Having just written my article on North Korea there have been a number of people asking me if I have had personal experiences there. I have never set foot in North Korea (at that time no Americans were allowed in) but I spent a good deal of time on its Chinese and Russian borders. It was an unusual experience.
My company was engaged in the efforts to deliver raw materials to the giant Russian aluminium smelters in Bratsk and Krasnoyarsk. Russia had all the facilities to produce aluminium in their plants from domestic sources but they lacked the basic ingredient, alumina which is produced by the processing of bauxite with caustic soda. There were several alumina producing plants which were used; the largest was at Nikolayev in the Ukraine. The alumina plants imported bauxite from Africa, principally from Guinea, and sent the refined alumina the three thousand kilometres from the Ukraine to the smelters at Bratsk and Krasnoyarsk where it was turned into aluminium. It was then transported three or four thousand kilometres back to the ports of the Baltic or the Black Sea for sale overseas. The principal market was Japan; a voyage of many thousands of nautical miles. This, as one might guess, was not a very efficient system.
There was also a domestic alumina plant at Achinsk in Siberia which produced alumina through the nepheline process which produces a ‘fluffy’ as opposed to ’granular’ alumina. It was close to the Siberian smelters but it suffered the same problems of lack of cash and disorganisation as that suffered by the aluminium smelters. It was clear that to make the Russian smelters work it would be necessary for their Western partner to supply all the inputs to the smelter and to market the product in the international metal markets. Also, as important, it was necessary to find a way to import these raw materials through ports on the Russian Far East and to export the finished metals from the same Far East Russian ports to Japan and elsewhere in Asia. This would save millions in transport charges for the materials and the finished products. The Holy Grail was the quest for a Russian Far East Port which had the equipment and the rail links to serve as the hub of the aluminium export business.
The Russians had the idea that they could build their own international aluminium industry but they were lacking in cash, credit, organisation and management structures. The Russians were in a dilemma. They needed to buy, in hard currency, the alumina it needed for the aluminium smelters. It didn’t have these reserves or the mechanism to guarantee the purchases. The individual aluminium smelters (Bratsk, Krasnoyark, Irkutsk, Sayansk, Kandalaksha, Nadvoitsky, Bogoslovsk and Novokuznetsk) had no cash reserves to fund the purchase of alumina (or coal or electricity), nor did they have a line of credit established at any bank which could give them the working capital to produce the aluminium. As a result of this their offers of metals to the world market were not believed; the metal buyers and traders knew that if they agreed to purchase the aluminium and put letters of credit in place, the Russian smelters could not be guaranteed to perform, nor could they issue Performance Guarantees as compensation. Still less could they arrange the shipment of the aluminium from the factory to a port as they couldn’t pay the railroads or the ships which would produce the bills of lading.
Marc Rich and Felix Posner, and later David Reuben and Alan Cligman, pioneered the idea of “tolling”. That is the Western metal traders would supply the smelters with the necessary raw materials, bring in the coal and alumina, arrange the electrical supplies and handle the shipping and transport of the goods to and from the smelters. Having paid for the cost of the inputs, the Western metal traders would take the primary metal produced for sale at a subsidised rate from the smelters and market the aluminium on the international commodity markets. It would pay a fee, or “toll” to the smelter for the processing.
In order to make this work, practically, they needed reliable access to Russian Far East seaports and connections to the Russian railroads (Trans-Siberian and the Baikal-Amur) as well as the associated rolling stock to carry the goods on the rail lines. My job was to find the suitable ports for handling these supplies in and metals out; arrange the railroad connections and sidings along the way; and to use our ships to transport the raw materials in and the aluminium out.[i]
After some searching at Vostochny, Vladivostok and Nahodka ports we decided to use the Port of Vanino further north on the Sea of Okhotsk and to concentrate on the Baikal-Amur Railroad for transport. However, the company Dalso had already contracted for the Bratsk smelter, for some of the alumina to be imported through the North Korean port of Rajin. While I was in Bratsk I was asked to advise on the system. Dalso had sold Bratsk the idea that they would need a pneumatic system to lift the alumina out of the vessels and put the alumina in railcars. They told me they had bought a system from the Belgian company, Vigan, to perform this at the bargain price of three and a half million dollars. I had just been at the Vigan plant and had an offer for the exact same equipment at two hundred thousand pounds, delivered. I was told not to mention this to anyone. They asked if I could ship around twenty thousand tons of alumina from Freemantle, in Australia, through the port of Rajin to test the system.
We sent a vessel to Australia and picked up the alumina and transported it to Rajin. The master of the vessel sent me some telexes that he was having a little difficulty getting into the port because of ‘red tape’ (no pun intended). When he docked and they started unloading they had other difficulties. Each day the master communicates the noon ROBs (remaining on board) of fuels, food, water and condition so that the owner can plan the further details of the voyage, the bunkering and chandlering. He sent me an urgent message “The stevedores are asking the crew for the peels of the oranges they are eating. What shall I do?” I asked him why they wanted the peels. He told me that there was starvation in the country and the crew wanted to use the peels to make tea as they had none. I told him to give them all oranges, not just the peels. He told me that when he offered the oranges there was some reluctance. The first two men who took the oranges were immediately arrested by the army because it was unseemly for the Koreans to beg for food. The others were allowed to keep the orange peels.
Having delivered the alumina in Rajin our vessel sailed off. The Bratsk smelter contacted us every day asking where the alumina was. They had seen no sight of it and it was already seven days and it had disappeared. I had no idea but I contacted some people I knew in Harbin, in China, who told me that there was always a delay in transferring from Korean and Chinese trains to the Russian rail system because the Russian rails were wider than the standard gauge used by China and Korea and, at the bridge connecting the two rail lines, every carriage containing twenty tons of alumina had to be lifted by a crane and repositioned on to Russian bogies for the journey to Bratsk. The twenty thousand tons I had delivered had to be transferred to a thousand rail wagons, each of which had to be lifted and put on new bogies. It was not an efficient system.
About four months later we were contacted by the smelters asking if we could find additional ports in Russia, which we could use to deliver aluminium. My friend and colleague Niksa Lazaneo (a Croatian) travelled with me to the ports of Zarubino and Posyets on the Russian, Chinese and Korean border to create further outlets for the supply of aluminium that was pouring out of the smelters. It was strange going there as the region was newly opened for people to visit. First, they lifted the restrictions on Russians and then the restriction on foreigners. There were several cities and ports in Russia which I was among the first allowed to enter. I had been issued a blanket visa which specified that I could go anywhere in Russia. In Zarubino and Posyets I was the first foreigner to be let in. They were friendly, but a bit wary.
We went first to Zarubina. Normally this would be a three and a half or four-hour flight. It took us almost nine hours. There was nothing wrong with the helicopter but we had very little fuel because supplies were limited. We flew from one small air base to another on the route south, having to negotiate to buy enough fuel to take us to the next base. We disembarked at each base and haggled over the fuel. We were shocked to see the conditions in which the soldiers lived. It was very primitive and unkempt. In each common room, there was a big pan full of kasha (buckwheat groats) sitting on a low heat and a small bowl of some kind of brown sauce which had a skin on it. That was the rations for the people at the air base. As they got hungry they went in and got some food which was washed down with weak tea from a samovar. They told me that was all they had for over a week. They offered us a Kalashnikov and a Strela (Grail – RPG7) for cash. I declined the offer. It was very sad to see how they lived. This was true of all the bases we visited.
We had some success at Zarubino and then drove for a few hours to Posyets. On the way, we passed large prison camp. From the three-ring design it was clear that this was or used to be part of the Gulag. I enquired politely if the Gulag was still in business and was told not to worry, it was only a penal colony for soldiers now. When we arrived in Posyets it was clear that the port was not ready to receive a stream of metals for export as the rail connection was poor and the port machinery was ancient. We were told, though that there was a Tumen River Area Development Plan which we should examine. The Tumen River in Hunchun straddles the borders of China, Russia and the DPRK. In 1992, China, Russia, the DPRK, the Republic of Korea (ROK) and Mongolia launched a joint development project in the Tumen River area, a move made to strengthen regional cooperation in the area. It never progressed very far beyond the planning stages.
We drove closer to the Chinese, Russian and North Korean border with some local officials from Makhalino and met some business people from Hunchun in China which was proposed as a key development zone for the Tumen River community. There were no North Koreans. We had a small lunch and they told me frankly that I would be wasting my time doing anything in the region. The South Koreans tried to assist but the North Koreans wouldn’t deal with them. The Chinese pointed out that the North Koreans came across the border into China (and into Russia) to steal food, to take equipment and fuels, and to scurry back into Korea when approached. I asked if the North Korean Army couldn’t stop this and they laughed and told me it was the North Korean Army that was doing all the stealing. No one else would dare. Later, when I went to Harbin, the Chinese told me the same story. We packed up and flew back to Khabarovsk.
After that we didn’t waste any more time trying to engage with anything else in North Korea or its railroads. We probably avoided some extra problems we didn’t need.