    [Senate Hearing 108-157]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 108-157

                       DRUGS, COUNTERFEITING, AND WEAPONS
                        PROLIFERATION: THE NORTH KOREAN
                                   CONNECTION

    =======================================================================

                                    HEARING

                                   before the

         FINANCIAL MANAGEMENT, THE BUDGET, AND INTERNATIONAL SECURITY
                                  SUBCOMMITTEE

                                     of the

                                  COMMITTEE ON
                              GOVERNMENTAL AFFAIRS
                              UNITED STATES SENATE

                          ONE HUNDRED EIGHTH CONGRESS

                                 FIRST SESSION

                                   __________

                                  MAY 20, 2003

                                   __________

          Printed for the use of the Committee on Governmental Affairs

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                       COMMITTEE ON GOVERNMENTAL AFFAIRS

                       SUSAN M. COLLINS, Maine, Chairman
    TED STEVENS, Alaska                  JOSEPH I. LIEBERMAN, Connecticut
    GEORGE V. VOINOVICH, Ohio            CARL LEVIN, Michigan
    NORM COLEMAN, Minnesota              DANIEL K. AKAKA, Hawaii
    ARLEN SPECTER, Pennsylvania          RICHARD J. DURBIN, Illinois
    ROBERT F. BENNETT, Utah              THOMAS R. CARPER, Delaware
    PETER G. FITZGERALD, Illinois        MARK DAYTON, Minnesota
    JOHN E. SUNUNU, New Hampshire        FRANK LAUTENBERG, New Jersey
    RICHARD C. SHELBY, Alabama           MARK PRYOR, Arkansas

               Michael D. Bopp, Staff Director and Chief Counsel
         Joyce Rechtschaffen, Minority Staff Director and Chief Counsel
                         Darla D. Cassell, Chief Clerk

                                     ------

         FINANCIAL MANAGEMENT, THE BUDGET, AND INTERNATIONAL SECURITY
                                  SUBCOMMITTEE

                    PETER G. FITZGERALD, Illinois, Chairman
    TED STEVENS, Alaska                  DANIEL K. AKAKA, Hawaii
    GEORGE V. VOINOVICH, Ohio            CARL LEVIN, Michigan
    ARLEN SPECTER, Pennsylvania          THOMAS R. CARPER, Delaware
    ROBERT F. BENNETT, Utah              MARK DAYTON, Minnesota
    JOHN E. SUNUNU, New Hampshire        FRANK LAUTENBERG, New Jersey
    RICHARD C. SHELBY, Alabama           MARK PRYOR, Arkansas

                        Michael Russell, Staff Director
                  Richard J. Kessler, Minority Staff Director
                          Amanda Linaburg, Chief Clerk

                                C O N T E N T S

                                     ------
    Opening statement:
                                                                       Page
        Senator Fitzgerald...........................................     1
        Senator Akaka................................................     6
        Senator Lautenberg...........................................    11

                                   WITNESSES
                             Tuesday, May 20, 2003

    Andre D. Hollis, Deputy Assistant Secretary for Counternarcotics,
      U.S. Department of Defense.....................................     3
    William Bach, Director, Office of Asia, Africa, and Europe,
      Bureau of International Narcotics and Law Enforcement Affairs,
      U.S. Department of State.......................................     5
    Nicholas Eberstadt, Ph.D., American Enterprise Institute.........    14
    Larry M. Wortzel, Ph.D., Heritage Foundation.....................    16
    Robert L. Gallucci, Ph.D., Georgetown University Walsh School of
      Foreign Service................................................    18
    Former North Korean High-Ranking Government Official, Identity
      Protected......................................................    24
    Bok Koo Lee [Alias], Former North Korean Missile Scientist.......    27

                         Alphabetical List of Witnesses

    Bach, William:
        Testimony....................................................     5
        Prepared statement...........................................    39
    Eberstadt, Nicholas, Ph.D.:
        Testimony....................................................    14
        Prepared statement...........................................    45
    Former North Korean High-Ranking Government Official:
        Testimony....................................................    24
        Prepared statement...........................................    70
    Gallucci, Robert L., Ph.D.:
        Testimony....................................................    18
        Prepared statement...........................................    69
    Hollis, Andre D.:
        Testimony....................................................     3
        Prepared statement...........................................    36
    Lee, Bok Koo:
        Testimony....................................................    27
        Prepared statement...........................................    73
    Wortzel, Larry M., Ph.D.:
        Testimony....................................................    16
        Prepared statement...........................................    50

                                    Appendix

    List entitled ``North Korean Provocations, 1958-2003,'' submitted
      for the record by Senator Fitzgerald...........................    33

                       DRUGS, COUNTERFEITING, AND WEAPONS
                        PROLIFERATION: THE NORTH KOREAN
                                   CONNECTION

                                  ----------

                             TUESDAY, MAY 20, 2003

                                         U.S. Senate,
                      Subcommittee on Financial Management,
                      the Budget, and International Security,
                      of the Committee on Governmental Affairs,
                                                        Washington, DC.
        The Subcommittee met, pursuant to notice, at 2:08 p.m., in
    room SD-342, Dirksen Senate Office Building, Hon. Peter G.
    Fitzgerald, Chairman of the Subcommittee, presiding.
        Present: Senators Fitzgerald, Akaka, and Lautenberg.

                OPENING STATEMENT OF SENATOR FITZGERALD

        Senator Fitzgerald. I am going to call the Subcommittee to
    order. Senator Akaka is on his way over, but in the interest of
    time, we want to begin now. There will be a vote I believe at
    2:20 p.m..
        Today, the Governmental Affairs Subcommittee on Financial
    Management, the Budget, and International Security is holding a
    hearing on Drugs, Counterfeiting, and Weapons Proliferation:
    The North Korean Connection.
        I would like to welcome our distinguished witnesses who are
    here today, including two North Korean defectors. They will be
    on the third panel.
        I would like to take a moment, at the outset, to describe
    the logistics of the hearing for the benefit of members of the
    media and those in the audience. The hearing will be held in
    open session through the first round of panel 3 that includes
    the North Korean defectors. Those witnesses have asked that we
    protect their identities. Therefore, screens will be installed
    at the witness table for panel 3, and we ask that members of
    the media and the public not attempt to breach the screens.
        The defectors have also indicated their willingness to
    disclose additional highly sensitive information to the
    Subcommittee in a closed session. Therefore, after the first
    round of questions in open session, the Capitol Police will
    secure the room for a closed, unclassified session. At this
    time, members of the media and the audience will be asked to
    leave the hearing room.
        Thank you in advance for your cooperation.
        Today, we will hear testimony that indicates or suggests:
    One, that the North Korean Government runs a drug production
    and trafficking business and essentially functions as a state-
    level crime syndicate;
        Two, that North Korea is using the hard currency generated
    by its state-level crime syndicate to fund its military and
    weapons programs, including possibly its nuclear weapons
    program; and, therefore,
        Three, the drug production and trafficking business run by
    the North Korean Government or apparently run by the North
    Korean Government poses a threat to international security.
        While it is certainly true that in the past we have seen
    governments function like crime syndicates--the Taliban
    Government in Afghanistan comes to mind--the critical
    difference in this case is evidence that the North Korean
    regime is using proceeds from criminal activities to fund a
    robust weapons program that already has a nuclear capability.
        The two North Korean defectors have never appeared before
    Congress until today. Their testimony will establish that North
    Korea produces poppy and manufactures heroin for sale abroad.
    The proceeds from these sales, as well as the proceeds from
    sales of military weapons, fund North Korea's large military
    and nuclear program that pose a growing threat to international
    security.
        The North Korean military has over 1 million active troops
    and approximately 4.7 million reserves. By comparison, South
    Korea has approximately 686,000 active troops and approximately
    4.5 million reserves. The United States has roughly 38,000
    troops in South Korea. North Korea also has over 200 Scud
    missiles and 2,500 rocket launchers, many of which can carry
    chemical weapons.
        Given the nexus between its state-level drug production and
    trafficking business and its weapons programs, North Korea is
    essentially a crime syndicate with nuclear bombs or, as one
    commentator put it, ``It is a mafia masquerading as a
    government.''
        The role of a government is to protect its citizens from
    criminals, but in the case of North Korea, it appears that the
    government is the criminal. Since 1976, there have been over 50
    documented incidents, many involving the arrest or detention of
    North Korean diplomats directly linking the North Korean
    Government to drug production and trafficking.
        And I would like to, at this point, refer to the poster we
    have over there by the video screen, and I would like to
    include that list in the record.\1\ The poster highlights some
    of these activities. Without objection, I ask that this list,
    prepared by the Congressional Research Service be included in
    the record.
    ---------------------------------------------------------------------------
        \1\ The list entitled ``North Korean Provocations, 1958-2003,''
    submitted for the record by Senator Fitzgerald appears in the Appendix
    on page 33.
    ---------------------------------------------------------------------------
        There even have been reports, which one of our witnesses
    will confirm today, that North Korea was limiting food crop
    production in favor of poppy crop production. In North Korea,
    it appears that the government is the drug lord.
        The world witnessed a graphic example of North Korea's role
    in drug trafficking last month when, on April 20, Australian
    police arrested 26 crew members of a North Korean ship called
    Pong Su after being spotted trying to off-load approximately
    $80 million of heroin to a fishing boat off the coast of
    Australia. The Australian Navy and police boats forced the
    4,000-ton Pong Su into Sydney Harbor, after it was chased for 4
    days and several hundred miles along Australia's East Coast.
        Australian officials have now identified one of the crew as
    a senior member of the North Korean Workers Party and continue
    to investigate additional links between the captured freighter
    and the North Korean Government.
        I would now like to ask staff to play a news video produced
    by ONE News of New Zealand regarding the capture of the Pong
    Su.
        [Video played.]
        Senator Fitzgerald. The Australian incident poses grave
    threats and challenges to the Northeast Asia region, as well as
    to the international community, including the United States.
    Therefore, one question we will explore today is whether North
    Korean is exporting deadly drugs so it can build even deadlier
    weapons of mass destruction.
        Since Senator Akaka is not here yet--we will turn to the
    panelists. And if Senator Akaka arrives imminently, we may
    break to allow him to give his opening statement. We are
    pleased to have with us two senior officials from the
    Department of Defense and the Department of State.
        Andre Hollis serves as the deputy assistant secretary of
    Defense for Counternarcotics. In this capacity, Mr. Hollis
    develops the Defense Department's counternarcotics policy,
    manages over 100 programs that support counternarcotics efforts
    in the United States and abroad and oversees a budget in excess
    of $800 million.
        William Bach currently serves as the Director of the Office
    of Asia, Africa and Europe for the State Departments' Bureau of
    International Narcotics and Law Enforcement Affairs. He has
    held this position since 2001 and manages a budget of over $200
    million.
        Thank you both for being here today. In the interest of
    time, we ask that you summarize your statements, if possible,
    and we can simply take your longer statements and include them
    in the record.
        Mr. Hollis, would you like to proceed with your opening
    statement?

    TESTIMONY OF ANDRE D. HOLLIS,\1\ DEPUTY ASSISTANT SECRETARY FOR
              COUNTERNARCOTICS, U.S. DEPARTMENT OF DEFENSE

        Mr. Hollis. Thank you, Mr. Chairman, and thank you for the
    opportunity to speak before you this afternoon about our
    concerns----
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Mr. Hollis appears in the Appendix on
    page 36.
    ---------------------------------------------------------------------------
        Senator Fitzgerald. Could you pull the microphone a little
    bit closer to your face, please. Thank you.
        Mr. Hollis. Thank you, again, sir. I am pleased to appear
    before you to discuss concerns about North Korea's involvement
    in illicit drug trafficking.
        Over the past several years, as you noticed this afternoon,
    there have been numerous reports of drug seizures linked to
    North Korea, primarily of methamphetamine and heroin destined
    for Japan, Taiwan, China, Russia, and elsewhere.
        The recent seizure, 50 kilograms of heroin transported by
    the Pong Su, again, as you mentioned, demonstrates that
    elements with North Korea are extending their illicit
    activities south into Australian waters. This incident
    underscores the need for multilateral, multi-agency efforts to
    detect, monitor, and interdict North Korean drug trafficking.
        I would like to summarize a point that you very well
    mentioned, sir, and that is that the Pong Su seizure does, in
    fact, heighten our concern that North Korean officials may be
    using illicit trading activities to produce much needed hard
    currency.
        It is clear that any illicit trafficking involving North
    Korea is a potential threat to the security of our friends and
    allies in the region and to the United States. The Australian
    Government, most notably its foreign minister, have called upon
    multilateral efforts to work to combat drug smuggling from
    North Korea.
        We support that call, and we stand ready, as part of the
    interagency of the U.S. Government, to work with our friends
    and allies in the region. To that end, officials within the
    Department of Defense, State, Justice, the Drug Enforcement
    Administration, and the intelligence community are reviewing
    what types of assistance that we are authorized to provide and
    how to provide that should our friends and allies in the region
    request it.
        Practically speaking, I would like to summarize for you
    some of the authorities that the Department of Defense has
    given to provide support to our partner nations in terms of
    countertrafficking in drugs.
        First and foremost, we are authorized to provide support to
    law enforcement agencies and military personnel with
    counterdrug responsibilities. We provide training, we upgrade
    equipment, we maintain a series of intelligence initiatives,
    both in terms of collection analysis and dissemination of
    intelligence among law enforcement, military and intelligence
    services, command and control systems that allow our allies and
    friends to communicate that information real time, as well as
    the ability to assist them with minor infrastructure.
        The Department and our agency counterparts are fully
    capable and ready to support regional partners with training,
    facilities, intelligence, and organizational experience to
    counter the threat of illicit trafficking that may be coming
    from North Korea.
        The Department of Defense with, again, our interagency
    partners, have a long history of bringing together interagency
    capabilities and personnel to assist and to fuse our efforts to
    fight drug trafficking. The interagency drug task forces that
    exist in both Florida, and Alameda, California, and the
    Congress has generously funded are wonderful examples of the
    interagency fusion that might be appropriate for East Asia.
        These task forces bring together law enforcement,
    intelligence and military services to work jointly with partner
    nations to battle the trafficking of a variety of substances,
    including drugs. In particular, sir, this approach has been
    very good at dealing with the trafficking threat in Southeast
    Asia, Thailand, and Malaysia, in particular.
        In sum, sir, we are working closely with our interagency
    allies. I know that the State Department is talking to our
    friends and allies in the region about what we might be able to
    do in assistance, and as we continue to work to that end, we
    will, of course, continue to consult with the Congress.
        I look forward to accepting and answering all of your
    questions.
        Senator Fitzerald. Thank you, Mr. Hollis. Mr. Bach.

    TESTIMONY OF WILLIAM BACH,\1\ DIRECTOR, OFFICE OF ASIA, AFRICA,
         AND EUROPE, BUREAU OF INTERNATIONAL NARCOTICS AND LAW
             ENFORCEMENT AFFAIRS, U.S. DEPARTMENT OF STATE

        Mr. Bach. Good afternoon, Mr. Chairman.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Mr. Bach appears in the Appendix on
    page 39.
    ---------------------------------------------------------------------------
        Thanks for this opportunity to testify before the
    Subcommittee on the subject of narcotics trafficking and other
    criminal activity with a connection to the Democratic People's
    Republic of Korea. My oral testimony will summarize the written
    report that you already have.
        For some 30 years, officials of the DPRK and other North
    Koreans have been apprehended for trafficking in narcotics and
    other criminal activity, including passing counterfeit U.S.
    notes. Since 1976, there have been at least 50 arrests and drug
    seizures involving North Koreans in more than 20 countries
    around the world. More recently, there have been very clear
    indications, especially from a series of methamphetamine
    seizures in Japan, that North Koreans traffic in, and probably
    manufacture, methamphetamine drugs.
        Given the tight controls in place throughout North Korea
    and the continuing seizures of amphetamines and heroin
    suspected of originating from North Korea, one must ask how any
    entity, other than the state, could be responsible for this
    high-volume drug trafficking.
        Much of what we know about North Korean drug trafficking
    comes from drug seizures and apprehensions abroad. A typical
    incident of drug trafficking in the mid 1970's, when
    trafficking by North Koreans first emerged as a significant
    problem, would involve a North Korea employee of a diplomatic
    mission or a state enterprise would be apprehended with illicit
    drugs by police or border crossing officials.
        In a very recent case, noted by this Subcommittee already,
    Australian Federal police reported that on the night of April
    16 of this year, police observed the North Korean vessel Pong
    Su relatively close to the shore off the coast of Victoria. The
    police followed two ethnic Chinese suspects on the shore as
    they left the beach and headed for a nearby hotel. The next
    morning, the two suspects were arrested with 50 kilograms of
    heroin. The ethnic Chinese suspects, and the captain and crew
    of the Pong Su have been charged with narcotics trafficking and
    a protest has been lodged with Pyongyang by Canberra.
        By 1995, North Korea had begun importing significant
    quantities of ephedrine, the main input for methamphetamine
    production. At about this time, methamphetamine was emerging as
    a drug of choice all over Asia. During the next several years,
    the Japanese seized numerous illicit shipments of
    methamphetamine that they believed originated in North Korea,
    and most of these seizures, traffickers and North Korean ships,
    rendezvoused at sea in North Korean territorial waters for
    transfer of the narcotics to the Japanese traffickers' vessels.
    Taiwanese authorities also seized several shipments of
    methamphetamine and heroin that had been transferred to the
    traffickers' ships from North Korean vessels.
        In both the cases of Japan and Taiwan, large quantities of
    drugs were transferred from North Korean state-owned ships, on
    occasion from North Korean naval ships, to the traffickers'
    ships.
        The U.S. Secret Service Counterfeit Division is aware of
    numerous cases of counterfeiting with North Korean connections.
    Typical of such cases was one reported in Macao in 1994, when
    North Korean trading company executives, who carried diplomatic
    passports, were arrested for depositing $250,000 in counterfeit
    notes in a Macao bank. There are numerous other counterfeiting
    incidents with links to Macao banks, North Korea and North
    Korean diplomats.
        North Korean traffickers have links to Russian, Japanese,
    Taiwanese, China, Hong Kong, and Thai organized crime elements.
    In all cases, the relationships began as one of wholesaler with
    retailer. North Koreans with large quantities of drugs to sell
    have sold them to criminal groups with the retail networks
    necessary to move the drugs to consumers. This wholesaler/
    retailer relationship seems to have evolved in recent years.
    Incidents such as the Pong Su arrest, for example, demonstrate
    that North Korean traffickers are becoming involved farther
    down the trafficking chain.
        Mr. Chairman, I thank you and the Members of the
    Subcommittee for your attention, and I would be pleased to
    answer any of your questions.
        Senator Fitzgerald. We are going to have to take a brief
    recess because a vote has begun. If you gentlemen could be kind
    enough to wait for me to return, and perhaps Senator Akaka will
    come here after the vote, it will be just a few more minutes,
    and we will be right back. We will ask our questions, and then
    we will excuse you.
        Thank you very much for your testimony. We will take a
    brief recess.
        [Recess.]
        Senator Fitzgerald. We will resume the Subcommittee hearing
    now. I appreciate your patience, and sorry to keep you waiting
    as I voted.
        Senator Akaka, the Ranking Member, has joined us, and,
    Senator Akaka, I would like to give you the opportunity to make
    your opening statement. Thank you for being here.

                   OPENING STATEMENT OF SENATOR AKAKA

        Senator Akaka. Thank you very much, Mr. Chairman. I
    appreciate what you are doing with the Subcommittee and your
    leadership in this area. I want to ask that my full statement
    be placed in the record, and I will make a brief statement.
        Senator Fitzgerald. Without objection.
        [The prepared opening statement of Senator Akaka follows:]

                  PREPARED OPENING STATEMENT OF SENATOR AKAKA

        Mr. Chairman, I appreciate the opportunity to be here this
    afternoon for the first hearing of this Subcommittee under your
    leadership. I am also pleased that the first hearing is on an issue
    relating to international security. Our Committee and this Subcommittee
    have a long history of engagement on these issues, and I am glad you
    are continuing both this tradition and this responsibility.
        I share your concern over the situation in North Korea. We do not
    need to invade North Korea to find proof of its involvement in weapons
    and drug trafficking.
        This hearing highlights a critical issue in international efforts
    to control the spread of weapons of mass destruction: The emergence of
    new suppliers of WMD technology and expertise. North Korea, for
    example, has exported ballistic missiles and related technology to
    Egypt, Syria, Iran, Libya, and Pakistan. Missile exports are a major
    source of hard currency for North Korea. There is little sign North
    Korea will end its exports unless under either a positive or negative
    incentive. North Korea is also capable of producing chemical and
    biological weapons although there has been no evidence to date that
    North Korea has exported either of these types of weapons or the
    technology to produce them. We now fear that North Korea's nuclear
    weapons program will lead it to export both technology and plutonium to
    other states.
        I commend recent efforts by the administration to engage North
    Korea in a dialogue on these issues. I wish that this engagement had
    occurred sooner and had built on the momentum left from the previous
    administration which seemed close to achieving an agreement on halting
    North Korea missile exports.
        We have two policy choices: Either to attempt to negotiate a
    mutually satisfactory solution with North Korea, leading to an
    accommodation, if not acceptance, of an authoritarian regime. The
    second would be to pursue a strategy of isolation and hostility,
    leading eventually to conflict with the North.
        The first approach is repugnant to many because it assumes we make
    peace with the devil. The second might result in a second Korean War. I
    would suggest that negotiation, however, buys time to change North
    Korea from within and, if our negotiations are successful, will end the
    threat of North Korean proliferation.
        I do not know if it is possible to reach an agreement with North
    Korea that will halt--and roll back--its WMD programs. I do know that
    if we do not engage North Korea seriously, we will never know if such
    an agreement could have been reached. I also believe we should pursue
    both bilateral and multilateral negotiations. We should take whichever
    road that offers the promise of ending the North Korean weapons
    program.
        The North Koreans will have to make significant concessions--and we
    will too. That is the price of any successful set of negotiations. And
    benefits must be mutual.
        I look forward to our witnesses today. I hope you can clarify for
    me our options in dealing with North Korea even as they detail our
    concerns about the North's proliferation and criminal activities. Thank
    you, Mr. Chairman for having this hearing this afternoon.

        Senator Akaka. Mr. Chairman, I appreciate the opportunity
    to be here with you this afternoon for the first hearing of
    this Subcommittee under your leadership in this room.
        I am also pleased that the first hearing is on an issue
    relating to international security. Our Committee and this
    Subcommittee has a long history of engagement on these types of
    issues, and I am glad you are continuing, with both this
    tradition and this responsibility.
        I share your concern over the situation in North Korea. We
    do need to invade North Korea to find proof of its involvement
    in weapons and drug trafficking. We have two choices, either to
    attempt to negotiate a mutually satisfactory solution with
    North Korea, leading to an accommodation, if not acceptance, of
    an authoritarian regime. The second would be to pursue a
    strategy of isolation and hostility, leading eventually to
    conflict with the North.
        The first approach is repugnant to many because it assumes
    we make peace with the devil. The second might result in a
    second Korean war.
        I would suggest that negotiation, however, buys time to
    change North Korea from within, and if our negotiations are
    successful, will end the threat of North Korean proliferation.
    I do not know if it is possible to reach an agreement with
    North Korea that will halt or roll back its WMD programs. I do
    know that if we do not engage North Korea seriously, we will
    never know if such an agreement could have been reached.
        I also believe we should pursue both bilateral and
    multilateral negotiations. We should take whichever road that
    offers the promise of ending North Korea's weapons program. The
    North Koreans will have to make significant concessions, and we
    will too. That is the price of any successful set of
    negotiations, and benefits must be mutual.
        I look forward to our witnesses today, Mr. Chairman. I hope
    they can clarify, for me, our options in dealing with North
    Korea, even as they detail our concerns about the North's
    proliferation in criminal activities, and I want to thank you,
    Mr. Chairman, very much for having this hearing.
        Senator Fitzgerald. Senator Akaka, thank you very much.
        Mr. Bach, I was wondering if the State Department had any
    information, and I know it is very hard to find, about what
    North Korea earns annually from legitimate exports of
    legitimate products. Do you have any figures or would you know
    how we could get some information on that?
        Mr. Bach. Thank you, Senator.
        No, I do not know the answer to the question, but we can
    certainly get it for you. I do not have even a good estimate, I
    am afraid. That is not my lane, but we can respond to you
    later.
        Senator Fitzgerald. We would appreciate it if you could get
    the estimate, even if it is just an estimate of their revenues.
    I believe we are going to have later testimony today that is
    going to estimate that North Korea earns about $650 million a
    year from the export of legitimate products, but something like
    twice that from the export of drugs and weapons.
        Mr. Bach, clearly, North Korea has been exporting weapons,
    specifically missiles. They were caught red-handed with that
    shipment off the coast of Yemen, which we interdicted, and then
    we allowed them to go forward with that shipment.
        Are there any international laws that they are violating
    when they sell their missiles?
        Mr. Bach. As I understand, that interdiction resulted in
    the ship proceeding towards it destination. I do not know the
    answer, if there were any international laws. I can get back to
    you on that one as well.
        Senator Fitzgerald. But, generally speaking, a country can
    manufacture weapons and sell them.
        Mr. Bach. That is correct.
        Senator Fitzgerald. If they are selling drugs, presumably,
    that would violate some international law, would it not? Or is
    it possible for a country just to be in the business of
    producing and selling drugs, such as heroin?
        Mr. Bach. Certainly, there are licit production of opium
    that take place in different countries, and it is exported
    under controlled circumstances for use in making medicines, but
    in the case of illegally importing or smuggling heroin into a
    country, as happened with the Pong Su, that is definitely
    illegal.
        Senator Fitzgerald. Is there any law that they would be
    violating if they are raising poppy for the production of
    heroin, if they are just doing that domestically? Do you know
    if North Korea is part of any treaty that forbids that?
        Mr. Bach. I do not believe that it is, sir. I think that
    they could grow poppy for the production of opium, which would
    then be used for licit purposes in the production of
    analgesics, but I do not think that heroin is something that
    is--well, it would be legal to do within the country if it were
    only for domestic purposes, I would imagine.
        Senator Fitzgerald. But if they are not signatory to any
    treaty, where they pledged not to export the heroin or the
    poppy, it is possible they are not even violating international
    law?
        Mr. Bach. Until it gets to another country, that is
    probably true, yes, sir.
        Senator Fitzgerald. Mr. Hollis, according to the Central
    Intelligence Agency's report to Congress, North Korea appears
    to be seeking to produce one to two nuclear weapons a year and
    has improved its missile technology. The North Koreans now
    possess weapons capable of reaching the United States, while
    carrying a nuclear weapons-sized payload.
        As the report states, for some time now, North Korea has
    demonstrated a willingness to sell missile systems to other
    states. Are either of you on the panel, Mr. Hollis or Mr. Bach,
    aware to which states has North Korea sold its missile systems
    to in the past, other than Yemen?
        Mr. Hollis. Sir, I will try to stay in my lane of Canon
    narcotics, but I will be happy to take your question back and
    refer that to the appropriate offices within the Department of
    Defense and get you an answer.
        Senator Fitzgerald. We would appreciate that. Thank you.
        Mr. Bach. I subscribe to that answer.
        Senator Fitzgerald. Same with Mr. Bach, OK.
        We have Senator Lautenberg here. I would like to recognize
    Senator Lautenberg, and we can make time for you to make an
    opening statement when you are ready or join the questioning,
    too.
        Senator Lautenberg. Thank you very much, Mr. Chairman. I
    will kind of catch up first. Thank you.
        Senator Fitzgerald. Thank you. Senator Akaka, would you
    have any questions?
        Senator Akaka. Yes, thank you very much, Mr. Chairman.
        I have questions for both of you.
        One witness in our next panel recommends that we work with
    the intelligence, customs, and law enforcement agencies of
    other countries, particularly those neighboring North Korea, to
    crack down on drug shipments. The Chairman has stated the
    problem real well. My question to both of you is are we not
    doing this already, and why is it not working? Mr. Hollis.
        Mr. Hollis. Thank you, Senator. And once again it is an
    honor to be here before you, and I would be happy to answer the
    question from DOD's perspective.
        If I may put it in context, sir, with respect to
    counternarcotics, particularly outside the United States, the
    Department of Defense has some specific responsibilities, and I
    want to set those out so that my answer to you is in the proper
    context.
        First and foremost, the Department shall serve as the lead
    agency for the detection and monitoring of maritime and aerial
    drug trafficking toward the United States. That is not
    necessarily a role and responsibility that is required here.
        Worldwide, however, working in support of the Department of
    State and in support of host nation law enforcement agencies
    with counterdrug responsibilities, we can, once they request,
    provide a variety of forms of support--training, upgrading
    their equipment, intelligence sharing, collection analysis,
    some infrastructure support, and some transportation support.
    All of that is predicated upon the country asking us, through
    the embassy, for that support, and we work with our interagency
    colleagues.
        We do provide a variety of forms of support throughout
    Asia, in particular, in Southeast Asia, and there are other
    agencies within the U.S. Government that do provide support in
    North Asia.
        So what I am trying to say to you, sir, is when the
    countries request support, through the respective embassies,
    the embassies send those requests in, and the appropriate
    agency, as part of the U.S. Government, will provide that
    support, but we stand ready to provide that support.
        Senator Akaka. Mr. Bach.
        Mr. Bach. Yes, Senator. We do have that mandate to help
    countries coordinate their defenses against narcotics. We tend
    to do it in countries where the threat is directed at the
    United States, and we do not know of any incidents where
    narcotics that we think originated from North Korea have come
    to the United States.
        We do help countries in Southeast Asia with their
    counternarcotics programs. We do not have very many programs in
    North Asia, and that is because, in the case of China, we do
    not have a letter of agreement, a treaty, with China to
    cooperate on counternarcotics. In the case of Korea, Japan, and
    Taiwan, those are countries that are rich in resources
    themselves, and they do not need our assistance.
        So the countries that are targeted by the North Koreans,
    particularly, do not seem to qualify, in most cases, for the
    sorts of assistance programs that INL provides.
        Senator Akaka. I take it that China does not permit DEA
    into China.
        Mr. Bach. It actually has just arrived at some sort of an
    agreement where they are permitting DEA to work with the
    Chinese officials on counternarcotics matters. And, in fact,
    DEA does have offices in many of these countries, and that is
    we are deriving quite a bit of our information from very good
    cooperative relationships between law enforcement on our side
    and Japan and Taiwan in particular.
        Senator Akaka. Here is another question to both of you. Do
    you have any evidence that foreign diplomats stationed in North
    Korea are involved in helping North Koreans traffic in drugs?
    Mr. Hollis.
        Mr. Hollis. Sir, I am personally unaware of anything, in
    response to your question. But, again, I would be happy, if you
    would like, to refer that question to the intel community. I am
    sure that, under the appropriate circumstances, they would be
    happy to respond to you.
        Senator Akaka. Thank you. Any comment on that, Mr. Bach?
        Mr. Bach. No, sir.
        Senator Akaka. My other question is, is there any evidence
    that North Korea is not growing poppies, but importing them to
    process into heroin? And if that is so, from where do they
    obtain these raw products?
        Mr. Bach. I can try to answer that, sir. We are not certain
    where they are getting the heroin. We have heard reports, of
    course, that some of the heroin that is being trafficked by
    North Koreans has originated in Southeast Asia, but we have
    also heard that Korean processors of opium into heroin use
    packaging that is made to look as though it comes from
    Southeast Asia, so it could be a ruse.
        As far as attempts made at identification of poppy
    cultivation inside of North Korea, we have, in 1996 and 1999,
    used overhead imagery to try to identify cultivation of poppy,
    and in neither of those cases were we able to identify
    sufficient quantities of what looked like poppy from the
    satellite imagery to identify North Korea as a major producer;
    that is to say, that it has 1,000 hectares under poppy
    cultivation, and that has to do with the fact that we have not
    had a ground-truthing survey in conjunction with the aerial
    survey.
        Typically, you have to have people on the ground talking to
    farmers, getting more information for the analysis that then
    can be used to establish the poppy signature by the overhead
    imagery. So we do not have that kind of information.
        Senator Akaka. Thank you very much, Mr. Chairman.
        Senator Fitzgerald. Senator Lautenberg, I do not know
    whether you would care to make an opening statement at this
    time?

                OPENING STATEMENT OF SENATOR LAUTENBERG

        Senator Lautenberg. Mr. Chairman, I appreciate the
    opportunity that we have to try to decipher where it is we want
    to go with our policy with North Korea. Do we have a gain or a
    loss by bringing the two things together? And that is to try to
    have a counterdrug effort and to be talking about that, when it
    is hard to evaluate, which is the more terrible, more evil
    thing, and that is to talk about whether or not weapons of mass
    destruction are being produced, ballistic missiles, etc., in
    North Korea. That hostility is obvious. The other is kind of
    sub rosa, as it is throughout the world, in terms of drug
    trafficking.
        I would ask you, Mr. Hollis, whether, to start this, if I
    may, Mr. Chairman--and that is are we pursuing our drug
    enforcement policy with the same vigor, with the same
    equipment, the same knowledge that we do in other parts of the
    world, like we do in Colombia, let us say, or we do in other
    places or do domestically?
        Do we use our satellite technology to try and find out
    whether these things, to Senator Akaka's question, is there
    poppy cultivation in North Korea? And in a way I am not sure
    that that is so relevant because if you want to get that stuff,
    it is available all over the world, but just to try to
    determine how much effort we are putting into this.
        Mr. Hollis. Thank you, Senator. That is a very good
    question, and it is a question that a lot of bright people,
    with a lot of pay grades even higher than my own, are working
    on as we speak.
        The question is to what extent, if I understand correctly,
    to what extent is the level of effort that we, as the
    international community, execute in counterdrug, say, in
    Northeast Asia? Should it be greater, should it be less, in
    comparison to, say, our efforts with our friends in----
        Senator Lautenberg. Southeast Asia or----
        Mr. Hollis. Yes, sir. There are a lot of people who are
    working on that question and who are thinking about that
    question. I think it is also fair to say that it has not been a
    question that a lot of people have pondered in the recent past.
        Senator Lautenberg. But we know, directly, that there is a
    flow, that there is a lot of drug activity, that the ship, the
    Pong Su, etc., but we have other evidence as well, as I
    understand it, and do we see a direct flow from there to here,
    into the United States?
        Mr. Bach shakes his head, no, and that is interesting
    because that is where I want to go. I would like to know, Mr.
    Chairman, whether or not this is a--drugs invading our society
    are always a serious threat, but is this of the magnitude that
    we want to put the law enforcement effort into it? It is always
    more difficult when we have no relationship with the company.
    Again, I used Colombia before as an example. We have got full-
    fledged diplomatic and functional relations going on there.
        So is this of the magnitude that it ought to take us off
    the topic, the principal topic, or will this, as a matter of
    fact, negate some of the work that we are trying obviously to
    do, to have a dialogue? At least I speak for my own vantage
    point, I would like to see a dialogue going on there. I do not
    think we are of the capability or of the mood to do an Iraq
    over there and invade the country to try and quell their
    capability for developing weapons of mass destruction.
        Mr. Bach, do you want to comment on that?
        Mr. Bach. Yes, Senator. I wanted to comment on my shake of
    the head earlier, which is that we do not have any evidence
    that the North Korean drugs are coming to the United States.
    There have been no incidents so far of drugs we can trace to
    North Korean traffickers coming to the United States.
        In terms of the amount of effort that we are placing in the
    countries that are most targeted by the North Koreans--Taiwan
    and Japan--we are cooperating with those countries in terms of
    a lot of various economic programs, of course, and certainly
    law enforcement and coordination of law enforcement efforts,
    from the point of view of DEA, for example, the Japanese, those
    relations are very close.
        In terms of the kind of assistance that we are giving to
    the Andean Ridge in Colombia, for example, it is not analogous
    in the case of Japan. They have about 2.2 million users of
    amphetamine-type substances in Japan. They are dealing with
    them domestically. They do not need our assistance in doing
    that. We are trying to give them whatever assistance we can, in
    terms of providing a platform for coordination with other
    countries to work together in counternarcotics, but we are not
    giving them the kind of assistance programs that we have for
    countries that do not have the level of resources that Japan
    and Taiwan have.
        I think that answers----
        Senator Lautenberg. Yes. So we are doing it for the well-
    being of our friends and allies, and that is OK.
        The question is, going directly to the subject at hand, and
    that is North Korea. We have got a lot to worry about we think
    there from all kinds of things, and whether the scourge is the
    threat from nuclear or ballistic missiles or whether it is from
    a drug invasion, which can, in many ways, be very effective in
    debilitating a society. But, if not, should you both be at the
    table at the same time, I ask, Mr. Chairman, with all due
    respect? Is one counter to the other in any way?
        Mr. Hollis. Senator, if I may offer just a quick comment,
    sir, and it is more a question that really is worthy of
    discussion and thought.
        If, working with our friends and allies, we are able to
    detect and monitor the movement of drugs by air, by land, and
    by sea, what else will you see?
        Senator Lautenberg. Well, we should do it. Yes, we should
    do it and take that information. But just so we understand
    here, for our own use and legislative purpose, is it the kind
    of thing because I, frankly, my focus would be much more on the
    build-up of weapons, and the antagonisms that are going there,
    and where I worry a lot about, South Korea and other places
    near North Korea, and how much effort we should put into the
    North Korean threat and not diverting it with a lot of other
    things.
        And I am content, if you both kind of confirm the fact that
    we are doing this for our friends and allies, and providing
    part of an intelligence or whatever network that we can to stop
    the drug flow, but the question about what should we do to try
    and get a relationship going with North Korea that takes down
    the weapons threat and offers us a chance to have some kind of
    a dialogue, but that can have us not pointing guns at one
    another, but pointing hands at one another; Mr. Bach, what is
    the State Department's inside view, confidentially, among this
    group?
        Mr. Bach. Thanks, Senator.
        I think we are very eager to get into a relationship with
    North Korea, where they stop doing what they are doing with
    missile exports, and drugs and development of nuclear weapons.
    We would like very much if the North Koreans would behave more
    reasonably in a lot of different areas, and we are trying to
    work together with our allies and friends to make sure that we
    do together what we can to bring that sort of attitude to the
    North Korean leadership.
        And it is very difficult, of course, to reach them, but we
    are trying, as we can, with counternarcotics policies and law
    enforcement cooperation to bring about that mind-set in the
    North Korean leadership. I think that is the most helpful thing
    that we can do. I do not think of opposition to narcotics
    trafficking by North Korean vessels as a diversion or a
    distraction from the main game. I think it is all part of the
    same fabric of rather irrational behavior on the part of the
    North Korean Government.
        Senator Lautenberg. Is it thought that drug trafficking is
    part of the North Korean national policy?
        Mr. Bach. We cannot say for sure, definitively, that it is
    part of the state policy. We can only surmise that it would be
    very difficult for the state not to be involved because it
    seems to have totalitarian control over much of the enterprise
    that takes place in the country, much of the agriculture,
    certainly much of the trading, and many of the people that have
    been apprehended as trafficking in drugs or counterfeit bills
    have had diplomatic passports, so we think that there must be
    some association, although we cannot say that it is guided by
    the state.
        Senator Lautenberg. I thank the gentlemen. Thanks, Mr.
    Chairman.
        Senator Fitzgerald. Thank you, Senator Lautenberg.
        And I would like to thank Mr. Hollis and Mr. Bach for their
    testimony today. We appreciate your coming up to the Senate to
    testify.
        And with that, I would like to dismiss the first panel and
    invite the second panel to come up. We have Dr. Robert
    Gallucci, the dean of Georgetown University Walsh School of
    Foreign Service; Nick Eberstadt, the Henry Wendt Scholar in
    Political Economy at the American Enterprise Institute; Larry
    Wortzel, vice president and director of the Heritage
    Foundation's Davis Institute for International Policy Studies.
        [Pause.]
        Senator Fitzgerald. Well, thank you very much. Thank you
    all for being here.
        Dr. Eberstadt, I would invite you to begin first with your
    testimony, and then we will proceed from my left to right.

    TESTIMONY OF NICHOLAS EBERSTADT, Ph.D.,\1\ AMERICAN ENTERPRISE
                               INSTITUTE

        Mr. Eberstadt. Mr. Chairman, distinguished Members of the
    Subcommittee, and esteemed colleagues and guests. It is always
    a pleasure and an honor. With your permission, I will submit
    written record later.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Mr. Eberstadt appears in the Appendix
    on page 45.
    ---------------------------------------------------------------------------
        I thought I would begin with a little bit of background
    research, since I have no security clearances, and thus only
    know what I read in the newspapers about DPRK merchandise in
    counterfeiting weapons and drugs.
        If we can move to the first slide, please.
        What we have here is some of my homework. I have tried to
    reconstruct North Korean trade patterns according to what we
    call ``mirror statistics,'' which is to say North Korea's trade
    partners' reports about purchases and sales of merchandise by
    the DPRK. These are highly incomplete and quite limited, but
    they provide some insight I think that may be useful.
        This Figure 1 shows total reported North Korean export
    revenues over the period from 1989 to 2001. Of course, then
    went down after the end of the Soviet Union. The point to take
    home here I think is that North Korea, as a state, has
    essentially no legitimate, legal visible means of support.
        In the year 2001, the DPRK reportedly, through these data,
    earned $750 million in total revenue through nonmilitary
    merchandise sales. To put that amount in perspective, it would
    be less than $40 per capita for the country as a whole--an
    absolutely extraordinarily low level for an urbanized literate
    population.
        Senator Fitzgerald. What were they exporting back in the
    late 1990's that had them at a much higher figure?
        Mr. Eberstadt. They had export arrangements, whereby the
    Soviet Union was obliged to purchase their supplies--textiles,
    magnesite, cement, steel, other products of that sort--but
    those were, so to speak, forced purchases.
        Senator Fitzgerald. So their buyer evaporated with the
    demise of----
        Mr. Eberstadt. Their buyer evaporated, and there were no
    new markets for these products.
        Senator Fitzgerald. Now, is the $650 million or $700
    million in legitimate exports that they now have mainly
    textiles?
        Mr. Eberstadt. It would be textiles, gold, steel, cement,
    some agricultural products, including sea products, fish,
    seaweed, mushrooms, and the like.
        Senator Fitzgerald. Thank you.
        Mr. Eberstadt. The next slide, Figure 2, will show North
    Korea's reported merchandise imports, what it is reported as
    buying from other parts of the world. That has gone up since
    1998 rather significantly to a little bit over $2 billion
    reported.
        And if we see the following slide, Figure 3, that will show
    the discrepancy between what North Korea is reported as
    earning, legitimately, and what North Korea has reported as
    buying, and it is a big gap. The gap was down to about $600
    million in the late 1990's, but has risen very substantially in
    the early 2000's, above $1,200 million, about $100 million a
    month.
        This is the overall merchandise trade deficit. Part of that
    discrepancy is due to China's subsidy of North Korea. And in
    the final slide, Figure 4, we take China out of the equation,
    and we see the unexplained excess of purchases over imports
    going from under $100 million in 1997 up to above $800 million
    in 2001.
        This, if you will, invisible means of support for the DPRK
    state includes foreign aid from other governments, including
    our own; Japanese remittances from pro-DPRK groups in Japan;
    South Korean tourism payments; secret South Korean official
    payments, including the payments made to secure the Pyongyang
    Summit of 2000; but also drugs, counterfeiting, and arms. We
    cannot parse these out from these particular numbers, but we
    can see that it has increased very substantially over the last
    number of years.
        May I make a few additional points, Senator?
        Senator Fitzgerald. Yes.
        Mr. Eberstadt. I would make five additional points, if I
    could, very quickly.
        First, I think it is reasonable, from what we read in the
    newspapers, to conclude that drug and counterfeiting traffic
    from the DPRK is a state business, not a rogue units business
    or some private enterprise. There is essentially no private
    enterprise in the DPRK. Ask yourself if it would be possible
    for individual farmers to cultivate thousands of hectares of
    opium, poppies, or to establish labs for methamphetamine
    production. The question, I think, answers itself.
        Second, drug and counterfeiting is part and parcel of North
    Korean diplomacy, not an aberration, and we can see this by
    looking back as far as the 1970's. In 1976, the Scandinavians
    expelled North Korean diplomats for trafficking drugs, for
    being caught trafficking drugs. Why did it take them until 1976
    to catch them? Because they did not establish relations with
    Pyongyang until 1973.
        Similarly, why did it take Venezuela until 1977 to catch
    North Korean diplomats trafficking drugs? Because Venezuela and
    North Korea did not establish relations until 1974. You can go
    on down the list.
        Third, drug and counterfeiting trade is entirely consistent
    with the official DPRK view of its legal and treaty
    obligations, which is to say it is entirely opportunistic.
    Pyongyang's is a predatory approach, and we see this in drugs
    and counterfeiting of other countries' currencies.
        Fourth, the DPRK, as a government, positively prefers, I
    think, drug and counterfeiting business to other peaceful legal
    means of merchandise trade. Again and again, the DPRK has
    indicated that it views ordinary, peaceable commercial
    merchandising as subversive of the authority of its state. Drug
    and counterfeiting is not subversive of its authority, which is
    to say drug and counterfeiting are part of the strategy for
    state survival of the DPRK.
        Fifth, and finally, if we can believe news stories, the
    DPRK's drug and counterfeiting businesses are centralized
    through something called Bureau No. 39 of the Workers Party of
    the DPRK. This is controlled by the highest authorities of the
    state. That would correspondingly suggest that revenues entered
    into through Unit No. 39 are also applied to the state's top
    priorities. It is no secret that the DPRK enshrines ``military
    first'' politics as its very top priority of state. Thus, it is
    hardly wild to suggest that narcotics and counterfeiting may
    directly be contributing to the WMD buildup that is threatening
    the United States and her allies today.
        Thank you, sir.
        Senator Fitzgerald. Thank you very much, Dr. Eberstadt. Dr.
    Wortzel.

      TESTIMONY OF LARRY M. WORTZEL, Ph.D.,\1\ HERITAGE FOUNDATION

        Mr. Wortzel. Mr. Chairman, distinguished Members of the
    Subcommittee, thank you very much for the opportunity to
    testify today.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Mr. Wortzel appears in the Appendix
    on page 50.
    ---------------------------------------------------------------------------
        North Korea's exports, from legitimate business in 2001,
    this is according to the April 23, 2003, Wall Street Journal,
    was about $650 million.
        The income to Pyongyang from illegal drugs in the same year
    was between $500 million and a billion dollars. Missile sales
    earned Pyongyang about $560 million in 2001. North Korea
    produces somewhere between 30 and 44 tons of opium a year,
    according to testimony by the U.S. Forces Korea commander, and
    the Guardian of England, on January 20, 2003, puts North Korean
    counterfeiting profits at somewhere between $15 million and
    $100 million a year--they say $100 million last year.
        So, if you want to put economic pressure on the Government
    of North Korea, if you do not want a military lever only, you
    begin to take care of all of this other illegal trade. That is
    one way to do it. The Kim Jong-il regime resembles more a cult-
    based, family-run criminal enterprise than a government.
        And according to a Congressional Research Service 1999
    report, North Korea seems to support its diplomatic presence
    overseas, and its intelligence activities around the world,
    through these illegal drug sales and counterfeiting.
        North Korean diplomats, workers, and officials have been
    caught selling opiates, including heroin, as well as
    amphetamines and date-rape drugs in Japan, China, Russia,
    Taiwan, Egypt, the Czech Republic, Bulgaria, and South Korea.
    The State Department, however, in its 2003 International
    Narcotics Strategy Control Report, could provide no conclusive
    evidence of illicit opium production in North Korea. Well, I
    just am a little skeptical of that conclusion.
        Now, Senator Lautenberg is no longer here, but I think it
    is important for us to remember that the same network of North
    Korean officials that distribute those drugs and distribute
    that opium could distribute nuclear materials, and that is not
    far off what Li Gun said to Assistant Secretary of State Kelly,
    when he met him in Beijing, as sort of an offhand threat. I
    think we have to take care of this, not as perhaps the priority
    of the U.S. Government, but it must be a priority.
        I believe that we have to put pressure on North Korea, and
    countries around it, to watch North Korean diplomats, military
    and government officials who transport and sell drugs, and even
    a place like China is likely to help with that.
        North Korea has also exported significant ballistic
    missile-related equipment, parts, materials, and technical
    expertise to South America, Africa, the Middle East, South
    Asia, and North Africa. The entire Pakistani program is
    probably, the late, more long-range Pakistani program, their
    Ghauri system, is all North Korean Nodong-based. That earns
    them quite a bit of money.
        India, in 1998, stopped and detained a North Korean ship at
    Kandia that contained 148 crates of blueprints, machinery and
    parts for ballistic missiles on the way to Pakistan from North
    Korea.
        Now, there has been talk of an air and sea quarantine of
    North Korea as an economic measure. I would say to you that,
    first of all, a quarantine is an act of war. The ship that was
    intercepted on the way to Yemen was intercepted pursuant to
    international law under United Nations sanctions against
    Afghanistan.
        Now, if we were able to do that and begin to get aircraft
    and ships and check them, we still have the problem of whether
    Russia and China would cooperate because North Korea could just
    as well ship those things through China or Russia, and China
    certainly facilitated all of North Korea's help to Pakistan. So
    this is a diplomatic problem, and it has to be solved, I think,
    through diplomatic means.
        I think that there are measures we should take to address
    these things. I think U.S. diplomats should be putting pressure
    on the intelligence, customs and law enforcement agencies of
    other countries and working with them to crack down on North
    Korean drug and counterfeit money shipments.
        They should stress that North Korea's drug trade is not an
    independent operation, but it is controlled by the Kim Jong-il
    regime.
        Sponsoring governments should ensure that their own
    embassies are actively not helping move these things back and
    forth. That is another diplomatic lever.
        Just as we have in the war on terror and in the war on
    drugs, we can work with other international agencies and
    foreign governments to crack down on financial institutions
    overseas that support North Korea's criminal activities.
        Now, Japan has $240 million in legal trade with North
    Korea. Japan could take action there, if North Korea persists
    in its illegal trade.
        I think we still need to maintain a very strong military
    presence overseas and that we need to be prepared to fight if
    the North Koreans start a war, and I think we need to get
    ballistic missile defenses deployed in the region just as
    quickly as we can because of that military threat.
        Finally, I think that when we do talk to North Korea, and I
    think we should, it is absolutely imperative that it be done in
    a multilateral context. We cannot and should not isolate our
    ally, South Korea.
        Economic assistance to North Korea should be predicated on
    the verifiable end to its nuclear programs.
        Thank you, Mr. Chairman, Senator Akaka.
        Senator Fitzgerald. Dr. Gallucci.

         TESTIMONY OF ROBERT L. GALLUCCI, Ph.D.,\1\ GEORGETOWN
               UNIVERSITY WALSH SCHOOL OF FOREIGN SERVICE

        Mr. Gallucci. Thank you, Mr. Chairman. Thank you for the
    opportunity to appear before the Subcommittee today, and with
    your permission, Mr. Chairman, I will submit some comments
    formally for the record.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Mr. Gallucci appears in the Appendix
    on page 69.
    ---------------------------------------------------------------------------
        Senator Fitzgerald. Without objection.
        Mr. Gallucci. I understand the subject today, Mr. Chairman,
    is the connection between the drug and counterfeiting activity
    of North Korea, illicit drug trade and counterfeiting, and
    weapons of mass destruction. It would seem to me a good place
    to start is by saying that, independent of any connection
    between that illicit trade and weapons of mass destruction, it
    would be a good idea for the United States and the
    international community to do what it could to interdict that
    trade. That, just on the face of it, would be a valuable
    objective.
        That said, though, going to the connection, this is a
    source, as other witnesses have pointed out, of hard currency,
    and apparently a significant source, and as such, since money
    is fungible, these funds, undoubtedly, can be used to support
    the North Korean military capability, including its ballistic
    missile and nuclear weapons program and other weapons of mass
    destruction.
        So that if you needed an additional reason, the connection
    to the threat posed by these weapons of mass destruction to the
    United States and its allies, particularly South Korea and
    Japan, would be one such.
        However, it would seem to me the reverse, turning the
    argument about, is not such a good idea. It does not seem to
    make sense to offer the proposition that a good way to go about
    stopping North Korea's nuclear weapons program, for example, is
    by stopping or interdicting illicit drug and counterfeiting
    activity.
        It seems to me that the programs of North Korea are a very
    high value to it in weapons of mass destruction, particularly
    the nuclear weapons program, and if they value their fissile
    material production, which now comes from existing spent fuel,
    fuel that is being irradiated, from which plutonium can be
    extracted, and an uranium enrichment program which will produce
    enriched uranium, if funds are needed for these programs, they
    will be found.
        They may be found by extracting the funds from those funds
    which are now used to support a very large conventional
    military establishment. They may be found by the regime making
    very brutal tradeoffs with requirements in the civilian sector.
    So I do not see the relative cost of these programs, as
    compared to other areas where they may be able to find funding,
    to be such as to suggest that this interdiction of drugs and
    counterfeiting would have the impact of preventing these
    programs from going forward.
        My principal concern, therefore, as I listen to arguments
    about the importance of the drug and counterfeiting funds to
    the North Koreans, is that there be a delusion, in a sense,
    that we might be able to prevent the nuclear weapons program
    specifically from proceeding by acting against these programs
    which are, in and of themselves, reprehensible.
        It seems to me that we are now facing essentially the same
    three choices that we faced a decade ago if we wish to stop the
    nuclear weapons program in North Korea and stop that program
    specifically.
        Those three choices were, and are:
        First, the use of force, with all that implies, in terms of
    horrendous casualties, were we to do that;
        Second, to contain North Korea, which is another way of
    saying to accept the North Korean nuclear weapons program, and
    that option or that choice would entail, first, accepting the
    risks, which I think are quite high, that South Korea and Japan
    might eventually follow suit and acquire nuclear weapons. I
    think the risks are quite high that their ballistic missile
    program would eventually be mated with the nuclear weapons
    program, and those missiles would eventually be capable of
    reaching our West Coast;
        And, finally, and I think most significant of all, there is
    the possibility that North Korea might export and sell this
    fissile material to terrorists. I guess I would take issue with
    my colleague, Dr. Wortzel, here. I would think this is the
    overriding priority. I cannot myself think of a more important
    objective for the national security, the homeland security of
    the United States of America, than making sure that fissile
    material does not fall into the hands of terrorist groups.
        So, finally, in the three options, the third one is left,
    and that would be to negotiate with the North Koreans, to see
    at least whether it was possible to negotiate a verifiable end
    to the nuclear weapons program, in other words to test the
    North Koreans, who have said they are prepared to put their
    nuclear weapons program on the table, test that proposition and
    see if we could not negotiate the outcome we want. At least I
    would do this before I would consider opting for either of the
    first two choices.
        There is, in other words, in my view, no free lunch here in
    dealing with the North Korean problem, not by a process of
    containment or not by a processing of hoping the Chinese will
    solve the problem for us. I think the choices are the choices
    we have always had.
        The subject of this hearing, though, the drug trade and the
    counterfeiting, are two concerns which are quite legitimate and
    ought to be pursued, and the only concern I am presenting to
    the Subcommittee today is that we not mistake that effort for
    an effective policy of dealing with the nuclear weapons
    program.
        Thank you, Mr. Chairman.
        Senator Fitzgerald. Dr. Gallucci, thank you very much.
        You started your comments by saying that the world
    community should interdict any illicit drugs that are being
    shipped out of North Korea. How do we go about doing that?
    Given that the North Koreans have a close relationship with
    China, do we try to involve China? Do you think that is
    feasible?
        Mr. Gallucci. Mr. Chairman, we have come to the point, for
    me at least, which I have to fess up that I am no expert in
    drugs or counterfeiting. It does seem to me, though, that at
    least individual states in the international community are
    prepared to cooperate with us, when they think they are dealing
    with ships that have illegal drugs aboard and perhaps
    counterfeit currency.
        I do not know that we can expect that we are going to get
    full cooperation from the Chinese, particularly, in this area.
    And I know one of my colleagues made this point, but if we are
    hoping, for example, to in a sense quarantine the North Koreans
    with a policy of bringing the rest of the international
    community aboard, I think we have to ask ourselves whether the
    Chinese would be willing to engage in a policy which we thought
    was designed to bring the North Koreans to their knees; an
    outcome which the Chinese I do not think really would find as
    favorable as we would. So I think we have to wonder about the
    extent to which they will cooperate with us.
        But as to the real thrust of your question, what the
    legalities of this would be, I really do not know, Mr.
    Chairman. I am sorry.
        Senator Fitzgerald. Dr. Eberstadt, you had some very
    interesting statistics, and you came up with good possible
    explanations for what could be funding the trade deficit that
    we know North Korea has.
        One other possibility is that they could be getting foreign
    aid or they could be borrowing money that would enable them to
    fund that large deficit. Are they getting foreign grants and
    loans of a sizeable amount, that you are aware?
        Mr. Eberstadt. During the period up to 2001, sir, yes, they
    were getting foreign aid, including foreign aid from the U.S.
    Government.
        Senator Fitzgerald. And how much was the United States
    providing?
        Mr. Eberstadt. The Congressional Research Service has
    estimated, between 1995 and 2001, total humanitarian, and heavy
    fuel oil and medical aid from the USG to DPRK was a little bit
    over $1 billion in total. So U.S. foreign aid, certainly, could
    help to explain it.
        Senator Fitzgerald. Are they getting loans from any
    international funds like the World Bank or International
    Monetary Fund?
        Mr. Eberstadt. No, sir. Our restrictions and sanctions on
    the DPRK----
        Senator Fitzgerald. Block that.
        Mr. Eberstadt [continuing]. Impel the United States to vote
    against membership or such loans, and they are not receiving
    them. DPRK does get a small amount of money from the U.N.
    Development Program, but I think that is a few million dollars
    a year.
        Senator Fitzgerald. Dr. Wortzel, Mr. Bach from the State
    Department testified that the State Department had sought
    satellite imagery in 1996 and 1999, I believe he said, and that
    the satellite imagery suggested no evidence of poppy
    cultivation greater than a thousand hectares?
        Mr. Wortzel. He said hectares, that is correct.
        Senator Fitzgerald. Do you believe that?
        Mr. Wortzel. No, I do not, Mr. Chairman. The Congressional
    Research Service, again, in its 1999 report, put poppy
    cultivation at somewhere between 3,000 and 7,000 hectares. And
    I also do not accept----
        Senator Fitzgerald. And what was the basis for them saying
    that?
        Mr. Wortzel. Well, I am sure it was imagery. I mean, it was
    an unclassified report, but they based it on U.S. Government
    surveillance.
        I also do not accept the statement about ground truthing.
    It has been a number of years since I had to, as a military
    intelligence officer, deal with imagery and ground truthing,
    particularly of agricultural things, but it seems to me that
    the signature, whether it is in multispectoral sort of color
    imaging of agricultural growth or in other forms of imagery,
    the signature of poppies is the same all around the world. It
    might differ slightly by the amount of moisture in it, but I
    think we could do better.
        Senator Fitzgerald. Dr. Eberstadt.
        Mr. Eberstadt. Sir, I hope it is not churlish of me to
    point out that if the U.S. Government were to determine
    conclusively that the DPRK were cultivating more than a
    thousand hectares of opium poppies, illicit opium poppies, a
    year, the U.S. Government would consequently be obliged, under
    the Foreign Assistance Act of 1961, to impose additional
    economic sanctions against the DPRK, which is to say if one
    were interested in promoting an ``engagement'' policy with the
    DPRK, it would be highly inconvenient to determine if the DPRK
    had a thousand hectares or more.
        Senator Fitzgerald. Are you suggesting that the State
    Department could be putting pressure on officials who make
    those assessments to keep their findings under a thousand
    hectares?
        Mr. Eberstadt. I would simply suggest good lawyers do not
    ask questions they do not like the answers to.
        Senator Fitzgerald. Senator Akaka, would you have questions
    of the witnesses?
        Senator Akaka. I do have questions. Thank you very much,
    Mr. Chairman.
        Dr. Gallucci, you probably have the most experience of
    anyone outside the government in negotiating with the North
    Koreans. Do you believe that it is possible to reach a
    verifiable agreement with them?
        Mr. Gallucci. I believe it is possible, Senator. I believe
    we, in 1994, concluded what is known as the agreed framework
    which had a portion of it that was verifiable, and we were able
    to verify that the plutonium program we were out to stop was
    stopped and has been stopped, and because of that deal, there
    are probably 100 or so less nuclear weapons on the face of the
    Earth than there would otherwise be.
        But the portion of the framework which was not subject to
    verification, other than what we could do by, as we say,
    national technical means, went to enrichment, and that is where
    they cheated. So if you ask could we, in a sense, do another
    deal, but this time make sure that the whole thing was
    verifiable, I think it can be imagined, and I think it is
    possible.
        The question is whether the North Koreans would go for such
    a deal, and I do not know, and I do not think anybody would
    know until we sat down and tried to do it. We did not know last
    time until we tried to do it.
        Senator Akaka. I emphasized that because, in your
    statement, you said that, of the three, that was possible, and
    I just wanted to ask you about that again, and I thank you for
    your statement.
        We are concerned about North Korean reprocessing spent fuel
    into plutonium. Do you think if we reached another agreement
    with the North Koreans to end its nuclear program, do you think
    we would still be able to account for what has been
    reprocessed?
        Mr. Gallucci. Senator, right now, that is a slightly more
    complicated question than it was a few months ago. In 1994, the
    intelligence community--our intelligence community--assessed
    that North Korea, more likely than not, had one or two nuclear
    weapons. That was based on an assessment that they had
    reprocessed or could have reprocessed as much as 8 or 10 or so
    kilograms of plutonium, in that range, in any case.
        And so we had that assessment, and we did not, in the
    agreed framework, provide for the immediate inspections that
    would help us determine how much plutonium they actually had.
    However, the framework does provide that the North Koreans
    cannot get the major benefits of the deal, which were those two
    large light-water power reactors. They cannot get even the
    first bit of serious equipment for those reactors until they
    come clean with the IAEA, and we settled that issue. So that
    was part of the original deal.
        Now, we have not gotten to that point in the construction
    of the reactors, so we do not know what would have happened had
    we gotten there. The deal has collapsed for other reasons right
    now.
        At this moment, the reason I said it was more complicated,
    is because we have just heard that one of three things is true,
    either the North Koreans have, as they said at one point, just
    completed reprocessing the spent fuel, which they discharged
    from the reactor and was in a pond which contains about 30
    kilograms of plutonium, enough for perhaps five or six nuclear
    weapons.
        They may have already separated that plutonium or, as we
    also heard from the North Koreans at another point, they are in
    the process of separating that plutonium or, as we also heard
    or might conclude, they have not yet started.
        So I do not know that we know, and I cannot go much
    further, on an unclassified basis, to talk about this, but what
    we do know about this I think is inconclusive at this point.
        Senator Akaka. Thank you. I appreciate your response. I
    know it is touch and go, and I know you have had the kind of
    experience that a few have had.
        My time is almost up, Mr. Chairman, but I would like to ask
    Dr. Wortzel a question.
        I want to tell you that I share your frustration for
    negotiating with the North Koreans, and I agree that we must
    also negotiate multilaterally. And I also should tell you that
    I do not share your view that bilateral negotiations are a
    mistake. I think there is room for that. The administration
    just completed negotiations in Beijing that were essentially
    bilateral, even though Chinese diplomats were present in the
    room.
        In your testimony, you mentioned North Korea's dependence
    on China for fuel and for food. How long and how far do you
    think China would go to use this dependence to force North
    Korea to change its policy, and do you think China would do so
    to the point of provoking a coup in North Korea?
        Mr. Wortzel. Mr. Akaka, thank you for your question.
        Senator I spent I guess just about 5 years as a military
    attache inside China. I can say that in direct bilateral
    negotiations with North Koreans on the prisoner of war missing
    in action teams that the United States sent into North Korea,
    they were not easy to work with, but you could negotiate with
    them, you could reach an agreement. They kind of took you to
    the cleaners financially, but they lived up to their agreement.
    So there are times when you can do that. This is, obviously, a
    much more sensitive issue.
        As a military attache, I had the privilege of, at different
    times, escorting not only the minister of Defense of China, but
    the chief of their General Staff Department, the deputy chiefs
    of their General Staff Department, at one time probably every
    military region commander, at one time or another, at some
    rank.
        And I can tell you that, uniformly--in fact, one
    conversation was, ``Wortzel, you are a military intelligence
    officer. Report this back to your government. We will not let
    the Government of North Korea collapse, period.''
        Now, then we went into a very long discussion of what
    measures one could take, and what if there was an implosion or
    an explosion. I believe that is still the policy of the
    People's Republic of China. They do not want to see a collapse.
    They do not want to see the United States or South Korean
    forces up on the border of China and the Yalu River. I do not
    think they want to see a nuclear North Korea, necessarily,
    either, mostly because of what it means for Japan.
        China supplies somewhere between 70 percent and 88 percent
    of North Korea's fuel needs. I believe oil for food was 12
    percent. China supplies somewhere between 30 percent and 40
    percent of North Korea's food needs. They can modulate that, as
    they did for 3 days in November, I think it was. But I think
    they are both the problem, and perhaps the key, to a solution,
    and that is why I think it is very useful that however
    diplomatic the facade was, that there were multilateral
    negotiations in Beijing.
        Senator Akaka. Thank you very much for your response.
        Mr. Chairman, thank you.
        Senator Fitzgerald. Well, I would like to thank the
    gentlemen for appearing here before us. Your testimony was very
    enlightening. I appreciate your efforts, and we will submit
    your full statements for the record.
        And with that, I would like to now call on panel 3 and ask
    staff to make the necessary arrangements.
        The Subcommittee will hear from two North Korean defectors
    who have personal knowledge of and experience with a number of
    the issues we have discussed today. Both witnesses have
    requested that we protect their identities, and both witnesses
    will have interpreters.
        [Pause.]
        Senator Fitzgerald. Our first witness is a former North
    Korean high-ranking government official. He worked at a North
    Korean Government agency for 15 years and has detailed
    firsthand knowledge about drug trafficking and counterfeiting
    by the North Korean Government. For reasons he cannot disclose
    today, he defected to South Korea in late 1998.
        The second North Korean defector is a former missile
    scientist who is personally familiar with the manufacture,
    programming and deployment of missile systems. As the head of
    the Technical Department of a missile factory in North Korea,
    Bok Koo Lee--that is an alias that he uses--will testify to his
    personal knowledge of, and involvement with, the missile
    program in the factory town where he worked between 1988 to
    1997. Mr. Lee defected from North Korea in July 1997.
        Gentlemen, thank you for being here today. You may proceed
    with your opening statements, beginning with the first
    defector, who is the former high-ranking government official.

       TESTIMONY OF FORMER NORTH KOREAN HIGH-RANKING GOVERNMENT
                 OFFICIAL \1\ [THROUGH AN INTERPRETER]

        Defector No. 1. Mr. Chairman and Hon. Senators, I am the
    witness designated as the former North Korean high-level
    government official to testify about the drug production and
    trafficking by the North Korean regime. I would like to thank
    you and the American people for your concerns and interests to
    help save the North Korean people suffering under the worst
    kind of one-man dictatorship in the past 50 years.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of former North Korean high-ranking
    government official appears in the Appendix on page 70.
    ---------------------------------------------------------------------------
        I worked at a North Korean Government agency for 15 years,
    where I was able to get detailed and firsthand knowledge about
    the drug trafficking by the North Korean regime. There are
    reasons that I cannot really explain here, but, nevertheless,
    for the reasons I cannot disclose, as I said, I defected to the
    Republic of Korea in late 1998. I now live in Korea's capital
    city of Seoul and work to help save the people whom I left
    behind in North Korea.
        Production and trafficking of illegal drugs by the North
    Korean regime has been widely publicized for some years now.
    Recently, concerning the seizure of 50 kilograms of heroin, on
    a North Korean ship named ``Bongsu,'' by the Australian
    authorities has confirmed again that North Korean regime has
    been very busy making and selling the illegal drugs to other
    countries in order to support the cash-strapped regime. North
    Korea must be the only country, as far as I can tell, on the
    entire globe to run a drug production trafficking business on a
    state level.
        North Korea started its production of drugs secretly in the
    late 1970's in the mountainous Hamkyung and Yangkang Provinces.
    North Korea began to produce and sell drugs in earnest
    beginning in the late 1980's, and that is the time when Kim Il-
    sung, of North Korea, who is the leader of that country, toured
    Hamkyung-Bukdo Province and designated the area around Yonsah
    Town in Hamkyung Province to be developed into an opium farm.
    It was known that the Japanese colonial government also used
    this area to grow opium, and Kim Il-sung told the people to
    earn hard currency by growing and selling opium because he
    needed cash.
        The local party province committee developed an
    experimental opium farm in Yonsah Town in secret, and the farm
    was tightly guarded by the security police officers. They began
    to produce opium at the collective farms located in towns like
    Yonsah, Hweryung, Moosan, and Onsung in Hamkyung-Bukdo
    Province. All opium produced, thus, produced in these farms
    were sent to the government to be processed into heroin. They
    called these opium poppies the broad bellflowers in order to
    hide the operation from the general public, but this was an
    open secret because everybody knew what that was all about.
        North Korea had very little to export since the early
    1990's because 90 percent of their factories became useless for
    lack of raw materials and energy. They tried to export
    mushrooms, medicinal herbs and fisheries to China, Japan and
    South Korea. However, the only way to bring in large sums of
    hard currency was to sell drugs to other countries and to
    smuggle in used Japanese cars in turn.
        In the late 1997, the Central Government ordered that all
    local collective farms must cultivate, grow, for the area of
    about 10 chungbo, that is, about 25 acres, of a poppy farm
    beginning in 1998. The Chinese Government somehow learned about
    this and then dispatched reporters and police officers to take
    pictures of these farms near the border.
        All opium thus produced are sent to the pharmaceutical
    plants in Nanam area of Chungjin City in Hamkyung-Bukdo
    Province. They are processed and refined into heroin under the
    supervision of seven to eight drug experts from Thailand, and
    this is all done under the direct control and strict
    supervision of the Central Government.
        I heard that there is another opium processing plant near
    the Capital City of Pyongyang, but I have not confirmed this
    myself. These plants are guarded and patrolled by armed
    soldiers from the National Security and Intelligence Bureau of
    North Korea. No outsiders are allowed in these facilities.
        North Korea produces now two types of drugs: heroin and
    methamphetamine, which is called in Korean, ``Hiroppon.'' They
    produce these drugs one ton a month each. Heroin is packaged in
    boxes, each containing 330 grams--that is about 11.6 ounces--of
    heroin, and those boxes have a Thai label. Methamphetamine is
    packaged in boxes each containing about 1 kilogram of the
    substance, but has no label.
        In China, near the border, the drugs are sold for $10,000
    per kilogram. And through the ocean on board, these drugs are
    sold for $15,000 per kilogram. North Korea sells these drugs,
    through the border with China, to China or, through the seas,
    Hong Kong, Macao, Russia, Japan, Russia, even South Korea. They
    also deal with the international drug dealers on the Yellow Sea
    and Eastern Sea. Their major markets are, of course, Japan.
        It has been no secret that the North Korean regime has used
    its diplomats and businessmen for drug trafficking, using all
    means possible. In November 1996, a North Korean diplomat who
    was stationed in Moscow, Russia, was caught by the Russian
    border police. When he was caught, he had 20 kilograms of
    illegal drugs with him. He later committed suicide in the
    prison.
        Things were desperate in North Korea. In December 2001,
    South Korean authorities found a big shipment of illegal drugs
    at the Port of Pusan, but South Korean authorities did not
    identify the source of that drug shipment, but it was well
    known, I have no doubt, that this shipment must have come from
    North Korea.
        I have a list of instances involving North Korean drug
    trafficking as follows:
        In July 1995, an agent of the North Korean National
    Security and Intelligence Bureau was caught by the Chinese
    police when he tried to smuggle in 500 kilograms of heroin.
        In November 1996, a North Korean lumberjack working in
    Russia was caught at Hassan Station with 22 kilograms of opium.
        In May 1997, a North Korean businessman was caught in
    Dandung, China, when he tried to sell 900 kilograms of
    methamphetamine.
        In July 1997, another lumberjack was caught in Havarovsk,
    in Russia, with possessing 5 kilograms of opium.
        In January 1998, two North Korean diplomats stationed in
    Mexico were caught by the Russian police officers when they
    tried to smuggle in 35 kilograms of cocaine.
        And in July 1998, two North Korean diplomats stationed in
    Russia [sic] were arrested when they tried to smuggle in
    500,000 capsules of psychotomimetics, which is a kind of
    stimulant.
        It is my view, given the fact that North Korean regime is
    confronting a very critical crisis and economic dire situation,
    that short of international measures, strong and effective
    measures on the part of the international community, North
    Korea will continue, in my view, to produce and sell drugs.
        North Korea is the only country on Earth that grows opium
    poppy, processes it into heroin and sells them abroad. I,
    again, would like to urge a stern measure on the part of the
    international community to cope with this dire situation of
    North Korea involving drug trafficking and selling.
        Senator Fitzgerald. Thank you very much, Defector 1.
        And now we will proceed to the second North Korean
    defector. He is, again, a former missile scientist who is
    personally familiar with the manufacture, programming, and
    deployment of missile systems.
        Thank you for being here, and you may proceed.

       TESTIMONY OF BOK KOO LEE [ALIAS],\1\ FORMER NORTH KOREAN
               MISSILE SCIENTIST [THROUGH AN INTERPRETER]

        Mr. Lee. Thank you for inviting me to this hearing.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Mr. Lee appears in the Appendix on
    page 73.
    ---------------------------------------------------------------------------
        My name is Bok Koo Lee. I defected from North Korea on July
    21, 1997. Between 1988 until July 1997, that is, 1988 until
    July 1997, I worked at Munitions Plant No. 38 in Huichon,
    Jagang Province, North Korea. There are 11 subplants at this
    munitions complex, also known as Chungnyon Jeonghi Yonkap
    Kiupso, meaning Youth Electric Combined Company. Among the 11
    subplants, Nos. 603 and 604 produced and assembled missile
    parts. The parts we produced are all electronics. I held the
    position of head of Technical Department at Subplant 603 until
    I left North Korea in July 1997.
        The responsibilities of the technical department are
    assembly and development of parts for missile guidance control
    vehicle, as well as developing the software. The missile
    launching units are made up of these control vehicles and the
    transport vehicles.
        In the interest of time, I would like to talk mainly about
    one of my experiences on this missile guidance control vehicle.
        In the summer of 1989, as we were ordered by the Second
    Economic Committee, which controls all munitions industry in
    North Korea, I, together with five colleague engineers of mine,
    went to the Nampo military port in Nampo City, South Pyongyang
    Province.
        When we arrived at Nampo, a cadre from the Second Economic
    Committee greeted us and issued camouflage uniforms for the
    military, and we changed into them before we boarded a ship.
    Since we were locked under the deck and could not see outside,
    I do not know exactly how long, but the voyage seemed to have
    lasted about 15 days, according to our eating and sleeping
    pattern.
        When we docked at a port, we went to the stern of the ship,
    and there we found and boarded a missile guidance control
    vehicle that we built in North Korea. I knew then and there
    that we were about to test launch a missile. With the windows
    of the vehicle blocked, we traveled for about 2 days inside
    this missile guidance control vehicle before it stopped, and
    our military commander told us to be ready for battle.
        So we opened the windows and the back door, too, in order
    to connect the power supply. That is when I heard someone's
    voice from outside, and when our commander walked up to him, I
    could see that the man was an Arab. ``I must be in an Arab
    country,'' I thought.
        About 10 minutes later, the commander yelled, ``Storm,''
    which is the battle order in North Korea. Each of us took up
    his position inside the vehicle to man this equipment, and then
    we put it ready in sequence. In a few minutes, the commander
    gave us the order to launch, and we transmitted the launch
    signal.
        About 20 minutes afterwards of transmitting guidance
    control signals, the commander relieved us of our duties. Since
    the missile was not nearby, we could not see. And when the
    launch was over, we left in a hurry, leaving our control
    vehicle there, and rode another military vehicle to come back
    to the ship we were on.
        The next morning, the ship began its journey back to Nampo,
    which also took about 15 days. From there, we rode on a bus
    from Nampo to arrive at an annex building of the Party Central
    Committee in Pyongyang. The routine debriefing took as long as
    15 days. We did not have much to report, but the debriefing of
    our superiors took 15 days.
        When the debriefing was over, Kim Chol Man, then chairman
    of the Second Economic Committee, gave us some gifts,
    complimenting our mission, which he said was to Iran.
        After our return to the plant, I learned from Lee Byung Su,
    the chief engineer in charge of Technical Improvement, that Yon
    Hyong Muk, then-Premier of North Korea, accompanied us to Iran,
    and he brought back to North Korea 220,000 tons of crude oil.
    These 220,000 tons of crude oil was taken by the military with
    the order of Oh Jin-u, the head of Armed Forces. And when the
    fact was revealed to Premier Hyong, he had a big fight with Oh
    Jin-u before Kim Il-sung about this, and he ended up taking
    back some of the oil from the military.
        After our trip, Subplants 603 and 604 began producing the
    same missile guidance control vehicles as we took to Iran.
    Since then, we produced nine such vehicles over a few years and
    exported them to Arab countries. Or course, we also produced
    and still produce, I believe, parts for other short- and
    medium-range missiles.
        Additionally, I would like to testify on the participation
    of North Korean missiles during the first Gulf War of 1991, the
    removal and relocation of Yongbyon nuclear facilities to
    somewhere else, and about the Kumchang-ri Cave during the
    closed session.
        One final thing I would like to stress in this hearing is
    the fact that in order to bring about the collapse of North
    Korean regime, the munitions scientists like myself, in and
    outside of North Korea, must be aware of the existence of safe
    harbors in the West which will take them. Then, more scientists
    will escape North Korea to seek asylum and the production of
    weapons of mass destruction, such as nukes and missiles, will
    be severely curtailed, eventually to the point where there is
    no more people left to push that nuclear button.
        It has been so long since the loyalty to Kim Jong-il by
    North Koreans have collapsed. If one sings well, there is an
    ample reward. Whereas, the scientists, like myself, will get
    mere briefcases, ballpoint pens and Kim Jong-il's monologue for
    their achievement. Therefore, no one hardly strives to develop
    new things any more, but just occupies the desk.
        We urge you to mobilize the international community and do
    this to precipitate the collapse of North Korean regime.
        Thank you very much.
        Senator Fitzgerald. Well, thank you both for testifying,
    and thank you for your courage in making yourselves available
    to this Subcommittee.
        I want to start with Defector 1. Our State Department
    witness said that we do not have any satellite evidence of
    poppy production in North Korea. Based on what you know about
    North Korea's cultivation of poppy, is there a reason why we
    could not see the poppy fields with our satellites?
        Defector No. 1. It is surprising to me that satellite
    pictures could not catch, satellites could not catch the poppy
    farms in North Korea because, as I said earlier, since 1998,
    there were all poppy farms about 10 chungbo, I think it is
    about 30-some acres, was put aside for the sole purpose of
    cultivating poppies only. And Chinese police officers and
    Chinese reporters came to the border, and they took the
    pictures of these farms. I am just flabbergasted that
    satellites or the United States could not have access of this
    or ascertained this kind of agricultural activity growing
    poppies.
        Senator Fitzgerald. The poppy fields that you described,
    did you personally see those poppy fields?
        Defector No. 1. Yes, numerous farms myself, with my naked
    eyes.
        Senator Fitzgerald. Were you personally involved in
    trafficking heroin, as a high-ranking officer of the North
    Korean Government?
        Defector No. 1. Yes, there was a time I was directly
    involved in the trafficking, the drug trafficking myself, and I
    am confident that the drugs seized, after North Korean Ship
    Pong Su was seized by the Australian authorities, I am sure
    those drugs are North Korean products.
        Senator Fitzgerald. Were you directed by your superiors in
    the North Korean Government to traffic in the drugs you
    trafficked in or were you doing that on your own?
        Defector No. 1. There is nothing in North Korea a person
    can do voluntarily to help the regime. And especially speaking
    of production and selling, trafficking drugs, and processing or
    growing poppies and processing poppies into heroin, these are
    all done on the state level, as a state business, and they do
    this as a means of acquiring or earning, as they say, hard
    currency.
        Senator Fitzgerald. So was it your job, working for the
    North Korean Government, was it part of your official duties to
    traffic in drugs?
        Defector No. 1. Well, there are several reasons. I cannot
    really specify here, especially about certain things I did
    myself, but I can tell you this much. I can assure you that
    production, the sale and trafficking of the drugs is done, it
    is not because somebody wants to get involved in that kind of
    business, but they are told to do so. Therefore, they are doing
    it, and they are told directly by the highest authority in
    North Korea, the one who has most power.
        Senator Fitzgerald. So it is safe to conclude, from your
    testimony here today, that the North Korean Government is in
    the business of producing and trafficking in drugs like heroin.
        Defector No. 1. Yes, sir, my answer is positive. Of course,
    that was the situation, and North Korean regime, since mid
    1970's, when its economy or economic situation started
    deteriorating, they started growing and trafficking drugs as a
    part of national policy, and it has been that way even today.
        Senator Fitzgerald. Do you have any idea how many people
    the North Korean Government employed in its drug production and
    trafficking business, at least while you were there?
        Defector No. 1. Well, I can tell you that at least 30
    people that I personally knew were involved in trafficking,
    drug trafficking and selling drugs, just to give you this as an
    example, what limits I have, directly had. I am just curious
    this thing that is the fact that the highest, most powerful
    authority in North Korea have his people to engage in
    production and trafficking drugs, it is not known to the United
    States or the international community. Because of the absolute
    power that North Korean leader has, anything is possible, as
    far as he is concerned.
        Senator Fitzgerald. Well, Defector 1, thank you very much.
    That has been very powerful testimony.
        I would like to ask some questions of Mr. Lee.
        Mr. Lee, based on your personal experience and knowledge,
    does North Korea currently have nuclear weapons?
        Mr. Lee. I am not a nuclear scientist, so I cannot give you
    ``own hand'' response, but I do believe there are nuclear
    weapons in North Korea.
        Senator Fitzgerald. Mr. Lee, you testified in detail about
    your own mission to a country that you believe was Iran to do a
    demonstration of a North Korean missile. Are you aware,
    personally, of other such missions, and do you know to what
    countries those missions have been?
        Mr. Lee. Yes, I do.
        Senator Fitzgerald. You indicated to my staff that the
    North Korean missile industry depends entirely on foreign
    imports. Can you go into greater detail about that dependence
    on foreign imports?
        Mr. Lee. I worked for 9 years as an expert in the guidance
    system for North Korean missile industry, and I can tell you
    definitely that over 90 percent of these parts come from Japan.
    And the way they bring this in is through the Chosan Sur [ph]
    and the North Korean Association inside Japan, and they would
    bring it by ship every 3 months, and we would go out to the
    port, at times, when we are in a hurry and pick them up
    ourselves.
        Senator Fitzgerald. Were those parts smuggled from Japan
    into North Korea or did North Korea purchase those parts?
        Mr. Lee. I am sure it is informal. The ship that is used to
    ferry these parts is called Man Gyong Bong, and this is a
    passenger ship. It is not a freighter, so it is the smuggling.
        Senator Fitzgerald. Mr. Lee, do you have any information on
    North Korea's nuclear program and the Yongbyon nuclear
    facility?
        Mr. Lee. I do not have profound knowledge about the North
    Korean nuclear development structure, but I was nearby when
    there was this issue about IAEA inspection a long time ago.
        Senator Fitzgerald. Mr. Lee, you were a scientist in the
    missile program. As a scientist in the missile program, were
    you at all aware of the country's trafficking in drugs, as
    testified by Defector 1? Did you have any knowledge of that?
    Does that come as a surprise to you or do you believe that
    testimony?
        Mr. Lee. I knew already that from 1999 the collective farm
    had certain parcels allocated for the poppy cultivation. Each
    collective farm had to cultivate poppies.
        Even in the area where I worked, where the Munitions Plant
    No. 38 is located, they developed a poppy field in Oh Su Dong
    [ph], Joongang Gun [ph], Jagang Province, from 1994. To do
    this, 2,000 reserve military was mobilized, and they were put
    in to cultivate, to develop the poppy field. And because they
    lacked the housing, we were also mobilized to build housing for
    these reserve servicemen who were put in to develop the poppy
    fields.
        When I left in 1997, through that route in that
    neighborhood, I could see the poppies were growing there. I
    could see the poppy fields. In the fall, when they usually
    harvest these poppies, they would use the students, and when
    they do this, they would send the students in, and when they
    are done, they would frisk them with only briefs on so that
    there is nobody would take away these poppies.
        Senator Fitzgerald. I just want to be clear on that. You
    recall 2,000 military personnel being directed to work on
    growing poppies?
        Mr. Lee. The servicemen who have just been discharged.
        Senator Fitzgerald. So they were men who had been
    discharged? They were put to work----
        Mr. Lee. As soon as they were discharged, they were put to
    work to develop these poppy fields.
        Senator Fitzgerald. And then students were used to harvest
    them?
        Mr. Lee. To harvest them, yes, that is correct, sir.
        Senator Fitzgerald. Well, gentlemen, thank you very much
    for this testimony. At this point, I would like to ask you both
    to stay there. We are going to go into our closed session now.
        As I previously announced to the audience, I would now ask
    that the Capitol Police and security staff prepare the hearing
    room for a closed session. I also ask that members of the
    audience and the media please leave the room at this time.
        As a reminder to Senate staff, this closed session will be
    conducted at the unclassified level.
        [Whereupon, at 5:01 p.m., the open Subcommittee meeting was
    adjourned.]

                                A P P E N D I X

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