A new executive order signed by President Obama and published at around 2:00 today is either a game-changer in his North Korea policy or a wet paper tiger. On its face, the Executive Order is tough, sweeping, and potentially lethal:
Section 1. (a) All property and interests in property that are in the United States, that hereafter come within the United States, or that are or hereafter come within the possession or control of any United States person of the following persons are blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in: any person determined by the Secretary of the Treasury, in consultation with the Secretary of State:
(i) to be an agency, instrumentality, or controlled entity of the Government of North Korea or the Workers’ Party of Korea;
(ii) to be an official of the Government of North Korea;
(iii) to be an official of the Workers’ Party of Korea;
Emphasis mine. I’ll interrupt the list here to ask the obvious question: Does this mean that Kim Jong Un and his regime’s billions in offshore slush funds are blocked, to the extent those funds are denominated in dollars? If I’d only read the Executive Order, I’d answer “yes” unequivocally. If Kim Jong Un isn’t an “official of the Government of North Korea,” the Pope might as well be a Unitarian. By the same logic, Kim Yong Nam, Choe Ryong Hae, Hwang Pyong So, and the other little grey men who fill Pyongyang’s reviewing stands and funeral details should also be designated under this E.O.
Most of the reporters covering the story, however, only seem to have read Treasury’s press release and its new annex listing whose assets are blocked “concurrently with” the new E.O. And oddly enough, neither His Porcine Majesty nor any of his top caporegimes is named in that annex. Instead, the annex lists just ten mid-level officials working abroad for KOMID, a/k/a, the Korea Mining Development Trading Corporation (a notorious proliferation front), and three entities: KOMID itself, Korea Tangun Trading Corporation (Tangun, another proliferation front), and the Reconnaissance General Bureau (RGB, the North’s main spy agency).
The individuals in question are posted in China, Russia, Iran, Syria, and Namibia.
This lends itself to an alternate interpretation — that any North Korean government or party official could be designated and blocked at any time, but not all are … at least until the State and the Treasury Departments sit down to decide that the Pope is indeed Catholic. You’d think an Executive Order would mean what it says, and that under the broad language of the E.O., a name designation of Kim Jong Un wouldn’t even be necessary. But having said that, I’d feel much more confident about that conclusion if Treasury would clarify the point. And maybe it will:
“It’s a first step,” one of the officials said. “The administration felt that it had to do something to stay on point. This is certainly not the end for them.” [N.Y. Times]
Other cases aren’t helpful in answering this question. For example, when President Bush sanctioned Alexander Lukashenka in Belarus and Robert Mugabe in Zimbabwe, those E.O.s listed each of them by name in the annex, but then, those executive orders didn’t use sweeping language designating any official of the government or ruling party, either.
To further confuse matters, all three of the entities designated today were already on the SDN list. Why designate them again? Maybe to cover new aliases, to pad the numbers, or to create the illusion of action. Or to note that the RGB is “North Korea’s primary intelligence organization,” is “involved in a range of activities to include conventional arms trade proscribed by numerous United Nations Security Council Resolutions,” is “responsible for collecting strategic, operational, and tactical intelligence for the Ministry of the People’s Armed Forces,” and runs “many of North Korea’s major cyber operations.”
None of those explanations quite satisfies, somehow.
What the Executive Order doesn’t tell you, by the way, is that the RGB is also responsible for North Korea’s poison-needle assassination campaign against North Korean exiles, human rights activists, and others. The RGB’s recent activities are some of the best reasons why North Korea should also be on the list of state sponsors of terrorism, even if you say (and you’d be wrong if you did) that such a listing would only be “symbolic.” And of course, even symbolic things can be consequential.
Continuing with the list of those designated today, it also includes “persons” the President determines …
(iv) to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, the Government of North Korea or any person whose property and interests in property are blocked pursuant to this order; or
(v) to be owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, the Government of North Korea or any person whose property and interests in property are blocked pursuant to this order.
That’s standard but necessary language to cover subsidiaries, front companies, aliases, and enablers. How it’s enforced will be the key to whether this Executive Order puts real pressure on the regime or not.
The administration’s press release suggests that it intends to apply serious and sustained financial pressure to North Korea. It’s suspect in that it claims to have done so previously. It also lends more support to the narrower interpretation of this E.O. in the short term — that is, that the Pope is Catholic when we say he’s Catholic.
This step reflects the ongoing commitment of the United States to hold North Korea accountable for its destabilizing, destructive and repressive actions, particularly its efforts to undermine U.S. cyber-security and intimidate U.S. businesses and artists exercising their right of freedom of speech.
Pursuant to the authorities of this new E.O., Treasury today has designated three entities and 10 individuals for being agencies or officials of the North Korean government.
“Today’s actions are driven by our commitment to hold North Korea accountable for its destructive and destabilizing conduct. Even as the FBI continues its investigation into the cyber-attack against Sony Pictures Entertainment, these steps underscore that we will employ a broad set of tools to defend U.S. businesses and citizens, and to respond to attempts to undermine our values or threaten the national security of the United States,” said Secretary of the Treasury Jacob J. Lew. “The actions taken today under the authority of the President’s new Executive Order will further isolate key North Korean entities and disrupt the activities of close to a dozen critical North Korean operatives. We will continue to use this broad and powerful tool to expose the activities of North Korean government officials and entities.”
Targeting the Government of North Korea and the Workers’ Party of Korea
The E.O. signed today escalates financial pressure on the Government of North Korea, including its agencies, instrumentalities, and controlled entities, by authorizing targeted sanctions that would deny designated persons access to the U.S. financial system and prohibit U.S. persons from engaging in transactions or dealings with it.
Interestingly, the President justified this action based on “the provocative, destabilizing, and repressive actions and policies of the Government of North Korea, including its destructive, coercive cyber-related actions during November and December 2014, actions in violation of UNSCRs 1718, 1874, 2087, and 2094, and commission of serious human rights abuses.”
That would mark the first time the President has sanctioned North Korea for human rights abuses, and would be consistent with one recommendation of the U.N. Commission of Inquiry on Human Rights in North Korea, provided that the members of the COI don’t feel that the President went too far.
Presumably, this language also means that the White House and the FBI are sure about North Korea’s responsibility for the Sony hack, despite the proliferation of alternative “inside job” theories. I don’t know what the FBI knows that we don’t, and I certainly don’t see a motive for the Obama Administration to fabricate this after ignoring North Korea for so long, but I’d like to see the FBI give us something more solid than, “Trust us.”
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So what else does this mean? For those of you who are still wondering how blocking North Korean assets could affect Pyongyang, I think Bruce Klingner explained it well here. Skip about halfway down to the part about sanctions as “an important and variable component” of our foreign policy. The key point is that 60% of the world’s currency reserves are denominated in dollars, and that dollars have to flow through U.S. financial institutions, which are regulated by the Treasury Department. North Korea probably still hides plenty of cash flow within the dollar system. More significantly, so do “persons” who “provide financial, material, or technological support [to] the Government of North Korea.” And until today, I couldn’t find any authority requiring so much as a license from Treasury to invest millions of dollars in North Korea, as long as the transaction didn’t involve a sanctioned entity, imports into the United States, or exports of CCL-controlled items to North Korea.
For another thing, the Kaesong Industrial Complex uses U.S. dollars to pass hard currency to Kim Jong Un’s regime in bulk cash form, no strings attached, and notwithstanding the prohibitions of U.N. Security Council Resolution 2094. Those arrangements may be in peril unless Treasury grants Uri Bank a license to continue pouring money into Pyongyang through Kaesong, no questions asked, in exchange for what amounts to slave labor.
The fact that there are other media of exchange, such as the Euro, the Yuan, gold, and barter, means that third-party sanctions will also be essential to making sanctions work. Applying them without undue harm to our own interests will require the application of some diplomatic capital.
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So on the face of it, this EO is tough — very tough. Arguably, it’s more sweeping and less carefully targeted than H.R. 1771 ever was, for fear of causing unintended humanitarian consequences.
What remains to be seen is what everything now depends on — how it’s interpreted, and how aggressively Treasury will enforce it. Even now, there are only about 75 minor North Korean entities on the SDN list. That still pales in comparison to the 300-400 Iranian entities listed. It all depends on how aggressively and diligently Treasury designates other North Korean regime officials and entities, how broadly Treasury applies and interprets Section 1(a)(i)-(iii), how many trips David Cohen makes to visit Chinese and Swiss bankers, and just how quickly foreign banks block or purge themselves of North Korean funds. (We forget that Treasury did much more than sanction one dirty bank in Macau in 2005; in fact, this was a broad campaign of financial diplomacy.) If the answer is “very,” the little gray men in Pyongyang will feel significant financial pain within a year.
Finally, it means that my 3,000-word academic paper on the weakness of current North Korea sanctions may need a substantial revision.
In the short term, North Korea may decide to lash out. Presumably, someone in the White House thought to advise USFK to raise its alert status. In the medium term, if this Executive Order means what it appears to mean, it probably rules out any deal with North Korea until 2017 (not that the prospects for that were very good anyway). In the long term — again, if this is enforced aggressively — either Kim Jong Un will be asking for Agreed Framework III within two years, or his replacement will.