S. Korea and Japan Join Sanctions Effort Against North Korea

Kyodo News and Yonhap are reporting that we’re close to announcing a deal on sanctions at the U.N. Security Council.  I’m hopeful that the length of the negotiation means that we’ve insisted on something reasonably tough on paper; less so that the Chinese and the Russians will cooperate in practice.  I tend to view claims that China has lost patience with North Korea at last as so much Chinese disinformation, meant to mask China’s premeditated enabling of North Korea’s misdeeds and atrocities.  Instead, I believe that the China will do what it can to undermine sanctions, but only to the extent it’s relatively inexpensive for China’s other interests.  Herein lies the challenge to our priorities.  Are we willing to pay a price in our relations with China to save an American city?

China’s cooperation would help us pressure North Korea, but we shouldn’t expect it, and we really don’t need it.  Unilateral U.S. Treasury sanctions on one Chinese bank servicing North Korean accounts put severe economic pressure on the regime, and this despite both China and South Korea working to undermine those sanctions back in 2005-2006.  At that time, half of North Korea’s foreign income probably came from South Korea, but that is changing rapidly.  The steepening loss of South Korean aid, including the collapse of the Sunshine experiments, will certainly be a shock to the palace economy.  The more comprehensive and better informed a sanctions effort is, the better it will work.

North Korea will also be hurt if its ability to sell gold and solicit investments on the international markets are cut, and a tough U.N. resolution could help us to persuade such countries as Britain, Thailand, and Egypt to cooperate in pressuring the North.  Investments like that of Egypt’s Orascom probably can’t continue if the resolution demands strict accounting for the proceeds, and a tough resolution would justify tough new sanctions on Syria for its purchase of a nuclear reactor and reverse-engineered Russian missiles.  North Korean arrangements that rent out labor to overseas logging and manufacturing companies may also suffer.  Collectively, these income sources are substantial for the state organs that had come to depend on them.

The primary effect, however, will come from financial sanctions imposed by the treasuries of various nations enforcing sanctions, particularly our own.  No doubt, that will be a topic of discussion when President Lee and President Obama meet in Washington next weekObama and Lee have shown signs of working better with each other than any of their predecessors since … well, ever.  (Behind the scenes, relationships between American and South Korean presidents have always always been contentious.)   But nothing restores sigificance to an alliance quite like the unity of interests brought into focus by a common threat.  Today, South Korea has gone from undermining Treasury sanctions to providing valuable financial intelligence:

South Korea has informed the U.S. of up to 20 North Korean bank accounts suspected of being used for counterfeiting, money laundering and other illegal transactions, a news report said Wednesday.  [….]

South Korea gave the U.S. the information on some 10 to 20 North Korean bank accounts in China and Switzerland at Washington’s request, South Korea’s Chosun Ilbo newspaper reported, citing an unidentified government official.  [….]

[A]nalysts say North Korea has an exclusive department, known as Room 39 or Bureau 39, to control various illicit business activities such as counterfeiting, drug-smuggling and weapons sales.  Room 39 has 120 foreign trade companies under its jurisdiction, Lim Soo-ho, a research fellow at the Samsung Economic Research Institute in Seoul, told The Associated Press.  He said that though the bureau formally falls under the ruling Workers’ Party, in reality it is controlled directly by supreme leader Kim Jong Il.  [….]

A 2007 report published by the Millennium Project of the World Federation of United Nations Associations said North Korea makes an estimated $500 million to $1 billion annually from criminal enterprises.  [AP, Kwang Tae Kim]

South Korea has also imposed sanctions on North Korea that sound roughly analogous to those available to President Obama under Executive Order 13,832, permitting focused trade bans and asset freezes on companies assisting in WMD proliferation:

South Korea imposed its first financial sanctions on North Korean companies, officials said Tuesday, taking a symbolic action that could anger the Communist regime while bolstering a joint front with the United States as the allies seek to punish the North for its recent nuclear test.  [….]

On Tuesday, the Ministry of Strategy and Finance in Seoul said that it has banned trading with three North Korean firms — Korea Mining Development Trading Corporation, Tanchon Commercial Bank, and Korea Ryongbong General Corporation — and will freeze their assets. But officials said that these firms have no trading with South Korea or assets in the South.

The Security Council had earlier targeted those three North Korean entities when it reaffirmed financial restrictions against the North after its rocket launch on April 5.  [N.Y. Times, Choe Sang Hun]

These three entities had also been sanctioned by the U.S. Treasury Department under Executive Order 13,382, repeatedly.
Finally, there was never much question that Japan would willingly join the effort:

Police served a fresh arrest warrant Tuesday on a South Korean trader for allegedly exporting pianos and cars to North Korea last year in violation of the foreign exchange and trade control law, marking the first arrest over exports of luxury goods to the country, police said.

The export of luxury goods to the North is banned under the economic sanctions Japan imposed on the country following its first nuclear test in 2006.  [Kyodo News]

More here.

These developments are encouraging.  On the day President Obama was inaugurated, two of President Lee’s foreign policy advisors asked me what leverage they could use to influence the North Koreans’ behavior.  I suggested financial pressure of exactly this kind.  I don’t doubt that other, smarter people gave the same advice, but I hope that what I said had some effect.  The concerted economic power of the United States, Japan, and South Korea will be a very formidable weapon.  That’s particularly true if they focus that pressure on China as well.


  1. “I’m hopeful that the length of the negotiation means that we’ve insisted on something reasonably tough on paper”

    Somebody should tell the UNSC that paper makes a lousy defense against nukes and missiles.


  2. Have you considered adding foreign, contracted labor to the sanctions package?

    As you already know, NK contracts out cheap labor (e.g. 10-15,000 in Siberian timber camps; 5,300 in Mongolia) to foreign governments. Laborers reportedly face harsh working conditions, unfair compensation, etc.

    I’m wondering if there’s been a push to target the bank accounts where foreign governments deposit the “wages” that the NK regime subsequently distributes to its workers.

    Also, I may be entirely wrong, but wouldn’t the unintended consequence of sanctions be that it would force the NK regime to go completely underground, thus taking activities off the radar and harder to track?

    I mean, did the Macau case really create that much of a dent to the regime or did the regime raise that big stink because it was their money.


  3. I was just talking about financial punishment with someone the other night and we agreed that this is what is going to hurt the regime the most, in addition to any provisions that would allow North Korean ships to be boarded and searched for contraband.

    North Korea’s other money-making schemes are unlikely to be enough alone to keep the regime afloat. (If there is one good thing to come out of the world financial crisis, it is the decreased demand for weapons and drug trafficking.)

    On another note: Regarding North Korea’s contracted labor, it has long been suspected that after the DPRK normalized ties with Burma/Myanmar, it wouldn’t be long until North Korea was out there digging tunnels. This article has published photos and research which the author says verifies previous speculation about North Korean involvement in Myanmar. Payments are supposedly made in the form of gold and other minerals. It’s an interesting read and I’m curious to see what the other parts of the article will reveal. (This was part 1.)


  4. hmm yea I agree that targeting contracted labor wouldn’t have as much impact as the more popular sanctions, but it would play a small part. why not pursue a comprehensive approach in putting a stranglehold on nk’s illicit activities?

    thanks for the link to the article (part II is out as of today)! hm i wonder if bureau 39 handles all contracted labor…