A report published by the Royal United Services Institute (RUSI) on Friday details the presence of Chinese state-owned firms within a web of entities, individuals and ships linked to a case of North Korean weapons smuggling in 2016.
The report also focuses on a Chinese national named Li Anshan who, it says, appears to have been a central player in North Korea’s illicit shipping network.
While the findings do not explicitly indicate “support from Chinese authorities” for North Korea’s arms trading, the report’s authors say, they do raise questions about due diligence and sanctions enforcement practices by Beijing.
“Information uncovered and presented here adds further weight to the body of evidence that points to the critical role of Chinese nationals in operating and managing North Korea’s illicit shipping fleet,” the report reads.
“It also presents evidence that some parts of these networks are not merely based in China but may also have ties to the Chinese state.”
The report focuses on the network previously involved in the ownership, management and operation of a cargo vessel called the Jie Shun.
August 2016 saw the Cambodia-flagged, North Korean captained and crewed vessel interdicted by Egyptian authorities that subsequently found 30,000 rocket-propelled grenades on board hidden under a consignment of DPRK iron ore.
A UN Panel of Experts (PoE) noted in 2017 that it was the “largest interdicted ammunition consignment in the history of sanctions against the Democratic People’s Republic of Korea.”
The iron ore was also subject to UN Security Council (UNSC) resolutions.
Chinese SOE Connections
As reported by the PoE in 2017, the Jie Shun was registered by Li Anshan in 2012 to a Dalian-based company called Liaoning Foreign Trade Foodstuffs Shipping (Liaoning Foreign Trade), with the RUSI report further identifying Li as the company’s “chief captain,” citing a 2008 Chinese language interview.
The vessel was registered under the Cambodian flag, assigned a North Korean crew and, two months after Li first registered the vessel, transferred to Li’s Hong Kong-based firm Hua Heng Shipping.
The registered owner of the vessel in 2012 was Jie Shun Shipping and then subsequently Vast Win Trading in 2014 and during the time of the interdiction, according to the Equasis maritime database.
However, the PoE report added that Egyptian authorities said it considered Li’s Hua Heng to be the de facto owner of the ship at the time of the interdiction in 2016.
Liaoning Foreign Trade was itself a state-owned company until 2003 when other individuals became involved, RUSI says, citing Chinese corporate documents.
However, the report reveals that the company maintained its links to the Chinese state, including when Li first registered the vessel.
“In summary, the Chinese government – perhaps unwittingly – owned a stake in the registrant of the Jie Shun when a North Korean crew was assigned to it in 2012,” the report says.
Despite the Jie Shun interdiction and the PoE’s questioning of Li in 2016, the state maintained its links to his company.
“Liaoning Foreign Trade maintained a connection with the Chinese state subsequently, however, being part owned until September 2017…by Liaoning Limeng State-Owned Assets Operation,” the RUSI paper says.
The report adds that Liaoning Limeng is also owned by the Liaoning Provincial People’s Government State-owned Assets Supervision and Administration Commission.
While Liaoning Limeng appeared to distance itself from Liaoning Foreign Trade in late 2017, it still listed Liaoning Foreign Trade within its organizational chart as an equity investment in early 2018, the report says.
Other state-owned companies, the RUSI paper notes, also maintained various links to Liaoning Foreign Trade.
Citing Chinese corporate databases, RUSI reports that Liaoning Foreign Trade is a shareholder of a Chinese state-owned firm called Liaoning Fude Food.
It adds that Liaoning Foreign Trade shares an address with another state-owned firm owned by Liaoning Limeng and identifies Liaoning Foreign Trade as the commercial manager of a vessel owned by another state-linked firm, Heilongjiang Province Longhang Heavy Equipment River & Sea Transport, registered at the same location.
Liaoning Foreign Trade, the report also shows, continued to be involved with Hua Heng Shipping and DPRK networks.
“Liaoning Foreign Trade and Hua Heng Shipping are – as of January 2019 – listed as the International Safety Management Code (ISM) Manager and Commercial Manager of the Sierra-Leonean flagged JOINT PACIFIC,” the report says.
Using maritime tracking, RUSI showed the Joint Pacific visiting DPRK ports, including a coal terminal, while under the management of the two companies.
The report points to additional ships managed by Liaoning Foreign Trade and Hua Heng visiting DPRK ports as well.
“Chinese government entities appear to continue to be connected with the company through the addresses, shareholders and management that Liaoning Foreign Trade shares with other apparently state-owned companies,” the report says.
“This points towards a need for China to investigate more deeply any potential Chinese links to North Korea-related illicit activity, particularly if state-owned enterprises are involved in any part of the ownership structures.”
The report also identifies further links between Li and North Korean illicit shipping networks, which were also partially detailed in the PoE report from 2016, including Ocean Maritime Management (OMM) and Hitoshi Kasatsuga, one of North Korea’s most well-known smugglers. At the time, in 2016, Li denied the associations.
However, following its open source investigation published in the report, RUSI assessed that Li is “a central node in North Korea’s illicit shipping network.”
“His companies have owned, managed and provided ISM services to several vessels operating on behalf of entities designated by the UN under the North Korean sanctions’ regime,” the report read.
“These activities took place while Liaoning Foreign Trade – the company which first registered the Jie Shun and for which Li was employed as chief captain – was part-owned by elements of the Chinese state.”
The paper is the inaugural report published under RUSI’s Project Sandstone, which is a newly launched effort to analyze North Korean illicit shipping networks.
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