Diplomacy Money Laundering NK Economics Six-Party Talks

Plan B: How to Disarm Kim Jong Il Without Bombing Him

Insanity: doing the same thing over and over again and expecting different results.    — Albert Einstein

Plan A, gentle diplomacy,  has  again  failed to disarm Kim Jong Il.  Whenever this happens (every time it’s tried) advocates of doing the same thing over and over again fall back on The False Choice, whether expressly or by implication:  it’s  their way or war.  They know better, of course, which technically makes this a lie.   And usually, this lie  stands uncorrected:

“People lambaste the six-party process, and sure, it offers no refuge for those in need of instant gratification,” Mr. Hill, the negotiator, said in an interview. “But when asked for alternatives” to the nuclear pact, Mr. Hill said, “even the noisiest critics fall silent.   [N.Y. Times]

Hill knows better.  Last year,  North Korea talked him into abandoning the one alternative that’s ever succeeded in  modifying Kim Jong Il’s behavior:  economic constriction.  In just 17 months, the Treasury Department’s sanctions against  one  small  bank in Macau brought Kim Jong Il’s palace economy to the brink of the same catastrophe the rest of the North Korean economy reached 15 years ago.  Not only did the State Department force Treasury to abandon that pressure, Hill even  helped Kim Jong Il launder $25 million in mostly ill-gotten gains.  In exchange, Hill bought us  some exceedingly nebulous North Korean promises to disarm, eventually.  Not only did North Korea predictably  renege, it continued to proliferate nuclear materials and/or technology to Syria right  under our noses.

Quietly, the  appeasement camp is now talking about an alternative of its own — negotiating an acceptance of North Korea as a “responsible” nuclear power (see here, here, and here).  This is madness; not just for the obvious reasons, but because we have yet to even try  a  comprehensive, sustained effort  against Kim Jong Il’s regime-sustaining finances.  In the  year  President Bush  has left in office,  he could  inflict a shock  such of such voltage  that  it  could deprive  Kim Jong Il of the ability to  pay and feed  the military, intelligence, and bureaucratic  organizations on whom his survival depends.   Plan  B starts  with  ten  executive decisions, but President Bush must make them now:

1:   Declare Bureau 39 of the North Korean Workers’ Party to be an “entity of special concern” for money laundering under Section 311 of the USA PATRIOT Act. Then  impose the so-called Fifth Special Measure on Bureau 39 and its bankers.  Bureau 39 is the carotid artery of  Kim Jong Il’s  palace economy. It is responsible for earning, laundering, and  recouping foreign exchange through such illegal businesses  as drug dealing, counterfeiting, and missile sales.  The Fifth Special Measure prohibits the designated entity from holding correspondent accounts in U.S. banks and would cut off  most of Kim Jong Il’s access to  international finance.   This same sanction proved devastating when applied to Banco Delta Asia, and when applied to  foreign jurisdictions such as Nauru and the Ukraine.   Nuclear option:   Apply  PATRIOT 311 to the entire government  of North Korea.

2:   Sue.  File  criminal and/or civil  RICO and/or money laundering charges against Bureau 39  for any criminal conduct occurring inside the United States, such as the distribution of counterfeit currency, cigarettes, or pharmaceuticals.  Putting the evidence before an impartial tribunal  places it before the  eyes of the  world.  By  adding forfeiture counts, prosecutors  would  gain  the  means to attach and seize Kim Jong Il’s personal assets.   If North Korea  can be proven responsible for crimes of violence against U.S. persons,  it lacks many of the protections of the Foreign Sovereign Immunities  Act  because of its listing as a state sponsor of terrorism.   The  clearest  case of this may be North Korea’s suspected abduction, torture, and murder  of  the Rev. Kim Dong Shik, one of whose suspected abductors now sits in a South Korean jail.  Korea North Korea would almost certainly not send a lawyer to defend  itself in U.S. courts, in which case, the U.S. government  (or Kim  Dong Shik’s widow)  would win by default judgment.   Nuclear option:   Charge Kim Jong Il as an individual  defendant.

3:   Strictly and aggressively enforce U.N. Security Council Resolutions 1695 and 1718, using the Proliferation Security Initiative to  stop and search North Korean ships believed to be carrying prohibited cargoes such as missiles or nuclear material.  These important  resolutions ban North Korea from trading in most major  weapons systems, components, and technology.  They also require those tendering payment to the  regime to ensure that those funds are not used for its WMD programs,  never an easy thing to do in the case of secretive North Korea.  Nuclear option:   A “soft” blockade.  Search any North Korean merchant ships we find on the high seas, seizing  any we find carrying illegal cargo.

4:   Halt the sale of  North Korean blood gold.   Following Treasury’s sanctions against Banco Delta, Kim Jong Il began selling off his nation’s gold reserves to buyers in  Thailand and on the London exchanges.  President Bush should ask Britain to halt the sale of North Korean gold, subject to appropriate assurances  required under  resolutions 1695 and 1718.  He should also raise publicity and awareness of the fact that concentration camp prisoners mine much of that gold as a prelude to seeking international sanctions.

5:   Divest U.S. pension and other funds from companies doing business in North Korea, such as Hyundai Asan.  The divestiture movement has had significant success within some state legislatures and enjoys bipartisan support.

6:    Push China aside.  Let’s be realistic:  China isn’t going to help us force Kim Jong Il to disarm.  China  has undermined every previous multilateral action against North  Korea and still  subsidizes Kim  Jong Il.  China prefers a divided Korea that acts as a distraction for U.S. influence and power in Asia.   Under Executive Order 13,382, however,  Treasury can sanction and freeze the assets of entities that support or  finance North Korea’s  WMD programs.  We have already sanctioned Chinese companies under  13,382  for transferring sensitive  techology to North Korea.  Treasury could let the Chinese know that we’ll also apply  it  to any finanancial institutions acting as conduits for China’s aid to North Korea.   After all, China voted for U.N. Security Council Resolution 1718 but  still does not “ensure” that North Korea isn’t using  Chinese  aid money for WMD programs; thus,  the language of 1718  supports  this more aggressive interpretation of E.O. 13,382.  Because North Korea continues to engage in continuing acts of international  terrorism, another possible vehicle would be E.O. 13,382’s terrorist financing counterpart, Executive Order  13,224Nuclear option:   Investigate larger Chinese banks for money laundering, something Treasury may already suspect  in the case of the Bank of China.  Even a whisper of a  PATRIOT 311 designation might cause a bank run.

7:    Work with South Korea and Japan.  Japan has already cut off most commerce with North Korea,  and it probably wouldn’t take much coaxing to get Japan’s full support.  A greater opportunity lies in the potentially cooperative government  about to take  power in South Korea.  Seoul had provided billions of dollars in unconditional aid to Kim Jong Il’s regime in the last decade, but incoming President Lee Myung Bak has already stated that he wants to condition continued aid on North Korea’s disarmament.  Lee also wants some things from us, such as a  delay in the handover of wartime operational control to  the ROK military.   In return, he might agree to  end  all subsidies for the  unprofitable and unpopular Kumgang tourist project, a cash cow for Kim Jong Il  whose proceeds are suspected of financing North Korea’s military.  We should also ask  Lee to end direct bilateral aid and  channel all of South Korea’s humanitarian aid through the  World Food Program (this would also mean better monitoring and less diversion).  We could leave the Kaesong Industrial Park mostly  alone for now, but ask South Korea to enforce  laws prohibiting direct payments to North Korea strictly.  We should also encourage strictly humanitarian aid to the North Korean people.  That leaves the South Koreans some  leverage to  hold in reserve.  Nuclear options:   “Rotate” more of USFK’s forces home for temporary exercises; apply  Executive Order 13,382  to Hyundai Asan Corporation and Woori Bank.

8:   Restrict trade.  North Korea’s trade with the United States is infinitessimal, mostly because North Korea can’t produce high-quality consumer  merchandise and has no credit rating.  Still, it’s important to recall that President Clinton eased  trade sanctions in 1999 as a reward for North Korea’s missile testing moratorium.   Those sanctions should have been reimposed after North Korea’s July 4, 2006 missile test, but never were.  After the passage of U.N. Security Council  Resolutions 1695 and 1718, however, the United States accepted an obligation to account  for where  Kim Jong Il spends  any money our corporations are sending him.   Today, most  imports, exports, and other large transactions with North Korea  require approval from  Treasury’s Office of Foreign Asset Control  (OFAC).  OFAC should deny permission  for transactions with North Korea unless the applicant  can verify a non-military use for the funds to be tendered.

9:   Engage the people.  Kim Jong Il’s hermetic seal around the North Korean people is breaking down, thanks to (a) radio, (b) curiosity, (c) capitalism, which drives a thriving black market, (d) corruption among the border guards, and (e) the regime’s financial inability to maintain control over its borders.  Even as we seek to weaken Kim Jong Il’s capacity to oppress, we should do what we can to feed, strengthen, and empower the North Korean people.  Our quarrel isn’t with them; they’re Kim Jong Il’s  greatest victims and potentially, our greatest  allies.  First, the Bush Administration must make good on its cheap talk about human rights by implementing the North  Korean Human Rights Act of 2004.   Congress passed this  legislation unanimously, but  the State Department has blocked its implementation ever since  President Bush signed  it more than three years ago.   This is not to say that the Administration shouldn’t also talk about  human rights.  But instead of childish epithets like “pygmy,” President Bush should  simply restate what we know  about the  concentration camps,  the infanticides, the mistreatment of the  handicapped, the  persecution of Christians, and the political manipulation of the Great Famine.  At the same time, we should offer the North Korean people food aid,  conditioned on  strict  monitoring and independent distribution by the World Food Program.  We should also tell the North Korean people that we stand ready to help them by  broadcasting into their country 24 hours a day.  We should tell them  about  the depraved opulence of Kim Jong Il’s life, the corruption of their government, and the prosperity of South Korea.   We should demand that the Red Cross be  given access to the concentration camps, and  that the  World  Food Program be given access to the hungry.  The P.R. battle has great power to constrain or support  our options.  Bad P.R. for Kim Jong Il can  deter leaders, investors, and candidates from defending policies that have prolonged  Kim Jong Il’s  misrule, and the misery of the North Korean people.

10:   Start preparing for reconstruction.  Unless Kim Jong Il believes that  we’re prepared to accept the collapse of his regime as an alternative to verifiable disarmament, he won’t disarm.  We should also understand that rebuilding North Korea will be a task of incalculable scale  that we’ll eventually have to face, one way or another.  Even if  South Korean and Chinese aid continues indefinitely, it’s probably just a matter of time before Kim Jong Il’s regime collapses or dissolves into chaos.  Kim Jong  Il is over 60, his health is said to be  bad, and he has no suitable successor.  The economic system is in steady decline, resistant to reform, and probably incapable of reform.  Information is leaking in and discontent is spreading.  The food situation, which  had  recovered to more-or-less subsistence levels after the Great Famine, has worsened again following Kim Jong Il’s rejection of international aid and severe floods.  North Korea is a failed state — stripped, gutted, and  traumatized.  Its reconstruction challenges could dwarf those of post-Saddam Iraq.  That’s why  we  must wrap our minds around how big a problem  we’re facing, financially, politically, diplomatically, militarily, and psychologically.  Legislation such as the the North Korean Refugee Relief and Reconstruction Act  would be a good start toward preparing to deal with those problems.

None of this requires us to close off our diplomatic channels to North Korea.  We should keep talking, but we should also be realistic about our approach to those talks and widen their agenda.  Even if negotiated disarmament seems exceedingly unlikely, we should  express our  willingness to talk any time, even if only for P.R. reasons.  We should also  be realistic enough to understand that a  bad deal is not better than no deal, and a meaningless deal is a bad deal.  We’ve learned that deals must be backed by pressure,  that they must  have clear terms and strict deadlines, and that we must extract tangible and immediate  concessions instead of vague and distant promises.  North Korea is such an exceptionally opaque place that  we can’t begin to hope for success  without turning “trust but verify” on its head.  The first goal — not the last — should be to push inspectors and verification teams through North Korea’s walls of secrecy.  Kim Jong Il will never give us an honest declaration.  We’ll have to help him write it.

We should also expand the agenda to cover all of our disagreements with North Korea:  missiles, chemical and biological weapons, human rights, food aid,  and conventional weapons.  That way, prolonged  North Korean recalcitrance imposes a political and economic cost on its government.  Our goal here  should be nothing less than full access for international aid workers, investors, development teams, journalists, and Red Cross teams.  Call it “compassionate self-interest” — when North Koreans receive food and medical aid from foreigners instead of the regime, decades of xenophobic propaganda will lose all credibility.  It is the transparency that leads us to truth, not a worthless signature, that will tell us when Kim Jong Il has committed himself to disarmament.

I’m under no illusion that Kim Jong Il is likely to agree  to this.  He knows  what it could cost him.  But then again, Kim Jong Il should be under no illusion that he could easily survive a year of Plan B, and I don’t think he is.  To say that pressure doesn’t help or harms diplomacy requires one to believe that any relationship between the events of September 15, 2005  and  September 19, 2005  was  mere coincidence.  Last year, we saw what happens  when  we relax  our pressure  prematurely.  Even if the next Administration chooses a different course, implementing Plan B will at least demonstrate what other, better options we have than trusting Kim Jong Il to use his nukes responsibly.


  1. Regnery Publishing
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  2. Thank you, but I just don’t have the time to bother with agents and publishers, and what’s more, I’d like to get these ideas circulating in the right places much sooner.


  3. Just out of curiosity, if we do this and it works, North Korea probably collapses, right?.

    Then what?

    Are we prepared for the enormous economic, political, and social upheaval that are likely to result from a Korean reunification stemming from the catastrophic collapse of Pyongyang? More to the point, is South Korea? Do they want to be? And where does China play in all of this? If their objective is a divided Korea that distracts us, how are they likely to respond to US machinations to cripple the North with financial sanctions? Difficult to believe they would do nothing… even starting rumors that they’re dumping their dollars could seriously tweak the (none too robust) U.S. economy.


  4. This is most excellent Joshua. There is some interesting things going on, and North Korea is right back to its hard line stance once again. Par for the course.


  5. Jason, With your first point, I agree that post-collapse North Korea is going to be a terrible situation requiring a lot of preparation we haven’t done, largely because the outgoing ROK government pretty much boycotted the planning. We need to sit down with the ROKs and the Chinese to define who will have what role, and yesterday. I suppose as bad as that prospect is, it’s less bad than doing our reconstruction inside the United States. I mean, you have read about the whole Syria thing, right? I hope you agree that this isn’t an acceptable risk.

    Exactly what could China do here? By dumping a lot of dollars, surely that wouldn’t be without consequence for China, too. I’m guessing the main reason they purchased those dollars might have been the infamously poor capitalization of their banks, with all of their nonperforming albatross loans to state-owned enterprises. So by unloading dollars, they make their own banks more vulnerable, thus exacerbating the very vulnerability I propose to exploit.

    Also, bear in mind that China’s economic growth depends on exports to the United States. With China’s one-child policy and its ageing population, they’re in a race to accumulate the means to pay a lot of pensions that will be due in the next 20-30 years. If they hit the economic wall, they will lose that race, and even more social unrest could be the result.

    Or, they could invade North Korea, which I’m not sure is such a bad thing from a strictly Machiavellian point of view. I certainly don’t think the United States should put its forces into North Korea post-collapse, except for brief and strictly limited missions to round up loose nukes or support the establishment of basic humanitarian services.

    Yes, there are things China could do, but frankly, those things would hurt China more than they would hurt us.


  6. It finally occurred to me a couple of years ago that the “only alternative is war” people didn’t just mean that we would feel we must make war on NK but that they also included complete fear of having to deal with the consequences of a collapse of the North itself – which could come with North Korea lashing out of very deadly proportions. So, they ultimately prefer dealing with a “managable” North Korea.

    It is the same kind of thinking exhibited by Colin Powell and many others when they argued leaving Hussein in power was the best course of action, because we would not want to see an even worse dictator put in charge, Iraq’s WMDs taken over by radical Islam, or Iran take over Iraq and threaten Saudi Arabia’s position of control in the Middle East.

    Whatever the case, with North Korea, it is perhaps one of the most immoral positions you can advocate, because you are advocating the continued inhuman oppression of the North Korean people complete with massive concentration camps.

    What makes even worse is the fact that —- the collapse they want to avoid is inevitable.

    They just don’t want to share the blame of having brought it about. The millions of dead and millions more suffering North Koreans are acceptable, as is the fact collapse is going to come anyway, as long as “we” are not the ones who “cause” the suffering collapse will bring by helping to push NK over the edge.

    One thing I would really like to read up about right now, but haven’t found any good sources in my initial short search, is ——- what are the attitudes toward North Koreans – from man in the street to highest ups – on China and the Chinese?

    My ill-informed gut instinct tells me that a Chinese occupation of the North would be untenable even in the medium term – say 10 to 20 years. My guess is that the only people who will be ultimately acceptable to the North Korean masses, as they stand now, will be South Koreans. Just holding NK together will cost tons, but add to that a significant animosity (on racial lines as well), and I think China moving into the North would end up costing them to the point they would end up bitterly pulling out having accomplished little.

    One thing I have been thinking about this week, which I’ve blogged about a good bit, is how the US could fund, work with, and/or imitate the efforts of the Christian groups that have been working with North Koreans in Manchuria and North Korea.

    At its most successful, the spread of this movement could benefit us in many, many ways, but the ultimate goal would be to provide a thought system that would connect North Koreans with the greater world – that would help bridge their transition from an ultra-hermit kingdom status defined by hatred and fear of the outside world into one accepting major components of that outside world. It could do things like help them understand better the nature of democracy as viewed in Western (and now global) civilization. It could help ease the possible consequences of a collapse of the North by providing them with a spiritual meaning at a time of deep crisis…..
    ……it could also help distance them away from China as well as bring them closer to the US and West and South Korea…..given China’s stance on religion and Christianity…..

    (Short note for Mr. Millar…….on a note from another comment thread…….I’m not in Korea these days and I’ve never been a soldier (except for a short stint in the Navy where I was discharged shortly after basic due to a blood circulation problem). I haven’t been in Korea since 2002, and I am back in my hometown in Georgia, after having been away for a decade, teaching ESL in a high school.)


  7. “Quietly, the appeasement camp is now talking about an alternative of its own — negotiating an acceptance of North Korea as a “responsible” nuclear power.”

    Can you provide something to back up this statement? It is certainly believable that the appeasement camp may argue to start the negotiations over from the beginning again but this is a different thing altogether.


  8. If it is a private circular, can you say that the entire ‘appeasement camp’ is thinking that way? Perhaps what we need is a clearer definition who the ‘appeasement camp’ is. Perhaps a few (influential?) people within the appeasement camp are considering this issue?


  9. Joshua, those are really good points about China. The economic levers pull both ways, although “it will hurt them as much as it will hurt us” may or may NOT deter them from having a go. I’m willing to bet their threshold for economic pain is a LOT higher than that of the United States; we’ll yelp and roll over faster than they will.

    I’m not sure what you mean by bringing up the “Syria thing.” Concept here being that if NK collapses they can no longer proliferate nuclear weapons to Syria who presumably would transfer them to entities that could use them on American soil? (Would have to be second or thirdhand use, because Syria cannot range the United States with ballistic missiles.) Not clear to me that we haven’t already passed the point of no return on that. Of course I agree that NK should be stopped from developing and/or proliferating nuclear weapon technology, but it might actually be MORE difficult to do that if their system collapses. If Kim Jong Il sees the world in the context of threats to his survival, and regime collapse is about as bad as it can get for his survival, isn’t that when he’s more likely to take desperate measures to hang on?

    We do agree that planning for the post North Korea-era should have started a long time ago and is nowhere today. This is South Korea not wanting to face up to the enormous difficulties they’ll face in absorbing 23 million impoverished, uneducated, and unskilled people who speak only 2/3 of the same language. Until they start to take that prospect seriously I don’t think we’ll see any concrete preparations to make it easier when it happens.


  10. Joshua, it is not my intention to infer something that you didn’t say. Thanks for the links, I will read through more thoroughly when I get home from work. Just quickly, the first link was 2006 and the third is 2004, which is a bit dated for current (2008) trends and thinking on this issue. The second one is current but appears less explicit on the point you make. For now I will accept that you know something I don’t.


  11. Another first-rate, post, Josh. This is why I read your blog before (and often to the exclusion of) others sources.

    It’s good to know that real options exist for this surreal NK mess, even if the actual implementation of them, at least as of now, seems rather unlikely. It somehow gives me enough hope to hope, if you will.

    ps, I don’t know of any outlets for the larger version of this post that you wouldn’t already know of. But good luck, I would love to see your work on a bigger stage!

    [thinking about this more, i could see the above piece in the Post Sunday Outlook section.]


  12. Very well thought out. One can wish our so called leadership would have the courage to act on it.

    I also think the comments about the need for South Korea to play the dominate role in reconstruction is on target.

    As for the threat of chaos that can follow the collapse of North Korea. Some where between one and two million people have dies over the last decade so the government of North Korea could continue to exist . How many millions more have to die before before Kim Jong Il is thrown into the scrap heap of history?


  13. I wonder what effect the political class in North Korea would have on the political culture of South Korea in a post-collapse scenario. The ROK already seems to have some tolerance for, if not affinity for, extreme leftist North Korean political views. It seems plausible that the political elite in North Korea would continue to have a political role in a unified Korea, and that anti-Americanism could become more widespread as a result.


  14. Dave, note that Hecker says we should combine the three nos with one yes, “our willingness to seriously address North Korea’s fundamental insecurity”. The root of North Korean insecurity is, however, North Korea’s own policies.

    Hecker also says, “The greatest current vulnerabilities in enforcement appear to be in China. Beijing has not been willing to tighten sanctions on Pyongyang to denuclearize …”. He hopes that if we grant the one yes, China will help to shut down North Koreas nuclear exports and imports.

    I think China should take strong measures to denuclearize North Korea regardless of anything the USA says or does. But the Chinese leaders ask for my advice even less often than they ask for Hecker’s.


  15. Glans, yes, I see your points and just wish that Chinese and North Korean leaders would ask, at this crucial time for some advice. Is there such a hot-line for world leaders? I know not.

    So, I wonder how much influence China has on N. Korean policy, and are they just as insecure,
    apparently about the west.
    My impression is they are now in the same boat on the nuclear issue.

    Can China also say Yes? I will wish for that.


  16. as a korean living in europe, “thank you very much “for your interest on this north korea problem. this primitive , ignorant kim jong -il with this stupid Ju-che Idea should be brought to international court ! I heard he also is an phadopile too !
    how I shame on myself as korean !!!


  17. Dear Mr. Stanton,

    A concrete plan, based on real-world experience, for a worthy goal, deserves respect. Respect entails listening, and effective listening entails asking questions.

    The Kim family regime probably would recognize such measures as threatening their power and wealth. What would they do? Keeping in mind that they have only one tool at their disposal, namely violence.

    Do they believe their own propaganda and think they could win a war? There is, after all, no advisor in their court with any incentive to be truthful.

    Would China be capable of restraining them?

    Could the KFR be persuaded to go quietly into the sunset by the morally appalling measure of buying them off? They could live well as billionaires in China, and without the constant tension of guarding against coup attempts.

    Is the experience of police negotiators with hostage takers applicable? The KFR is holding their own population hostage.


  18. Fred, It seems to me that the questions you ask could just as well apply to any decision we make about North Korea, from whether we give them cash to whether the President of South Korea makes a public display of mourning for Kim Jong Il.


  19. Out of the blue, I read the book Escape From Camp 14, and then the one about the Long Road Home. If NK dissolved overnight, it couldn’t get much worse. The underground capitalism is already in place, and the world would freely give aid. And what better example do they have than SK, to show them how to rise up? The hardest part would be unravelling the generations of brainwashing. These people have been told that their leaders are gods. But the Japanese were able to accept that there Emperor wasn’t a god. Who knows. The Koreans as a whole seem to be a special group of people. It is very hard to accept that these things happen to humans today, and on such a grand scale. You who are trying to raise awareness to the cause should thank the NK leaders for launching rockets and acting like idiots. If they wanted to be left alone and remain a secret, they are going about it the wrong way. I truly hope that this wrong can be righted in our lifetime.


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