NORTH KOREA: RAJIN PORT FRICTIONS; CHINESE AND

C O N F I D E N T I A L SECTION 01 OF 03 SHENYANG 000185

SIPDIS

DEPARTMENT FOR EAP/K, INR, EAP/CM

E.O. 12958: DECL: TEN YEARS AFTER KOREAN UNIFICATION
TAGS: PREL PGOV PINR EWWT KN KS CH
SUBJECT: NORTH KOREA: RAJIN PORT FRICTIONS; CHINESE AND
NGOS IN RASON; FOOD AID AND PRC GRAIN-EXPORT RESTRICTIONS

REF: SHENYANG 76

Classified By: ACTING CONSUL GENERAL BRIAN M. GIBEL.
REASONS: 1.4(b)/(d).


1. (C) SUMMARY: Chinese commercial concerns have been
focusing on the North Korean port of Chongjin since
Pyongyang recently terminated a Chinese company's lease
rights at the DPRK port of Rajin and awarded those
privileges to a state-owned Russian firm. One Chinese
scholar claims the move is further evidence that Moscow and
Pyongyang are "strategically restricting" the PRC.
Although Chinese private firms are now negotiating for use
of Chongjin Port, the extent of PRC Government involvement
there--if any--remains unclear. Recent returnees from
Rajin-Sonbong (Rason) report new restrictions on Chinese
nationals starting several months ago. NGO contacts
involved in Rason offered differing accounts of North
Korean oversight of the aid community there. During
travels late last month to North Hamgyong, Yanggang and
Chagang provinces, one NGO worker found dwindling food
supplies, including among some local officials. Rason, in
contrast, remains better off. PRC grain-export
restrictions continue to complicate and increase the costs
of food-aid efforts targeting northeastern North Korea.
END SUMMARY.


2. (SBU) Poloff and Pol/Econ Chief traveled December 15-18
to Changchun, capital of Jilin Province; Yanji, seat of the
Yanbian Korean Autonomous Prefecture; Tumen, across from
Namyang, North Korea; and Helong, near the DPRK's Musan
Iron Mine.

PRC DIFFICULTIES IN RAJIN, INTEREST IN CHONGJIN
-------------- --


3. (C) PRC focus on the North Korean port of Chongjin has
grown as a result of what contacts describe as Pyongyang's
abrupt handover of a Chinese lease in Rajin Port to a
Russian state-owned company. An April 2008 Russo-North
Korean accord granted Russian concerns the right to
build/use a container terminal at Rajin Port and, by late
2009, reconstruct the 54-kilometer railroad linking Rajin
and Khasan, a border settlement directly across the Russian
border (see reftel). In the process, North Korean
authorities abrogated at least one Chinese firm's
contractual rights to use Rajin Port, said Jilin Academy of
Social Sciences (JASS) North Korea specialist ZHOU Weiping
(PROTECT) in Changchun on December 14. Offering similar
claims were LU Chao (PROTECT),a Shenyang-based North Korea
expert at the Liaoning Academy of Social Sciences, on
December 9; LIU Chensheng (PROTECT),a Shenyang-based PRC-
DPRK trade facilitator, on December 11; and ZHU Yilong
(PROTECT),the Tumen-based General Manager of the Yanbian
Haihua Import and Export Company, on December 16.


4. (C) Zhu identified the usurped Chinese firm as the
Yanji-based Yanbian Xiantong Shipping Group, what appears
to be, or have once been, a PRC-ROK joint venture. (NOTE:
Zhu's firm, Yanbian Haihua, is a well-connected player in
PRC-DPRK trade and reportedly one of Jilin Province's
largest DPRK-related trading companies. It is also a
licensed exporter of PRC foreign aid to the DPRK and in
2002 established a joint venture in Chongjin, according to
local media.) Chinese-language news accounts from the time
vary, but contacts have told us Xiantong formally acquired
the rights to terminal three in Rajin Port for its
container and bulk cargo operations around 2004/2005.
Xiantong declined our meeting requests.


5. (C) Recent events in Rajin have led PRC entities to
enter negotiations with the North Korean Government for
berthing and possible development rights in Chongjin Port,
according to Zhou Weiping and Zhu Yilong. Details on the
timing, scope and extent of PRC Government involvement--if
any--in the talks remain unclear, however.


6. (C) Queried on the context of the apparent North Korean
volte face in Rajin, Zhou Weiping assessed that Russia and
the DPRK are "strategically restricting" the PRC. As a
private firm, Xiantong had insufficient leverage with
Pyongyang, making it easier for North Korean authorities to

SHENYANG 00000185 002 OF 003


revoke the contract, said Zhou. She added that the
Xiantong case comes amid similar PRC difficulties with
other ventures, including enforcing Chinese rights to
develop the Musan Iron Mine and pave the strategic road
from Yanbian's Quanhe Land Port to Rajin Port, she added.
Against this backdrop, Jilin scholars advocated national,
or at least provincial, government involvement in the
Chongjin Port negotiations to prevent a similar experience,
claimed Zhou.


7. (C) Landlocked Jilin Province has long sought an outlet
to the Sea of Japan (East Sea)--access that Rajin would
have offered. Zhou claimed Jilin Party Secretary WANG Min
made the strategic decision--she did not say when--to no
longer pin the province's hopes for maritime access so
heavily on Rajin. One "direct result," said Zhou, is the
new "inland port" Jilin opened--the first of its kind and
part of a larger infrastructure project in the province--in
early December 2008. This facility will permit Jilin firms
to clear customs in Changchun and transport their goods
directly to Dalian Port for immediate shipping to the
Koreas or beyond.

NEW RESTRICTIONS ON PRC NATIONALS IN RAJIN-SONBONG?
-------------- --------------


8. (C) Recent returnees from Rajin-Sonbong echoed media
accounts reporting new North Korean restrictions affecting
some Chinese nationals in the area. JIN Shuguang
(PROTECT),an ethnic Korean Chinese who travels monthly to
Rason and northeastern North Korea to distribute
humanitarian aid on behalf of the Yanbian University of
Science and Technology (YUST),suggested the new
regulations began in November. He claimed December 16 that
the restrictions appear to confine Chinese businessmen
residing/operating in northeastern North Korea exclusively
to Rason. The restrictions, he said, also impair the
ability of Chinese businessmen to enter the country. Kim
was unclear on the impetus for the shift, but speculated
North Korea "feared" excessive Chinese influence, a common
theme we have heard and continue to hear from other
contacts.


9. (C) Separately, a Yanbian-based Western aid worker also
newly returned from Rason reported December 16 that she
heard North Korean authorities recently had started
revoking the residency permits of certain Chinese
businessmen in Rason while also clamping down on visas for
incoming Chinese business travelers. Speculation in the
Rason aid-community has it that Pyongyang leaned on Rason
authorities to tamp down on Chinese influence in the area,
she said. On December 17, a Yanji-based Westerner plugged
into Yanbian-based Western and Korean NGO personnel
operating in Rason noted that he had also heard rumors of
such restrictions in Rajin starting one or two months ago.


10. (C) The impact and extent of this apparent new policy
remains unclear. The Yanbian-based Western aid worker, for
instance, related that her group's two Chinese employees
based in Rajin have fared differently; one faced no
difficulties on the ground, while the other experienced
visa-renewal problems (though the group is unsure whether
this stems from her nationality or other issues).

DPRK OVERSIGHT OF NGOs in RASON
--------------


11. (C) NGO contacts offered differing accounts of recent
official North Korean oversight of the foreign aid
community in Rason. The Korean-Chinese Jin Shuguang
reported tightening restrictions on his humanitarian-aid
operation, based out Yanji. North Korean authorities late
this year informed him without explanation that his group
would be denied entry to the DPRK starting in December, for
the remainder of 2008, though activities would be permitted
to resume in January 2009. Jin observed that compared to
last year, North Korean security services have been
noticeably more scrupulous--especially since April--in
inspecting his operations. The Yanbian-based Western aid
worker frequently in Rason described ongoing efforts this
year by North Korean authorities to ferret out foreigners
involved in non-substantive projects. But she noted that

SHENYANG 00000185 003 OF 003


the growing strictures on the Rason aid community earlier
this year, stemming from the fallout over the arrest of
Canadian aid worker Kim Je Yell (see reftel),had eased
since August/September.

NGO WORKER ON NORTHEASTERN DPRK FOOD SITUATION, AID
-------------- --------------


12. (C) Jin Shuguang claimed that during his travels in
North Korea late last month he noted insufficient food
supplies in parts of northeastern North Korea. The YUST
operation Jin runs aims to support approximately 30,000
North Korean children through distributions of
food/clothing to orphanages and social-welfare institutions
in Rajin-Sonbong and North Hamgyong, Yanggang and Chagang
provinces. Despite this year's comparatively better
harvest, food supplies remain insufficient and were
depleting at a more rapid pace than usual, said Jin. He
claimed local cadres in North Hamgyong Province confided in
November that their government rations had been cut and
requested that Jin bring "extra" aid for them on his next
visit. Rajin, where YUST operates an orphanage, has fared
a bit better. Jin's comments track with the observations
of the Yanbian-based Western aid worker, who has a
background in agriculture. She described a successful
potato crop this year in Rason and lively agricultural
markets filled with more food and activity than in 2007.


13. (C) Strong PRC enforcement of grain-export restrictions
this year has complicated YUST's food-aid operations
considerably, explained Jin. YUST remains unable to export
many grains or grain products (e.g., flour) from northeast
China to North Korea; Jin has received no indication from
PRC officialdom that any imminent change is in the offing.
YUST has consequently been procuring grain in South Korea
and shipping it by sea from Pusan to Rajin, leading to a
two- or three-fold increase in costs. The group has also
turned toward shipping processed grain products (e.g.,
instant noodles, cookies) and processing equipment from
China to North Korea--categories of goods not prohibited by
the PRC export regulations.
GIBEL