Russia’s Hunt for Arms Meets North Korea’s Need for Cash

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Hey Sarah here. One of the best things about working at Bloomberg is that we've got reporters everywhere. Today, on the Big Take, we're bringing you a story from our colleagues in Hong Kong. I'm handing the mic over to my colleague Janet Paskin, and we'll be back with you soon. Here's Janet.

We are now two years into the war in Ukraine, and while both sides were running low on ammunition for a while, Russia seems to have solved that problem. Russia is not only relying on its own weapons, it's getting ammunition from elsewhere, from someone who has enough to spare and wants Russia to win this war. Now, United Nations countries aren't supposed to be selling arms to Russia, so no one wants to take the credit. But there are some pretty good clues about where all this ammunition might

We have Russia saying nails in time to a deepen an enhancer cooperation for strategic purposes.

Who's Russia writing to North Korea. Now, Russia sends a letter like this every year to North Korea in celebration of Liberation Day, a holiday marking the end of Japan's rule over the Korean Peninsula. But my colleague John Herskowitz has been covering and watching North Korea for more than twenty years, and he says this letter was different. For one thing, it was broadcast on North Korean state TV

And it's like, uh, it's yeah, there's just a subtle change here. It seemed like, given the situation, it was a good time to take stock of what North Korea had and what Russia needed.

So what does North Korea have that Russia needs? The answer is ammunition, lots of it. I'm Janet Paskin and this is the big tick from Bloomberg News today on the show, how North Korea has become critical to Russia's military campaign in Ukraine and why that might be one of the most lucrative things North Korea has ever done. North Korea is one of the most isolated, cut off countries in the world, and it's not like that letter from Russian President Vladimir Putin straight up says please send

There were about three or four ships which went regularly between Russia and North Korea. And then there are satellite images showing munitions dumps being filled with munitions, so these show the route from North Korea to Russia across Russia into munition stumps by the border with Ukraine.

On top of that, there was this warning from US State Department spokesperson Ned Price.

We have information that, despite the public denials that we've heard from the DPRK.

DPRK is North Korea's official name, the Democratic People's Republic of Korea.

The DPRK is covertly supplying Russia's war in Ukraine with a significant number of artillery shells, while obfuscating the real destination of these arm shipments by trying to make it appear as of their incented countries in the Middle East or North Africa.

According to estimates by the US and South Korea, North Korea has sent ballistic missiles and more than two million rounds of one hundred and fifty two millimeters artillery shells. Those shells are basically huge bullets. There are some of the most heavily used munitions in the war in Ukraine, and with two million of them, Russia can fire up to tens of thousands a day. For that, Russia is willing to pay dearly, So for North Korea, there's a lot of money on the table.

We don't know what the exact costs of North Korean artillery shells are, but it may be worth taking a look at something similar the one hundred and fifty five millimeter shell that's the NATO standard. Now, if you look at like some of these recent procurement contracts, these show that they're going for about three to four thousand dollars each. So if you do that times two million, you're looking at eight billion dollars. That's for normal, newly manufactured one

And even if you know, whether it's eight billion dollars or four billion dollars or two billion dollars, that's a lot for North Korea exactly.

The economies estimated to be about twenty five billion dollars, so any any sort of help. If it's eight billion, it's the third of the economy. It would be the biggest gain in North Korea's economy in Kim Jong UN's reign, probably one of the biggest ever for North Korea.

And the money is only part of it. After the break, how North Korea is really getting so much more Officially, both North Korea and Russia deny that there's any arms trade underway, but at the same time they're not being very subtle. Russian military leaders are visiting Pyongyang and North Korea is showing off it's inventory.

Kim Jong un took Russia's defense minister to an exhibition hall and showed him all of his latest weaponry, missiles, anti aircraft systems. This went out on state media North Korea wasn't hiding anything.

So between what North Korea is openly broadcasting, satellite images and other military intelligence, the US and its allies feel very confident that this arms transfer has happened. John, why does North Korea bother denying this to the world.

Because it's a violation of UN sanctions. I'm not sure what the reason is, but openly admitting to violating UN Security Council resolutions and sanctions it's probably not a look that North Korea wants.

But regardless of the denials from North Korea and from Russia, it's clear that this type of arrangement would be a win for Kim Jong un.

The war in Ukraine has opened opportunities for North Korea that have never been there before for economic assistance the likes of which Kim Jong un has never seen.

John says that economic assistance could come in many forms.

North Korea has so many needs it's really difficult to say what it can be getting when. It needs food, it needs fuel and needs cash, It needs technology, it needs armaments. Kim Jong un wants to put more satellites in orbits, so it needs Russian out for that. He wants to build a nuclear powered submarine needs help for that. He may want to build cold power plants because his country is chronically short of electricity, He'll need Russian help

After decades of sanctions, North Korea is one of the poorest countries in the world. Famine and malnutrition are chronic. Anything that Kim Jong un can deliver to improve overall quality of life is a big deal.

One of the big things for him has been the construction of housing. Construction materials are some of the things that have been hit by sanctions, and North Korea has had trouble getting its hands on. The more materials he can get for building construction, the better it is for his economy, the more that he can show that he is providing.

Besides those material gains, the arms deal with Russia also helps boost Kim's image among his own people.

He's seen more as an international statesman the more that he gets the visits from Russia, which has also precipitated more visits from China.

This makes Kim look good at home and with North Korea's allies abroad, and that has made him bolder.

The most obvious thing in what we've seen in state media is that Kim has taken a more aggressive stance towards South Korea. Cut off economic cooperation, said peace reunification is impossible, remove the concept from the constitution, is said, he has the legal right to annihilate South Korea. So we have that on one.

End, and we have North Korea re emerging as a viable source for military supplies. Now you have hot wars in Ukraine and Gaza and conflict in Yemen, and North Korea's weapons are passing a real time test on the battlefield.

Now that Russia is buying North Korean missiles, they're newer missiles. It's kind of a seal of approval that North Korean missiles are good enough. It could reopen the market for North Korea to try sales abroad again.

There are still sanctions in place to prevent this kind of trade, but.

Russia has defied you on sanctions. North Korea has tried to find ways to get around you on sanctions. Soviet friends Iran, Yemen, Syria. The countries that were once customers for North Korea could go to Russia as a conduit for missiles, and Russia could be a friend for North Korea as it tries to go out in the world and find ways to get money.

But becoming a global arm supplier would mean a trade off for North Korea. It can sell weapons overseas or it can rebuild its own stockpile, but it can't really do both.

One thing to consider as well is that these stores of artillery that North Korea's had waiting for years are not as big as they want were. North Korea hasn't

Right now, there are no signs that this arms trade between Russia and North Korea will end anytime soon. Earlier this year, the two countries foreign ministers met in Moscow and North Korea said that Putin has accepted Kim's invitation to visit Pyongyang soon. The closer these two get, the more the pressure mounts on Ukraine and its allies.

Ukraine's supplies are dwindling. Europe has pled a million artillery shells a year to Ukraine, but it's having trouble meeting that. So Ukraine is rationing ammunition and its air defenses are also under pressure. The more missiles North Korea provides to Russia, the more air defenses Ukraine has to deployed to shoot

This is the big take from Bloomberg News. I'm Janet Paskin. This episode was produced by Yang Yang and Naomi Caitlin Kenny is our editor. It was mixed by Veronica Rodriguez and fact checked by Tiffany doy Like Maples is our sound engineer. Our senior producers are Naomi Shavin and Gilda Decarli. Elizabeth Ponsett provides the editorial direction. Nicole Beemster Bower is our executive producer, and Saige Brauman is Bloomberg's head of podcasts.