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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Hey Sarah here. One of the best things about working

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Speaker 2: at Bloomberg is that we've got reporters everywhere. Today, on

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Speaker 2: the Big Take, we're bringing you a story from our

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Speaker 2: colleagues in Hong Kong. I'm handing the mic over to

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Speaker 2: my colleague Janet Paskin, and we'll be back with you soon.

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Speaker 2: Here's Janet.

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Speaker 3: We are now two years into the war in Ukraine,

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Speaker 3: and while both sides were running low on ammunition for

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Speaker 3: a while, Russia seems to have solved that problem. Russia

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Speaker 3: is not only relying on its own weapons, it's getting

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Speaker 3: ammunition from elsewhere, from someone who has enough to spare

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Speaker 3: and wants Russia to win this war. Now, United Nations

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Speaker 3: countries aren't supposed to be selling arms to Russia, so

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Speaker 3: no one wants to take the credit. But there are

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Speaker 3: some pretty good clues about where all this ammunition might

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Speaker 3: be coming from. Starting with a letter that Russia sends

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Speaker 3: in twenty twenty two, just six months after it invades Ukraine.

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Speaker 1: We have Russia saying nails in time to a deepen

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Speaker 1: an enhancer cooperation for strategic purposes.

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Speaker 3: Who's Russia writing to North Korea. Now, Russia sends a

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Speaker 3: letter like this every year to North Korea in celebration

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Speaker 3: of Liberation Day, a holiday marking the end of Japan's

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Speaker 3: rule over the Korean Peninsula. But my colleague John Herskowitz

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Speaker 3: has been covering and watching North Korea for more than

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Speaker 3: twenty years, and he says this letter was different. For

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Speaker 3: one thing, it was broadcast on North Korean state TV

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Speaker 3: most U latim do u Latimio. And then there's what

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Speaker 3: the letter said, this call to deepen and enhance our

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Speaker 3: cooperation for strategic purposes.

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Speaker 1: And it's like, uh, it's yeah, there's just a subtle

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Speaker 1: change here. It seemed like, given the situation, it was

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Speaker 1: a good time to take stock of what North Korea

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Speaker 1: had and what Russia needed.

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Speaker 3: So what does North Korea have that Russia needs? The

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Speaker 3: answer is ammunition, lots of it. I'm Janet Paskin and

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Speaker 3: this is the big tick from Bloomberg News today on

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Speaker 3: the show, how North Korea has become critical to Russia's

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Speaker 3: military campaign in Ukraine and why that might be one

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Speaker 3: of the most lucrative things North Korea has ever done.

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Speaker 3: North Korea is one of the most isolated, cut off

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Speaker 3: countries in the world, and it's not like that letter

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Speaker 3: from Russian President Vladimir Putin straight up says please send

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Speaker 3: us some ammunition, thank you very much. So I asked John,

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Speaker 3: how do we even know for sure that North Korea

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Speaker 3: is supplying Russia's military And he said, for one thing,

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Speaker 3: there are satellites that take pictures of North Korea, and

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Speaker 3: images from those satellites do show shipments heading to Russia.

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Speaker 1: There were about three or four ships which went regularly

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Speaker 1: between Russia and North Korea. And then there are satellite

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Speaker 1: images showing munitions dumps being filled with munitions, so these

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Speaker 1: show the route from North Korea to Russia across Russia

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Speaker 1: into munition stumps by the border with Ukraine.

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Speaker 3: On top of that, there was this warning from US

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Speaker 3: State Department spokesperson Ned Price.

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Speaker 4: We have information that, despite the public denials that we've

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Speaker 4: heard from the DPRK.

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Speaker 3: DPRK is North Korea's official name, the Democratic People's Republic

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Speaker 3: of Korea.

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Speaker 4: The DPRK is covertly supplying Russia's war in Ukraine with

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Speaker 4: a significant number of artillery shells, while obfuscating the real

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Speaker 4: destination of these arm shipments by trying to make it

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Speaker 4: appear as of their incented countries in the Middle East

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Speaker 4: or North Africa.

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Speaker 3: According to estimates by the US and South Korea, North

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Speaker 3: Korea has sent ballistic missiles and more than two million

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Speaker 3: rounds of one hundred and fifty two millimeters artillery shells.

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Speaker 3: Those shells are basically huge bullets. There are some of

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Speaker 3: the most heavily used munitions in the war in Ukraine,

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Speaker 3: and with two million of them, Russia can fire up

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Speaker 3: to tens of thousands a day. For that, Russia is

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Speaker 3: willing to pay dearly, So for North Korea, there's a

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Speaker 3: lot of money on the table.

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Speaker 1: We don't know what the exact costs of North Korean

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Speaker 1: artillery shells are, but it may be worth taking a

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Speaker 1: look at something similar the one hundred and fifty five

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Speaker 1: millimeter shell that's the NATO standard. Now, if you look

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Speaker 1: at like some of these recent procurement contracts, these show

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Speaker 1: that they're going for about three to four thousand dollars each.

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Speaker 1: So if you do that times two million, you're looking

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Speaker 1: at eight billion dollars. That's for normal, newly manufactured one

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Speaker 1: hundred and fifty five millimeters artillery shells. North Korea has

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Speaker 1: artillery shells that have been sitting around for decades. A

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Speaker 1: lot of them are probably duds. What the actual value

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Speaker 1: is I don't know, but I think they would probably

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Speaker 1: have a value for billions of dollars.

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Speaker 3: And even if you know, whether it's eight billion dollars

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Speaker 3: or four billion dollars or two billion dollars, that's a

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Speaker 3: lot for North Korea exactly.

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Speaker 1: The economies estimated to be about twenty five billion dollars,

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Speaker 1: so any any sort of help. If it's eight billion,

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Speaker 1: it's the third of the economy. It would be the

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Speaker 1: biggest gain in North Korea's economy in Kim Jong UN's reign,

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Speaker 1: probably one of the biggest ever for North Korea.

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Speaker 3: And the money is only part of it. After the break,

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Speaker 3: how North Korea is really getting so much more Officially,

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Speaker 3: both North Korea and Russia deny that there's any arms

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Speaker 3: trade underway, but at the same time they're not being

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Speaker 3: very subtle. Russian military leaders are visiting Pyongyang and North

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Speaker 3: Korea is showing off it's inventory.

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Speaker 1: Kim Jong un took Russia's defense minister to an exhibition

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Speaker 1: hall and showed him all of his latest weaponry, missiles,

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Speaker 1: anti aircraft systems. This went out on state media North

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Speaker 1: Korea wasn't hiding anything.

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Speaker 3: So between what North Korea is openly broadcasting, satellite images

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Speaker 3: and other military intelligence, the US and its allies feel

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Speaker 3: very confident that this arms transfer has happened. John, why

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Speaker 3: does North Korea bother denying this to the world.

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Speaker 1: Because it's a violation of UN sanctions. I'm not sure

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Speaker 1: what the reason is, but openly admitting to violating UN

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Speaker 1: Security Council resolutions and sanctions it's probably not a look

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Speaker 1: that North Korea wants.

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Speaker 3: But regardless of the denials from North Korea and from Russia,

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Speaker 3: it's clear that this type of arrangement would be a

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Speaker 3: win for Kim Jong un.

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Speaker 1: The war in Ukraine has opened opportunities for North Korea

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Speaker 1: that have never been there before for economic assistance the

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Speaker 1: likes of which Kim Jong un has never seen.

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Speaker 3: John says that economic assistance could come in many forms.

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Speaker 1: North Korea has so many needs it's really difficult to

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Speaker 1: say what it can be getting when. It needs food,

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Speaker 1: it needs fuel and needs cash, It needs technology, it

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Speaker 1: needs armaments. Kim Jong un wants to put more satellites

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Speaker 1: in orbits, so it needs Russian out for that. He

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Speaker 1: wants to build a nuclear powered submarine needs help for that.

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Speaker 1: He may want to build cold power plants because his

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Speaker 1: country is chronically short of electricity, He'll need Russian help

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Speaker 1: for that. He may want to develop more powerful missiles,

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Speaker 1: will need Russian help for that. He may want to

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Speaker 1: buy more Hennessy Kognac and he may need Russian help

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Speaker 1: for that. And you just don't know what exactly it is.

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Speaker 3: After decades of sanctions, North Korea is one of the

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Speaker 3: poorest countries in the world. Famine and malnutrition are chronic.

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Speaker 3: Anything that Kim Jong un can deliver to improve overall

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Speaker 3: quality of life is a big deal.

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Speaker 1: One of the big things for him has been the

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Speaker 1: construction of housing. Construction materials are some of the things

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Speaker 1: that have been hit by sanctions, and North Korea has

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Speaker 1: had trouble getting its hands on. The more materials he

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Speaker 1: can get for building construction, the better it is for

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Speaker 1: his economy, the more that he can show that he

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Speaker 1: is providing.

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Speaker 3: Besides those material gains, the arms deal with Russia also

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Speaker 3: helps boost Kim's image among his own people.

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Speaker 1: He's seen more as an international statesman the more that

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Speaker 1: he gets the visits from Russia, which has also precipitated

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Speaker 1: more visits from China.

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Speaker 3: This makes Kim look good at home and with North

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Speaker 3: Korea's allies abroad, and that has made him bolder.

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Speaker 1: The most obvious thing in what we've seen in state

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Speaker 1: media is that Kim has taken a more aggressive stance

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Speaker 1: towards South Korea. Cut off economic cooperation, said peace reunification

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Speaker 1: is impossible, remove the concept from the constitution, is said,

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Speaker 1: he has the legal right to annihilate South Korea. So

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Speaker 1: we have that on one.

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Speaker 3: End, and we have North Korea re emerging as a

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Speaker 3: viable source for military supplies. Now you have hot wars

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Speaker 3: in Ukraine and Gaza and conflict in Yemen, and North

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Speaker 3: Korea's weapons are passing a real time test on the battlefield.

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Speaker 1: Now that Russia is buying North Korean missiles, they're newer missiles.

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Speaker 1: It's kind of a seal of approval that North Korean

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Speaker 1: missiles are good enough. It could reopen the market for

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Speaker 1: North Korea to try sales abroad again.

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Speaker 3: There are still sanctions in place to prevent this kind

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Speaker 3: of trade, but.

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Speaker 1: Russia has defied you on sanctions. North Korea has tried

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Speaker 1: to find ways to get around you on sanctions. Soviet

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Speaker 1: friends Iran, Yemen, Syria. The countries that were once customers

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Speaker 1: for North Korea could go to Russia as a conduit

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Speaker 1: for missiles, and Russia could be a friend for North

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Speaker 1: Korea as it tries to go out in the world

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Speaker 1: and find ways to get money.

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Speaker 3: But becoming a global arm supplier would mean a trade

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Speaker 3: off for North Korea. It can sell weapons overseas or

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Speaker 3: it can rebuild its own stockpile, but it can't really

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Speaker 3: do both.

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Speaker 1: One thing to consider as well is that these stores

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Speaker 1: of artillery that North Korea's had waiting for years are

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Speaker 1: not as big as they want were. North Korea hasn't

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Speaker 1: fallt a war since nineteen fifty three. They have thousands

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Speaker 1: of artillery pieces which are positioned along the border to

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Speaker 1: face off against South Korea, and the idea of an

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Speaker 1: initial North Korean attack would be to rain down hundreds

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Speaker 1: of thousands of shells onto South Korea, which will be

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Speaker 1: much more difficult now that it's sending so many of

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Speaker 1: its shells to Russia.

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Speaker 3: Right now, there are no signs that this arms trade

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Speaker 3: between Russia and North Korea will end anytime soon. Earlier

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Speaker 3: this year, the two countries foreign ministers met in Moscow

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Speaker 3: and North Korea said that Putin has accepted Kim's invitation

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Speaker 3: to visit Pyongyang soon. The closer these two get, the

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Speaker 3: more the pressure mounts on Ukraine and its allies.

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Speaker 1: Ukraine's supplies are dwindling. Europe has pled a million artillery

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Speaker 1: shells a year to Ukraine, but it's having trouble meeting that.

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Speaker 1: So Ukraine is rationing ammunition and its air defenses are

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Speaker 1: also under pressure. The more missiles North Korea provides to Russia,

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Speaker 1: the more air defenses Ukraine has to deployed to shoot

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Speaker 1: down North Korean missiles, Russian missiles, drones. You know, these

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Speaker 1: are not sophisticated weapons, They're not difference makers, but now

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Speaker 1: with Ukraine's stocks drying up, they could be.

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Speaker 3: This is the big take from Bloomberg News. I'm Janet Paskin.

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Speaker 3: This episode was produced by Yang Yang and Naomi Caitlin

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Speaker 3: Kenny is our editor. It was mixed by Veronica Rodriguez

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Speaker 3: and fact checked by Tiffany doy Like Maples is our

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Speaker 3: sound engineer. Our senior producers are Naomi Shavin and Gilda Decarli.

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Speaker 3: Elizabeth Ponsett provides the editorial direction. Nicole Beemster Bower is

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Speaker 3: our executive producer, and Saige Brauman is Bloomberg's head of podcasts.

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Speaker 3: Thanks for listening, Please follow and review The Big Take

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Speaker 3: the show. We'll be back on Monday.