Oct. 19 (Bloomberg) -- The United Nations is hitting Kim Jong Il where it hurts, cutting off trade in the luxury goods favored by the North Korean dictator and his entourage.

Kim, his family and members of North Korea's ruling class fancy Mercedes-Benz cars, Hennessy cognac and French wines, says Michael Breen, author of ``Kim Jong Il: North Korea's Dear Leader.'' They buy the goods abroad and bring them back to a country locked in poverty where annual per capita income is $914.

``The idea is to punish the leaders and not the people,'' says Jean-Baptiste Mattei, a spokesman at the French Foreign Ministry in Paris. ``It's a way to hit the nomenklatura, who are the only ones who can travel abroad and consume these goods.''

The UN Security Council included the ban on luxury goods in an Oct. 14 resolution designed to punish North Korea for testing a nuclear bomb. It also prohibits travel by the families of officials linked to the country's nuclear program.

``The North Korean population has been losing height and weight over the years, and maybe this will be a little diet for Kim Jong Il,'' U.S. Ambassador John Bolton told journalists at the UN in New York the day before the vote.

Kim, 64, succeeded his father as leader of the Democratic People's Republic of Korea in 1997. He has followed a policy he calls ``military first,'' giving the Korean People's Army -- his main support base -- first choice on resources even as the population suffered from a famine in the late 1990s. Food shortages killed as many as 2 million people, according to the U.S. Agency for International Development.

`Critically Deficient Diet'

``Many of the country's 23 million people struggle to feed themselves on a diet critically deficient in protein, fats and micronutrients,'' according to a country report on the Web site of the UN's Rome-based World Food Programme.

Kim's inner circle stocks up on their favorite goodies through fake trading companies in China or during official trips abroad, says Paul Beretz, founder of Clayton, California-based Pacific Business Solutions, a consulting firm for companies that do business in Asia.

Kim owns 200 Mercedes S-Class cars and has a personal net worth of $4 billion, partially amassed from trafficking drugs and missiles and from counterfeiting, according to a Sept. 28 report from the U.S. House of Representatives' Permanent Select Committee on Intelligence.

North Korea spent $24 million during the 1990s buying luxury watches and $1.3 million on French perfume, the Korea Times said in its Oct. 13 online edition, citing foreign customs offices.

``The luxury items serve to keep the super-elite ruling family in the style to which it has become accustomed and also allow Kim Jong Il to dispense favors to party officials and generals,'' says Breen, who lives in Seoul and has visited North Korea seven times. ``From this perspective, they are key to his rule, which is why they are now being targeted.''

Chinese Connection

The UN sanctions may do little to coerce Kim to dismantle his nuclear weapons program. China is the only country with any leverage because it supplies North Korea with the oil and electricity the military needs to function, said Valerie Niquet, director of the Asia center at the French Institute of International Relations in Paris.

Jim Hoare, the U.K. charge d'affaires in North Korea's capital, Pyongyang, from 2001 to 2002, says the sanctions will have no effect.

``The goods will still come in from China,'' he says. ``It's hard to impose sanctions on a regime with relatively little international trade and relatively few outside contacts.''

Diamond-Studded Rolex

The committee that will monitor the sanctions will have the discretion of defining what luxury goods mean, says Ambassador Adamantios Vassilakis of Greece, a Security Council member.

Japanese immigration agents nabbed Kim Jong Il's son at Tokyo's Narita airport in 2001, when he tried to enter the country with a bogus passport. Fellow travelers told the Hong Kong-based Asia Times and CNN that the younger Kim wore a diamond-studded Rolex watch and his wife was toting a Louis Vuitton handbag.

At one point, Kim Jong Il was the single biggest customer for Hennessy's Paradis brand, spending about $700,000 a year, Breen wrote in his book, citing an unidentified company official. He stopped drinking hard liquor and switched to wine in his 50s on the advice of his doctor.

Paul Skipworth, regional director of Moet Hennessy Asia Pacific, said in an e-mailed response to questions that Hennessy has no direct business with North Korea and is unaware of any of the regime's cognac preferences. Moet Hennessy is a unit of Paris-based LVMH Moet Hennessy Louis Vuitton SA. A Rolex spokesman in Geneva declined to comment.

``North Korea isn't a market for luxury goods and it won't be for at least the next 10 years,'' says Michele Norsa, chief executive officer of leather goods-maker Ferragamo in Rome. ``North Korea is the most closed market in the world.''

France, a permanent member of the Security Council, isn't concerned that some banned goods are likely to be French.

``It's a sacrifice we are willing to make,'' Mattei says with a laugh.

To contact the reporter on this story: Gregory Viscusi in Paris at gviscusi@bloomberg.net; Todd Zeranski at the United Nations at tzeranski@bloomberg.net.

Last Updated: October 18, 2006 17:22 EDT