UNSCR 2371: Text and commentary (see update)

Today, the U.N. Security Council adopted Resolution 2371 unanimously. The text is in black, my commentary is in blue italic.

PP1: Recalling its previous relevant resolutions, including resolution 825 (1993), resolution 1540 (2004), resolution 1695 (2006), resolution 1718 (2006), resolution 1874 (2009), resolution 1887 (2009), resolution 2087 (2013), resolution 2094 (2013), resolution 2270 (2016), resolution 2321 (2016), and resolution 2356 (2017), as well as the statements of its President of 6  October 2006 (S/PRST/2006/41), 13 April 2009 (S/PRST/2009/7) and 16 April 2012 (S/PRST/2012/13), (updated PP1 of UNSCR 2321)

PP2: Reaffirming that proliferation of nuclear, chemical and biological weapons, as well as their means of delivery, constitutes a threat to international peace and security, (PP2 of UNSCR 2321)

PP3: Expressing its gravest concern at the July 3 and July 28 of 2017 ballistic missile  tests by the Democratic People’s Republic of Korea (“the DPRK”),  which the DPRK has stated were tests of intercontinental ballistic missiles, in violation of resolutions 1718 (2006), 1874 (2009), 2087 (2013), 2094 (2013), 2270 (2016) 2321 (2016), and 2356 (2017), and at the challenge such tests constitute to the Treaty on Non-Proliferation of Nuclear Weapons (“the NPT”) and to international efforts aimed at strengthening the global regime of non-proliferation of nuclear weapons, and the danger they pose to peace and stability in the region and beyond, (PP3 of UNSCR 2321)

PP4: Underlining once again the importance that the DPRK respond to other security and humanitarian concerns of the international community, (PP4 of UNSCR 2321)

PP5: Underlining also that measures imposed by this resolution are not intended to have adverse humanitarian consequences for the civilian population of the DPRK, (PP5 of UNSCR 2321)

PP6: Expressing serious concern that the DPRK has continued to violate relevant Security Council resolutions through repeated launches and attempted launches of ballistic missiles, and noting that all such ballistic missile activities contribute to the DPRK’s development of nuclear weapons delivery systems and increase tension in the region and beyond, (PP6 of UNSCR 2321)

PP7: Expressing continued concern that the DPRK is abusing the privileges and immunities accorded under the Vienna Conventions on Diplomatic and Consular Relations, (PP7 of UNSCR 2321)

PP8: Expressing great concern that the DPRK’s prohibited arms sales have generated revenues that are diverted to the pursuit of nuclear weapons and ballistic missiles while DPRK citizens have unmet needs, (PP8 of UNSCR 2321)

Are you listening, Singapore?

PP9: Expressing its gravest concern that the DPRK’s ongoing nuclear- and ballistic missile-related activities have further generated increased tension in the region and beyond, and determining that there continues to exist a clear threat to international peace and security, (PP9 of UNSCR 2321)

PP10: Acting under Chapter VII of the Charter of the United Nations, and taking measures under its Article 41,

1. Condemns in the strongest terms the ballistic missile launches conducted by the DPRK on 3 July and 28 July of 2017, which the DPRK has stated were launches of intercontinental ballistic missiles, and which used ballistic missile technology in violation and flagrant disregard of the Security Council’s resolutions; (Based on OP1 of UNSCR 2270)

Reading that language, it’s not hard to reverse engineer how the argument between the U.S. and Russian diplomats went.

2. Reaffirms its decisions that the DPRK shall not conduct any further launches that use ballistic missile technology, nuclear tests, or any other provocation; shall suspend all activities related to its ballistic missile program and in this context re-establish its pre-existing commitments to a moratorium on missile launches; shall abandon all nuclear weapons and existing nuclear programs in a complete, verifiable and irreversible manner, and immediately cease all related activities; and shall abandon any other existing weapons of mass destruction and ballistic missile programs in a complete, verifiable and irreversible manner; (OP 2-4 of UNSCR 2270, adapted and combined)

Designations

3. Designate individuals and entities for asset freeze/travel ban:  Decides that the measures specified in paragraph 8(d) of resolution 1718 (2006) shall apply also to the individuals and entities listed in Annex I and II of this resolution and to any individuals or entities acting on their behalf or at their direction, and to entities owned or controlled by them, including through illicit means, and decides further that the measures specified in paragraph 8(e) of resolution 1718 (2006) shall also apply to the individuals listed in Annex I of this resolution and to individuals acting on their behalf or at their direction; (OP3 of UNSCR 2321)

4. Designation of additional WMD-related Items: Decides to adjust the measures imposed by paragraph 8 of resolution 1718 (2006) and this resolution through the designation of additional goods, directs the Committee to undertake its tasks to this effect and to report to the Security Council within fifteen days of adoption of this resolution, and further decides that, if the Committee has not acted, then the Security Council will complete action to adjust the measures within seven days of receiving that report; (OP25 of UNSCR 22270)

5. Designation of additional Conventional Arms-related Items: Decides to adjust the measures imposed by paragraph 7 of resolution 2321 (2016) through the designation of additional conventional arms-related items, materials, equipment, goods, and technology, directs the Committee to undertake its tasks to this effect and to report to the Security Council within thirty days of adoption of this resolution, further decides that, if the Committee has not acted, then the Security Council will complete action to adjust the measures within seven days of receiving that report, and directs the Committee to update this list every 12 months; (Based on OP7 of UNSCR 2321 and OP25 of 2270)

Transportation

6. Prohibit port calls by designated vessels tied to illicit activities: Decides that the Committee may designate vessels for which it has information indicating they are, or have been, related to activities prohibited by resolutions 1718 (2006), 1874 (2009), 2087 (2013), 2094 (2013), 2270 (2016), 2321 (2016), 2356 (2017), or this resolution and all Member States shall prohibit the entry into their ports of such designated vessels, unless entry is required in the case of emergency or in the case of return to its port of origination, or unless the Committee determines in advance that such entry is required for humanitarian purposes or any other purposes consistent with the objectives of resolutions 1718 (2006), 1874 (2009), 2087 (2013), 2094 (2013), 2270 (2016), 2321 (2016), 2356 (2017), or this resolution; (New)

I’m not sure this adds much to existing sanctions that already require member states to seize designated North Korean ships that enter their harbors. It may be that member states were so reluctant to deal with the hassle of disposal that someone figured it would be easier to require them to keep the ships out of port entirely. I’m not so sure. 

7. Prohibit chartering of vessels flagged by the DPRK: Clarifies that the measures set forth in paragraph 20 of resolution 2270 (2016) and paragraph 9 of resolution 2321 (2016), requiring States to prohibit their nationals, persons subject to their jurisdiction and entities incorporated in their territory or subject to their jurisdiction from owning, leasing, operating any vessel flagged by the DPRK, without exception, unless the Committee approves on a case-by-case basis in advance, apply to chartering vessels flagged by the DPRK;

The only country I’ve heard was doing this is a Middle Eastern country that starts with “i” and ends with “n” and is spelled “i-r-a-n.”

Sectoral

8. Full ban on coal, iron and iron ore: Decides that paragraph 26 of resolution 2321 (2016) shall be replaced by the following:

“Decides that the DPRK shall not supply, sell or transfer, directly or indirectly, from its territory or by its nationals or using its flag vessels or aircraft, coal, iron, and iron ore, and that all States shall prohibit the procurement of such material from the DPRK by their nationals, or using their flag vessels or aircraft, and whether or not originating in the territory of the DPRK, decides that for sales and transactions of iron and iron ore for which written contracts have been finalized prior to the adoption of this resolution, all States may allow those shipments to be imported into their territories up to 30 days from the date of adoption of this resolution with notification provided to the Committee containing details on those imports by no later than 45 days after the date of adoption of this resolution, and decides further that this provision shall not apply with respect to coal that the exporting State confirms on the basis of credible information has originated outside the DPRK and was transported through the DPRK solely for export from the Port of Rajin (Rason), provided that the exporting State notifies the Committee in advance and such transactions involving coal originating outside of the DPRK are unrelated to generating revenue for the DPRK’s nuclear or ballistic missile programs or other activities prohibited by resolutions 1718 (2006), 1874 (2009), 2087 (2013), 2094 (2013), 2270 (2016), 2321 (2016), 2356 (2017), or this resolution; (New)

The good news: there is no longer a coal cap for China to cheat on. The bad news: there is now a complete coal ban for China to cheat on. A little birdie tells me – and in the near future, that little birdie will also tell you — that the North Koreans are smuggling their coal to China via third countries. My guess is that even if this isn’t airtight in practice, it will still make it harder and more expensive for Pyongyang to sell its coal, meaning it will cut into Pyongyang’s export profits.

9. Prohibit seafood exports from the DPRK: Decides that the DPRK shall not supply, sell or transfer, directly or indirectly, from its territory or by its nationals or using its flag vessels or aircraft, seafood (including fish, crustaceans, mollusks, and other aquatic invertebrates in all forms), and that all States shall prohibit the procurement of such items from the DPRK by their nationals, or using their flag vessels or aircraft, whether or not originating in the territory of the DPRK, and further decides that for sales and transactions of seafood (including fish, crustaceans, mollusks, and other aquatic invertebrates in all forms) for which written contracts have been finalized prior to the adoption of this resolution, all States may allow those shipments to be imported into their territories up to 30 days from the date of adoption of this resolution with notification provided to the Committee containing details on those imports by no later than 45 days after the date of adoption of this resolution;

Good on you, U.N., for using this nifty idea. I first suggested the same thing in this post, and section 311 of the KIMS Act now allows the President to designate anyone who buys fishing rights, food, or agricultural products from North Korea. I read the resolution’s language to cover the sale of fishing rights as well as seafood. For its next act, the U.N. should also ban food exports entirely. Pyongyang has no business exporting food for hard currency while the poor starve.

10. Prohibit lead exports from the DPRK: Decides that the DPRK shall not supply, sell or transfer, directly or indirectly, from its territory or by its nationals or using its flag vessels or aircraft, lead and lead ore, and that all States shall prohibit the procurement of such items from the DPRK by their nationals, or using their flag vessels or aircraft, whether or not originating in the territory of the DPRK, and further decides that for sales and transactions of lead and lead ore for which written contracts have been finalized prior to the adoption of this resolution, all States may allow those shipments to be imported into their territories up to 30 days from the date of adoption of this resolution with notification provided to the Committee containing details on those imports by no later than 45 days after the date of adoption of this resolution;

I did not even realize North Korea exported lead, but evidently, it does

11. Ban the hiring and paying of additional DPRK laborers used to generate foreign export earnings: Expresses concern that DPRK nationals frequently work in other States for the purpose of generating foreign export earnings that the DPRK uses to support its prohibited nuclear and ballistic missile programs, decides that all Member States shall not exceed on any date after the date of adoption of this resolution the total number of work authorizations for DPRK nationals provided in their jurisdictions at the time of the adoption of this resolution unless the Committee approves on a case-by-case basis in advance that employment of additional DPRK nationals beyond the number of work authorizations provided in a member state’s jurisdiction at the time of the adoption of this resolution is required for the delivery of humanitarian assistance, denuclearization or any other purpose consistent with the objectives of resolutions 1718 (2006), 1874 (2009), 2087 (2013), 2094 (2013), 2270 (2016), 2321 (2016), 2356 (2017), or this resolution; (New)

Here is the first binding limit on North Korean labor exports, but it’s really a cap. On the bad side, because everyone involved in these contracts was already concealing or misrepresenting the number of North Korean laborers anyway, it will be hard to tell what “exceeds.” On the good side, this doesn’t prevent the U.S. from using section 321 of the KIMS Act to sanction employers of North Korean slave labor or their governments, and it will give the U.S. a stronger argument to convince host nations to send those workers home. This assumes we’re making that effort – and I keep hearing that we are, quietly. I also don’t interpret this to diminish the existing requirements of UNSCR 1718, paragraph 8 that purchasers of North Korean labor (a) “ensure” that the money doesn’t go to the nuke fund, and (b) abstain from dealing with designated persons.

Financial

12. Prohibiting new or expanded joint ventures and cooperative commercial entities with the DPRK: Decides that States shall prohibit, by their nationals or in their territories, the opening of new joint ventures or cooperative entities with DPRK entities or individuals, or the expansion of existing joint ventures through additional investments, whether or not acting for or on behalf of the government of the DPRK, unless such joint ventures or cooperative entities have been approved by the Committee in advance on a case-by-case basis; (New)

So, got your tickets yet for that big investment fair in Rason in two weeks? Are those tickets refundable? Yeah. Unfortunately, the word “existing” means that this isn’t necessarily the end for the MKP Group, although some parts of it (such as banking joint ventures) are banned by other resolutions. Ditto Orascom. It would be nice to get more definition on the words “new,” “existing,” and “expansion,” which seem like potential loopholes.

13. Clarifies that the prohibitions contained in paragraph 11 of resolution 2094 (2013) apply to clearing of funds through all Member States’ territories; (New)

This is useful. Although section 201 the NKSPEA effectively (if indirectly) banned direct and indirect dollar clearing services for North Korean banks, this extends that obligation to other issuers of convertible currencies – the EU, the UK, Canada, Australia, Switzerland, Hong Kong, Japan, etc. – and also closes a potential loophole for offshore dollar clearing. As always, detection and enforcement will be key.

14. Clarifies that companies performing financial services commensurate with those provided by banks are considered financial institutions for the purposes of implementing paragraph 11 of resolution 2094 (2013), paragraphs 33 and 34 of resolution 2270 (2016), and paragraph 33 of resolution 2321 (2016); (New)

In other words, shadow banks and money launderers (such as DCB Finance and Kim Chol-Sam) are banks for purposes of the resolutions. That matters, because North Korea increasingly relies on trading companies to perform the functions of banks.

Chemical Weapons

15. Prohibiting use of chemical weapons and calling for accession to the CWC: Recalls paragraph 24 of resolution 2270 (2016), decides that the DPRK shall not deploy or use chemical weapons, and urgently calls upon the DPRK to accede to the Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and Their Destruction, and then to immediately comply with its provisions; (Based on OP24 of UNSCR 2270)

For reasons that ought to be obvious ….

Vienna Convention

16. Abiding by the VCDR/VCCR: Demands that the  DPRK fully comply with its obligations under the Vienna Convention on Diplomatic Relations and the Vienna Convention on Consular Relations; (New)

In South Dakota English, this means stop renting out your embassies as eurotrash flophouses.

Impact on the People of the DPRK

17. Regrets the DPRK’s massive diversion of its scarce resources toward its development of nuclear weapons and a number of expensive ballistic missile programs, notes the findings of the United Nations Office for the Coordination of Humanitarian Assistance that well over half of the people in the DPRK suffer from major insecurities in food and medical care, including a very large number of pregnant and lactating women and under-five children who are at risk of malnutrition and nearly a quarter of its total population suffering from chronic malnutrition, and, in this context, expresses deep concern at the grave hardship to which the people in the DPRK are subjected; (New)

I can’t overstate how smart and important this language is. Pyongyang will always try to use its people as human shields against sanctions. It will always steal from the poor to give to the rich and the military. The world needs to remember exactly why so many North Koreans are poor and hungry, and it’s not because North Korea is a poor country, or because of weather, or sanctions. It’s because of choices – choices that are made in Pyongyang.

Sanctions Implementation

18. State implementation report: Decides that Member States shall report to the Security Council within ninety days of the adoption of this resolution, and thereafter upon request by the Committee, on concrete measures they have taken in order to implement effectively the provisions of this resolution, requests the Panel of Experts, in cooperation with other UN sanctions monitoring groups, to continue its efforts to assist Member States in preparing and submitting such reports in a timely manner; (based on OP36 of UNSCR 2321)

If they weren’t filing their reports before, it’s going to take more than a strongly worded appeal to make them file now. That’s where the BRINK Act becomes important. Take a gander at section 104 for some of the sanctions non-compliant states might face.

19. Redouble implementation efforts: Calls upon all Member States to redouble efforts to implement in full the measures in resolutions 1718 (2006), 1874 (2009), 2087 (2013), 2094 (2013) 2270 (2016), 2321 (2016), and 2356 (2017), and to cooperate with each other in doing so, particularly with respect to inspecting, detecting and seizing items the transfer of which is prohibited by these resolutions; (OP38 of UNSCR 2321)

20. Update Committee and POE mandate: Decides that the mandate of the Committee, as set out in paragraph 12 of resolution 1718 (2006), shall apply with respect to the measures imposed in this resolution and further decides that the mandate of the Panel of Experts, as specified in paragraph 26 of resolution 1874 (2009) and modified in paragraph 1 of resolution 2345 (2017), shall also apply with respect to the measures imposed in this resolution; (OP39 of UNSCR 2321)

21. Standard “seize and dispose” provision: Decides to authorize all Member States to, and that all Member States shall, seize and dispose (such as through destruction, rendering inoperable or unusable, storage, or transferring to a State other than the originating or destination States for disposal) of items the supply, sale, transfer, or export of which is prohibited by resolutions 1718 (2006), 1874 (2009), 2087 (2013), 2094 (2013), 2270 (2016), 2321 (2016), 2356 (2017), or this resolution that are identified in inspections, in a manner that is not inconsistent with their obligations under applicable Security Council resolutions, including resolution 1540 (2004), as well as any obligations of parties to the NPT, the Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and on Their Development of 29 April 1997, and the Convention on the Prohibition of the Development, Production and Stockpiling of Bacteriological (Biological) and Toxin Weapons and on Their Destruction of 10 April 1972; (OP40 of UNSCR 2321)

This provision addresses what I call the Mu Du Bong problem. Remember when Mexico seized the Mu Du Bong after it ran aground off the port of Tuxpan? For the longest time, the Mexicans didn’t know what to do with the ship. This question eventually came to me via an indirect route. I pointed out that paragraph 8 of UNSCR 2087 already authorized Mexico to seize, destroy, or dispose of the ship as it saw fit. Of course, 2087 isn’t a Chapter VII resolution, but the Mu Du Bong became an artificial reef shortly thereafter, so I’d like to think I played some small role in the lives of some red snapper and grouper.

22. Force majeure clause: Emphasizes the importance of all States, including the DPRK, taking the necessary measures to ensure that no claim shall lie at the instance of the DPRK, or of any person or entity in the DPRK, or of persons or entities designated for measures set forth in resolutions 1718 (2006), 1874 (2009), 2087 (2013), 2094 (2013), 2270 (2016), 2321 (2016), 2356 (2017), or this resolution, or any person claiming through or for the benefit of any such person or entity, in connection with any contract or other transaction where its performance was prevented by reason of the measures imposed by this resolution or previous resolutions; (OP41 of UNSCR 2321)

This keeps governments that freeze assets from getting tied up in litigation for enforcing the resolutions – theoretically. Of course, not all member state courts will recognize this, and it only applies to claims by North Korea or by designated persons. It will require good implementing legislation, which (let’s face it) very few countries have.

23. Request Interpol notices: Requests that Interpol issue Special Notices with respect to designated individuals, and directs the Committee to work with Interpol to develop the appropriate arrangements to do so; (New)

OK, I’ll admit that I’m mildly impressed by this. I’ll believe it when Kim Chol-Sam leaves China for good.

24. Expand POE capacity and resources: Requests the Secretary General to provide additional analytical resources needed to the Panel of Experts established pursuant to resolution 1874 (2009) to strengthen its ability to analyze the DPRK’s sanctions violation and evasion activities; (Based on OP42 of UNSCR 2321)

Hmm. Are they hiring lawyers, and what do they pay?

Political

25. Reiterates its deep concern at the grave hardship that the people in the DPRK are subjected to, condemns the DPRK for pursuing nuclear weapons and ballistic missiles instead of the welfare of its people while people in the DPRK have great unmet needs, and emphasizes the necessity of the DPRK respecting and ensuring the welfare and inherent dignity of people in the DPRK; (OP45 of UNSCR 2321)

As stated above, this matters.

26. Reaffirms that the measures imposed by resolutions 1718 (2006), 1874 (2009), 2087 (2013), 2094 (2013), 2270 (2016), 2321 (2016), 2356 (2017), and this resolution are not intended to have adverse humanitarian consequences for the civilian population of the DPRK or to affect negatively or restrict those activities, including economic activities and cooperation, food aid and humanitarian assistance, that are not prohibited by resolutions 1718 (2006), 1874 (2009), 2087 (2013), 2094 (2013), 2270 (2016), 2321 (2016), 2356 (2017) and this resolution, and the work of international and non-governmental organizations carrying out assistance and relief activities in the DPRK for the benefit of the civilian population of the DPRK and decides that the Committee may, on a case-by-case basis, exempt any activity from the measures imposed by these resolutions if the committee determines that such an exemption is necessary to facilitate the work of such organizations in the DPRK or for any other purpose consistent with the objectives of these resolutions, and further decides that the measures specified in paragraph 8(d) of resolution 1718 (2006) shall not apply with respect to financial transactions with the DPRK Foreign Trade Bank or the Korea National Insurance Corporation if such transactions are solely for the operation of diplomatic missions in the DPRK or humanitarian assistance activities that are undertaken by, or in coordination with, the United Nations; (Based on OP46 of UNSCR 2321)

So, spoiler alert: the FTB, which Treasury designated in 2013, and which featured prominently in this recent civil forfeiture suit, is designated in one of the annexes below, which is good. When I say that Pyongyang uses its people as human shields, the Foreign Trade Bank is a perfect example of that strategy, and how some humanitarian aid NGOs have been willing accomplices of it. That exemption is probably a smart move, tactically.

27. Reaffirms its support for the Six Party Talks, calls for their resumption, and reiterates its support for the commitments set forth in the Joint Statement of 19 September 2005 issued by China, the DPRK, Japan, the Republic of Korea, the Russian Federation, and the United States, including that the goal of the Six-Party Talks is the verifiable denuclearization of the Korean Peninsula in a peaceful manner, that the United States and the DPRK undertook to respect each other’s sovereignty and exist peacefully together, that the Six Parties undertook to promote economic cooperation, and all other relevant commitments; (OP47 of UNSCR 2321)

Note the language “reaffirms its support.” I occasionally see claims, either from soft-liners here or from Beijing, that the resolutions require us to return to six-party talks — never mind that North Korea won’t return to them — and that some notion of reciprocity consequently releases China from its obligations to enforce the other provisions. But “reaffirms its support” is non-binding language, in contrast to the sanctions provisions that say “decides,” and which are binding. The obligations aren’t reciprocal, and the idea that this provision requires anyone to return to the talks (including Pyongyang) is baseless. The resolutions do, however, use “decides” when they require Pyongyang to completely, verifiably, and irreversibly dismantle its nuclear, chemical, biological, and ballistic missile programs.

28. Reiterates the importance of maintaining peace and stability on the Korean Peninsula and in north-east Asia at large, and expresses its commitment to a peaceful, diplomatic, and political solution to the situation and welcomes efforts by the council members as well as other States to facilitate a peaceful and comprehensive solution through dialogue and stresses the importance of working to reduce tensions in the Korean Peninsula and beyond; (OP48 of UNSCR 2321)

29. Affirms that it shall keep the DPRK’s actions under continuous review and is prepared to strengthen, modify, suspend or lift the measures as may be needed in light of the DPRK’s compliance, and, in this regard, expresses its determination to take further significant measures in the event of a further DPRK nuclear test or launch; (OP49 of UNSCR 2321)

30. Decides to remain seized of the matter. (OP50 of UNSCR 2321)

Now, the designations.

Annex I

Travel Ban/Asset Freeze (Individuals)

1. CHOE CHUN YONG

a. Description: Representative for Ilsim International Bank, which is affiliated with the DPRK military and has a close relationship with the Korea Kwangson Banking Corporation.  Ilsim International Bank has attempted to evade United Nations sanctions.

b. A.K.A.: Ch’oe Ch’un-yo’ng

c. Identifiers: Nationality: DPRK; Passport no.: 654410078; Gender: male

With respect to each of these guys, I can only ask: are their designated successors in Beijing yet?

2. HAN JANG SU

a. Description: Chief Representative of the Foreign Trade Bank.

b. A.K.A.: Chang-Su Han

c. Identifiers: DOB: November 08, 1969; POB: Pyongyang, DPRK; Nationality: DPRK; Passport no.: 745420176, expires on October 19, 2020; Gender: male

3. JANG SONG CHOL

a. Description: Jang Song Chol is a Korea Mining Development Corporation (KOMID) representative overseas.

b. AKA: n/a

c. Identifiers: DOB: 12 March 1967; Nationality: DPRK

4. JANG SUNG NAM

a. Description: Chief of an overseas Tangun Trading Corporation branch, which is primarily responsible for the procurement of commodities and technologies to support the DPRK’s defense research and development programs.

b. A.K.A.: n/a

c. Identifiers: DOB: July 14, 1970; Nationality: DPRK; Passport no.: 563120368, issued on March 22, 2013; Passport expiration date: March 22, 2018; Gender: male

5. JO CHOL SONG

a. Description: Deputy Representative for the Korea Kwangson Banking Corporation, which provides financial services in support to Tanchon Commercial Bank and Korea Hyoksin Trading, a subordinate entity of Korea Ryonbong General Corporation.

b. A.K.A.: Cho Ch’o’l-so’ng

c. Identifiers: DOB: September 25, 1984; Nationality: DPRK; Passport no.: 654320502, expires on September 16, 2019; Gender: male

6. KANG CHOL SU

a. Description: Official for Korea Ryonbong General Corporation, which specializes in acquisition for the DPRK’s defense industries and support for the DPRK’s military-related overseas sales. Its procurements also likely support the DPRK’s chemical weapons program.

b. A.K.A.: n/a

c. Identifiers: DOB: February 13, 1969; Nationality: DPRK; Passport no.: 472234895

7. KIM MUN CHOL

a. Description: Representative for Korea United Development Bank. 

b. A.K.A.: Kim Mun-ch’o’l

c. Identifiers: DOB: March 25, 1957; Nationality: DPRK

8. KIM NAM UNG

a. Description: Representative for Ilsim International Bank, which is affiliated with the DPRK military and has a close relationship with the Korea Kwangson Banking Corporation.  Ilsim International Bank has attempted to evade United Nations sanctions.

b. A.K.A.: n/a

c. Identifiers: Nationality: DPRK; Passport no.: 654110043

9. PAK IL KYU

a. Description: Official for Korea Ryonbong General Corporation, which specializes in acquisition for DPRK’s defense industries and support to Pyongyang’s military-related sales. Its procurements also likely support the DPRK’s chemical weapons program.

b. A.K.A.: Pak Il-Gyu

c. Identifiers: Nationality: DPRK; Passport no.: 563120235; Gender: male

List Update for Aliases:

• JANG BOM SU (KPi.016) – New AKA: Jang Hyon U with date of birth 22 February 1958 and diplomatic passport number 836110034, which expires on 1 January 2020.

• JON MYONG GUK (KPi.018) – New AKA: Jon Yong Sang with date of birth 25 August 1976 and diplomatic passport number 836110035, which expires on 1 January 2020.

Annex II

Asset Freeze (Entities)

1. FOREIGN TRADE BANK (FTB)

a. Description: Foreign Trade Bank is a state-owned bank and acts as the DPRK’s primary foreign exchange bank and has provided key financial support to the Korea Kwangson Banking Corporation.

b. AKA: n/a

c. Location: FTB Building, Jungsong-dong, Central District, Pyongyang, DPRK

Now we’re talking.

2. KOREAN NATIONAL INSURANCE COMPANY (KNIC)

a. Description: The Korean National Insurance Company is a DPRK financial and insurance company and is affiliated with Office 39.

b. AKA: Korea Foreign Insurance Company

c. Location: Central District, Pyongyang, DPRK

Another good one, though the failure to designate the Korean Shipowners’ Protection and Indemnity Association, which insured the Chong Chon Gang, seems like an oversight

3. KORYO CREDIT DEVELOPMENT BANK

a. Description: Koryo Credit Development Bank operates in the financial services industry in the DPRK’s economy.

b. AKA: Daesong Credit Development Bank; Koryo Global Credit Bank; Koryo Global Trust Bank

c. Location: Pyongyang, DPRK

4. MANSUDAE OVERSEAS PROJECT GROUP OF COMPANIES

a. Description: Mansudae Overseas Project Group of Companies engaged in, facilitated, or was responsible for the exportation of workers from the DPRK to other nations for construction-related activities including for statues and monuments to generate revenue for the Government of the DPRK or the Workers’ Party of Korea. The Mansudae Overseas Project Group of Companies has been reported to conduct business in countries in Africa and Southeast Asia including Algeria, Angola, Botswana, Benin, Cambodia, Chad, the Democratic Republic of the Congo, Equatorial Guinea, Malaysia, Mozambique, Madagascar, Namibia, Syria, Togo, and Zimbabwe.

b. AKA: Mansudae Art Studio

c. Location: Pyongyang, DPRK

In theory, African dictators will have to build their own big, ugly statues now. Recall that UNSCR 2321 banned the export of statues. But … no Air Koryo? Really? I guess we’ll have to wait for the nuke test for that one.

These sanctions could be damaging — if member states enforce them. The sanctions in UNSCR 2270 should have been more damaging than they were, but China violated them and, until very recentlygot away with it. Getting other member states to enforce the sanctions will require the President to use the authorities Congress has given him in the NKSPEA and the KIMS Act. A truly effective policy will require a whole-of-government approach: the State Department will have to lobby foreign governments, the Treasury and Justice Departments must be prepared to sanction violators, and the Homeland Security Department must step up the screening of cargo from ports that don’t inspect North Korean cargo.

Finally, the administration must speak coherently about sanctions, diplomacy, human rights, the proper role of engagement, what happens if diplomacy fails, and how to reunify Korea peacefully (or, as peacefully as possible). So far, I’ve seen some encouraging steps on sanctions enforcement, but not the coherent whole-of-government effort we’ll need.

~   ~  ~

The question most people are asking now is, “Will things be any different this time?” There’s one reason to think that they just might be. No, this isn’t the first sanctions resolution that might have done serious harm to Pyongyang’s palace economy if it had been enforced, but as I’ve said before, U.N. sanctions don’t enforce themselves. All the U.N. can really do is pass new resolutions and issue the occasional Panel of Experts report. (The Panel, which had previously issued its reports annually, will now start issuing them bi-annually. Its first mid-term new report should be coming out in the new few days. Expect it to be bleak about enforcement and compliance efforts so far, but it will also call out more cheaters and concentrate the attention of the FBI, the Treasury Department, and the Justice Department on them.)

Persuading governments and companies that want to trade with Pyongyang to stop doing so sometimes requires either an inducement or a threat. Yun Byung-Se was skilled at the use of inducements, particularly in Africa, but with Moon Jae-In in office, the U.S. has probably lost Seoul as a valuable diplomatic ally against Pyongyang. 

The Trump administration has recently become more willing to use threats. It hasn’t talked about it much yet, but the Treasury and Justice Departments have begun to seize and forfeit the funds of the trading companies that broker Pyongyang’s coal exports to China. It has also zapped one Chinese bank that was involved in laundering money for North Korea, and fired a shot across the bow of the correspondent banks that carelessly clear those transactions through our financial system. As the Justice Department noted last September, Pyongyang has tried to switch to non-dollar currencies, but without much success. Sellers prefer dollars. Now, for the first time, the U.S. has made a credible threat to banks and trading companies that facilitate Pyongyang’s coal exports. 

As for those who might be tempted to accept China’s view that Pyongyang’s coal exports were for “humanitarian” purposes, a new story by the Washington Post’s Peter Whoriskey cites the Justice Department filings I refer to in the preceding paragraphs to debunk that cynical lie (as I characterize it in the article, which quotes me):

Documents from a recently unsealed U.S. court filing, combined with another federal case, suggest that much of the money China has paid to North Korea for coal over the years went toward the country’s weapons and military efforts.

The coal trade cited in the court documents, which has accounted for as much as a third of North Korean exports, helps explain how North Korea continued to develop its weapons programs despite being impoverished and under trade sanctions. The connections to the military also undermine Chinese claims that their imports were benefiting North Korean civilians.

“We considered that to be a very narrow [humanitarian] exception, but it soon became clear that not all others shared our view,” a State Department spokesperson said before the vote.

In the most recent court filing, unsealed last month, U.S. government attorneys were granted a seizure warrant against the largest Chinese importer of North Korean coal and four related front companies after presenting evidence that the Chinese company’s transactions with North Korea were “ultimately benefiting sanctioned North Korean end users, including North Korea military and North Korea weapons programs.”

The documents cite a defector, deemed “reliable,” who said that the vast majority of the revenue from the country’s coal exports go toward the military, nuclear missiles and weapons programs.

Those disclosures followed a court case filed in September in which federal attorneys cited a spreadsheet showing a major Chinese coal importer making purchases from various North Korean government agencies.

The Chinese importer was also purchasing from a North Korean company controlled by a secretive government branch believed to be conducting illicit activities and slush funds for political leaders. [WaPo, Peter Whoriskey]

It’s always refreshing to see journalists find, read, and cite primary sources rather than call up the same familiar “experts” who may not know anything about sanctions or even about North Korea, but who can be relied on to validate their own opinions. Read the whole thing. 

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We cannot live with a nuclear North Korea (or rather, it will not live with us)

Yesterday, the North Korean threat finally crossed the ocean to our shores. As it is after every fresh outrage from Pyongyang, the question many will ask is, “Now what?” Certainly, there are plenty of legal, financial, and diplomatic options on this list that President Trump’s cabinet can exercise. Congress is also ready to act, or nearly so. You should expect to see the Senate move legislation you’ve seen (or something similar to it) and legislation you have not yet seen. That is good, but is there still time? After years of indecision and neglect, it will take concerted diplomatic and law-enforcement efforts for financial pressure to show its effects on Pyongyang, and no pressure that fails to threaten the very end of Kim Jong-Un’s misrule will be sufficient.

As you read this, “experts” across Northwest D.C., including some of those who are most responsible for getting us into this mess in the first place, are proof-reading their next op-eds calling for us to beg for a deal that Pyongyang doesn’t want and wouldn’t keep. As Pyongyang has said repeatedly (though too many of us choose not to hear it) it will not negotiate away its nuclear arsenal. A freeze would only trade away valuable concessions until Pyongyang seizes on the slightest pretext to renege on it.  Those who tell us that we must talk to North Korea ignore the evidence of how often we have tried. Indeed, it is they who aren’t listening to North Korea. These people are deluding everyone — most of all themselves. Pyongyang did not starve millions of “expendable” people to build a nuclear arsenal so that it could trade that arsenal away. Kim Jong-Un does not want nuclear weapons merely to defend himself from us. He will use them to blackmail Seoul into a “peace process” that would achieve the incremental surrender of South Korea and ultimately, the legacy to which his father and grandfather devoted their lives — the reunification of Korea under his rule. I believe he now sees that goal as within his reach. He may be right.

Can we learn to live with a nuclear North Korea that sold missile technology to Iran, built a nuclear reactor in a part of Syria now controlled by ISIS, and threatened to sell nuclear weapons to terrorists? That attacked our South Korean treaty ally or U.S. forces stationed in Korea in 1968, 1969, 1970, 1976, 1983, 1987, 1998, 2002, 2010, and 2015, killing 50 South Koreans in 2010 alone? That sends assassins to murder human rights activists and dissidents in exile? That has launched cyberattacks against banks, newspapers, nuclear power plants, and the Seoul subway? That launched another cyberattack against a Hollywood movie studio, made terrorist threats against movie theaters in the United States, and chilled the freedom of expression that Americans cherish and have given their lives for? That murdered the half-brother of its tyrant with a deadly nerve agent, in a crowded airport terminal, in the capital city of a friendly nation, 5,000 miles away? That may already be able to strike the United States with a nuclear weapon? The very idea is madness. One day, Kim Jong-Un, whose tolerance for risk always exceeds the calculations of our “expert” class, will go further than we are prepared to tolerate. Down this path lies war — a war whose potential will grow more destructive with each passing year.

Any fool who can hear the rising roar and see the boiling cloud of mist ahead knows where this current is carrying us. We cannot live with a nuclear North Korea if it means — as it assuredly does — the end of nonproliferation and the beginning of an age in which nuclear, chemical, biological, and cyber-terrorism will cease to be theoretical and become imminent and frequent. Fundamentally, the question isn’t really whether we can live with a nuclear North Korea, but whether a nuclear North Korea so inculcated with hatred of America, and with contempt for our open and democratic society, would live with us.

For now, I doubt we’ll make much progress with Russia or China at the U.N., though I think we should give it a token try. One additional provision that’s now worth asking for is an air and sea blockade in which only imports of food, non-luxury consumer goods, and humanitarian supplies should go through. But China and Russia would not agree to this, and I increasingly incline toward not wasting our political capital there. Instead, we should re-focus our diplomatic energy on progressive diplomacy to build a coalition outside of the U.N. to enforce existing U.N. sanctions and deny the North Korean regime the funds that sustain it. But is there still time? And more importantly, don’t Pyongyang’s escalations call for a reassessment of what sanctions are meant to achieve, and therefore the targeting strategy?

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Trump & North Korea: In search of maximum pressure (Pt. 1)

Last week’s North Korea designations from the Treasury Department were the second round since Inauguration Day, and like the first round, they omitted the essential element for sanctions against North Korea to be effective: secondary sanctions to deter Chinese | banks and companies from enabling North Korean proliferation and money laundering, as they’ve been | doing for so long, and so flagrantly. On this point, I need not repeat Anthony Ruggiero’s arguments, so I’ll just refer you to his post.

In other words, this still isn’t the “maximum pressure” the Trump administration promised us, and continues to promise us. Rather than designate the dozens of North Korean front companies and agents identified in the U.N. Panel of Experts’ recent reports, OFAC continues to designate North Korea’s support network in China incrementally. The only Chinese connections in this round were the designation of Korea Zinc Industrial Group, which has offices in Dalian, and the designation of (U.N.-designated) Koryo Credit Development Bank official Ri Song-hyok, who “has reportedly established several front companies in order to procure items and conduct financial transactions on behalf of North Korea.” (Under UNSCR 2321, paragraph 33, China and other states were supposed to have expelled all representatives of North Korean financial institutions last year. The fact that Ri is still doing business in Beijing speaks volumes.)

How does one explain this not-even-remotely-maximum pressure? One obvious possibility is that Xi Jinping snookered Trump into quietly withdrawing his support for secondary sanctions against North Korea’s Chinese enablers. If so, “maximum pressure” will certainly fail. A second possibility is that this Japanese report that President Trump gave Xi Jinping 100 days to tame His Porcine Majesty is accurate, in which case the 100-day grace period will expire in mid-July. In any event, the evidence that China is holding up its end of the bargain is hardly conclusive, and whatever China is doing isn’t enough to moderate Pyongyang’s provocative behavior. For all of the recent rhetorical differences between Pyongyang and Beijing, Pyongyang seems to be as skeptical as I am that China will exert serious, regime-threatening pressure on it.

There are still some straws an optimist can grasp. The designation of the entire North Korean military (specifically, the State Affairs Commission, the Korean People’s Army, and the Ministry of People’s Armed Forces) may seem symbolic at first glance, but it could be a step in the direction of designating the many military-affiliated trading companies that fund it. If OFAC proceeds to do so, it will fill various banks’ anti-money laundering compliance databases with the names, addresses, and passport numbers of North Korean agents, which will trigger heightened due diligence obligations under 31 CFR 1010.659, which could pave the way for subpoenas, civil penalties, and deferred prosecution agreements against non-compliant large banks, and the potential loss of correspondent relationships by non-compliant smaller banks. Going after the security forces that suppress dissent and the trading companies that collect the revenue that sustains them would be a sound targeting strategy if the administration pursues it aggressively. Again, whether the Trump administration has the political will to do this remains to be seen.

Another hopeful sign is that the Trump administration doesn’t seem to be sparing Russia with regard to secondary sanctions.

OFAC designated Moscow-based Ardis-Bearings LLC and its director, Igor Aleksandrovich Michurin, pursuant to E.O. 13382 for their support to Tangun.  Ardis-Bearings LLC is a company that provides supplies to Tangun, and Michurin is a frequent business partner of Tangun officials in Moscow. [….]

OFAC designated the Independent Petroleum Company (IPC) pursuant to E.O. 13722.  IPC is a Russian company that has signed a contract to provide oil to North Korea and reportedly has shipped over $1 million worth of petroleum products to North Korea.  IPC also may have been involved in circumventing North Korean sanctions.  OFAC also designated one of IPC’s subsidiaries, AO NNK-Primornefteproduct. [OFAC Press Release]

Leo Byrne has more information on the designation of IPC here.

Both rounds of designations by the new administration show a continued focus on the use of Executive Order 13722’s sectoral sanctions to strike at critical elements of Pyongyang’s economic support, including coal and energy. The designation of the Korea Computer Center is interesting is that it was not for hacking (see section 104(a)(7)), but for raising revenue for the military by selling software (see section 104(a)(8)). Also, Treasury finally got around to designating Kim Su-Kwang, the North Korean Reconnaissance General Bureau agent who infiltrated the World Food Program’s offices in Rome.

~   ~   ~

The other sanctions news last week was the Security Council’s approval of Resolution 2356, which contains no new substantive provisions, only designations. On one hand, designations are certainly better than a “presidential statement,” and it’s some consolation that the U.N. is now pursuing North Korean officials who are responsible for censorship (the Propaganda and Agitation Department) and terrorism (the Reconnaissance General Bureau), suggesting an approach more holistic than one that treats Pyongyang’s proliferation as an isolated problem. The designation of Kangbong Trading Company, a military-affiliated coal-merchant designated by the Treasury Department in December, is worth watching. We’ll see if it means China will actually comply with the coal cap. I’m not holding my breath for that, but China’s agreement to a U.N. designation should hush China’s objections if the administration later decides to indict the purchasers of Kangbong’s coal later, for money laundering, conspiracy, and violations of the International Emergency Economic Powers Act.

On the other hand, this is a Chapter VII resolution in name only. There are no new restrictive measures, such as a ban on labor exports, or Pyongyang’s unconscionable export of food for cash while its people starve. The number, quality, and geography of the designations does not suggest a collective U.N. seriousness about uprooting North Korea’s proliferation network in China, Malaysia, Singapore, or Africa. The failure to designate Air Koryo, a key smuggling tool of the regime, is disappointing, and the failure to designate entities exposed in the most recent Panel of Experts report — notably Glocom and its affiliates — is simply egregious. While Resolution 2356 is certainly better than nothing, it’s also much less than what’s needed to enforce sanctions and make them work. As such, it’s a depressing sign of weakness from the Trump administration and disunity from the Security Council.

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What the Chinpo Decision doesn’t mean for the U.N.’s North Korea sanctions

Since the High Court of Singapore reversed part of the conviction of Chinpo Shipping for its role in financing the 2013 Chong Chon Gang arms shipment just over two weeks ago, and despite the crush of other (still unfinished) commitments that have eaten up my blogging time, I’ve wanted to set a few minutes aside to post some thoughts on the decision. (If you haven’t already looked up “chinpo” at Urban Dictionary, you really shouldn’t.)

Let’s start with what the decision wasn’t: a persuasive precedent for a narrow reading of U.N. sanctions:

May 2017: judicial reasoning in the Chinpo Shipping case found that the correct interpretation of UN sanctions against the DPRK is narrower than is often supposed, suggesting that even if current UN sanctions were to be implemented fully by all countries, a lot of trade with the DPRK could still continue lawfully; [Tristan Webb, NK Pro]

Contra Webb’s long-winded and thinly veiled celebration of the decision as a defeat for Donald Trump, “maximum pressure,” and U.N. sanctions, this decision turns out to have been much less than that. Rather, it was a flawed decision interpreting a badly written regulation that was two resolutions out of date at the time, and would be four resolutions out of date now had Singapore not already replaced it with a newer and tougher regulation that would likely have avoided the High Court’s embarrassing decision entirely. This decision is unlikely to be precedent in Singapore, much less in other countries.

The decision should, however, embarrass the 1718 Committee into carrying out its responsibility to “circulate a comprehensive compilation” of the Security Council’s North Korea sanctions (see paragraph 44), and spur the U.S. to lead a global effort to draft model sanctions legislation through the UNSCR 1540 process, the Proliferation Security Initiative, or the Financial Action Task Force.

This is my conclusion after having taken the extreme step of actually reading the decision, which I had to do for someone else on Saturday morning anyway, as one of those commitments I mentioned. (Special thanks here to Andrea Berger for posting it and helping me find it. Read her post, too.) Although I’m not a Singaporean lawyer, the laws of Singapore and the United States both descend from the English legal tradition, and to an American lawyer, the concepts will seem familiar.

Lost amid the commentary is that fact that the latter part of the High Court’s decision affirmed Chinpo’s conviction and fine for breaking the Money Changing and Remittance Business Act, by remitting more than $40 million for various North Korean entities through its Bank of China account without a license. As the High Court made clear, those remittances went well beyond the volume of Chinpo’s nominal shipping business, and Chinpo was really acting as a shadow bank. (That the Bank of China’s lawyers aren’t combing through terabytes of information right now, in response to Treasury Department subpoenas about flagrant Know-Your-Customer violations and possible money laundering, may be the greatest crime of all.)

The High Court reversed the portion of Chinpo’s conviction for violating the Singapore’s circa-2010 regulation implementing the U.N.’s North Korea sanctions, because the prosecution failed to prove that Chinpo had reason to know that its remittances directly benefited North Korea’s nuclear program. That part of the result is both absurd and partially understandable. It’s absurd because the U.N. sanctions themselves required no such standards of proof in 2013, when they occurred. The Chinpo wire transfers financed the smuggling of weapons, in violation of an arms embargo in effect against North Korea under resolutions 1718 (paragraph 8) and 1874 (paragraphs 9 and 10). Now, here is what the Singaporean prosecutors had to work with in 2013 — a poorly drafted, ridiculously outdated, and incomplete rule:

12.  No person in Singapore and no citizen of Singapore outside Singapore shall —

(a) provide any financial services; or

(b) transfer financial assets or resources, or other assets or resources,

that may reasonably be used to contribute to the nuclear-related, ballistic missile-related, or other weapons of mass destruction-related programs or activities of the Democratic People’s Republic of Korea.

Yes, that’s it. Not only does the regulation fail completely to prohibit financing of North Korea’s arms trade, it fails to incorporate the UNSCR 1718 arms embargo at all. There’s just no excuse for an advanced nation to have failed in this way, given that the embargo has been in effect since 2006. Which is why the decision was also partially understandable; after all, the court couldn’t very well allow Chinpo to be convicted for something the law didn’t yet prohibit. This is not to excuse the High Court’s ridiculously narrow reading of the regulation, and (given the nature of North Korea) the insurmountable evidentiary burdens the court applied to what was meant to be a due diligence obligation. 

So what we have here is a flawed decision based on a poorly drafted, outdated, and now-superseded regulation by a government that likely didn’t want to interfere too much with Singapore’s lucrative commercial ties to North Korea or offend Chinese interests. No doubt, after the Panel of Experts traced the Chong Chon Gang money trail back to Singapore, some Grand Poobah in the Singapore government told the prosecutors to charge Chinpo with something. That poorly drafted regulation is all the prosecutors really had. (Another serious, if more forgivable, error is that by the time of the Chong Chon Gang seizure, UNSCR 2087 and UNSCR 2094, with its much more stringent financial provisions — see paragraphs 10-16 — had been in effect for five months, but Singapore still hadn’t updated its regulation.)

Still, if this sort of thing can happen in a modern, advanced, rule-bound place like Singapore, why should we expect better results from Indonesia, Tanzania, or Angola?  The U.N. Security Council has now passed seven lengthy, often impenetrably worded, and overlapping resolutions strung together with confusing cross-references. It’s time to help the states with the lowest capacity to enforce those resolutions understand, translate, codify, enact, and enforce them. Model legislation is an essential first step, and only the U.S. can really lead that effort.

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The U.N. Human Rights Council needs reform (again)

Again, the idea of a U.S. withdrawal from the U.N. Human Rights Council is under consideration. Americans, especially American conservatives, tend to fixate on the Council’s fixation with Israel. For reasons I’ll make clear enough below, that fixation is not just silly, it’s cynical. Still, I think leaving the HRC just yet would be a big mistake. I might have answered that question differently ten years ago, before the U.N. Commission of Inquiry proved that the HRC is capable of doing good and altering the global consensus in ways that not only have the potential to help the people of North Korea, but to do so in ways that also align with our own interests (a point I’ll return to below). Before that, I couldn’t have argued that the HRC’s influence was, on the whole, positive, or even potentially positive. Institutions like the HRC require careful tending. Without it, they become worse than useless. If you wonder what I mean, read this resolution. Once I’d read about it, I was glad we had at least threatened to leave:

In a resolution (A/HRC/34/L.14) on human rights and unilateral coercive measures, adopted by a vote of 32 in favour, 14 against and zero abstentions, the Council calls upon all States to stop adopting, maintaining or implementing unilateral coercive measures not in accordance with international law, international humanitarian law, the Charter of the United Nations and the norms and principles governing peaceful relations among States; and rejects all attempts to introduce unilateral coercive measures, as well as the increasing trend in this direction, including through the enactment of laws with extraterritorial application. The Council requests the High Commissioner, in discharging his functions in relation to the promotion and protection of human rights, to pay due attention and to give urgent consideration to the present resolution; and also requests the High Commissioner to organize for the thirty-sixth session of the Council the biennial panel discussion on the issue of unilateral coercive measures and human rights, and prepare a report on the panel discussion for submission and presentation to the Council at its thirty-seventh session.

In English, that means that governments should not sanction other governments for human rights abuses unless all members of the Security Council (including China and Russia) agree. The votes:

In favour (32): Bangladesh, Bolivia, Botswana, Brazil, Burundi, China, Congo, Côte d’Ivoire, Cuba, Ecuador, Egypt, El Salvador, Ethiopia, Ghana, India, Indonesia, Iraq, Kenya, Kyrgyzstan, Mongolia, Nigeria, Panama, Paraguay, Philippines, Qatar, Rwanda, Saudi Arabia, South Africa, Togo, Tunisia, United Arab Emirates, and Venezuela.

Against (14): Albania, Belgium, Croatia, Georgia, Hungary, Japan, Latvia, Netherlands, Portugal, Republic of Korea, Slovenia, Switzerland, United Kingdom of Great Britain and Northern Ireland, and United States of America.

The HRC’s fixation with Israel is only a symptom of the deeper problem. This vote is much more probative of what the deeper problem is — the Council’s (lack of) membership standards, and the hostility of many of its members to the very idea of holding abusers accountable. In many cases, sanctions are the only way despots can be held accountable in the short term. That hostility isn’t hard to explain when you realize that the HRC’s current members include Bolivia, China, Congo, Cuba, Egypt, Ethiopia, Saudi Arabia, Venezuela, and numerous other states that should never pass a Universal Periodic Review. As they taught us to say in lawyer school at such moments, res ipsa loquitur.

Liberals who value the U.N. as an institution must acknowledge this for what it is: a cynical takeover of a human rights institution by some of the world’s most despotic states, which seek to sit in judgment over their betters. The issue that underlies all of the HRC’s troubling votes is who is allowed to sit on the HRC at all. Beneath that issue, in turn, must be the establishment of basic standards for membership. After all, the despot’s favorite strategy against his critics is moral equivalence — to obliterate the meaning of human rights standards by equating every sin with every other sin. If all sins are equal, and if all states commit sins, then China and Saudi Arabia are qualified to fill the HRC’s agenda with resolutions condemning Switzerland for conditions in its immigration detention centers, or Israel for walling out bus bombers. Then, the HRC becomes a parody of itself. Such an institution is not only not worth having, it’s worse than nothing. When we reach that point, it’s time for some careful tending and hard bargaining, including threats to withdraw.

In America, there is a long-standing argument between so-called “realists” and Wilsonians over the proper role of human rights in our foreign policy. So-called “realists” tend to advocate for the U.S. doing whatever supports its immediate, short-term interest, but when that involves supporting despotic regimes, “realism” comes with long-term costs. Anyone who has lived in South Korea knows how anti-Americans have fetishized every difficult or flat-out wrong choice the U.S. has made during its long (and overwhelmingly beneficent) involvement there. But the opposite can also be true.

I believe that it is usually in our long-term interest to take the side of persecuted peoples, because people tend to have long memories about who supported them in their darkest days. A case in point here is one of the states that voted against the cynical resolution I cited above, and one we seldom hear about: Albania. (Our successes are seldom as well-publicized as our failures.) Once one of the world’s most despotic states, Albania now enjoys friendly relations with the United States. Pro-American sentiment is strong, largely because its people remember the U.S. role in ending the slaughter in Kosovo. It can’t hurt, either, that former dictator Enver Hoxha often demonized the United States. As a partial consequence of this favorable publicity, Albania has become a valuable ally. While not a perfect democracy, it has evolved rapidly into a representative government with regular free elections. Its human development index has risen steadily in recent years, to the point where it is now considered a middle-income country. Albania is an example of a nation whose favorable memories of U.S. intervention paid long-term dividends by creating a friendly government that pursues friendly policies, and whose people are far better off than they were under a previous hostile and oppressive regime.

How we use our influence at institutions like the HRC and the Security Council can be an important instrument of our national power to advance those interests. Time has convinced me that there is no universally correct answer to the argument between self-described realists and Wilsonians. Not every society (case in point, Egypt) is presently capable of self-government. In such places, forcing an immediate transition to Jeffersonian democracy can only end in one form of despotism or another. Yet even in those places, our objective should be to use whatever influence we have to catalyze the evolution of a society, to prepare it for self-government as quickly as its economic, educational, and cultural conditions allow.

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Yay, it happened! Jim Rogers got burned by hyping North Korea!

And just like that, crackpot investment advisor Jim Rogers joins the distinguished company of Hyundai Asan, Volvo, Yang Bin, David Chang and Robert Torricelli, Chung Mong-Hun, Roh Jeong-ho, and Orascom’s Naguib Sawaris, all of whom won Darwin Awards in North Korea. I’ve previously written about Rogers and his enthusiasm for North Korea and its worthless currency. That OFK post caught the eye of a New York Times reporter, who has just published a story on the relationship between Rogers and his self-described business partner, a Chinese entity called Unaforte:

“It’s very exciting. The kid has been opening up North Korea,” Mr. Rogers said in an interview, referring to Kim Jong-un, the country’s ruler.

But North Korea can be a murky place to tread — as Mr. Rogers’s experience shows.

A Hong Kong company called Unaforte that is involved in several North Korean businesses named Mr. Rogers as a shareholder a year ago, according to a corporate filing. Investing in a North Korean business like that would probably violate American sanctions if it happened now, though experts say it was legal at the time. [NYT, Patrick Boehler & Ryan McMorrow]

In this case, “experts” means me. Rogers’s investment came just a month before President Obama signed Executive Order 13722, which imposed sectoral sanctions on North Korea’s transportation, mining, energy, and financial services industries. That E.O. was enough to drive investor and fund manager James Passin out of North Korea. Before that, however, our threadbare North Korea sanctions probably didn’t prohibit what Rogers did. Still, staying one step ahead of the law doesn’t mean one isn’t stepping in something.

Mr. Rogers said he gave Unaforte $100 as a token of good will but never expected that it would name him as a shareholder. Asked about his stake in the company in October, he interrupted an interview with The New York Times to call Unaforte and told the English-speaking sister of its founder that the company had agreed he could not be a shareholder.

Speaking into his phone, Mr. Rogers said, “I know I have told you, ‘Never, never, never.’”

Unaforte no longer lists Mr. Rogers as a shareholder in its filings but will not release shareholder records that might show more details about the shares given to Mr. Rogers. Officials at Hong Kong’s corporate registry said they were investigating whether Unaforte is complying with the city’s disclosure laws. Unaforte did not respond to emailed questions for comment. [NYT]

The Times chronicles how Rogers quickly distanced himself from Unaforte once its reporters started asking questions (“I make speeches for hundreds of people.”). At one time, Unaforte featured Rogers prominently in its promotional materials. Its founder, Zhao Chunhui, calls himself “Jim Rogers’s business partner in China.” Then, a Unaforte website marketing its North Korea investments — a bank, an office park, and a stake in a gold mine — “went offline after The Times began to ask about its businesses.” On March 17, 2016, two days after President Obama signed EO 13722, Rogers wrote to Unaforte, asking “that it return his $100 and take back an unspecified number of shares.”

To make matters worse, Unaforte also drew a mention in the latest report of the U.N. Panel of Experts, for setting up a bank in the Rason Special Economic Zone. Sorry, my WordPress installation doesn’t read hanja:

221. A Hong Kong, China, company, Unaforte (?????????), with a Yanbian branch (?????) established the First Eastern Bank (????) in Rason in 2014 as a subordinate enterprise to provide financial support and loans to Chinese investors in mining and real estate projects in Rason (see annex 15-11). The bank is licensed by the Central Bank of the Democratic People’s Republic of Korea (see annex 15-12) and provides loans to Chinese individuals and companies in the Rason area. In its promotional materials, Unaforte claims: “The [First Eastern] Bank is fully independent and does not require proof of identity. It is not subject to the jurisdiction of China or [the] Democratic People’s Republic of Korea and is not required to report to the Chinese government or the Democratic People’s Republic of Korea government!” (see annex 15-13). The Panel notes that foreign nationals holding accounts in banks of the Democratic People’s Republic of Korea would be a violation under resolution 2321 (2016).

Under sanctions adopted by the U.N. Security Council last year, the Far Eastern Bank must now be closed. Specifically, Paragraph 31 of UNSCR 2321, adopted on 30 November 2016, requires Member States to close all existing representative offices, subsidiaries or banking accounts in the DPRK within 90 days. UNSCR 2270, paragraph 33, requires Member States to “prohibit in their territories the opening and operation of new branches, subsidiaries, and representative offices of DPRK banks,” to “prohibit financial institutions within their territories or subject to their jurisdiction from establishing new joint ventures,” except with a U.N. Committee’s advance approval, and requires member states “to close such existing branches, subsidiaries and representative offices, and also to terminate such joint ventures [and] ownership interests.”

Previously, Leo Byrne of NK News also reported on Unaforte’s exports of gold jewelry to Hawaii. The gold was allegedly mined in North Korea; thus, exports to the U.S. could have violated a 2011 executive order prohibiting imports from North Korea, except pursuant to a Treasury Department license. Rogers comes across looking like a fool, a charlatan, and a generally amoral person, but from a strictly legal perspective, not even he can be faulted for ex-post facto sanctions violations. There’s no evidence that Rogers knew of the gold jewelry exports to the U.S., but if he did, that might be his greatest legal risk.

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U.N. report: SWIFT banking network violated North Korea asset freeze

Since last year, this blog has covered SWIFT’s continued provision of financial messaging services to North Korean banks, despite suspicions that North Korea was involved in stealing almost $100 million from the Bangladesh Bank by hacking into SWIFT’s messaging software. Later, I wrote about an effort in the last Congress to ban North Korean banks from SWIFT, mirroring a sanction that was one of our most effective measures against Iran. SWIFT is effectively the postal service of the financial system, sending instructions between banks to credit and debit accounts to facilitate payments. Losing SWIFT access makes it slow, costly, and inefficient for a bank to operate.

The U.N. Panel of Experts’ latest report, released over the weekend, now confirms that SWIFT continued to provide services to three North Korean banks — Bank of East Land, Korea Daesong Bank, and Korea Kwangson Banking Corporation, the object of this recent Justice Department indictment — long after those banks were designated by the U.N. and the U.S. Treasury Department. Worse, the Belgian government authorized that. Generally speaking, both sets of designations require the freezing of any of the target’s assets, and prohibit any action that facilitates the target’s transfer of property or interests in property.

248. In response to inquiries by the Panel, SWIFT confirmed to the Belgian authorities that it provided financial messaging services to designated banks of the Democratic People’s Republic of Korea. As part of its procedure for doing so, SWIFT requests authorization from the Government to receive the moneys owed for the services. Upon receipt of such authorization, SWIFT receives payment for its services from the designated banks.  The payments are then entered in its books and recorded as revenue. The Belgian authorities have authorized SWIFT to receive the amounts set out in tables 13 and 14 from designated banks in exchange for the provision of financial messaging services, the provision of the SWIFT handbook, training in the use of the SWIFT network and maintenance costs.

SWIFT stopped providing services to four other North Korean banks — Amroggang Development Banking Corporation, Daedong Credit Bank, Tanchon Commercial Bank, and Korea United Development Bank — not because SWIFT was even minimally principled, but because “those banks themselves requested SWIFT to do so.”

Paragraph 8(d) of UNSCR 1718 requires all Member States, and all persons subject to their jurisdiction, to “ensure that any funds, financial assets or economic resources are prevented from being made available by their nationals or by any persons or entities within their territories, to or for the benefit of” designated entities. The whole point of financial messaging services is to make economic resources available. I can’t for the life of me see how financial messaging on behalf of designated North Korean banks is anything but a clear violation of 1718.

The unavoidable fact of SWIFT messaging is that it enables banks to effect financial transfers. Thus, messaging services that facilitate designated banks’ financial transactions violate a Member State’s duty (in this case, Belgium’s) to “prevent” the funds “from being made available” to designated entities, per paragraph 8(d) of UNSCR 1718 (2006), paragraph 11 of UNSCR 2094 (2013), and paragraph 10 of UNSCR 2270 (2016). To authorize the acceptance of payment from designated DPRK entities would permit those entities to purchase goods and services and access the global economy, which would contravene the plain meaning of an asset freeze. That’s exactly what Belgium and SWIFT did here. Bear in mind that last summer, the Justice Department indicted Dandong Hongxiang for using an off-the-books ledger system to move funds for one of the very same banks.

Then, there is the question of whether SWIFT provided “financial services” to North Korean banks. In relevant part, Paragraph 11 of UNSCR 2094 requires Member States to “prevent the provision of financial services . . . by their nationals or entities organized under their laws . . . of any financial or other assets or resources . . . that could contribute to” activities prohibited by the Security Council’s resolutions. By citing Paragraph 8 (d) of UNSCR 1718 (2006), this provision specifically applies to entities that have been designated by the Security Council.

Now, I take it that SWIFT’s highly-paid lawyers and lobbyists (at least, more highly paid than me) have gone to great lengths to persuade people that financial messaging services aren’t “financial services.” In paragraph 249 of the Panel’s report, Belgium cites domestic and EU law to that effect. At best, that’s a valiant effort to make chicken salad from chicken shit. To its credit, the Panel didn’t buy that, although it focused on a different angle — the receipt of fees by SWIFT from North Korean banks.

The Panel notes that, in the absence of a determination by the Committee that these payments fall under the exemptions in paragraphs 9 (a) and/or (b) of resolution 1718 (2006), the receipt of funds from a designated entity is a violation of the asset freeze pursuant to paragraph 8 (d) of resolution 1718 (2006) and paragraphs 8 and 11 of resolution 2094 (2013).

Myself, I’m much less concerned about the minuscule fees SWIFT received — a few thousand dollars — than the (undoubtedly, much larger) sums SWIFT’s messaging services helped those designated banks to move.

With U.N. resolutions, we’re lucky if many states’ officials read them at all. For the resolutions to have any chance to work as intended, thousands of officials in hundreds of member states have to interpret and apply them consistently. Not all of those officials are banking lawyers. Pedantic interpretations of resolutions that fly in the face of their plain meaning are a recipe for exceptionalism. That’s what happens when a Member State’s interpretation of its domestic law is allowed to contravene the plain meaning and purpose of the resolutions.

Belgium, of all places, now finds itself cast as a unilateralist rogue state defying U.N. resolutions and flirting with money laundering. Given SWIFT’s influence on both sides of the Atlantic, it probably saw itself as above the law. There is nothing on SWIFT’s website reacting to that revelation at the time of posting. But with the truth of SWIFT’s enabling of dirty North Korean banks now revealed, it’s hard for me to believe that it will be business as usual. At a bare minimum, I’d expect SWIFT to disconnect the three designated banks. The next move may well be up to Congress. For SWIFT, that’s a lot of risk to take to feed the hand that bites them.

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Update:

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Trump struggles on North Korea, but it’s still the first quarter (updated)

By this time tomorrow, we’ll know whether initial reports that Kim Jong-nam was assassinated by two North Korean women with a poison needle at the Kuala Lumpur Airport were wrong or only half-wrong. For now, I’ll dwell on grading the Trump administration’s answers to its first North Korean test — the test of a missile system whose moderate range belies its potential dangerousness, given its potential to be launched from a mobile carrier or a submarine. So far, that grade is a C-minus, but it’s still only the first quarter.

No doubt, the North Koreans knew that Trump would get the news during dinner with Shinzo Abe at Mar-a-Largo. That Trump devoted two days to meeting with Abe and restoring the confidence of an important ally is praiseworthy. Trump’s immediate reaction to the test, however, attracted criticism that he, Abe, and their aides held a sensitive (and perhaps, classified) discussion in an open, non-secure area. That was followed by a short, overly cautious, obviously scripted (good!) statement from a glowering Trump, who said nothing except that he would stand by Japan. The next day, Trump called North Korea “a big, big problem” and promised, without elaborating, to “deal with that very strongly.” So?

So, the administration is hinting at another Air Force flyover in Korea. That’s fine for reassuring the South Koreans, but I strongly doubt that Kim Jong-un cares.

The U.S., South Korea, and Japan also agreed to take the matter straight to the U.N., but they walked away with no better than a pro-formastatement, which has no legal effect. I didn’t expect a resolution, but I would have at least expected Trump to direct Ambassador Haley to push for some additional U.N. designations — of Air Koryo, the Korean National Insurance Corporation, various slave-labor exporters, or at the very least, some additional ships (such as those the Obama administration recently undesignated). It’s possible that behind the scenes, the U.S. and its allies are still pushing for this; we’ll know within a few days. The U.S. and its allies could also carry their frustrations with North Korea and China into the bargaining over the text of the U.N. Panel of Experts’ next report, which is due to be released in a month or so, and which is sure to contain at least one (literally) explosive revelation.

To back up its negotiating position with a threat of consequences, the Treasury Department could do another round of designations of North Korean targets, or (better yet) Chinese targets that are helpingNorth Korea break sanctions. The latter option is (a) what’s needed, (b) what Congresswants, and (c) what Rex Tillerson promised in his confirmation hearing.

Republican Senator Cory Gardner of Colorado on Sunday issued a statement on Pyongyang’s latest missile test, urging the Trump administration “to immediately pursue a series of tough measures, to include additional sanctions designations and show-of-force military exercises with our allies in the region, to send a message to Kim Jong-un that we remain committed to deterring the North Korean threat.”

Gardner, the chairman of the Senate’s Foreign Relations Subcommittee on East Asia, the Pacific, and International Cybersecurity Policy, authored the North Korea Sanctions Policy and Enhancement Act enacted last year through which Washington imposed landmark unilateral sanctions on Pyongyang.

He said that the latest missile test is an example of why “U.S. policy toward North Korea should never be ‘strategic patience,’ as it was during the Obama administration.”

On Friday, Gardner sent a letter to Trump to urge his administration to take a “determined and resolute U.S. policy toward North Korea.”

In the letter, Gardner urged the Trump administration to fully enforce existing U.S. and multilateral sanctions regarding North Korea and impose additional sanctions as necessary, highlight the regime’s illicit nuclear and ballistic weapons programs, human rights abuses and malicious cyber activities.

He also urged Trump to “employ all diplomatic tools to pressure” Beijing to fully enforce its North Korea sanctions commitments and encouraged secondary sanctions on any China-based entities that are found to be in violation of U.S. and UN measures.

Gardner called upon Trump to enhance Washington’s “defense and deterrence posture in East Asia,” especially urging the placement of the U.S.-led Terminal High Altitude Area Defense, or Thaad, system in South Korea.

“We must not allow China’s unprecedented pressure campaign against the ROK (Republic of Korea) to cancel the Thaad deployment succeed,” he wrote. [Joongang Ilbo]

Recent events give us a strong basis for optimism in this regard. On February 3, following an Iranian missile test, Treasury’s Office of Foreign Assets Control (OFAC) designated 13 individuals and 12 entities. Of these, three of the individuals had Chinese names or nationalities, and one of the entities was Chinese. This drew the usual howls of protest from the Forbidden City, which is firmly opposed to unilateral sanctions, exceptwhenit isn’t. The designations of Chinese entities working with Iran could mean that China’s days of immunity to U.S. sanctions are over.

Finally, the missile test could influence the new administration’s review of its North Korea policy and help it decide how to improve on “strategic patience.” Michael Flynn’s resignation last night could impact the contours of the new policy, depending on who succeeds him. Whatever Flynn’s other faults — and this is a blog about North Korea, so I’ll leave that discussion to others — he said nothing about North Korea that I disagreed with. Critical to that policy review will be the question of whether the U.S. will be willing to take diplomatic, overt, covert, or clandestine action to subvert Kim Jong-un’s political control inside North Korea itself. Such a strategy, in tandem with strong sanctions enforcement, will probably be a necessary element in convincing the generals in Pyongyang that they can only survive by coming to an accord with the U.S. and South Korea.

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Updates: Have you heard that thing where they say “take him seriously, but not literally?”

I guess “on” is better than “with,” so take from that what you will, if anything at all. Ambassador Haley sent a clearer signal:

Haley may be a novice in foreign policy, but she pretty obviously gets it. Experience is no substitute for good judgment.

It wasn’t the council condemnation that was significant and notable, but rather the print statement issued by new US Ambassador to the UN Nikki Haley as she entered the consultations room.

Just weeks into her position, the tough-talking diplomat said Monday, “It’s time to hold North Korea accountable, not with our words, but with our actions.” Also in contrast to other recent US ambassadors, there was criticism aimed at China over its support of Pyongyang.

Haley wrote, “We call on all members of the Security Council to use every available resource to make it clear to the North Korean regime, and its enablers, that these launches are unacceptable.”

Enablers? No doubt a Trump administration shot across the bow aimed at Beijing. China went along with the council statement issued Monday night calling the launch a grave violation of its obligations under Security Council resolutions.

[….]

Haley’s veiled shot at China is not the diplomatic norm at the United Nations. Usually, harsh words among the big powers are expressed behind closed doors, though former US Ambassador Samantha Power and Russian Ambassador Vitaly Churkin went at it during public council meetings on Syria, the anger spilling over after years of war.

President Trump said last week he had agreed that Beijing is the one China in the US relationship, not Taiwan, but the Haley comment means relations among the big permanent five countries on the Security Council are likely to be in potential roller-coaster mode for the next four years. [CNN]

Relations with China may have to get worse before they can get better.

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China’s latest cheating on North Korea sanctions is a test for Trump

Like most people, I would prefer that the new President of the United States refrained from conducting diplomacy by Twitter. Without endorsing the medium, I gave a qualified endorsement to the message President Trump sent to China when he accused it of not helping to reign in His Porcine Majesty. Trump was right about this, of course. Over the last several years, the U.N., no less, has published a wealth of evidence that China has (almost certainly willfully) violated the North Korea sanctions it voted for in the Security Council. Here’s the latest example:

26. Decides … that the DPRK shall not supply, sell or transfer, directly or indirectly, from its territory or by its nationals or using its flag vessels or aircraft, coal, iron, and iron ore, and that all States shall prohibit the procurement of such material from the DPRK by their nationals, or using their flag vessels or aircraft, and whether or not originating in the territory of the DPRK, and decides that this provision shall not apply with respect to:
. . . .
(b) Total exports to all Member States of coal originating in the DPRK that in the aggregate do not exceed $53,495,894 or 1,000,866 metric tons, whichever is lower, between the date of adoption of this resolution and 31 December 2016 …. [UNSCR 2321, Nov. 30, 2016]

Just eight weeks later, the inestimable Leo Byrne cites customs data showing that China imported twice the amount of North Korean coal permitted for the remainder of 2016:

Customs figures show Chinese traders imported over 2 million tonnes of coal in December, up from 1.9 million the previous month. North Korea’s received $168 million for the commodity, a figure over three times that outlined in Resolution 2321. [NK News, Leo Byrne]

So yesterday, a reporter asked the Chinese Foreign Ministry’s mouthpiece to explain herself.

Q: [I]t is stipulated in Resolution 2321 of the UN Security Council that the imported coal from the DPRK by 31 December 2016 should not exceed one million ton or 54 million US dollars. Statistics recently released by China’s customs shows that China’s volume of coal imports from the DPRK in December 2016 exceeded the cap. What is China’s comment on that?

A: On your first question, it is a shared obligation of UN member states to implement resolutions of the Security Council. According to Chinese laws, it is required for the Chinese government to issue a statement for actions taken to implement Resolution 2321. This is a regular practice of the Chinese side. The statement by relevant Chinese ministries is one such step. The list of dual use items and technologies annexed to the statement is a verbatim quote of the list in the resolution.

The mouthpiece is referencing this belatedly updated list of things Chinese companies aren’t supposed to export to North Korea, unofficially translated here, at NK Pro.

On your second question, let me point out that Resolution 2321 should be implemented in a comprehensive and balanced manner. And it is not only China who should implement the resolution. The resolution called for solving the issue of the Korean peninsula through political and diplomatic means. I would like to ask, what efforts have been made by other relevant countries? [ChiCom Foreign Ministry]

The mouthpiece implies that China’s compliance with the sanctions resolutions is conditioned on “other relevant countries … solving the issue of the Korean peninsula through political and diplomatic means.” But the resolutions impose no such obligation or condition. The argument is spurious. It’s also circular, because North Korea’s first demand in negotiations will surely be that we stop enforcing sanctions, meaning that China’s de facto position is that it won’t comply with sanctions unless we lift sanctions.

Specifically on your question, competent authorities of China issued a statement on 9 December, immediately after the adoption of Resolution 2321 by the Security Council, ordering the suspension of coal imports from the DPRK until 31 December 2016. The Chinese side have taken measures in line with the requirements of the resolution and fulfilled its own international obligation. [ChiCom Foreign Ministry]

China’s obligation under Resolution 2321 does not end with issuing a statement and then forgetting about it. Surely China, which can have Jingjing and Chacha at a dissident’s doorstep 20 minutes after an offending Weibo post, can’t expect us to believe that it can’t enforce its laws. Surely China, whose customs authorities know how to detect and hold up shipments when doing so serves Beijing’s interest in bullying its neighbors, can’t expect us to believe that it can’t enforce its customs laws. When confronted with evidence of a violation of a U.N. sanctions resolution China voted for eight weeks ago in a clear, blue question, China’s mouthpiece gave a vague, red answer. That answer shows contempt for the United Nations and the United States.

For eight years, Barack Obama mostly kowtowed in the face of a whole course of aggressive Chinese conduct. Obama’s passivity pleased many “China hands” in academia, but worried our military, shook the confidence of our allies, and yielded some grave setbacks for peace and security in an economically vital part of the world. The most menacing of these is Kim Jong-un’s alarming progress toward nuclear breakout. Beijing acts as if it does not understand the risk of war if sanctions fail, or the risk that this war would involve China. Either that, or China sees a nuclear North Korea as useful for China’s plans to dominate northeast Asia.

For all that was wrong with the Obama administration’s North Korea policy, the former President did lay down a marker in blocking the assets of the North Korean military-controlled companies responsible for most of the coal exports. To the extent that Chinese importers purchased from those designated suppliers or failed to limit North Korean coal imports as required under U.N. resolutions and Chinese law, the U.S. has the authority to freeze the Chinese importers’ dollars. Alternatively, it could invoke section 205 of the NKSPEA to increase the inspection of cargo arriving at U.S. ports from Chinese ports that facilitated violations of the coal cap. This is a test for the new Trump administration. We’re about to find out if Donald Trump’s tough talk is more than just talk.

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Yonhap: U.S., ROK & Japan to impose coordinated sanctions independently of U.N.

With reaction to UNSCR 2321 ranging from the skeptical to the unfavorable, U.S. and South Korean diplomats have been practicing their skills at porcine cosmetology this week. But if the generals in Pyongyang are already quaffing Hennessey to celebrate the latest advance for the byungjin policy, that may be premature. The Security Council may not have the last word on North Korea’s September 9th nuke test after all:

South Korea, the United States and Japan are preparing to announce their own sanctions on North Korea at the same time in a joint action to maximize their impact to the communist country, Foreign Minister Yun Byung-se said Thursday.

“Basically, (the three countries’ independent sanctions) will be announced concurrently or at a very similar time,” Yun told Yonhap News Agency, referring to the nations’ follow-up measures to the United Nations Security Council’s adoption of Resolution 2321. South Korea is set to unveil its own set of new sanctions on Friday. [Yonhap]

My two greatest concerns with 2321 are, first, that the surprisingly high coal export limits are a license to cheat that may actually raise the amount of coal Pyongyang can export, and second, that within the negotiations with China over the resolution was a sub rosa agreement by the U.S. to abstain from using the power of the dollar against Chinese banks and businesses that are propping up His Supreme Corpulency. This report doesn’t address the first concern, but it may palliate the second.

Obviously, how much the new bilateral sanctions would palliate my concern depends on what the sanctions are, and Yun didn’t say much about that, except that “[b]ilateral sanctions prepared by the U.S. side may be strong enough to hurt North Korea more than the recent UNSC resolution.” This article, however, gives some vague hints at the South Korean actions. Yun also didn’t say exactly when the new sanctions would be announced, because the different countries have different “internal procedures.”

I can certainly imagine what kind of sanction would have that sort of effect. So can the Obama administration, and so can the U.S. House and U.S. Senate, whose most vocal members and committee chairs are going to be pushing for just that for at least two more years. That the allies appear to be practicing Progressive Diplomacy is also excellent news.

I may not miss Park Geun-hye as much as I’d miss Yun Byung-se. I certainly hope he stays on in the banana republic that South Korea has recently become, but then, who am I? I’m writing this from Washington, D.C.

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The U.N.’s new North Korea resolution wasn’t worth the wait

Lest anyone think I’m blindly criticizing the Obama administration as it tries to cover its exit and legacy, start with my favorable comments on UNSCR 2270. That resolution might have been the baseline for a genuinely effective global sanctions program, but the text of the new resolution the Security Council will vote on tomorrow arguably lowers the high bar set by 2270. Indeed, because of our independent authority to enforce 2270 in tandem with our allies, we would have been better off with no resolution at all than a weak one.

Although the text contains some useful provisions, including a ban on shipping insurance and the expulsion of North Korean bank operatives, many of the nominally tough provisions are full of loopholes. For example, how many North Korean diplomats must each country expel? What prevents North Korean diplomats, now limited to one bank account each, from simply putting those accounts in the names of “private” trading companies?

The ban on North Korea using real property abroad for non-diplomatic purposes could, depending on how it’s interpreted, require it to shut down the Chilbosan Hotel, its Chinese base of operations for cyberattacks. And anyone who might have fantasized about reopening Kaesong or the success of Rajin should read paragraph 32 carefully.

The veiled threat in paragraph 19 to suspend North Korea’s U.N. privileges is interesting, but ultimately empty. China and Russia would veto any such move.

The new designations in the annexes are weak, mostly consisting of mid-level officials who will be easy to replace. The absence of Air Koryo, the Korea National Insurance Corporation, and Mansudae Overseas Project Group from the list are big disappointments.

But the biggest overall disappointment may be the text’s lack of hard, clear, enforceable follow-the-money provisions. There is no new requirement for member states to track and report beneficial ownership by North Korean nationals, which would have been a potential windfall of financial intelligence on North Korean money laundering and sanctions evasion.

Many of the provisions — such as the ban on dual-use items, helicopters, and technical assistance — were already prohibited under any reasonable interpretation of UNSCR 2270. Russia, India, and other states have violated those prohibitions.

The addition of two items — rugs and china — to the luxury goods list is laughable.

The most talked-about provision, the new cap on North Korean coal exports, will be difficult to monitor and enforce. How will the U.N. Panel of Experts really know what minerals China is importing, in what volumes, or at what prices? Even if they are enforced, the cuts in coal exports are not deep enough to create the kind of financial crisis in Pyongyang that will force it to reconsider its nuclear weapons program. Pyongyang exports $1 billion worth of coal in a typical year. This text would cut that amount in half. If you’d asked me in March to guess what “livelihood purposes” means, I’d have said it sets a much lower cap than what the Chinese extracted from us. (Update: Also, I’d have said that for “livelihood purposes” to be anything but a farce — a license to cheat, really — it would have required the Chinese to pay the North Koreans in food instead of dollars. But now, Pyongyang and Beijing can safely conspire to starve the North Korean people, while using the profits of their trade to terrorize Koreans on both sides of the DMZ.) Arguably, the Chinese won the right to sell North Korea more coal than we’d have allowed to pass through our financial system under the new U.S. sanctions law and executive order. For the sake of getting China to sign another piece of paper, we threw away that leverage.

Meanwhile, most of North Korea’s other revenue sources are untouched by any enforceable provisions (the text merely expresses “concern” about North Korea’s slave labor exports). A modest exception is a ban on the sale of North Korean crew services.

What hovers over all of this is that Chinese banks and businesses — encouraged by Beijing — have willfully and persistently cheated on the sanctions right up to this very minute. The new resolution would not have restated UNSCR 2270’s requirement to inspect checked baggage and cargo at land borders if China has not failed to enforce those provisions to begin with.

What’s needed much more than new measures is a stark demonstration to Chinese banks, businesses, and ports that those who cheat will suffer the same fate as Banco Delta Asia and Dandong Hongxiang. President Obama has decided to sacrifice the greater need, which is enforcement, for a lesser need, a new resolution. To the very last, this administration’s North Korea policy is much more tongue than tooth. At such moments, I sympathize with Donald Trump’s criticism that this administration doesn’t excel at negotiation. We’ll soon see if he can do any better.

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If China is gambling on Trump to blunt N. Korea sanctions, it could lose bigly*

By all outward appearances, President Obama never really had a coherent North Korea policy. While pursuing a deal that Pyongyang either didn’t want or wouldn’t keep, it reacted to each nuclear test by building on John Bolton’s work and nominally tightening the sanctions the U.N. initially imposed a decade ago, in Resolution 1718. The idea, apparently, was to deter Pyongyang by threatening its plans to develop Hamhung and Chongjin, something it no more intends to do than the Confederacy intended to institute a slave literacy campaign. Under President Obama, sanctions were always incremental, were never well-enforced, and never seemed to be part of any plausible broader strategy.

Still, if only to make a display of doing something after each test, the U.S. would expend much diplomatic energy on haggling with China (and Russia — let’s not forget Russia) over the terms of a new resolution. In due course, the Security Council would approve it, and for three or four months, everyone would pretend that this time was different before returning to business as usual.

As of today, 74 days have passed since September 9th, when North Korea conducted its fifth nuclear test, yet there is still no agreed draft resolution. For those keeping score, that’s the longest delay yet between a test and a resolution (the previous record of 56 days was set earlier this year, after the fourth nuclear test).

Three weeks ago, The Wall Street Journal reported that the P-5 were close to a deal on “[a] new sanctions package … that more effectively blocks the regime’s overseas funding sources,” and might narrow a “livelihood purposes” loophole that effectively nullified a ban on North Korea’s coal exports (see also). The U.S. side was also pushing China to agree to “crack down” on North Korea’s slave labor exports.

Meanwhile, Bureau 39 continues to rake in millions of dollars from higher coal prices, at the expense of military-controlled trading companies (but see this contrary report that coal prices are actually falling).

Reports today say that talks between the U.S. and China are in “their final stages,” but we’ve heard that before, and we still have no word that the two sides have agreed on a draft resolution. A few days ago, Obama had his last meeting with Xi Jinping. The meeting produced little more than a pro-forma agreement that the Korean Peninsula should be nuclear-free, a statement that increasingly becomes moot for North Korea as it gains relevance for South Korea. One of Obama’s priorities for that meeting was to push China to crack down on North Korea. If the result isn’t a significantly tougher resolution within a week, we can probably conclude that President Obama failed to achieve that goal.

That would lend credence to reports that China is stalling talks on a new resolution, perhaps until Obama leaves office. According to those reports, China is still smarting over the U.S. indictment of flagrant sanctions cheat Dandong Hongxiang Industrial Development (while sparing the banks that facilitated the violations). It may be calculating that a President Trump will be more focused on economic issues and won’t want to start off by antagonizing China over a low-priority issue like North Korea. That would be a big gamble.

trump-casino

If so, China may be miscalculating. Although the President-Elect has yet to name several key members of his national security cabinet, what we know so far doesn’t suggest that he’s likely to adopt a soft line or make North Korea a back-burner issue. The most talked-about contenders for Secretary of State are Mitt Romney and … John Bolton (enough said?). James Mattis, who recently spoke to the President Elect about North Korea and other issues, didn’t earn the nickname “Mad Dog” by calling for agreed frameworks. (Update: My favorite Mattis quote: “I come in peace. I didn’t bring artillery. But I’m pleading with you, with tears in my eyes: If you fuck with me, I’ll kill you all.”)

There is also direct evidence of what those close to President Elect Trump have said about North Korea policy. In a meeting with South Korea’s deputy National Security Advisor Cho Tae-yong, Michael Flynn, the selectee to be the next National Security Advisor, called the U.S.-South Korea alliance “vital” and said the new administration would make North Korea a priority. At the time, Flynn did not specify how, but Cho later said that Trump would adopt “stern measures,” and that his aides see “no momentum” for dialogue with North Korea. Flynn was previously quoted as saying, “We should not let the current North Korea regime … exist for a long time.” 

Despite Trump’s loose talk of talks with His Porcine Majesty, one Trump advisor, former congressman Pete Hoekstra, has already ruled them out for “the near future.” Heritage Foundation ex-President and Trump advisor Edward Fuelner has specifically said that the U.S. would impose a secondary boycott on Chinese firms that are propping up Pyongyang financially.

Even before Election Day, we knew that the next president could clash with China over North Korea. The result of the election doesn’t seem to have diminished the likelihood of that. I increasingly incline to the view that either the current President or the next one should signal to the Chinese that if they don’t agree to and enforce tough new sanctions, we’ll walk away from talks over a new resolution and act on our own. That strategy would use a combination of progressive diplomacy and the thinly veiled threat of Executive Order 13722 sanctions to get foreign governments to enforce UNSCR 2270. President Obama knows what he needs to do, but lacks the will. China would be ill-advised to assume the same of President Trump.

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* Update: I couldn’t resist changing the title.

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Introducing the OFK sanctions explainer and law library

For those who’ve wanted a compilation of the key U.N. documents, U.S. statutes, regulations, executive orders, general licenses, and third-country sanctions laws, along with a brief explanation of how those authorities work, start here and click your way around. It’s still a work in progress, but the most important authorities are there. I also added section-by-section links to the key provisions of the NKSPEA and an FAQ. Enjoy!

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U.N. & Obama vacillate as our last chance to stop Kim Jong-un runs out

Have you ever heard the late Christopher Hitchens speak about his visit to North Korea, and how he promised himself that he would not use the “1984” cliche? “Eventually,” Hitchens said, “They make you do it.” I believe it was sometime around 2007 that I made the same promise to myself about the Hans Blix scene in “Team America” when speaking of the U.N.’s response to North Korea’s increasingly brazen behavior. It has become another cliche, but they also make you do it.

This week, Samantha Power went to the Security Council and said this:

The DPRK’s missile tests help it to threaten the territory of even more countries in the region, whether through its land-based missiles or now via its recently tested submarine-launched ballistic missiles.

Once the DPRK has the capability to do so, we know what they intend to do with these missile systems, because they have told us. They are explicit: they intend to arm the systems with nuclear weapons. Kim Jong Un said this himself yesterday, according to the DPRK’s official news agency. [….]

The Security Council must remain unequivocal and united in condemnation of these tests, and we must take action to enforce the words we put on paper – to enforce our resolutions.

Meanwhile, at the State Department, words words words or something. At least the White House made a feint at meeting the test posed by Power’s last clause when it refused to rule out more sanctions, but there aren’t any signs that it means to impose any, either. Contrary to the overwhelming evidence, spokesman Josh Earnest (whose name is an oxymoron) said that the U.S. and China have worked “cooperatively in a coordinated fashion” to “steadily ratchet up” the pressure on North Korea. Unless Earnest really means that we’re cooperating with Beijing because we’ve capitulated to it, this is just more bullshit.

Despite the evidentiary and analytical challenges of calculating North Korea’s trade with China, the best evidence we have suggests that China continues to exploit the “livelihood” loophole for coal and iron ore exports to prop up Kim Jong-un’s rule. Despite the importance of drawing distinctions between trade that feeds the North Korean people and trade that props up the regime, bilateral trade hasn’t fallen much overall, and the small decline may owe more to China’s sagging economy than to its enforcement of sanctions. To make up for the drop in the coal trade and falling prices, China is sending more tourists to North Korea and accepting more slave labor from North Korea, including those formerly employed at Kaesong. Beijing is also engaging in public displays of affection with Pyongyang to show how much more worried it is about South Korean missile defense than it is about North Korean missiles.

China’s recent purchase of North Korean fishing rights was unconscionable and inhumane. It took away a source of food that should fill the markets that feed North Korea’s poor, and replaced it with another source of unrestricted cash for the ruling class in Pyongyang. By doing so, it arguably violated the U.N. Security Council resolutions.

To state what should be obvious, Kim Jong-un is politically invested in his weapons programs and won’t change his behavior unless the world can unite to coerce that change. Evans Revere, a recovering engager whom I probably wouldn’t have cited approvingly a few years ago, is almost certainly correct when he says, “The only way to get North Korea’s attention is to put at risk the one thing that North Korea values more highly than its nuclear weapons. That’s the future existence of the regime.” Revere now concedes that positive incentives haven’t worked on Pyongyang, and with North Korea “rapidly improving its ability to deliver nuclear and other weapons toward specific targets accurately,” we can’t rule out the possibility that it “might seek to use nuclear weapons to blackmail one or more of its neighbors.” Well, yes.

Japan and South Korea are both calling for more sanctions to prevent this outcome, but it’s fairly clear that the Obama administration isn’t pushing for any, and is mostly concerned with avoiding any sort of crisis before it slinks out of town, after having wasted eight critical years. South Korea’s foreign and defense ministers will visit Washington in October to make their case for “specific measures” again. Seoul thinks this may be its last chance to prevent North Korea from reaching nuclear breakout and subjecting it to the slow strangulation of nuclear blackmail, and I suspect that they’re probably right about that. Hopefully, when President Obama met with President Park instead of the President of the Philippines, she made that case forcefully. Nothing less than South Korea’s survival as a democracy depends on it.

With our time quickly running out, the idea of settling for a piece of paper from the U.N. is madness. Although the U.N. statement hints at “significant measures,” a Japanese diplomat is quoted as saying that “many council members supported the idea of further measures,” but “fell short of a consensus.” So presumably, China continues to be unhelpful and obstructionist, the Obama administration continues to be weak and indecisive, and no further resolutions will be forthcoming until Pyongyang does something else, like another nuke test. And perhaps, not even then.

~   ~   ~

As for what sanctions we should impose now, I posted my own wish list in July. It includes:

(1) the designation of North Korean entities, such as Air Koryo, the DPRK Central Bank, and North Korea’s state insurance companies, all of which are facilitating sanctions violations;

(2) the closing of loopholes left over from UNSCR 2270, including the “livelihood” loophole for coal and iron ore exports; and

(3) new measures, including a ban on labor and food exports by North Korea, and a requirement to disclose beneficial ownership by North Korean nationals to the Panel of Experts.

In the case of Air Koryo, there’s no question that it flagrantly violates the luxury goods ban; journalists have tweeted photographs of huge flat screen TVs being loaded aboard its flights. The U.N. Panel of Experts has implicated Air Koryo in the proliferation of SCUD missile parts, and notes that the dual civilian and military use of some of its aircraft could itself constitute a violation of the arms embargo. The Panel of Experts has also noted that Air Koryo holds a number of suspicious debts to recently formed shell companies, implying that Air Koryo is involved in money laundering or sanctions evasion. According to South Korean press reports, Air Koryo is also used to ferry bulk cash to evade U.N. sanctions. 

As for concerns that Air Koryo also engages in legitimate civilian business, I would respond that if Air Koryo were to be designated, third-country airlines would take over its routes, because Pyongyang needs to have air commerce of some kind. The same can be said of North Korea’s financial, shipping, and insurance industries. Pyongyang has repeatedly used all of these state-owned industries for sanctions evasion and proliferation. If those industries were sanctioned and shut down, then third-country airlines, insurers, ships, and banks — which would presumably have more incentives to follow the law — would take up the slack. That would make it much more difficult for Pyongyang to violate U.N. sanctions.

Above all, however, U.N. member states must be willing to use their national laws to impose secondary sanctions on entities — especially Chinese entities — that knowingly help Pyongyang violate U.N. sanctions. This is now a requirement under U.S. law, and I remain concerned that the Obama administration isn’t following it. Without secondary sanctions — and most critically, the strict enforcement of secondary financial sanctions against North Korea’s bank accounts in China and elsewhere — North Korea will find ways around the sanctions, because plenty of Chinese companies will be willing to help it find those ways. Are we serious about global nonproliferation, the security of the world’s most economically vital region, and the protection of the democratic system of our treaty ally in South Korea? I’m searching in vain for any evidence that we are.

~   ~   ~

Update: Stop the presses. Maybe President Park was persuasive after all.

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Why Treasury should require banks to keep records about N. Korean beneficial ownership

In my policy discussions about North Korea, two of the smartest sanctions skeptics I’ve debated are professors John Park and James Walsh. Not only are they both genuinely nice people, their skepticism points to flaws and gaps in the sanctions regime, and that skepticism ultimately serves to improve the quality of the sanctions and their enforcement. They’ve been particularly persuasive about the importance of pursuing “North Korea Inc.,” Pyongyang’s extensive and shadowy network of agents and trading companies in China, who facilitate not only its legal trade, but also act as money launderers and purchasing agents for its WMD programs and luxury goods demands. Such is the nature of money laundering; it uses legal trade to conceal illegal trade.

One answer to Park and Walsh’s criticisms is to add one additional special measure, found at 31 U.S.C. 5318A(b)(2), to the special measures Treasury previously announced on June 1st. This measure would require financial institutions to collect information on the beneficial ownership of property by North Korean persons, or of property in North Korea. That would mirror the European Union’s recent blacklisting of North Korea for money laundering, which triggers increased beneficial ownership reporting rules.

Happily, I’m joined in this view by the most accomplished North Korea sanctions expert I know, William J. Newcomb, who previously served with the CIA, Treasury, State Department, and the U.N. Panel of Experts (here’s a link to an address Bill gave to the Korea Society). Today, Bill and I posted a public comment on Treasury’s proposed special measures against North Korean money laundering. You can read the full text of the comment below the fold, annotated with hyperlinks. It should also be available on the federal regulations portal shortly.

To read the full comment, click the “continue reading” button below.

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N. Korea sanctions update: I sense a great disturbance in the force, as if billions of dollars cried out in terror and were suddenly frozen.

[First, thank you for your patience with the light blogging recently. Most of my limited spare time has been consumed by a project that must take a higher priority than this site. That project has been perpetually at the verge of completion for weeks now, but should be done soon.]

North Korea’s fourth nuclear test in January was a watershed in sanctions law and policy. Until then, the U.S. and the U.N. had mostly pretended to have tough sanctions against North Korea. Until then, South Korea’s policy was to subsidize and sanction the same government at the same time. Since March, with Congress’s passage of H.R. 757, the closure of Kaesong, the U.N.’s approval of Security Council Resolution 2270, and President Obama’s signature of Executive Order 13722, it has been at least plausible to claim that on paper, there are tough sanctions against North Korea. Whether reality will conform to the law will depend on political will, and the political will of many U.N. member states will depend on whether they believe the U.S. has the political will to use its own secondary sanctions against them if they flout the U.N. sanctions.

Here, the signs continue to be mixed. Almost as soon as Congress moved forward with H.R. 757, and even before the Security Council approved UNSCR 2270, big Chinese banks began to freeze North Korean accounts and close down the branches of North Korean banks. North Korea’s mineral exports to China have, at the very least, dropped sharply, and the drop-off in trade across the Yalu River has emptied office buildings in Dandong. Companies are scrambling to cleanse their supply chains of gold from the Central Bank of the DPRK. Elsewhere, I’ve written extensively about China’s hit-and-miss compliance with shipping sanctions, although the latest reports tell us that there are leaks, and that some designated North Korean ships are approaching Chinese ports with their transponders switched off.

This should be a topic of discussion between U.S. and Chinese diplomats.

Unfortunately, there is little publicly available evidence that the Obama Administration is making the same diplomatic effort to get countries to enforce the sanctions that the Bush Administration did between September 2005 and February 2007. It has now been two months since the U.S. government designated anyone under its North Korea sanctions programs, with the splashy launch of Executive Order 13722. Already, election season is consuming Washington’s attention. Political appointees who should be visiting Brussels, Shanghai, Windhoek, and Cairo to deliver veiled warnings act like they’re busy packing their files and job-hunting. If the administration wants to leave its successor more leverage than it had, it must show the world that it hasn’t lost its interest in implementing U.N. Security Council Resolution 2270.

Fortunately, South Korea has done much to fill this void. Park Geun-hye, ably aided by Foreign Minister Yun Byung-se, has followed her closure of Kaesong, and her lobbying of the European Union to implement sanctions, by lobbying France, Germany, Mexico, India, and even Iran. At least some of this has been effective. Park’s visit to Mexico seems to have played some role in its decision to finally seize the Mu Du Bong, although that action was also held up by questions of legal authority that UNSCR 2087 had already answered clearly and explicitly. India, which had shown signs of cozying up to North Korea, is now promising to implement UNSCR 2270 faithfully. (The outreach to Iran was admirably bold of her, and probably for the consumption of American audiences, but it’s unlikely that Park can offer Iran a replacement for what it really wants from North Korea.) The things Park doesn’t do well are obvious enough, but Park has proven herself a very skillful diplomat. It’s fair to say that she and her Foreign Minister have put our State Department to shame.

Meanwhile, implementation of the most important element of the sanctions — the financial sanctions — is finally beginning in earnest. We have just hit UNSCR 2270’s 90-day deadline for banks worldwide to close the correspondent accounts of North Korean banks. The EU has published strong new regulations implementing the resolution (h/t), and has also just announced a new round of designations, freezing the assets of 18 individuals and one entity, “mostly high-ranking military officials involved in agencies responsible for North Korea’s nuclear and ballistic weapons programs.” This will add pressure on the Obama Administration to follow. (Note to the EU: you’d send a clearer message if EU development funds weren’t being used at Polish shipyards that employ North Korean slave labor.)

Switzerland, which is not an EU member, has also just announced a new round of sanctions to implement 2270:

Measures in the financial sector include freezing assets and a ban on providing financial services. The group of people affected will now be widened. Any funds that are connected to North Korea’s nuclear or missile programmes have been affected, as have the finances of the country’s government or the Korean Workers’ Party.

The cabinet said that an exception has been made for the funds of diplomatic representations.

The sanctions mean that Swiss banks cannot open any branch or subsidiaries in North Korea, and existing banks and even accounts will have to be shut down by June 2. The same is also true in reverse – North Korean banks operating in Switzerland will have to leave.

An existing ban on exporting luxury goods will now include more products, and goods that would “increase the operational capabilities” of North Korea’s army are banned.

Any imports or exports will be checked at a customs point for the prohibited products, and exports to North Korea will require advanced authorisation from the State Secretariat of Economic Affairs (Seco). [SwissInfo]

This could be very important. For years, Switzerland had been one of North Korea’s most promiscuous suppliers of luxury goods, and was also rumored to be a haven for large regime slush funds — perhaps as much as $4 billion — under the control of former Ambassador to Switzerland and master money launderer Ri Chol. North Koreans in exile had called on the Swiss government to freeze those assets. Let’s hope that that’s what just happened.      

Even Russian banks are showing signs of compliance.

Radio Free Asia said in a report posted on its website that Russia’s central bank recently ordered other local banks and financial institutions to halt transactions with North Korea.

The central bank also said that transactions of bonds held by North Korean individuals, organizations and other groups subjected to United Nations’ sanctions should be banned immediately.

In addition, Russian financial institutions should close any accounts deemed to be linked to Pyongyang’s nuclear and missile programs, the report said. [Yonhap]

Kudos to South Korean Foreign Minister Yun Byung-se for exercising more global leadership than I’ve seen from a middle power in my memory. Even as the U.S. looks punch-drunk, the South Koreans are fighting above their weight.

“A perception has taken hold in the international community that sanctions and pressure of a different kind compared to the past should be applied to get the North to change and seek denuclearization,” Foreign Minister Yun Byung-se said in a speech at a forum.

“In the last couple of days, Switzerland the European Union took their own sanction measures. Our government will keep leading the international community’s pressure on the North from all possible directions going forward,” he added. [Yonhap]

Although the Obama Administration isn’t showing much strength now, a key test will come in July, when under section 304 of the NKSPEA, the President will have to report back to Congress on which North Korean officials, to include Kim Jong-un himself, will be designated for human rights abuses. Already, the State Department is saying that it will “identify and sanction those responsible for human rights abuses in North Korea.” It also offered these welcome words.

“The reason that that provision is in the executive order is to make it possible for us first to develop the evidence and second to act on it. The principle of accountability is a feature of U.N. Security Council Resolution 2270 as well,” Russel said. “I think that the prospect of officials being held to account for systemic abuses of universal human rights is a serious one and that is one way in which we and the international community can keep faith with the North Korean people.”

Russel also said he believes that North Korean people, when they are eventually liberated, will “ask who stood by them” and the U.S. is firmly committed to be among the supporters for them.

On Monday, Amb. Robert King, special representative for North Korean human rights issues, made a similar remark.

“We’re looking at the issue of how we might identify individuals that meet our legislative requirements to apply sanctions against individuals and there are a whole range of issues that we’re looking at. People involved in abductions will be one that we are looking at,” he said. [Yonhap]

A designation triggers the freezing of assets, which will further increase the financial pressure on the regime. And if, as now seems likely, Hillary Clinton is elected this fall, her words (and those of her advisors) offer Kim Jong-un no encouragement that this pressure will ease anytime soon. That’s good, because it will likely take between one and two years before Pyongyang starts to show signs of serious financial distress. It will take careful attention and patience to build the pressure needed to change Pyongyang without war. The greater challenge will be to maintain the determination to keep that pressure in place until Pyongyang shows that it will meet the hard conditions set forth in section 402 of the NKSPEA. Until Pyongyang is prepared to accept that level of basic transparency, no deal it signs will be worth the paper it’s printed on.

~   ~   ~

Update: The UK and Swiss governments have published guidance for their banks on their new sanctions regulations, here and here, respectively. Also, here’s more information about Russia’s sanctions implementation rules.

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European Union publishes new N. Korea sanctions regulation to implement UNSCR 2270

I’ve previously written about the importance of Europe’s role in enforcing U.N. sanctions against North Korea. On March 5th, the EU designated 16 people and 12 entities under its existing North Korea sanctions program. Yesterday, it finally announced the publication of a new “restrictive measures” regulation to implement UNSCR 2270. Based on the summary, the new regulation follows last month’s Security Council resolution right down the line.

The measures extend, inter alia, export and import prohibitions to any item (except food or medicine) that could contribute to the development of the operational capabilities of the DPRK’s armed forces. Member states will be required to inspect all cargoes to and from the DPRK on their territories, to ban DPRK chartering of vessels or aircraft and to de-register vessels. They will have to ban flights carrying prohibited items and port calls of vessels engaged in violation of the relevant UNSC resolutions. They will also be required to ban exports from the DPRK of certain mineral products (including coal, iron and gold) and exports to the DPRK of aviation fuel. Member states will be required to expel DPRK representatives and third country nationals involved in the DPRK’s illicit programmes (as identified by the relevant UNSC resolutions).

Moreover, additional financial measures being introduced include:

  • an asset freeze on government entities associated with the DPRK’s nuclear or ballistic missile programmes or other activities prohibited by UNSC resolutions

  • an obligation to close:

    • existing branches, subsidiaries or representative offices of DPRK banks;
    • existing joint ventures, ownership interests and correspondent banking relationships with DPRK banks; and
    • existing branches, subsidiaries or banking accounts in DPRK if they could contribute to DPRK’s illicit programme
  • a ban on private financial support for trade if such financial support could contribute to DPRK’s illicit programmes

The new regulation will become effective when it’s officially published in the EU’s official journal later today. The restrictions on exports and the requirement to inspect all cargo going to North Korea should also limit the supply of European luxury goods to North Korea, although some will invariably continue to leak in through China. It will be interesting to see if the new regulation also expands the definition of “luxury goods.”

The provisions that bear the most careful watching, however, are those that affect finance. The termination of correspondent relationships and the closing of certain accounts should trap large sums of money in European banks. If the dollar is by far the world’s most important reserve currency, the Euro is the second-most important, so this action closes off the most important remaining avenue of escape for those funds.

The Wall Street Journal also quotes EU foreign policy chief Federica Mogherini as saying that the EU “is still considering additional EU-only sanctions on top of the U.N. measures,” and cites unnamed officials as saying that “some preparatory work has started on this.” Previously, the EU has gone beyond U.N. requirements by blocking North Korea’s national insurance company, which is suspected of defrauding European insurers out of millions of dollars.

One important measure the EU could take would be to expel North Korean forced laborers. This working paper, by the North Korean Alliance for Human Rights in North Korea, documents the surprisingly widespread use of North Korean labor by EU nations, and notes that North Korean laborers in the EU earn more cash for Pyongyang per capita than those in China, Africa, or the Middle East. Two of the worst offenders are Malta and Poland.

The EU could also ban the sale of equipment that can be used for surveilliance or censorship, or by the security forces for political repression. According to multiple reports in the Daily NK, a German company is supplying North Korea with equipment to track down illegal cell phones. The EU should also implement the U.N. Commission of Inquiry’s recommendations by freezing any assets owned or controlled by individual North Korean officials found to be responsible for human rights violations.

The single most important step Europe could take would be to cut off North Korea’s access to the SWIFT financial messaging service. In the case of Iran sanctions, that measure was one of the most effective in putting financial pressure on that regime.

The new regulation will not completely terminate North Korea’s financial shenanigans on the continent, however. For example, Switzerland and Liechtenstein, two states where large North Korean slush funds are reportedly held, aren’t EU members. North Korean prison camp survivors have called on Switzerland to freeze North Korean assets. The new EU regulation should increase pressure on both states to fully implement UNSCR 2270, and both the U.S. and South Korea can add their own diplomatic voices to that pressure.

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U.S. will announce new North Korea sanctions as early as this week.

At this event at the Heritage Foundation yesterday, I emphasized that U.S. and U.N. sanctions are mutually complementary, and that for the U.N. sanctions to work, the U.S. must show its determination to back them with the new authorities in H.R. 757, and by harnessing the power of the dollar.

The signs I’m seeing this week all suggest that the Obama Administration finally gets this. On Monday, President Obama said “that effective enforcement of sanctions on North Korea is one of the key tasks facing the country.” Yesterday, Treasury Secretary Jack Lew briefed a congressional committee on his talks with Chinese officials about enforcing North Korea sanctions, which he described as only “theory until you implement them” through “sustained efforts.” Said Lew, “We know from these sanctions programs that it’s grueling day-to-day work. You’ve got to identify the entities, act against the entities.” Exactly right.

The administration has also begun the hard work of financial diplomacy:

Adam Szubin, acting undersecretary of Treasury of terrorism and financial intelligence, will be in Beijing and Hong Kong on Monday and Tuesday to meet with senior government officials and compliance officers to discuss “a range of issues of mutual interest,” according to an advisory notice from Treasury. It comes in light of recent United Nations and U.S. sanctions on North Korea imposed this month, Treasury said.

“This trip provides an important opportunity for discussions of ways to strengthen U.S.-China coordination in response to North Korea’s destabilizing behavior and to ensure sanctions targeting the North Korean regime are as effective as possible,” the advisory notice said. [WSJ, Risk & Compliance Blog]

According to Channel News Asia, Szubin was to meet “with both government officials and the private sector” with regard to the implementation of both U.N. and U.S. sanctions. Reading the reports together, Szubin appears to have met with officials of certain banks that may hold North Korean assets. It may be a complete coincidence that Szubin visited Hong Kong just as HSBC froze Sam Pa’s accounts, and that HSBC’s top legal officer is Stuart Levey, Szubin’s predecessor. Coincidences do happen.

What we often forget about Treasury’s anti-money laundering effort against North Korea in 2005 and 2006 is that it was more than an action against one dirty bank. It was a broader campaign of financial diplomacy, led by Levey and Daniel Glaser (who is still a senior Treasury Department official today). It looks like we’re starting to see a similar strategy re-emerge now. There’s no question that implementing it will be challenging, based on what the U.N. Panel of Experts told us last week about North Korea’s extensive use of deceptive financial practices.

179. The financial sanctions notwithstanding, the Democratic People’s Republic of Korea continues to gain access to and exploit the global international financial system (including banking and insurance) through reliance on aliases, agents, foreign individuals in multiple jurisdictions, and a long-standing network of front companies and embassy personnel, all of which support illicit activities through banking, bulk cash and trade.

180. The Panel has concerns about banks without adequate banking regulations and the intent to enforce them, especially in countries lacking effective laws and compliance institutions.91 Transactions originating in foreign banks have been processed through corresponding accounts in the United States and Europe. The enhanced due diligence required under the resolutions in the case of the Democratic People’s Republic of Korea is frustrated by the fact that companies linked to the country are often registered by non-nationals, who also use indirect payment methods and circuitous transactions dissociated from the movement of goods or services to conceal their activity.

Cooperation and information sharing among member states will be essential to the success of the strategy.

181. The implementation of financial sanctions becomes more complex as it moves from targeted financial sanctions based on designation lists to activity-based sanctions,92 an endeavour that requires first establishing whether an entity is being controlled or used by a designated entity. The situation is complicated because lists of aliases are never exhaustive, not least because of alternative ways to transliterate Korean names. In addition, the Panel is hampered in updating information on designated entities owing to time lapses in responses to its inquiries, allowing entities more room to continue their activities.

Yonhap also reports that “[t]he U.S. is putting together a package of unilateral sanctions against the North to carry out the Security Council sanctions and the recent congressional legislation tightening the screws on Pyongyang.” Special Envoy for Human Rights Robert King adds, “There is an Executive Order being drafted right now that will deal with these additional sanctions.”

This is welcome, if unexpected. After all, what could a new executive order do that Executive Order 13687, which the administration has barely used, doesn’t already do? (Search “DPRK2.”) I suppose it could further clarify that the President may impose secondary sanctions on persons who engage in arms trafficking with North Korea, insure or reflag its ships, or maintain correspondent accounts for its banks, but H.R. 757 already gives the President the authority to address those things. What would be more useful would be a round of designations under section 104.

Treasury also sorely needs a better set of sanctions regulations to replace the weak ones at 31 C.F.R. Part 510. Instead, it needs something broadly analogous to the more comprehensive regulations that apply to Syria (Part 542), or to Iran (parts 560, 561, and 562). One important part of the new regulation would be its general licenses for humanitarian transactions, subject to the limits of section 208. Another would expansive definitions of “arms or related materiel” (to include technical assistance) and “severe human rights abuses” (to include the use of North Korean forced labor). Let’s hope Treasury is working on that, too, but for now, the good news is that Treasury is working.

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