Egypt’s North Korea Connection

The Ryugyong Hotel in 2011, showing work completed by Orascom. Photo: Flickr

August 10, 2017

By Daniel Leone

Egypt watchers noticed an unusual reference to North Korea in the readout of President Donald Trump’s July 5 call with Egyptian President Abdel Fattah al-Sisi. The White House statement said,

“The two presidents also discussed the threat from North Korea. President Trump stressed the need for all countries to fully implement U.N. Security Council resolutions on North Korea, stop hosting North Korean guest workers, and stop providing economic or military benefits to North Korea.”   

In fact, ties between the Democratic People’s Republic of Korea (DPRK) and Egypt go back decades, and Egypt has never fully aligned with the U.S. position against the Pyongyang regime. U.S. officials say that successive administrations have raised the issue with Cairo, behind closed doors. As the Trump administration ramps up pressure on North Korea to halt its nuclear program, Egypt apparently is among the focuses of U.S. diplomacy, both public and private.

Background on Egypt and North Korean Ties

The DPRK and Egypt formed close ties in the early 1970s, when Egypt invited North Korean pilots to train Egyptians before Egypt’s war with Israel in 1973. Reportedly, North Korea received Scud-B missiles from Egypt from mid-1976 through 1981, after North Korea aided Egypt in the 1973 war. North Korea subsequently provided more assistance and technical expertise to Egypt in establishing indigenous production of a Scud missile clone. Former President Kim Il Sung hosted former President Hosni Mubarak four times in Pyongyang between 1983 and 1990, and the two reportedly had a good relationship. There is currently a North Korean embassy in Cairo and an Egyptian embassy in Pyongyang.  

Sanctions Against North Korea

UN Security Council (UNSC) sanctions against North Korea render most forms of trade with the country illegal under international law. UNSC resolutions approved in 2006, 2009, and 2016 imposed a comprehensive prohibition on the export of weapons to and the import of weapons from North Korea. Other UNSC resolutions enacted since North Korea’s first nuclear test in 2006 have placed sanctions intended to damage North Korean foreign trade and financial transactions. The most recent UNSC sanctions approved on August 5, 2017 target North Korea’s primary exports, including coal, iron, lead, iron ore, lead ore, and seafood, as well as business partnerships between foreign firms and North Korean banks.   

The UN Security Council unanimously adopted resolution 2371, which strengthened sanctions against the North Korea. Photo: Kim Haughton/UN

The United States also has enacted unilateral sanctions against North Korea. The 2016 North Korea Sanctions and Policy Enhancement Act requires the President to sanction entities or individuals found to have contributed to North Korea’s weapons of mass destruction program, arms trade, human rights abuses, or other illegal activities. The 2016 law also imposes new sanctions for entities involved in the DPRK’s mineral and metal trades, and requires the Treasury Department to investigate North Korean money laundering activities.

Illegal Arms Trading

There are several possibilities for what Trump was referring to regarding Egypt and “military benefits” for the DPRK. According to numerous reports, Pyongyang uses front companies, international facilitators, and diplomatic and trade missions to sell and procure prohibited items. UN investigators said in early 2017 that they had documented North Korean trade in “hitherto unreported items such as encrypted military communications, man-portable air defense systems, air defense systems and satellite-guided missiles” in the Middle East and Africa, among other locations. There have been documented incidents of North Korean arms smuggling to Libya, Eritrea, and other countries. According to the South Korean Yonhap News Agency, former DPRK intelligence officials said in 2015 that Egypt was the hub of North Korea’s arms trade in the Middle East.

A UN panel of experts said in 2015 that the North Korean front company Ocean Maritime Management (OMM) was being used to smuggle weapons and had worked with individuals and entities based in Egypt, among other locations. The UN panel listed Egypt’s Port Said as a location near the Suez Canal where North Korea had shipping agents, and stated that OMM personnel were embedded in the Egyptian shipping firm Sunlight Agency in Port Said at least until 2011. The North Korean individuals associated with OMM and the Sunlight Agency were “extensively involved in the operations and logistics of OMM-controlled vessels, including facilitating their passage through the Suez Canal,” according to the UN. Records of Suez Canal transit by OMM-linked ships, some of which may have been transporting arms, are included in the report. In August 2016, Egyptian officials intercepted a North Korean ship en route to the Suez Canal carrying about 30,000 PG-7 rocket-propelled grenades and related equipment, as well as minerals used in smartphone production. UN reports have also suggested that the Korea Rungrado General Trading Corporation has operated in Egypt in the past, and may have provided Egypt with missile parts.

North Korean Workers

Trump urged Egypt to “stop hosting North Korean guest workers.” In December 2016, the U.S. Department of the Treasury sanctioned a number of North Korean companies and individuals, including the Mansudae Overseas Project Group of Companies, for exporting workers to Egypt and other African countries in order to generate revenue for the regime.

Orascom

The White House statement also called on Egypt to stop providing “economic benefits” to North Korea. This could refer, inter alia, to the reported substantial ties of the Sawiris family, Egypt’s wealthiest family, to the country. Naguib Sawiris’ firm Orascom Telecom Media & Technology (OTMT) signed a contract with the North Korean government in 2008 to set up Koryolink, North Korea’s only 3G mobile phone network. The network has garnered three million users and reportedly nets the cash-poor DPRK government hundreds of millions of dollars annually. North Korea has also prohibited OTMT from repatriating its dividends, forcing the massive company to reinvest hundreds of millions of dollars and providing North Korea with rare foreign investment. OTMT Chairman Naguib Sawiris reportedly held talks in Pyongyang in April 2017. The August 2017 UNSC Resolution includes language prohibiting joint ventures and cooperative commercial entities with the DPRK, but OTMT may emerge mostly unharmed from the sanctions, because the resolution includes a vague loophole for “existing joint ventures,” and states that a UN committee may approve some cooperative entities.

Naguib Sawiris (center) poses with Kim Jong Il (right) and Kim Jong Il’s brother-in-law Jang Song Thaek (left) in North Korea in 2011. Photo: KCNA

OTMT did announce in 2016 that the conglomerate would close its affiliate bank, Orabank, in Pyongyang that was used to facilitate the transfer of funds in and out of the country due to U.S. sanctions. According to Chosun Ilbo, a major South Korean news outlet, Orabank was linked to the Foreign Trade Bank of North Korea, which the United States has sanctioned for involvement in funding North Korea’s nuclear weapons program. Though he remains the executive chairman at OTMT, Sawiris resigned from his CEO position a day after the firm’s announcement to close Orabank. The move may have been an effort to protect him from sanctions that penalize American citizens from doing business in North Korea, as Sawiris has dual U.S.-Egyptian citizenship.

During an interview with Forbes in 2012, Naguib Sawiris also confirmed the role of OTMT in the “construction, repair, and façade installations” of the infamous pyramid-shaped Ryugyong Hotel in Pyongyang. During the 2012 interview, Sawiris also stated that OTMT was “planning to relocate Koryolink headquarters into the tower very soon,” though there is no indication that the relocation occurred. North Korea broke ground on the massive Ryugyong Hotel in 1987, but the project was shelved in 1992 and stood idle until 2008, when OTMT became involved in the project according to media reports.

August 14, 2017 – This article has been updated to clarify the reported role of Orascom Telecom and Media Technology (OTMT) in North Korea.