North Korea has become a gangster nation, pocketing $700 million to $1 billion a year from counterfeiting of U.S. greenbacks, trafficking illicit narcotics, smuggling contraband smokes and even peddling knockoff Viagra, according to U.S. government estimates.

"North Korea is the only government in the world today that can be identified as being actively involved in directing crime as a central part of its national economic strategy and foreign policy," says David Asher, until recently a State Department adviser on Asia.

Pyongyang's global criminal cabal - including Chinese gangs, Russian mafia, Japanese yakuza and an IRA politico - produces a tidy little slush fund for "Dear Leader" Kim Jong Il, which shamefully equals the country's legitimate export income.

Pyongyang's infamous Bureau No. 39 runs the crime-for-profit scheme - including drug production, counterfeiting and smuggling - that uses state trading firms, embassy diplomatic pouches and commercial cargo.

The "payola" keeps Kim Jong Il flush in cognac and caviar, and buys loyalty from the military, security services and other elite. The income also funds Pyongyang's embassies and buys gear for its nuclear/ballistic missile programs.

The Congressional Research Service notes that, since 1990, at least 50 drug seizures in over 20 countries have involved North Korean diplomats and trade officials. Most glaringly, North Korea's ship "Pong Su" was seized off Australia in 2003 with 125 kilos of heroin aboard.

According to defectors, North Korea cultivates poppies on as much as 7,000 hectares. This makes North Korea the world's No. 3 heroin producer behind Afghanistan and Burma. (Japan, Russia, China and Europe are the leading customers.)

Methamphetamine is also a choice North Korean export. Japanese police have traced as much as 40 percent of the meth seized in Japan in recent years to North Korean sources. (Pyongyang also sends "horse" to China, South Korea and Taiwan.)

North Korea is also the first government known to produce "Monopoly money" since the Nazis. Indeed, it's the world's premier counterfeiter of U.S. currency, especially the $100 bill. Known as the "supernote" due to its primo quality, the Korean fake far surpasses the paper that comes out of the Latin American and Eastern European crime syndicates.

Since the first "supernote" was discovered in Manila and Belgrade in 1989, Pyongyang has printed at least 19 new versions to keep up with U.S. Mint changes, the Washington Times recently reported. Over the last 16 years, authorities have seized $45 million in supernotes.

Pyongyang works with others, too. Last summer, a U.S.-Canada undercover op indicted 87 Americans and foreigners in 11 U.S. cities for smuggling "play" money, narcotics and bogus smokes.

Fifty-nine of the 87 crooks were cuffed in one day. (Eight of them were pinched by Operation "Royal Charm," an FBI sting - the feds invited them to a fake wedding aboard a yacht moored off Atlantic City. Several of the stooges actually came from overseas bearing gifts such as his/her Rolexes for the betrothed.)

In closing this ring, authorities seized: $4 million in supernotes; one billion sham cigs (some Chinese) worth $42 million; ecstasy, meth and Viagra worth hundreds of thousands of dollars; $700,000 in mock U.S. postage stamps and several hundred thousand dollars in jeans.

Last October, the Brits arrested an Irish nationalist in Belfast after a U.S. indictment fingered him for helping six others move a $1 million in phony North Korean 100s in Europe. While seeking medical care, he fled to Ireland; America is seeking extradition.

North Korea also smuggles gold, diamonds and weapons - as well as environmentally sensitive ivory and rhino horn.

Pyongyang plainly intends to milk the international crime "cash cow" even more vigorously to support its desperately anemic economy.

The North Koreans are among the victims. Over the last decade, while the regime used land to grow poppy instead of food, 2 million North Koreans needlessly starved, with many children left mentally impaired from severe malnourishment.

And despite Pyongyang's assertions that the "perfect" communist state is drug-free, due to rampant internal corruption, self-imposed poverty and widespread hunger, homegrown heroin is now making its way into North Korean veins.

So long as North Korea peddles drugs and counterfeit coin, stifles its economy and brandishes nuclear weapons, it will not only be a danger to its neighbors and the United States, but to itself as well.

Peter Brookes is a Heritage Foundation senior fellow. His book, "A Devil's Triangle: Terrorism, WMD and Rogue States," is just out.