day and a half last month, the people of this small tourist town watched in puzzlement as the rusty freighter Pong Su maneuvered off the coast. At times, they say, the 350-foot cargo ship came within a few hundred yards of the rugged shoreline that is famous for shipwrecks.

Just after midnight April 16, the ship approached a rocky, deserted beach and launched a rubber speedboat. In it were two men and the only cargo the ship had been carrying: at least 110 pounds of high-quality heroin. The Pong Su was an unlikely drug-running vessel from an unexpected place: North Korea.

The sea was especially rough that night, and 8-foot waves swamped the little boat. The heroin and one North Korean made it to safety, but the other crewman did not. His kelp- entangled body washed up on shore. Later that day, police in a nearby town seized three men and the heroin, estimated to have a street value of $50 million.

The 4,480-ton Pong Su led Australian police vessels on a four-day chase in 30-foot swells until commandos boarded the freighter by helicopter and boat. The 29 remaining crew members, also North Koreans, were arrested and charged with aiding and abetting narcotics smuggling.

North Korea has been quietly involved in the drug trade since at least 1976, when a North Korean diplomat in Egypt was arrested with 880 pounds of hashish. Since then, there have been at least 50 arrests or drug seizures involving North Koreans in more than 20 countries, William Bach of the State Department’s Bureau for International Narcotics and Law Enforcement Affairs told a Senate Governmental Affairs subcommittee Tuesday.

In the past several years, most North Korean trafficking has involved methamphetamine and heroin destined for Japan, Taiwan, China and Russia, Andre D. Hollis, a Pentagon counter-narcotics official, testified at Tuesday’s hearings.

The Pong Su’s covert mission in southern Australia appears to have been a daring expansion into the Australian heroin market by a bankrupt regime increasingly desperate to stay afloat. The ship is owned by a company headquartered in Pyongyang, the North Korean capital, and several of the arrested crew members were members of the ruling Korean Workers’ Party.

‘Smear Campaign’

The North Korean government has denied allegations that it was involved in the heroin delivery and says the charges are part of a U.S. “smear campaign” to increase international pressure on the regime to shut down its nuclear program.

The Australian government says it is investigating whether the communist regime was behind the smuggling enterprise. Officials and defectors said any other explanation would be hard to accept.

“North Korea is a socialist state. There is no private enterprise in North Korea,” Australian Foreign Minister Alexander Downer said after issuing a protest to the regime’s ambassador.

“I am confident that the drugs seized [from the Pong Su] were North Korean products,” a North Korean defector, whose name was withheld to protect his identity, told the Senate panel. The man, who wore a hood and was a former high-level government official who defected to South Korea in 1998, said he had direct knowledge of 30 other officials involved in narco-trafficking.

North Korea’s narcotics business has long been overshadowed by the regime’s program to build nuclear weapons. The Bush administration recently expressed concern that the regime may try to manufacture weapons-grade plutonium and smuggle it abroad. If so, the Pong Su’s journey to Australia raises the possibility that the same method could be used to smuggle plutonium.

The North Korean government says that the Pong Su is a “civilian trading ship” and that its owner had no knowledge of the heroin.

According to shipping industry insiders, the Pong Su is the flagship of a commercial shipping company known as Pong Su Ship Management, which owns six vessels and has been expanding in recent years.

“The company is owned by North Korea,” said Neil Tsang, a ship broker based in Taiwan who sold several vessels to the company and helps the firm lease them out for transporting products such as lumber, coal, steel and feldspar around Southeast Asia.

He said he doubts that company managers knew the ship was carrying drugs.

The company’s manager, Kim Chu Nam, could not be reached by telephone at his office in Pyongyang.

It is unlikely that a North Korean company would be dealing drugs without government involvement, said Cho Sung Kwon, a South Korean criminologist who has advised his country’s intelligence service on North Korea.

“North Korea is a socialist country, so everything is closely monitored and controlled,” he said.

“It is not just the kind of state-sanctioned drug trafficking you might see in Latin America. It is state-sponsored.”

The defector who testified to the Senate on Tuesday said North Korea started secret drug production in the mountains in the late 1970s but that it only began to produce and sell drugs in earnest in the late 1980s, when North Korean founder Kim Il Sung, father of the current leader Kim Jong Il, designated an area around the town of Yonsa in North Hamgyong province as an opium poppy farm.

“Kim Il Sung told his people to grow opium because he needed cash,” the defector said.

In late 1997, the government decreed that all North Korean collective farms must allocate about 25 acres of land to poppy farming, the defector said.

The opium is sent to pharmaceutical plants in the Nanam area of the east coast city of Chongjin, where it is processed into heroin under the supervision of seven or eight drug experts from Thailand -- all under direct government control, he said.

North Korea produces a ton of heroin and a ton of methamphetamine a month, which can be sold for about $5,000 a pound in China or about $7,500 a pound elsewhere, he said.

Yoon Yong Sol, a former North Korean police official who lives in Seoul, said in an interview last month that he was personally involved in ordering farmers to switch their fields to poppy cultivation during the height of the famine that killed an estimated 2 million people.

“There were some complaints that during the famine we should be growing grain, not poppies, but the instruction from the central government was that if we grow poppies we can sell the product for 10 times as much to buy grain,” Yoon recalled.

Asian Drug Market

He said drugs were sold by security agency officials at the Chinese border or shipped to Taiwan, Hong Kong, Macao and Japan. Yoon said he once made a delivery of illegal narcotics to the Chinese border.

“This country is so desperate to go on that they will do anything to survive,” Yoon said. “Ninety-nine percent of their factories are not operating, there are no raw materials and no energy. Even fishing boats can’t fish because there is no oil for fuel. The only way to earn hard currency is by drugs.”

While high school students elsewhere might get lectures on the evils of narcotics, another defector, who lives in Seoul and who declined to be named, said that he and his classmates were assigned at harvest time to work in the fields, slashing open the poppies for their resin.

“The boys used to work for 40 minutes, the girls for only 30 minutes. You would get dizzy if you stayed too long,” the defector recalled. “We didn’t really know what it was, and we didn’t ask. When I think back on it, I realize that North Korea is an ideal place to grow and export drugs because nobody will question the authorities or even question whether it is legal.”

Key Producer of Opium

U.S. military intelligence officials in Seoul say that North Korea is the third-largest producer of opium despite its inhospitable climate and soil. Estimates of drug revenue range from $100 million to $500 million a year.

The botched Australian deal appears to mark the beginning of a more ambitious approach by a regime badly hurt by a crackdown on weapons exports after the Sept. 11 attacks and by cuts in international donations of fuel, food and fertilizer.

According to drug experts, North Korea had not attempted to sell its own heroin in Australia because the quality was so poor. This time, Australian police say, the heroin was of the high-quality Double UOGlobe brand most likely produced in Myanmar, another dictatorship largely closed off to the outside world.

The Pong Su was registered in Tuvalu and flew the small Pacific nation’s flag. Its owners equipped the vessel with extra fuel tanks so it could travel long distances -- even circumnavigate Australia -- without having to stop. The ship most likely picked up its cargo of heroin in Myanmar or Thailand and headed south around Australia’s west coast, using established shipping lanes. By mid-April, the Pong Su had reached the southern end of the continent and headed toward Wye River, a popular tourist town about 80 miles southwest of Melbourne.

If the smugglers had done their homework, they might have come up with a different plan.

The place they chose to make their delivery is one of the country’s most treacherous stretches of coastline. Similar to California’s rugged Big Sur, it is known as the Shipwreck Coast because so many vessels ran aground here during the 19th century.

The smugglers also picked the worst time for their rendezvous. Heavy surf is so predictable this time of year that an annual surfing contest is held up the coast at Bell’s Beach.

The week the Pong Su arrived, Wye River was packed with visitors enjoying a school holiday.

“Everyone along the whole coast was wondering, ‘What’s that ship doing?’ ” said Richard Buckingham, a longtime Wye River resident. “It got so close people thought it was going to run aground. They did it right in front of everybody.”

About that time, Australian police were conducting electronic surveillance on two Malaysians and a Singaporean who were visiting Australia and were suspected of involvement in drug smuggling.

But police were not on hand to see the Pong Su approach Boggeley Creek, two miles from Wye River, and launch its speedboat to hand over the drugs to the three foreigners. It’s not clear where the small boat overturned; police suspect some of the shipment may have been lost in the surf, though 110 pounds made it to shore. For days afterward, divers searched the water and police scoured the beach.

“No officers saw the boat capsize,” said Frank Prendergast, the Australian Federal Police’s southern operations director.

Hours after the bungled delivery, police found the body on the beach and arrested the three foreigners with the heroin in the nearby town of Lorne. It wasn’t until the next day that an officer stumbled on the surviving North Korean smuggler hiding in the bushes at Boggeley Creek. Soon after the arrests, the chase of the Pong Su began.

The cargo ship, traveling 10 knots, headed along the coast toward Sydney with surveillance planes and police, customs and navy vessels hot on its tail. The captain refused orders to pull into an Australian port, saying he had come from Indonesia and was headed to Papua New Guinea.

For four days, the waves were so huge that police and customs agents could not board.

“There was no chance that the vessel was going to get away,” said customs spokesman Leon Beddington. “It was just a matter of deciding when it was safe to board it.”

When the seas calmed April 20, special forces commandos were lowered from helicopters, landed on the deck and seized the ship. More commandos boarded by boat. The Pong Su’s crew offered no resistance. The ship was seized and taken into Sydney Harbor, where authorities discovered the custom-made fuel tanks. Authorities meticulously searched the vessel, using a particle analyzer so sensitive that it can find a grain of sand in an Olympic-size swimming pool.

‘On Illegal Mission’

“In circumstances where the vessel had no cargo, no reason to be in Australia, was so far away from where it normally travels, and appears to have been modified for the purpose of making the journey, we say the ship was on an illegal mission to deliver that heroin to Australia,” prosecutor Scott Bruckard told a Melbourne court in April at a hearing for the members of the crew. All 30 are being held for trial this year.

Like the rest of Wye River, Max Rathbone, 77, was captivated by the vessel offshore, which he could see from his house on the hill above town. Smuggling heroin, the retired builder said, is more effective in destroying the West than making nuclear weapons.

“It’s a good way to kill a country,” he said. “You don’t have to fire bullets. They’ll make a lot of profit, and they’ll bring the young of the country down to their knees.”

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Paddock reported from Wye River and Demick from Seoul. Times staff writer Sonni Efron in Washington and researcher Rie Sasaki in The Times’ Tokyo Bureau contributed to this report.