North Korea is an international deadbeat but Russia ended up collecting

How North Korea Stole 1,000 Volvos From Sweden - YouTube

North Korea's $430 Million Car Debt: Fifty Years of Unpaid Volvos Still Running Strong

Half a century after Sweden delivered 1,000 Volvo sedans to North Korea, the hermit kingdom's debt has ballooned to unprecedented levels while many of the original vehicles continue operating as taxis in Pyongyang.

Fifty years ago this month, what seemed like a promising trade deal between Sweden and North Korea turned into one of international commerce's most enduring financial oddities. In 1974, as part of a broader diplomatic and economic outreach following the establishment of formal relations in 1973, North Korea placed orders for substantial Swedish exports including 1,000 Volvo 144 sedans and industrial mining equipment.

The vehicles were duly shipped and delivered, but payment never materialized. Today, that unpaid invoice has transformed into a debt that various sources estimate between $250 million and $430 million, depending on how interest and the broader trade package are calculated.

A Deal Gone Wrong

The original transaction, valued at approximately $70-75 million in 1974 terms (roughly $390-420 million in today's currency), was part of Sweden's broader strategy to establish trade relationships with emerging markets during the Cold War era. At the time, North Korea appeared to be a viable trading partner with a functioning industrial economy.

"At the time, [North Korea] wasn't doing so badly," explained Jonathan D. Pollack, a senior fellow at the Brookings Institution, in a 2017 NPR interview. "After the Korean War, their economy was rebuilt, it became a functioning industrial state, still very aid-dependent — but it wouldn't have seemed like such a bad bet, under the circumstances."

Swedish companies, backed by their government's export credit guarantees, shipped millions of dollars worth of products including heavy mining machinery and the now-famous fleet of Volvo 144 sedans. The cars were intended to serve various governmental functions, including taxi service in the capital.

The Debt Continues to Grow

According to the Swedish Export Credit Agency (EKN), which insured the transaction, North Korea has made no payments since 1989. The agency continues its ritualistic reminder system, sending payment notices to Pyongyang twice yearly — a practice that has continued uninterrupted for decades.

Of the 16 countries that owe money to Sweden through EKN, North Korea's debt accounts for approximately 45 percent of the total outstanding claims, making it Sweden's largest sovereign debtor. The compound interest has caused the original debt to multiply several times over.

Recent estimates vary significantly regarding the current debt total:

• Some sources cite approximately $322-330 million as of 2017
• More recent calculations suggest the debt may have reached $430 million by 2025
• Swedish media reports have mentioned figures approaching 3 billion Swedish Kronor (approximately $270-290 million)

Cars That Won't Die

Perhaps the most remarkable aspect of this saga is the longevity of the Volvo 144s themselves. Despite being nearly 50 years old and operating in a country with limited access to original spare parts, many of the vehicles remain in service.

In October 2016, the Swedish Embassy in Pyongyang tweeted: "Still going strong. One of the Volvo's from yr 1974 still unpaid for by DPRK. Running as taxi in Chongjin w almost half million km on odo!"

The durability of these vehicles has become something of a testament to Swedish engineering. Tourist accounts and diplomatic observations consistently note the presence of these vintage Volvos on North Korean streets, often serving as taxis in Pyongyang and other cities.

"Many of the Volvos were put to serve in the small but very present taxi fleet in Pyongyang," recalled one visitor. "I think I've never been inside such an old car even back home in Sweden. This taxi was very well maintained too, close to mint condition it seemed."

Diplomatic Implications

The Volvo affair has created an unusual diplomatic dynamic. Sweden became the first Western nation to establish an embassy in North Korea in 1975, and for more than two decades, it was the only Western diplomatic presence there. This unique position has allowed Sweden to serve as an intermediary between North Korea and countries like the United States, Canada, and Australia, providing consular services for their citizens.

Sweden still maintains its embassy in Pyongyang, and it has taken part in humanitarian aid work and expanded its role as intermediary between North Korea and the outside world. Some analysts suggest that the unpaid Volvo debt is simply an accepted cost of maintaining this important diplomatic channel.

A Pattern of Non-Payment

North Korea's failure to pay for the Swedish goods is part of a broader pattern of sovereign debt defaults from the 1970s. The country owes substantial sums to other European nations:

• Switzerland reports claims of $241 million as of December 2016
• Finland and Finnish businesses are owed more than $35 million

Unlike Sweden, some countries have taken different approaches. Russia instead adopted a different strategy. In 2014 Moscow cleared most of the $10 billion debt North Korea owed from the Soviet Union times, eyeing instead a potentially lucrative natural gas pipeline and other infrastructure projects.

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Sidebar: Russia's Strategic Debt Forgiveness and Its Ukraine War Payoff

While Sweden continues to pursue its decades-old debt from North Korea, Russia took a dramatically different approach that now appears prescient given current geopolitical developments.

The $10 Billion Soviet Debt Write-Off

In 2014, Russia's parliament voted to forgive 90 percent of North Korea's Soviet-era debt, which amounted to $10.94 billion as of 2012. The debt originated from loans made by the Soviet Union to North Korea since the 1960s to build power plants and other infrastructure. North Korea was left with only $1.09 billion to repay over 20 years in six-month installments.

Russia's Deputy Finance Minister Sergei Storchak indicated that the remaining payments would be reinvested into North Korean projects, including a proposed gas pipeline from Russia's Sakhalin Island fields to South Korea via North Korea, and railway infrastructure. The pipeline was envisioned to carry 10 billion cubic meters of gas annually to South Korea.

The debt forgiveness was part of Russia's broader strategy to diversify its energy markets away from Europe toward Asia—a goal that gained new urgency following Russia's clash with the West over Ukraine and Crimea in 2014.

From Debt Relief to Military Partnership

Russia's strategic debt forgiveness has proven to be a geopolitical masterstroke. As of 2025, North Korea has become one of Russia's most crucial military suppliers in its war against Ukraine, providing:

• Artillery Shells: An estimated 8-9 million artillery shells delivered since 2023, with North Korean ammunition reportedly comprising 50-60% of all shells fired by Russian forces in Ukraine
• Container Shipments: Over 20,000 shipping containers of military equipment transported from North Korean ports to Russia
• Advanced Weapons: Hwasong-11 series ballistic missiles and 170mm self-propelled guns
• Military Personnel: Approximately 12,000 North Korean troops deployed to support Russian operations

Economic Revival Through War

The arms trade has dramatically revived Russia-North Korea commerce:

• 2022: $3.78 million in trade
• 2023: $34.4 million (nine-fold increase)
• 2024: $52.9 million (January-May alone)

Estimates suggest North Korea's military supply deal with Russia could be worth $2.8-5.5 billion, providing a critical economic lifeline to the isolated regime.

Strategic Implications

Russia's debt forgiveness strategy contrasts sharply with Western approaches. While Sweden continues sending payment reminders for its much smaller debt, Russia's write-off has yielded:

1. Military Supply Chain: A reliable source of ammunition at a time of critical shortages
2. Diplomatic Alliance: Strong support from North Korea in international forums
3. Strategic Leverage: A partnership that complicates Western efforts to isolate both nations

The arrangement demonstrates how sovereign debt can be used as a tool of geopolitical influence rather than merely financial recovery. Russia's willingness to absorb the $10 billion loss in 2014 has been repaid many times over through North Korea's military support in Ukraine.

Current Status

Unlike Sweden's persistent but futile debt collection efforts, Russia's strategic debt forgiveness has created a mutually beneficial partnership that directly supports its current military objectives. North Korean factories are reportedly operating "at maximum capacity" to supply Russian forces, while Russia provides North Korea with oil, food, and advanced military technology in return.

This stark contrast illustrates how different approaches to sovereign debt can yield vastly different geopolitical outcomes—Sweden's adherence to financial principles versus Russia's use of debt as a strategic tool.

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The "Largest Car Theft in History"

While media reports have sometimes dubbed this incident "the largest car theft in history," legal experts note that it's technically a case of unpaid invoices rather than theft, since the vehicles were delivered as part of a legitimate trade agreement that North Korea simply chose not to honor.

The Swedish Export Credit Agency, which compensated Volvo for the unpaid cars decades ago, maintains that "claims will be recovered" despite the obvious practical challenges of collecting from one of the world's most isolated nations.

Ironically, Volvo Cars itself is no longer Swedish-owned. In 2010, Ford Motor Company sold Volvo Cars to China's Zhejiang Geely Holding Group for $1.8 billion, making the dispute over Swedish-made vehicles even more complex from an international relations perspective. While Volvo Cars was publicly listed on the Nasdaq Stockholm stock exchange in 2021, Geely Holding still retains majority ownership. By a strange twist of modern globalization of trade, Volvo Cars is now owned by Zhejiang Geely Holding, a Chinese auto company that's a privately-held entity in an authoritarian communist regime.

Current Status and Future Prospects

As of 2025, the debt remains entirely unpaid, and prospects for collection appear virtually nonexistent given North Korea's international isolation and economic constraints. The Swedish government continues its semi-annual reminder notices, though officials acknowledge they typically receive no response from Pyongyang.

"No payment has been made since 1989," confirmed Katarina Byrenius Roslund, deputy director of the Swedish Foreign Ministry's press office. The debt has become a peculiar fixture of Nordic-East Asian diplomacy — too large to forget, too unlikely to collect.

For North Korea, the aging Volvos serve as mobile reminders of an earlier era when the country briefly opened to Western trade. For Sweden, they represent both a diplomatic investment and a very expensive lesson in the risks of sovereign lending.

The story has become a fascinating case study in international trade, diplomatic relations, and Swedish automotive durability. However, North Korea's unpaid Volvo debt, while unusual in its longevity and the continued operation of the original vehicles, is part of a broader pattern of sovereign debt disputes that have shaped international finance for centuries.

Similar Cases: A Pattern of Sovereign Debt Disputes

North Korea's unpaid Volvo debt is far from unique in the world of sovereign finance. History is littered with similar cases where countries have defaulted on their obligations, leading to protracted legal battles and diplomatic tensions.

The Argentina "Vulture Fund" Saga

The most notorious modern example involves Argentina's battle with hedge funds following its 2001 default on $100 billion in debt. Although around 93% of bondholders accepted reduced repayments (typically being repaid only 30% of the face value of bonds), a minority owning around 7% of the debt (US$4 billion), mostly hedge funds and vulture funds, continued to argue in court that they were due repayment in full.

Led by Paul Singer's Elliott Management Corporation, these "holdout" creditors purchased Argentine bonds at deep discounts and then sued for full repayment. Elliott bought $20.6 million face value of bonds for approximately $49 million, but by 2014 these bonds had a face value of $832 million. The legal battle lasted 15 years and culminated in a 2016 settlement where Argentina paid more than $10 billion to resolve the dispute.

The case became a symbol of "vulture fund" tactics, where specialized investors buy up the debt of distressed countries, usually for pennies on the dollar, then sue or use other means to squeeze the nations to pay ten times, even a hundred times, what the vulture fund paid for the debt.

Peru and Other Victims

Elliott Management had previously employed similar tactics against Peru in the 1990s. In 1995, Elliott bought $20 million face value of defaulted Peruvian bank debt. In 1998, after extensive litigation and numerous attempts by Elliott to settle, the court awarded the hedge fund $58 million, including past due interest.

African Nations Under Pressure

Investigative journalist Greg Palast noted that vulture funds "buy up the debt of the poorest nations on the planet, usually for pennies on the dollar, then sue or use other means to squeeze the nations to pay ten times, even a hundred times, what the vulture fund paid for the debt". Countries like Liberia, Zambia, and the Democratic Republic of Congo have faced similar pressures from these specialized debt funds.

The Republic of Congo Case

Elliott exposed corruption in the Republic of the Congo in its efforts to enforce judgments totaling more than $100 million in defaulted bank debt. In 2008, Elliott bought $32.6 million in loan debt incurred by Congo... After Elliott's investigations produced evidence of corruption, the government settled for an estimated $90 million on debt for which Elliott paid less than $20 million.

International Law and Recourse Mechanisms

The absence of a comprehensive international framework for sovereign debt resolution creates significant challenges for both creditors and debtors. Unlike corporate bankruptcies, which are governed by established legal procedures, sovereign defaults exist in a legal gray area with limited enforcement mechanisms.

Historical Sovereign Immunity

For centuries, defaulting governments were immune from legal action by foreign creditors. However, this protection has significantly eroded since the 1970s, fundamentally changing the dynamics of sovereign debt markets.

The Erosion of Sovereign Immunity

Since the 1970s, however, sovereign immunity has eroded and banks and specialized hedge funds have successfully sued defaulting countries in courts in the United States and the United Kingdom. This legal evolution has created new challenges for debt restructuring processes.

Research shows that creditor lawsuits have become an increasingly common feature of sovereign debt markets. The legal developments have strengthened the hands of creditors and raised the cost of default for debtors. Studies indicate that since the mid-2000s, one in two defaults is now accompanied by litigation, compared to less than 10% in the 1980s and early 1990s.

Limited Enforcement Mechanisms

Despite the erosion of sovereign immunity, practical enforcement remains challenging. Unlike corporations, governments cannot be liquidated and there is no supranational legal authority to enforce repayment.

Creditors have developed various strategies to pressure defaulting governments:

1. Asset Seizure Attempts: In recent years, more than 50% of creditors made at least one attempt to seize sovereign assets abroad
2. Financial Embargos: Courts can disrupt international capital flows, effectively imposing financial embargos on defaulting sovereigns
3. Diplomatic Pressure: Leveraging relationships with creditor nations to apply political pressure

Current International Framework Gaps

The gaps in debt restructuring architecture and framework persist. There is no centralized dispute resolution mechanism and there is no attempt to develop international law governing international bankruptcies. This implies that a judgment passed in one jurisdiction is not enforceable in another jurisdiction.

The United Nations has noted several critical missing provisions:

• No "breathing space" mechanism to find solutions and protect against litigation
• No enforceable priority rules for creditors
• No organized representation of all stakeholders
• No harmonized laws, policies, and institutional mechanisms

Modern Litigation Trends

The market changed fundamentally in the early 1990s, with the entry of specialized distressed debt funds, which buy debt at a discount and then sue for full repayment. Hedge funds now account for two-thirds of new cases and they pursue more aggressive legal strategies compared to other types of creditors.

Litigious creditors rarely wait for the satisfaction of their claims in court. Instead, they attempt to pressure the defaulting government into an out-of-court settlement at profitable terms.

Proposed Solutions

Various proposals have emerged to address these gaps:

1. Sovereign Debt Restructuring Mechanism (SDRM): The IMF proposed creating a statutory framework similar to corporate bankruptcy, but it failed due to resistance from private creditors and concerns about IMF power.
2. Collective Action Clauses (CACs): Modern bond contracts increasingly include provisions that prevent small groups of holdout creditors from blocking restructuring agreements.
3. The Raffer Proposal: Named after economist Kunibert Raffer, this suggests creating an international arbitration system where neutral judges would decide on debt restructuring cases.

Implications for the North Korea Case

The evolution of sovereign debt litigation helps explain why North Korea's strategy of simply ignoring Swedish payment demands has been relatively successful. Unlike the Argentine case, where bonds were issued in New York under U.S. law with explicit waivers of sovereign immunity, North Korea's trade debt with Sweden operates under different legal frameworks.

Sweden's continued diplomatic presence in North Korea and its role as an intermediary with other Western nations may also create incentives for Swedish authorities to avoid aggressive collection tactics that could jeopardize these valuable diplomatic relationships.

The North Korean case thus represents both a relic of an earlier era of sovereign finance and a preview of the challenges that will persist as long as the international community lacks a comprehensive framework for resolving sovereign debt disputes.

As these remarkably durable vehicles continue their service on North Korean roads, they embody one of international trade's most persistent and surreal unresolved chapters — a testament to Swedish engineering quality and a cautionary tale about the complexities of dealing with opaque regimes, while also highlighting the stark differences between approaches to sovereign debt as demonstrated by Sweden's persistent collection efforts versus Russia's strategic debt forgiveness that has yielded significant geopolitical returns.

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Sources

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