Organized crime enters North Korea’s markets

From the perspective of North Korea’s poor, the era of Kim Jong-un has been a time of increasing state control over information and borders, but also a time when the state has taken a relatively (by North Korean standards, anyway) laissez-faire approach to market trade. There are exceptions, of course, including crackdowns on South Korean imports and on the Chinese mobile phones that could have made cross-border trade so much more efficient, but the general trend is for State Security Department officers to collect taxes — and bribes, of course — and let merchants work out affairs among themselves.

Inevitably, that has led to the rise of an industry of men who will, for a price, help people “work out affairs” among themselves. In this sort of system, the litigant with the most wealth and power has the advantage and invariably uses it to suppress competition.

“Wealthy and powerful donju and merchants often hire mob members to secure their business interests. The mobs have contacts in powerful organizations, so as long as they pay bribes to various officials, they are untouchable by ordinary citizens.”

According to the source, there is an unwritten rule in North Korea’s markets to not intrude in each other’s business areas. There are also frequent cases in which trust has been established between merchants who acquire products and donju who provide cashflows, featuring transactions with ‘post-payment systems’ for half of their trade money. [Daily NK]

Local merchants also use violence to control prices, including by beating up merchants who undercut their competitors’ prices. The police don’t care, so “muscle has become the rule of law in the markets.”

“In July, a woman in Pyongsong City requested a mob member take care of a merchant who stole the donju she was trading with. The merchant was attacked with a knife and left with an ugly scar on his face, although he was not seriously harmed,” a separate source in South Pyongan Province reported. As such, she explained, locals are increasingly saying that in order to survive in the markets, one needs to be fiercer than wolves without a conscience, and that the law is useless and safety is only assured via close relations with mob members.

The Daily NK reports that sanctions are exacerbating the ferocity of competition for certain products, like solar panels, and causing “frequent conflicts” among merchants. That is too bad, because solar panels help people to achieve a degree of independence from state control. There are no U.N. or U.S. sanctions that prohibit the export of solar panels to North Korea, but it’s possible that de-risking by banks and the freezing assets of state-connected trading companies is having spillover effects. That’s to be expected, I suppose. One hopes that in time, small independent traders will find ways to supply this demand.

The real story here, however, may be that Pyongyang is starting to cede its monopoly on the use of violence, a subject that Thomas Hobbes and Max Weber both wrote about extensively. This is not to say that organized crime in North Korea is entirely new. Pyongyang has long partnered with organized crime groups in Japan to skim off pachinko revenue or the Russian mob distribute counterfeit $100 bills. Some scholars believe that Pyongyang largely outsourced its drug trade to organized crime groups a decade ago. Others say that North Korea’s government is itself an organized crime family with a flag and a seat at the U.N.

What is new is that ordinary, non-elite North Koreans are now going around the state to seek justice, or injustice, through violent means from providers that the state itself does not tolerate, but which its corrupt police do, for a fee. The inevitable reaction to this will be, first, a loss of legitimacy by the state, and eventually, the rise of vigilantes, perhaps backed by mediators and informal courts, to keep the peace that the state will not. As with the rise of guerrilla journalism and guerrilla clinics, the rise of guerrilla justice would be an important step toward the creation of undergovernments like the ones I wrote about here.

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The State Department’s efforts to isolate Pyongyang are starting to pay off

The reviews of Rex Tillerson are in, and most of them aren’t good. We could have predicted this ten months ago; after all, most of the commentariat harbors center-left or pro-“engagement” views and it wasn’t going to agree with Trump’s policies anyway. Still, it’s hard for me to accept at face value the criticisms of those who have defended, to varying degrees, the self-evidently disastrous North Korea policies of Barack Obama and second-term G.W. Bush — policies that have more similarities than differences. It’s an additional challenge to separate one’s views of this President and his Twitter habits from an assessment of his North Korea policies, or how competently his administration has executed them. Still, one can agree with Trump’s decision to break from the failed policies of his predecessors, which brought us to this crisis, and still acknowledge that some of the criticism has merit. Overall, this administration is getting more things right than its predecessors did, but let’s start with the areas that need improvement.

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First, an effective Secretary of State speaks articulately for his country. Tillerson isn’t a vocal or charismatic advocate of our interests or of the values that serve those interests. I can understand why Tillerson might be more concerned than his predecessors about upstaging his boss, or about saying something his boss might contradict later on Twitter. Maybe the recent diminution of the nationalist wing in the White House will liberate Tillerson, but his reticent personality may also be part of the problem. 

The State Department’s hiring freeze, which continues months after it was lifted for the rest of the government, retards the pace at which State can review and approve sanctions designation packages and dispatch envoys to persuade other nations to cut their ties to Pyongyang. I don’t yield to anyone as a critic of the State Department’s performance on North Korea policy or in agreeing that State needs some profound cultural and personnel changes. Agreed Frameworks I and II and the Leap Day Agreement have justly cost it credibility it may never regain. Even so, the President needs a strong diplomatic corps to build a global coalition against Pyongyang and, when the time is right, to know how to leverage that pressure to achieve our core interests in negotiations with our frenemies and our foes. We need good diplomats for both tasks.

Tillerson has also sent mixed signals on its willingness to negotiate with Pyongyang. His recent statement complimenting North Korea for not launching a missile against Guam resulted in a predictable embarrassment — he might as well have dared Kim Jong-un to test a nuke.

Tillerson’s greatest error on North Korea policy, however, has been to overlook the importance of human rights as a key element of U.S. policy, and as an argument for a global coalition against Pyongyang (for more on that point, see this by the Heritage Foundation, no less). Tillerson himself referred to the “moral dimension” of isolating Pyongyang, saying, “These first steps toward a more hopeful future will happen most quickly if other stakeholders in the region and the global security (sic) join us.” 

Yet by merging the duties of the Special Envoy for human rights into another full-time position, and by explicitly disavowing any efforts to destabilize the regime, Tillerson is throwing away the very leverage he imagines he’s clinging to when he says, “All options are on the table.” Pyongyang dismisses this as a bluff, but friends whose support we’ll need don’t. It’s our talk about human rights that really terrifies Pyongyang. What Kim Jong-un and his generals see in their nightmares is a day when they’ve lost control of the minds of the North Korean people, and can’t afford to pay, equip, or maintain the security forces to suppress 70 years of grievances from those they’ve cheated, abused, and bereaved.

By ceding human rights, Tillerson is missing an opportunity to build a global coalition around the principles articulated in the U.N. Charter. And no one has a greater need of a persuasive public advocate than a Secretary of State who isn’t one himself. Also, Pyongyang thinks we’re trying to overthrow it anyway. If anyone asks us if we’re encouraging the North Korean people to overthrow His Porcine Majesty, we shouldn’t say we are or that we aren’t. We should just be vague.* Let our frenemies and foes use their imaginations and be afraid of what we’ll do if diplomacy fails.

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Still, let’s give Tillerson credit where it’s due. He can boast of some successes here that build on the significant gains that Yun Byung-se achieved before Park Geun-hye’s impeachment. He probably deserves some credit for getting two useful resolutions (2371 and 2375) through the U.N. Security Council, although Ambassador Haley and the USUN staff probably deserve most of it. Liberals tend to overestimate the moral authority of U.N. resolutions, while conservatives tend to underestimate their utility in getting wavering, reputation-conscious states to put economic and diplomatic pressure on Pyongyang. In fact, U.N. and U.S. national sanctions are mutually complementary. Neither works very well without the other.

There has also been significant progress toward isolating Pyongyang internationally, consistent with what Tillerson called for in this April 28th speech to the U.N.: first, to implement existing U.N. Security Council resolutions; to suspend or downgrade diplomatic relations with North Korea; and third, to isolate North Korea financially — a request Tillerson delivered with an explicit threat of secondary sanctions.

Recently, State’s efforts to disconnect North Korea’s diplomatic and trade links to the global economy have gained momentum. Start with this post from February and this one from June on Tillerson’s slow start. This post from August documents the first public signs of the administration’s efforts, through the spring and summer, to get southeast Asian nations to cut their ties with Pyongyang. Although State Department people say that much of this work is being done quietly and without publicity, in recent weeks, there have been more public reports that those efforts are starting to pay off — in some cases, because we’re backing them with threats.

  • 8/31: Spain says it will reduce the number of North Korean diplomats in its country.
  • 9/7: Mexico expels North Korea’s ambassador over its latest nuclear test.
  • 9/8: The Philippines’ Foreign Secretary says his country, which had recently become one of Pyongyang’s largest trading partners and a haven for drug dealing and money laundering — including the proceeds of the Bangladesh Bank/SWIFT hack — will end all trade with North Korea.
  • 9/9: Trump and Abe ask the President of France to increase pressure on North Korea.
  • 9/10: Japan’s Foreign Minister asks Qatar to stop using North Korean slave labor, before visiting Saudi Arabia and Egypt.
  • 9/11: Peru announces that it will expel the North Korean ambassador.
  • 9/11: Japan’s Foreign Minister, having failed to extract commitments from Saudi Arabia and Qatar to stop buying slave labor from North Korea, takes his appeal to the Arab League.
  • 9/12: President Trump meets with the Prime Minister of Malaysia, a haven for North Korean money laundering, and says (for what it’s worth) that Malaysia had agreed to stop doing business with Pyongyang.
  • 9/12: Egypt, a major and long-standing North Korean arms client, says it will cut its military ties to Pyongyang after the U.S. withholds an aid payment (more here).
  • 9/18: Vietnam expels another representative of the U.N.-designated Tanchon Commercial Bank.
  • 9/18: Kuwait says it will expel North Korea’s ambassador and reduce the size of its embassy staff from nine to four.

Reducing North Korea’s diplomatic presence abroad is essential to any campaign of diplomatic pressure, because North Korea’s diplomats do double-duty as arms dealers and money launderers. Of course, some important caveats apply. First, take any government’s promise to cut ties with North Korea with several grains of salt. For example, last November, Sudan said it would cut its military ties to North Korea, but as of July, the U.S. was still urging Khartoum to keep its promise and threatening to cut aid. Namibia promised to cut its military ties to North Korea, but we later learned that this wasn’t true, either. Second, Rex Tillerson cannot take full credit for this strategy, merely for his part in executing it. In the final months of the Obama administration, State Department official Danny Russel said that the U.S. has asked governments around to “downgrade or sever” their diplomatic relations with North Korea.

I’ve long argued that diplomacy would play a critical role in addressing the collection of crimes and crises collectively known as “North Korea.”  The theory I’ve advanced is what I call “progressive diplomacy,” which means that we should build coalitions with friendly and persuadable nations before we attempt to negotiate with hostile ones. Our objective should be to isolate Pyongyang and its allies until we have sufficient leverage for negotiations to have a chance of achieving our interests. Rather than approach Pyongyang now, while its leverage exceeds our own, we should approach friendly states (South Korea, Japan, Canada, the UK, the EU, Singapore, Panama) first and ask them to cut their economic and diplomatic ties to Pyongyang. Our next targets should be wavering states (Malaysia, Zambia, Namibia), then Pyongyang’s more willful enablers (China, Russia) and finally, Pyongyang itself. That sequence maximizes our leverage at each stage of this diplomatic process by approaching hostile states only after they are relatively isolated.

For the last 20 years, we’ve had that sequence entirely wrong. Give Rex Tillerson credit for getting it right, and for what he has done in the last several months to translate that strategy into policy. If the unplugging of Pyongyang’s diplomatic and financial links to the world is starting to cause it pain, and there are growing signs that it may be, I would expect Pyongyang’s provocations to escalate. Contra the pro-engagement critics who characterize each new nuclear and missile test as proof that sanctions aren’t working, it’s at least as likely that those escalating provocations are signs that they are. 

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* I don’t advocate a declared policy of “regime change.” First, what those words mean to most people (as in, invasion) would be disastrous for Korea. Second, it’s no use proclaiming a policy that can’t be explained or defended publicly, and a subversion project would necessarily include overt, covert, and clandestine elements. Our public position should be that nations are obliged to consider what their trade is supporting, that our financial system is closed to those who aid and abet crimes against humanity, that we will prioritize giving the North Korean people freedom of information, and that it is for the North Korean people to decide how they will use that information.

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Updates:

  • 7/19: Spain says it will expel the North Korean ambassador.

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South Koreans like Moon Jae-in personally, but are uneasy with his North Korea policies

If Moon Jae-in and his inner circle are, in the pits of their souls, as extreme as I think they are, why hasn’t Moon moved forward with his plans to reopen Kaesong, or Kaesongograd? Probably because he can read a poll, such as this one from the center-left Korea Herald:

A recent poll by Gallup Korea, conducted from Sept. 5, after the Sept. 3 nuclear weapons test by the North, shows a clear sign of hardening attitudes among South Koreans.

Of 1,004 respondents, 76 percent considered the sixth atomic detonation as a threat to security. But when asked if they thought the North would initiate a war, only 37 percent answered it was possible, while 58 percent responded that that was little to no chance of such an outcome.

However, 60 percent approved of South Korea rearming with nuclear weapons to respond to the North Korean threat, while 35 percent opposed the idea.

US tactical nuclear weapons were withdrawn from South Korea in 1991, when the two Koreas signed an agreement on denuclearization, non-aggression and reconciliation. While the South has clung to the principle of a neclear-free (sic) Korean Peninsula, the North has abandoned it, conducting six nuclear tests so far.

While nuclear rearmanent (sic) is mainly pushed by conservatives that pursue tougher policies against the North, more liberal voters also appeared to be in support of the idea, the data showed. Of the 353 respondents who viewed themselves as liberals, 47 percent approved of stationing nuclear weapons here, while 48 percent of the group opposed the idea.

What is more surprising perhaps is that more Koreans even said that humanitarian aid should be cut if the North does not give up its nuclear program.

In 2013, a Gallup poll showed that 47 percent of South Koreans said that humanitarian aid should continue even if North Korea continues its nuclear program.

In the latest poll, the figure dropped to 32 percent, while the proportion of South Koreans opposed to the idea rose to 65 percent.

Left-leaning respondents were also skeptical of offering any kind of humanitarian aid, with 52 percent of them calling for a halt. [Korea Herald]

The Asan Institute’s latest update also cites a Gallup Korea poll indicating that 60 percent of Koreans want nukes, with just 35 percent opposed. Oh, and Moon’s approval rating has fallen into the low 70s (!). According to Asan, this modest decline “appears to be driven by his failure to address the North Korean nuclear problem.”

I’ve never questioned that Moon is an extraordinarily talented politician. He’s clearly no fool. He carefully avoided the extreme rhetoric espoused by just about everyone around him throughout his career while casting himself as a nice, sensible person. Nice goes a long way in politics, but after every honeymoon comes laundry day.

When a politician takes office, the mainstream wants to believe the best about him. For its own sake, it wants him to govern well and succeed. The base wants to believe that he will do the extreme things he promised (or implied) when no one from the Chosun Ilbo was listening. For a while, that means that both the base and the mainstream will align. Both will favor the politician, and there will be a window of irrational exuberance. Then, the politician takes a few polls and realizes that if he goes where the base wants him to go, the mainstream will repossess his parliamentary majority. The politician hesitates and the base feels betrayed (and in Korea, that tends to mean roadblocks, Molotov cocktails, tear gas, and billy clubs — and a lot of nasty, misogynistic invective from Pyongyang).*

Moon can’t please everyone. And increasingly, his positions on security will cost him political support. Late word is that Moon has ruled out the acquisition of South Korean nukes; his people, who justifiably question the wisdom of entrusting their freedom to a mercurial and intermittently isolationist guarantor half a world away, want them. Moon wants to reopen Kaesong or open Kaesongograd; the majority does not. Moon wants to give the North humanitarian aid; the majority does not. And the crazy old uncle in Moon Jae-in’s attic just keeps coming downstairs to talk about the freeze proposal that the rest of Moon’s cabinet was so recently forced to disavow.

What’s unfortunate is that Moon could be remembered as one of Korea’s most popular and effective presidents if he’d focus his attention on needed social, economic, and legal reforms — breaking up the chaebol, increasing competition and free trade to lower consumer prices, shortening the work week and letting workers spend Saturdays with their families, reforming libel laws, increasing welfare programs for the disabled, limiting the powers of police and prosecutors, introducing the right to trial by jury, and improving worker protections like overtime pay. I’m not sure you can call 41 percent a mandate, but a 72 percent approval rating certainly translates to political power of some kind. Moon is at the height of his popularity and power. A decision to squander that power on quixotic and unpopular policies to appease an unappeasable Kim Jong-un beggars a rational explanation. It even suggests not-so-rational ones.

Ever since it became inevitable that Moon Jae-in would become South Korea’s next president, it was clear that our next POTUS would need a Moon Jae-in mitigation plan. The best possible mitigation plan is to defer to a voting public that hasn’t completely taken leave of its senses. The public’s moderation is all the more impressive in light of the fact that Moon has no credible political opposition to speak of. These polls are also a useful check against overinterpreting the policy views of the millions of Koreans who took to the streets so recently to oust Park Geun-hye from office.

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* Now here’s an interesting study in media bias for you. The Daily Beast and Xinhua cover the same protests. The Daily Beast says “violent protests,” and Xinhua says “violently dispersed.” Let me take this occasion to thank Xi “Winnie the Pooh” Jinping for all he has done to provoke this moderate backlash by South Koreans. We truly couldn’t have achieved this impressive result without him.

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Chinese banks are cracking down on N. Korean money laundering again. Will it last this time?

Several news sources are reporting that Chinese banks, particularly in China’s northeast, have started to freeze or close accounts held by North Korean individuals and businesses. The Daily NK, citing unnamed local sources, was the first to report this potentially important development. It says both large state-owned banks (such as the China Construction Bank) and regional banks (such as Pudong Bank) recently banned all North Koreans from opening new accounts and ordered the closure of existing accounts. It also quotes a March 2017 report by Radio Free Asia that “[p]rivate Chinese banks are beginning to close bank accounts held by North Korean nationals” and that “North Korean laborers earning foreign currency in China have been issued an emergency alert.”

Kyodo News, citing “sources familiar with the situation,” says that the new measures have made it “nearly impossible to do business between the two countries.” It reports that the Bank of China, the China Construction Bank, and the Agricultural Bank of China branches in Yanji, have all banned North Koreans from opening accounts. The banks have not yet frozen the accounts, meaning that the North Koreans can still withdraw cash, but they can’t make deposits or remittances. According to an unnamed employee of one of the banks, “This is being influenced by international sanctions against North Korea.”

Kyodo speculates that either “China may have become more serious about curbing its nuclear ambitions,” or that the measures were “intended to help major Chinese banks avoid being hit by sanctions imposed by the United States and other countries,” like the Bank of Dandong was. Interestingly, it also attributes a 75 percent decline in North Korea’s imports of refined petroleum products over three months, and a corresponding rise in fuel prices inside North Korea, to the fact that “North Koreans were having difficulty paying for petroleum product imports because of the banking restrictions.”

Reuters, citing a bank teller in Liaoning, reports that the China Construction Bank “completely prohibited business with North Korea” starting on August 28th. A customer service representative for the Industrial and Commercial Bank of China also told Reuters that the bank “had stopped opening accounts for North Koreans” and (for good measure) Iranians on July 16th, but didn’t explain further. Those dates closely follow a series of forfeiture complaints, seizures, and designations by the Justice and Treasury Departments, most of them targeting financial flows through Chinese banks, involving North Korean front companies, which turn out to be less well hidden than many “experts” had assumed.

The Bank of China, which became a bête noire for Congress much earlier than other Chinese banks over revelations that its Singapore branch willfully helped Chinpo Shipping facilitate money laundering (and indirectly, arms smuggling) for His Porcine Majesty, stopped allowing North Koreans to open accounts at the end of last year. Or so says an unnamed teller at the BoC’s Dandong branch, who adds that the BoC also froze existing North Korean accounts. A teller at the Agricultural Bank of China branch in Dandong also said that BoC was refusing to open new accounts for North Koreans.

The Financial Times also reports that “multiple bank branches,” including those of China’s big five banks, “had imposed a freeze on new accounts” for North Korean individuals and companies, and that some of the banks were also “cleaning out” existing North Korean accounts and banning North Koreans from making new deposits. Officials at all of the banks refused to comment.

Both the FT and the Daily NK note that the banks’ new measures exceed what new U.N. sanctions require, but all of the reports fail to note that these actions would be completely consistent with stricter U.S. financial regulation on North Korean money laundering, along with the aforementioned recent actions by the Treasury and Justice departments, showing that the feds can trace North Korean transactions through specific Chinese banks — including those named in these reports — and are willing to take legal action against them. Some sources told the FT that corporate told them to freeze North Korean accounts in August; others said they were told in January.

Unfortunately, the Daily NK reports that North Koreans affected include not only “consular officials” and state trading companies, but also “laborers,” who may be either illegal (and increasingly scarce) migrant workers or state-contracted slave laborers (the report didn’t specify). Either way, that’s an unfortunate and unavoidable consequence of what would be an extremely important development — if it lasts. The FT quotes a Chinese professor of North Korea studies, who puts a brave face on the actions, saying that the actions benefit China, and that “China takes sanctions very seriously.” Stop laughing, dammit — this is a serious, adult conversation about banking regulation.

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The FT calls this “unprecedented,” but it really isn’t (of the five news sources I cite here, only the Daily NK gets this). There is, of course, the example of Banco Delta Asia and what we too easily forget — the Bush administration’s global campaign of financial diplomacy that persuaded banks around the world to close North Korean accounts. We now know that that strategy put Kim Jong-Il’s regime under severe financial strain, until Bush lost his nerve, lifted the pressure, and exchanged invaluable sanctions relief for a handful of worthless North Korean promises.

Then, in 2013, after Pyongyang’s third nuclear test, after Treasury sanctioned the DPRK Foreign Trade Bank, and after Ed Royce first introduced the bill that would later become the NKSPEA, which mandates secondary sanctions, big Chinese banks began to freeze and close North Korean accounts. It didn’t last, because the banks soon saw that Xi Jinping wanted those accounts open more than Barack Obama wanted them closed. The same pattern repeated itself in early 2016, and again (as Justice Department filings later showed) it was right back to business as usual a few month later, again because the Obama administration wasn’t willing to back its sanctions with enforcement actions.

Is this time any different? The answer depends on why the banks are doing this. As noted, what the banks are doing here doesn’t exactly align with what the U.N. resolutions require, but it aligns perfectly with what I’d expect inexperienced Chinese compliance officers to do to protect their banks from rising legal risks under U.S. banking and sanctions laws. In this post, I explained the importance of distinguishing the interests and actions of the Chinese government from those of individual Chinese banks, which are actually global corporations with global exposure. In other words, “Chinese” banks may be bending to Treasury’s will for the same basic reason that U.S. tech companies have collaborated with Chinese censors. My belief that the Chinese security establishment is fundamentally hostile to U.S. interests and thus willfully weaponizing North Korea remains unmoved. On balance, it seems more likely that the banks are doing this to protect their own reputations, credit ratings, and share prices — just as the Chinese Finance Ministry wants them to, and just as the Defense and Foreign ministries don’t.

Also, when is the last time an American Secretary of the Treasury said anything like this?

“If China doesn’t follow these sanctions, we will put additional sanctions on them and prevent them from accessing the U.S. and international dollar system — and that’s quite meaningful,” Mnuchin said during an event at CNBC’s Delivering Alpha conference in New York on Tuesday. [….]

“North Korea economic warfare works,” Mnuchin said. “We sent a message that anybody that wanted to trade with North Korea — we would consider them not trading with us.” [Bloomberg]

Next, read this excerpt from the written testimony of Assistant Secretary of the Treasury Marshall Billingslea before the House Foreign Affairs Committee yesterday. Billingslea first explains that Treasury works closely with U.S. allies, the intelligence community, and the State Department to “conduct detailed forensic investigation and analysis” to “deny North Korea its current, principal source of funds.” He goes on to say that while we prefer to have Beijing’s voluntary cooperation, we’re also perfectly willing to hit Chinese targets we don’t get it.

For instance, on August 22, we struck at the heart of North Korea’s illegal coal trade with China.  Treasury designated 16 individuals and entities, including three Chinese companies that are among the largest importers of North Korean coal.  We estimate that collectively these companies were responsible for importing nearly half a billion dollars’ worth of North Korean coal between 2013 and 2016.  These funds are used to support the Government of North Korea and the Workers’ Party of Korea, including its nuclear and ballistic missile programs.  On top of that, we know that some of these companies were also buying luxury items and sending an array of products back to the North Korean regime.  On August 22 we sent two clear messages.  The first was to North Korea: we intend to deny the regime its last remaining sources of revenue, unless and until it reverses course and denuclearizes.  The second message was to China.  We are capable of tracking North Korea’s trade in banned goods, such as coal, despite elaborate evasion schemes, and we will act even if the Chinese government will not. [….]

China is even more central to a successful resolution of the crisis caused by Kim Jong-Un.  China accounts for at least 90 percent of North Korea’s exports.  North Korea is overwhelmingly dependent upon China for both trade and access to the international financial system.  China’s full and effective enforcement of UN sanctions is therefore essential.  Unfortunately, I cannot assure the Committee today that we have seen sufficient evidence of China’s willingness to truly shut down North Korean revenue flows, expunge the North Korean illicit actors from its banking system, and expel the North Korean middlemen and brokers who are establishing webs of front companies.  We will continue to work with the Chinese to maximize economic pressure on North Korea, but we will not hesitate to act unilaterally.  If China wishes to avoid future measures, such as those imposed on Bank of Dandong or the various companies sanctioned for illegal trade practices, then it urgently needs to take demonstrable public steps to eliminate North Korea’s trade and financial access. [Treasury Dep’t]

Then, watch his testimony on video.

Mr. Billingslea shows great promise. Let’s hope we have the next Stuart Levey or Juan Zarate on our hands, because we’ve never needed one more than we do now.

Of course, it’s The Boss, House Foreign Affairs Committee Chairman Ed Royce, who has been pushing for this strategy for years. Two laws, one presidential election, and three nuclear tests later, Royce looks to have finally gotten his way. Speaking at a hearing of his Committee yesterday, Royce called on the feds to “target major Chinese banks, including Agricultural Bank of China Ltd. and China Merchants Bank Co., for aiding Kim’s regime.” Royce was referring to a letter he sent to Mnuchin listing some of the banks that keep showing up in Justice Department indictments, forfeiture complaints, and seizure warrants as having effectively provided sanctioned North Korean banks with indirect correspondent account services in violation of this Treasury Department regulation, and asked the Treasury Department to sanction them.

Personally, I don’t expect Treasury to do anything as blunt or binary as a total asset freeze or a 311 action to most of those banks (on that point, Billingslea told the Committee that the 311 action on the Bank of Dandong had “a very clear effect” on its operations, but didn’t elaborate). Instead, I expect Treasury to start auditing the big banks and their correspondents for compliance with its new North Korea-specific regulation, with an eye toward civil penalties and fines like those imposed against European banks that skimped or cheated on anti-money laundering compliance on behalf of Iran and other sanctioned countries. Those fines often amounted to hundreds of millions of dollars (or, in the case of BNP Paribas, $9 billion). There may be such a thing as “too big to fail,” but there is no such thing as “too big to fine.”

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The Daily NK reports that small traders are already adapting to the new measures by going to a cash-based business model. Reporters are fond of saying that Pyongyang can easily evade financial sanctions by carrying around briefcases full of cash, but that’s mistaken on several levels. First, a typical briefcase only holds just over $2 million, which is enough to fuel the sort of cross-border trade in food and consumers goods that we shouldn’t want to stop, but hardly an efficient way for a Syrian arms client or Burmese middleman to pay a KOMID dealer for a shipment of machine tools or vacuum dryers. Needless to say, it’s not nearly enough to feed a million-man army or sustain an entire government. After all, China may not really care about policing bulk cash smuggling — notwithstanding its occasional, short-lived pretenses to the contrary — but countries like Bangladesh and Sri Lanka do.

That is to say, one potential outcome of these restrictions could be to break up larger, regime-controlled trading blocs in favor of smaller traders whose wares are more likely to end up in the homes and bellies of the poor. That would be a largely positive development. Our goal should not be a complete embargo of North Korea, which is why I was actually relieved that the U.N. didn’t impose a total fuel ban in its latest sanctions resolution. Our goals ought to be to expose and destroy Pyongyang’s state-controlled overseas trading networks, to freeze its cash reserves (which sit in Chinese banks, and which Pyongyang may be depleting rapidly), to de-fund its military and security forces to give the North Korean people a little breathing space and freedom from fear, and to create the “death spiral” that will cause money launderers who can’t make their kick-up payments to defect and bring us yet more valuable financial intelligence, which will help us find and freeze yet more assets.

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Moon Jae-in, Putin & Kaesong 2.0: Why the state of the U.S.-Korea alliance is not strong

Of the many reasons why the U.S. and South Korea failed to prevent North Korea from acquiring nuclear weapons, one of the most important is that, despite their nominal alliance, Washington and Seoul have been fundamentally misaligned on North Korea policy since Bill Clinton and Kim Young-Sam led their respective nations. The most important of these differences was their mutually canceling economic policies toward Pyongyang. As the U.S. moved (however slowly and haltingly) toward isolating Pyongyang economically to slow and reverse its nuclear weapons development, Seoul opted to catapult billions of dollars over the DMZ, no strings attached. The most financially significant subsidy came through the Kaesong Industrial Complex, where Seoul subsidized South Korean companies that paid “wages” to North Korean workers (wages that Pyongyang mostly confiscated). Seoul’s policy, in tandem with Beijing’s trade and aid, filled Pyongyang’s coffers with billions of dollars in regime-sustaining hard currency — currency that, as far as anyone can tell, went directly to the development of nuclear weapons and ballistic missiles.

Together, the policies of Seoul and Washington amounted to the incoherent approach of sanctioning and subsidizing the same target at the same time. The clearest illustration of that incoherence is U.N. Security Council Resolution 1718, drafted and passed under John Bolton’s leadership in 2006, which required member states to “ensure” that their money wasn’t paying for Pyongyang’s nuclear weapons.

(d)   all Member States shall, in accordance with their respective legal processes, freeze immediately the funds, other financial assets and economic resources which are on their territories at the date of the adoption of this resolution or at any time thereafter, that are owned or controlled, directly or indirectly, by the persons or entities designated by the Committee or by the Security Council as being engaged in or providing support for, including through other illicit means, DPRK’s nuclear-related, other weapons of mass destruction-related and ballistic missile-related programmes, or by persons or entities acting on their behalf or at their direction, and ensure that any funds, financial assets or economic resources are prevented from being made available by their nationals or by any persons or entities within their territories, to or for the benefit of such persons or entities; [UNSCR 1718]

In reality, Pyongyang has the most opaque finances of any government in the world, and Seoul hadn’t the slightest idea where its $100 million-a-year Kaesong subsidy went. Instead, it has willfully misread the resolution and reversed its burden of proof, denying that it has evidence that Pyongyang is providing this cash to, say, its General Bureau of Atomic Energy. If pressed, senior U.S. officials would admit that they were “concerned” about this.

“Precisely what North Koreans do with earnings from Kaesong, I think, is something that we are concerned about,” said Cohen. “All of the hard currency earnings of North Korea are something I would say that we should be concerned about. There are a number of thousands of workers at Kaesong who get paid for their services, so I think it is a complicated situation.” [VOA]

Whatever former President Park Geun-Hye’s other sins, in her last year in office, she managed to achieve an alignment of U.S. and South Korean policies that the two nominal allies had lacked for a quarter of a century. The legacy of that year was the termination of South Korea’s subsidies to the North through the Kaesong Industrial Complex, significant diplomatic pressure on Pyongyang’s trading partners, and U.N. Security Council resolutions that now present a high bar to resuming operations there.

“32.  Decides that all Member States shall prohibit public and private financial support from within their territories or by persons or entities subject to their jurisdiction for trade with the DPRK (including the granting of export credits, guarantees or insurance to their nationals or entities involved in such trade), except as approved in advance by the Committee on a case-by-case basis; [UNSCR 2321]

That is to say, any government’s support for trade with North Korea requires the approval of a U.N. committee that operates by consensus, and where the U.S. holds an effective veto. That puts Moon Jae-in’s campaign promises of reviving the Sunshine Policy on a direct collision course with the U.S., which now sees itself as under an increasingly direct North Korean threat for having been Seoul’s security guarantor.

Before Donald Trump was inaugurated or Moon Jae-In was elected, I predicted that behind the diplomatic pleasantries and joint press releases, the two presidents would (like their predecessors) be fundamentally misaligned on North Korea policy, and that each capital and cabinet would deeply distrust the leader of the other. More than two years before the election of Donald Trump, empirical evidence showed that the American news media leaned much further to the left than the voting public. One may safely say that the news media dislike this president with an intensity that goes far beyond their antipathy toward “ordinary” Republican presidents, even if one harbors sympathy for some of that criticism. Critics who pounced on Trump’s election-eve demand that Seoul pay for THAAD, and his more recent threats to terminate the U.S.-Korea free-trade agreement — even as Seoul resists China’s unilateral sanctions over THAAD — were right to view those statements as erratic and harmful to the relationship, although the South Korean public’s support for the U.S. and Korea’s alliance with it has proven remarkably resilient.*

I don’t live in Seoul or mix within the policy circles favored by Moon Jae-in’s administration, so I can only imagine how deeply Seoul distrusts Washington and Trump. I do live in Washington, however, and it’s apparent to me from my conversations with well-placed people here that Washington’s distrust of Moon runs very deep. In contrast to the media’s tendency to amplify every misstep by Trump on Korea, they have largely embargoed the very real reasons for Washington’s distrust of Moon. These include a career spent inside the brain trusts of South Korea’s most anti-American and anti-anti-North Korean movements and his appointment of (sometimes violent) pro-North Korean and anti-American characters into key positions in his administration. It should give Americans pause, for example, that President Roh’s Chief of Staff once spent years in prison for organizing Lim Soo-kyung’s propaganda tour of Pyongyang, and once led a student group that tried to firebomb the U.S. embassy. A man who, if he were to immigrate here, couldn’t pass a U.S. government background check to deliver your mail now has access to some of our most secret operational plans. If that doesn’t concern you, it should.

When Moon Jae-in came to visit Trump at the White House three months ago, there was reason to fear that the meeting would be a fiasco. Presidential advisor Moon Chung-in’s pre-summit tour of the Washington think tank circuit mostly horrified conservatives who are in power in Washington today and was an especially inauspicious sign. Thankfully, the two presidents did not feud publicly, but it was almost immediately apparent that their visit bridged none of the allies’ fundamental differences. Trump is now revealing that privately, the two leaders disagreed on the most contentious of them — how to deal with Kim Jong-un.

As if to affirm the accuracy of Trump’s assessment, Moon has just returned from a cozy summit with Vladimir Putin, where the two leaders agreed to build what sounds a lot like Kaesong 2.0 near North Korea’s border with Russia.

South Korea’s unification ministry said Friday it plans to seek trilateral economic cooperation involving the two Koreas and Russia after taking into account international sanctions and public sentiment.

President Moon Jae-in has unveiled the so-called new Northern Policy designed to expand economic cooperation with northern states including North Korea.

The Ministry of Unification said that the initiative involving the two Koreas and Russia will help implement Moon’s another vision to build a new economic belt with North Korea. [Yonhap]

See also. So far, details of this scheme are scarce, but if it involves the use of North Korean labor outside North Korea, it faces an additional obstacle from the UN’s newest resolution.

11. Expresses concern that DPRK nationals frequently work in other States for the purpose of generating foreign export earnings that the DPRK uses to support its prohibited nuclear and ballistic missile programs, decides that all Member States shall not exceed on any date after the date of adoption of this resolution the total number of work authorizations for DPRK nationals provided in their jurisdictions at the time of the adoption of this resolution unless the Committee approves on a case-by-case basis in advance that employment of additional DPRK nationals beyond the number of work authorizations provided in a member state’s jurisdiction at the time of the adoption of this resolution is required for the delivery of humanitarian assistance, denuclearization or any other purpose consistent with the objectives of resolutions 1718 (2006), 1874 (2009), 2087 (2013), 2094 (2013), 2270 (2016), 2321 (2016), 2356 (2017), or this resolution; [UNSCR 2371]

To amplify the absurdity of this, the Joongang Ilbo reports that Moon “failed to sway” Putin on enforcing sanctions against Pyongyang. But that report and the Moon administration’s new proposal can’t both be true. Reread the resolutions I quoted above and tell me how, even arguably, one can interpret such a proposal as (a) consistent with the resolutions, or (b) doing anything other than undermining the economic pressure Washington is trying to exert on Pyongyang right now. The most generous interpretations of Moon’s misreading of U.N. sanctions would attribute it ignorance, illiteracy, or incompetence. But coming less than a week after North Korea’s sixth nuclear test, while rumors of a long-range missile test swirled through Twitter, this latest proposal seems too spectacularly ill-timed to be inadvertent. Moon is showing Kim and Putin his outreached hand, even as he shows America his middle finger.

Give Trump credit where it’s due. His policy instincts about Moon and the South Korean left hew closer to reality than those of the last several American presidents. A good president doesn’t always need a mastery of fine detail; he simply needs to have good enough policy instincts to select advisors who do (and then, stay off Twitter and let them do their jobs).

Now the question that confronts Washington is how to mitigate the damage that Moon is willing to do to core U.S. national security interests. Moon knows the weakness of his position — his people like him personally, and wanted a change after ten years of conservative rule, but are deeply uneasy with his North Korea policies. No doubt, the signs of decoupling of the U.S.-South Korea alliance are cause for celebration in Pyongyang and Beijing. But if Moon means to finlandize South Korea and undermine sanctions yet again, why should Washington let him do so on his own terms? A strong demonstration that this will cause a breach in the alliance will undermine Moon’s political support, and may discourage him from undermining sanctions that Seoul’s representatives have supported at the U.N. Perhaps having a president with a Twitter account and a reputation for spontaneity isn’t all bad.

~   ~   ~

* Analysts tend to underestimate the appeal of a confident, “strong”-looking leader to voters. This appeal transcends culture.

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Buzzfeed is out of its depth on Egypt and North Korea sanctions

If journalism can be reduced to its most fundamental purpose, that purpose is to tell the reader important things he does not know. Be mindful of this purpose as we review one example of the slapdash reporting one tends to see whenever North Korea intrudes into the headlines.

As the Trump administration scrambles to respond to North Korea’s nuclear ambitions, it is trying to coax the country’s smaller trading partners, from Sudan to the Philippines, to ramp up the pressure on Kim Jong Un’s regime. Last week, the Trump administration announced that it would cut $96 million in aid and delay $195 million in military funding to Egypt, citing human rights concerns — and, according to reports, over the country’s robust relationship with North Korea.

One of the largest recipients of US aid, Egypt has also had a longstanding relationship with the isolated regime in Pyongyang, particularly trading in weapons. It’s unclear, though, what aspects of Egypt-North Korea relations the administration is displeased with, and whether it includes commerce not prohibited by sanctions. [Buzzfeed, Megha Rajagopalan & Maged Atef]

Not clear which aspect, you wonder? Might Buzzfeed have found some relevance in Pyongyang’s history of selling ballistic missiles to Egypt, no doubt to fund other missile programs that threaten the U.S. directly? Or that in 2015, the Obama administration sanctioned an Egyptian trading company for its ties to KOMID, North Korea’s principal arms exporter?

Buzzfeed’s reporters do finally get around to mentioning — near the very bottom of their piece, by which time wiser readers will have moved on — that “North Korea has even helped Egyptian scientists develop missile systems.” They do not mention that this is a long and ongoing relationship, that it flagrantly violates a U.N. arms embargo that has been in place for eleven years, that this embargo has been reaffirmed and strengthened by at least half a dozen resolutions since then, or that Egypt’s violation of it has been mentioned repeatedly by the U.N. Panel of Experts. Given the reporters’ emission of an inky cloud of confusion about what commerce is or isn’t prohibited by sanctions, wouldn’t more competent journalism have taken a moment to find the resolutions, read them, and explain them to its readers?

“The question is, if this North Korean issue is so important for the US, why didn’t they ever mention it with us before?” said Emad Gad, a member of the Egyptian parliament’s foreign affairs committee. “The Egypt-North Korea relationship is an old one, so why are we suddenly hearing they have problems with our relations with North Korea?”

Hey, I’m no human polygraph, but I know what bullshit smells like. A 30-second Google search yields this New York Times article (I know) noting that “[s]uccessive American administrations have privately raised the issue of North Korea in talks with Cairo, but with little success.” Suddenly?

Egypt makes up a very small part of the value of North Korea’s total trade — but it attracted headlines in 2008 when Orascom, an Egyptian telecom firm, set up the first North Korean 3G network. And Egypt is a well-known buyer of North Korean missiles and other weapons.

Again, Buzzfeed is out of its depth, leaving out revelations by better reporters that Orascom’s venture in North Korea was a likely violation of U.S. law, a fiasco for its shareholders, and a career-discriminating event for its CEO, Naguib Sawiris. All of which also goes unmentioned.

In Cairo, the development was met with confusion, and in some quarters, frustration.

“The North Korean-American issue is a conflict between the US and its allies against North Korea — not the whole world against North Korea,” said Gen. Hamdi Bakhit, a member of parliament who sits on the powerful Defense and National Security Committee. “China, for example, has a balanced relationship with both the US and North Korea … America is just fishing for a mistake to pressure Egypt.”

All of which Buzzfeed takes at face value, uncritically, without further inquiry or elucidation of its readers that a government’s mouthpiece has just lied to them like Anthony Weiner talking to a vice squad detective. Yes, we are but a simple junta leading a government that rules over almost 100 million people! We sing, we dance, we smoke our hookahs, and we craftily expunge all traces of shadowy extremist sects from every slum in Cairo, and that is all! We cannot be bothered to read U.N. Security Council resolutions or U.N. Panel of Experts’ reports, or file an implementation report that even fills a single sheet of paper.

Meaning, the Egyptian government knows damn well where to find these resolutions, what they mean, and what they prohibit. Which is more than I can say for Buzzfeed’s reporters.

Look, I understand that many journalists despise Donald Trump. I can understand why. It isn’t hard to find conservative pundits who share that sentiment. It isn’t hard to find journalists who would clearly despise a President Kasich almost as much for the sole reason that he’s a Republican. But something is terribly wrong with anyone whose moral lens is so monochromatic that she defaults to a certain sympathy for anyone whom Trump is against, even when that anyone is a sanctions-busting military junta. Or Kim Jong-Un.

In this case, however, the Trump administration is doing precisely what Barack Obama, George W. Bush, and Bill Clinton ought to have done over the last 24 years — diplomatically, nonviolently, and consistently with a sheaf of U.N. Security Council resolutions — working to end a grave and direct threat to the United States and all of the world, and to prevent a nuclear war in Korea. Does understanding that really require extraordinary moral agility, or might a willingness to use Google suffice?

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Sung-Yoon Lee: Nukes are Pyongyang’s “nonnegotiable means of isolating & exercising dominance over Seoul.”

Professor Lee raises, if ever so briefly, the standards of a newspaper that is simultaneously America’s most prestigious, and in terms of its North Korea coverage, easily its worst.

But a nuclear North Korea is unlike a nuclear China or Russia. During the Cold War, neither Beijing nor Moscow faced an existential threat in the form of an alternate Chinese or Russian state. Pyongyang, on the other hand, has had to live with a far more prosperous and legitimate Korean state across its southern border.

This internal dynamic of the Korean Peninsula compels Pyongyang to continue to threaten war and perfect its weapons of mass destruction. The regime’s logic is that the more advanced its nuclear capability, the less likely the United States will be to defend South Korea at the risk of sacrificing millions of American lives at home.

Hence, for the North, menacing the United States is a nonnegotiable means of isolating and exercising dominance over Seoul. This is how the regime of Kim Jong-un seeks to ensure its long-term survival. [Sung-Yoon Lee, The New York Times]

I often wish that I could write as well in my first language as Professor Lee can write in his second language. I always look forward to his op-eds — not only because they’re a pleasure to read, but also because off-hand, I can’t think of anyone else who writes about North Korea in the English language, who also reads North Korean propaganda in the original Korean, who possesses the additional understanding and context of having been raised in the Korean culture, and who is possessed of the good judgment to interpret that evidence usefully for the reader. If you’re as devoted a NYT non-subscriber as I am — I say this as someone who has co-written two op-eds (both with Prof. Lee) that the Times has published — this is well worth spending one of your free clicks.

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Some N. Koreans grow weary of a war that is forever imminent, as others yearn for it.

For the last 60 years, the people of North Korea have been told that they must sacrifice all their wants — and too many of their needs — for the sake of a holy war with Oceania that has always been imminent. Pyongyang’s media manipulation strategy shows the world’s most gullible journalists (and I mean you, Will Ripley) images of subjects who are (or who appear to be) united in fanatical, robotic devotion to the state’s war propaganda. Yet out in the provinces, the people have stopped believing it.
People have also been overheard complaining among themselves about how the government has to take such actions to create an artificially tense atmosphere, as without them, the people would show no real concern. “North Korea would suffer unspeakable destruction if war breaks out, so are they really going to attack the US?” one resident said to the source.
Evidence suggests that the regime does not have any such intentions, and is merely focusing on creating an atmosphere of war without undertaking any significant military maneuvers. Years of false claims of a coming “total war” and threats of annihilation have damaged the government’s credibility among the people. [Daily NK]
Or, in the original German, “Wollt ihr den totalen Krieg?” And the people said “nein.”*
“These latest measures do not represent any change in the regime’s strategy, and their failure to even respond to this week’s joint US-South Korea military drills with exercises of their own is further proof. They will just continue with their saber-rattling, forcing the people to the streets for daily demonstrations, taking pictures and putting on a show, but nobody at this point believes they will really start a war,” the source said. [Daily NK]
But whether this confidence is an expression of weariness or reassurance (or some combination of both) may depend on the individual. Some North Koreans say “when the war comes” as code talk for “after the regime ends.” A former member of the Pyongyang elite told me this in a conversation more than a decade ago. Here is more evidence of that.

“An increasing number of residents are pointing out that, for them [the North Korean people], provoking the US is a losing battle. We are the ones who suffer from the regime’s belligerent behavior with no consideration for reconciliation and cooperation,” he added.

Some residents are said to be welcoming the regime’s propaganda that a war is imminent, a source in North Hamgyong Province said. We want the suffering to finally end even if it means losing a war,” he said.

“Kim Jong Un is using the same old strategy of his grandfather (Kim Il Sung) and father (Kim Jong Il) to consolidate the population with threats of war, but it is not really effective anymore.” [Daily NK]

Often, I think we underestimate how intelligent, and how perceptive some North Koreans are in seeing through the state’s propaganda, yet at the same time, they may not be nearly perceptive enough about the cost of the war Kim Jong-Un is leading them into. Are their circumstances so desperate that they would gamble everything to reset the future? I suspect we’d find different answers to that question in Pyongyang, in the provinces, and in the barracks. We should help all of them understand that cost in vivid terms, along with who will bear it, and who profits from this regime’s endless war hysteria and all of the hard labor it is used to justify. History is often written by people who see only their desperation, who yearn to erase the future, and who damn all consequences. But if the North Korean people are waiting for us, they are waiting in vain. No matter the circumstance or the scenario, the cost of rebooting their future will be great. It will be far greater for them if it involves war with us. If they want a future, they must take history into their own hands.

~   ~   ~

* The rhetorical similarities between Goebbels’s words and Pyongyang’s rhetoric today are uncanny. Said Goebbels in 1943: “Do you believe with the Führer and us in the final total victory of the German people? Are you and the German people willing to work, if the Führer orders, 10, 12 and if necessary 14 hours a day and to give everything for victory? Do you want total war? If necessary, do you want a war more total and radical than anything that we can even imagine today?” You see what I mean? But war fever and Stakhanovite exhortations have short shelf lives — historically, no longer than ten years. A state can only sustain the ideological fervor for this level of self-sacrifice for so long before the people tire of it.

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Kim Jong-Un’s Moonshadow Policy is eclipsing free thought in S. Korea, and beyond

As we begin rehashing the time-worn policy arguments about responding to a nuclear North Korea, it’s useful to inform those arguments with further evidence of just how Pyongyang is leveraging its nuclear hegemony, by escalating its control over speech in South Korea. Last week, a few of us noticed that KCNA published a “death sentence” against four journalists (two reviewers and two newspaper presidents) over a review of “North Korea Confidential” by James Pearson and Daniel Tudor, asserting further that “the penalties will be enforced at an arbitrary point in time at an arbitrary point, without any additional procedure.”

President Bush removed North Korea from the list of state sponsors of terrorism on October 11, 2008. Discuss among yourselves.

I’ve posted the full text of KCNA’s threat below the fold (click “continue reading.”) The threat drew a mild condemnation from Seoul. What, do you suppose, are the odds that KCNA made this threat without the personal approval of His Porcine Majesty? No doubt, Pyongyang found the cover of the Korean edition to be provocative:

I don’t know if the reviewers would have even seen this cover. Pearson, an affable person who has done some excellent investigative journalism about North Korea’s money laundering in Malaysia and Singapore, also sent me a review copy when the book came out in English. My copy doesn’t have that cover. Other authors who’ve sent me review copies have done so by .pdf, and none of those texts showed a cover image. But then, the North Korean judicial system isn’t known for its evidentiary rigor or protections of due process.

Why else might Pyongyang target “North Korea Confidential?” It’s certainly a useful snapshot of how provincial North Korea in 2015 differed from the circa-1985 impression that most foreigners have of its society, culture, and economy, although a regular (or obsessive) Korea-watcher won’t read much there that she hasn’t read somewhere else. The book is hardly an indictment of North Korea’s political system. Pearson and Tudor don’t ignore the existence of the political prison camps or other human rights abuses, but those things aren’t the main focus of their book. They mainly focus on economic and cultural changes in North Korea since the Great Famine, and on evidence supporting the implication (of which I’m skeptical) that these things will necessarily drive political change. In their conclusion, they are “doubtful about the possibility of regime collapse” and skeptical of the proposition that “sanctions could push the DPRK to the breaking point.” They ultimately conclude that “the most likely scenario for North Korea in the short and medium term is the gradual opening of the country under the current regime.”

Of course, things don’t seem to be working out that way. Indeed, Kim Jong-Un’s greatest domestic achievement may be his success in sealing North Korea’s borders and implementing a moderately effective digital censorship regimen, perhaps with the technical assistance of well-meaning engagers here.

None of which is really my point. My point is that compared to any number of other North Korea books one can read in Korean, “North Korea Confidental” is mild stuff. It’s not half as inflammatory, subversive, or acerbic as most of what you might read at this blog, or at B.R. Myers’s Sthele Press. Having mostly finished this post last week, I decided to hold it for a few days while I emailed some other authors to ask whether their works are published in Korean. Professor B.R. Myers informs me that “The Cleanest Race” is; so is Kang Chol-hwan’s “The Aquariums of Pyongyang;” Yeonmi Park’s, “In Order to Live;” and most of Marcus Noland and Stephan Haggard’s books. All of these books are more ideologically dangerous to Pyongyang than “North Korea Confidential.” Why not them?

The key to explaining this, I think, is that the authors themselves were not the targets of this threat; the Korean journalists who reviewed the book’s Korean edition were. And here, we find the makings of a pattern and an escalation, because a reader brings to my attention that KCNA has also published this threat against centrist and right-of-center Korean media — sorry, make that “Puppet Reptile Writers.” Apologies for the long quote, but this is worth reading and archiving in full:

Pyongyang, September 1 (KCNA) — Yonhap News, Chosun Ilbo, Dong-A Ilbo, Maeil Kyongje, Munhwa Ilbo and other vicious conservative media of south Korea professing to represent the south Korean media are speaking ill of the Korean People’s Army’s resolute warning for mounting enveloping fire on Guam and the will of the Korean people to wage death-defying resistance against the U.S. and are unhesitatingly trumpeting about such rhetoric as “enhanced war atmosphere” and “creation of tensions for maintaining social system”.

A spokesman for the Central Committee of the Journalists Union of Korea in a statement Friday says this clearly proves that the puppet conservative media are made up of hack writers, servants of bellicose forces at home and abroad and group of traitors with whom we can not live together.

The Central Committee of the Journalists Union of Korea sternly declares as follows reflecting the towering grudge and hostility of the mediapersons of the DPRK against the puppet conservative media going reckless to hurt the dignity of the DPRK while pointing an accusing finger at the dignity of the supreme leadership of the DPRK:

We will sharpen the just writing brushes to defend our leader, our party and our social system and win a final victory in the confrontation with the U.S.

No matter how loudly the hostile forces may cry out, they can never check the advance of the DPRK dashing toward the bright future of humankind along the straight road of independence, Songun and socialism.

We will track down the puppet conservative reptile writers fostering discord within the nation under the auspices and at the instigation of the anti-reunification forces at home and abroad, and throw overboard all of them.

The puppet ultra-right conservative hack writers without elementary conscience as writers have to be completely stamped out. This is the unanimous will of the mediapersons of the DPRK, and this will be put into practice.

Our grime and merciless pen will sight the bases which commit hideous crimes against the DPRK by spreading misinformation about it, and beat them to pieces.

The puppet conservative media escalating confrontation with the DPRK while dare challenge the annihilating spirit of the army and people of the DPRK will never be able to evade the shower of retaliatory blows. -0- [link]

Let’s call all of this precisely what it is: terrorism. See also Pyongyang’s extraterritorial censorship of “The Interview” in the United States, Europe, and Asia. See also (in no particular order) its series of attempts between 2008 and 2014 to murder North Korean dissidents in exile, its 2012 threat to shell the offices of conservative South Korean newspapers, its 2014 threats against defector-activists who launch leaflet balloons over the DMZ, its approval of the 2015 slashing attack on the U.S. Ambassador, its 2016 threat to murder the President of South Korea, its 2017 threat to murder the ex-President of South Korea and just about anyone who angers it, and its 2017 murder of Kim Jong-Nam in Kuala Lumpur.

I offer that evidence for the benefit of anyone who is tempted to believe the palliative that we can just “learn to live with” a nuclear North Korea, to view our own acknowledgement of Pyongyang’s nuclear status as the end of this crisis, or to find reassurance in the belief that Pyongyang, having achieved nuclear hegemony at such cost, will rest contentedly within its own borders. On the contrary, from now until the end of Kim Jong-Un’s life, every book review, editorial, film, conference, and U.N. vote will be cast as a choice between the offending thoughts, on one hand, and assassination or war on the other. How much of your freedom of thought will you give up for the sake of “peace?” The problem with that question is that no one ever asks it just once.

I have written before about how the generals in Pyongyang believe they can gradually subjugate South Korea into submission and remote control by confederation, rather than attempt to occupy a country with twice its population and many times its wealth. I have written about how Pyongyang’s attempts to censor opinion in South Korea and elsewhere, including the United States and Europe, are at the vanguard of those plans, because Pyongyang knows that to control people, you must first control their thoughts. Pyongyang’s thought control takes many forms, from death threats, to hacking the email of scholars here, to threatening the organizers of conferences. So does the thought control of its simpaticos in South Korea, who use the courts to intimidate refugees, use South Korea’s oppressive libel laws to suppress parliamentary and political speech, send thugs from state-subsidized labor unions to attack their critics, and (as Roh Moo-hyun did) use selective and ideologically motivate tax audits against unfriendly newspapers. And these are just the things we know about.

It may be a complete coincidence that at this moment, Moon Jae-in and the hard-left labor unions are now using threats of criminal prosecution to assert ideological control over Yonhap and other state-owned media. Then again, it may not be a complete coincidence. Whatever this is, it is not “liberal.”

North Korea and the anti-anti-North Korean left in South Korea have many instruments for controlling the thoughts of South Koreans. Recently, I argued how various forms of censorship have gravely damaged South Korea’s liberal democracy and the quality of its political debate. Meanwhile, the fawning coverage that foreign and Korean journalists have given Moon Jae-in is enough to make Kim Jong-un envious of his treatment by KCNA. These are the journalists who are supposed to be the guardians of a free press. But at the critical moment, they are almost as derelict as (though less corrupt than) the Associated Press was when it made its Faustian bargain with the North Korean government. You won’t hear a critical word from the AP about the fact that its business partner just published a threat to murder four fellow journalists. Remember that the next time anyone from the AP makes a self-serving soapbox argument about its important role as a guardian of your freedom (which is exactly what the AP and journalists should be).

As for most foreign and Korean journalists, they’re so personally and ideologically enamored of Moon Jae-in, and so invested in the narrative of Pyongyang as David besieged by Goliath, that they’ve blinded themselves to this partial eclipse of South Korea’s freedoms. Pray that Kim Jong-Un’s Moonshadow Policy is no more successful than Kim Dae-jung’s Sunshine Policy was. You can try to reassure yourself that this is South Korea’s problem, but recent history suggests that while the path of totality will eventually cover all of Korea, the path of the partial eclipse will be global. And so far, Pyongyang’s campaign seems to be working. By the way, when was the last time you saw a movie about North Korea? I’ll bet it wasn’t made after 2014.

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… and Kim Jong-Un got the bomb, and we all just lived happily ever after.

Since North Korea’s sixth* nuclear test, I’ve already read several analyses concluding that North Korea now has the bomb for good, and that we might as well give up on denuclearization — as if Pyongyang’s acquisition of a nuclear arsenal ends with us all living happily ever after together. You can only believe that if you either haven’t read much North Korean propaganda — or choose to ignore it, just as much of Europe ignored the words Hitler wrote in Mein Kampf in the 30s. But what North Korea wants is South Korea. It has always wanted South Korea, and it has never stopped saying that it wants South Korea. Its messianic vision of reunification has always rested on its express promise of reuniting Korea under its rule. You can try to pretend that away, but North Korea won’t be content to sit behind its borders and watch its legitimacy eroded away by unfavorable comparison — made vivid by every smuggled DVD of a South Korean TV drama — to a superior model of Korean nationhood.

Why do we refuse to believe Pyongyang when it makes its intentions so manifest? Because it couldn’t conquer and occupy the South by conventional war? Do we assume that Pyongyang’s plans haven’t evolved since 1953? I assure you — its current plans are much more rational and attainable than that.

In the meantime, Pyongyang needs cash, and it will sell any weapon to any buyer to get it. And it will threaten or murder any critic, foreign or domestic, whose words undermine the integrity of its propaganda, until in some small way, we are all subject to Pyongyang’s global censorship. Not even the U.S. Ambassador, or a Hollywood film studio, is off limits to its goon squads. Accepting a nuclear North Korea doesn’t mean this crisis is over. It means we’ve entered Korean War II in earnest. Korean War II is a war of skirmishes in which Pyongyang will seek to incrementally terrorize South Korea into submission and the U.S. into disengagement. It will mean a new period of accelerating crises and outrages that will almost inevitably lead to miscalculation and war. We cannot live with a nuclear North Korea.

The geniuses who’ve spent the last 30 years misjudging Pyongyang and counseling us to appease it are soon to fill your TV screens and op-ed pages. They would sit this episode out if they had any shame at all, and you will tune them out if you’re more sensible than they are. Which, statistically speaking, you probably are.

There is much overlap between these advocates of appeasement and those who once said, in no particular order, that (1) North Korea only wanted nuclear reactors to generate electricity, (2) that if we cut a deal, it would keep its word, (3) Kim Jong-Un would be the reformer we’ve all been waiting for, (4) Pyongyang only wants nukes for defense, and (5) that years of tough sanctions — sanctions that almost none of these critics had read or knew the first thing about — haven’t worked. They now call for a deal, in the hope that you haven’t noticed how Pyongyang has insisted, again and again, that it will never give up its nukes. What, do they suppose, are we supposed to negotiate except this year’s price of extortion? We can neither talk, nor bomb, nor wait out way out of this crisis.

Clearly, sanctions haven’t worked yet, if you define “work” to mean disarm or topple Kim Jong-Un. Whether they’re beginning to work remains to be seen. It’s a lazy argument that equates coincidence with causation for polemic convenience. One could have made it after North Korea’s first nuclear test in 2006, when financial sanctions (as we know now) clearly had put Pyongyang under withering pressure and eventually forced it to return to talks (where we exchanged real concessions, including the lifting of sanctions, for false promises to disarm). There are some early signs that sanctions are beginning to fray the system’s financial and political cohesion, but as I’ve said all along, it will take two to three years for them to begin to show their effects, and it’s too early to call this evidence compelling.

If you remember nothing else about our sanctions against North Korea, remember these points. First, as a practical matter, and until early 2016, the U.S. had stronger sanctions in place against Zimbabwe than against North Korea. Our North Korea sanctions were among our weakest sanctions programs, out of deference to Beijing, which consistently cheated on U.N. sanctions, to the point of selling Pyongyang the trucks that carry its missiles. Even then, the U.S. only began to enforce the new sanctions authorities Congress gave it in June 2017. It’s time to offer Beijing a sharper choice than it has had to make before. That’s not just a threat of secondary sanctions and trade consequences; it’s also a threat of instability along China’s border. If Pyongyang and Beijing are willing to threaten our security, why should we refrain from doing the same to them?

So does this mean we’re too late? Yes, we’re too late to stop North Korea from having a nuclear arsenal, but not too late to stop it from having a bigger and better one, not too late to undermine Kim Jong-Un’s misrule politically, and not too late to truncate whatever crisis is to come four or five years from now. Our goal now must be to abbreviate, as much as possible, the amount of time we have to try to deter a state that’s increasingly undeterrable by abbreviating the rule of Kim Jong-Un.

Meanwhile, beseech the deity of your choice that the Defense Department is accelerating its development of boost-phase missile defenses; ground-based missile defenses like the Arrow, Iron Dome, and C-Ram systems; and hyper velocity projectiles that will allow conventional 155-millimeter and 5-inch artillery to be integrated into a missile defense network. That’s probably our only option for defending Seoul and Osan Air Base against North Korea’s tube artillery, and its chem/bio-capable 300-millimeter artillery rockets. Those systems may give us a partial sense of security a few years from now, at great cost, but the only way we’ll ever have lasting security from Kim Jong-Un’s threats is the end of his misrule. That change — the change that we need, and that the North Korean people need even more desperately than we do — must come from within.

~   ~   ~

Previously said “seventh.” Since corrected, thanks to a reader.

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Do you own any clothing made in North Korea? (Answer: Don’t be so sure.)

The U.N. Security Council is reportedly considering a variety of new sanctions against North Korea over its latest missile test, and according to Reuters, a ban on textile exports is among the sanctions under consideration. For a few years, we’ve known that the export of textiles (or textile workers, who labor under sweatshop conditions for little or no pay) is increasingly lucrative for Pyongyang. I don’t need to explain that historically, textile work has lent itself to particularly exploitative labor arrangements.

As always with North Korea sanctions, enforcement is the rub. We can expect North Korean exporters to continue sewing “made in China” labels on their wares and sneaking them into foreign markets — including the United States — to defraud customs officials to get lower tariff rates, and to defraud consumers who would boycott North Korean products and the stores that sell them. In case you’re wondering, yes, we have a law against country-of-origin fraud, and yes, President Obama did sign an executive order prohibiting imports of goods made with North Korean goods, services, or technology (so that’s two felonies, in case you’re keeping count).

It’s entirely possible, of course, that retailers may be selling North Korean-made textiles without knowing it. This recent New York Times story, for example, claims that North Korean sweatshops sew “made in China” labels on their products. That’s consistent with other reports I’ve bookmarked over the years that Chinese exporters are conspiring to commit country-of-origin fraud. Way back in 2004, in the earliest days of this venerable blog, the Korea Times reported that JC Penney was importing and selling North Korean-made textiles in its stores. At the time, I wrote to JC Penney to inquire about the story. JC Penney wrote back promptly and strongly denied having ever imported or sold North Korean-made goods in its stores.

In other cases, manufacturers knowingly use North Korean labor while hoping we won’t find out about it. RipCurl Sportswear and Woolen Mills clothing both became objects of controversy recently for using North Korean labor. And of course, textiles were among the main products manufactured in the Kaesong Industrial Complex. Textile export sanctions would be yet another blow to Moon Jae-In’s plans to revive Kaesong.

As with other facets of the North Korea problem, there isn’t just one answer to this problem. Part of the answer lies in better due diligence by merchants about their supply chains. Next, suspend your sense of historical irony and learn a lesson from the American cotton industry, which has waged an effective anti-slavery campaign against cheap imports made with Uzbek cotton. The cotton industry collected evidence that this cotton is often harvested with forced labor, and then joined forces with human rights NGOs to mount an effective public and political pressure campaign. It also made good use of this regulation to petition Customs and Border Protection to exclude the imports from U.S. commerce.

Finally, when NGOs, industry groups, and investigators discover evidence of fraudulent or illegal North Korean exports within U.S. jurisdiction — either because the transactions were cleared through U.S. banks, because a U.S. person was involved in a transaction facilitating the exports, or because the wares entered U.S. commerce — the U.S. government has several tools it can use to prosecute offenders, and to freeze or forfeit their assets. These include the prohibition against country-of-origin customs fraud, Executive Order 13570 , the new discretionary textile export sanctions authority in section 104(b)(1)(E) of the NKSPEA (as amended here), and the new sanctions against users of North Korean forced labor, which blacklist not only the manufacturers that use North Korean labor, but also the governments that tolerate it.

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Speaking out for the North Korean people is more than a full-time part-time job

For months, I’ve heard rumors that the Trump administration isn’t fond of special envoys, and quietly, some of us fretted that the administration was planning to eliminate the job of Special Envoy for Human Rights in North Korea. As it turns out, Tillerson isn’t doing exactly that:

The functions and staff of the special envoy for North Korean human rights issues would now fall under the office of the under secretary for civilian security, democracy and human rights, who will now also assume that title. The position of special envoy for the six-party talks dealing with North Korea will be removed, as the talks ended in 2008. [CNN]

Why stop there? Why doesn’t Tillerson just eliminate both posts? Because he can’t. The human rights envoy’s position is a creation of statute — specifically, of section 107 of the North Korean Human Rights Act of 2004, now codified at 22 U.S.C. 7817. A cabinet secretary can’t unilaterally eliminate a position that Congress has created.

The good news is that the job would move out of the East Asia Bureau, where the Special Envoy’s mission was more easily subordinated to each Assistant Secretary’s pursuit of a Nobel Peace Prize. But the proposal to merge the Special Envoy’s job into another position is problematic. Until recently, Congress cared deeply about the issues within the Special Envoy’s mandate. We’re about to find out if it still does. It was never pleased that former Special Envoy Jay Lefkowitz was a part-time Special Envoy. In the notes below section 7801, in fact, there is sense-of-Congress language expressing the sentiment that “the Special Envoy for North Korean Human Rights Issues should be a full-time position.”

The State Department will say that merging a position doesn’t mean it isn’t full time. Congress will answer that if you’re doing more than one job full-time you aren’t doing either job full-time, and the notion of a full-time part-time job is absurd. Anyone who can’t think of why this should be a full-time job doesn’t understand what the job should be. The Special Envoy should be the administration’s principal public voice who speaks to the world, and to the people of North Korea, in explaining, defending, and encouraging the implementation of policies that force Pyongyang to accept transparency, and to respect human life and dignity, or perish.

Congress and the world will not unite around a policy that diminishes or sidelines human rights. Transparency and respect for human life are logically inextricable from issues of war, peace, and proliferation. Those issues are also linked geographically, and perhaps operationally. To sideline human rights would throw away an important source of leverage over North Korea, China, South Korea, and Japan, which sees getting its abducted citizens back as a part of the Special Envoy’s job.

Human rights is also a test of whether diplomacy can work at all. If Pyongyang can’t accept transparency in its acceptance of aid or the amelioration of conditions in its gulags, why should anyone believe that we can have credible nuclear diplomacy? Human rights can be an important force multiplier in sanctions enforcement. If you’re a North Korean diplomat in Vientiane or Asmara who’s thinking about jumping the fence and taking your laptop and the passwords to your bank accounts with you, does this make it more or less likely that you’ll go through with that?

This proposal sends a message that America is abandoning the people of North Korea just when we need each other most. It will cost us the support of a global liberal coalition that is tempted to view sanctions-busting engagement or squandering unmonitorable aid as strategies for advancing humanitarian conditions in the North. It will undoubtedly please accountants in OMB and career diplomats in some quarters of the State Department, but it’s short-sighted and wrong. Congress should protest.

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State Department issues new reports on N. Korean gulags, religious repression

Last week, State issued two new reports on North Korea. The first of these reports, mandated by section 303 of the North Korea Sanctions and Policy Enhancement Act of 2016, terms itself a report on North Korea’s prisons. In fact, it only describes the worst tier of them — the dreaded kwan-li-so, or political prison camps, several of which are places where the condemned never leave.

CAMP 16 HWASONG
41.314103,129.342054

There is little information available on the total control zone Camp No. 16 (Hwasong political prison camp). Located in Hwasong County, North Hamgyong Province, 385 kilometers northeast of the capital of Pyongyang, there are no known former prisoners or camp officials available to testify about conditions in the camp. The limited information about the facility has been drawn from testimony by local residents. Camp 16 is reported to be a total control zone divided into three sections for prisoners whose crimes differ in severity. Unconfirmed reports suggest prisoners may be used in the construction of the Punggye-ri nuclear test site. This camp site also has hydropower capabilities and light agricultural and mining industrial activities along the waterway.

The National Human Rights Commission of [South] Korea has estimated there are approximately 20,000 prisoners in Camp 16. Some NGOs report that prisoners from Camp 22 may have been transferred to Camp 16 in 2012. Satellite imagery analysis does show some modest construction at Camp 16 around that time, but more information would be necessary to conclude whether the expansion was the result of a growing prisoner population.[2] [U.S. State Dep’t]

Of course, North Korea also has other levels of prisons, including local jails and detention facilities, and larger re-education camps that hold a mixture of actual violent criminals, lower-grade political criminals, and economic criminals who may fall into a gray area between the two. Imagery of Camp 16 was first published at this humble blog, describing a reported mass escape that I’ve never been able to confirm, and on which I’ve never seen any subsequent reporting. Years later, I published a much longer, prisoner’s-eye analysis of imagery of the camp, and of the nuclear test site immediately adjacent to its western boundary, as a public service to anyone who thinks the nuclear and human rights issues can be separated.

The report doesn’t cite its sources, but it appears to rely heavily on the excellent reports and imagery analysis of the Committee for Human Rights in North Korea, specifically its long-form “Hidden Gulag” reports, and the shorter updates it publishes on observations in the satellite imagery.

This is not to say that State’s report isn’t helpful. I know of at least one prominent NGO that’s already poring over it, and will likely cite it in an upcoming authoritative report that could have global and historical implications. Furthermore, the very publication of this report forces State to confront this issue, and will frustrate those (on the far left, the far right, and aspiring Nobel Peace Prize winners in the State Department) who would rather not upset His Porcine Majesty by speaking of such unpleasantries.

Which is exactly what happened with State’s annual report on religious freedom.

North Korea “categorically rejected the report, branding it as the thing that does not deserve even a passing note,” its state-run Korean Central News Agency (KCNA) quoted a spokesman for the country’s Religious Believers Council as saying.

The spokesman said the U.S. action “is nothing but a last-ditch effort for tarnishing at any cost the international image and strategic position (of North Korea) … and further fanning up the climate of sanctions and pressure against the DPRK.” The DPRK is the abbreviation of North Korea’s official name, the Democratic People’s Republic of Korea.

“The Religious Believers Council of Korea will as ever take a strong counteraction against the U.S. arbitrary practices and hostile policy toward the DPRK in a solidarity with the international religious organizations,” the spokesman said. [Yonhap]

Pyongyang claims that its people are perfectly free to practice any religion they choose and maintains several sham churches for the convenience of gullible journalists and other visitors who accept that illusion at face value. North Korean Christians will tell you otherwise:

The government continued to deal harshly with those who engaged in almost any religious practices through executions, torture, beatings, and arrests. An estimated 80,000 to 120,000 political prisoners, some imprisoned for religious reasons, were believed to be held in the political prison camp system in remote areas under horrific conditions. CSW said a policy of guilt by association was often applied in cases of detentions of Christians, meaning that the relatives of Christians were also detained regardless of their beliefs.

Religious and human rights groups outside the country provided numerous reports that members of underground churches were arrested, beaten, tortured, or killed because of their religious beliefs. According to the NKDB, there was a report during the year of disappearances of people who were found to be practicing religion within detention facilities. International NGOs reported any religious activities conducted outside of those that are state-sanctioned, including praying, singing hymns, and reading the Bible, could lead to severe punishment including imprisonment in political prison camps. [U.S. Dep’t of State]

To read the rest on your own, go here and mouse over “countries.” For reasons that become clear to the student of political psychology, Pyongyang is absolutely terrified of Christianity. Click here for more posts on North Korea’s persecution of Christians — which is one of two compelling cases for a charge of genocide (the murder of ethnically mixed, half-Chinese babies of refugee women being the other).

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FBI, Treasury & DOJ hit N. Korean enablers with secondary sanctions, forfeitures

Two months ago, the Center for Advanced Defense Studies (C4ADS) released its groundbreaking report, “Risky Business,” which used open-source business records to trace the 5,233 companies that (according to C4ADS) comprise nearly the entirety of North Korea’s “limited, centralized, and vulnerable” financial networks in China. At the time, I speculated that we hadn’t heard the last word from the FBI, the Treasury Department, and Justice Department, and yesterday, my suspicions were confirmed.

First, Treasury designated a series of North Korean, Chinese, and Russian nationals for dealing with sanctioned entities through the dollar system, in violation of the International Emergency Economic Powers Act. The effect of the designations is to freeze any assets of those entities that are in the United States, prevent them from using the dollar system for future transactions, and prevent U.S. persons from providing them with any goods, services, or technology.

“Treasury will continue to increase pressure on North Korea by targeting those who support the advancement of nuclear and ballistic missile programs, and isolating them from the American financial system,” said Treasury Secretary Steven T. Mnuchin. “It is unacceptable for individuals and companies in China, Russia, and elsewhere to enable North Korea to generate income used to develop weapons of mass destruction and destabilize the region. We are taking actions consistent with UN sanctions to show that there are consequences for defying sanctions and providing support to North Korea, and to deter this activity in the future.” [Treasury Dep’t Press Release]

Among yesterday’s notable targets:

* China-based Dandong Rich Earth Trading Co., Ltd., for buying vanadium from sanctioned Korea Kumsan Trading Corporation, a front for the General Bureau of Atomic Energy.

* Russia-based Gefest-M LLC and its director, Ruben Kirakosyan, for procuring metals for sanctioned Korea Tangun Trading Corporation, a front for the Second Academy of Natural Sciences, which is involved in North Korea’s WMD and missile programs.

* China- and Hong Kong-based Mingzheng International Trading Limited (“Mingzheng”), the subject of this previous Justice Department forfeiture case, which acts as a front company for the Foreign Trade Bank (FTB) of North Korea. Treasury designated the FTB in 2013 for proliferation financing. The U.N. recently designated it in UNSCR 2371.

* Three more Chinese companies that are “collectively responsible for importing nearly half a billion dollars’ worth of North Korean coal between 2013 and 2016,” including Dandong Zhicheng Metallic Materials Co., Ltd. (“Zhicheng”), JinHou International Holding Co., Ltd., and Dandong Tianfu Trade Co., Ltd. Dandong Zhicheng was exposed by C4ADS as part of the Sun Sidong network in June. This is the single largest purchaser of North Korean coal. That’s going to leave a mark.

* Three Russians and two Singapore-based companies involved in providing oil to North Korea.

Transatlantic Partners Pte. Ltd. (“Transatlantic”), Mikhail Pisklin, and Andrey Serbin were designated pursuant to E.O. 13722 for operating in the energy industry in the North Korean economy. Pisklin, through Transatlantic, concluded a contract to purchase fuel oil with Daesong Credit Development Bank, a North Korean bank designated in 2016. Serbin is a representative of Transatlantic who worked with Irina Huish of Velmur Management Pte. Ltd. (“Velmur”) to purchase gasoil for delivery to North Korea. Velmur was designated for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, Transatlantic. Velmur also sold gasoil to North Korea. OFAC also designated Velmur’s executive director, Irina Huish, for acting or purporting to act for or on behalf of, directly or indirectly, Velmur, and she has also worked with Transatlantic to circumvent sanctions. Both of these companies have attempted to use the U.S. financial system to send millions of dollars in payments on behalf of North Korea-related transactions.

Lest anyone accuse Treasury of singling China out, the designation of Singapore-based entities should send a strong message to a state that has largely overlooked the enforcement of North Korea sanctions and consequently become a haven for Pyongyang’s money laundering. I was also pleased to see Treasury go after KOMID’s slave labor racket and arms factory in Namibia, which I’ve previously written about here, here, and here, although I maintain that the NKSPEA also requires the President to sanction the Namibian entities that have knowingly dealt with sanctioned North Korean entities like KOMID. I hope Angola will be next.

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Just over an hour after Treasury released those designations, the Justice Department filed two civil forfeiture complaints against $11 million belonging to Velmur, Transatlantic, and Dandong Zhicheng. I downloaded both complaints from PACER, for the good of humanity, so you don’t have to.

Velmur complaint   |  Dandong Zhicheng complaint

You’re welcome, humanity.

This complaint alleges that Velmur and Transatlantic Partners Pte. Ltd. (Transatlantic) laundered United States dollars on behalf of sanctioned North Korean banks that were seeking to procure petroleum products from JSC Independent Petroleum Company (IPC), a designated entity. The complaint also seeks a civil monetary penalty against Velmur and Transatlantic for prior sanctions and money laundering violations related to this scheme.

According to the complaint, designated North Korean banks use front companies, including Transatlantic, to make U.S. dollar payments to Velmur. The complaint relates to funds that were transferred through four different companies and remitted to Velmur to wire funds to JSC Independent Petroleum Company (IPC), a Russian petroleum products supplier. On June 1, 2017, the Department of the Treasury’s Office of Foreign Asset Controls (OFAC) designated IPC. The designation noted that IPC had a contract to provide oil to North Korea and reportedly shipped over $1 million worth of petroleum products to North Korea. [U.S. Attorney’s Office]

Don’t focus on the fact that the putative claimants were selling fuel. Focus on the fact that they were dealing with a sanctioned North Korean entity through the dollar system, which is a felony. (U.N. sanctions only ban exports of aviation and rocket fuel, and U.S. fuel export sanctions are discretionary and have humanitarian exceptions.)

The government is seeking to forfeit $6,999,925 that was wired to Velmur in May 2017. The U.S. dollar payments, which cleared through the U.S., are alleged to violate U.S. law, because the entities were surreptitiously making them on behalf of the designated North Korean Banks, whose designation precluded such U.S. dollar transactions. The government also is seeking imposition of a monetary penalty commensurate with the millions of dollars allegedly laundered by Velmur and Transatlantic. [U.S. Attorney’s Office]

Regarding Dandong Zhicheng, a/k/a Dandong Chengtai …

The government is seeking to forfeit $4,083,935 that Dandong Chengtai wired on June 21, 2017 to Maison Trading, using their Chinese bank accounts. The investigation revealed that Maison Trading is a front company operated by a Dandong Chengtai employee. These U.S. dollar payments, which cleared through the United States, are alleged to violate U.S. law, because the recent North Korean sanctions law specifically barred U.S. dollar transactions involving North Korean coal and the proceeds of these transactions were for the benefit of the North Korea Worker’s Party, whose designation precluded such U.S. dollar transactions.

This case relates to a previously unsealed opinion from Chief Judge Beryl A. Howell of the U.S. District Court for the District of Columbia, which found that probable cause existed to seize funds belonging to Dandong Chengtai.  [U.S. Attorney’s Office]

As noted here. And lest we forget to give credit where it’s due …

The FBI’s Phoenix Field Office is investigating the case involving Velmur Management Pte Ltd. and Transatlantic Partners Pte., Ltd. The FBI’s Chicago Field Office is investigating the case involving Dandong Chengtai Trading Co. Ltd. Both investigations are being supported by the FBI Counterproliferation Center.

Assistant U.S Attorneys Arvind K. Lal, Zia M. Faruqui, Christopher B. Brown, Deborah Curtis, Ari Redbord, and Brian P. Hudak, all of the U.S. Attorney’s Office for the District of Columbia, are prosecuting both cases. Paralegal Specialist Toni Anne Donato and Legal Assistant Jessica McCormick are providing assistance. [U.S. Attorney’s Office]

Finally, let’s not forget the important work of C4ADS. Today, it will release an update to “Risky Business,” revealing that in addition to having funds in U.S. banks, the Chinese national who runs Dandong Zhicheng, Sun Sidong, owns real estate in the United States. Check C4ADS’s web site for the update.  

When I read C4ADS’s reports, I’m often reminded of the line from “Lawrence of Arabia” when Mr. Dryden (delivered by the wonderfully dry and underrated British actor Claude Rains) learns that Lawrence has conquered the Turkish base at Aqaba with an army of Arab tribesmen: “Before he did it, I’d have said it couldn’t be done.” Indeed, for years, scholars at famous think tanks assured us it couldn’t be done. First, they told us that sanctions against North Korea were maxed out. Then, they told us that Pyongyang’s networks were needles in a field of haystacks, and that the field itself was obscured and beyond our sight. And yet, without so much as a single security clearance between them, two brilliant young analysts at C4ADS mined data from open sources and traced the networks. It may be on the brink of proving all the “experts” wrong.

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Update: C4ADS writes in to say that the update was delayed, and will be released in a few days.

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Latest cases of chemical proliferation remind us why Kim Jong-Un must go

The first mid-term report of the U.N. Panel of Experts should be out any day now, and among its revelations will be yet more evidence that Pyongyang is helping Assad gas his own people:

Two North Korean shipments to a Syrian government agency responsible for the country’s chemical weapons program were intercepted in the past six months, according to a confidential United Nations report on North Korea sanctions violations.

The report by a panel of independent U.N. experts, which was submitted to the U.N. Security Council earlier this month and seen by Reuters on Monday, gave no details on when or where the interdictions occurred or what the shipments contained.

 “The panel is investigating reported prohibited chemical, ballistic missile and conventional arms cooperation between Syria and the DPRK (North Korea),” the experts wrote in the 37-page report. [Reuters]
Add this evidence to the already-long dossier on Pyongyang’s chemical weapons assistance to Syria. The vendor, predictably, was KOMID, or the Korea Mining Development Trading Corporation, Pyongyang’s main arms dealing agency. (According to the Panel’s most recent annual report, by the way, KOMID representatives continue to operate openly in and transit through China.)

Two different member states intercepted the shipments. Previously, Greece, Turkey, and Israel have all intercepted shipments of banned items from North Korea in the eastern Mediterranean. Last year, Egypt intercepted a shipment of North Korean-made rocket-propelled anti-tank grenades at the southern end of the Suez Canal. And just so we’re clear, Pyongyang is willfully supplying the chemical weapons that Assad is using to do this:
Source: http://cbrainard.blogspot.com/2013/08/assad-threatened-to-use-chemical.htmlSource: https://www.youtube.com/watch?v=zbi2FaMQA-s Source: http://nation.com.pk/national/22-Aug-2013/1-300-die-insyriachemical-attack Source: http://kufarooq22.over-blog.com/2013/08/children-killed-in-syrian-regime.html
During the last year, we’ve also learned that Pyongyang is perfectly willing to make its own use of the deadliest chemical weapons known to mankind, including the persistent nerve agent VX against a noncombatant in an area crowded with completely uninvolved civilians in the capital city of a friendly nation. We know that North Korea would proliferate anything, including the means to produce nuclear weapons, to Syria.

Suspend your belief that Pyongyang (as it continues to insist) will never negotiate away its nuclear weapons or ballistic missiles. Suspend your disbelief that Pyongyang would comply with its agreements even if it signed yet another one. At no point have talks with Pyongyang so much as broached its proliferation, or its chemical weapons, or its biological weapons, or the tube and rocket artillery (some of it chem/bio-capable) it has pointed at the people of Seoul. There is no diplomatic process or agreement that will foreseeably end that threat before Pyongyang proliferates it globally.

Yes, you can rail against Clinton, Bush, and Obama for wasting years we did not have, but we are where we are. The best alternative left to us may be a combination of sanctions and information operations to destabilize the regime, along with the best blockade of North Korea we can now manage in the meantime. When member states don’t inspect North Korean cargo as required under UNSCR 2270, it may not be legally possible to search them, but it’s certainly physically possible. To complicate that option, however, most of North Korea’s maritime trade is run through short-haul trips across the Yellow Sea to China. It would be risky, but possible, to search smuggling ships and those running with their lights and beacons off, but that presents a high risk going hot with Chinese or North Korean ships. If that’s more risk than you’re willing to accept, the KIMS Act would also allow us to penalize ports don’t meet their inspection requirements and flag states that reflag North Korea’s ships, but that would come with economic costs for us. An amendment to the NKSPEA (“notwithstanding section 203(b) of the International Emergency Economic Powers Act”) could close the legal loophole that Air Koryo continues to fly through, and could — eventually — ground it, but that, too, would take time to work.

These measures could eventually shut down most of North Korea’s external maritime trade, but implementation is never immediate — at best, it would take months. Other measures, like mining harbors or bombing runways, present undue risks of causing civilian casualties or starting a war. But increasingly, we must balance all of the risks of shutting down Pyongyang’s proliferation against the risk of the civilian casualties that Pyongyang’s proliferation is causing right now, and could cause for years to come.

I occasionally see scholarly articles arguing that destabilizing the regime in Pyongyang presents an unacceptable risk that “loose” WMDs would proliferate. What I’d like to ask the scholars writing these articles is this: isn’t the greater proliferation risk that a “stable” regime in Pyongyang endures?

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Whatever happened to North Korea’s agricultural reforms? Just what I expected.

Starting around 2012, with a boost from an AP Pyongyang guided tour and some optimistic (but thinly sourced) analysis from Randall Ireson, Andrei Lankov, and others, a consensus formed among the pro-engagement school of North Korea watchers that Pyongyang was finally striking out on a bold new course of reform in an area of obvious need — its agriculture sector. In practice, the “reform” amounted to breaking up big collectives into smaller ones, and allowing collective farmers to keep and sell in the markets a portion of the crops they grew, a model that hardly evokes historical memories of social justice in the context of the Reconstruction-era South. It also looked suspiciously like a case of Pyongyang again trying to adjust to an economic reality that its people had imposed by necessity.

Although Pyongyang appears to have changed the way it taxed farmers starting in 2012, this blog has taken a consistently skeptical view of any analysis characterizing this as “reform.” Engagement advocates tend to view North Korea’s economic policies as socialism rather than economic totalitarianism with ideological decorations, which helps them characterize un-socialist policies as economic reforms. This, in turn, is a platform from which they leap to predictions that political reform will inevitably follow. But in addition to the paucity of evidence of what the changes to North Korea’s agricultural policies really meant in practice, there were reasons to doubt their implementation and question their significance. Indeed, there was evidence to support skepticism about them almost from the very beginning. By 2015, North Korean farmers “no longer believe[d]” that the changes would benefit them given state’s confiscation of their surpluses for the military and other expenses.

To their credit, both Ireson and Lankov eventually retreated from their optimistic predictions when they didn’t pan out, and most talk of agrarian perestroika has since died away. Even so, it’s still useful to follow just how Pyongyang’s experiment with sharecropping worked out. This analysis from last September, citing a recent defector from Ryanggang Province, gives us some evidence of the results.

A defector who goes by Mrs. Han offered invaluable insight to the problems pervading the new system at a recent event hosted by the North Korea Intellectuals Solidarity (NKIS) in Seoul. “When the pojeon system was first introduced, rural residents were singing its praises, thinking to themselves, ‘We’re finally going to be able to make a living.’ But when the system was actually implemented, the vast majority of the yield went to the state, leaving very little behind for the farmers who worked the land. That turn of events was deeply dispiriting for the workers,” said Mrs. Han, formerly the manager of the TaeHong Country Cooperative Farm in Ryanggang Province before she defected last October.

NKIS President Kim Heung Kwang added that if the pojeon family unit system was truly implemented, the degree of autonomy and living standard of agricultural workers should have improved. “But that is simply not what has happened,” he pointed out. [Daily NK]

According to Ms. Han, the state’s unsustainably high production quotas and its practice of charging farmers for fertilizer and pesticides mean that farmers seldom have a surplus to sell. According to a second report, where the state collected surplus crops and promised to redistribute them, that redistribution didn’t happen. Other reports note that regime officials tend to confiscate and divert the surplus that farmers were told they could keep and sell.

“Our provinces are known as the breadbasket, but the rice we’ve harvested has all been sent to the army, leaving us with nothing. Furthermore, the public distribution system is dispensing nothing. So people from this province haven’t been able to even taste the very rice they grew. They have to go as far as Ryanggang Province when they want to buy rice,” a source in North Hwanghae Province reported to Daily NK on August 5.

The extent of the problem is severe, she added, noting that “even as recent as ten years ago, our living standard wasn’t this low. These days, there are more and more people who have been forced to live as kotjebi [homeless orphans]. We’ll starve if we’re forced to endure another year or two of this.” [….]

“People around here are forced to watch the rice they’ve harvested being sent to Pyongyang. Far from receiving public distribution rations, they haven’t even seen that system in action. It’s ironic that this province produces the largest rice yield in the country, and yet its residents are forced to purchase smuggled Chinese rice in Ryanggang Province at above market price.”

This is in stark contrast to the cities, where markets are always open and bursting with a diverse array of goods. In the agricultural villages, however, product selection is scant and the markets operate on an irregular schedule (e.g. only on the 1, 11, and 21 of each month). Moreover, a poor logistics and distribution framework means few products are available to rural dwellers, most of whom live hand to mouth. [Daily NK]

The plight of African-Americans in the American South continues to be a useful historical parallel. As then, sharecropping in North Korea is contributing to a Great Migration of the rural poor to the cities. Historically, Pyongyang has controlled the movements of its population with a system of travel passes. It has been particularly careful to control who is allowed to live in Pyongyang. Surely it knows that rapid urbanization that concentrates large numbers of rural poor in the cities is a potential threat to the stability of the state.

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The North Korean people didn’t elect Kim Jong-Un. Stop threatening to bomb them.

I’m already on record on the topic of threatening war against North Korea: it scares our friends more than our enemies (who assume, correctly I hope, that we’re bluffing). If we want to threaten the thing our enemies fear most, threaten to sow the seeds of the revolution that the people of North Korea desperately need. Nukes aren’t much good in that kind of war, and China would never tolerate their use so close to its borders. If we can’t resist threatening to bomb someone, at least threaten to bomb the person who is responsible for this crisis, and deliver those threats privately. The people of North Korea didn’t elect Kim Jong-Un. At least Americans had a choice, sort of.

The people of North Korea don’t make policy, can’t criticize their government’s policies, and often don’t even agree with those policies. They’d rather eat than have missiles. So I really wish we would not play directly into the hands of Kim Jong-Un’s propaganda by threatening the very people we’ll need to befriend, support, and empower to verifiably disarm His Porcine Majesty.

One aspect of the defense secretary’s statement, however, was deeply troubling: “The DPRK should cease any consideration of actions that would lead to the end of its regime and the destruction of its people.” The overriding evidence suggests that Kim Jong Un cares not a whit for his people — threatening their destruction will not serve to deter him and is, more importantly, detrimental to US aims. Over the longer term, the United States has an interest in the peaceful unification of the peninsula under Seoul’s democratic leadership. Threatening the North Korean people with destruction is to make enemies of potential friends; it is, more troublingly, a promise to extend and deepen, rather than end, the suffering that the Kims have long inflicted on their people. [Michael Mazza, American Enterprise Institute]

Mind you, everything I’ve seen or heard about Mattis until now has given me reason to admire his intellect and patriotism. Maybe he has the wrong people in charge of his press office, but this is a terrible message to send at a time when our need to gain the confidence of Koreans on both sides of the DMZ is greatest. Statements like this, and especially this one from Senator Graham, send a message that Korean lives are unimportant to us. Talk like this not only empowers everyone, north and south, who hates us, but it sends a message throughout the world that America is a dangerous ally to have and should be kept at arm’s length. If America blunders into a nuclear war in Korea, what ally would ever want to be close to us again?

I am not one of those Pollyannas who believe the myth, popular among those who’ve misjudged North Korea for decades or spent the last eight years whistling toward the very crisis I predicted here, that Kim Jong-Un only wants nukes to deter us. North Korea wants nukes for much more than that.

We cannot coexist with a nuclear North Korea because it will not coexist with us. Its political system requires conflict and crisis to justify itself. Trump is right that this is a crisis. But a crisis is no time to shoot one’s self in both feet.

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