Sweden-North Korea friendship at a great cost

Sweden was the first Western country to create close trade relations with North Korea –but was utterly duped. To this day, North Korea owes Sweden about half a billion US dollars for transactions completed in the 70s and subsequent interest for non-paid purchases. Below is an article about what the friendly relations with North Korea has cost Sweden.

Swedish personnel in Pyongyang (Photo: Erik Zachrison)

The North Korean debt to Sweden increases yearly by millions of dollars, mainly for purchases of cars and drilling equipment delivered by Swedish companies Volvo and Atlas Copco in the 70s. Sweden has had an embassy in North Korea for a longer time than any other Western country, and about 40 years ago Swedes had a general positive view of North Korea in contrast to the general view today as an international culprit. As of April 1973, Sweden, as the only Western country, recognized North Korea.

A tug-of-war between leftist and rightist ideas was underway in Sweden and voices were heard that Sweden, as a neutral country, must recognize North Korea since the capitalist counterpart South Korea was recognized in 1959. Phrases such as “an economic miracle” had been voiced about the former and many companies hungered for a whole new and unexploited marketplace.

High GDP numbers hinted that North Korea had the second highest living standards in Asia following Japan. North Korea, with its long coast and vast forests was considered to match Sweden. The Swedish Trade & Invest Council believed fruitful exchanges could be made in the ship, port, wood and paper industries. Furthermore, similarities in geographical qualities indicated that Swedish machines for the mining industry would be a perfect match for North Korea.

Swedish leading-edge technology on display. (Photo: Erik Zachrison)

As soon as the recognition of North Korea was proclaimed, Volvo received an order of 1000 cars and Swedish companies were given orders for around 0.6 billion US dollars in today’s value. Gargantuan earth excavator machines and construction machines were sent by ship and the Trans-Siberian railway and both the embassy and an industry fair were opened in 1975 in North Korea. The Swedish ambassador and important company directors were all at the scene for the inauguration of the industry fair on the anniversary of Sweden’s recognition of North Korea on April 3^rd.

A Swedish excavating machine is shown to the crowd in North Korea. (Photo: Sveriges Radio)

It was not before long that the companies realized that the trade relations with North Korea would come to be a major commercial catastrophe. During one of the exhibition days, Swedish employees were banned from their own fair. During that time, North Koreans most likely conducted industrial espionage by dismantling and re-assembling the machines. North Korea did not pay for their orders and not even for the machines that were left in the country after the industrial fair.

Swedish export companies turned to The Swedish Export Credits Guarantee Board and were thus paid indirectly by Swedish taxpayers for their losses. The board works as an insurance company for Swedish export companies to protect themselves from the risk of non-payment. They believe that they will not see any money in the near future and that it is very doubtful in a longer perspective as well. North Korea has since long been a country for which the board does not issue any insurances and therefore any possible export to North Korea is done through advance payment. By the end of 2012 Sweden had almost 1 billion US dollars in claims from derailed export transactions to other countries, with North Korea making up almost half of that.

Portraits of North Korean President Kim Il-Sung and King Carl XVI Gustaf of Sweden. Notice how Sweden is spelled in Korean based on the Swedish pronunciation and not the English pronunciation. (Photo: Erik Zachrison)

In 1976, the common man in Sweden learned about the true nature of North Korea as a scandal was unveiled where North Korean diplomats at the North Korean embassy in Stockholm had been caught smuggling goods from Poland to finance their workplace.

On the other side of the world, the Swedish embassy in North Korea first had plans to shut down the Swedish embassy. However, it remained, first as somewhat of an enforcement service in hopes of receiving part of the debt from North Korea. From time to time small repayments were made up until 1989 when the suspension of payments became a fact. Today the embassy remains as a protective outpost for many Western countries, among them the United States, but barely a sliver of hope remains of seeing any debt repayment for Sweden.