When the United Nations Security Council imposed a ban on exporting luxury goods to North Korea, the main targets were the isolated state's chain-smoking elites, including its leader Kim Jong-il.

While the European Union proscribed “high-quality cigars and cigarillos” under sanctions first slapped on the Stalinist regime in 2006, the US and Japan went further and targeted cigarettes.

The North Korean dictator's access to premium overseas smokes – and his regime's access to hard cash – should have been further limited by British American Tobacco's decision last year to stop supplying its State Express 555 cigarettes to the country.

The London-based company suspended the trade even though it was not prohibited under EU sanctions. In response to a Financial Times investigation, BAT said it pulled the supply after discovering that its 555s intended for North Korea – referred to as NK 555 – were being re-exported to other Asian markets.

The diversions offer a rare glimpse of one channel through which the impoverished country can secure precious foreign exchange – especially as the noose tightens on its arms exports, with recent seizures in Bangkok, Dubai and South Africa.

International security agencies have also cracked down on suspected North Korean smuggling of narcotics and counterfeit $100 bills in recent years, forcing the regime to revert to other ways to generate hard currency.

“These arms busts suggest there is reasonable [international] co-operation,” said Marcus Noland, a North Korea expert with the Peterson Institute for International Economics in Washington. “Sanctions haven't shut the door on North Korea, but they have made it more difficult for [the arms] trade.”

The NK 555 diversions may be part of a much larger flow of dollar-earning re-exports, and their interruption comes at an awkward time for a regime that has tested the patience of the international community – and even once-steadfast allies such as China – with its persistent nuclear brinkmanship.

Closer to home, a populace with memories of 1990s-era famines is now bristling with anger at Pyongyang's recently botch- ed currency reform programme. “The turmoil in North Korea is self-inflicted and far more damaging than the [UN] sanctions,” said Mr Noland.

BAT's halting of supplies of 555s to North Korea did not end its business ties to the country. It continues to supply its former Pyong- yang joint venture, from which it divested in 2007, with materials for the manufacture and sale of cheaper Craven A cigarettes on the domestic market.

BAT says 175m NK 555 were exported to North Korea in 2008. They were made and packaged in Singapore which, like the EU, banned exports of cigars but not cigarettes.

The London-based company sold the NK 555s to SUTL Group, a family-controlled distributor in Singapore, for onward shipment to the North Korean port of Nampo.

The diversions discovered included a cargo of NK 555 that appeared in Singapore in August 2009.

“When we became aware of the diversion, we immediately launched an investigation,” Pat Heneghan, global head of BAT's anti-illicit trade division, told the FT. “We certainly didn't like what we found.”

While there was no evidence of any involvement by SUTL in the diversion, Mr Heneghan said BAT still had “a very hard discussion with the distributor”. SUTL declined to comment to FT inquiries. There is no evidence that the re-export of NK 555s by a number of unidentifiable North Korean entities and other small trading companies across Asia was illegal.