North Korea Is Newest Frontier for a Daredevil Investor
He searched for oil in the badlands of Somalia and fueled a stock market boom in Mongolia. He sued the world’s smallest republic, far out in the Pacific, for a chunk of what it is worth.
Now, he is betting on North Korea.
James Passin, a hedge fund manager at Firebird Management, believes the nuclear-armed country sits on as much as a billion barrels of crude — enough to make it as big a producer as Oklahoma. If the oil exists, he wants to help unlock it.
火鸟管理投资公司(Firebird Management)的对冲基金经理詹姆斯·帕辛(James Passin)认为，这个核武国家拥有可以生产10亿桶原油的石油储量，足以让它成为像俄克拉荷马州那么重要的石油产地。如果这一储量确凿，他想帮助释放它的价值。
“You have a country with 25 million people — young, highly disciplined, literate — and a strong military-industrial complex,” he said in an interview. “It’s possible that the early investors will be rewarded with potential for massive appreciation.”
The risks of sinking cash — even just $7 million or so of Firebird’s $700 million in assets — into a neo-Stalinist state with labor camps and virtually no private property are obvious. The geopolitical volatility was on full display last week, as North Korea claimed that it had tested a hydrogen bomb. And Mr. Passin is treading on murky investment territory, given the American sanctions against the country.
His investors have experienced the wild rides that come with such frontier markets. Two of his funds are being liquidated after deep losses, including on banking in Iraq, gold in Armenia and oil and gas in Kenya.
But Mr. Passin isn’t deterred. “I see opportunities when other people are afraid,” he said.
Mr. Passin, 44, studied philosophy at St. John’s College in Maryland. He was inspired to enter finance, he said, in part by the story of Thales, a philosopher in ancient Greece who got rich by monopolizing olive presses before a bumper harvest he had foreseen in the stars.
现年44岁的帕辛曾在马里兰州圣约翰学院(St. John’s College)研修哲学。他说自己之所以进入金融领域，部分原因是受到古希腊哲学家泰勒斯(Thales)的启发。泰勒斯通过观察星象，预见来年橄榄要大丰收，便提前预租、垄断了所在地区的橄榄榨油作坊，由此获得巨大财富。
Contrarian instincts have led Mr. Passin to out-of-the-way markets like Chechnya, Congo and Somalia.
Joseph Naemi, one of Mr. Passin’s longtime business partners, recalled joining him in a brash attempt in 2002 to buy Uzbekistan’s national oil company, Uzbekneftegaz. They had a meeting with a dozen Uzbek government officials, and Mr. Passin’s pitch was simple: He was there to write a check for $600 million to $700 million to buy the entire company. But the country did not go for the proposal.
“The skeptical look around the boardroom was actually hilarious,” Mr. Naemi wrote in an email.
In 2006, Mr. Passin toured Mongolia and zeroed in on its stock exchange. It was “just a room with some computers,” Mr. Passin recalled.
He said he snapped up shares in “anything that was listed.” By 2011, the country’s economy was clocking one of the fastest growth rates in the world — 17 percent a year — as vast troves of minerals were discovered under the steppes.
Since then, Mongolia’s bull market has crashed, Mr. Passin said, and the economy has slowed. But he is redoubling his efforts there, aiming to construct a set of world-class Mongolian corporations — a project he has broadly likened to the empire-building of Genghis Khan.
Mr. Passin is also wagering on distressed debt in the South Pacific. Firebird has been suing the tiny, destitute island nation of Nauru for repayment on about $24 million of defaulted government-backed bonds, equal to about one-sixth the country’s gross domestic product.
Firebird, which bought the bonds from the original creditors at a fraction of their face value, stands to make money if it wins. The hedge fund has been fighting in Australian courts to garnish Nauru’s state bank accounts — and briefly succeeded in freezing the accounts.
“We will go to every corner of the world to find assets,” he said.
Mr. Passin’s North Korean investments may be his most contentious.
Firebird owns nearly half of a Mongolian company, HBOil, which entered a joint venture with the government of Kim Jong-un in 2013. The partnership gave the small company expansive rights to overhaul North Korea’s primitive energy sector by opening 100 gas stations, restarting a derelict refinery and drilling for oil and gas.
The projects have yet to materialize. Companies have been searching for oil and gas there since the 1980s, and it remains unclear whether the country has any significant quantities.
Mr. Naemi, who is advising HBOil, believes there are deep reserves of oil — perhaps as much as a billion recoverable barrels on land. But the current low price of oil means that if it exists, and can be extracted, it still might not be profitable.
Mr. Passin’s investment also raises legal questions. Alexandra López-Casero, a sanctions lawyer at the Boston-based law firm Nixon Peabody, said the investment might violate American sanctions against North Korea absent a license from the Treasury Department in Washington. Other experts disagree, noting that the United States has not issued a blanket prohibition on investing in the North.
帕辛的这项投资还有一些法律方面的问题。总部位于波士顿的律所尼克松-皮博迪(Nixon Peabody)处理制裁案件的律师亚历山大·洛佩斯-卡塞罗(Alexandra López-Casero)表示，这项投资可能违反了美国对朝鲜的制裁，因为它没有获得美国财政部的许可。有些专家不同意这种观点，他们指出，美国并没有全面禁止针对朝鲜的投资。
Mr. Passin said that Firebird had neither sought such a license nor needed one. He added that an expert had reviewed the venture for him and concluded that it was legal.
Some analysts worry that any oil exploitation would fortify Mr. Kim and others in the country’s ruling elite. “The security risk is not small, as the oil business in D.P.R.K. is exclusively handled by the Communist Party and the military,” said Keun-Wook Paik, an expert on North Korean oil at the research institution Chatham House, using the abbreviation for the Democratic People’s Republic of Korea, the country’s official name. “It will be a kind of Pandora box opening.”
一些分析人士担忧，在朝鲜进行石油开发可能会增强金正恩及该国其他统治精英的力量。“其中的安全风险可不小，因为朝鲜的石油生意都是由该国共产党（即劳动党——译注）和军队垄断经营，”研究机构皇家国际事务研究所(Chatham House)的朝鲜石油问题专家白均旭(Keun-Wook Paik)说。“这就像打开了一个潘多拉盒子。”
Mr. Passin dismisses such concerns.
He said business with North Korea would both benefit ordinary people and encourage the totalitarian state apparatus to become “more open and less harsh.” Besides, he argued, if the West avoided commerce with unsavory nations, much of the world would be off limits.
“I believe there are companies that will emerge out of the D.P.R.K. that will be of lasting importance,” he said. “That will survive for centuries.”