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Arguments to Impotence, Part 2: A response to Joseph DeThomas

As Professor Lee and I have flogged, and flogged, and flogged, and flogged this horse that our sanctions against North Korea were far weaker than was widely assumed, we knew a few of you were rolling your eyes and wondering how long we would go on flogging it. The answer, of course, is, “As long as it takes.” 

If the published opinions of Michael Green, Victor Cha, Bruce Klingner, Scott Snyderthe editors of The Washington Post, Evans Revere, Robert Gallucci, and the United States Congress are enough to call “a consensus,” Professor Lee and I may need to find another horse. The new consensus is that sanctions can and should do much more to disarm North Korea, and that secondary sanctions against Kim Jong-un’s Chinese enablers are an essential part of this strategy.

The most surprisingly strident agreement comes from Peter Harrell, who served as Deputy Assistant Secretary for Counter Threat Finance and Sanctions in the State Department’s Bureau of Economic and Business Affairs from 2012 to 2014. In 2013, Harrell was also one of State’s representatives in discussions with House staff about the shape of H.R. 1771, the predecessor of H.R. 757. I honor the Vegas Rule with respect to the content of those discussions, but I liked Harrell personally (although, given my own calculated obnoxiousness in those meetings, the converse is less likely to be true). Without revealing more, I was surprised to see Harrell call H.R. 757 no more than “a useful first step” toward something much stronger, and to see him criticize the weakness of the sanctions in place now.

The existing sanctions are not effectively designed to challenge this dynamic. For example, the U.S. and our allies do not currently sanction international companies that establish joint business ventures in North Korea or that trade with North Korean mining, metals, textile and other companies that are mainstays of the North Korean economy. [Peter Harrell, The Hill]

Of course, civil servants don’t go to meetings to share their personal views. In 2013, Harrell served his President loyally, professionally, and competently. Now that he can speak for himself, Harrell joins fellow Obama Administration alumnus Kurt Campbell in arguing that sanctions can do much more. 

There are U.S. and United Nations sanctions against selling luxury goods like sports cars and high-end watches to North Korea—an effort launched several (sic) to curb the reportedly-lavish lifestyles of North Korea’s elite —but these sanctions have rarely been enforced. [Harrell]

True. The most recent example of this came last week, when the Treasury Department sanctioned a series of Chinese companies and individuals for selling missile technology to Iran, but not for their concurrent dealings with North Korea. 

Then, Harrell begins to show us his inner Curtis LeMay:

First, the U.S. and our allies should begin imposing sanctions on international companies that do business with North Korea’s primary economic sectors, such as mining and textiles. These could be modeled after the sanctions imposed on Iran beginning in 2010 that drove most international companies to stop doing business with Tehran. [Harrell]

From the sound of Senator Cory Gardner’s comments to Yonhap this week, that may be where the Senate is heading. Gardner, though still a freshman, is well regarded for his intellect and his command of Asia policy, and has emerged as the Senate’s leading voice on North Korea. Critically, Gardner tells Yonhap, “The main point of the bill obviously is a mandatory sanctions regime.”

Harrell continues:

The U.S. should also ramp up financial sanctions against the handful of banks that still do business with North Korea. Unlike current legislative proposals, however, financial sanctions should not be limited to banks that facilitate North Korea’s nuclear program or other illicit activities. Instead, the goal should be to entirely cut North Korea off from the global banking system, much as the U.S. did with Iran over the past five years.

Combined, escalated trade and financial sanctions have the potential to curb North Korea’s growth and to undercut the economic base that the North requires to keep advancing its nuclear program.  Stepped up enforcement of the existing sanctions targeting North Korea’s illicit activities would complement such a new broader sanctions campaign against North Korea’s economy. [Harrell]

Harrell doesn’t draw a red line at the Yalu River, either:

China, which is responsible for more than half of North Korea’s trade, is a key player and needs to make a choice: either join in an international effort to increase pressure on North Korea, or see Chinese companies that continue to trade with the North risk their ability to participate in the broader global economy.  China’s own rising concern about its long-time client’s nuclear program and other destabilizing activities makes it likely that China would ultimately join in a campaign of escalated economic pressure, as long as the diplomacy is handled deftly. [Harrell]

Naturally, this is not a unanimous view. Another former Obama Administration official, Joseph DeThomas, has published a post at 38 North criticizing the CNN op-ed Professor Lee and I published earlier this week. I can see why DeThomas might have felt stung by our criticism of the Obama Administration’s dereliction in enforcing sanctions as the North Korean threat grew. It’s curious that DeThomas chooses us among so many others who’ve recently espoused similar views, but we’ve never been the kind to shy away from arguments. Fortunately, I’ve already prebutted DeThomas’s argument-to-impotence in this OFK post and this one, at The Weekly Standard, but briefly: 

  • DeThomas calls it an “urban myth” that the Banco Delta Asia measures threatened the survival of Kim Jong-il’s regime, but officials who were in the Bush Administration at the time, and who would presumably have a stronger basis of knowledge, disagree.
  • DeThomas says sanctions won’t work because we don’t know where Kim Jong-un’s money is, but I’ve cited evidence to the contrary, and a source now tells the New York Times that, actually, the Treasury Department does, too, know. (It’s also odd that DeThomas doesn’t direct this argument toward Peter Harrell, who was State’s Deputy Assistant Secretary for Counter Threat Finance and Sanctions until 2014, and who clearly feels otherwise.)
  • To the extent we don’t know where the money is, that’s partially due to the fact that our sanctions regulations are too weak for us to gather that information from the financial industry.

A few other points:

DeThomas argues that most of North Korea’s income isn’t strictly illegal. To be clear, we said “much of” North Korea’s income was “derived from proliferation and illicit activities.” This is the essence of money laundering — you commingle the proceeds of illicit activity with legitimate income to conceal its origins. That’s why money laundering laws make the entire commingled amount subject to seizure and forfeiture.

DeThomas says that North Korea is now working through non-bank institutions to move its money, which I believe to be partially true. It’s also true of many other rogue states, drug dealers, and terrorists we’ve successfully targeted. North Korea didn’t invent money laundering. If Osama bin Laden died broke and isolated, a country of 23 million people must have a higher financial profile.

DeThomas doesn’t think we can “internationalize” effective sanctions at the U.N. I’d urge him to reread Paragraphs 11 through 15 of UNSCR 2094. Those provisions, if enforced as written, are already sufficient authority to internationalize effective sanctions. (This is not to deny that there’s room for improvement, particularly with respect to the mandatory reporting of North Korean property, accounts, and transactions to the Panel of Experts.)

DeThomas wonders: “Perhaps the sanctions experts in the US Treasury, Department of State or in the intelligence community are aware of a Chinese entity that is: a) violating US sanctions on North Korea, and b) is clearly generating significant amounts of foreign exchange for the regime.” Well, if I’m aware of all these examples, I certainly hope the experts can name more examples than a blogger can.

DeThomas worries that sanctions on North Korea’s Chinese enablers will bring down the Chinese (and with it, the global) economy. In fact, Section 207(b)(1) of H.R. 757 allows the President to waive even mandatory sanctions if “[t]he waiver is important to the economic or national security interests of the United States.” Not that a sanctions waiver will be enough to save the Chinese banks from all the bad loans they were forced to make to prop up state-owned enterprises and pump up stock prices. Not that Chinese banks that block North Korean deposits will have anything to worry about. It’s hard to believe that any Chinese bank is so heavily invested in North Korea that it can’t cut its ties quickly.

DeThomas argues that sanctions will piss off the Chinese, and calls for more of the same meek supplications that have failed for 20 years. The risk of pissing off China clearly doesn’t deter me as much as it deters DeThomas, given the bad faith China has shown in its non-enforcement and affirmative proliferation. Relations with China might just have to get worse before they get better.

As to DeThomas’s inference that sanctions will lead to war with North Korea, they actually led to a (flawed) disarmament agreement in 2007. North Korea has actually been more menacing since 2008, when we weakened our sanctions. In any event, it certainly won’t become less menacing after it has a more effective nuclear arsenal.

To sum up, one former Obama Administration official thinks H.R. 757 goes too far, and another thinks it doesn’t go far enough. Financial Times reporter Simon Mundy even manages to make both arguments in one story, criticizing H.R. 757 for being too permissive with its waivers to be effective, yet too offensive to China.

The new consensus, however, is that we need tougher sanctions against both North Korea and its Chinese backers. All of which suggests Congress got it just about right, although the Senate will still have the last word. From some of the chatter I’ve picked up offline, many Senators’ moods toward Pyongyang aren’t far removed from those Cato the Elder harbored toward Carthage. If we aren’t all frozen solid or eaten by wolverines by Monday, we’re in for an interesting week.