Kim Jong Il, the North Korean dictator, is planning to use the London gold market to circumvent financial sanctions imposed by the international community.

Mr Kim’s cash-strapped regime relisted its central bank with the London Bullion Market Association this year and is preparing to sell gold through London.

Gold traders said yesterday that they had seen no sign of the North Koreans disposing of gold in London since the Chosun Central Bank regained its status as a “good delivery supplier” this year. However, North Korea is thought to be preparing to sell gold through London once it gets a regular supply from its outdated mines.

The development of the mines is expected to be assisted by foreign investment, The Times has learnt. One of the funds seeking to buy into the North Korean gold market is the London-based Chosun Development & Investment Fund.

Attempts by North Korea to gain access to the London gold market could be a blow to American efforts to limit Mr Kim’s ability to pay for weapons of mass destruction and nuclear materials. The US Treasury gave warning last year that North Korea was using international banks to launder the proceeds from currency counterfeiting and drug and weapon sales. The Government of Macau subsequently froze $24 million held by the Banco Delta Asia.

The UN formalised financial sanctions against North Korea in October after Mr Kim’s regime claimed to have detonated a nuclear device. However, gold sales would not be covered by the UN sanctions and Mr Kim again would have access to large quantities of foreign currency that could be used to fund a nuclear programme.

It is believed that in the 1980s the North Koreans sold about a tonne of gold a month — worth about $24 million (£12.2 million) today — through London.

North Korean goldmining aspirations are being assisted by foreign investors who see opportunities there. Colin McAskill, the chairman of Koryo Asia and investment adviser to the Chosun Development & Investment Fund, which was established last year to invest in North Korea, said: “One of the priorities of the fund is to redevelop the goldmining and other mineral industries and bring the product back through London.”

Roger Barrett, who runs the Beijing-based Korea Business Consultants, a firm that assists foreign enterprises in the North, said that he had helped to facilitate a goldmining deal between Singaporean investors and North Korea in 2002. The Chinese are also thought to be considering investments in the North Korean mining sector.

However, gold producers cannot sell in London without attaining good-delivery status. North Korea held that distinction from 1976 to the early 1990s, when floods and mine collapses are thought to have shut down production there. Having regained the status, the country will be able to sell into the London market as soon as it can generate a regular supply of metal.

Yesterday the US Treasury Department declined to comment on the awarding of good-delivery status to the North Koreans. A spokesman for the North Korean Embassy in London said: “This world is full of these kinds of stories. It’s all just blah, blah, blah.”

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