In his dealings on behalf of North Korea since the late 1970s, Colin McAskill had experienced highs – first earning the isolated regime’s trust by delivering a couple of fancy speedboats for the use of then-successor-in-waiting Kim Jong Il.
And he’d experienced lows, none lower than the 1987 failure of a European debt restructuring scheme he’d undertaken for Pyongyang.
If it wasn’t metaphorically all gold, nevertheless McAskill had been in the presence of piles of real gold for more than a decade while overseeing the regime’s London bullion business.
“Bullion shipments of one ton each, of 999.999 purity, started in January 1983 and continued without incident or default until November 1993,” he says.
But in 1993, during one of the multiple crises that have erupted over the decades regarding North Korea’s nuclear weapons program, the United States developed a punitive interest in Pyongyang’s income from bullion sales.
Now that he was exposed to risk from the long arm of the US Treasury Department, McAskill determined that he needed to be reimbursed – even for a modest amount of less than US$2,000 per month – for his bullion services, which previously he had supplied pro bono.
“Toward the end of 1993 when it did appear that it was going to be troublesome, I entered into an agreement” – with Credit Lyonnaise, whose subsidiary conducted the bullion sales, “to pay me US$0.05 per ounce starting in 1994. We were shipping one ton per month and there are 32,150.7 troy ounces in one metric ton of 999.999 purity bullion.”
Things moved fast, though. “When it became clear that the US was getting desperate and would resort to some dirty tricks and possibly seize or block the funds, I reluctantly advised Pyongyang to stop shipment – which they did in November 1993.”
McAskill notes that Pyongyang still has plenty of gold to be mined, although mine damage from disastrous floods in the 1990s has affected supply. He says supply can be restored and he stands ready to help out again with bullion.
“I’m well in touch with the situation and ready to move, but this time not for free,” he says.
As the gold tale illustrates, McAskill’s fascination with North Korean plays never waned. In 2000, he announced yet another scheme: He and others had formed the Chosun Development & Investment Fund and would seek $50 million for investments in North Korea. “It’s the last virgin economy,” he proclaimed.
He had worked on the concept for several years – starting when it was still US government policy to use incentives to encourage North Korea to focus on economic development and put aside nuclear weapons ambitions.
The most notable tactic was the Bill Clinton-era “Agreed Framework” via which the international community would provide North Korean with light-water reactors in return for abandoning its other nuclear facilities.
Kim Jong Il, having taken over as second-generation ruler in 1994, “was really keen to break out of the mess they were in, especially after the ‘Great Leader’ Kim Il Sung died and the military became more prominent,” McAskill says. I had a gateway to the very highest level and was trusted to get things done.”
Meanwhile, “although the previous pattern in Washington had been that, every time the government changed, so did the North Korea policies the previous lot had put in place. Bill Clinton was the exception. He saw a way to get my chums onto our side through economic regeneration.”
McAskill had proposed his fund at a UN Development Program conference in Hawaii. Afterward, the Clinton administration “bent over backwards to assist me in getting it set up. We had a second conference in Seattle sponsored by the US Department of Energy and a committee was set up to oversee the project. We were making great headway.
“But when President George W. Bush took over, he stopped any and all US government involvement in the project.”
Largely unknown at the time, a component of McAskill’s Chosun Fund plan was that North Korea would issue dollar- or euro-denominated bonds preferably backed by Seoul, which was then focused on the “Sunshine Policy” – a strategy of engagement with Pyongyang. The bonds could be given to holders of its international debt at some discount to get the debt off the books.
The idea, again, was to wipe the slate clean, making North Korea eligible for international loans, and to preclude seizure of North Korean assets for default judgments.
That would be critical because North Korea has both private and sovereign debt in the West, as well as what may or may not be still-unpaid debts to China. It has court judgments in the United States and perhaps other countries that must be dealt with before it can be accepted back into international financial society.
“We know that Russia has already come to a very generous discounted settlement” regarding its outstanding loans to North Korea, says McAskill. “The Chinese on the other hand are much more secretive about their dealings with Pyongyang and one can only assume that a similar arrangement may have been made with Beijing.”
Another idea incorporated in that bond concept was that the holders of those new bonds could use them as partial payment for any purchases from North Korea.
Under Bush, US policy on North Korea shifted to a line far tougher than the Clinton administration’s policies. Bush’s Treasury Department sought to enforce sanctions on anyone in the world who was known to be helping North Korea with its nuclear program.
The Agreed Framework died, “which basically led us to the situation we now find ourselves in,” McAskill says.
The Briton, like anyone else dealing with North Korea, had to take care to avoid US sanctions. But he continued to talk about deals. His last visit to the country was in 2015, when he was exempted from a SARS lockdown to enter.
McAskill’s Chosun Fund, with its plans for issuing bonds to resolve North Korea’s lingering credit problem, “never took any money,” he says. “We did receive firm pledges approaching $50 million from some big names.”
However, the Bush administration leaned upon those names “to withdraw from their commitment to the fund.” The fund is long defunct – a casualty of sanctions. McAskill is unconnected to a similarly named, Atlanta-based Chosun Fund that appears to focus on investment in South Korea.
McAskill continues to focus on how to help Kim Jong Un fulfill a pledge made to his subjects in his first public speech in April 2012: that he would enable them to stop tightening their belts.
That of course requires dealing with the defaulted London Club debt. “If anything was going to be problematic, it was this,” McAskill says.
Currently, trading of European debt certificates, which ended up being issued after McAskill’s debt restructuring effort failed, is specifically barred under sanctions imposed by the UN – and, especially, by the United States – that forbid investment in North Korea. Today, US vulture funds hold a majority of those debt parcels (which McAskill calls “illicit”), without being able to trade them.
Enthused by Kim’s 2018 New Year’s address calling for an economic reconstruction program, McAskill says, he decided to “throw a cat amongst the pigeons and see what happens.”
North Korea had been working on a project to develop the country’s forests of Korean pines and produce pine nut oil. However, McAskill says, they had run into “serious difficulties because of the complexity” of the processing needed.
“When I reviewed what they intended to do I came to the conclusion that it would cost $3-$4 million and take two to three years before they had anything to sell.”
He prepared a “comprehensive memorandum” offering his own alternative proposal and sent it directly to Kim Jong Un in Pyongyang last September. He advised concentrating not on pine nut oil but on the pine nut kernels themselves, a culinary product extracted from pine cones and in high demand in some markets such as Italy.
“The residue from the production process would be used to produce nourishing food by-products for the local communities and, more importantly, a fuel source for domestic use,” he says. “In my research I came across a boiler developed specifically for this purpose.”
Although much North Korean forest was cut down decades ago, McAskill says the country still has “in excess of 60,000 hectares of pinus koraiensis in three counties, two in the east and one in the west. I know. I’ve been there in 2015 and lunched with the governors.”
The project is “designed to operate within the confines of the current sanctions regime,” he tells Asia Times. “It may be possible to register the company as a charitable UK trust” – a humanitarian project instead of a sanctions-forbidden joint venture.
Pyongyang responded this January via its London embassy, signaling that his memo had reached its target and making its interest clear, McAskill says. He met embassy personnel – but then came Covid-19.
That month North Korea closed its borders. Rumors spread about Kim’s health as he made far fewer public appearances than had been his habit before the coronavirus outbreak. Kim “to my knowledge went into isolation,” McAskill asserts, adding that little can happen until the pandemic subsides.
Looking toward that point, he says that his latest proposal – building on the original Chosun Fund proposal – includes an “imaginative” component to deal with the country’s debt.
Experts are skeptical of McAskill’s debt-clearance hopes.
Peter Ward, a University of Vienna scholar based in Seoul, tells Asia Times that “European debts and debts to other foreign creditors outstanding since the 1970s are unlikely to be paid in full” – although he acknowledges that “an agreement could theoretically be reached with the creditors.”
“Dare I also cynically note that the North Koreans have a history of refusing to repay, and are likely to be highly resistant?” Ward added.
Sanctions make any deal impossible now, Ward says, but if they’re eventually relaxed, “things might change. North Korea needs rapid growth to repay existing loans even with haircuts, and also then take on more debt to finance investment.”
But the chances of North Koreans acting in good faith are low, Ward says. If there’s loan forgiveness accompanied by new lending, “another round of defaults appears likely.”
Ward led a trio of Seoul-based researchers who sought to determine why foreign direct investment appears artificially low even “given the small size of North Korea’s economy” and despite the apparently vigorous interest of North Korea’s leadership in encouraging” FDI. They listed three reasons in a 2019 report.
“The North Korean nuclear and missile program and related international sanctions are the first,” the report notes. Secondly, North Koreans authorities “tend to have unrealistic expectations about foreign investment. [They] believe that little if any infrastructure investment is required on their part and that they should have considerable control over foreign firms’ managerial decisions in country.”
But the biggest reason, again, may be “the remarkable unwillingness of the North Korean side to honor contract obligations … aggravated by high levels of official corruption.” The report concludes: “The pattern of deliberately mistreating foreign investors has not changed.”
Thomas Byrne, former Asia sovereign chief for the Moody’s ratings agency, goes farther, saying McAskill “has an impossible task” in renegotiating North Korean bank debt.
“Creditor banks would have to take a very large haircut – 80% to 90%, if not more, probably at the highest range historically for private creditors’ losses on their lending to sovereigns.”
Byrne notes that one of the highest creditor losses on record was Yemen in 2001: 97%. Venezuela’s 2017 haircut was about 80% – but it has oil to export. “North Korea’s limited capacity to export,” he says, “constrains its ability to service debt, even if it were willing.”
“North Korea would likely demand new money in some form,” Byrne says.
Cuba rescheduled with Paris Club government creditors, including Russia, around 2015, with an 81% haircut, Byrne said – but a second round of bank debt rescheduling with Cuba stalled when the Donald Trump administration reversed the Obama administration’s engagement with Havana.
North Korea’s situation is even worse. There is “no point in rescheduling as long as trade and financial sanctions are in place,” Byrne said. “Nothing to gain in terms of access to credit.”
Byrne is scathing about Pyongyang’s record. “Creditworthiness is antithetical to their core strategy of shaking down the external word. The faint glimmer of hope in early 2018 was a mirage.”
Byrne notes that sanctions that followed the first 2006 nuclear test were “pretty much piecemeal” but that since 2016’s test number four, “sanctions have become comprehensive and crippling.”
Even North Korea’s closest ally, China, recognizes realities. The Beijing-based Asian Infrastructure Investment Bank “won’t touch North Korea with a ten-foot pole so as not to diminish the quality of its loan portfolio,” Byrne said.
McAskill acknowledges there are massive barriers. For those he blames US, not North Korean, policy. But US President Donald Trump’s firing of National Security Advisor John Bolton was a positive, he believes, since Bolton scuppered what otherwise might have become a Trump-Kim deal in a 2019 summit in Hanoi.
He urges Washington to deal with Kim. “There is everything to play for,” McAskill said – particularly given the rise of China. He suggests the West establish closer ties with South Korean President Moon Jae-in and work with him on economic reconstruction of the North.
McAskill is convinced that Kim “is sincere about his economic reconstruction program” and is “willing to sacrifice some of his hard-won nuclear deterrent arsenal in return for some sort of sanctions relief.”
Asked if he believes that North Korea in his lifetime will be restored to the good graces of the Western banks, McAskill – still dapper in the bow ties he always wears except during Royal Ascot, when he and other guests in the Royal Enclosure are subject to a more restrictive dress code – replies: “Certainly!”
A veteran Asia correspondent and a Pyongyang watcher since 1977, Asia Times Associate Editor Bradley K. Martin is the author of Under the Loving Care of the Fatherly Leader: North Korea and the Kim Dynasty.