[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.]


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