Last week, Samantha Power was in Seoul, reassuring our increasingly panicky South Korean allies that the U.S. will use “all the tools in our tool kit” to deny His Porcine Majesty hard currency and WMD materiel, and pressure him to disarm. Meanwhile, a must-read article in Foreign Policy reveals that late in the eleventh hour of his presidency, Barack Obama still hasn’t decided to use “all” the tools after all, particularly the one Congress wants him to use — secondary sanctions against Chinese banks.
Instead, FP reports, senior administration officials are “heatedly debating whether to trigger harsh sanctions against North Korea that would target Chinese companies doing business with the hermit regime, in a crackdown like the one that crippled Iran’s economy.”
Officials told FP that the approach would be similar to the sweeping secondary sanctions that were slapped on global banks handling transactions with Iran. Those sanctions are widely credited with bringing Iran’s economy to its knees in 2013 and forcing Tehran to the negotiating table over its nuclear program. [Foreign Policy, Dan De Luce]
The prime targets of the new strategy under discussion? Exactly the right ones — Chinese trading companies and banks. Open sources alone provide for no shortage of targets. We already know about the recently indicted Dandong Hongxiang. There’s also the Bureau 39-linked 88 Queensway Group; gold dealer Unaforte, which may be exporting to the U.S. in violation of Executive Order 13570; the Wanxiang Group, which may be China’s largest importer of North Korean minerals; banks like the Bank of China, which willfully helped North Korea launder money through the U.S. financial system; and other Chinese banks that turn a blind eye to their know-your-customer obligations on behalf of North Korean customers, as well as Chinese customers that help them circumvent U.N. sanctions and U.S. law.
But a decision to go after Chinese banks and trading companies that deal with Pyongyang could rupture Washington’s relations with Beijing, which bristles at any unilateral sanctions imposed on its companies or drastic action that could cause instability in neighboring North Korea. [FP]
The U.S. has told the Japanese and South Korean governments that it is focused on cutting off North Korea’s sources of hard currency, including labor exports. But with even people in Beijing speaking openly of limited military strikes and South Koreans worried about falling under the shadow of nuclear blackmail, the sense of urgency in Seoul, Tokyo, and Washington has never been greater. Trade sanctions alone will probably take much longer to work than financial sanctions, and are more likely to hurt the wrong people, thus undermining political support for stricter enforcement. Now, having let matters drift for eight years and lost the confidence of the entire Congress, the administration belatedly recognizes that things have deteriorated quickly, and that it needs a quicker strategy.
“In the past two or so years, there’s a general appreciation that the situation has become worse and that we, the United States and the responsible nations of the world, need to up our game,” said a senior government official, who spoke on condition of anonymity. As a result, the administration is “looking at a more active and more aggressive use of the authorities” for sanctions, the official told FP. [….]
The political calendar in the United States also is shaping the internal discussions, with some officials arguing that President Barack Obama would be better placed to order the move in his final months in office, rather than leaving it to a new administration to enter into a heated dispute with China. [FP]
Since North Korea’s fifth nuclear test, Congress has put the administration under intense pressure to implement the NKSPEA more aggressively. South Korea and Japan are also pushing for the more aggressive strategy.
U.N. resolutions and new legislation adopted by Congress in February give the administration far-reaching legal authorities to block assets, file criminal charges, and cancel visas for individuals or organizations violating sanctions rules on North Korea. But so far, the administration has yet to wield those authorities in a decisive manner, taking action in a relatively small number of cases while it seeks to persuade China to take a more assertive role. [FP]
Which you already know, because you read this blog. FP also picks up on the Senate Asia Subcommittee’s aggressive questioning of the administration in its most recent oversight hearing.
Since approving new sanctions legislation in February, U.S. lawmakers from both parties have complained that relatively few companies or individuals have been blacklisted and charged.
“You have sanctioned no Chinese banks at the end of the day, and they are probably the major financial institutions for North Korea,” Sen. Bob Menendez (D-N.J.) said at a hearing last week with top State Department officials.
Republican Sen. Marco Rubio, speaking at the same hearing of the Senate Foreign Relations Subcommittee on East Asian and Pacific Affairs, accused the administration of timidity when it comes to sanctions that could antagonize the Chinese government.
“We know who these companies are. We haven’t moved fast enough on it. There’s no reason not to have moved faster. There’s plenty of targets of opportunity and plenty of information out there about them,” Rubio said. [FP]
See this link for similar bipartisan pressure coming from the House side of the Mall. So what has prevented the administration from responding to this pressure from our allies and Congress? Deference to China.
“It could become the defining issue in the U.S.-China relationship. It could push Beijing and Washington into a very unhappy place,” said Evan Medeiros, who served as Obama’s top advisor on Asia affairs at the White House National Security Council until last year.
Pursuing Iran-like sanctions against North Korea would mean “hardcore secondary sanctions in ways that the Chinese aren’t going to like,” he said.
“But the U.S. is simply going to have to be willing to countenance friction in the U.S.-Chinese relationship that the U.S. hasn’t been willing to accept to date, because the North Korean threat is becoming too serious,” said Medeiros, now at the Eurasia Group since leaving the White House. [FP]
Obama has tended to avoid confrontation with China on most issues, including over the South China Sea and economic disputes. The administration, however, did take a forceful stance against Beijing-backed cyberhacking in the United States.
“They have placed a premium on trying to manage the relationship with China in a constructive way and to contain areas of friction or competition,” said a congressional staffer. [FP]
Right. Because it would be terrible if relations broke down so badly that China started, say, unilaterally seizing huge tracts of strategic waters, rounding up and jailing dissidents, or amping up its anti-American propaganda.
De Luce reports that the administration still hasn’t made its mind up, and “may in the end opt to take a more incremental approach, avoiding a major clash with China.” Which would be typical. In fact, I wouldn’t be astonished if the administration had planted this story to pressure China to be more flexible in its negotiations over a new U.N. Security Council resolution, agreement on which is taking even longer than usual. Having said that, what a rare joy it is to read journalism like De Luce’s, which shows that the reporter took the trouble to research and understand the subject matter before writing about it.