House Foreign Affairs Committee holds briefing; members demand tougher sanctions on N. Korea, China (updated with video of full hearing)

The House Foreign Affairs Committee held a briefing on North Korea and the Sony hack today. Three witnesses appeared:

The Honorable Sung Kim
Special Representative for North Korea Policy and
Deputy Assistant Secretary for Korea and Japan
U.S. Department of State
[full text of statement]

The Honorable Daniel Glaser
Assistant Secretary for Terrorist Financing
Office of Terrorism and Financial Intelligence
U.S. Department of the Treasury
[full text of statement]

Brigadier General Gregory J. Touhill, USAF, Retired
Deputy Assistant Secretary for Cybersecurity Operations and Programs
U.S. Department of Homeland Security
[full text of statement]

Here’s Chairman Royce’s opening statement.

In all the years I’ve gone to these things, I don’t think I’ve ever seen more bipartisan unity about, or rage toward, North Korea. Some members continue to labor under misconceptions about what our sanctions are and what they can do, but all of them want sanctions intensified. One Democrat, Rep. Brian Higgins of New York, said the solution to the North Korea problem is “to end North Korea’s existence as an independent entity and reunify the Korean Peninsula.”

If anything, there was even more rage directed at China, for knowingly hosting the hackers who attacked U.S. interests and threatened Americans from Chinese soil, and for failing for years to enforce U.N. sanctions against North Korea. Congress could not have been more united and emphatic that it wants North Korea’s Chinese enablers sanctioned. Chairman Royce pushed Kim and Glaser hard on secondary sanctions. Brad Sherman (D-CA) called on China to be designated as a currency manipulator. He questioned whether China would give sincere cooperation on cybersecurity, when “their hands are dirty” and they’re involved in cyberespionage “all four hands and snout.” (Russia was also criticized by some members for its closer ties with North Korea.)

Sherman, always the funniest guy in the room, said, “I’d like to give [North Korea] a double dose of free speech.” He called for 24-hour broadcasting into North Korea and suggested that the State Department look into “satellite television broadcasting into North Korea … because I particularly want to broadcast a particular movie … the director’s cut.” (Right idea, Brad, but wrong movie.)

Darrell Issa (R-CA) is a member of the Committee again, and Issa may be the most frightening man on Capitol Hill to be questioned by. He called on China to be sanctioned under a new cyberespionage sanctions authority (scroll to the bottom of page 893). Issa noted that China doesn’t have a free internet, that it gives North Korea all of its internet access, and that that access is narrow. There’s simply no way China didn’t know.

To all of this, Glaser said that if evidence implicates Chinese entities, “We’re fully committed to holding entities in China accountable.” Sung Kim tried to say that he saw a change in China’s attitude, but Glaser said it best, in response to a question from Rep. Reid Ribble (R-WI): “China’s not going to do us any favors. China is going to work with us because it’s in their interests.” “We’ve seen that with China’s commercial banks time and time again.”

About that new executive order, now numbered as Executive Order 13,687: you saw that I struggled with two possible interpretations, one broad and one narrow. The narrower interpretation turns out to be the correct one. So while EO 13,687’s potential is sweeping, its present impact is minuscule. In other words, Kim Jong Un’s assets are not blocked yet; the Pope is Catholic when John Kerry says he is.

Having said that, the dialogue between Chairman Royce and Glaser sounded like the old Danny Glaser we once knew and loved. Talking about the effect of Banco Delta Asia, Royce said, “I later talked to defectors who worked on the missile program … that program came to a halt” because of the BDA sanction. “They couldn’t buy gyroscopes.” Royce wanted to see an “impact on the the family itself that runs that country” until “the generals are not paid, the army is not paid,” and they conclude that “there has to be a better way” than following Kim Jong Un.

To this, Glaser said that in 2005 and 2006, “hundreds of banks at the time” cut the North Koreans off. But then, Glaser said that because of the “chilling effect” of this, that was the “world in which we’re still living.” (I thought it was 1984 again, and we’ve always been at war with Eastasia.) Glaser called the Foreign Trade Bank, which Treasury blocked in 2013, North Korea’s “primary source of access to the international financial system.” Even so, he allowed that EO 13,687 “gives us the ability to really step … up” the process of identifying and cutting off North Korea’s “financial nodes.”

Glaser didn’t seem worried about our ability to influence Chinese banks. He cited their behavior after Treasury acted against the Foreign Trade Bank of North Korea as an example.* He said the main challenge was identifying North Korea’s “financial nodes.” (My guess is that if Treasury doesn’t know, it’s because Treasury never put enough investigative resources on the task. Sanctions can’t work if you don’t have good financial intelligence. Let’s hope it’s about to get better.)

And lest anyone wonder where North Korea keeps its money, Glaser said, “We shouldn’t take our eye off the ball, and the ball is Asia. That’s where they get their primary access to the international financial system … specifically China.” Glaser chided the Chinese for continuing to allow Korea Kwangson Bank, an entity blocked by Treasury and designated by the European Union, to operate a branch in China.

Glaser ducked a question on whether North Korea should be designated a primary money laundering concern. On the humanitarian effect of sanctions, Glaser repeatedly insisted that the government of North Korea “bears sole responsibility for the suffering of the people of North Korea.”

Rep. Ted Poe (R-TX) did a masterful grilling of Sung Kim on putting North Korea back on the list of state sponsors of terrorism. Sung Kim would only say State is studying the issue. Toward the end of the hearing, Rep. Tom Emmer (R-MN, a new member) asked whether EO 13,687 represents “an increase in intensity” in North Korea sanctions. Ambassador Kim said, “I think that would be accurate.”

All of the witnesses affirmed their confidence that North Korea was responsible for hacking Sony. When Rep. Gerry Connolly (D-VA) asked Kim whether he believed North Korea was responsible for the 2013 Dark Seoul attack, Kim said, “We believe so, more importantly, the South Korean government believes so.”

Royce said twice that the next version of H.R. 1771 would be introduced in the near future, but wasn’t specific.

It’s not clear whether EO 13,687 represent a policy change or an empty threat. The true answer will depend on interpretation and enforcement. Glaser tried to sound like we’ve kept the pressure on North Korea since the days of Banco Delta Asia, but Juan Zarate has already told us that isn’t so, and if it was, Kim Jong Un and his top thugs would be sanctioned by name, just like Mugabe and Lukashenka are.

Here’s how Yonhap covered the story; more here. See also AP and Reuters. The Reuters piece was good, but it incorrectly states that Royce’s new bill will label North Korea a Primary Money Laundering Concern; actually, it will urge the President and the Treasury Department to do that.

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* The news there is mixed. In May of 2013, two months after Treasury sanctioned the Foreign Trade bank and a little more than a week after the introduction of H.R. 1771, China’s four largest banks — the Bank of China, the Industrial and Commercial Bank of China, the China Construction Bank, and the Agricultural Bank of China  — all halted money transfers to North Korea. Other, smaller Chinese banks, like the Bank of Dandong, continued to move money for Pyongyang, and at the lowest reaches of the financial ecosystem, North Korean money launderers still operate in Guangdong with impunity, and more discreetly, in places like the British Virgin Islands. Enforcing sanctions is like mowing the lawn. If you don’t do it regularly, things grow back quickly, and it’s the weeds that will thrive the most. Unlike mowing the lawn, you can’t take a uniform approach to different enforcement targets.

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Update: After all that, here’s the whole thing on video. If you catch any errors in my transcription, kindly drop a comment or email. Thanks.