The U.S. may (finally) be serious about capping North Korea’s coal exports

For almost three months after North Korea’s fifth nuclear test, the U.N. Security Council remained deadlocked over how to respond, with the U.S. and its allies pressing to limit Kim Jong-un’s access to hard currency and China trying to shield its belligerent protectorate from the consequences of its behavior.

Among the most hotly debated questions was how to limit North Korea’s coal exports to China, one of His Porcine Majesty’s most important sources of hard currency. Although UNSCR 2270, passed in March after the fourth nuke test, banned most of Pyongyang’s mineral exports, there was a gaping loophole allowing exports of coal, iron, and iron ore for “livelihood” purposes. Unfortunately, it soon became clear that “livelihood” translated into Chinese means “whatever.” The exception soon swallowed the rule, and coal exports did not fall; they rose … by a lot. By September, China’s coal imports from North Korea had risen 12.8 percent over the same period last year, to a record high. The Obama administration clearly felt that China was cheating. (See also my posts from March, July, and October and Stef Haggard’s post from yesterday.)

The eventual compromise the U.S. and China reached in UNSCR 2321 was disappointing, to say the least. Rather than take any plausible steps to ensure that Pyongyang really used its coal money to provide for the livelihoods of its hungry people, the resolution simply capped coal exports at $400 million or 7.5 million metric tons a year, whichever is less. (In 2015, North Korea exported $1 billion worth of coal to China) On paper, Chinese power companies were also prohibited from buying any amount of coal from entities associated with North Korea’s WMD programs.

The flaws in this “solution” are obvious. How will we know how much coal North Korea exported, and at what price? By relying on Chinese customs statistics? How will we know which North Korean entities really sold the coal? And more fundamentally, given that cash is fungible and North Korean despots have consistently prioritized their arsenals and their own high lifestyles over the survival of their people, how can anyone verify how the world’s most financially opaque society spent the money? If China really gave a whit about the “livelihoods” of North Koreans — in fact, it holds the lives of North Korean men, women, and children in utter contempt — it would have agreed to pay for “livelihood” coal in the form of food, or to the World Food Program. An unverifiable cap is a license to cheat.

~   ~   ~

But Treasury’s announcement last week of bilateral sanctions against certain North Korean coal exporters, who Treasury believes “may benefit the Government of North Korea or the Workers’ Part (sic) of Korea,” could go far to swallow the “livelihood” cap exception to the coal ban that swallows the rule.

OFAC designated Daewon Industries and the Kangbong Trading Corporation for having sold, supplied, transferred, or purchased, directly or indirectly, to or from North Korea, metal, graphite, coal, or software, where revenue or goods received may benefit the Government of North Korea or the Workers’ Part of Korea.  The Kangbong Trading Corporation’s parent is the Ministry of People’s Armed Forces.  Daewon Industries also operates in the energy industry in the North Korean economy, and may be subordinate to the Munitions Industry Department, which is sanctioned in UNSCR 2270, designated by the U.S. pursuant to E.O. 13382, and responsible for overseeing the development of North Korea’s ballistic missiles, including the Taepo Dong-2. [U.S. Treasury Dep’t Press Release]

With that action, Treasury’s clear message to Chinese buyers is that certain North Korean sources are off limits, cap or no cap. The recent example of the Dandong Hongxiang indictment and forfeiture complaint hovers over all of this, posing a credible threat that Chinese buyers could have their dollar assets frozen. And in case anyone thinks Dandong Hongxiang was a one-off, our diplomats have said it isn’t.

The United States has warned China it will blacklist Chinese companies and banks that do illicit business with North Korea if Beijing fails to enforce U.N. sanctions against Pyongyang, according to senior State Department officials. The tougher U.S. approach reflects growing impatience with China and a view that it has not strictly enforced existing sanctions to help curb Pyongyang’s nuclear program, which a U.S. policy of both sanctions and diplomacy has failed to dent.

U.S. Deputy Secretary of State Antony Blinken gave the message to Chinese officials in meetings in Beijing in October after North Korea conducted its fifth and largest nuclear test, the officials said. U.S. National Security Adviser Susan Rice and Secretary of State John Kerry stressed the importance of choking off financial flows to Pyongyang during a meeting with Chinese State Councilor Yang Jiechi in New York on Nov. 1. [Reuters]

There are some early signs that Chinese industry may have gotten that message, although it’s typical for Chinese companies to slow their trade with North Korea temporarily after the U.N. passes new sanctions. As I’ve pointed out here more than once, there is undeniable evidence that China has violated North Korea sanctions frequently and flagrantly for years. China will not wait long to resume its cheating and test our resolve. With demand for North Korean coking coal high, we’ll need a strong deterrent to enforce sanctions. If our President-Elect has done anything right, he has sent a clear (and apparently calculated) message that China’s sensitivities will not prevent him from acting decisively to protect U.S. interests. After all, it’s not as if our sensitivities have had much visible effect on China’s behavior.

This wasn’t the only energy sanction Treasury imposed last Friday:

OFAC designated the Korea Oil Exploration Corporation for operating in the energy industry in the North Korean economy.  The Korea Oil Exploration Corporation is a state-controlled enterprise of the North Korea Ministry of Oil.  The Korea Oil Exploration Corporation has reportedly worked to establish contracts with Iranian oil entities, in part to supply crude oil to two refineries in North Korea. [U.S. Treasury Dep’t Press Release]

Among others, that’s probably bad news for James Passin, a hedge fund manager who gambled his shareholders’ money on a refinery and oil exploration in North Korea. U.N. sanctions ban exports of aviation and rocket fuel to North Korea, but not crude. Until recently, China continued to export petroleum products to North Korea. (For the record, I oppose banning exports of gasoline, diesel, and heating oil to North Korea, for humanitarian reasons.)

~   ~   ~

The Obama administration’s designation of the North Korean companies consolidates a U.S. shift to a harder line on sanctions enforcement, reflecting a bipartisan consensus for tougher action in Congress. It’s also satisfying to me personally, because the administration has adopted the strategy I advocated here in October.  Note that the language in the Treasury Department’s press release (“revenue [that] may benefit the Government of North Korea or the Workers’ Part of Korea”) does not match the language of UNSCR 2321 (“entities that are associated with the DPRK’s nuclear or ballistic missile programmes or other activities prohibited by [applicable U.N.] resolutions”), because the administration relied on the domestic legal authority of Executive Order 13722 instead:

Sec. 2. (a) All property and interests in property that are in the United States, that hereafter come within the United States, or that are or hereafter come within the possession or control of any United States person of the following persons are blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in: any person determined by the Secretary of the Treasury, in consultation with the Secretary of State:

   (i) to operate in any industry in the North Korean economy as may be determined by the Secretary of the Treasury, in consultation with the Secretary of State, to be subject to this subsection, such as transportation, mining, energy, or financial services;

   (ii) to have sold, supplied, transferred, or purchased, directly or indirectly, to or from North Korea or any person acting for or on behalf of the Government of North Korea or the Workers’ Party of Korea, metal, graphite, coal, or software, where any revenue or goods received may benefit the Government of North Korea or the Workers’ Party of Korea, including North Korea’s nuclear or ballistic missile programs;  [EO 13722]

Those provisions, in turn, implement sections 104(a)(8) and 104(b)(1) of the North Korea Sanctions and Policy Enhancement Act. They may have also reflected Treasury’s interpretation of the coal export ban as passed in March, in UNSCR 2270. U.N. resolutions don’t enforce themselves. They require U.N. member states to implement their sanctions through legislation. Member states that want U.N. sanctions to work benefit from a U.N. imprimatur to globalize sanctions enforcement. Each level of authority needs and complements the other.

Tactically, it was wise of the administration to wait for the (undoubtedly difficult) negotiations with China to conclude before it acted. The clear message it sent at the conclusion of that negotiation is that, for the time it has left, it will hold China to its word. Let’s hope the next administration is equally serious.

Continue Reading

Why Seoul’s blacklisting of Air Koryo & Dandong Hongxiang matters

South Korea is the first of the Free Three (the U.S., South Korea, and Japan) to announce independent multilateral sanctions on North Korea following the approval of UNSCR 2321. Some of the measures, such as the blacklisting of Choe Ryong-hae and Hwang Pyong-so, will probably mean almost nothing until some future left-wing president tries to give one of them a ticker-tape parade along the Chongro.

An extension of South Korea’s ban on ships that have entered North Korean ports within the last 180 days will do more, by forcing shipping companies to choose between the modest trade with North Korea and the much more significant trade with Japan and South Korea. With North Korea’s own ships already under rising pressure even pre-2321, and now facing a loss of access to insurance, North Korea may soon find itself increasingly isolated from its export markets.

South Korea’s blacklisting of Air Koryo, while not directly significant by itself (Air Koryo doesn’t fly to South Korea) may foreshadow a corresponding action by the U.S. Treasury Department, which would freeze North Korea’s national airline out of the dollar system and seriously crimp its operations. (Update: That turns out to have been a pretty good guess. OFAC just released a new round of designations that includes North Korean banks, slave labor merchants, the Korea National Insurance Corporation, and Air Koryo. I’ll have more to say after work.) It could also clear the way for South Korean diplomats to lobby middle powers like Malaysia, Thailand, Kuwait, and Singapore to deny Air Koryo landing rights. That would be a severe blow to Pyongyang. South Korea’s diplomatic campaign against North Korea’s foreign clients has been highly effective this year.

The most important and courageous move, however, was this one:

In particular, Dandong Hongxiang Industrial Development and four of its executives were included on the list, marking the first time that a Chinese firm is facing South Korea’s unilateral sanctions.

The company is under investigation on suspicions that it exported aluminum oxide — a nuclear bomb ingredient — to the North at least twice in recent years. In September, the U.S. blacklisted it along with its owner and other company officials.

With the latest action by Seoul, a total of 79 individuals and 69 entities will be subject to sanctions in connection with the North’s nuclear programs. The government announced a blacklist in March as a follow-up move to the UNSC’s Resolution 2270 adopted in the wake of the North’s fourth nuclear test in January.

Any financial transactions with them will be prohibited, while their assets in South Korea will be frozen. The blacklisted people will also be banned from entering the country, which is seen as a symbolic action given that there are no exchanges between the two Koreas. [Yonhap]

This could be the first sign that the three allies, acting outside the U.N. and beyond the reach of a Chinese or Russian veto, are forming a coalition to combine their economic power behind secondary sanctions against Pyongyang. If Japan joins in this, it will mean that the Chinese trading companies that prop up His Corpulency’s misrule will now face not only the freezing of their dollar assets, but the loss of their trade relationships with the two most important non-Chinese markets in northeast Asia. If those Chinese trading companies think they can mitigate the risk of secondary sanctions by insulating themselves from the dollar, Seoul has just added an additional layer of risk for those that continue to trade with Pyongyang. If the Free Three have coordinated their sanctions well, Tokyo will soon add its heft to that risk. Trading companies’ shareholders, officers, and bankers may find that risk increasingly unacceptable.

Beijing knows that while Dandong Hongxiang is itself a dead letter, this sort of Progressive Diplomacy represents a dangerous precedent for its interests. I expect it to react furiously. Even a year ago, I could not have imagined Park Geun-hye antagonizing South Korea’s greatest trading partner this way. Today, with all the noise about impeachment and the North Korean crisis, the Chinese reaction could be crowded out of the headlines. But with Park having conceded that she cannot hold onto power for long, she has nothing to lose.

Not only does Park have no reason not to burn bridges, she may have her own reasons to punish China. If she’s at least as paranoid as I am, she may suspect China, or its North Korean dependent, of directly or indirectly supporting the media frenzy that led to her downfall. It seems plausible in the age of Wikileaks that foreign governments give clandestine support to media hostile to leaders who oppose their interests. She may even suspect them of having planted the tablet that first broke the scandal. Personally, I see no direct evidence of it, nor do I think it’s more than 20 percent likely, but I’ve yet to see anyone explain (or even inquire into) the remarkable coincidence by which a discarded device just falls into the lap of a hostile press and topples a head of state. It seems easier to pull off than, say, throwing Wisconsin to Trump.

Either way, Park Geun-hye isn’t going quietly, and she’s gambling that the actions she takes on her way out the door will have the support of a future President Trump. No matter how much the Hankyoreh rages, that will make those actions even harder for her successor to undo than for her to do. What we may be seeing here is the first brick in a multinational sanctions coalition in which the members concentrate their collective power against Pyongyang’s enablers. For now, the Free Three are the core of that coalition, but with skillful diplomacy and time, that coalition may soon include other middle powers, other issuers of convertible currencies, and key members of an increasingly fractious European Union.

Continue Reading

Clinton’s North Korea epiphany: We have always been at (cold) war with China

So desperate are we to avoid a Cold War (or worse) in the Pacific that throughout the Obama years, we’ve pretended that China hasn’t been waging one unilaterally the whole time. Meanwhile, China has seized the South China Sea, bullied our allies with spurious territorial claims, whipped up anti-American rhetoric to persecute human rights activists, and effectively quit enforcing sanctions against North Korea despite signing on for a nominally tough new resolution in March.

Evidence, you ask? Start with this new Australian report showing that China isn’t enforcing the U.N.’s new cargo inspection requirements at all. China still hasn’t stopped buying minerals like gold and titanium, which is isn’t supposed to buy in any quantity. Coal and iron imports, which are supposed to be limited to “livelihood” purposes, fell sharply in the first quarter of this year, only to rise again in the second. Chinese online vendors have even been selling North Korean coal. China continues to sell kerosene (read: jet fuel) in violation of a U.N. ban. Sanctioned North Korean ships have been seen leaving port. One, the Victory 2, has made regular calls in Chinese ports. Others have been seen hovering just off the Chinese coast. A China-based company, Blue Ship Management, continues to operate two sanctioned North Korean ships. More than 800 agents of North Korea’s Reconnaissance General Bureau, which was designated in UNSCR 2270, continue to operate on Chinese soil, mostly hunting for defectors and policing overseas workers. Et cetera, et cetera, et cetera, and so forth.

These are the wages of our weakness toward North Korea and China. The new realization that North Korea could be just two years away from having a second-strike capability to hit our West Coast with nuclear weapons has raised the danger of nuclear war to their highest level since 1962, as I predicted it would a year ago. Unfortunately, the President has been poorly served by his National Security Staff and State Department, which have counseled him to hold back on holding China accountable for enabling the steady rise of this threat. China’s friends in Washington, and others who should know better but don’t, are fond of saying there’s nothing we can do about this. But we know what scares and moves China — secondary sanctions. Congress gave the President the authority (and a mandate) to impose them because China’s violations of sanctions against North Korea are nothing new. They have been so longstanding and so flagrant as to eliminate any other possibility but a deliberate, willful policy.

Even before the last nuclear test, there was a growing sense that President Obama had failed to hold North Korea’s Chinese enablers to account for those violations, despite having so recently signed a new legal mandate to do so. Even before that test, President Obama had said he would seek to toughen sanctions in response to North Korean missile test, and revealed his irritation with China after its rude treatment of him, and after getting an earful of its unreasonable objections to THAAD:

“China continues to object to the THAAD deployment in the Republic of Korea, one of our treaty allies. And what I’ve said to President Xi directly is that we cannot have a situation where we’re unable to defend either ourselves or our treaty allies against increasingly provocative behavior and escalating capabilities by the North Koreans,” Obama said at a news conference in Laos after the East Asia Summit.

“And I indicated to him that if the THAAD bothered him, particularly since it has no purpose other than defensive and does not change the strategic balance between the United States and China, that they need to work with us more effectively to change Pyongyang’s behavior,” he said, according to a White House transcript. [Yonhap]

And even before that test, the Chairman of the Foreign Relations Committee had called on the President to enforce the North Korea sanctions law he has signed just seven months ago, including by imposing secondary sanctions on Chinese entities. Similar reactions came from Paul Ryan and Ed Royce, the Chairman of the House Foreign Affairs Committee (HFAC).

China has to understand that we will sanction those banks again, those Chinese banks that are transferring the hard currency…We need to use these powers that now the administration has under the bill that I authored – that’s been signed into law by the President – to tell China, ‘No, there will be secondary sanctions on any economic activity you are engaged in with North Korea.’ Because our goal right now is to shut [North Korea’s] economy down so they cannot continue to expand this nuclear weapons program.” [CNN]

HFAC’s Asia Subcommittee has already scheduled a hearing for Wednesday afternoon. Even before the hearing was announced, I predicted that it would be contentious — this is an election-year embarrassment the administration and Hillary Clinton don’t need. Now, freshly humiliated by North Korea’s latest nuclear test, the administration is suggesting that it’s finally ready to seek new U.N. sanctions, possibly to close existing loopholes (probably the “livelihood” exception to the coal and iron ore import ban) and ban fuel exports to North Korea. The Washington Post reports that the U.S. and South Korea may also push to ban North Korean labor exports, which will hurt North Korea’s ability to launder money by giving it less “legitimate” income for co-mingling and hiding illicit income. More importantly, the administration is saying that it’s finally ready to follow the law and enforce the sanctions that already exist.

“We will be working very closely in the Security Council and beyond to come up with the strongest possible measure against North Korea’s latest actions,” said U.S. envoy Sung Kim on Sunday.

“In addition to action in the Security Council, both the U.S. and Japan, together with the Republic of Korea, will be looking at unilateral measures, as well as bilateral measures, as well as possible trilateral cooperation,” he said, referring to South Korea by its official name. [Reuters]

So much for the idea that this time is different — that China had finally lost patience with North Korea. In an epiphany that I thought would never come to Washington, Hillary Clinton (of all people) has articulated why — China has been using North Korea as a “useful card” to divide U.S. forces in Asia and the Pacific (left unsaid: while China seizes the South China Sea and surrounds Taiwan).

“Up until relatively recently, I think (China was) under the impression that they could control their neighbor and they didn’t want to crack down because they saw it as a useful card to play,” Clinton said.

“If (North Korean leader Kim Jong-un) gets a little crazy, maybe the South Koreans will move toward (China) a little bit; he gets a little crazier, maybe they can make some deals with the Japanese about things they want. It was a strategic calculation,” she said. [Yonhap]

Separately, Clinton called the North Korean nuclear and missile programs “a direct threat to the United States” that we “cannot and will never accept,” which is welcome news at a time when some people are seriously suggesting that we can and must.

Clinton, a former secretary of state, also said that she supports President Barack Obama’s calls for strengthening the existing sanctions and impose additional measures.

“At the same time, we must strengthen defense cooperation with our allies in the region; South Korea and Japan are critical to our missile defense system, which will protect us against a North Korean missile,” she said.

“China plays a critical role, too, and must meaningfully increase pressure on North Korea — and we must make sure they do,” she said.  [Yonhap]

Clinton is right, of course, as is her rival in this election.

“North Korea’s fifth nuclear test, the fourth since Hillary Clinton became Secretary of State, is yet one more example of Hillary Clinton’s catastrophic failures as secretary of state,” Trump communications aide Jason Miller said in a statement.

“Clinton promised to work to end North Korea’s nuclear program as secretary of state, yet the program has only grown in strength and sophistication,” he said. [Yonhap]

Park Geun-hye has called on China to enforce sanctions as it had agreed, a brave thing considering that China has increasingly tried to bully South Korea with its considerable economic leverage. No doubt, Park knows what’s at stake. There is already speculation about a sixth nuclear test. If the U.S. and South Korea uncover and freeze the money that keeps Kim Jong-un in power, victory and reunification could be within sight. A slow defeat of extortion and enslavement is in sight, too. If these are our choices, better a banking crisis in China than a war in Korea.

Continue Reading

China’s next maritime conflict could be with North Korea

This week, the eyes of the world are on arbitrators’ rejection of China’s made-up claims to the South China Sea. Further north, however, Pyongyang’s lease of fishing rights to Beijing threatens to instigate violent brawls between North Korean and Chinese fishermen.

Earlier this year, China stopped accepting imports of North Korean seafood. The reasons for this still aren’t clear, but one possibility arises from a report that much of North Korea’s fishing fleet is controlled by the Reconnaissance General Bureau, which is designated under U.N. Security Council Resolution 2270. That designation requires China to prohibit all transactions with any person or entity “owned or controlled” by the RGB. (China continues to allow RGB agents to operate on its territory, catching defectors and keeping overseas workers in line, so its enforcement of this provision isn’t wholly rigorous.)

For a while, this meant that North Koreans found previously scarce seafood dumped in the markets at a steep discount. Later, however, Pyongyang began keeping its smaller fishing boats in port. This was a jarring change from the recent stories of North Korean “ghost ships” washing up on the Japanese coast with dead bodies aboard.

As with so much of what goes on in North Korea, we can only speculate about why this happened. It’s possible that the fishermen had attempted to defect, but because there were no women or children among the dead, it seems more likely that the regime had set unreasonable quotas for the fishermen, who then sailed beyond the range of their fuel supply (historically limited as an anti-defection precaution) in a vain attempt to meet those quotas.

Radio Free Asia reported that the subsequent decision to keep the boats in port was another precaution against defections. Maybe, but maybe Pyongyang simply saw no reason to send the boats out if it couldn’t earn hard currency by doing so. Feeding hungry North Koreans is an insufficient motive, apparently.

Clearly, the last few years have been desperately difficult ones for North Korean fishermen. In their latest turn of misfortune, their government leased the rights to fish off North Korea’s coasts to Chinese fishermen. The big winners appear to be the Chinese. The larger ships of Pyongyang’s state-controlled fleet still operate, while small North Korean fishing boats have lost the most.

On the heels of a new bilateral fishing rights deal, state-run companies in the North are bringing in scores of cutting-edge fishing vessels from China, undermining the livelihoods of ordinary fisherman in the North.

“A fleet of new fishing vessels have emerged in the East Sea waters off of Sinpo, South Hamgyong Province,” a source from the province told Daily NK on July 6. These Chinese ships, outfitted with small refrigerating facilities, state-of-the-art fish-finding equipment, and high-performance GPS and radar systems, are under three-year contracts, which stipulate the entirely of any catch be handed directly over to China in exchange for cash– save the costs of the ship lease.

Such an agreement seemingly bears out claims by South Korea’s National Intelligence Service via a parliamentary committee on June 30 that North Korea sold its fishing rights to China this year to the tune of 30 million USD. [Daily NK]

See also The Joongang Ilbo. In other words, Pyongyang found another way to get Beijing’s money, and Beijing found another way to get Pyongyang’s fish, that Beijing thinks it can defend from U.N. scrutiny. But this has put North Korea’s fishermen in desperate straits. Most of their catch as been sold to China, denying them their livelihoods, yet they’re still expected to meet their steep “loyalty” payment quotas to the state.

The pact has spurred frenetic fishing expeditions by North Korean state companies to amass the highest possible amount of funds. China, on the other hand, “is simply sitting back and collecting on this deal,” the source said.

Therefore, the livelihoods of people living in adjacent fishing villages are on the line, which is of “entirely no concern to the [North Korean] leadership,” the source asserted, adding that while many see the season’s squid catch as their “year’s harvest,” but with their backs against the wall to pay loyalty funds, “state companies couldn’t care less about their troubles.”

These hulking vessels are north of 100 tons, highly mobile, and their operators unsatisfied to confine their expeditions to the deep sea, instead pillaging the shallow, coastal waters as well. Bottom trawling, an environmentally destructive fishing method that drags vast nets across the seabed, is also common.

The fishermen may not dare to challenge the North Korean security forces, but they’re ready to brawl with the Chinese fishermen.

Coupled with the fact that China supplies them with diesel and other fishing instruments, these smaller boats “don’t stand a chance,” the source noted, and “with little in the way of recourse, many [fisherman] are staging armed dissent.”

“Denouncing the vessels as ‘pirate ships,’ people hurl stones at them as soon as they spot them. The anger is so intense, in fact, that many of the [North Korean] fishermen stand guard at the ports armed with clubs to prevent them from docking,” he concluded.

In 2014, Pyongyang also leased China the rights to fish in its waters (including waters that both North and South Korea claimed). That same year, however, the North Korean coast guard seized a Chinese fishing boat, roughed up the members of its crew, and confined it on starvation rations until the captain signed a confession. With North Korea, the fact that you have a deal never quite guarantees peace.

Illegal Chinese fishing has also caused clashes with South Korea, some of them fatal. This has recently become a major diplomatic issue between the two countries.

But aren’t the North Koreans too docile and submissive to engage in violent protests against invited guests of the regime? Not really. North Koreans argue with their own country’s police over economic issues (as opposed to explicitly political ones) more than we tend to assume. Brian Myers has described the North Korean tendency toward childlike, spontaneous rage and offers evidence that the state encourages it (within limits, obviously). In this case, the anger of the fishermen derives from a combination of material desperation and xenophobia — both sentiments we can reasonably believe to be stronger in North Korea than in South Korea.

There are several ways this could end badly for Pyongyang — with violent clashes between North Korean and Chinese fishermen, with violent clashes between North Korean fishermen and North Korean police, or in the long term, by giving China a basis to make expansionist claims to a right to fish in Korean waters.

Continue Reading

The evidence of China’s compliance with North Korea sanctions is still mixed.

This week, there has been much talk and excitement about a new study, by the new blog Beyond Parallel, analyzing satellite imagery of six select sites along the Chinese-North Korean border, and finding evidence of a recent decline in bilateral trade. From this, the study concludes that China may be (as Josh Rogin paraphrases it for The Washington Post) “Beijing has been quietly punishing Kim by cutting off the flow of funds to his regime.” Here are the study’s two main findings:

First, the satellite images indicate a substantive reduction of economic activity on the Sino-North Korean border measured by the fewer trucks, trains, and boats in the February 2016 image compared to a similar timeframe in 2015. [….] In the aftermath of North Korea’s January 2016 nuclear test, this observed downturn in activity was comprehensive across customs areas, railway, and road traffic.

Second, the images also suggest that independent Chinese actions were taken to reduce trade in this region after the nuclear test and prior to China’s signing on to UN Security Council Resolution 2270. These findings run contrary to some estimates that Sino-North Korean trade (particularly Chinese exports) increased in the first quarter of 2016, and might confirm large anomalies in trade data as reported by China’s customs statistics, KOTRA (Korea Trade-Investment Promotion Agency), and other organizations.

The study is interesting and data-driven, and every North Korea-watcher should celebrate the launch of any new information source that promises this kind and quality of analysis. What’s more, by analyzing the volume of traffic at multiple sites over several months, the study is less vulnerable to the regime’s manipulations than the satellite theater that is almost the only good reason to read 38north (the contributions of J.R. Mailey and Andrea Berger being two other notable exceptions).

It’s especially tempting to feel triumphal about Victor Cha’s conclusions that China has taken “unilateral measures to drastically curtail trade interaction along their border,” and that China is “squeezing [North Korea] more than we were led to expect.” Still, the evidence and my objectivity restrain me to say, “Not so fast.”

First, there is also substantial evidence that China is still violating key provisions of the sanctions to prop North Korea up. North Korea’s most important export by reported volume is coal, followed by other minerals, and as NK News’s invaluable Leo Byrne has noted, the trade in sanctioned minerals continues. To some extent, North Korea has shifted its coal exports to other avenues, including Alibaba.com. At the land border, trucks loaded with titanium are still crossing into China. Worse, North Korean ships that have been specifically designated by the U.N. are still operating, and in some cases, are coming very close to Chinese ports they aren’t even supposed to approach. Then, their transponders go dark. This suggests that those ships are either landing in Chinese ports or off-loading their cargo onto smaller vessels without landing. Both alternatives violate UNSCR 2270.

Second, the kinds of commerce that benefit the regime most (as opposed to market trade that benefits the North Korean people) aren’t easy to measure with satellites. North Korea’s other lucrative exports include gold, weapons and weapons and technology, and labor. Its most essential imports include bulk cash, wire transfers, gold (again), and luxury goods that come in on Air Koryo. It probably also earns significant revenue through tourism. These are not things that can be measured by counting railcars.

Third, the study focuses on overland trade but tells us little about maritime trade. If the authors of the study want to improve the utility of this project — and I emphasize that it’s potentially a very valuable one — it should also examine maritime traffic to and from the key North Korean ports of Nampo and Sinuiju. Maritime trade is more likely to be under the control of, and to the immediate benefit of, the regime. It should specifically look for trade in bulk cargo like coal, imports and exports of fuel, and the movement of designated ships (it’s possible to match IMO numbers from transponders with satellite images).

Fourth, there may be other explanations for Beyond Parallel’s observations. I’ve long felt that Korea-watchers were far too trusting of officially reported statistics on China’s trade with North Korea, and the case of China’s fuel exports to North Korea illustrates just how easily China can manipulate those statistics. But to the extent we believe those stats, they do show a significant decline in North Korea’s exports over the last six months. The problem with attributing this to sanctions is that this decline extends a trend that we began to observe earlier, particularly in the mining industry. In fact, at Benjamin Katzleff Silberstein has pointed out on several occasions, this decline in trade volume has a closer correlation to the decline China’s economy than it has to sanctions. An interesting question is whether China’s own internal market controls, including its restrictions to prevent capital flight, may be playing a role, but that question is beyond the depth of my knowledge of economics (anyone? Bueller?).

Other potential causes of a decline in bilateral trade include regime-driven trade and travel restrictions leading up to the party congress in May, and problems with North Korea’s infrastructure, such as the partial collapse and subsequent repair of the Sino-Korean Friendship Bridge last October. (The effects of this may or may not have ended before Beyond Parallel’s study began.) That would also help explain why the study found that trade began to decline before U.N. sanctions were increased in March.

Finally, we should not hope for China to enforce sanctions in unilateral ways that depart from the strict letter of the U.N. Security Council resolutions, whether by under-enforcing or over-enforcing sanctions. The main reason sanctions haven’t worked thus far has been — and continues to be — China’s under-enforcement of sanctions. That is why Congress decided that secondary sanctions were necessary to force China to comply, by dividing the interests of China’s fundamentally hostile government from those of its more pliable banks and industries, which need access to American markets. But what we don’t always realize is that sanctions over-enforcement is an equal danger. This veers off onto a long tangent, so I’ll save it for tomorrow’s post.

Continue Reading

Daily NK: China not taking North Korean coal shipments

Last week, I posted about the conflicting reports about China’s compliance with the new sanctions on North Korea. Just after I posted that, I noticed that the Daily NK had also added a report of its own, suggesting that amid a regime mobilization to expand coal production, coal exports were being refused by Chinese ports.

“Recently, we’ve seen a full ban on our [North Korean] ships at the Port of Yingkou in Liaoning Province, where coal trade had been most active with China,” a source from Pyongyang told Daily NK in a telephone conversation on Tuesday. “We’ve also received notice that the Port of Rizhao in Shandong Province will also gradually restrict entry.”

An additional source in the capital corroborated this news.

“The news suddenly arrived as a unilateral announcement from China two days ago, leading to chaos at the commerce ministry,” the source explained. “Cadres have been unable to decide whether to turn around all of the other ships at sea, on top of the coal and iron ore vessels that are still awaiting orders after being refused port entry at Yingkou.” [Daily NK]

Contrary to the predictions of sanctions skeptics, the bad economic news is not causing people to rally to the regime.

This setback was reported to the Central Party, but trade officials have instead chosen to admonish others for not taking action in advance to mitigate the problem rather than consider potential solutions. There has also been indirect criticism of the nuclear test and long-range rocket launch, with questions as to why they need to “clean up a mess made by others,” he reported.

Some cadres are reportedly expressing their concerns over the financial implications of these events, exclaiming, “If we can’t export coal any more, we’re done for.” The question of who will be held responsible for the export blockage also has people on edge, with some reminded of Jang Song Thaek shouldering the blame for the country’s failed currency reform and the stalling of construction for the 100,000 homes project in Pyongyang.

The source added that coal workers are also troubled by the export block after having been excited about the prospect of receiving increased rations as a reward for the “70-day battle” production surge. “Cutting off ration supplies [received from China with remuneration for coal] will negatively affect workers and result in diminished output, and by extension impact power plants, the industrial sector, and other aspects of people’s lives. This may in turn ignite a good deal of anger within the public,” he speculated. [Daily NK]

The export ban will affect the operation of the mines in due course. Last year, mine workers weathered another slowdown in Chinese imports because most of the miners’ wives trade in the markets.There will also be many, varied, and complex effects on North Korea’s industrial capacity, some of them completely desirable, and others that may cause the U.S. and China to agree that a use of the “livelihood” loophole in UNSCR 2270 is appropriate.

There will be impacts on the power supply, which has long been spotty, even in Pyongyang where it is disproportionately allocated. No doubt, this will be a good year for the solar panel trade. One positive impact of the last decades of unreliable government services is that North Korea’s poor have learned to be resilient, resourceful, and independent of the state. That’s why, despite last year’s drought and dire predictions of a new famine, North Koreans managed to avert the worst, probably through private agriculture.

It won’t be possible to completely shield the North Korean people from the impact of sanctions, but it is our obligation to mitigate it as much as we can, while telling the North Korean people the real reason why they suffer. Sadly, some short-term hardship may be North Koreans’ only way to escape a future filled with starvation, oppression, and war. The only escape from that future is to break either the regime, or its will to resist change, peace, and openness.

Continue Reading

HSBC freezes “at least” $87M in assets of North Korea-linked Chinese tycoon

You all remember Sam Pa, right? He’s the Chinese ex-spy with a history of dubious business dealings in Africa, for which he was eventually sanctioned by the Treasury Department. Pa’s 88 Queensway group also had dealings with Korea Daesong General Trading Corporation, a financial arm of North Korea’s Bureau 39, for which he was not designated. Today, this happened:

HSBC has frozen more than $87m in accounts linked to a Chinese tycoon behind several multibillion-dollar deals in Africa, while it investigates allegations of “serious financial crimes”.

Accounts controlled by Sam Pa and his business associate Veronica Fung were blocked by the bank a year ago, but its internal investigation is still going, court documents have revealed. Last week, a Hong Kong judge declined Mr Pa and Ms Fung’s request that he order HSBC to release the funds, which are “extremely substantial”, according to the ruling. One account alone contains $87m, the documents show.

Mr Pa has built a network of interests in oil, minerals and infrastructure by cultivating regimes regarded as among the world’s most repressive and corrupt, from Angola to North Korea — often blazing a trail for Chinese state-owned groups. [Financial Times]
The story included no suggestion that the action was related to Pa’s links to North Korea. Oh, and you all remember who’s in charge of compliance at HSBC, right? Good for HSBC.

Continue Reading

N. Korea sanctions are failing because of China. That’s why we need secondary sanctions.

Last November, I put up a post cataloging China’s long and deep history of breaking U.N. sanctions against North Korea. The post, which relied heavily on reports of the U.N. Panel of Experts monitoring North Korea sanctions, attracted a great deal of attention, including from Senate staff as they considered the North Korea Sanctions and Policy Enhancement Act. The new POE report, released yesterday, is almost 300 pages long (including exhibits) and has more than enough material to make a rich sequel to that post. It has almost as much evidence of China’s willful blindness or outright duplicity as the rest of the reports combined.

Yesterday, I singled out one of the most brazen examples, in which the Bank of China told a North Korea-linked customer to hide those links when it processed $40 million in wire transfers through the U.S. financial system (the Chinese government delayed the release of the report because of its objection to that finding).

And there is so much more. For example, multiple U.N.-designated North Korean arms smugglers and proliferators are still operating openly in China. Leader Trading Company and Korea Taesong Trading operate out of Dalian and possibly Dandong (paras. 169-170), while Korea Tangun Trading Corporation still operates out of Shenzhen, under the alias Ryungseng Trading Corporation (para. 174).

They’re keeping busy, too. A cargo of missile-related parts seized on its way to Syria passed through Dalian, despite being linked to Leader Trading Company and Korea Mining Development Trading Corporation, or KOMID (also designated). The North Koreans “used two companies, Dalian Union International Trading Co., Ltd. and Dandong Yongxinghe Trade Co., Ltd. … to procure the items” from China, Hong Kong, Taiwan, and other locations.

Screen Shot 2016-03-09 at 9.37.08 PM Screen Shot 2016-03-09 at 9.36.48 PM

Few of the suppliers asked who the end users were, but in the one case when one did, the Chinese middlemen didn’t answer (paras. 62-70). In the annexes, you can see multiple documents associated with Leader Trading and KOMID’s shipments to Syria, listing addresses in China.

Screen Shot 2016-03-08 at 9.33.53 PM

In 2013, an unnamed member state intercepted a shipment of SCUD missile parts on their way from Beijing to a trading company in Egypt. (Sharp-eyed readers may wonder if this is the same Egyptian trading company the Treasury Department designated here, under Executive Order 13687 last year. It wasn’t, which suggests that Egypt’s links to North Korea aren’t just a one-off, but an issue that deserves more diplomatic attention than it’s getting.) The North Koreans flew the parts to Beijing aboard Air Koryo. The shipper, Ryongsong Trading Co. Ltd., used the same address as North Korea’s embassy in Beijing (paras. 71-75).

Screen Shot 2016-03-08 at 9.41.29 PM Screen Shot 2016-03-08 at 9.41.21 PM

The North Koreans obtained UAVs with military applications from suppliers in China, or from Chinese intermediaries (paras. 78-91). There are many documents on this in the exhibits, mostly from Chinese suppliers.

Screen Shot 2016-03-08 at 9.46.36 PM

Remember when the South Koreans recovered UAVs that had overflown the Blue House and Baekryeong Island? This seems rather damning.

Screen Shot 2016-03-09 at 9.41.08 PM

Remember those special “logging” vehicles the North Koreans bought from Hubei Sanjiang Space Wanshan Special Vehicle Company — quite possibly the world’s only manufacturer of extraterrestrial logging equipment — until they showed up in a parade hauling missiles through downtown Pyongyang? Senator Cruz gave that one an honorable mention in an angry letter he sent to President Obama this year, calling for secondary sanctions on China.

Well, guess what just happened again? This time, Chinese trucks are being used to haul 300-millimeter rockets, which are a serious threat to Seoul, and to U.S. military installations in South Korea (paras. 96-100). China’s defense is that it told the North Koreans to use these $50,000-a-pop trucks strictly for commercial purposes only. (I’m guessing the trucks North Korea actually uses for strictly commercial purposes have somewhat lower Kelly Blue Book values than this.) Except when North Korea lies about end-uses to normal, law-abiding countries, said countries tend to stop selling them those things. Now, UNSCR 2270 prohibits the sale of dual-use trucks.

Screen Shot 2016-03-08 at 9.55.08 PM

A Chinese middleman, George Ma, procured at least four armored Mercedez S-Class sedans for His Corpulency. The cars were purchased from Germany and customized in the United States (I’m guessing the services included putting in extra-strong rear springs). There’s no evidence in the reports to suggest that the German supplier or the American customizer knew where the cars were headed, but the U.S. shop appears not to have done its due diligence on the Chinese purchaser (paras. 118-121), which revealed its North Korean connections on its website. Depending on the timing and other factors, this could be a violation of Executive Order 13551.

I wonder how many kids you could feed for what one of those cars cost. Remember, it’s the sanctions that are starving North Koreans. Just keep repeating that until you believe it.

Screen Shot 2016-03-08 at 10.16.00 PMMirae Shipping, a subsidiary of U.N.-designated Ocean Maritime Management, helped broker the 2013 Cuba arms deal from its office in Shenzhen. From there, things get so unbelievably weird that I’ll just put it out there and let you read it for yourself:

143. Around the time of the designation, in July 2014, Mirae operated several foreign-flagged vessels as charter parties. However, it failed to make its payments, given that it was experiencing financial difficulties. The vessels’ owner companies and mortgagees (“the claimants”) requested maritime courts in Wuhan and Qingdao, China, in August and September 2014, respectively, to arrest and detain several vessels, including the Great Hope and the Benevolence 2. 71

144. In response, the Harbour Superintendence Authority of the Democratic People’s Republic of Korea arrested and detained the claimants’ vessels in the country’s ports on the pretext of “tax evasion” (see annex 87). Another vessel owned by the claimants was already being detained by the country owing to a prior dispute between the charterer and the Korean Ocean Shipping Agency.

145. Subsequently, the Ministry of Land and Marine Transport intervened on behalf of OMM. The Ministry/OMM then led the negotiation by framing the disputes as a single package deal. The negotiations resulted in a set of complex arrangements aimed at achieving the simultaneous releases of multiple vessels among the various parties. The Panel notes the clear influence exerted by the Ministry/OMM over the Harbour Superintendence Authority and the country’s other shipping companies.

146. The negotiations were settled in December 2014 with the release by the Democratic People’s Republic of Korea of the claimants’ vessels in exchange for the claimants’ release from China of the Mirae-operated vessels (see annex 87).72 The settlement’s terms significantly favoured OMM. Mirae was released from outstanding debts. The claimants were forced by the Ministry/OMM to abandon another vessel, which was then transferred to Korea Tong Hung Shipping and Trading (the vessel’s operator) at no cost.

The upshot:

That OMM and the Ministry of Land and Marine Transport, in particular the Ministry’s senior official, Mr. Kim Yu Il, coerced the claimants to transfer to the Democratic People’s Republic of Korea at least two vessels (Benevolence 2 and Great Hope) operated by Mirae (acting on behalf of OMM), which constitutes evasion of the sanctions imposed under paragraph 8 (d) of resolution 1718 (2006) and paragraphs 8 and 11 of resolution 2094 (2013). The Ministry acted on behalf of OMM and assisted in its evasion of sanctions;74

China wasn’t alone in being implicated in the report:

  • Para. 30-33. North Korea’s KN-08 ballistic missile looks like a clone of the Soviet 9M79. Unfortunately, the report doesn’t say how the North Koreans got the plans for the missiles, or whether they got them after the U.N. first imposed its sanctions in 2006. The KN-11 submarine-launched missile also looks a lot like a Soviet SS-N-6/R-27, because the North Koreans obtained one from the Soviets in the 1990s and reverse-engineered it.
  • Para. 61. Burma continues to purchase suspicious nuclear-related items.
  • Para. 94. Eritrea appears to be doing some kind of arms deal with the North Koreans.
  • Paras. 101-106. Namibia got busted hiring KOMID to build it a weapons factory. The key North Korean personnel are diplomats posted in South Africa, who shuttle back and forth between the two countries.
  • In multiple parts of the report, it’s clear that Syria continues to be a major North Korean arms client.
  • Paras. 112-117. Uganda and Viet Nam have both hired North Korean military or police advisors, something that the Panel of Experts thinks was already a violation of past resolutions (me, too), but which is now a definite no-no under UNSCR 2270.
  • Para. 123-129. Israel sold North Korea $346,726 in gold, India sold them $1,913,677 in precious metals and stones, Thailand sold them$262,908 worth of cars, and Brazil sold them some unknown amount of jewelry. Once again, with feeling: sanctions starve babies.
  • Para. 182-186. A Taiwanese company, Royal Team Corporation, sold pressure sensors to North Korea for its missile program, and not for the first time. RTC has been supplying the North Koreans continuously since 2004, often hand-carrying the merch to Pyongyang through (you guessed it) Beijing and Macau. In 2008, a Taiwanese court even convicted RTC for supplying sensitive technology to North Korea. RTC needs to be sanctioned to extinction. Then, its officials should be locked away Supermax, its factory razed, and the grounds sown with salt.
  • Annex 1. The POE is investigating possible attempted North Korean arms dealing involving the UAE, Malaysia, and Ethiopia.

There is also more evidence of North Korea’s abuse of engagement programs to obtain sensitive technology, including from The Centre for Space Science and Technology Education in Asia and the Pacific (para. 46) and the International Astronautical Federation (paras. 55-58 and this post).

Overall, the Panel concludes that North Korea is as determined as ever to acquire nuclear weapons and ballistic missiles, and that sanctions are failing due to member states’ failure to enforce them.

Given the stated intentions of the Democratic People’s Republic of Korea and its continued efforts to enhance the scope of its nuclear and missile programmes and to seek international acceptance and legitimacy for these prohibited programmes, there are serious questions about the efficacy of the current United Nations sanctions regime.

The Panel’s investigations have shown that the Democratic People’s Republic of Korea has been effective in evading sanctions and continues to use the international financial system, airlines and container shipping routes to trade in prohibited items. Designated entities conceal their illicit activities by embedding agents in foreign companies. They use diplomatic personnel, long-standing trade partners and relationships with a small number of trusted foreign nationals. Its designation in July 2014 notwithstanding, Ocean Maritime Management Company, Limited continues to operate through foreign-flagged vessels, name and company reregistrations and the rental of crews to foreign ships. This enables it to obtain access to foreign ports in the region and beyond, as well as maritime insurance, a prerequisite for operation. [….]

All these activities are facilitated by the low level of implementation of Security Council resolutions by Member States. The Panel has consistently highlighted the problems of non-implementation of the resolutions, which allows prohibited activity to continue. The reasons are diverse, but include lack of political will, inadequate enabling legislation, lack of understanding of the resolutions and low prioritization.

The introduction calls out Africa and the Middle East — and certainly, there is evidence of violations there. Indeed, many other states have failed to turn in their compliance reports, or have provided reports of low quality, including non-permanent members of the Security Council. But for the Panel to fail to mention the one state that’s involved in facilitating just about every last one of these violations, either through its banks, intermediaries, immigration authorities, or ports, is telling, especially given the delay in publishing the report. I can only assume that the Chinese representative pressured the Panel to water down this language.

Despite the otherwise excellent investigative work of the Panel, its report shows us that the moral suasion of U.N. alone isn’t enough to make sanctions work. That will require a credible threat of secondary sanctions to get Chinese banks, ports, and businesses to comply, and that will probably require making some examples. For conduct that happens after February 12, 2016, there will be some new rules, and there should also be some very hard consequences.

Continue Reading

WaPo editorial: “China’s switch” on N. Korea sanctions “had a lot to do with” H.R. 757.

After the President signed H.R. 757 into law, but before the U.N. Security Council approved resolution 2270, sanctions skeptics predicted that the new U.S. law would complicate diplomatic efforts to get China to enforce U.N. sanctions. Events thus far have refuted that view. After the President signed the new law, China, which had inflexibly opposed new U.N. sanctions for weeks, reversed course and voted for the strongest North Korea sanctions resolution so far. Even before China’s official retreat, China’s banks had already begun to freeze North Korean accounts. What explains this shift? The editors of The Washington Post offer this guess:

SECRETARY OF State John F. Kerry emerged frustrated from a meeting with China’s foreign minister in late January after proposing new U.N. sanctions on North Korea. Beijing balked, saying it was not willing to take steps that risked destabilizing the regime of Kim Jong Un even after the regime conducted what it claimed was a hydrogen bomb test. On Wednesday, China seemingly reversed course, joining a unanimous U.N. Security Council in imposing the toughest sanctions applied to North Korea in more than a decade.

What prompted this welcome change? Mr. Kerry and his State Department team spent weeks negotiating with their Chinese counterparts — and North Korea’s launch of a long-range rocket last month over Beijing’s objections may have spurred a U.S.-Chinese convergence. Our guess, however, is that China’s switch had a lot to do with steps taken by South Korea and Congress.

In Seoul, the government of President Park Geun-hye, which Beijing has been courting, decided to move forward on plans for deploying a U.S. missile defense system that China regards as a threat. Meanwhile, Congress adopted new U.S. sanctions that could penalize Chinese companies and banks that do business with North Korea. In other words, the Chinese leadership finally was forced to consider tangible consequences for its coddling of the reckless and increasingly dangerous North Korean ruler.

The result is sanctions that, on paper, could have the most damaging impact in Pyongyang since the George W. Bush administration succeeded in locating and freezing the regime’s foreign financial assets in 2005. The new resolution orders the inspection of all cargoes entering and leaving North Korea, bans its export of some minerals and import of arms, and mandates a shutdown of its international banking activities. It also cuts off supplies of most aviation fuels and expands the list of luxury items the elite cannot receive. [Editorial, Washington Post]

In other words, and as I argued last month, the new U.S. sanctions law actually gave the Obama Administration more leverage to succeed in its diplomacy with China. As I argued last week, U.S. and U.N. sanctions are not contradictory, but complementary and mutually reinforcing. Indeed, the timing of the Chinese banks’ actions suggests they may be more responsive to Washington than they are to Beijing. I can’t overstate my doubts that China has had a willing conversion, and has decided to enforce the spirit and letter of U.N. sanctions. But the evidence increasingly shows that whether or not China’s government can be persuaded to enforce sanctions, its banks and ports can be.

Continue Reading

China’s largest bank freezes North Korean accounts

Not even a week after President Obama signed the North Korea Sanctions and Policy Enhancement Act into law (full disclosure), a South Korean newspaper is reporting that a number of Chinese banks, including China’s largest bank (and the world’s largest, in terms of assets) have frozen the accounts of their North Korean customers.

It has been confirmed that some Chinese banks in northeastern China, including the Dandong, Liaoning Province branch of Industrial and Commercial Bank of China (ICBC), the country’s largest bank, have suspended cash deposit and transfer services for accounts owned by North Koreans since December last year. The effectuation of new and tougher U.S. sanctions on North Korea on Thursday will likely affect Chinese businesses and financial institutions ever more. [Donga Ilbo]

Although the Treasury Department’s direct regulatory authority is limited to dollar-denominated transactions, the breadth of the secondary sanctions language in section 104(b) of the new law is sweeping enough to have shut down transactions in other currencies, including the Renminbi.

In telephone conversations with the Dong-A Ilbo on Thursday and Friday last week, an employee of ICBC’s Dandong branch said that the measures started in late December, adding that the bank had suspended all deposits and transfers of foreign currencies, including the Chinese yuan, in and out of those accounts. Dandong is located in a border area with North Korea. More than 70 percent of North Korea-China trade takes place in the city.

The banks’ actions have already begun to cause pain for the North Korean government.

A source quoted a Chinese entrepreneur in Shenyang, Liaoning Province as saying that a Chinese bank he was doing business with recently informed him that it would not take deposits in or make cash transfers from North Korean accounts. The businessman, who invested in several mines in North Korea, had paid for minerals from the mines imported to China through the bank. His North Korean partner is urging him to send money quickly, according to the source. [….]

Chinese companies operating plants in the border area and employing North Korean workers are restless, as the U.S. and South Korea have cut off Pyongyang’s financial sources for the nuclear and missile development by the U.S. sanctions law and the shutdown of the Kaesong Industrial Complex.

“If we trade minerals with North Korea and make transactions of the United Nations-designated contraband goods, our business will be hit hard by the U.S. sanctions law,” another Chinese businessman said. “Many entrepreneurs are worried because their major importers such as the U.S., Europe and South Korea will likely block imports of Chinese products manufactured by North Korean employees.”

The claim that the banks began freezing accounts in December introduces some doubt that the new U.S. sanctions law is the cause of the banks’ actions. In December, the bill was crawling through the Congress at a snail’s pace. True, Senator Gardner had introduced his bill in the Senate in October and had pushed it hard, but it wasn’t until the January 6th nuclear test that it hit the fast track. One Chinese source, apparently speculating, suggested that the account freezes may have been related to the Moranbang Band fiasco.

“After the Chinese government started some measures to put pressure on Pyongyang, it could have further expanded and strengthened the sanctions following a series of provocations such as the nuclear test and the missile launch (February 7),” the expert said. It is possible that Beijing, which participated in some of the international sanctions on the North following the third nuclear test in February 2013, has broadened the scope its sanctions on the North.

It’s also possible that the banks really didn’t start “the measure” in December at all. There were no reports of account freezes in either December or January, and plenty of reporters — and bloggers — keep a close eye on these things. This could be disinformation by Beijing to save face. China has also taken a beating in the U.S. and South Korean press for its failure to put pressure on Kim Jong-un. Back-dating the actions to December could be China’s way of taking credit for pressure it had no real hand in exerting. It’s unlikely that these banks acted in December and that we’re only hearing these reports two months later, and it’s too coincidental that we’re only hearing them after President Obama signed the new law.

Screen Shot 2016-02-21 at 9.37.47 PM

[ICBC Branch in Dandong]

So does this mean the law is already working? Not yet, but if the law is working as intended, this is the kind of report I’d expect to see in these first weeks. It means that the bigger Chinese banks, which have more exposure to the financial system, have gotten the message. The big Chinese banks also shunned North Korean business in 2013, under pressure from Treasury, but that pressure wasn’t sustained, and so it wasn’t decisive.

To make the law work as intended, Treasury will first have to publish new regulations in Title 31 of the Code of Federal Regulations, so that banks everywhere — but especially in Europe — must apply for licenses for dollar transactions with North Korea. It must also demonstrate its seriousness about enforcement by going after smaller banks like the Bank of Dandong and Orabank, non-bank institutions like 88 Queensway, and to the extent we can identify them, North Korean money launderers in Guangdong and Macau.

One wonders how many companies like Orascom Telecom will now face plunging share values because of their exposure to North Korea. It’s further evidence that sanctions risks associated with North Korean investments are “material,” and that the Securities and Exchange Commission should require those investments to be disclosed in public filings.

Update: 

South Korea said Monday that North Korea is believed to be relying on cash delivery or borrowed-name bank accounts in a bid to avert China’s possible financial sanctions.

A local media company reported that Chinese banks in areas bordering North Korea have begun to freeze accounts held by North Koreans apparently in response to the North’s latest nuclear and missile test.

The Unification Ministry said that it is checking the validity of the report.

“But the North is thought to directly deliver cash or use borrowed-name bank accounts when it comes to its external trade (with China),” said Jeong Joon-hee, a ministry spokesman at the regular press briefing. [Yonhap]

Inevitably, there will be small leaks like this, but you can’t run a country of 23 million on gym bags filled with cash. So while the new law may already be having an impact — and in light of the closure of Kaesong, that impact may be a substantial one — I’m also worried that Treasury still hasn’t issued any implementing guidance about exempting food and medicine transactions. They need to publish that immediately.

Continue Reading

What the U.N.’s new North Korea sanctions resolution should (and should not) do.

Yonhap reports that the U.S. and China have made progress toward an agreement on a draft U.N. Security Council resolution. Although we’ve seen few hints about exactly what sanctions China is willing to sign up for — much less enforce — China is paying lip service to the notion that North Korea must pay a “necessary price” for its behavior. Has Xi Jinping relented in his unprecedented stubbornness, or was it always China’s plan to relent after stalling us, in the hope that with time, the pressure on it would subside? But the pressure has built, not subsided, and the Washington Post‘s Simon Denyer sees signs that this pressure, including the deployment of the THAAD missile defense system, may be causing China to re-think its “paternal benevolence” toward North Korea.

New sanctions legislation may have also played a role, and the State Department is already using the threat of secondary sanctions in its talks with China. This threat has deep political backing in Washington. Everyone with a megaphone is in a foul mood toward China — Congress, presidential candidates, Korea scholars, and the editorial pages. In recent weeks, The Washington Post and The New York Times have both called for the President to use new legislation to apply secondary sanctions to North Korea’s Chinese enablers. Here’s hoping we’ll keep that pressure on until China acts responsibly.

This new leverage will be helpful if it gets us to a new U.N. resolution that includes (and enforces!) useful measures, such as —

  • Above all: 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;
  • 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.

Would accountability for North Korea’s crimes against humanity be too much to hope for? Probably, but we should keep demanding it — publicly — until China relents, even if it takes years.

Other ideas in circulation cause me more concern that policymakers could lose the plot and take sanctions too far, or in the wrong direction. For example, the U.N. should not (and almost certainly, would not) indiscriminately cut off all trade between China and North Korea. That would be counterproductive, ineffective, and inhumane. Sanctions are meant to retard and punish proliferation and show Pyongyang that defiance is a losing proposition. They can be targeted to defund the state’s military and security forces, force cadres to turn to corruption and smuggling for a living, and by default, shift North Korea’s internal balance of power from the men with guns to those without. If properly targeted and administered, they might even force reforms.

Freezing the regime’s trading companies, hard currency businesses, and offshore slush funds serves this goal; hunger in the provinces does not. On the contrary, circumstantial evidence has long suggested that the regime uses food as a weapon to control its subjects. After all, by any reasonable reckoning, North Korea has more than enough money to feed all of its people, but has willfully chosen not to. Perhaps Pyongyang sees liberation from the state’s rations as a first step toward economic liberation, intellectual liberation, and eventually, political liberation. Perhaps it is, which is why we should catalyze precisely this progression inside North Korea.

That’s why sanctions should avoid attacking the trade networks that support the jangmadang markets that are feeding most North Koreans. When regime-controlled networks also supply these markets, they should be assigned a secondary priority for sanctions targeting, until non-regime-controlled networks are capable of supplanting them.

Fortunately, I’ve seen no serious proposals to impose a trade blockade on North Korea, despite North Koreans’ fears of one. North Koreans may not understand how modern sanctions work. You can hardly blame them for this when hardly anyone in Washington, Seoul, or Brussels does either. But those who don’t live in Chongjin or Sinuiju and think “sanctions” means trade sanctions are stuck in the 80s.

There are, however, serious proposals circulating in South Korea for a fuel blockade against North Korea. Some in Seoul believe that this would cause North Korea’s collapse, although I’m not sure why that’s so. China is opposed to a total fuel cutoff because of its potential “impact on the ordinary North Korean people.” I haven’t lost sight of the humanitarian benefits of the collapse of this regime, but here, I find myself in rare sympathy with China’s position on the basic principle. After that, things get more complicated.

First, I’m not sure that China is still exporting crude oil to North Korea, or that North Korea still has the capacity to refine it (I’d welcome the opinions of informed readers). China does export refined petroleum products, such as gasoline, diesel, jet fuel, and heavy fuel oil to North Korea, some of which is pilfered from state stocks and sold on the black market. All of these products have different impacts on the North Korean economy. To add further to the confusion, China has sometimes omits fuel exports from its official trade statistics. Marcus Noland smells a rat, and I also suspect that China is disinforming us to take pressure off itself.

Proponents of a fuel blockade should remember that gasoline and diesel don’t just fuel military vehicles; they also fuel vehicles used to plant, grow, and transport food. (Although many North Korean farmers still use oxen to plow fields, or use wood-gas-powered trucks to transport food.) Often, the same vehicles are used for both purposes.

Heavy fuel oil is used to heat homes in cities. In small towns and in the country, people heat their homes with coal, charcoal, and firewood. Cutting off fuel oil would make a lot of people cold, and perhaps reinforce their xenophobic hatred of us, but His Corpulency would never freeze.

There is, however, one category of fuel that China should stop selling to North Korea — jet fuel. Cutting off the supply of jet fuel would ground the North Korean Air Force and deny its pilots the flying hours they need to stay ready. It would ground Air Koryo, which is effectively under military control, as the U.N. Panel of Experts has noted. It would improve enforcement of the arms trade and proliferation bans, because Air Koryo is known to have used its fleet of (mostly Il-76) transports to smuggle weapons and other contraband. It would improve enforcement of the luxury goods ban, because Air Koryo passengers carry prohibited luxury goods from China to North Korea on its flights. Finally, it would deny Pyongyang some of the revenue it earns from tourism.

I don’t yield to anyone in my wish for Götterdämmerung in Pyongyang, but let’s keep a few things in mind. First, we must never back the regime into a position where war becomes an acceptable alternative or a necessary deterrent. Pressure on the regime must be steady and firm, but calibrated such that good-faith negotiation is always a safer alternative for Pyongyang than either war or the status quo. The strategy must be to convince Kim Jong-un — or those around him — that time is not on their side, and that the path to survival lies through a negotiated disarmament, peace, and reunification. If it becomes necessary to prevent war, we may even have to make the painful choice to grant safe passage, or some form of amnesty, to people who have committed horrific crimes against their own people.

Second, hard-liners should remember that the same soft-liners who never raised a peep as Pyongyang sanctioned and starved its own people are always waiting to pounce and blame them for starving North Korean babies. It’s unfair and disingenuous, but the world has never been fair. No policy can endure for long without the support of the political mainstream.

More fundamentally, we can’t solve the North Korea crisis without a much more sustained and methodical effort to win over the North Korean people. Sanctions will play an important role in changing North Korea, but as I’ve said all along, they are not a complete policy. South Korea, as the only legitimate Korean government, must also devote serious thought, creativity, technology, and political will to breaking through the digital DMZ, and giving North Koreans the means to speak freely to other Koreans from Paektu-san to Halla-san, and spread a message of rice, peace, and freedom to Koreans north of the DMZ.

Continue Reading

NYT: How China helped N. Korea buy ski lift cable cars, and break U.N. sanctions

Yesterday, I posted about hunger in North Korea, the fact that Kim Jong-un is spending the nation’s lunch money on missiles and ski resorts, and the importance of helping the North Korean people make that connection though a comprehensive information operations strategy. The New York Times has bolstered the evidence of North Korean and Chinese culpability for this tragedy with a detailed report on North Korea’s purchase of the equipment for its ski resort through China.

Previously, NK News revealed that the Masikryeong Ski Resort was filled with foreign-sourced equipment, and identified most of the manufacturers (if you aren’t a subscriber, there’s a version here, at The Telegraph). The question left unanswered, however, was whether the North Koreans obtained the equipment directly from the manufacturers, or through China. The Times found evidence in China’s own customs data proving that it was the source of at least some of the equipment.

The cable cars for the Masikryong ski resort, which are at least 30 years old and out of fashion on European ski slopes, were made by Doppelmayr, an Austrian company, and used for years in Ischgl, a skiing town in Austria. After the resort decided to install new cable cars, the old ones were sold to an Austrian secondhand dealer, Pro-Alpin, according to Ekkehard Assmann, head of marketing at Doppelmayr.

Pro-Alpin, in turn, sold the cable cars to an unidentified Chinese company, according to Pro-Alpin’s website. The Chinese company then arranged for the equipment to be shipped to North Korea. [NYT, Jane Perlez & Yufan Huang]

The Times also examines China’s lame and risible excuses for ignoring the U.N. luxury goods sanctions it repeatedly voted for at the Security Council.

By almost any estimate, the sale of such items appears to violate the intent of United Nations sanctions meant to punish the North for its nuclear weapons program — specifically, sanctions targeting luxury goods, intended to cover products like Champagne and caviar, yachts and expensive cars.

But China, whose companies were involved in providing the equipment for the Masikryong ski resort, which opened in 2013, told a United Nations panel that those sanctions did not apply because skiing is a “normal activity” in North Korea, a country where most of the population is impoverished and food shortages are common. “Skiing is a popular sport for people, and ski equipment or relevant services are not included in the list of prohibited luxury goods,” the Chinese said, according to last year’s annual report from the United Nations panel, which monitors sanctions violations. [….]

The luxury goods sanctions have a glaring loophole: Each country is permitted to define what it considers luxury goods. The United States has published a detailed list, down to such items as vanity cases, binoculars and television sets larger than 29 inches. The European Union says “articles and equipment for skiing, golf, diving and water sports” are luxury goods and bans them from export to North Korea. [NYT]

Here is the U.S. list (see Supplement 1), and here is the EU list (see Annex III). Yet, nearly a decade after the U.N. Security Council approved resolution 1718 ….

But China has failed to publish such a list and has not honored those of other countries, the documents of the United Nations panel show. Because it has never said what it considers to be luxury goods, China can argue that cable cars for Mr. Kim’s prestige resort were permissible, even justifying them as equipment for the masses.

“China appears impervious to shame,” said Marcus Nolan, of the Peterson Institute for International Economics in Washington, who said there were no penalties for flouting the luxury goods sanctions. [NYT]

The Times also traces the genesis of Xi Jinping’s obstructionist policy toward sanctions enforcement generally.

The Chinese hope to prevent tougher sanctions for fear that the North will become a hostile neighbor, a policy that diplomats said appears to have been shaped by President Xi Jinping last summer. In talks last week with his Chinese counterpart, Foreign Minister Wang Yi, Secretary of State John Kerry made little headway in persuading China to toughen sanctions against North Korea, and he warned that the United States would most likely move ahead on its own. [NYT]

The policy isn’t entirely a new one. Diplomatically speaking, Xi is more openly obstructionist than his predecessors, but China has a longstanding pattern and practice of violating sanctions against North Korea related to proliferation, arms sales, deceptive financial practices, and luxury goods.

What neither Xi nor President Obama counted on, however, was that Congress would seize the initiative.

Tougher sanctions legislation is moving through Congress that, among other things, would target Chinese banks that do business with North Korea. The administration has been reluctant to call for such sanctions, known as secondary sanctions, and it is not clear what the White House would do about the legislation, American experts said.

“Given the broad and variegated bilateral relationship between the United States and China, U.S. officials have been reluctant to confront and economically punish China with secondary sanctions in case it should undermine other key priorities in the bilateral relationship,” said Elizabeth Rosenberg, senior fellow at the Center for a New American Security. [NYT]

The Times also gives us some absolutely breathtaking data on what Kim Jong-un is wasting on luxury goods, while most of his subjects are food-insecure, malnourished, stunted, or starving.

Chinese customs data showed that North Korea imported $2.09 billion in luxury goods between 2012 and 2014, according to recent congressional testimony by Bonnie S. Glaser, senior adviser for Asia at the Center for Strategic and International Studies. Among the items that have slipped through the sanctions are Mercedes-Benz S-Class cars, photographs of which appeared in last year’s United Nations report. An unidentified American company armored the cars, the report said. It also said that a luxury yacht worth as much as $6 million, made by a British company, Princess Yachts International, made it into North Korea and has been used by Mr. Kim.

In 2014, China exported $37 million worth of computers; $30 million of tobacco; $24 million of cars; and $9 million of air-conditioning equipment to the North, according to trade statistics from the United Nations Department of Economic and Social Affairs. In all these categories, China was the top exporter, the United Nations said. [NYT]

As the Times notes, “luxury goods may seem a relatively minor issue,” but “they help to ensure the loyalty of the tiny elite around” His Corpulency, thus helping to preserve its cohesion. Their availability also sends a signal inside Pyongyang that the regime is financially secure, bolstering the confidence of the elites in the regime’s survival.

There is also another, more important, reason why luxury goods sanctions matter. It bears repeating that the World Food Program’s operations in North Korea cost just $100 million a year, to feed just 2.4 million women and children, a figure that undoubtedly includes substantial salary and overhead costs. If the period from 2012 to 2014 is inclusive, that’s a three-year period, and an expenditure of almost $700 million a year — an even higher estimate than the one I cited here.

Yesterday, I posted evidence that for many North Koreans, the food situation remains desperate. No government has a sovereign right to steal and waste the wealth of its people when the people are hungry. Viewed this way, North Korea’s luxury goods imports and missile tests aren’t just a sanctions violation, they’re a crime against humanity. What’s especially frustrating is that it’s a crime the world has the power to prevent, by putting North Korea’s assets into financial receivership. The world’s financial regulators should put Kim Jong-un and his minions on notice that their offshore bank accounts are available to buy food, medicine, and humanitarian supplies, but not for ski resorts and luxury cars.

Continue Reading

The biggest loser from North Korea’s nuke test? China. (updated)

When I was in high school, my favorite TV show was “Miami Vice.” Until it jumped the shark in Season Three, I’d count the minutes until each episode began. One of its best episodes was called “Golden Triangle,” in which the show developed the main characters’ boss, Lieutenant Castillo, played by Edward James Olmos in his breakout role. Olmos played Castillo deep and dark. To me, at that age, Castillo personified cool.

In this episode, Castillo revealed his past as a DEA agent in Thailand, where he’d gone native, learned to speak Thai, met and lost his life’s great love (played by the delectable Joan Chen), and then barely survived a deadly ambush at the hands of his nemesis, a Nationalist Chinese general turned Golden Triangle drug lord named Lao Li.

Lao Li’s character was played by the late, great Keye Luke, an actor who deserved vastly more memorable roles than were available to Asian-Americans for most of his long life. Luke played this role brilliantly, with an impeccably icy sagacity. (Watch the whole episode below if you doubt me). In his career, Luke was probably most famous for playing Master Po in “Kung Fu,” but I’d have remembered him for the talent he showed in this one “Miami Vice” cameo if he’d never done anything else.

This being a blog about North Korea, you may be wondering whether I will be making a topical point. We’re coming to that; trust me. In this episode, Castillo learns that his old nemesis, General Lao Li, has decided to move his smuggling operation to Miami by posing as a respected retiring businessman, putting down strong roots in the community, and gaining the favor and patronage of the political establishment. (Yes, Joan Chen is there, too.) To do this, he gives strict orders that his subordinates behave like paragons of legality, maintain low profiles, and avoid attracting the attention of law enforcement — and especially of Lieutenant Castillo — at all costs.

Lao Li soon learns that his grandsons have defied him and are driving around in a Lamborghini. Most unforgivably, they have been selling heroin. Castillo is watching, and his men arrest the grandsons. This is a risk, and a defiance of his authority, that Lao Li cannot accept. In terms of its plot, acting, and production values, this episode could have been a movie, but the scene that illustrates my topical point starts at 41 minutes.

[If only one of the grandsons had been fat. Really fat.]

That Lao Li’s character happens to be Chinese is as incidental to the analogy as the fact that Castillo’s character doesn’t. Xi Jinping may not inhabit a higher moral plane than the fictional Lao Li, but he almost certainly inhabits a lower intellectual one. Xi may have a predator’s instinct for weakness, but he’s also a cumbrous, boorish nationalist who has managed to turn most of his democratic Asian neighbors against him. His legacy may yet be an Asian analogue to NATO that contains several newly-minted nuclear powers in an arms race with his ally (and him), along with a lot more port calls by the U.S. Navy.

Xi may not see this, but anyone can see that he has been humiliated by the perception that he cannot control his lawless dependent. That perception may be nothing more than a disguise for a more duplicitous agenda, but the perception itself is costly. Xi has greater schemes in mind, but his (metaphorical) grandson threatens to upset his plans by causing his neighbors to mobilize their defenses. His paternal benevolence should end here. It won’t. And that means Kim Jong-un will continue to be costly for Xi Jinping.

History will probably record that North Korea’s fourth nuclear test did more damage to the Obama Administration’s North Korea policy than it did to the the geology under Punggye-ri. In doing so, it also obliterated China’s credibility here. One of the more devastating criticisms of the administration’s policy came from The Washington Post‘s David Nakamura, who effectively accused the administration of outsourcing its policy to China. No wonder the State Department is feeling burned by China:  

In a striking public rebuke of China, Secretary of State John Kerry warned Beijing on Thursday that its effort to rein in North Korea had been a failure and that something had to change in its handling of the isolated country it has supported for the past six decades.

“China had a particular approach that it wanted to make, and we agreed and respected to give them space to be able to implement that,” Mr. Kerry said a day after North Korea’s latest nuclear test, after a phone call with his Chinese counterpart, Wang Yi. “Today in my conversation with the Chinese I made it clear: That has not worked, and we cannot continue business as usual.” [N.Y. Times, David Sanger and Choe Sang-hun]

If China’s quiet duplicity surprised the Secretary, it was because no one was giving him read-outs of the excellent reports of the U.N. Panel of Experts monitoring those sanctions. Those reports added to a considerable body of evidence that China was willfully violating the sanctions for years. In the short term, this is a big setback for the Obama Administration, but in the longer term, we can hope that a tougher, more engaged, and more realistic North Korea policy will be to the administration’s advantage as it winds down its affairs and transitions to the next one.

For China, the consequences may be more adverse and enduring. It stands to lose influence regionally because of North Korea’s actions. Its adversaries have taken steps to resolve the differences that divided them, and are now effectively allied against it. South Koreans even speak openly of acquiring their own nuclear weapons. As well I would, too, if I were South Korean, Japanese, or Taiwanese.

It also stands to lose credibility globally. As William Newcomb, a former member of the U.N. Panel of Experts, told the AP, “China uses the sanctions committee’s consensus rule ‘to renege on what it agreed to do in the Security Council as well as to block proposed designations.’” Now, the U.S. and China are fighting about both the substance and enforcement of U.N. sanctions. More voices in the U.S. are calling for secondary sanctions that hit Chinese targets. Some South Koreans are also blaming China:

North Korean leader Kim Jong-un went ahead with the fourth nuclear test because it will not cause China to abandon the North, said Kim Hwan-suk, a senior analyst at the Seoul-based Institute for National Security Strategy.

“North Korea used brinkmanship because it knows that China won’t abandon it, given its strategic value,” Kim said. “North Korea does not expect China to fully support sanctions against the North by the U.N. Security Council.” [Yonhap]

The strongest words came from South Korea’s Foreign Minister:

Foreign Minister Yun Byung-se on Sunday called on China to prove its “firm” opposition to the North’s claimed hydrogen bomb test after the North’s largest ally denied responsibility in curbing Pyongyang’s nuclear ambitions.

“The Chinese government must clearly follow through with its promise made to the international community when it votes for the United Nations Security Council resolution,” Yun said on “Sunday Diagnosis,” a KBS current affairs program, on Sunday morning.

“That’s important to stabilizing the Korean Peninsula, Northeast Asia and the international community. It would prove that China hasn’t made empty promises.” [Yonhap]

China, for its part, is pushing back and blaming the U.S. for Kim Jong-un’s decision to test a nuke, thereby revealing much about its fundamental hostility to U.S. interests and utter disregard for the welfare of North Koreans:

In a commentary, China’s state-run Xinhua news agency said, “The U.S.’s combative approach has in effect deepened Pyongyang’s sense of insecurity and prompted the country to go further in challenging non-proliferation restrictions.”

“The Western media and some politicians have piled blame on China for failing to halt the DPRK’s nuclear program,” the Xinhua commentary said, using an acronym for North Korea’s official name.

“But any hasty conclusion to identify China as the crux of the ongoing nuclear crisis on the Korean Peninsula is as absurd as it is irresponsible,” it said.

Another state-run newspaper published by China’s ruling Communist Party also blamed what it calls a “hostile policy” by South Korea, the United States and Japan towards North Korea for the North’s fourth nuclear test.

In an editorial, the state-run Global Times newspaper appeared to defend North Korea’s defiant pursuit of nuclear weapons, saying there will be “no hope” for Pyongyang to give up its nuclear ambitions unless South Korea, the U.S. and Japan change their policy toward the North.

“There is no hope to put an end to the North Korean nuclear conundrum if the U.S., South Korea and Japan do not change their policies toward Pyongyang,” the editorial reads. “Solely depending on Beijing’s pressure to force the North to give up its nuclear plan is an illusion.”

Lu Chao, a research fellow of Korean studies at the Liaoning Academy of Social Sciences, told the Global Times newspaper on Saturday that North Korea has developed nuclear weapons because of a “hostile policy” by the U.S. against the North. [Yonhap]

This sort of rhetoric will not play well in Washington, and will not advance China’s interests. Instead, it will inflame opinions on Capitol Hill and among American voters. In an election year, it will set off a contest among candidates to promise the most anti-Chinese policies. A few of those promises might even be kept. So why does China say such silly things? For the same reason Donald Trump says silly things — because of his emotions, and to exploit the emotions of other mediocre minds.

Historically, China has been an empire that either absorbed or dominated its neighbors. States that remained independent were required to send ambassadors to the Forbidden City to kowtow and give tribute. Chinese political culture is a hierarchical and status-conscious one in which you’re either above or below. Those above condescend and exploit. Those below fawn and obey. With this realization, I suddenly understood the appeal of Maoism. In comparison, Korean society seems positively egalitarian. I certainly know who I’d rather drink with, or have on my side in a street fight, but then, I’m an assimilated wasicu

Because of status-based and institutional arrogance, and because China’s leaders aren’t held accountable by a critical press or free elections, they overestimate their own competence and don’t weed out incompetent or corrupt officials. That’s true everywhere, but it’s especially true in dictatorships. Job security is more closely related to getting along with others, and showing the right deference to superiors. That drives China to make “safe” decisions by continuing with what has worked before, or seemed to. If what worked before stops working, the new plan may come too late, and may be the work of not-very-competent people. See, e.g., the recent performance of the Shanghai Stock Exchange.

The leaders of China are rational, but they’re also operating with limited information, because of both groupthink and censorship. So when Chinese elites say that sanctions won’t work or human rights problems in North Korea aren’t really that bad, they probably believe that, mostly. That’s both because they don’t know, and also because they don’t care that much. To Chinese elites, Koreans are a “down” people, and that goes double for North Koreans. They may be extremely adept at weighing of costs against benefits, but groupthink and institutional resistance are high obstacles to a careful reconsidation of the bubble that’s building beyond China’s northeastern border.

In the case of North Korea, we may yet persuade China to shift course. There might yet be a chance for a face-saving soft landing that avoids regional war and protracted chaos, and protects China’s basic security interests, ours, and those of our allies. For now, that still seems unlikely. That’s unfortunate, because the interests of China, the United States, and a united Korea could be reconciled by skillful diplomacy. I’m not sure if Beijing really agrees, but a nuclear North Korea is bad for China — very bad. To get to that realization, however, China will have to feel enough of a cost to shift its incentives. That means that U.S.-China relations may have to get worse before they get better.

~ ~ ~

UPDATE: Now, the South Korean semi-official news agency, Yonhap, reports that Chinese are complaining that their government needs to take a harder line.

In one opinion poll of some 42,500 people by the state-run Global Times, 81 percent say the North’s nuclear test poses a threat to China’s security.

In another poll of 4,900 people by the same paper, 82 percent responded that they support new sanctions by the U.N. Security Council against North Korea.

Some Internet users posted comments about North Korean leader Kim Jong-un on the newspaper’s website, likening him to an “extremely crazy guy.”

Other users say China must cut its aid of oil and food to North Korea.

China is North Korea’s top trading partner and supplies almost all of the isolated ally’s energy needs, but many analysts believe that China’s Communist Party leadership won’t exert enough leverage on North Korea because a sudden collapse of the North’s regime could threaten China’s own security interests. [Yonhap]

That’s the first thing resembling an opinion poll I’ve seen measuring Chinese sentiments about North Korea policy. The 82 percent support for new U.N. sanctions is stunning, and at striking variance with elite opinion in China. Yonhap also reports “growing public resentment” of North Korea, and that “some social media users criticizing their government for not taking a tougher response to the North’s test.” Imagine how they’ll feel if sanctions start to have collateral effects on China’s fragile economy. What this means is that Xi Jinping’s North Korea policy is probably causing harm to his domestic support, in addition to the harm it’s doing to his international credibility.

Continue Reading

That time in 2013 when 100 N. Korean women staged a walkout at a prison uniform factory

Fittingly, our story begins with a Chinese textile company that made prison uniforms. We don’t ordinarily think of Chinese prison-garment workers as overpaid, but then, some North Korean officials paid them a visit. The officials knew of a derelict factory in the extreme northeast of the workers’ paradise, where women would work 12 hours a day for 30 kilograms of rice a month.

For the women, this was still a good wage, especially compared to any wage that might be paid in North Korea’s inflated currency, and at a time when rice had a high market value. There was no shortage of applicants, and by September 2013, the factory had hired 125 women and 10 men, and started up. Then, a month later, payday rolled around:

However, just one month after start of operations a major problem arose. The payment of white rice was not made as promised. Most of the angry female workers refused to come to work.

The white rice for the “monthly wage payments” was to be brought in by the Chinese company, then handed over to the workers via the county officials. That was the agreement. However, the officials first withheld about half of the rice as “army rice” before paying the workers. That’s what made the workers so angry.

The officers, in a panic, visited the homes of the workers to encourage them to come to work.

“The female workers sent the officers packing, saying, ‘How can you expect us to come to work when you will not pay us properly? We will starve!’ In North Korea today, if promises are not kept, any one will leave the workplace at the factory in the same way” says Mr P. [Rimjin-gang]

The incident happened nearly two years ago, but Rimjin-gang held the story until recently “to ensure the safety of the reporter,” known as “Mr. P.” Shortly after the work stoppage, the Chinese investors withdrew from the project, and North Korea’s opening to the world slipped from our grasp once again.

Jiro Ishimaru, the founder of Rimjin-gang, who has been reporting on North Korea for over 20 years, says “this is the first time he has ever heard of something like this that might be called a group labour dispute.” In 2011, however, the Daily NK reported a work stoppage by a brigade of underfed soldiers at a uranium mine.

In my recent essay on “guerrilla engagement,” I wrote of using clandestine communications to empower and organize North Korean workers with clandestine labor unions. If labor organizations proliferated throughout North Korea, they could eventually organize nationwide work stoppages and strikes. Here is an incident where a clandestine labor organization formed locally and spontaneously. It isn’t hard to believe that with a little support, more North Koreans at other factories and mines would organize, too.

Continue Reading

Kim Jong Un seeks friends and funds abroad as he isolates his people.

In the three years that he has been in power, His Porcine Majesty has found plenty of time for Dennis Rodman, but none for meetings with foreign leaders. Suddenly, in the last two months, he has flirted with (1) a summit with South Korean leader Park Geun-Hye, (2) inviting Japanese Prime Minister Shinzo Abe to Pyongyang, (3) and a visit to Vladimir Putin in Moscow in May. His central bank even “committed itself to implementing the action plan of ‘international standard’ for anti-money laundering and combating the financing of terrorism.” (I’m sure Pyongyang will find some way to reconcile this with its arms sales to Hezbollah and Hamas.)

If you believe that talks with North Korea are immediately capable of solving anything, or that they are an end in themselves, you may be pleased that Kim Jong Un has developed this urgent interest in diplomacy. What accounts for this belated quinceañera, assuming that any of these meetings comes to pass? Only Kim Jong Un knows, but I doubt it has anything to do with a yearning for more intelligent companionship. There’s almost certainly a financial motive, if not more than one.

One motive may be a growing threat of sanctions. Kim’s charm offensive began just after December 19th, when FBI and President Obama announced that North Korea had hacked Sony Pictures and threatened audiences for “The Interview.” Almost immediately, Congress called for stronger sanctions, and centrist figures in the foreign policy establishment, including Richard Haass and Winston Lord, began calling for regime change. President Obama himself suggested that the collapse of North Korea’s system was inevitable, although he didn’t declare an intent to catalyze that result.

On January 2nd, President Obama signed Executive Order 13687, authorizing sanctions against all entities and officials of North Korea’s government and ruling party, and (more importantly) authorizing secondary sanctions against the Chinese, and other entities that provide Pyongyang its regime-sustaining hard currency. The order was potentially sweeping and devastating, but in its actual impact, it reached only three entities that were already sanctioned, and ten mid- to low-level arms dealers. But the President also said that this was only a first step, which left Pyongyang scurrying to secure its financial lifelines.

Pyongyang’s charm offensives always seem to come just as the political will waxes to enforce sanctions against it. The charm offensives play on the individual interest of each interlocutor — Park Geun Hye’s domestic unpopularity, Shinzo Abe’s desire to bring abductees home, Putin’s search for ways to f**k with Obama — to disrupt any coordination among them. It works because we’re dumb enough to let it. And once sanctions enforcement wanes, so will Kim Jong Un’s interest in diplomacy.

One thing is clear enough: a credible threat of sanctions certainly hasn’t done any harm to prospects for diplomacy with North Korea. I could also say, with equal conviction, that they haven’t harmed John Hinckley’s odds of marrying Jodie Foster.

~   ~   ~

Another possible explanation is a series of reports suggesting that North Korea’s trade relations with China are declining. For one thing, fewer North Koreans are traveling there:

Overall figures for North Korean residents entering China annually totaled between 100,000-120,000 until 2010 before jumping to 150,000 in 2011. A steady period of continual increase in visitors followed until 2013, when the number of North Koreans traveling to China reached an all-time high of 200,000, roughly half of whom noted their reason for making the trip as “looking for work.” Aside from finding employment, 34,000 went to conduct business or attend a conference, and 1,500 went purely to travel. This represents a 60% and 50% respective reduction when compared to last year’s figures. Visits to friends and relatives dropped to 1,100–one-third of those making the trip for the same reason in 2013.

Male visitors [150,000] composed five times total amount of females [30,000] visiting China from North Korea. Most North Koreans [77,000] traveled by boat for the trip. [Daily NK]

North Korean agents who do travel to China are also having more difficulty doing business there. There’s no evidence this has anything to do with sanctions. It appears to be because of a combination of a sagging Chinese economy and the lingering effects of the Jang Song-Thaek purge. After that purge, I posted here that the regime had called home large numbers of its China-based money men, presumably men who were loyal to Jang or thought to be, and that the money men had stayed away in droves. Subsequently, I posted about another reported defection of a senior financier in Russia. That trend continues:

A source in a northeastern Chinese city, who spoke on condition of anonymity because of the sensitivity of the issue, said only about 30 percent of the North Korean businessmen have returned to China after being summoned.The summonses are also believed to be part of efforts by North Korea to redistribute the “rights of doing businesses with China,” a key source of earning hard currency, to its ruling elite, the source said.”The replacement of businessmen loyal to Jang Song-thaek has been gradually carried out and a lot of North Korean businessmen were summoned until late last year,” the source said. “Of those being summoned, only about 30 percent returned to China.”There are no official data on how many North Korean businessmen are working in the Chinese border cities.A second source in another Chinese border city with North Korea said that about 170 North Korean businessmen in the city were replaced over the past year.With Chinese investor confidence eroding over the North’s unpredictable behavior, the new North Korean businessmen come under further pressure in building business connections with their Chinese counterparts, the second source said. [Yonhap, via the Korea Herald]

Not only is the sagging Chinese economy hurting Bureau 39, but according to the report, “Chinese investor confidence” is also “eroding.” One reason may be the arbitrary behavior of North Korean officials, including their inclination toward unilateral price increases and demands for bribes and prostitutes. I can’t speak to the latter concern, but the former concern can’t have improved since Kim Jong Un had Jang shot for “selling off precious resources of the country at cheap prices.” This is consistent with evidence of a sudden onset of distress in North Korea’s mining industry, although I can’t say whether poor investor relations are a cause of the problems or a consequence of them.

The report cites Korea Trade and Investment Promotion Agency (KOTRA) figures, according to which, “North Korea’s annual trade with China fell 2.4 percent from a year ago in 2014,” from $6.54 to $6.39 billion, “marking the first decline since 2009.” These figures are sourced to Chinese government statistics, which is one reason to distrust them. For example, we read a lot of reporting last year that China had cut off North Korea’s crude oil supply, only to find that China had merely reclassified its trade as aid, or supplied Pyongyang with refined petroleum products (such as jet fuel) instead.

The report also claims that “North Korea’s exports of coal to China slipped 17.6 percent from a year ago to $1.13 billion, marking the first drop in 8 years.” I see more extrinsic evidence that that report is accurate.

And there are other signs of trouble: it would be a snub for Kim Jong Un to visit Russia before he visits China, and it was a snub for the leaders of China and South Korea to meet before the leaders of China and North Korea met. China didn’t send a representative to Kim Jong Il’s latest birthday party, either. This doesn’t yet mean that China has broken with North Korea. It certainly doesn’t mean that China wants to destabilize North Korea. It bears watching, however.

~   ~   ~

In other ways, Pyongyang is intensifying its isolationism. The ones that have attracted the most media attention are its bans on foreigners entering North Korea for a marathon and its creepy Arirang Festival. (By contrast, it recently granted permission for this “peace” march by a group of left-wing activists, led by Christine Ahn and Gloria Steinem). The dubious pretext for Pyongyang’s isolationism is that it is a precautionary quarantine against Ebola. This has inconvenienced two groups of useful idiots — the North Korea tour companies and the slummers who use them. I don’t see the down side to that. In the long run, it will mean fewer hostages for Pyongyang, and less hard currency for its bank accounts.

Why would Pyongyang shut down this lucrative, low-risk traffic in people with more money than sense or soul? No one knows but Pyongyang. Maybe it really is terrified of Ebola, yet confident that Gloria Steinem isn’t a carrier. Then again, maybe it’s terrified of a contagion of another kind.

For years, the pro-“engagement” argument for tourism in North Korea has been that there is something transformational, even dangerously subversive, about it that minders, deceptions, and other controls can’t contain. (Somehow, I doubt that Koryo Tours and Young Pioneers make the same argument to their contacts in Pyongyang.) I’ve usually been dismissive of this argument, although I’d be genuinely interested in hearing any evidence that Pyongyang thinks it has anything to fear from this kind of tourism. Even if that argument had any merit, Pyongyang knows how to deal with foreign subversive influences. Maybe it just did.

~   ~   ~
Kim Jong Un has been isolating low-caste North Koreans since the very beginning of his reign. His regime continues to do that by terrorizing traders, cracking down on cell phones, and blocking the flight of desperate people:

“A family of four from North Hamkyung Province attempted to escape with the help from a border guard and a smuggler near the end of last month; however, someone tipped off the proper officials, resulting in their arrest,” a source in Yangkang Province reported to Daily NK on February 4th. “To expedite the family’s escape, the smuggler got a number of soldiers, all of whom he deemed trustworthy, involved. But too many caught wind of the family’s plot to defect, which led to the family’s eventual capture.”

The family’s eldest son purportedly fled while being held in custody, leaving behind the parents and their younger son to endure relentless interrogation at a SSD-run detention center, where they are “as good as dead,” according to the source, because not only were they themselves planning to defect, but now their son presumably succeeded in doing so despite being held in custody. [Daily NK]

Human Rights Watch has documented the border crackdown in a new report, which you can read here.

“North Korean authorities are using brutal punishments to shut the door on people fleeing the country, and cracking down on those who share information with the outside world,” said Phil Robertson, deputy Asia Director. “Kim Jong-Un is trying to silence news of his systemic and pervasive rights crimes by going after the messengers, such as people with connections in South Korea or those who can help North Koreans flee there.”

The North Korean leadership has made clear the country must redouble its efforts to remain shut to the outside world.

“We must set up two or three layers of mosquito nets to prevent the poison of capitalism from being persistently spread by our enemies across the border into our territory,” said Kim Jong-Un, North Korea’s supreme leader, during a speech at the 8th Conference of Ideological Workers of the Korean Worker’s Party on February 25, 2014. “We also have to be active to block the imperialists’ plots for ideological and cultural invasion.” The “mosquito net” system Kim referred to was developed in the North to attract the inflow of foreign investment while blocking the infiltrations of foreign ideas, news, and culture. [….]

According to the escapees, the North Korean government has also been actively tracking down unauthorized phone calls from cell-phones operating on Chinese service provider networks being used by people in the North Korean border areas to call to China or South Korea. “The phones have no signal in the cities anymore and I have heard they even have mobile technology to find the exact location of the caller even after you hang up,” said Kim. “I used to call from my living room, but later I had to go high up in the mountains in the middle of the night and I was scared to talk for more than a minute or two.” Park said she used to get calls from North Korea at all times of the day and talk for long periods, but now the number of calls she receives has shrunk by approximately 60 percent since 2012.

“North Korea feels threatened by news and images of the outside world seeping into the country and now is trying to reassert its control by going after people bringing in the information,” said Robertson. “Talking on an overseas phone call, or watching a foreign television show should not be considered crimes, but the government is tightening control through repression and fear.”

More here and here. One backlash of this increased border control is a rise in cross-border violence, and more tension with China. North Korea’s border guards had come to rely on the bribes and extortion they taxed from this localized, illicit cross-border trade. With the loss of that income, the underpaid guards have turned to violent crime, and like all criminals, they go where the money is. China has since raised militias to patrol the border regions, and North Korea has purged an official of the Supreme Guard Command as punishment for the violence. There were also purges at the local level.

There is a very important point here, one that makes Kim Jong Un’s diplomatic outreach completely consistent with his isolationism: it costs money to pay border guards, buy cell phone trackers, and isolate the people you consider “wavering” or “hostile.” North Korea earns that money by extracting aid from foreign sources, and through its officially sanctioned trade relationships. Here is another way that sanctioning the regime can actually open North Korea to outside trade and influence.

~   ~   ~
These reports paint a picture of a regime that is struggling to maintain its financial links to the outside world, while severing the economic, social, and cultural links between its people and the outside world. If a less isolated, less hungry, less brutal, and less provocative North Korea is in our interests, then our obvious policy response is to undermine both aspects of that policy — to facilitate illicit cross-border flows of information, people, money, and goods, while cutting Pyongyang’s hard currency flows.

The first part of this strategy is the more difficult one. Some of it can be done through broadcasting, some requires creative technological thinking, and some will require clandestine operations.

The second part is about sanctions enforcement, which requires financial intelligence, legal tools, effective diplomacy, and political will.

The reports of defections by North Korean financiers suggest a potential windfall of financial intelligence. Each of these men, and each of their laptops, represents a potential Rosetta Stone. I certainly hope some of them have found safety in the care of U.S. and South Korean intelligence agents. I’ll also express my hope that The Guardian and Al-Jazeera will refrain from getting them — and their entire families — killed, by printing their names.

The Obama Administration will also have to find the political will to dissuade South Korea and Japan from subsidizing Pyongyang and loosening their own sanctions. It will have to find the political will to threaten secondary sanctions against the Chinese and Russian interests that prop Pyongyang up. Lacking this, the administration’s policy will continue to fail. My guesses are (respectively) that it won’t, it won’t, and so it will. North Korea’s hostage-taking, threats, and inducements will recoup more modest financial benefits for the regime. That’s about all Pyongyang needs to undermine the effect of U.N. sanctions, and to sustain its provocative and repressive ways.

Continue Reading

N. Korea: We didn’t hack Sony, but we’re glad someone did

As suspicions grow that North Korea was indeed responsible for the Sony hack, North Korea offers that oddly unconvincing denial. If the North Koreans really did do it, some commenters think the U.S. will have to respond:

Aitel says the hacks are potentially “a ‘near red-line moment'” because they represent the kind of incident that would almost require a US policy response assuming a rival state was behind it. As Aitel says, “This is the first demonstration of what the military would call Destructive Computer Network Attack (CNA) against a US Corporation on US soil … a broad escalation in cyberwarfare tactics” that would demand some kind of American response. [Business Insider]

Personally, I’d have thought that the 2009 incident when North Korea (or its sympathizers) was suspected of hacking “27 American and South Korean government agencies and commercial Web sites” would have crossed a red line. I’d be interested in knowing what evidence linked those attacks to North Korea, but targets of cyberattacks often avoid publicizing the fact that they were attacked.

Mandiant’s extensive report on China’s state-sponsored hacking was an exception to that rule. Maybe Mandiant should write a second report on North Korea, and especially about what support the North Korean hackers receive from China.

Continue Reading

Sony Pictures should go after North Korean hackers’ Chinese enablers

Since the weekend, several of you have e-mailed me about “suspicions” — and really, I don’t think they went further than that — that North Korea may have hacked Sony Pictures and leaked unreleased movies to file sharers to punish it for “The Interview.” Those rumors were covered by many outlets, but frankly, the open-source evidence for North Korea’s complicity was little more than speculation, at least until I read this today:

Hackers who knocked Sony Pictures Entertainment’s computer systems offline last week used tools very similar to those used last year to attack South Korean television stations and ATMs, people briefed on the investigation said.

The similarity would reinforce a hunch among some investigators, which include Sony, the Federal Bureau of Investigation and a team from Silicon Valley security company FireEye Inc., that North Korea played a role in the breach at the film and television studio, one of the largest in the U.S. South Korea publicly blamed the 2013 attacks on North Korea. [….]

Sony Pictures is set to release this month “The Interview,” a comedy in which U.S. spies enlist a television host played by James Franco and his producer, played by Seth Rogen, to assassinate North Korean leader Kim Jong Un. In June, a spokesman for the Pyongyang government said distribution of the movie would be “the most undisguised terrorism and a war action” and threatened a “strong and merciless countermeasure” if the U.S. government “patronizes the film.” [Wall Street Journal]

It’s hardly proof beyond a reasonable doubt, but it’s something. Interestingly, “The Interview” wasn’t one of the Sony films the hackers leaked — not yet, anyway. For now, Sony Pictures continues to deny that it has direct knowledge of North Korea’s involvement. As I noted here, Sony was previously reported to have made changes to the script to appease the North Koreans. So much for appeasing North Korea, although South Korea seems congenitally incapable of learning that:

“The Interview,” a North Korea-themed satire starring actors Seth Rogen and James Franco, won’t be released in South Korea, a Seoul-based official for Sony Pictures Entertainment said. [….]

South Korean media reports cite a Sony Pictures Korea official as saying the distributor never had plans to release the film due to concerns about inter-Korean relations. A Sony Pictures official declined to comment on the reasons behind the decision not to show the film in South Korea. [WSJ Korea Real Time, Jeyup S. Kwaak]

Cowards. Kwaak’s post notes that South Korean state censors prevented “Team America” from being screened in South Korea, but doesn’t link the suppression of “The Interview” to government censorship. One possibility is that the ROK government asked Sony very politely. Another is that Sony anticipated that the usual gang of pro-North Korean thugs and thought police would try to disrupt screenings.

And what recourse does Sony have against the hackers, assuming it can prove that North Korea was responsible? Hacking is a federal felony, and an attack on a U.S.-based computer system would arguably give the feds subject-matter jurisdiction. If the Justice Department prosecutes, it probably wouldn’t find any live bodies to stick in the dock, but because hacking is a predicate offense for money laundering, DOJ would still be able to forfeit assets of anyone the court convicted. Not that that would do Sony much good.

Sony might be able to sue North Korea by taking advantage of several exceptions to North Korea’s sovereign immunity under 28 U.S.C. 1605(a). Collecting the judgements, of course, would be another matter entirely. Just ask any of the lawyers who won these judgments.

More interesting, however, are suspicions that the hackers may have been operating out of China, which isn’t a novel theory. That almost certainly couldn’t happen without the knowledge of the Chinese government and other Chinese entities, perhaps including entities with assets that could be reached by U.S. courts.

This suggests that a more fruitful legal strategy may be for the feds to prosecute, and for parties like Sony to sue, the Chinese enablers. There are even indications that our government might have the political will do to that. The new Congress could also require the Director of National Intelligence to report on China’s sponsorship of North Korean hacking. Unclassified portions of that report might provide useful evidence for Sony’s case.

~   ~   ~

Update: One reason Sony Pictures might not go after the hackers’ Chinese enablers is that Hollywood has been too preoccupied welcoming its new Chinese overlords and sucking up to its new censors. I thought it was bad enough when Sony Pictures bent over for Japan’s censorship; wait till you see what stultifying delights the Chinese have in store for us.

And the unlikely hero of this alarming and underreported controversy? Oliver Stone, himself a suspected disseminator of KGB propaganda, naturally. So I guess the wounds from the Stalin-Mao rift are still raw in some quarters. Hat tip to a reader.

~   ~   ~

Update 2: According to this report by U.S. Army Major Steve Sin, a defector reported that as of 2004, members of a North Korean military hacker unit called Unit 121 conducted “some of its operations from a North Korean government-operated hotel called Chilbosan in Shenyang, China.” Business Insider sent a reporter there (Update: or, horked the pictures online; see comments) to see what the hotel looks like today.

Continue Reading

China’s bridge to nowhere?

The AP’s Pyongyang Bureau Chief reports that as China completes a $350 million bridge across the Yalu River from Dandong to Sinuiju, and weeks after its announced opening date, the North Korean side is largely an unfinished abutment.

Now, it is beginning to look like Beijing has built a bridge to nowhere.

An Associated Press Television News crew in September saw nothing but a dirt ramp at the North Korean end of the bridge, surrounded by open fields. No immigration or customs buildings could be seen. Roads to the bridge had not been completed.

The much-awaited opening of the new bridge over the Yalu River came and passed on Oct. 30 with no sign the link would be ready for business anytime soon. That prompted an unusually sharp report in the Global Times — a newspaper affiliated with the Chinese Communist Party — quoting residents in the Chinese city of Dandong expressing anger over delays in what they had hoped would be an economic boom for their border city.

The report suggested the opening of the mammoth, 3-kilometer bridge has been postponed “indefinitely.” Beijing and Pyongyang have made no official comment. [….]

The bridge — which, from the start, appears to have been of more interest to China than to North Korea — is intended to provide a new connection between Dandong and the special economic development zone in North Korea’s Sinuiju. More broadly, China wants to develop inroads with North Korea that will allow its landlocked northeastern provinces access to North Korean ports so its goods can be exported or shipped down the Chinese coastline more cheaply. [AP, Eric Talmadge]

It’s an interesting enough report, but so soon after one of Talmadge’s colleagues felt the need to discredit “defectors” and guerrilla media, I can’t help noting that the first report I saw that North Korea wasn’t completing its side of the bridge was in The Daily NK, back in July:

“The Chosun side took on the job of constructing the roads, but they are making painfully slow work of it. Because the roads are still not finished, people are wondering whether their initial aim of increasing trade volumes is on its way down the drain,” a source close to the project told Daily NK on the 1st.

“China provided a lot of materials and machinery to the North, but there is a story that this machinery was sent for use on other projects rather than for the bridge construction. The Chinese traders who did harbor high hopes for [economic] opening brought on by the bridge are showing their disappointment more and more,” the source explained. [….]

This declining enthusiasm is tangible in the property market in Langtou, the region of Dandong that ought to benefit the most from bilateral economic activity across the new bridge. “Apartment prices remain where they were three years ago, at roughly 4000 Yuan per pyeong,” explained the source. Pyeong is a Korean unit of measuring area, and amounts to 3.305785m². [….]

In addition to problems with the bridge, Daily NK established in May that almost no progress has been made on the development of two Special Economic Zones in the Sinuiju area (see linked article).

Then, last month, China’s Global Times further corroborated the story:

In the story headlined, “Opening Day of New China-North Korea Yalu River Bridge Indefinitely Delayed,” the Global Times newspaper reported that the bridge had been “fully completed and put into use on Oct. 30. However, it all becomes uncertain.”

Zhang Hui, chairman of a Chinese construction company behind the bridge, told the newspaper that, “Due to various reasons, construction was delayed for nearly a year.”

It was unclear whether Zhang’s comments indicated that the opening of the bridge has been delayed by one year. [via Yonhap]

In my experience, the most frequent propagators of apocryphal stories about North Korea aren’t guerrilla journalists, but the lower reaches of the British media ecosystem and “established” South Korean papers that cite anonymous sources.

As for the bridge itself, I wouldn’t be too quick to write it off as a failure just yet. China’s real purpose for it may have more to do with contingency planning and future colonial administration than trade.

bridge

[Times of London]

North Korea’s failure to prioritize the project is curious. Maybe, in due course, it will get around to building those road links and customs checkpoints. Even if North Korea regulates the traffic across the bridge strictly and meters it down to a trickle, having this infrastructure available for the use of controlled and preferred trade would seem to serve the interests of the state capitalists in Pyongyang. Still, I can see why Kim Jong Un might think he’s already dependent enough on trade with China, and why he might see the rapid expansion of trade as risky:

“[China]’s not even shepherding anymore. It’s more of just inundating North Korea with all of these influences from the Chinese side where the idea is to essentially corrupt them, show them what it tastes like to make money,” said John Park, a North Korea expert at the Massachusetts Institute of Technology and the Harvard Kennedy School. [Reuters, Apr. 2013]

For whatever reason, this bridge isn’t Kim Jong Un’s highest priority right now, and Kim Jong Un’s highest priorities get done with Masikryeong speed. Time will tell whether he’s actively resisting or delaying it, and how long it will sit unused, like the Ryugyong Hotel. That would be a potent symbol indeed of the failure of the premises behind the Sunshine Policy.

~   ~   ~

Update: More here, at NK News.

Continue Reading
1 2 3 13