Chinese agent exposed by FT investigation into North Korea oil trade arrested

A Chinese oil broker whose activities were exposed by a Financial Times investigation has been arrested in South Korea on suspicion of organising illegal transfers of diesel to North Korea.

The broker is suspected of arranging more than 35 transfers amounting to 18,000 tonnes of diesel, in deals valued by the South Korean coastguard at Won18bn ($14.6mn).

Investigators from the South Korean coastguard said the agent arranged for a Russian oil tanker operated by a South Korean oil company to conduct ship-to-ship fuel transfers with a Chinese vessel in the South China Sea. The Chinese ship then conducted ship-to-ship transfers with North Korean vessels, a violation of UN sanctions.

Last month, a joint investigation by the FT and the Royal United Services Institute think-tank tracked a delivery of marine oil last year from South Korea’s south-east coast into North Korea’s exclusive economic zone.

The investigation revealed that an unnamed Chinese shipping agent had brokered a deal between a South Korean company called Eastern Pec and a Shanghai-based company called Met Ocean Co to conduct a fuel transfer in the South China Sea.

The marine oil was transferred from South Korea to a meeting point by Eastern Pec using a Russian oil tanker called the Mercury, which it had chartered from a company based in Vladivostok. The cargo was then transferred to a Chinese ship called the Shundlli, which was operated by Met Ocean.

In a “letter of guarantee” seen by the FT, Met Ocean promised Eastern Pec not to deliver the shipment to North Korea. But satellite imagery and tracking data show the Shundlli going on to conduct an apparent transfer with a second ship in the North Korean EEZ.

The coastguard confirmed that the agent arrested late on Monday, who is a naturalised South Korean national, was the same person who brokered the deal between Eastern Pec and Met Ocean. Authorities took action amid fears that the agent could become a flight risk after his activities were revealed.

The broker was detained on charges relating to shipments conducted between October 2021 and January 2022, which do not involve the Mercury, the Shundlli or Eastern Pec, according to authorities. Investigations into the operation exposed by the FT are ongoing, they added.

“The FT report helped us broaden our investigation, enabling us to ask the broker about other deals that he was involved in,” said a Korean coastguard official. “We are also investigating his other activities involving the Mercury and Eastern Pec.”

Eastern Pec has said that the operation revealed by the FT was the first time it had worked with the broker.

The UN Security Council imposed a cap on permitted oil transfers to North Korea in 2017 after Pyongyang’s sixth and most recent nuclear test. The ceiling of 500,000 barrels a year is far below the energy needs of the North Korean economy.

All such oil transfers must be reported to a UN sanctions committee, but in practice, only a fraction are. An unreported transfer constitutes a violation of the sanctions.

Go Myong-hyun, a sanctions expert at the Asan Institute for Policy Studies in Seoul, said that the transfers helped prop up North Korea’s shattered economy, as well as Pyongyang’s capacity to train and field its armed forces and sustain its weapons development programmes.

“No matter how large or small, what this shows is that the South Korean authorities need to identify these operations and crack down on them hard,” he said.


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