Report of the Panel of Experts established pursuant to resolution 1874 (2009) Summary Over the period under review the Democratic People’s Republic of Korea has continued to reject and to violate Security Council resolutions. In November 2010 the Democratic People’s Republic of Korea revealed that it had been pursuing a programme of uranium enrichment and was constructing a new nuclear reactor. The country has also continued to defy the bans on imports and exports of nuclear-related items, of conventional arms and of luxury goods, and this report details several seizures of banned shipments. The Panel believes that, while sanctions have clearly not stopped the Democratic People’s Republic of Korea’s nuclear programmes and trade in arms, they have made it more difficult and expensive for the country to pursue these. Nevertheless Member States continue to face numerous difficulties in implementing sanctions. The Panel has discovered loopholes and other vulnerabilities in shipping and transportation practices that the Democratic People’s Republic of Korea and others have exploited, and notes increasing sophistication on the part of the Democratic People’s Republic of Korea both in the establishment of shell and front companies and offshore financial agents, and in the proliferation of affiliates, substitutes and aliases intended to mask already designated entities and individuals. This report therefore includes a variety of recommendations to improve the effectiveness of sanctions. These include suggested responses to the Democratic People’s Republic of Korea’s uranium enrichment programme, further efforts to encourage Member States to report as required by the Council, extending the list of items prohibited by the Committee established pursuant to resolution 1718 (2006), clearer guidelines on the definition of luxury goods and an expansion and updating of the list of eight entities and five individuals currently sanctioned by the Committee. 11-32818 (E) 120511 !""#$%"%!! In pursuing its mandate the Panel has consulted extensively with Member States, inspected seized goods and interviewed numerous experts at international conferences and in New York. It has increased its knowledge of techniques of sanctions evasion used by the Democratic People’s Republic of Korea (which include extensive falsification of documents and diversion of cargo), illicit financial transactions carried out by the Democratic People’s Republic of Korea, the channels through which banned goods travel, and cooperation of the Democratic People’s Republic of Korea with other States in pursuing proscribed activities. The Panel is grateful for the cooperation it has received from many Member States. Much remains to be done to improve sanctions implementation among Member States and to constrain the networks that facilitate sanctions evasion. Looking forward, the Panel plans to work with Member States to improve the rate of filing of national implementation and compliance-related reports, to work towards establishing best practice for vigilance on cargo to and from the Democratic People’s Republic of Korea, to suggest other entities and individuals for designation, and to recommend ways of countering the efforts of the Democratic People’s Republic of Korea to evade sanctions. 2 11-32818 Contents Page Abbreviations.................................................................. 5 I. Introduction ................................................................... 6 II. Methodology .................................................................. 7 III. Background ................................................................... 7 IV. Panel of Experts................................................................ 9 V. Reports of Member States........................................................ 12 A. National implementation reports .............................................. 13 B. Compliance-related reports (inspection, seizure and disposal) ...................... 15 VI. Nuclear, other weapons of mass destruction and ballistic missile programmes of the Democratic People’s Republic of Korea ............................................ 16 A. Nuclear programmes........................................................ 16 B. Ballistic missile programmes ................................................. 24 C. Other existing weapons of mass destruction programmes .......................... 26 VII. Export and import-related measures ............................................... 27 A. Nuclear, other weapons of mass destruction and ballistic missile-related exports and imports ................................................................... 27 B. Arms exports and imports ................................................... 30 C. Ban on luxury goods ........................................................ 32 VIII. Interdiction.................................................................... 34 A. Trade and transportation infrastructure ......................................... 34 B. Patterns of sanctions evasion ................................................. 38 C. Interdiction actions ......................................................... 41 IX. Financial measures ............................................................. 43 A. Illicit financial transactions .................................................. 44 B. Foreign investment in the Democratic People’s Republic of Korea .................. 46 X. Designation of goods, entities and individuals ....................................... 48 A. Designation of entities and individuals ......................................... 48 B. Designation of goods ....................................................... 52 XI. Unintended impact ............................................................. 53 A. Unintended impact on the humanitarian situation ................................ 53 B. Unintended impact on diplomatic missions ..................................... 54 XII. Recommendations .............................................................. 54 11-32818 3 Annexes A.1. Imagery of the Yongbyon Nuclear Research Centre ................................... 61 A.2. Imagery of the fuel fabrication complex ............................................ 62 A.3. Imagery of the 5-MWe reactor and light water reactor construction site .................. 63 A.4. Imagery of the new launch site close to Tongchangdong ............................... 64 A.5. Items designated by Member States as luxury goods .................................. 65 A.6. List of autonomous designations .................................................. 72 A.7. Main transportation routes in the Democratic People’s Republic of Korea ................ 81 4 11-32818 Abbreviations HEU highly enriched uranium IAEA International Atomic Energy Agency IATA International Air Transport Association ICAO International Civil Aviation Organization IMO International Maritime Organization INFCIRC information circular (IAEA publication) LEU low enriched uranium LLI Lloyd’s List Intelligence MWe Megawatt-electrical MWt Megawatt-thermal SWU separative work unit UF6 uranium hexafluoride WCO World Customs Organization 11-32818 5 I. Introduction 1. In paragraph 26 of Security Council resolution 1874 (2009), the Secretary- General was requested to establish a Panel of Experts to gather, examine and analyse information regarding the implementation of the measures imposed by the Council in its resolutions 1718 (2006) and 1874 (2009) and, in particular, to document incidents of non-compliance; to assist the Security Council Committee established pursuant to resolution 1718 (2006) in carrying out its functions; and to make recommendations on actions that the Council, the Committee or Member States may consider to improve implementation of those measures. This is the Panel’s second annual report. 2. The situation remains challenging. At the date of this report there are no indications that the Democratic People’s Republic of Korea is ready to roll back its proscribed programmes. The political and security climate on and around the Korean peninsula has deteriorated in the wake of unprovoked acts of war by the Democratic People’s Republic of Korea. With the Six-Party Talks stalled the sanctions remain the primary Council mechanism for both condemnation and constraint of the Democratic People’s Republic of Korea’s non-conventional capabilities. 3. Although the revelation by the Democratic People’s Republic of Korea of its uranium enrichment programme despite the sanctions might seem to raise issues about their effectiveness, it appears that the country may have acquired and developed much of this programme before their adoption. Recent developments are therefore not evidence that they have been ineffective. On the contrary evidence suggests that the sanctions have succeeded in economic terms by raising the costs of illicit transfers while simultaneously lowering the returns to the Democratic People’s Republic of Korea. They are also believed to have increased the risk of doing business for States and non-State actors, which may have a deterrent effect. Nevertheless, implementation of the sanctions has to be improved to prevent further development and possible proliferation of the Democratic People’s Republic of Korea’s nuclear programmes. 4. During the reporting period, the Panel followed up on its investigations and on the findings it has reported to date. This report and its confidential annex present the latest findings of the Panel. It notes both challenges and