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North Korea’s Inflection Point – Analysis

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With the US midterm elections over and the results clear, specific actors are going to proceed.  North Korea is no exception because of the sharp escalation in doctrinal changes and missile tests that started in January 2022.

The cryptocurrency funding aspect for these programs is of interest as the end of the year approaches with more trouble from Pyongyang. Next week, more answers will become available regarding how North Korea clashes with its neighbors.

North Korea’s funding for its kinetic programs is troublesome.  It has stolen more than $300 million worth of cryptocurrency. An $81 million cyberheist from the Bangladesh Central Bank and $60 million from Taiwan’s Far Eastern International Bank stand out as two key examples of the size of these North Korean operations. An Israeli crypto firm was a recent target of what appears to be an attempt by Pyongyang to steal more crypto assets.

North Korea’s cyberfunding is highly political too, sending a strong message about capabilities. The first big example was in 2014: North Korea hacked Sony Pictures Entertainment as revenge for the movie “The Interview,” causing financial and reputational damage.  Around the same time, it sent spear-phishing messages to other victims in the entertainment industry, including a movie theater chain and a UK company that was producing a fictional series involving a British nuclear scientist taken prisoner in North Korea.

In 2017, Pyongyang was behind the malware used in the 2017 WannaCry 2.0 global ransomware, reaping more cash for North Korea. It conducted such operations through the Lazarus Group and a North Korean government front company, Chosun Expo Joint Venture also known as Korea Expo Joint Venture. Pyongyang is the best of the best in terms of using cybercrime as a revenue generating technique to pay for dangerous and destabilizing weapon systems, some even in underground chambers beneath water reservoirs.  When North Korea conducts its nuclear test, remember where the funding came from.

Importantly, on US midterm election day, the US made a smart move by redesignating privacy crypto-exchange Tornado Cash as a sanctioned entity, arguing that North Korea was using the service to support its weapons of mass destruction program.  North Korea has been financing their weapons programs via crypto for a number of years now, far in advance of other illicit crypto ecosystems.  Other countries are watching out for Pyongyang’s forward leaning cyber criminals. 

More importantly, the US-South Korea response to North Korea’s antics this year is some of the most assertive in years. Joint exercises, responses, flight formations including two B1 bombers, have been showing their might to Pyongyang. South Korean and US warplanes also practiced bombing a target in the Yellow Sea in response and fighter jets from the US and Japan carried out joint drills over the Sea of Japan.

North Korean President Kim Jong Un is not one to cower under threats, even those coming from the US Secretary of Defense about North Korea ceasing to exist. Within the North Korean leadership mindset, Pyongyang becomes more emboldened because of its kinetic achievements in this key year for Kim.

Timing is everything in the Northeast Asian theater especially from Pyongyang’s point of view.  Last week, North Korea launched over 30 missiles and hundreds of artillery shells after threats from Pak Jong Chon, secretary of the Central Committee of the Workers’ Party of Korea. He strongly condemned the joint military drills between South Korea and the US, and asserted that “the US and South Korea will get to know what an irrevocable and awful mistake they made.” This warning is being received by policymakers and stakeholders.

While many observers looked to dissect his statement as a threat of a nuclear test, others believe Kim JongUn is biding his time on this forthcoming detonation.  It is believed that Kim has nothing to lose by taking his time and continuing his strategy of graduated escalation before delivering his coup de grâce, a major nuclear test or even a series of tests.

To be sure, with the midterm elections over and more emboldened, President Joe Biden is set to meet Prime Minister Fumio Kishida of Japan and South Korean President Yoon Suk-yeol during a trip to Asia to discuss how to stem North Korea’s nuclear program given the tests and cybercrime funding. The leaders are meeting in Cambodia for the ASEAN and the Group of 20 industrialized nations meetings.  Biden may be meeting Chinese President Xi Jinping directly about North Korea’s nuclear issue. Interestingly, Russian Foreign Minister Sergey Lavrov will also be in attendance. These important meetings are occurring during the window for North Korea to test a nuclear weapon. So a showdown seems to be on the horizon.

Overall, North Korea is using 2022 to reaching its maximum capabilities as a nuclear armed state capable of launching missiles to hit targets from Guam to Hawaii and in between. The cybercriminal aspect that helped to build the capacities we see today continues to require maximum policy focus in the upcoming meetings in Southeast Asia.

Dr. Theodore Karasik

Dr. Theodore Karasik is a senior advisor to Gulf State Analytics and an Adjunct Senior Fellow at the Lexington Institute in Washington, D.C. He is a former Advisor and Director of Research for a number of UAE institutions. Dr. Karasik was a Lecturer at the Dubai School of Government, Middlesex University Dubai, and the University of Wollongong Dubai where he taught “Labor and Migration” and “Global Political Economy” at the graduate level. Dr. Karasik was a Senior Political Scientist in the International Policy and Security Group at RAND Corporation. From 2002-2003, he served as Director of Research for the RAND Center for Middle East Public Policy. Throughout Dr. Karasik’s career, he has worked for numerous U.S. agencies involved in researching and analyzing defense acquisition, the use of military power, and religio-political issues across the Middle East, North Africa, and Eurasia, including the evolution of violent extremism. Dr. Karasik lived in the UAE for 10 years and is currently based in Washington, D.C. Dr. Karasik received his PhD in History from the University of California, Los Angeles.

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