This is the first installment of a three-part series.

Can North Korea’s regime de-prioritize the building of a nuclear arsenal and refocus on improving its dismal economy?

The consensus view is: “Not as long as the Kims are in power. They care only about the survival of their dynasty – thus their lust for nukes – and don’t mind if their subjects go hungry.”

For one Pyongyang watcher, however, hope springs eternal. Offered the right deal with the right timing, he insists, the regime can turn around.

For decades, Colin McAskill, who can claim to be North Korea’s most steadfast long-haul business partner, has been working toward just that.

Currently, the 81-year-old London businessman is in the midst of a years-long dry spell, during which international sanctions have barred him from pursuing any commercial deals. He has not visited North Korea since 2015.

But his optimism is on the rise, based on signals he sees both in North Korea and abroad. He hopes to receive, before long, a summons to return to Pyongyang and offer, yet again, advice on how to make the country prosper.

He knows there is one huge caveat. Prosperity can’t come until North Korea regains its long-lost credibility in global financial markets.

Pyongyang’s ideology exalts state socialism – even though private trade in goods and services has kept its economy from total collapse for at least a quarter century.

Under the law, private property doesn’t exist and it’s a criminal offense to run a private company. Pyongyang is home to nothing so un-socialist as a stock exchange; there are no shares to trade.

North Korea is not even tracked on the Fitch Ratings quarterly economic data charts for 36 “frontier emerging markets,” an investment category attracting pioneers and cowboys.

Nevertheless, foreign investors over the decades have continued to hear about a market in North Korean bonds.

North Korean bank notes. Image: Daily NK/Twitter

In the early 1970s, Pyongyang went on an import binge, borrowing the equivalent of hundreds of millions of dollars to finance the purchase of such Western European capital goods as Swiss machinery for making watches.

The plan was to repay the money by exporting products made with the new equipment. But the world economy turned downward at a time when the country’s engineers were still low on the technological learning curve.

Pyongyang soon defaulted on that commercial, interbank debt. Bankers left holding the bag eventually bundled much of the unpaid commercial debt into certificates – not exactly bonds, but close – for trading in London.

For decades afterward, speculators bid the certificates up whenever it looked as if the country might get its financial act together. That could happen if South Korea absorbed a collapsed North and Seoul took on the outstanding debts.

Alternatively, North Korea could undertake policy changes – including arrangements to repay its debts and restore its international credit rating. That could pave the way to a real international market in North Korean bonds.

Over the three generations of Kim family rule the second alternative has on occasion resonated with the top man, says McAskill. He believes current ruler Kim Jong Un, as recently as just before Covid-19, was seriously considering such a plan ­– but the pandemic forced its shelving.

Now the North Korean economy is even weaker than usual due to a combination of sanctions and a homegrown policy that has all but halted foreign trade in order to block entry of the novel coronavirus, which originated in China.

It almost certainly would take a diplomatic breakthrough, including sanctions relief, to encourage a new round of economic and financial experimentation. Interestingly, some reports suggest that US President Donald Trump has an October surprise along those lines on his pre-election wish list.

Meanwhile, to cope with the domestic economic downturn, the regime has returned to a little-known earlier practice: selling bonds to its own people. Judging from information that has filtered out, these moves look unlikely to encourage any financial culture centered on securities.

We know about the new bonds mainly from Daily NK, a Seoul-based online news organization whose reporters talk by cellphone with secret contacts inside North Korea. Daily NK heard that Kim Jong Un, at a Workers’ Party Politburo meeting in April, had signed off on a plan to issue public bonds.

Image of North Korea’s proposed bonds. Image: Daily NK/Twitter

Under that scheme, 60% of the bonds were to be handed to state-linked enterprises in need of public funds. Those companies were supposed to use the bonds in lieu of cash to pay their bills.

University of California San Diego North Korea watcher Stephan Haggard in a report for South Korea’s Korea Economic Institute suggests that “this effort to substitute bonds for cash is designed to avoid direct monetary emission that would have inflationary effect or lead to the depreciation of the exchange rate.”

Haggard explains: “Unlike advanced industrial states, and even emerging markets, monetary policy is hard to conduct in the North Korean economy. Who wants to hold more North Korean won?”

The country’s private-sector wheeler-dealers, a new bourgeoisie informally dubbed donju (“money masters”), were called upon to spend their accumulated stashes of dollars, euros and yuan to purchase the remaining 40% of the bonds.

That reportedly has not been going well: many donju consider it a ploy to confiscate their foreign exchange.

Consider the tale of a man named Ri, a de facto private operator of some state-owned mine shafts near Pyongyang. According to a Daily NK source, mine operators were summoned to an April meeting where a complex director urged them to buy bonds.

Ri “asked the director what would happen” if he chose not to buy. Refusal would be considered “reactionary,” he was told – whereupon Ri asked sarcastically what the regime had done to help him build his mining business.

On May 6 secret police showed up, forced the miners to gather, then arrested Ri, who was summarily executed. His business and personal possessions were confiscated and his wife and two children sent to a prison camp.

Starting in the 1950s, North Korea had pitched occasional bond issues to the domestic population and to sympathetic ethnic Koreans abroad, especially in Japan.

The 2003 “people’s life bonds,” for example, specifically paid no interest – unless a holder won a lottery. But the regime did award medals honoring buyers’ loyalty. Clearly, these were not the sort of bonds traded on markets elsewhere.

People prepare to bow before the statues of late North Korean leaders Kim Il Sung and Kim Jong Il on Mansu Hill, to mark the 72nd anniversary of the founding of Korean People’s Army in Pyongyang. Photo: AFP/Kim Won Jin

Donju reportedly find the current bond issue disturbingly reminiscent of a 2009 currency revaluation. Then, the regime knocked one zero off the old sums and confiscated huge chunks of people’s savings by drastically limiting the amounts of old currency that could be exchanged for new.

The state holds most cards. In particular, it can withhold business licenses from donju who fail to put their money where their loyalty should be. Still, authorities sweetened the offer this time by encouraging buyers to use their bonds to invest in a China-North Korea joint venture trading company.

“While many donju don’t trust the state, they know that Chinese-backed companies aren’t likely to fail,” Daily NK’s source said.

Whether, over the decades, the regime has redeemed any of the bonds it’s issued is uncertain. In any case, bonds that remain outstanding would be unsuitable investments for outsiders, due to international sanctions. Ditto for European debt certificates.

Beyond that, as Haggard says, “one deep underlying similarity” between the European debt episode and the bond issues targeted at Koreans is that “the North Korean regime faces enduring credibility problems that fundamentally limit its capacity to raise funding through the issue of debt of any sort.”

That takes us back to Colin McAskill – who has been deeply involved in efforts to restore Pyongyang’s international credit.

McAskill, a well-connected British marine engineer, by the early 1970s had advanced from designer to investor/industrialist and was making “a great deal” of money. Among other companies, he bought a firm that designed, manufactured and sold hovercraft and speedboats.

The main element of hovercraft design is the flexible skirt – the patent of which is owned by the UK government. London licensed McAskill’s company to use the patented design and foreign governments bought hovercraft from him.

One day in the late 1970s “an English export agent approached us for a much larger craft to be used as an amphibious air-sea rescue craft capable of carrying 40 passengers, for a country in the Far East,” McAskill recalls.

Colin McAskill (L) in a file photo. Photo Courtesy: Colin McAskill

The terms of the patent license “required us not only to know who the end user was but to establish unequivocally what the intended purpose for the craft was.”

Learning that the would-be customer was North Korea, McAskill went to East Berlin and met the buyer’s representative, a “Mr. Song.”

Both German speakers, they hit it off. Some months later, Song brought a delegation of North Korean designers for a factory visit – after the UK’s “prime minister herself had authorized visas for the full delegation,” McAskill says.

Although they had come for the hovercraft, the delegates noticed pictures of a speedboat. They ordered two, and one large hovercraft.

Song was a “school chum” of Kim Jong Il, acting as a “personal envoy” of the man who would later become North Korea’s second ruler, McAskill says. Song invited the Briton to visit Pyongyang for the first time in December 1979.

In North Korea, McAskill recalls, “I was treated as an honored guest, meeting lots of very senior people including a senior general, who invited me to his dacha in the country for an elaborate dinner where there were still more generals and senior officials. I was ferried around the country.”

Soon, however, London, evidently under pressure from Washington, put the quietus on the hovercraft deal. Still, McAskill exported the two speedboats. “When the order was actually delivered, my credibility in Pyongyang went up no end,” he says.

By the same token, North Korea’s credibility with McAskill did not suffer from that transaction. Having in hand a letter of credit confirmed by a major London bank, he was paid in full.

He says he recently learned that the speedboats have been inherited and used by Kim Jong Un, the third-generation supreme leader. “To me they will always be known as the avocado pair, because of the green color chosen.”

Song introduced him to the chairman of what probably were the regime’s most important business and financial arms, Korea Daesong Group and Korea Daesong Bank – both creatures of Workers’ Party Headquarters Room 39, the bureaucracy that handles the ruling family’s overseas finances.

North Korean leader Kim Jong-un at a performance for the Worker’s Party of Korea meeting participants in an undated picture. Photo: KCNA

Due to his relationships, McAskill was called upon to help gold-rich North Korea with London bullion sales, starting in 1983. Bullion mined, smelted and assayed by North Korea “was accepted by the London Bullion Market as ‘good delivery,’ which meant it was globally accepted,” he notes.

Korea Daesong Bank “had established the Gold Star Bank in Vienna and Mr. Pak Gwang Ho was its president and, in my view, the sole keeper of the purse in western banks.”

Pak, who became McAskill’s regular contact, was a nervous soul, “hovering in the background near the door” whenever a particular higher-level official entered the picture, McAskill says.

Once the Briton walked out of talks with that higher-up. An agitated Pak followed, jumped into the car beside McAskill and pleaded with him to return, saying: “I’ll be shot!”

McAskill “turned to Pak and patted his knee, saying, ‘Mr. Pak, that’s your problem, not mine.'” The functionary survived to hover another day.

Pak was already selling bullion through a registered London bullion dealing company (now known as Credit Lyonnaise Rouse) run by Roy Leighton.

Serving as liaison between Pak and Leighton, McAskill arranged to have a bullion dealing room “fully kitted out with Bloomberg and Reuters equipment” set up in his own office in London’s ritzy west end. Four North Koreans staffed it, he says, with “appropriate visas and work permits provided by me.”

McAskill did not handle actual bullion sales. Rather, “my role was purely to ensure that the bullion transactions were legal, up to specification and properly delivered.”

The gold sold on the London Bullion Market was shipped from North Korea to East Berlin. Credit Lyonnais sent an armored car to collect the shipment. Payment was credited to the North Koreans’ account in London, McAskill says, “when it crossed Checkpoint Charlie” into West Berlin.

Involvement in the trade brought him little financial reward from North Korea, he says – but he did “several other deals” from which he did benefit. Indeed, he says, he “undertook many assignments, each of which gave me a profit.”

Pak in Vienna at Gold Star Bank, carrying out Room 39 policy, insisted that anything purchased for the ruling family’s use had to be of absolute best quality.

For example, McAskill cites a famous 1983 photo of the “Great Leader” standing on a balcony flanked by his entire Politburo. Kim Il Sung, “was wearing a smart overcoat with his hand outstretched, and the entire Politburo were wearing smart suits.”

The suiting, says McAskill, “was supplied by me from one of Scotland’s most famous mills, owned by a family I knew very well socially.” That, he says, “was the biggest order the factory ever had.”

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.