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