"United" Nations Sanctions

The U.N.’s new N. Korea sanctions will change the game … if they’re enforced.

The U.N. Security Council has just approved a new resolution, UNSCR 2270, sanctioning North Korea under Chapter VII and Article 41 of the U.N. Charter. Now that the Security Council has approved the resolution, I’m publishing this post, which I’ve been holding. It’s a strong text — very strong. In reviewing it, it’s useful to begin with my own wish list:

  • Requiring member states to report North Korean property, accounts, and transactions to the U.N. Panel of Experts;
  • Shipping sanctions prohibiting the provision of insurance, bunkering, and reflagging services to North Korean ships, thus forcing North Korea to rely on foreign ships for its maritime trade;
  • Designating Air Koryo, thus closing off another avenue for North Korean arms and luxury goods smuggling, and a ban on the export of jet fuel to North Korea;
  • Expanding designations to include more North Korean banks, government agencies, and senior officials involved in violating the resolutions; and
  • Prohibiting the use of North Korean forced labor.

With the exception of the last item, the text meets or exceeds these expectations. It’s not just orders of magnitude stronger than the resolutions that preceded it. If enforced as written, it would put North Korea into something like international financial receivership. The key provisions:

Financial Sanctions. The single strongest provision in the resolution — or any other resolution, or any other sanctions authority, anywhere — is a ban on any bank maintaining a correspondent account for a North Korean financial institution, except with the approval of the 1718 Committee. Member states are required to close North Korean bank branches, joint ventures, and correspondent accounts within 90 days. The practical effect of this will be to destroy North Korea’s banks, and make the regime entirely reliant on foreign banks (which aligns well with NKSPEA section 208(d)). Because foreign banks are more likely to rely on access to the U.S. financial system than North Korean banks, this will certainly freeze a great deal of North Korean money in foreign accounts. It will improve compliance with U.N. sanctions by driving what North Korean cash remains into the international financial system, where banks will be more likely to report suspicious transactions to the U.S. Treasury Department.

Member states are also required to close any North Korean bank accounts and branches if they have reasonable grounds to believe that they could contribute to violations of the U.N.’s sanctions against North Korea.

These provisions go well beyond my expectations. They will have a far greater effect than my own more modest proposal, the mandatory reporting of North Korean accounts and property (although the two ideas would have been complementary). Most reporters who’ve seen leaked drafts missed the significance of this, but it’s probably the single most devastating provision. It will effectively sever much of North Korea’s access to the global financial system. And because section 104(c) of the NKSPEA mirrors it, the Treasury Department has an effective enforcement mechanism that it’s required to use.

U.S. support for this provision is also a strong indication that in July, when the Treasury Department must decide whether to declare North Korea a jurisdiction of primary money laundering concern pursuant to section 201 of the NKSPEA, it is likely to answer in the affirmative. After all, if North Korean banks are supposed to lose their correspondent relationships, there’s no policy reason preventing the Treasury Department from imposing equal or lesser special measures under Section 311 of the Patriot Act. This will be a more powerful blow to Pyongyang than Banco Delta Asia ever was, by a mile.

The addition of U.N. sanctions to the NKSPEA will help close a key potential loophole. Although North Korea continues to rely heavily on the dollar system, it has almost certainly tried to use other convertible currencies — the yen, the pound, the Swiss Franc, the Canadian Dollar, the Hong Kong Dollar, the Singapore Dollar, the Australian Dollar — to evade the sanctions. U.N. sanctions will force the regulators of these currencies to freeze suspicious North Korean transactions, and that will add pressure to China, Russia, and other states to comply.

The text expands the financial due diligence of UNSCR 2094, paragraph 11, to include transactions in gold, including North Korea’s use of gold couriers.

Member states must freeze any assets of the North Korean government or Worker’s Party that they determine are associated with North Korea’s WMD programs or other prohibited activities. In my view, the latter clause creates too much wriggle room. It advances the asset freeze provisions little over previous resolutions, and will be subject to creative interpretation or willful blindness. There are also diplomatic and humanitarian exceptions.

The text also expands the ban on public financial support for trade with North Korea to include public or private support for trade with North Korea. Presumably, this is aimed at Kaesong, even if only to give the South Koreans a fig leaf to say that Kaesong didn’t violate the resolutions before, but violates them now. It was likely written into the resolution with Seoul’s consent, and will bind future South Korean governments after Park Geun-hye leaves office. It’s yet another nail in the coffin of the Sunshine Policy.

The early signs are also good for China’s compliance with the sanctions. Here is the latest evidence of that:

Chinese banks in the northern border city of Dandong have suspended the transfer of the yuan currency to North Korean banks, Chinese financial sector officials told Yonhap News Agency on Wednesday. [….]

Employees of the Dandong branch offices of China’s top four state-owned banks, including Agricultural Bank of China and Industrial and Commercial Bank of China, as well as six commercial banks such as China Merchants Bank, told Yonhap that the suspension came after “orders” from their headquarters.

Since North Korea’s third nuclear test in 2013, the Dandong branches of the Chinese banks have halted the transfer of U.S. dollars to North Korean banks. An employee of the Dandong branch of the Agricultural Bank of China said the order came down after North Korea’s fourth nuclear test in January. [Yonhap]

This conflicts with previous (and improbable) reports that the Chinese government ordered its banks to freeze North Korean accounts in December.

Yes, China will be tempted to cheat when things start to cool down, but section 104 of the NKSPEA will hover over the Chinese banks like the Banco Delta Asia measures did before. No sanctions regime is completely airtight, nor does one have to be airtight to work. If Treasury shows a willingness to (a) demand that China enforce the sanctions against small banks and non-bank institutions, or (b) impose unilateral sanctions on entities that cheat, the new sanctions can work well enough to present Kim Jong-un’s generals with an existential decision before the Ides of May.

Cargo Inspections & Shipping. As has been widely reported, all cargo to and from North Korea — or whose shipment was directly or indirectly brokered by North Koreans — will be subject to inspection. Critically for China, this includes cargo that’s merely transiting through the member state’s territory, as was the case for many of North Korea’s recent shipments of arms, WMD-related material, and luxury goods. This should complicate North Korea’s use of Chinese ports and airports to transship banned cargo, while Chinese authorities look the other way.

The new provision complements section 205 of the NKSPEA, which blacklists third-country ports that fail to inspect North Korean cargo (think Dandong and Dalian) and subjects cargo coming from those ports to increased U.S. Customs inspections. (Think of it as the trade analogue of Section 311 of the Patriot Act, a secondary sanction against ports that have insufficient compliance programs.)

The initial signs are good. According to a Yonhap report from last week, “A Chinese businessman here in Dandong said his recent request for a North Korean ship to enter the seaport in the Chinese city has been rejected by port authorities,” as part of a broader ban on North Korean ships. If true, this would exceed the requirement of the UNSC provision, and might reflect either that (a) North Korean captains refuse to let Chinese Customs inspect their cargo, (b) that Chinese authorities simply don’t have enough Customs officers to do the inspections, and prefer to turn North Korean ships away, or (c) the in terrorem effect of NKSPEA section 205 is causing port authorities to decline North Korean port calls. Historically, China has made early shows of compliance, only to relax its compliance later.

Member states may not charter ships or aircraft to North Korea (as was the case with the Bangkok arms shipment, aboard a chartered Ukrainian Il-76), or register North Korean ships except for “livelihood” purposes (and not to generate revenue). This is a loophole that appears in several places in the resolution. While it’s essential to include enough flexibility to avoid starving the North Korean people, there is the clear potential for China and other states to abuse this exception. (See this Wall Street Journal column for a critical analysis that focuses on this point in particular.)

The resolution requires member states to prohibit their nationals from reflagging or registering North Korean ships (such as with the M/V Dawnlight), or from owning, leasing, or operating North Korean ships, except for “livelihood” purposes. Ships that are owned or controlled by North Korea, but registered (= reflagged) by other member states must be deregistered.

States must deny flights permission to take off, land, or overfly their territories if they have reasonable grounds to believe that a flight contains contraband (multiple North Korean arms shipments have overflown, or landed in, Chinese territory).

Member states may not allow ships owned or controlled by U.N.-designated entities, or which a state has reasonable grounds to believe contain contraband, into their ports, except for emergency purposes, or for humanitarian purposes after first notifying the 1718 Committee. The most obvious example is the North Korean shipper Ocean Maritime Management (OMM), a notorious arms smuggler. If an OMM ship enters a member state’s port, the state is required to seize the vessel. (The resolution helpfully clarifies that vessels are “economic resources” subject to seizure). This is aimed at Russia and China in particular, which continue to allow OMM ships to dock in their ports, but also at countries like Mexico, which was hesitant to seize an OMM ship that ran aground in one of its ports. The resolution specifically calls out OMM and designates a series of its ships by IMO number.

One disappointment: the resolution still does not authorize inspections on the high seas (such as with the M/V Light and the Kang Nam I).

Jet Fuel. Last week, I called for a ban on the sale of jet fuel to North Korea, but opposed a broader ban on the sale of other refined petroleum products that are used to grow and transport food. I’m glad to see that the jet fuel ban (and a ban on the transfer of rocket fuel) made it into the final text. There is a humanitarian exception for verified essential humanitarian needs.

At Russia’s insistence, a narrow exception was added, allowing the sale of jet fuel outside North Korea for use by civilian aircraft. The language isn’t entirely clear, but seems intended to create an exception for foreign-flagged airliners to take up Air Koryo’s routes. This would be fine if it’s enforced as intended.

Vislog UN 23 feb 2016

[You’re welcome, United Nations!]

Counterproliferation. The resolution expands the list of proliferation-sensitive items that may not be sold to North Korea, and requires states to ban the import or export to or from North Korea of any materiel that could contribute to North Korea’s WMD programs.

Luxury Goods. The text disappoints by adding only marginally to the list of items defined as luxury goods, leaving that list far shorter than either its U.S. or EU counterpart lists. It may, however, make up for this shortcoming by giving the 1718 Committee 15 days to review the list of items designated per Paragraph 8 of UNSCR 1718 and add to that list as necessary. The items described in that paragraph include weapons, proliferation- and WMD-related materials, and luxury goods. There is a strong focus on items that North Korea might want to import for the Masikryeong Ski Resort. It clarifies, however, that the list is not exclusive. (Note that this paragraph’s reach and effectiveness actually broadened in the version approved by Russia.)

Ban on Mineral Exports. Bans the purchase or transfer from North Korea of coal, iron, or iron ore, except for “livelihood” purposes, and except for coal originating outside North Korea shipped through Rason. (Interestingly, Russia appears to have insisted on this exception, which would seem to benefit China the most, suggesting Russo-Chinese collusion.) The text also bans the purchase or transfer of gold, titanium ore, vanadium ore, or rare earth minerals from North Korea, without exception. 

According to one recent report, China has begun implementing the ban on purchases of North Korean coal, “which account for 42.3 percent of the China-North Korea trade,” but may resume the trade in May. The same report claims that “a Chinese businessman attempted to remit cash to the North via a Chinese bank in Shenyang, Liaoning Province to pay for North Korean iron ores but was informed that he was not allowed to do so.”

Arms Embargo. Member states are urged to identify North Korean front companies and shell companies, and report them to the Panel of Experts for designation. The draft closes the loophole allowing North Korea to import light weapons and small arms. Now, no imports of arms and related materiel are allowed. After the seizure of the Chong Chon Gang in Panama, Cuba denied selling arms to North Korea and claimed that these were merely old weapons being sent to North Korea for refurbishment.

The draft clarifies that transfers to and from North Korea for refurbishment and repair also violate the arms embargo (this was Cuba’s excuse for the Chong Chon Gang incident, although the shipment was obviously a sale by Cuba to North Korea). It also bans the transfer of dual-use materials (those with both military and civilian uses) to North Korea, except for exclusively humanitarian purposes. The provision contains an “exclusively humanitarian” exception, but to invoke the exception, the exporter must first notify the 1718 Committee of the export and submit a description of the exporter’s safeguards to prevent the export from being used for other purposes.

Mandatory expulsion of North Korean proliferators & arms dealers. The draft accuses North Korean diplomats of abusing the Vienna Convention to violate the Security Council’s resolutions. If a state determines that a specific North Korean diplomat or other representative — or any other foreign national — is working on behalf of a U.N.-designated entity, or in violation of the resolutions, the state must expel that person.

The resolution specifically mentions OMM, a notorious arms smuggler, and requires the many states (Brazil, Russia, China, and others) that, until recently, still hosted OMM officers and employees, to expel them.

Member states must expel all representatives of designated entities and may not provide specialized training in disciplines that could contributed to WMD programs. This may be a reaction to Russia’s hosting of scientists employed by North Korea’s General Bureau of Atomic Energy, or to the transfer of technology to North Korea that may have been used to weaponize anthrax. A new ban on advanced computer simulation could affect the Pyongyang University of Science and Technology. Joint ventures with designated entities, such as the North Korean “space” agency NADA, are also banned.

Both Uganda and Zimbabwe have employed North Koreans to train their police and military, respectively. The new resolution will ban the use of North Korean trainers and advisors.

Human RightsWe knew from the beginning that China and Russia would never let strong human rights language into the resolution. It does not mention human rights specifically, other than expressing deep concern about the grave hardship that the North Korean people are subjected to. The draft correctly calls out Kim Jong-un for diverting resources away from the North Korean people to his weapons programs. It underlines that the new resolution does not target the people of North Korea, and incorporates a number of exemptions to avoid affecting them.

Its most disappointing omission is its failure to ban North Korea’s use of forced labor to earn hard currency, although the financial sanctions described above, combined with the pressure of the NKSPEA, which does focus on forced labor, may cause users of North Korean forced labor to rethink those arrangements. After all, if the cash Pyongyang earns from expatriate labor could be used for WMD programs, member states must freeze that cash.

Missiles & “Satellites.” North Korea has offered the ridiculous defense that its missile launches — invariably timed within weeks of nuclear weapons tests — are merely satellite or space launches. The draft clarifies that satellite and space launches are prohibited tests of ballistic missile technology.

Designations. Another disappointment — neither Kim Jong-un, nor his sister, nor his top officials or money launderers are mentioned. But on the positive side, there are mandates for member states to file compliance reports, and for the 1718 Committee to step up its game and designate aliases, front companies, persons, and entities that violate the sanctions. Another bad sign is that, at Russia’s apparent objection, Jang Song-chol, a Russia-based representative of another notorious proliferator, the Korea Mining and Development Trading Corporation (KOMID), was dropped from the list of designated individuals. We’ll see if the Russians expel him, and whether KOMID’s activities in Russia will continue.

In conclusion, let’s give credit to someone who has earned it — Samantha Power, and her staff. She didn’t get everything she wanted — or everything I wanted — but she obviously got most of it, and what she got was very substantial. She seized the moment and the leverage Kim Jong-un gave her and made the most of it. The text of the resolution reflects obvious understanding of where sanctions have failed before, and needed strengthening. Power has proven herself to be as tough and skillful a negotiator as John Bolton, the architect of UNSCR 1695 and 1718. She extracted a strong text from the Russians and the Chinese, who are infamous for their obstructionism. This resolution ought to be counted as one of the greatest achievements of her still-young career. Her performance during this crisis proves that an ounce of character is worth a ton of experience.

Now, it will be up to the National Security Staff to empower the Treasury Department to put teeth into this, and it will be up to the State Department to urge other states, particularly in Europe, Africa, and the Middle East, to enforce it. If the administration does those things, the short-term outcome will be increased tensions and provocations, but the longer-term consequence will be to undermine Kim Jong-un’s consolidation of power, discredit him with his elites, and quite possibly cost him his life.

Or, he can negotiate with us in good faith, for once.


  1. Don’t hold your breath – the Russians will cheat on this, as will the Chinese and the Europeans.



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