The U.N. Security Council was already meeting about how to respond to North Korea’s latest missile tests when Pyongyang drew the curtain on its next act of satellite theater at Punggye-ri. Even without the latest sanctions, His Corpulency would probably have carried out another nuke test within the next year, if only to help consolidate his rule, and because the U.S. and South Korea are holding presidential elections. (North Korean dictators prefer to nuke off as new administrations assemble their policies and policy-makers.)
With this year’s new rounds of U.S. and U.N. sanctions, that already high likelihood became a near certainty. We knew all along that the North Korea crisis would have to get much worse before it can get better, and we’re still one to three years of aggressive implementation away from concentrating the igneous temperature and metamorphic pressure needed to make Pyongyang reconsider its policies. We should expect an interesting year, and we should have a list of options ready for it, rather than let a crisis go to waste.
[You should definitely skip over that part around 1:44.]
Fortunately, the most important legal authorities are already in place. If we did nothing for the next year but fully enforce UNSCR 2270, the North Korea Sanctions and Policy Enhancement Act, and the Obama Administration’s two most recent executive orders, we could still identify and destroy most of the financial network that sustains Kim Jong-un’s misrule. This isn’t to say that new sanctions couldn’t help close loopholes; it just means that the most important priority has shifted to enforcing the sanctions that are already in place. So with much of our Plan B now in place, the effort now shifts to enforcement and the closing of loopholes. Call it “Plan B-plus.”
For the U.N.
Designate, designate, designate: You know who still ferries banned luxury goods into North Korea? Air Koryo, that’s who.
This guy is checking in a serious TV – a 65″ Sony Bravia – on today’s Air Koryo flight from Beijing to Pyongyang pic.twitter.com/KegglgjBUa
— Anna Fifield (@annafifield) May 3, 2016
Who insures Pyongyang’s smuggling fleet? The Korea Shipowners’ Protection and Indemnity Association, which is probably a subsidiary of the infamous Korea National Insurance Corporation (which the EU has already designated, but we haven’t). Chinpo Shipping still isn’t designated despite having been convicted for its part in smuggling arms from Cuba to North Korea. All of the ships controlled by the (already designated) Reconnaissance General Bureau should be designated individually, by IMO number. The U.N. can also ban North Korea’s provision of crew services to foreign flagged ships.
The Central Bank of the DPRK sells gold — which is mined with forced labor, or in concentration camps — in violation of UNSCR 2270. Sam Pa and the 88 Queensway Group are already designated for violating Zimbabwe sanctions, and Pa is being prosecuted in China and has his bank accounts blocked, but a new North Korea designation for his dealings with Bureau 39 would send an important message by double-tapping a target the Chinese government is willing to sacrifice. Kumgang Economic Development Corporation, also known as KKG, is Pa and 88 Queensway’s North Korean business partner and, reportedly, a Bureau 39 front. They should be designated, too.
Korea Rungrado General Trading Corporation and the DPRK Chamber of Commerce rent out North Korean slave laborers. If we have any evidence that they pass their revenues to Bureau 39 (already designated), those entities should be designated, too. Mansudae Overseas Projects Group partnered with U.N. designated KOMID at that weapons factory in Namibia; it should be added to the blacklist. So, for that matter, should the Mansudae Art Studio, for the revenue it sends to Pyongyang by charging highly inflated sums for monstrosities such as these.
[Also, for crimes against humanity.]
Expulsions of North Korean operatives. In the last three years, the U.N. Panel of Experts has named dozens of North Korean operatives working around the world who have yet to be designated. Designating them would force other countries to deport them. Similarly, Treasury’s designations of North Korean smugglers and money launderers are still years behind the excellent work of the U.N. Panel of Experts. There are dozens of names in those reports that ought to appear on the U.N.’s own blacklist, and on ours.
Ban Labor Exports. I have a Y chromosome, so admitting that I was wrong isn’t easy for me, but I’m ready to admit that my first impression of Samantha Power was wrong. Just a few years ago, in blog posts and speeches, I taunted Ambassador Power by saying, “Samantha Power, North Korea is your Rwanda.” But since then, Ambassador Power has won me over. She has emerged as a calm, tough, steady, and effective diplomat and critic of Kim Jong-un’s crimes against humanity. She has also become an intelligent advocate for better sanctions enforcement. Power may yet end her term with as strong a legacy as the much-maligned John Bolton, whose tough bargaining built the foundation for everything the Obama Administration has achieved since. Maybe Power still can’t persuade China and Russia to refer His Porcine Majesty to the International Criminal Court, but she might get them to support sanctions that shut down North Korean practices that have human rights implications, or that earn it enough cash to resist the pressure to reform and disarm. After all, isn’t this what the Security Council did when it banned luxury goods imports in UNSCR 1718? The message then was that North Korea should provide for its people. It was the closest the U.N. has ever come to an effective response to Pyongyang’s failure to protect them. In the same sense, China and Russia might be pressured into agreeing to ban North Korean labor exports, if only because labor exports almost certainly finance proliferation.
Ban Food Exports. There is no excuse for a country that relies on food aid to simultaneously export food for hard currency, while contributing a relative pittance to importing grain to feed its own malnourished children. North Korea’s apologists reflexively predicted that sanctions would only starve the poor, but there is more evidence that the very opposite of this is true. This year, we saw two interesting dynamics when China began to implement UNSCR 2270. First, luxury foods (seafood, pine mushrooms) that Pyongyang usually exported but now couldn’t suddenly became available in North Korean markets for the first time most North Koreans could remember. (Limits on North Korean coal exports had a similar effect; they lowered the market price of coal, and according to sources I can’t attribute here, are credited for a better electricity supply in Pyongyang than at any time in recent memory.) Second, state trading companies that needed to earn cash to make their “loyalty” payments but found it harder to trade in sanctioned goods began shifting toward importing food into North Korea instead. Both of these dynamics suggest that a ban on food exports from North Korea could draw more food into the markets that feed most of North Korea’s people and actually help ameliorate the food crisis, while denying Pyongyang a key source of hard currency. Given the long-standing failure of U.N. aid programs to solve North Korea’s food crisis, it’s time to turn our attention to those markets, rather than the state’s corrupt and discriminatory distribution system, as a better solution to hunger in North Korea.
Define “Livelihood Purposes.” The “livelihood” loophole is UNSCR 2270’s most obvious shortcoming. It’s a loophole in coal and iron export sanctions that you can drive a freighter through. The exception should not be terminated completely; sanctions need safety valves so that member states can react to unintended consequences. Instead, the U.N. should define “livelihood purposes” to exclude any sale of coal that provides hard currency to His Porcine Majesty.
The term “livelihood purposes” means the sale or export by the Government of North Korea of coal, iron, or iron ore in exchange for food, medicine, or other humanitarian supplies to be imported into North Korea under the auspices of the United Nations World Food Program, and subject to adequate safeguards to ensure the distribution of such food, medicine, and other humanitarian supplies in accordance with the humanitarian needs of the North Korean people.
SWIFT. Really, how hard an ask should that really be at this point? North Korea is a prime suspect in the theft of $80 million from SWIFT member banks after hacking SWIFT’s software. If we were to ask the EU to support a new sanction disconnecting North Korean banks from SWIFT — and crucially, any other financial messaging services — would it really push back?
Oversight. Congress’s most important function now is to make sure the Executive Branch enforces the laws Congress has already passed. The “appropriate congressional committees” should reserve a SCIF for regular briefings from the Treasury, State, Commerce, and Homeland Security departments. The Executive Branch already has most of the authorities it needs to enforce sanctions effectively. I could, of course, draft many pages of text to force the Executive Branch to use those authorities (and just for shits and grins, I have).
Tourist Travel. But again, that isn’t to say that new legislation wouldn’t help. With North Korea effectively using two Americans as hostages, it’s long past time to ban transactions incident to tourist travel to, from, and within North Korea. Ideally, this could be done by U.N. resolution, but let’s not pretend that that’s likely this year. Doing so bilaterally would require an act of Congress, which means that it’s not going to happen until after Election Day, at the very soonest. (Sometimes, the mills grind slowly. It took three years for the NKSPEA to become law, but it still happened.) Although such a ban would be far from airtight, it would inflict significant financial pain, and it would reduce Pyongyang’s supply of American hostages. It also has the potential to affect not just travel by Americans, but any dollar-denominated travel transactions, including those by third-country nationals. Pyongyang increasingly relies on those transactions to remain solvent as sanctions take effect.
For the Executive Branch
Progressive diplomacy. When it comes to North Korea, I’m not widely known for commending the work of diplomats, but this year, I think we’ve gotten the sequence mostly right. We started with our friends. The U.S., South Korea, and Japan began 2016 by papering over their historical differences and forming an effective diplomatic alliance. Seoul and Washington have had the discipline and the foresight to reject Pyongyang’s divide-and-rule appeals for talks. Maybe it has finally occurred to them that the longer they stick together and build pressure against Pyongyang, the stronger their bargaining power will be, and the greater the odds that their diplomacy will actually succeed for once.
Seoul also invited European nations into that alliance and turned wavering states into friends. It has done an admirable job of unplugging the HAL 9000. Each chip unplugged allows Seoul to focus its attention on a diminishing list of enablers that reflag Pyongyang’s ships, buy its missiles, rent its slaves, and launder its money. The U.S. may have played some role in assisting that campaign, but if it has, it hasn’t publicized it. Similarly, the EU and Japan have been cooperative, but haven’t led on sanctions enforcement as they led on human rights at the U.N. We have yet to see the Obama Administration undertake anything that compares to the Bush Administration’s campaign of financial diplomacy, which quickly disconnected so many of North Korea’s financial links to the Outer Earth. Maybe that’s about to change. If the U.S., South Korea, Europe, and Japan join forces to pare North Korea’s enablers down to a few stubborn bitter-enders, those bitter-enders will feel increasingly isolated, North Korea’s money men will be increasingly exposed, and secondary sanctions against the worst of them will meet less international blowback.
Update: Follow the Money: North Korean exiles agree that designating Kim Jong-un for human rights abuses was a powerfully symbolic act, one that sends a clear message to the North Korean people that he is our target, not them. It is telling that North Korean media have been vague about the reason for the designation.
But this act could be much more than symbolic. According to open-source reports, Kim Jong-un keeps billions of dollars in slush funds abroad; estimates vary from as low as $1 billion in Switzerland, Austria and Luxembourg to as high as $6 billion overall. Top North Korean official Ri Su-yong allegedly managed some of them in Switzerland, and also served in The Netherlands and Liechtenstein, where Pyongyang allegedly kept some of its money. Ri still has close family ties to Bureau 39. Switzerland has recently committed to cooperating with sanctions against North Korea and enacted new regulations to implement the sanctions. The Treasury Department may have also identified hundreds of millions of dollars in North Korean accounts in Shanghai, including the names of the account holders. The 2014 defection of Yun Tae-hyong of Korea Daesong Bank may have provided the South Korean NIS another windfall of financial intelligence.
New EU regulations blacklisting North Korea for money laundering require the disclosure of accounts’ beneficial owners will illuminate more slush funds. Although a top Treasury Department (now the CIA’s Deputy Director) stated in 2013 that Treasury was “actively looking for” “very large amounts” of North Korean money, Treasury offered a disappointing lack of commitment to pursuing those slush funds when it announced its recent designations of Kim Jong-un and his top henchmen. The designation of Kim Jong-un and North Korea’s security forces can be more than symbolic. Nothing the U.S. can do would do more to open up North Korean society to the Outer Earth than to starve the security forces of the funds they need to fence the borders, pay border guards, and buy cell phone trackers. Nothing would damage regime cohesion and Kim Jong-un’s image more than working with foreign governments to identify and freeze the proceeds of Kim Jong-un’s kleptocracy, a specific sanctions authority Congress gave the Treasury Department in section 104(b) of the NKSPEA.
Secondary shipping sanctions. With worrying signs that Chinese ports’ compliance with UNSCR 2270 is slipping, it’s time for the U.S. to take a closer look at Section 205 of the NKSPEA, which provides for secondary shipping sanctions on non-compliant ports. U.S. Customs and Border protection could start by publishing a watch-list of the ports that are allowing North Korean ships to dock, and that aren’t inspecting all North Korean cargo. Cargo coming from those ports, in turn, will face additional delays as they face increased inspections in U.S. ports. My watch list would include Bayuquan, Dandong, Dalian, Longkou, Nantong, Penglai, Rizhao, Shanghai, Qingdao, and Yingkou, and the Beijing Capital International Airport in China; Abadan, Bandar-e-Abbas, and Khorramshahr, in Iran; Nakhodka, Vanino, and Vladivostok, in Russia; and Latakia and Tartous, in Syria. The administration should also harness the Proliferation Security Initiative to target non-compliant ports for closer inspection globally. That’s an important protection against whatever the North Koreans might be tempted to slip into a shipping container coming to one of our ports. The U.S. and South Korea should also redouble their efforts to end the prohibited reflagging of North Korean ships.
Investments. Although Executive Order 13722 bans new investments in North Korea, it doesn’t necessarily ban the existing ones. One step toward squeezing investment out of North Korea would be for the Securities and Exchange Commission to require any company — including foreign companies — that issues securities in the U.S. to disclose its investments in North Korea. That would expose those investors to boycotts, shareholder protests, and possible sanctions. Another, which I’ll explain in greater detail in an upcoming post, would be to require the disclosure of beneficial ownership in investments in North Korea, or in which any North Korean person has an interest. Here, the EU’s tighter rules on beneficial ownership disclosure, just announced this week, are a good example for us to emulate.
Fortunately, most of the necessary legal authorities are in place. If we did nothing for the next year but fully enforce UNSCR 2270, the North Korea Sanctions and Policy Enhancement Act, and the Obama Administration’s two most recent executive orders, the U.S. could cripple North Korea’s palace economy in two to three years. The distraction and potential disruption of the upcoming U.S. and South Korean elections are the greatest threat to this strategy now.