A top secret U.S. military assessment found that North Korea is still evading U.N. sanctions by transferring oil at sea, and that a coalition of U.S.-led forces deployed to disrupt the movements has failed to dent the overall number of illegal transfers, three U.S. officials familiar with the intelligence told NBC News.
The finding underscores the Trump administration's struggle to maintain economic pressure on North Korea amid a diplomatic bid to persuade Pyongyang to abandon its nuclear and missile arsenal. The smuggled fuel provides a crucial lifeline for the regime's economy and armed forces.
The U.S. Pacific Command assessment, labeled "Top Secret," found that the presence of warships and surveillance aircraft deployed by an eight-nation coalition since September has forced North Korea to adjust its tactics at sea, including transferring oil farther away from the Korean Peninsula and often in other countries' territorial waters.
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The North Koreans are also resorting to smaller vessels to avoid recognition by the coalition's warships and surveillance aircraft, the officials said. The assessment found that while attempts to transfer oil have not decreased, the coalition presence has forced North Korea out of the East China Sea and into more logistically challenging areas to the north and south. That shift could ultimately affect the pace and number of the ship-to-ship transfers, raising the cost of smuggling for North Korea, according to the three U.S. officials.
A U.S. defense official said the U.S. began surveillance flights over the East China Sea to disrupt these illicit transfers on Oct. 19, 2017. Since then, the U.S. has conducted more than 300 surveillance flights. Allied nations began flights on April 30, and have flown more than 200 surveillance flights to date.
Since October 2017, there have been 30 instances when smugglers halted ship-to-ship transfers when observed by coalition naval forces at sea, according to a U.S. defense official.
"We've increased pressure and have been collecting information on these illicit transfers and then feeding them back to our interagency partners for financial, law enforcement and diplomatic action," the official told NBC News.
In September, the U.S. and its allies expanded surveillance of North Korea's smuggling, with an eight-nation coalition, including Australia, Britain, Canada, France, Japan, South Korea and New Zealand, deploying warships and aircraft to better spot sanctions violations.
The move came after a surge in ship-to-ship transfers this year, with North Korea obtaining black market fuel at sea — often with the help of Chinese and Russian counterparts. The smuggling flouts U.N. sanctions that strictly limit oil imports. A U.N. Security Council resolution in September 2017 put a cap on refined imports at 500,000 barrels a year for North Korea.
A leaked report by U.N. sanctions experts in August, based on U.S. intelligence, found the number of transfers surging, with vessels turning off the transponders that show a ship's geographic location. Between January and May, North Korean ships made 89 deliveries of refined petroleum to the country's ports, U.N. Ambassador Nikki Haley said in July.
A senior Defense Department official recently described an escalating cat-and-mouse game with North Korea, as Pyongyang adapts its tactics to avoid being spotted by U.S. and allied aircraft and naval ships.
"It's a sustained effort but I would tell you the North Koreans are learning, evolving, getting better so the ship-to-ship transfers are taking place farther away from the Peninsula," Randy Schriver, assistant secretary of defense for Asian and Pacific security affairs, said at a discussion this month at the University of Chicago Institute of Politics. "So they're getting better with their own attempts to evade, and we're evolving as well in terms of our sustained effort to disrupt that."
The head of U.S. Pacific Command, Adm. Phil Davidson, told a small group of reporters last month that the U.S. has stepped up its participation in the coalition, recently dedicating two ships to the mission and increasing surveillance flights by 50 percent.
Another effect of the North Korean ships moving into waters belonging to other nations is those countries can share their intelligence about the smuggling with the international coalition, the three U.S. officials said.
Schriver said coalition vessels and aircraft have not carried out forced boardings of ships but have gleaned information that allows governments to uncover the smuggling networks.
"What's equally as powerful as boarding a ship is taking a picture of the hull, getting information about the ship involved in the illegal activity, and that allows you to get to the insurers, the networks, the people financing the operation, and so we've been successful with a camera as much as we would be if we were to proceed to boardings."
The crew of a Canadian naval ship taking part in the sanctions monitoring, the HMCS Calgary, reportedly saw several ship-to-ship oil transfers in recent months during its deployment in the East China Sea, with suspected blacklisted vessels taking part in some cases.
The mere presence of a Western warship prompted some smugglers to quickly turn and flee the area, Canadian media reported.
"We noted in a few instances that the transfers would wrap up quite quickly and they would have to escape. So our presence disrupted several of the transfers," said Cmdr. Blair Saltel.
Having survived decades of economic sanctions, North Korea has honed techniques to skirt international prohibitions, using shell companies, illicit financing, stealthy shipping movements, and partners in China and Russia to smuggle in prohibited goods, experts and former officials said.
Analysts and firms that track North Korean shipping data say there are numerous signs that the regime continues to use deception to move coal out of North Korean ports for sale and to obtain oil through ship-to-ship transfers at sea.
"I think they're certainly trying to keep apace with the sanctions regime," said Lucas Kuo, an analyst at C4ADS, a nonprofit research organization that uses data to track illicit networks.
Two ships identified in a report by a U.N. panel this year for smuggling coal to Russian ports, the Sky Angel and the Sky Lady, continue to operate and recently made port visits to Japan — even obtaining insurance paperwork, according to maritime and shipping sites.
The Sky Angel pulled into the Japanese port of Muroran in July, and Sky Lady made a port of call at Tomakomai on Tuesday.
"The fact that they're still able to acquire this insurance at least raises some questions," Kuo said.
Time-lapse videos from a San Francisco-based private company, Planet Labs, have shown coal shipments moving out of North Korean export facilities at Nampho and Rason over the past year. The videos indicate coal traffic ramped up during the course of 2018, the website NK Pro reported.
Apart from smuggling, legal trade between China and its impoverished neighbor has picked up again since a drop in 2017, when Pyongyang had angered Beijing with a flurry of missile tests.
Analysts that try to track the price of fuel in North Korea have detected no major spike in gasoline prices, despite the strict quotas imposed by the U.N. sanctions, with prices below peaks reached last year.
"While the price of diesel and petrol in Pyongyang appeared stable between July and October, we did see a slight increase in the cost of both products in mid-October, though not above previous levels observed in 2018," said Hamish Macdonald of NK Pro.
Experts and foreign diplomats say Washington's "maximum pressure" campaign has faltered since President Donald Trump met North Korean leader Kim Jong Un in Singapore in June, with China relaxing its enforcement of sanctions. Even the U.S. president has said he would prefer to drop the term "maximum pressure" given the positive tone of his discussions with Kim.
Despite the tentative detente between Kim and Trump, the Treasury Department has continued to press ahead on sanctions against North Korea in recent months. Treasury has blacklisted more individuals, ships and companies accused of violating U.S. sanctions against North Korea, and issued warnings to businesses and insurance companies to stay away from vessels or organizations suspected of taking part in smuggling operations.
Both China and Russia insist they are consistently abiding by U.N. Security Council resolutions on North Korea.
The White House and the State Department declined requests for comment.
As to whether China and Russia were fully enforcing international sanctions on Pyongyang, a State Department official told NBC News that all U.N. member states were obliged to carry out U.N. sanctions.
Some lawmakers have long urged the U.S. to go after major Chinese banks or firms suspected of enabling North Korea's evasion of sanctions, arguing that Beijing helps insulate its neighbor from the full effect of international sanctions. But the Trump administration, like its predecessors, so far has chosen not to penalize large Chinese companies in connection with North Korea's sanction-busting.
"The United States does not comment on internal deliberations regarding sanction designations, however our actions have made clear we will not hesitate to take unilateral action against entities that conduct prohibited activities or facilitate sanctions evasion," the State Department official said.