NORTH KOREAN PAYMENTS PROBLEM WITH THE WEST

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86T00608R000600050021-9
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 8
• Document Creation Date: December 16, 2016
• Document Release Date: October 19, 2004
• Sequence Number: 21
• Publication Date: June 3, 1975
• Content Type: MEMO

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SUBJECT North Korean Payments Problem with
the West
The attached article is forwarded in response to
your request of 30 May for information on North Korea's
debt situation. Any comments and questions may be
directed to F
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Distribution: S.08004
Orig & 1 -
1 -
1 -
1 -
1 -
1 -
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OER/C/CH:
(3 June 7
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North Korea: Payments Problem in the West
Over the past five years North Korea has directed an
increasing share of its foreign trade to the non-Communist
countries. Since early 1970, the North Koreans have signed
contracts with firms in Japan and Western Europe for
nearly 5600 million worth of industrial plants and related
equipment. Credit financing for these capital imports, as
well as for record grain imports from France, Canada, and
Argentina, permitted North Korea to run a trade deficit
with the non-Communist countries of $165 million in 1973.
In 1974 an estimated $545 million trade deficit with
the West led to severe payment difficulties for P'yongyang.
A surge of deliveries of equipment under previous contracts
and high world prices pushed up North Korea's import costs
while repayments or. credits from earlier years were falling
due. On the export 3ide,recession in the West weakened
demand for North Korean goods. Pyongyang withheld sales
of nonferrous metals, a major export earner, when prices
were at peak levels in early 1974 only to see prices tumble
later in the year. The North Koreans have also claimed that
their port expansion program disrupted export deliveries as
well as adding to their, costs.
In the second half of 1974 P'yongyang began defaulting
on a large number of Western letters of credit and loans.
By early 1975 the situation had become critical. The amount
that North Korea is in arrears is difficult to pin down but
at present it probably totals $200-300 million. Banks and
firms in Japan, France and the United Kingdom are the major
creditors. (One interesting note is that Soviet-owned
banks in Western Europe probably hold a sizable portion of
these debts.)
North Korea is the first case of default by a Communist
country in the West and its credit rating is at a low ebb.
A Swiss bank recently ranked North Korea as only a somewhat
better credit risk than Chile or Uppei. Volta. France, West
Germany, Japan and Austria have suspended government
guarantees for further credits. Purchases of helicopters
and a radar complex from French firms have been held up by
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the credit suspension. Even more serious, several firms
have stopped production of equipment under existing North
Korean contracts and have halted further deliveries until
the payments problem is resolved.
The loss of access to Japan Export-Import Bank
financing announced in late May, was a major blow to
Pyongyang since application for plant credits totalling
$50 million were pending. Japan was North Korea's largest
trading partner in 1974. North Korean trade organizations
in Japan had lobbied hard to prevent banks and firms from
officially notifying the Japanese government of the defaults
and precipitating the credit cut off. At the same time,
many small Japanese firms faced bankruptcy due to failure
to receive payment for goods sold to North Korea. Seoul
was also pressuring Tokyo to deny EX-IM credits to North
Korea.
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its lagging export earnings. Western blinks an firms,
once burned, will remain cautious in ex.,ending credit.
As a result, P'yongyang will find it harder to pursue its
ambitious goals for rapid industrializ,L on through the
acquisition of Western technology.
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North Korea: Foreign T'raee, 1973 and 1974 l/
(Million US $)
Exports
1973
Imports
Balance
Exports
1.974 `
Imports Ba
lan
ce
Total 490
805
-315
545
1,1)5 -
050
Non-Communist 120
285
-165
190
735 -5
45
Developed 110
250
-140
170
695 -5
25
Western
Europe 35
135
-100
60
335 -2
75
Japan 70
105
- 35
105
265 -1
60
Canada Negl.
10
- 10
Negi.
55 -
55
Australia ....
Negl.
...
Negl.
13.0 =
40
Hong Kong 5
Negl.
5
5
N.egi.
5
Less Developed
Countries 10
35
-25
20
40 -
20
Communist 370
520
-150
355
460 -1
05
USSR
180
300
-120
140
195 -
55
China
115
135
- 20
125
160 -'
35
Eastern
Europe 55
65
- 10
65
80 -
15
Other
20
20
...
25
25 .
..
1. Data have been rounded to the nearest $5 million and have been
adjusted to show North Korean exports f.o.b. and imports c.i.f.
2. Preliminary
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TRANSMITTAL SLIP
DATE
4 June 1975
TO:
CRS via St/P
ROOM NO.
BUILDING
I
Hqs.
REMARKS:
Enclosed is a corrected
copy of the foreign trade table
for S.08004, North Korean
Payments Problem with the West.
FROM: OER/C/CH
RQO [I~
BUILOINQ_~ S
FORM FEB 55'241
REPLACESFO'M 36-8
WHICH MAY E tISED,
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 Approved For Release 2004/10/28 : CIA-RDP86T00608R000600050021-9
North,Korea: Foreign Tratle, 1973 and 1974 l/
(Mil lion US $)
1973
Exports Im orts
talante
EX orts
1974 2/'
Imports
Total'
490 805
-315
590
1,255 -6
65
Non-Communist
120 285
-165
190
; 735
Developed
1.10 250
-140
170
! 695
Western
Europe
35 135
--100
60
335 -2
75
Japan
70 105
-- 35
105
265 -1
60
Canada
Negl.j 10
10
Negl.
55 -
55
Australia
Negl.
...
Neg?.
140 -
40
Hong Kong
5I
Negl;
5
5
N.egl.
Less Developed
Countries
10
35
-25
20
!40 -
20
Communist
370 520
-150
.400
520 -1
20
USSR
18'0 300
-120
185
255 -
70
China
115. , 135
- 20
125
160
35
Eastern
Europe
55
65
- 10
65
80 -
15
,Other
20
20
...
25
,25
1. Data have been rounded to the nearest $5 million and have been
adjusted to show North Korean exports f.o.b. and imports c.i.f.
2. Preliminary:
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