Maximum Pressure Watch: Trump puts the squeeze on Kim Jong-un

Donald Trump hit Kim Jong-un with his first sanctions executive order today. (Update: Its official number is Executive Order 13810.) The new EO partially implements UNSCR 2371, UNSCR 2375, and the KIMS Act, which the President signed in August. As a strictly legal matter, this EO will not affect anyone’s interests immediately because Treasury didn’t announce any new designations. As a practical matter, however, we may already be seeing the effects of the clear seriousness of purpose that Trump has already shown. You can read the full text here and a White House fact sheet here.

The New Authorities: A Summary

The new provisions broaden the administration’s authority to designate (and thus, freeze any assets within U.S. jurisdiction of) entities that engage in the conduct described below:

  • (i) Sectoral sanctions against anyone determined “to operate in the construction, energy, financial services, fishing, information technology, manufacturing, medical, mining, textiles, or transportation industries in North Korea.”

Treasury previously authorized sectoral sanctions against anyone operating in North Korea’s the mining, energy, transportation, and financial services industries. The newly designated industries include those sanctioned under the new U.N. resolutions and the KIMS Act. Sanctions on the medical industry are a notable exception. This will draw gasps of horror from some, but remember, there’s still a humanitarian general license that exempts “medicine distribution” and “the provision of health services.” Section 7 of the EO exempts UN operations entirely. So why say “medical” at all? The feds may suspect Pyongyang of hiding behind “medical” uses to make biological weapons, but that’s only a guess.  

  • (ii) Shipping sanctions against anyone who owns, controls, or operates any seaport, airport, or land port of entry in North Korea.
  • (iii) Import-Export: “to have engaged in at least one significant importation from or exportation to North Korea of any goods, services, or technology.”

Executive Order 13570 previously banned unlicensed imports and exports between the United States and North Korea. This provision, by contrast, bans any transactions through the U.S. financial system, or by U.S. persons, that facilitate imports to or exports from North Korea by anyone, to or from any country. In effect, if you trade with North Korea now, you have to use a non-dollar currency or get an OFAC license.

  • (iv) Status-based: “to be a North Korean person, including a North Korean person that has engaged in commercial activity that generates revenue for the Government of North Korea or the Workers’ Party of Korea.”

This effectively cuts the Gordian Knot around the spurious claims of China (or this one, by Tanzania) that the North Koreans they’re dealing with aren’t representatives of the North Korean government. Hopefully, Treasury will now start mining names out of the U.N. Panel of Experts reports and designating the members of Pyongyang’s overseas proliferation and money laundering networks, thus putting the banking industry on notice to freeze their accounts.

I’m glad Treasury exempted North Koreans (including refugees) who are legally in the United States. I would have preferred that Treasury had clarified that North Korean refugees in Europe and South Korea are also exempt. I realize that Treasury has no intention of enforcing sanctions against refugees in England or South Korea — and I hope the banks realize this, too. Some clarifying guidance from Treasury might be useful. Refugees in South Korea, in particular, often keep their family members alive by remitting money to them. As I’ve argued before, remittances might be a rare case of financial interaction with North Korea that actually does drive reform, by helping the poor start businesses and achieve financial independence from the state. Thankfully, a general license covers noncommercial, personal remittances.

Things start to get more interesting in Section 2, which provides for a secondary boycott on ships and aircraft. Under the EO, any ships or aircraft that have been in North Korea in the last 180 days can’t land in the United States. This both overlaps with and complements section 315 of the KIMS Act. It is also the same concept that Japan and South Korea had previously applied to North Korean ships, meaning that ships that visit North Korea will now incur a six-month ban from the waters of China’s three largest trading partners. Furthermore, any ship that has done a ship-to-ship transfer with a ship that has been in North Korea in the last 180 days also gets banned from U.S. ports for 180 days. Shipping trackers suggest that a fair number of these transfers are happening off the Chinese coast. A concern, however, is that the existing humanitarian general license may not cover shipments of commercial food imports (which we should want to encourage).

Section 3 contains some very tough secondary financial sanctions. Section 3(a) freezes any funds controlled by a “North Korean person,” or in which a North Korean person as an interest. This is very powerful — much like its ancestor, section 104(c) the NKSPEA, which blocks all property of the “Government of North Korea,” a term that the NKSPEA defines in roughly similar terms to this EO’s definition of “North Korean person.” The EO also extends the blocking to any person who finances, approves, facilitates, or guarantees a transaction that would be frozen under this paragraph.

Section 4 contains some additional penalties that are tailored to the financial industry. Any person who knowingly conducts or facilitates a transaction in property blocked under a North Korea-related executive order, or who knowingly conducts or facilitates a significant transaction in trade with North Korea, can lose access to the U.S. financial system. That potentially means no correspondent accounts, or the freezing of all of the bank’s assets in the United States. This amounts to a mini Patriot Act section 311 just for North Korea. And of course, banks that knowingly deal with Pyongyang could also face prosecution for money laundering, criminal or civil forfeitures, or the kind of civil penalties that were applied to BNP Paribas for violating Iran sanctions.

Which is to say, this section mostly does what section 104(b) of the NKSPEA does, now that President Trump has signed the KIMS Act section 311 amendments into law.

 We sound like we really mean it this time.

The effects of previous, strong-on-paper EOs fell short of their potential because President Obama never showed the world that he was serious about enforcing them (or rather, until the very end of his administration, he showed the world that he wasn’t serious about enforcing them at all). Let no one accuse Donald Trump of indecision or paralysis.

“A new executive order will cut off sources of revenue that fund North Korea’s efforts to develop the deadliest weapons known to humankind,” Trump said at the start of a trilateral luncheon meeting with South Korean President Moon Jae-in and Japanese Prime Minister Shinzo Abe in New York….

Trump said China’s central bank had just told the country’s other banks to “immediately” stop doing business with North Korea, and thanked Chinese President Xi Jinping for that “unexpected” decision.

“For much too long North Korea has been allowed to abuse the international financial system to facilitate funding for its nuclear weapons and missile programs,” he said. [Yonhap]

Take note, humanity: Donald Trump just said the right thing in the right tone, and it all appears to be true, right down to “unexpectedly.” Then, Treasury Secretary Steven Mnuchin said this at the U.N., just to be sure the whole world heard him:

For far too long, North Korea has evaded sanctions and used the international financial system to facilitate funding for its weapons of mass destruction and ballistic missile programs. No bank – in any country – should be used to facilitate Kim Jong-un’s destructive behavior.

This new Executive Order will authorize Treasury to impose a range of sanctions, such as suspending U.S. correspondent account access to any foreign bank that knowingly conducts or facilitates significant transactions tied to trade with North Korea or certain designated persons.…  Foreign financial institutions are now on notice that, going forward, they can choose to do business with the United States or with North Korea, but not both….

We call on countries around the world to join us by cutting all trade and financial ties with North Korea in order to achieve a denuclearized Korean peninsula. [link]

Finally, in a conference call this afternoon, a senior National Security Council official and a senior Treasury Department official (whom we weren’t allowed to name) emphasized the administration’s seriousness. Some key points:

  • This EO goes further than any other sanctions EO — implicitly, including even Iran. He might be right. I might have to shelve my “not the most sanctioned” refrain, assuming the administration enforces this.
  • Treasury will unravel the front companies and shell companies to get to any shipping company that smuggles to or from North Korea in violation of this EO.
  • Treasury is investigating financial institutions that have been involved in facilitating trade with North Korea, and will start enforcing this EO in the near term.
  • Treasury won’t only enforce the EO against Chinese banks. Before the President signed the EO, the administration discussed it with EU, Japanese, and South Korean officials. Oh, and Treasury would really like the South Koreans to use the full extent of their legal authority to publish their equivalent of SDN designations of North Korean enablers.
  • Also, it welcomes the investigative work of NGOs, specifically C4ADS (which single-handedly exposed much of Pyongyang’s money laundering network in China). I hope that means the government will offer them grant funding or rewards, as authorized in section 323 of the KIMS Act. (Leo Byrne and The Beard of Knowledge also received well-deserved praise.)

 Signs of impact on North Korean trade

So, you ask, will the Chinese banks finally listen? I’ve cited the evidence that they already are. Fuel prices in North Korea have spiked, North Korean workers are flooding back over the border to China, and trading companies in China are effectively out of business and unhappy about the freezing of their bank accounts. The coal industry, which has taken some hard hits from the Treasury and Justice Departments lately, is also showing the strain. These things could be consequences of the banks telling their customers to de-risk North Korea. We may soon find out just who’s right here.

 

Today, Reuters reports that the Chinese government has directed its banks to stop dealing with North Koreans entirely, to include winding down loans with existing customers. If that’s true — and if it lasts — that will be fatal. The timing is curious. One of the “senior administration officials” said that President Trump had only notified President Xi about this EO today, yet the reports of the alleged Central Bank order — the bankers say they received it Monday — come a week after multiple press reports of Chinese banks closing North Korean-controlled accounts. Could Beijing be making a virtue of necessity by ordering banks to do what they’re already doing for their own sake? As I’ve said before, there isn’t just one “China.” Various ministries and industries have diverse and conflicting interests.

This week, President Trump acted strongly, decisively, publicly, and with a deliberate seriousness of purpose. Banks and governments around the world will disregard his words at their peril (meaning, very few of them will). His misbegotten threats against North Korea (as opposed to its regime) shouldn’t distract us from what he did right, if only because his predecessors could not do it right. His words and actions, and in tandem with other governments’ actions to cut their trade and diplomatic ties to North Korea, should be difficult for Pyongyang to withstand for long. We may soon conclude the sanctions-never-work portion of our narrative and enter the sanctions-are-starving-North-Korean-babies portion of our narrative fairly soon. In fact, it looks like we already have.

14 Comments

  1. Well you’re getting what you want. I hope you’re happy. I have no ideological dog in the fight, whatever works. But this is like putting your kids lives on the line in a game of Poker. Win and its a great but lose and its unthinkable. From past history you know North Korea never likes being humiliated like this. We’ll see what happens.




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  2. I should’ve been more clear. There’s two broad sides: the engagement and hardline side. I can’t say I’m enough of a expert to know for sure other than John Bolton is a idiot. I hope Trump’s approach works even though I have grave misgivings. I admire and acknowledge that you proabably care about the North Korean people sadly more than South Koreans nevermind the average American. However I’m very concerned this hardline approach will start a war that will kill millions. I can’t help but imagine the more idiotic vapid things that would emerge such as the inevitable South Korean flag avatar and #PrayforKorea hashtags. I don’t think this approach will work but I pray it works. I just hope you and everyone else who pushed this can live with the consequences if it doesn’t.




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  3. I don’t expect to have trouble living with myself if Kim Jong Un, Trump, or anyone else starts a war, if that’s your question. I’ve always opposed war and still do. I’ve always opposed the idiocy that put nukes in the hands of Kim Jong-un and still do, not that it matters now that KJU is saying he won’t negotiate anyway. Exactly how do you suppose things end if we don’t enforce sanctions? Look at the trajectory we’re on — global proliferation, global threats and terror, and the finlandization of South Korea. You think things are bad now? Just watch present trends continue for two or three more years.




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  4. If North Korea is forced to negotiate an agreement which either eliminates its nuclear weapons or freezes further development of weapons capable of causing unspeakable casualty right here in our country, we are definitely heading in the right direction.

    Our 20 plus years of policy which has resulted in paralysis by over analysis due to potential casualty of millions of civilians in and near Korean Peninsula has brought the ultimate danger right in front of our doorstep. With the benefit of hindsight, it is clear the predecessors to Trump have failed miserably and dangerously to our detriment.

    The so-called “Supreme Leader” in NOKO maybe fat and goofy looking but he knows the reality of his situation. In the current climate, he and his ass licking generals know that if it even sends a projectile close enough to Guam, they all will be wiped off the face of this earth. I voted for Clinton. Having said that, if she were in charge right now I would be heck of a lot more nervous than I am right now in light of the heightened tension. I am not saying Trump gets a score of ten (could he have not said we would destroy the “North Korean REGIME” @ UNGA rather than fucking threaten the entire country?). But Trump is handling the current crisis with a refreshingly different tone and with sensible objectives. In my limited opinion, much credit also has to be given to Nikki Haley, our UN Ambassador, Steven Mnuchin, the Secretary of Treasury, and yes, Tillerson for playing the role of a good cop even better than actual good cops, if there are such things…

    To HJ433 – Nobody wants “a war that will kill millions”. I’m sure the “leader” of SK agrees with that as well. If you watched Moon Jae In in his tri-lateral Conference with Trump and Abe, you heard what Moon said. The escalating provocations by Kim Jong Un has given Trump no choice but to react in a “firm and appropriate” manner. I agree.




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  5. I can only speak for myself, but I don’t want to live as a slave to Kim Jung Un, or cower in fear toward him and his regime. I support what President Trump is doing.

    FYI I did not vote for Trump and I think he is total idiot, but on this issue I think he is right.




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  6. Thirded. I think Trump is the right guy to deal with this problem, and is going about it in the right way. And I think the DPRK regime is feeling the pressure.




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  7. Totally agree with Cameron. The alternative is that we all have to live indefinitely with LA and SF being 15 minutes from oblivion at the whim of the worst dictator the world has seen since Stalin and Hitler.




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  8. James Clapper, former Director of Intelligence, came on CNN this morning and stated the following:
    “What concerns me is….nobody knows what will set off Kim Jong Un’s fuse…”

    While I respect Mr.Clapper’s views here concerning the ratcheting up of the “rhetorical gunfire” between Kim and Donald Trump, Kim Jong Un can not and will not attack the U.S. and its allies. In the past, Kim has killed his uncle, his half-brother and reportedly whole bunch of others in domestic purging of his enemies. Kim has yet to meet with a foreign leader, Kim has not traveled outside NK since coming into power in 2012, Kim has yet follow through with hundreds of daily threats he has made including the promise of sending a rocket nearby to Guam by mid-August.

    Nobody here wants a military conflict with Kim. But I am tired of this narrative that gives this punk any more respect than what common sense calls for. This is a limited guy who is driven by his fears of getting assassinated and cares only about the survival of “deity” status for Kim family.

    Under the current circumstances, I am content with where we are today with regard to Kim Jong Un. Keep up the economic pressure and sanctions, ratchet up the education of NK’s terrible on-going human rights violations to the world, highlight our necessary and appropriate military response on the table, and lastly stop puffing up the “Supreme Leader” of one of the poorest countries in the world.




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  9. Senator Rand Paul from Kentucky just came on MSNBC and suggested having “Chinese peace-keeping force” at DMZ along with American force in an effort to show “respect” to “rising powers”!

    One of the dumbest fucking ideas I have ever heard in my life. I will let what will be quick and strong reaction from the people of ROK concerning this idea to illustrate why Mr.Paul should never be a Commander in Chief of any country let alone the state of Kentucky!




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  10. I can’t imagine these sanctions aren’t seriously hurting NK. Best case scenario is one of the generals puts a bullet in Kim’s ear, then cuts a deal.




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  11. reportedly whole bunch of others in domestic purging of his enemies. Kim has yet to meet with a foreign leader, Kim has not traveled outside NK since coming into power in 2012, Kim has yet follow through with hundreds of daily threats he has made including the promise of sending a rocket nearby to Guam by mid-August.




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  12. . I’m sure the “leader” of SK agrees with that as well. If you watched Moon Jae In in his tri-lateral Conference with Trump and Abe, you heard what Moon said.




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  13. Kim Jong Un can not and will not attack the U.S. and its allies. In the past, Kim has killed his uncle, his half-brother and reportedly whole bunch of others in domestic purging of his enemies.




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