Korea: The Price Of Pain Has Gone Up


January 8, 2015: The American FBI finally gave into public pressure and revealed why it was so sure North Korea was behind the hacking of Sony Pictures networks and the campaign to control how American media can portray North Korea. The FBI said that the hackers got sloppy at one point and the FBI was able to track some messages, relating to the Sony hack, back to Internet (IP) addresses owned and used by the North Korean government. This placates some but not all critics of the FBI analysis. It is understood that in the Internet security business you do not want to let the bad guys know what you have discovered about them. In this case, the North Koreans are seeking to confirm the FBI assertions and, if true, correct the problem. This might involve labor camp or a faster death by firing squad for the guilty to encourage others to ensure it does not happen again. The FBI did not want to make these disclosures, but someone higher up in the U.S. government wanted to assure the public that the government was on the ball here.

From the beginning (in late 2014) North Korea was blamed, especially by many media pundits, for the massive hack of Sony Pictures computer networks that removed several thousand gigabytes of data during late 2014. This hack was believed to be payback for Sony ignoring North Korean complaints about a Sony film (The Interview) that makes fun of North Korea and its leader. That was only the beginning for a tale of Information War that got stranger and stranger as more became known. First, there was the issue of who did it. While there was some evidence in the hacker code left behind that North Korea might have been involved, it was initially considered more likely that the Sony hack was carried out by pro-North Korean hackers, not North Korea itself. Some believed that the hackers were Russian and got in simply because it had become widely known that Sony network security was weak and vulnerable. Many leftist activists in East Asia are pro-North Korea and some of them have hacking skills and the motivation to do it. Some American government experts concluded that the hack was ordered by North Korea but were initially less precise about whether it was all done by North Korean government hackers. The FBI initially refused to reveal details of how it reached any of its conclusions. The evasiveness was understandable because details would reveal information on methods and sources and make it more difficult to use either the next time around. This evasiveness also made it look like North Korea did what China and Russia do frequently for espionage and Information War attacks; use third party mercenaries (organized crime) or patriotic citizens who have hacking skills.

North Korea always denied any involvement in the hack, but did encourage Sony to comply with the anonymous hacker demands that Sony pull the move from circulation permanently. At first Sony agreed but after massive criticism (both popular and from senior American officials) the Japanese owned Sony (whose senior management is Japanese and headquartered in Japan) changed their mind and allowed the movie to screen in over 500 independent theaters willing to do so on Christmas Day while also releasing the film to Internet based streaming (online viewing) sites. By early January these two distribution methods (which were confined to the United States) had brought in nearly $40 million (about 85 percent from online customers). With worldwide release, and all the free publicity, it looks like Sony is going to make a profit on The Interview (which cost $44 million to make and over $20 million to promote). North Korea is not pleased with this outcome.

By the first week of 2015 the U.S. imposed new sanctions on North Korea in response to the Sony hack. These measures were particularly painful because they hit North Korean efforts to illegally export weapons. In this case the U.S. put sanctions on foreign individuals believed to work with North Korean weapons export efforts. These sanctions make it more difficult, time consuming and expensive for North Korea to export weapons and thereby gain desperately needed foreign currency. The U.S. sanctions take advantage of the extensive control American firms have over the international banking system, which North Korea has to use for its illegal trade. In response North Korea offered to hold high level peace talks with South Korea. This sort of thing is popular in the south although most diplomats down there understand that chances of any real progress are very low and such “negotiations” are mostly for show. Or, in this case, to persuade South Korea to help get the Americans to ease up on the banking sanctions. The Sony hack was popular in South Korea because it’s always popular, on both sides of the DMZ, to stick it to the Japanese.

Meanwhile South Korea has revealed that they believe the North Korea Cyber War organization contains 6,000 hackers and support staff (including secret police personnel to ensure loyalty and correct thinking). South Korea has lots of evidence that the North Korean hackers are indeed skilled and have been responsible for a growing number of successful hacks against South Korean government, military and corporate targets.

Meanwhile North Korea is having less success with legitimate enterprises. In 2014 North Korea expanded its network of SEZs (special economic zones) to 24. These SEZs first appeared in 2011 in order to attract Chinese businesses. These zones were originally created to produce as much income for the north as soon as possible. The SEZs had some initial success but by 2014 most Chinese firms freely admitted they were not willing to deal with the corruption and poor infrastructure in North Korea. The corruption is getting worse and the decrepit infrastructure is not getting any better. Thus going into 2015 the SEZs are another government propaganda victory and economic disaster. Another recent economic disaster recently showed up off the west coast, in the waters where North Korean fishermen have seen their lucrative squid catch halved by the sudden appearance of Chinese trawlers using illegal (in both Koreas and many other countries) techniques to grab a much larger quantity of squid quickly. The fishermen believe some government official took a large bribe to allow the Chinese trawlers to come in and take most of the squid. Another example of the growing corruption problem could be seen on the Chinese border the week before January 1st. Normally this is the busiest time of the year for trade. December is when Koreans celebrate the old year and the new one. Debts are paid, which includes bribes for people you regularly do business with. This year North Korean customs officials let it be known that they expected much larger “gifts” from the Chinese traders they saw throughout the year. Many of the Chinese companies refused to pay and appear willing to give up their North Korean trade or at least wait until the greedy North Korean officials back off. This year officials throughout North Korea are demanding larger bribes and that has led to a lot of anger among the majority of North Koreans who mainly pay and receive little in return. There is a lot more activity by officials looking for infractions (possession of South Korean made goods or making illegal cell phone calls outside the country) that people can be forced to pay a bribe for in order to avoid going to a labor camp. These camps are suffering higher death rates because of food shortages and prison officials demanding bribes from the families of inmates the officials believe could pay.

January 6, 2015: China announced that it had formally protested to North Korea over a North Korean Army deserter who entered China in late December with a stolen pistol and then killed four Chinese civilians (while robbing them) on December 27th. Within 24 hours of the murders he was hunted down and killed by Chinese security forces. There was a time, a few years ago, when China and North Korea kept incidents like this quiet. No longer, mainly because it is happening more frequently and China believes the North Koreans are losing control with desertions in their military and security services on the rise. There was no announcement of the murders in Chinese media but the diplomatic protest was news outside of China and despite Chinese Internet censorship news of the murders got into China and spread rapidly. Before the end of the year there were anti-North Korean demonstrations by some Chinese living near the North Korean border. Since at least 2008 North Korea has been trying to do something about the growing number of soldiers who are deserting and fleeing to China. There are always some troops who desert and just disappear inside North Korea. But more of these deserters are being found in China, and South Korea. Those who make it to South Korea report that the troops are now going hungry, and senior officers are stockpiling food and attempting to move their families to China. The worst desertion incidents are the ones where the deserters take firearms with them and rely on robbery to survive. This is especially bad if they do this while still wearing their North Korean military uniform. Both China and North Korea have increased their border security but the number of people, armed or not, trying to get out of North Korea increases faster and the escapees are more desperate and resourceful.

January 2, 2015: Kim Yojong, the younger sister of North Korean dictator Kim Jong Un was seen in public wearing a wedding ring for the first time. It was later discovered that she had quietly married a senior government official who worked in “Room 39”, the department that looks after the Kim family finances. In early 2014 the eccentric and free-spirited younger (25 year old) younger sister was apparently persuaded to shape up and brought into the inner circle as a media specialist supporting her brothers image. Little sister helped schedule appearances and looks after how her brother is presented in the media. This is a Kim family tradition, of putting close family into jobs that directly support the supreme leader. Most of Kim Jong Uns siblings have proved unworthy, unwilling or both in this department. Until recently Kim Yojong was considered a lost cause and she may still be suspect. Kim Jong Un needs all the allies he can get because he continues to fire, retire, imprison or execute senior officials considered suspect.

December 30, 2014: South Korea is increasing its defense spending nearly five percent in 2015 to $33.4 billion. That’s more than triple what it was back in 2000. In part this is because of the continuing growth of the South Korean economy but also the result of the continued, and increasingly violent, threat from North Korea and the growing aggressiveness of China. In addition there is continued popular pressure in South Korea to eliminate conscription and move to an all-volunteer force. All this is expensive. In 2008, the South Korean defense budget went up 3.6 percent, but the military had called for a 7.9 percent increase. After the North Korean attacks in 2010 the annual increase ended up closer to ten percent and the annual increases remain higher than before 2010.

December 29, 2014: In yet another concession to massive public opposition the North Korean government has legalized the ownership and use of DVD players. The most popular models come from China, cost under $100 and play flash drives as well as CDs and DVDs, These look like laptop computers, have a similar size screen but no keyboard. Previously, despite harsh penalties (going to jail or paying a large bribe to the police) more North Koreans were obtaining and using these media players.

December 28, 2014: The U.S., Japan and South Korea signed a Trilateral Information Sharing Agreement meant to share information on North Korea to better counter North Korean aggression. What the United States really wanted was closer military cooperation between South Korea and Japan. Despite the threat both countries face from North Korea such cooperation has been impossible to achieve. Because of that Japan has been putting more effort into its defensive alliance with the United States. South Korea has turned down Japanese proposals that both nations coordinate military policy against common enemies (China and North Korea). Such cooperation is still very unpopular in South Korea because of continued anger over 40 years of brutal Japanese occupation early in the 20th century. This the Japanese consider self-destructive as it wallows in the past at the expense of dealing with current and future threats.

December 27, 2014: The North Korean Internet was unavailable for at least two hours. This is the second time in a week that this has happened and the government blames the United States. The American government denies any involvement. The North Korea Internet is tiny with only 1,024 IP (Internet) addresses and only 18 domains. Use of this Internet is tightly restricted and closely monitored. The North Korean internet access is provided by China. There is a larger internal Internet, which can only be accessed from within North Korea and contains only government approved content (mostly propaganda or educational).

December 20, 2014: South Korea expects 3.8 percent GDP growth in 2015. GDP growth in 2014 was 3.4 percent and three percent in 2013. In 2009 the South Korean economy emerged from the global recession, enjoying its highest economic growth (2.9 percent GDP increase in the third quarter) in seven years. There had been three quarters of decline. The recession had little impact on North Korea's economy, which has been shrinking for years. South Korean banking officials estimate that the North Korean economy shrank 1-2 percent a year through 2010 and is now growing (thanks to Chinese investment and trade) by about one percent a year.  North Korean GDP is estimated at $30-40 billion, creating a per capita income of up to $1,800. South Korea has a GDP of over $1.3 trillion and a per capita income of expected to reach $30,000 in 2015. The enormous economic gap between the two Koreas is the result of over half a century of communist economic mismanagement in the north and the major “weapon” in the conflict between the two Koreas. For decades the North Korean government strived to keep their population ignorant of the higher economic growth rate in the south. In the last decade that effort has failed and few North Koreans believe that the north is better off.  This was the official view the North Korean government maintained until recently. These days the North Korean government tends to consider economic comparisons with South Korea a forbidden topic, at least as far as public discussion goes.

December 18, 2014: A South Korean destroyer and a support ship docked in the Russian port of Vladivostok for a four day visit. Such visits are increasingly common as South Korea competes with North Korea to improve economic and diplomatic relations with Russia. So far South Korea is ahead but North Korea is trying to catch up.

December 17, 2014: Sony Pictures announced that in response to threats from North Korea it would not release The Interview on December 25th as planned. The movie was scheduled to appear on over 3,000 screens but theater owners feared that the terrorism threat, even though it was declared unsubstantiated by the U.S. government, would keep people away from their multiplexes on the biggest day of the year for movie attendance.





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