Why Susan Rice’s new Security Council resolution is a great victory … for China and North Korea

The Obama Administration spin on the long-stalled U.N. Security Council Resolution 2087 is that it “tightened” U.N. sanctions against North Korea, and that securing China’s vote for that resolution represents some sort of diplomatic accomplishment for the U.S. and Susan Rice.

Despite China’s rejection of proposals by the United States to add new sanctions, the Obama administration sought to characterize the vote as a tough response. “This resolution demonstrates to North Korea that there are unanimous and significant consequences for its flagrant violation of its obligations under previous resolutions,” said Susan E. Rice, the American ambassador to the United Nations.  [N.Y. Times]

I wish the reporters who repeated that spin, often unskeptically, would have bothered to read the resolution and compare it to UNSCR 1718, the John Bolton-authored resolution on which it largely leans.  Had they done so, they would have seen that by specifically naming a few long-sanctioned entities, individuals, and small fry, it implicitly narrows the potential breadth of its predecessor resolutions.

Because they didn’t, I did, and I’m about to walk you through it.  As you consider the language in these resolutions, you need to keep a few things in mind.  First, the key to making sanctions work is to build enough financial pressure against the regime that it has to choose between its weapons programs and its ability to pay its military and its party elite.  Playing whack-a-mole (as Marcus Noland call it) with just a few North Korean banks and trading companies is futile, because those North Korean banks and trading companies can change names, switch individual representatives, and shift assets to other entities faster than we can sanction them.  Second, we’ll never be able to interdict North Korea’s illicit arms trade as long as China knowingly gives that trade the sanctuary of Chinese airspace, or as long as China’s state-owned enterprises keep selling North Korea missile technology.  Third, sanctions can only work if the unethical third-country banks, investors, and trading companies that provide Pyongyang regime-sustaining hard currency are deterred from doing so.  That strategy can only work if resolutions are read broadly and applied flexibly to those entities that are known to have helped North Korea proliferate — entities like state-owned China Aerospace Science and Industry Corporation, which sold North Korea the chassis for missile transporters that now carry a new type of North Korean ballistic missile, one that some analysts had recently dismissed as fakes, but which now have the U.S. intelligence community and Secretary of Defense sounding very worried.

How will this new resolution influence the behavior of companies like CASIC?  For the answer, we turn to the resolution itself.  Paragraph 5(a) of UNSCR 2087 says that “[t]he measures specified in paragraph 8 (d) of resolution 1718 (2006) shall apply to the individuals and entities listed in Annex I and II, and the measures specified in paragraph 8 (e) of resolution 1718 (2006) shall apply to the individuals listed in Annex I . . . .” Annex I consists exclusively of North Korean entities that had already been sanctioned by the U.S. Treasury Department, and Annex II is also all North Korean, except for one solitary Hong Kong-based trading company.

The original language of UNSCR 1718, however, was much broader than this. Paragraph 8, which contains its key financial provisions, says:

(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;

(e) all Member States shall take the necessary steps to prevent the entry into or transit through their territories of the persons designated by the Committee or by the Security Council as being responsible for, including through supporting or promoting, DPRK policies in relation to the DPRK’s nuclear-related, ballistic missile-related and other weapons of mass destruction-related programmes, together with their family members, provided that nothing in this paragraph shall oblige a state to refuse its own nationals entry into its territory;

Emphasis mine.  Of course, effective enforcement always depended on a robust and decisive sanctions committee, something that clearly wasn’t going to happen after North Korea signed up for Agreed Framework II and Chris Hill’s faction got the U.S. government to stop enforcing its most flagrant violations.  After that, China effectively blocked and stalled the sanctions committee’s reports, which implicated China in repeated violations of 1718 and 1874, which followed in 2009.

By specifying a short list of mostly North Korean entities, however, 2087 effectively tells the myriad of Chinese banks and companies that were and are flagrantly violating 1718 — and 1874, and 1695 — that, by implication, they are home free.  This isn’t quite a grant of prosecutorial immunity to all of those other entities (North Korean, Chinese, and other) that continue to violate U.N. sanctions, but given the lilliputian paralysis of the U.N. Sanctions Committee, it’s pretty close.  This is, effectively, a huge victory for Chinese proliferation, and for North Korea.

As far as North Korea’s weapons trade goes, 2087 does nothing that UNSCR 1874 and 1718 had not done years ago, notwithstanding the triumphalism of The Guardian.

I have maintained that no enforcement action that relies on the consent and good faith of the Chinese government has any chance of success, but that multilateral actions to combat North Korean proliferation and money laundering can force Chinese entities to isolate North Korea, despite the opposition of the Chinese government.  This has been done effectively through the partnership of the U.S. Treasury Department and the Financial Action Task Force, a quietly effective global alliance of finance ministries.  Unfortunately, Treasury’s follow-on announcement of sanctions against three “usual suspects” under Executive Order 13,382 only reinforces that Treasury will do nothing to enforce those resolutions independently, because it sanctions just two individual North Korean representatives of a long-sanctioned North Korean bank, and one Hong Kong-based small-fish trading company that China itself was willing to sanction in 2087.  Does anyone suppose that Leader Trading Company had not long since liquidated and hidden its assets?

This isn’t to say that sanctions against small entities can’t work, too, provided that bigger entities also worry they might be next.  I’ve written frequently about how in 2005, sanctions against a small Macau-based bank, Banco Delta Asia (BDA), has a disproportionate impact on multiple sources of North Korean finance, whether illicit, comingled with “legitimate” trade, or indistinguishable.

in 2005 and 2006, the Asian Wall Street Journal, the South China Morning Post, and the Chosun Ilbo printed allegations that the Bank of China and one of its Hong Kong subsidiaries were under the scrutiny of U.S. authorities for possible links to North Korean laundering of illegally derived funds.  The Bank of China denied any involvement in laundering North Korean money, but in 2007, it was so terrified by the alleged association with illicit North Korean funds that it balked at moving $25 million in blocked North Korean funds from BDA to the New York Federal Reserve, at the request of both the U.S. and Chinese governments, to facilitate Agreed Framework II.

Similarly flexible sanctions could work now, but the Obama Administration won’t apply them.  I don’t know whether to attribute that to a spineless reliance on a U.N. Security Council that’s long been a hostage of Chinese duplicity, the incompetence of Susan Rice, the stultifying influence of John Kerry, or a simple aversion to any policy more decisive than trying to “manage North Korea out of the headlines,” but this resolution — if that is indeed our final response to North Korea’s last missile test — was much, much worse than no resolution at all.

What comes next isn’t hard to predict.

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