Now What?

North Korea’s missile test opens up new options for the United States. Here is a list of them.

[Scroll down for updates.] It too easy to say, as many will in the coming days, that there is little that the United States and other nations can do to North Korea diplomatically or economically now that it has done the unthinkably stupid and launched its (taepo)dong and (count ’em!) five smaller missiles [Update: make that six]. Let me express my respectful disagreement with some of the analysts cited by my colleague Richardson below, and let me follow that with a list of specifics.

True, the United States doesn’t have ambassadors in Pyongyang to recall, and there are no direct flights to suspend. Not that either measure is more than cosmetic in any event. There is much, much more that the United States and other nations could do in response to North Korea’s missile test, both unilaterally and multilaterally. That may explain what Stephen Hadley is up to:

The administration quickly launched a diplomatic counter offensive to the missile shots — including one missile capable of reaching the Unites States, but made clear the response will be diplomatic and not military.

“You are going to see a lot of diplomatic activity here in the next 24-48 hours,” said … Hadley.

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Tongsun Park’s Trial Begins

Park formerly served as a “Special Advisor” to Maurice Strong, a wealthy, uber-connected Canadian leftist who in turn was Kofi Annan’s Special Envoy to North Korea. Strong and Park have now both been implicated in the U.N. Oil-for-Food scandal. During his tenure, Strong was notable for a deathly silence on human rights. He resigned after the OFF allegations emerged.

Today, Park is charged with being an unregistered Iraqi agent, in violation of the Foreign Agents’ Registration Act. Writing in the National Review Online, Claudia Rosett reports from Park’s trial, in New York:

The defendant, South Korean businessman Tongsun Park, is charged in the Southern District of New York with acting as an unregistered agent of Saddam’s Iraq — which tried through various means, especially the manipulation of the 1996-2003 Oil-for-Food program, to end the U.N. sanctions imposed after Saddam’s 1990 invasion of Kuwait. Park’s lawyer, Michael Kim, says the 71-year-old Park is “absolutely not guilty.

….

Alleging that “Cash by the bagful was sent from Iraq to the United States and doled out here by an Iraqi agent to Tongsun Park,” Farbiarz outlined a tale of secret swaps of messages and money in New York cafes and restaurants; night-time meetings at the Sutton Place official residence of former Secretary-General Boutros Boutros-Ghali; a close encounter with longtime U.N. eminence Maurice Strong, who served as a top adviser to both Boutros-Ghali and then to Kofi Annan; and an episode in which Park in 1997 picked up cash from Saddam’s number two man in Iraq, Tariq Aziz, and “drove out of the Iraqi desert over the Jordanian border. (Boutros-Ghali, Strong, and Annan have all denied any wrong-doing in relation to Oil-for-Food.)

Park has a long history with allegations of corruption dating back to the 1970’s “Koreagate” scandal. Click here for some of the extensive posting I’ve done on the subject.

And get this: Park even has a web site, which focuses heavily on Korean nationalism, a la Robert Kim, but which seems to be all in English. Go figure. The site, wisely I’d say, says nothing about the charges, and contains no information that might connect Park to the government of North Korea, his birthplace.

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The Congo Question, The Heart of Darkness, and Accountability

The enforcement of standards of civilized behavior is what distinguishes us from our enemies, and today, we must again make that distinction plain. The Army has charged two soldiers and an NCO with murder in Iraq, based on an alleged incident that took place just last month. A three-star general ordered the investigation after following up reports about it. We eagerly await a John Murtha coverup allegation.

The case will now proceed to an Article 32 investigation, a cross between a preliminary hearing and a grand jury. The Article 32 is very possibly the greatest truth engine in any legal system, anywhere. Attorneys for the government and the defense (appointed military counsel; civilian counsel at no cost to the government) will have extensive rights to question witnesses and examine documents. One officer will examine all of the evidence produced and make recommendations on whether the case merits trial, and at what level. The recommendation is not binding. The various court-martial convening authorities — the highest of whom is generally a two- or three-star, will decide whether probable cause exists to believe that each accused committed a triable offense. As a practical matter, however, if the investigating officer finds probable cause, there will be a trial.

Patience is not a virtue of the American media, but I’ve had some of experience with both fora, and thus have far more confidence that the military courts will develop an accurate account of the events in question than the New York Times will. It’s entirely possible, after all, that these soldiers are not guilty, and while it’s now commonplace for us to forget that, no one deserves the benefit of all reasonable doubts more than those who protect our own freedom. If these turn out to have been soldiers who forgot who they were, the bidding ought to start at double-digit, hard-time confinement. The same would be just as true of accountability by senior officers and NCO’s, something that has finally begun to happen with Abu Ghraib. How ironic that for all of the attention lavished on Abu Ghraib, the world has forgotten most of the horrors that happened there. This is how the abandonment of perspective tends to work, and will probably work here.

If any reminder is needed that we ought to wait for the legal process before we judge any suspect, whether in this case or that of Haditha, Michael Yon has expressed it from a deeper personal knowledge and with a far greater poignancy than I could ever hope. Unfortunately, the cause for which all of the soldiers are sacrificing — including those whose conduct is beyond reproach — will soon face unfavorable comparisons to unattainable standards that no Army in the field has ever met, or will ever meet. Expect venenous, hyperbolic analogies to Einsatzgruppen. The message some will want us to take from this will be that the only appropriate atonement is to abandon the field to those who see the murder of children as their very point-blank, execution-style modus operandi. That, of course, would be to incentivize rather than deter barbarity.

Unfortunately, the morality of too many is sufficiently perverse that every death in Iraq — regardless of the actor or his intent — is implicitly the fault of the United States. This view shovels guilty and innocent alike into a statistical mass grave, with the fallen soldiers of an elected government piled on top of shards of foreign terrorists, with dead diplomats, foreign workers, and innocent children akimo in heaps, and here and there, an American Marine or British soldier. This view makes no moral distinction between the terrorist who drives a car bomb into a school, the child he killed, the teacher who dies trying to shield the child, or the Iraqi soldier whose final act is to empty his magazine into the car. It takes little thought to see this communal statistical burial, this exploitation of a victim in common cause with her murderer, for the desecration that it is.

Still, such a simplistic framework has appeal — as the substitution of emotion for thought always does — because it is easy on the mind. The anticipation of consequence, the consideration of the greater moral context, the careful examination of circumstances, and the building of one’s moral framework around reason are not, as a rule, easy things. One cannot reach the “right” moral answer without considering them, however.

Among those who will have the most to say about this case, and among those who have already had the most to say about Haditha, there has been much studious evasion of some dire realities, beginning with the fact that our deadliest enemy in Iraq — if not necessarily the most numerous — calls itself “al Qaeda in Iraq” and swears allegiance to those who engineered the murder of 3,000 American civilians on a single day — right here in America. They cannot argue why a government chosen by the consent of the governed in three free elections is less meritorious of our respect and support than the violent acts of gangs of displaced cut-throats and ambitious petty warlords. They cannot say how America can survive if it consistently yields the field of battle to those who would follow us to our homes to kill our people, rob us of our freedom, and destroy our prosperity, or why this would make the world better. They cannot explain why the forebearance and understanding of Europe and the Middle East have purchased them so forebearance and understanding in return — why, for example, were 25 terrorists convicted just last week for plotting attacks in France over Russia’s war in Chechnya? They do not answer for the incalculable horrors that would follow a sudden U.S. flight from a nation that freely elected leaders who ask for the presence of U.S. forces until — and only until — the rule of law and the will of the people have a chance to triumph against bands of cutthroats in the pay of the predatory tyrannies that surround them. They evade this obvious consequence above all others: that after Iraq, there will be another battleground, and another, and that sooner or later, America will be among them. Again.

It is a statistical certainty that in every Army there are men who have committed crimes, whether in times of peace or under the stresses of war. This is not an excuse for crime; it is an imperative both for accountability and for perspective. Neither any European nation, nor the Canadian Army, nor the United Nations itself is exempt from that statistical certainty, or from the responsibility to hold those who err accountable under the law. Here, the U.N. has much to learn from the Uniform Code of Military Justice. I wonder how many of those who say that we must abandon Iraq to the heirs of Saddam and Zarkawi believe just as strongly that the U.N. must atone for its soldiers’ exploitation of some Congolese girls by abandoning all of them — and their sisters, brothers, and parents — to the tender mercies of cannibals and rapists. It is only some sense of perspective that leads to the obvious answer, despite the U.N.’s woeful job of assuring that the guilty are held accountable.

A just world does not measure the justice of nations and their causes by the actions of an abberrant few, but by how swiftly and thoroughly their actions are judged, and accountability imposed, by a system of laws that represents the many. That process is at work in the U.S. military. If only we could hope for the maintenance of that perspective as that process works toward its conclusion. That may be too much to hope for.

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Why He Took Those Pictures

The U.S. Ambassador to South Korea, Alexander Vershbow, has paid a very public visit to the Kaesong Industrial Park, and the initial signs are good. Vershbow, a man who seeks the public debate his predecessors so often avoided, has not shied from stating some rather blunt views about North Korea. Thus, the fact that the North Koreans allowed his visit to go forward at all is surprising. Best of all, Vershbow snooped around, took pictures, and even seems to have sought a peek at the books, with his thoughts on the workers’ paychecks (or absence thereof). His reaction was cyptic:

“It was useful in getting more information about Kaesong, which I will pass on to my colleagues in Washington,” the diplomat said. “There are some questions people have in their minds about Kaesong, and I hope the information that I pass back will be helpful to my colleagues in understanding better what’s happening in Kaesong.” He said there were talks underway to organize a visit by the North Korea rights envoy, Jay Lefkowitz, “probably next month.”

Here’s the money quote:

The ambassador dodged a question on his government’s support for the complex, calling it tricky, but said he had seen quite a lot of U.S.-produced equipment while looking around.

That’s a highly significant statement.

Before some of us helped put Kaesong on the map as a human rights issue, it was a technology control issue, which requires us to talk some law, specifically the U.S. Department of Commerce’s extremely detailed technology control regulations. Those regulations are intended to keep sensitive or dual-use American technology out of the hands of our enemies. They apply to both direct exports and reexports to other end users.

This excellent primer describes how each listed product has a unique five-digit alphanumeric code known as an Export Control Classification Number (ECCN). Using this ECCN, it’s possible to determine what controls apply to each listed item here, which leads you to a country chart (15 C.F.R. sec. 738) that is updated frequently, but for which North Korea’s blocks have pretty much all been checked since 2001. Those blocks consist of a series of reasons for which the export restrictions were imposed: chemical and biological weapons, nuclear nonproliferation, national security, missile technology, regional stability, crime control, anti-terrorism, or the firearms convention (notice anything missing in there?). North Korea, for more good reasons I can count (see pretty much every entry I’ve ever posted here) hits every one of these except firearms convention controls.

Would a South Korean transfer of U.S. technology to a South Korean plant that happens to be inside North Korea violate the controls? We found the answer last year, when South Korean attempted to transfer items listed in one category of sensitive technology — telecommunications equipment, which often has dual-use applications:

[T]he export administration regulations (EAR) of the U.S. stand in the way as the country restricts exports of dual-use items, which can be converted for military purposes, to embargoed destinations including North Korea. Under the policy, a license is required for virtually all exports of products using more than 10 percent of U.S. technology or components.

“To avoid the EAR, we tried to procure telecom equipment from European manufacturers like Ericsson, Alcatel and Siemens. But the hitch is that their products may cross the 10-percent threshold and for this reason they are hesitant,” Park said. He added the European big names fear unauthorized exports of telecom gears to the North might arouse the ire of the U.S., which can prevent exports of their products to the U.S.

Because the controls apply not only to direct U.S. exports to listed nations, but also to reexports to listed nations, Ambassador Vershbow’s pictures are more than a simple threat to the North Koreans’ line of credit. If South Korean companies transferred technology to North Korean in violation of end-user rules (15 C.F.R. pt. 744), the offending South Korean companies could be facing sanctions of their own. That would be yet another earthquake in U.S.-South Korean relations, already severely strained by the unraveling of the military alliance and the likely collapse of U.S.-Korea Free-Trade talks as President Bush’s fast-track authority ticks away, and opposition in both the United States and South Korea grows.

One of the main sticking points has been the U.S. refusal to treat goods produced at Kaesong as South Korean products for FTA purposes. Very few nations, after all, have FTA’s with the United States, and it makes little sense for North Korea to enjoy a privlege that stalwart ally and trading partner Japan lacks. The import controls on North Korea are at 31 C.F.R. sec. 500.586; they were recently updated with this notice in the Federal Register banning U.S.-owned vessels from flying the North Korean flag. The Treasury Department’s Office of Foreign Assets Control has a good summary of the import sanctions currently in effect; more here. What about assembling or finishing Kaesong-made materials in the South? We’ve thought of that. You can see pretty much all of it by typing the word “Korea” into the search window here.

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There was another interesting vignette at Kaesong when Vershbow’s North Korean guide ““ almost certainly loaded with a prefabricated tirade ““ asked Amb. Vershbow about his opinion on human rights in the North. Vershbow wisely declined the guide’s opening to let fly with her canned David vs. Goliath setup before a gallery of sympathetic journalists. Watching Vershbow’s performance leaves you somewhat rueful that no one of his caliber was available to represent our interests for the last critical decade, when matters deteriorated to the woeful state at which they’d arrived when he was confirmed.

Reminder: Read our disclaimer.

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Japanese Coast Guard Searches N. Korean Drug Ship

They also arrested two people believed to have been part of the smuggling operation.

The men are accused of helping smuggle several hundred kilograms of amphetamines from North Korea to Japan, Jiji Press and public broadcaster NHK said.

Tokyo police arrested Woo Si-Yun, an unemployed 59-year-old South Korean living in Japan, and alleged Japanese gangster Katsuhiko Miyata, 58, the news organizations said.

Woo is believed to be the owner of a mobile phone recovered from a North Korean spy ship that sank in the East China Sea in 2001 after an exchange of fire with the Japan Coast Guard, Kyodo News said.

Investigators also searched a North Korean freighter that arrived Friday at western Tottori prefecture because they believe the ship was used to smuggle the drugs, NHK said.

Police are looking to arrest several others in connection with the case, Jiji said.

Photo: AFP

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Should Hanchongryon Be Designated a Terrorist Organization?

“Let us eliminate anti-unification pro-war forces which intend to cast fire clouds of a nuclear war on the heads of Koreans.
Hanchongryon Statement before visiting Pyongyang

If I’d had any idea that things were this bad on South Korean university campuses, I’d have been paying much closer attention:

Seven Korea University students face disciplinary punishment after illegally detaining nine professors for 16 hours. The Yonsei University president is working elsewhere after being driven out of his office some 40 days ago by radical students who are occupying the university administrative building. Some 50 pro-North Korea students of Joong-Ang University also occupied the president’s office and painted walls and floor with slogans.

Amazing. Like “1984” meets “Lord of the Flies.” This is the infamous North Korean fifth column known as Hanchongryon, with a long history of violence and almost always featured in our force protection warnings about violent demonstrations. More on that later. But this story ends well:

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Jay Lefkowitz Is Right About Kaesong

The debate about South Korea’s role in (not) improving human rights in the North seems to intensify by the hour. Freedom House is the latest to testify for the prosecution. If you believe the latest report from the Chosun Ilbo, the State Department is reeling from the vitriolic South Korean reaction to U.S. Human Rights Envoy Jay Lefkowitz over labor conditions in North Korea’s Kaesong Industrial Park:

Another U.S. government insider also said the controversial piece by Lefkowitz had not gone through normal advance review procedures. That implies that Lefkowitz’s harsh critique of South Korea’s little-monitored aid to the North and suggestion that North Korean workers at the complex are exploited would not have gone into the paper unchanged.

The damage being done, however, the department chose to use the same phrase as the envoy: “The world knows little about what actually goes on at Kaesong.

We obviously don’t know who that “insider” is, or what he really knows, but the report’s implication is almost certainly false. It’s certainly possible that State is backpedaling, but as I’ll soon explain, the chances of Lefkowitz’s statement not being vetted are next to nil.

I’ve already dealt with the South Koreans’ false response on food aid today and want to discuss Kaesong. The pro-business, nationalistic take of the Chosun Ilbo is that the U.S. is in a “bind” over Korean ire at Lefkowitz’s “slur.” How the U.S. is in a “bind” over this escapes me, and the Chosun Ilbo doesn’t explain. “Slur” means “a disparaging remark; an aspersion.” “Aspersion” means “An unfavorable or damaging remark; slander.” “Slander,” of course, requires that the remark be false, which it was not. Let’s review what Amb. Lefkowitz said about Kaesong:

America’s friends in Asia must be careful not to squander whatever influence they may have to bring about change in North Korea.

That’s too important a point to blow past — regardless of the actual conditions at Kaesong — because of conditions elsewhere in the North. Kaesong is a cash cow for Kim Jong Il, who has been doing a fine job of extracting cash from South Korea for the last decade, but who still hasn’t given a single meaningful concession on nukes, abductees, human rights, transparency for food aid delivery, or the 10,000-plus artillery tubes dug in at the DMZ at pointing South. South Korea, a nation with 1,000 of its southern citizens and 22 million of its northern ones in bondage has a duty to represent those citizens by extracting some mitigation of the conditions of their captivity in return.

Near Kaesong, a city just north of the Demilitarized Zone, 15 South Korean companies recently opened an industrial park using North Korean labor. So far, the consortium has pumped hundreds of millions of dollars into the North with more to come. A South Korean official enthusiastically described it as, “a cooperative project benefiting both the South and the North, and at the same time, a peace project overcoming the wall of the Cold War through economic cooperation.”

But the world knows little about what actually goes on at Kaesong, and given North Korea’s track record, there is ample cause for concern about worker exploitation. The South Korean companies apparently pay less than $2 a day per worker, and there is no guarantee that the workers see even this small amount.

That may actually be overstating the wages, as we’ll see. What Amb. Lefkowitz is really saying here is that we don’t know much, because the North Koreans themselves aren’t willing to let us know much. A U.S. delegation was allowed to visit recently, and I’ve spoken to a member of that delegation. Findings? Not many. They saw some nice, shiny factories, but they didn’t get much of a look under the hood. All we really know about labor conditions in Kaesong is what we’re likely to infer absent persuasive information to the contrary. Might some transparency be appropriate? Is it the fault of the United States that North Korea won’t let us interview a few of the workers in private? If they’re really as plump and content as oompa-loompas in a magical chocolate factory, what’s the harm in letting us interview a few of them in private? Why not make sure that at least some of the benefits from Kaesong go to those who need it desperately, instead of letting Kim Jong Il blow it all on MiGs, nukes, and luxury sedans?

The North Korean government deducts a “social fee” from their wages and empowers “labor brokers” to control the rest. Moreover, the site is fenced in, and the North Korean workers must come and go through a single entrance manned by armed soldiers. While the conditions at Kaesong may be marginally better than elsewhere in the North, substantial economic assistance to North Korea should be linked to human-rights progress for all North Koreans.

Those circumstances don’t exactly give much comfort, and I’ll simply redirect you to this post, which quotes extensively from several press reports that feed our worst suspicions by describing an atmosphere of pervasive, Orwellian control and isolation of the workers. Among the few specifics found? Te workers there keep just 40 cents a day, or $8 a month, and the unguarded admission by one of the South Korean bosses that Kaesong workers can’t form independent unions.

At a minimum, North Korea should allow an independent party, such as the International Labor Organization, to inspect and assess Kaesong and report its findings to the U.N.

And again, what’s really the harm in that? Except maybe this, of course (see Article 2). But isn’t multilateralism sacrosanct?

Having examined Lefkowitz’s remarks, are they really out of line? Well, here’s a record of him making very similar remarks at the Heritage Foundation back in early April, which is normally enough time to avert an international incident. Lefkowitz also said just about exactly the same at the NK Freedom Day rally, which means we’re now up to three times he’s said essentially the same thing publicly. Still not enough? Here’s a link to his prepared written statement, given on Capitol Hill last Thursday, which I also attended. If you read it, you’ll see that it’s also very similar to the WSJ piece. As anyone familiar with Washington bureaucracy knows, you don’t testify in Congress without your written testimony being vetted extensively. Meaning? Meaning I question the accuracy of the Chosun Ilbo’s report. Amb. Lefkowitz has now made very similar comments publicly four times over the course of nearly a month, including a written statement to a key committee of Congress. Not vetted? Please.

Finally, let’s see what U.S. law tells us about Kaesong in the context that’s the real deal-breaker: trade with the United States. The Tariff Act of 1930, specifically 19 U.S.C. sec. 1307, defines “forced labor” to mean —

all work or service which is exacted from any person under the menace of any penalty for its nonperformance and for which the worker does not offer himself voluntarily. For purposes of this section, the term ”forced labor or/and indentured labor” includes forced or indentured child labor.

Anyone want to try to lawyer Kaesong products out of that definition? If you can’t, then goods made “wholly or in part” at Kaesong may not be imported into the United States and are even barred from U.S. ports. Do not clear customs, do not collect $200.

Lefkowitz is dead-on — not just morally, but legally. Based on the best information we have, the workers at Kaesong didn’t choose their work voluntarily, can’t quit, can’t organize, and have no say about the pay or working conditions.

How is that not slave labor?

How is it “interfering in South Korea’s internal affairs” that the U.S. refuses to make a special exception to its slave labor laws for Kim Jong Il and his unscrupulous business partners in Seoul?

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WANTED

Two U.S. senior congressional researchers say Washington could bring criminal charges against North Korean leader Kim Jong-il over his country’s alleged counterfeiting of U.S. dollars. The two authors of a Congressional Research Service report say the U.S.’s increasing keenness to back up its allegations with legal evidence is fueling speculation that it is considering going after Kim.

Well, that would certainly mark a decisive policy shift — one that it would extraordinarily difficult for future presidents to reverse.  “Earthquake” might be more like it.  The effect on the U.S. relationship with both Koreas could be dramatic.  South Korea would be forced to choose.  North Korea would come under very stong pressure.  It would likely mean an abandonment of our fruitless efforts to talk Kim out of his bomb, shifting toward treating Kim himself as the problem.

Image from here.

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Will U.S. Finally Let in N.K. Refugees?

North Korean refugees rush a foreign embassy in China in search of asylum (AP photo)It’s long past time we did this

The U.S. government plans to break with long-established policy and start giving asylum to refugees from North Korea. Wording in the 2004 North Korean Human Rights Act that allows it to admit defectors from the Stalinist country has not yet been put into practice due to failure to confirm identities and objections from countries where the refugees were staying.

Prominent  activists for human rights in the North – Suzanne Scholte, Jae Ku, and Adrian Hong, to name three – were becoming increasingly vocal about their disillusionment with the State Department and Lefkowitz’s failure, thus far, to get the North Korean Human Rights Act implemented.  What we have seen recently is a new outreach effort by the State Department, which  is  the result of those concerns being relayed to Congress (via a knowledgeable source, Reps. Frank Wolf, James Leach, and Chris Smith  were particularly instrumental; Rep. Henry  Hyde may  also have  helped).

Jay Lefkowitz, the U.S. special envoy on North Korean Human rights, admitted to the activist group Freedom House in a closed-door meeting that the refugees are becoming a credibility problem for Washington. He also reportedly promised to become more active on the issue. In the meeting, which was attended 20 U.S. campaigners for North Korean human rights, Levkowitz [sic] said he would focus on rights, the issue of refugees and promoting greater openness in North Korea.

After this meeting, which I did not attend but from which I was sent some notes, I heard that  this move was coming, although I was asked not to blog it and was fairly skeptical in any event.  I still am.  Read this closely:

On Thursday, U.S. Secretary of State Condoleezza Rice also implied a policy shift by saying, “We are reviewing our policies on refugese,[sic] reviewing them with DHS (Department of Homeland Security), reviewing them with the FBI, to see if we can find a way to participate in the refugee activities as well. If it does admit them, it is likely to exacerbate tensions with North Korea in an already chilly climate because of Washington’s sanctions and the North’s nuclear ambitions.

For the record, the objections about North Korean infiltration are serious.  Put nothing past this regime.  But those problems are not insoluble, and must not be allowed to interfere with our higher obligations under federal statute and  international treaty.  A close reading, in fact, does not completely persuade me that this change has yet made its way to the embassy gates. 

For background, see this post by Richardson as well.  I must say how great it is to search the new, merged  archives and find so many on-topic, well-written posts by my co-bloggers.

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Cartoon Idiocy, Part II

After learning that South Korea was in danger of losing the title for “Hub of Petty Despotism,” President Roh Moo Hyun launched his own cartoon war of sorts this week. No embassies were harmed in this production; the only violence was that done to freedom of the press:

President Roh Moo-hyun yesterday filed a second libel suit against the mainstream Chosun Ilbo newspaper, saying a cartoon defamed him by circulating false facts. The cartoon, titled “The lie is detected fast,” was published on Aug. 9 last year and addressed illegal eavesdropping by the state intelligence agency.

In case you’re curious, this appears to be the cartoon we’re talking about:

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Banco Delta Sanctions ‘Severe Blow’ to NK Economy

The Chosun Ilbo,  relaying an AWSJ story, reports that the Treasury Department’s action against the Macau-based bank “dealt a severe blow to the secretive country,” “dried up its financial system,” and “brought foreign trade virtually to an end.”

In December, I noted reports  that North Korean front companies and spies were fleeing Macau en masse. According to today’s story, Banco Delta has now announced that it’s ending its financial ties with North Korea in an effort to prevent a run on its assets and a devastating rash of actions by other banks to cut their ties with Delta.

Because of the high percentage of bad loans and undercapitalization in the Chinese banking system, Beijing is clearly concerned about controlling the damage to its financial system.

The evidence of North Korean counterfeiting now appears to be beyond serious dispute.  The supernote issue emerged with an undercover bust and seizure in the U.S.  Shortly thereafter, the  Justice Department indicted an ex-IRA terrorist for circulating North Korean supernotes.  In January, this article (ht Richardson; pic, too!) reported that North Korean supernotes were found at Las Vegas casinos.  Last month, a Chinese government investigation confirmed North Korea’s counterfeiting and money-laundering activities.

Recently, a Korean newspaper reported a huge seizure of North Korean supernotes in Seoul’s famous Namdaemun market, and that South Korean police even sought U.S. assistance in confirming the notes’ North Korean origin.  The disclosure was an embarassment to South Korea and its president, which had expressed  doubts about the existence of evidence of recent North Korean counterfeiting, despite presumably knowing otherwise.

Although North Korea may be  hinting that it’s willing to discuss the counterfeiting issue, the U.S. Ambassador says his government will not be satisfied until the North Koreans hand over the plates and ink.

Update:   The BBC also covers the story, with this dramatic fact (as dramatic as banking gets, anyway):

The scandal weakened Banco Delta’s financial position, with customers withdrawing 10% of its total deposits after the allegations surfaced.

Wow.  No wonder Macanese authorities had to step in to save the bank from insolvency.

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