Park Geun-hye finds her inner Thatcher

Screen Shot 2016-03-11 at 8.25.35 AMThis week, the South Korean government imposed bilateral sanctions on North Korea, banning from its harbors ships that have been to North Korea in the last 180 days, cancelling a joint logistics project with Russia to export coal through Rajin, and designating “30 companies with links to the North’s nuclear and missile programs …, 38 North Korean nationals and two foreigners.” The targets include “Leonard Lai, president of ­Singapore-based Senat Shipping” (see this post) and “the Taiwanese president of Royal Team Corporation,” which repeatedly sold North Korea missile parts

The designations will do in the Won system approximately what an OFAC designation would do in the dollar system — freeze any assets the targets have in South Korea and ban them from the South Korean financial system. By itself, this will have modest effects; the Won is a semi-convertible, non-reserve currency. But if this marks the beginning of a coalition in which Japan, the U.S., Europe, Canada, Australia, and other nations issue coordinated designations of North Korea and its enablers, the effect will be devastating. It will also mark South Korea’s graduation from a bystander to its own national destiny, to a global leader in shaping it.

It now seems apparent that the closure of Kaesong was a complete change in the polarity of South Korea’s policy toward the North, to all-out pressure on Pyongyang to change or perish. How times have changed since 2002, when my Army-chartered flight lifted from the tarmac at Osan Air Base, my pregnant wife weeping silently beside me as she left her homeland and her newly widowered father behind. Since then, I’ve wondered whether the land where I’d spent the last four years — a land which had so endeared itself to me, and so often exasperated me — could long protect its imperfect freedom and its independence from its rapacious neighbors. Would it grasp that it was being slowly censored and seduced into servitude before that process became irreversible? Would it spend the next century apologizing to history for its failure to stand in solidarity with its oppressed brothers and sisters in the North? For most of the 14 intervening years, I’ve held little hope that it would.

Two years ago, I saw the first clear, statistically supportable evidence that the appeasement fever had broken, but still, no leader emerged to challenge the sultry delusions of the Sunshine Policy. No one, least of all the cautious triangulatrix Park Geun-hye, manifested the courage, the convictions, or the coherence to start and win the national conversation about Pyongyang’s nature, or the unwelcome truths this implied. Who would call out Pyongyang for what it really was — pathologically martial, militarist, mendacious, and existentially irreconcilable to peaceful coexistence with the South’s democracy and prosperity? What politician would dare say so, and convincingly?

I was in the audience when President Park addressed a joint session of Congress in 2013. I saw hints of resoluteness in Park’s words and bearing, but her policies always fell short of anything grounded on coherent vision for inducing change and securing peace.

Until now. Since January 6th, and in defiance of the low expectations she had spent a decade instilling in me, Park Geun-hye has started that conversation, abandoning the fantasy that Pyongyang can be appeased. Park’s policy shifts this year may have been the first genuinely brave decisions of her political career. She did not bow to pressure; she defied it. She took risks, and she led. She defied the rage of the streets to resolve (however imperfectly) old grievances with Japan, and unite around shared interests. She sent her diplomats around the world to help build a global coalition to pressure Pyongyang to disarm. And most importantly, she offered a strong defense of those decisions to her countrymen, in a historic speech before the National Assembly last month.

North Korea’s pursuit of a nuclear weapons program “will only hasten its collapse,” South Korean President Park Geun-hye said Tuesday, forgoing her usual caution to warn in uncharacteristically blunt terms that her government would do all it could to punish Pyongyang for its recent provocations. [….]

“Dear people of South Korea, it’s obvious now that our previous methods and goodwill cannot break Pyongyang’s nuclear will,” Park said in a special address to the National Assembly. “We should no longer be fooled by their deception and threats. I believe we should not provide them with unconditional support anymore nor succumb to their provocations. We now need to find a fundamental solution to effectively change North Korea, and it is our time to be brave,” she said firmly in the televised address. [….]

The shutdown was just the start, Park said Tuesday. “From now on, the government will start taking stronger and more effective measures to push North Korea to make changes by creating an environment in which the North will realize that nuclear development is not a way to ensure their survival but a way to ensure the quick collapse of the regime,” she said. [WaPo, Anna Fifield]

Events have finally clarified to Ms. Park that His Porcine Majesty is not a reformer-in-waiting or amenable to a negotiated disarmament, but an impulsive, brutal man who has lived a life without hearing the word “no.”

It was time to face the “uncomfortable truth” that the North would not change, Park said in comments that mark a significant reversal for a leader whose policy on Pyongyang had been based on what she’d described as “trustpolitik” that she hoped would lay the ground for eventual unification.

Park said past efforts at engagement had not worked. “It has become clear that the existing approach and goodwill are not going to break the North Korean regime’s nuclear development drive,” she told parliament. [….]

“The government will take strong and effective measures for the North to come to the bone-numbing realisation that nuclear development will not help its survival but rather it will only speed up the collapse of the regime,” Park said. [Reuters]

It probably wasn’t an accident that Park delivered the speech on Kim Jong-il’s birthday. She also addressed, however briefly, His Corpulency’s repression of the North Korean people.

Park’s speech contained harsh language, describing North Korea as “merciless” and under an “extreme reign of terror” following recent purges of top officials that outside analysts say were aimed at bolstering leader Kim Jong Un’s grip on power. Park also referred to Kim by his name several times when she criticized his government, something many Seoul leaders have avoided in the hopes of improved ties with Pyongyang. [AP]

And in an instant, Park swept away the irreconcilable contradiction between subsidizing North Korea and sanctioning it, a contradiction that had hobbled the world’s response to North Korea for the past 20 years, and that had denied Seoul the standing to ask other governments to enforce sanctions against Pyongyang.

“We cannot continue this situation in which we are de facto sponsoring the North Korean regime’s nuclear (capacity) and missile development,” Park said during a speech she requested to deliver before the legislative body, the first time she has made such a request since her inauguration. She emphasized that most of the funds South Korea paid were delivered to the leadership of the Workers’ Party of Korea (WPK), which is in charge of nuclear and missile development. [NK News, Ha-young Choi]

The best news of all is that now that Park has decided to lead, the South Korean people are behind her. The reactions from the center-left Korea Herald and the center-right Joongang Ilbo and Korea Times were all favorable. Park’s poll numbers are hardly stratospheric — she’s better at geopolitical chess than at empathy, noblesse oblige, or day-to-day administration — but her tough response to the North Koreans has at least raised those numbers from negative to neutral territory. In particular, most South Koreans support her decision to close Kaesong. Her emissaries are now delivering the message that if North Korea doesn’t disarm, the consequence will be regime collapse and reunification. The United States has also offered its support for “President Park’s principled and firm approach toward North Korea.” 

The left-wing opposition, no doubt preoccupied by its own internal divisions, has hardly raised a peep as Park has dismantled the Sunshine Policy, its legacy, and its political base of support. It even welcomed the U.N. Security Council’s passage of UNSCR 2270. Instead, writes Steven Denney, “Security is a main concern for many South Koreans, and with elections coming up, no one — not even liberals — will want to come across as ‘soft on security.’” Denney describes the current political mood in South Korea as one of “national security populism,” which seems vaguely familiar somehow. For now, Park will publicly resist calls by some South Korean politicians to get some nukes of their own, but it would not surprise me to see those plans go forward under a future administration. Nor, all told, would that cost me much sleep.

I would not go so far as to say that compassion for the North Korean people has caught fire in South Korean society, but the recent passage of a human rights bill in the National Assembly means that appeasement had become a politically indefensible reason to block the long-stalled law. The political ground has shifted, and much for the better. All that is lacking now is President Park’s plan to engage, to aid, and to earn the trust and support of, her 23 million countrymen between the Imjin and the Tumen.

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In The Weekly Standard: Kaesong, where life imitated Monty Python & the Holy Grail

large wooden badgerIn Monty Python and the Holy Grail, the Knights of Camelot are on a quest for the Holy Grail, but find their way barred by a group of ornery French knights – never mind what they are doing in England – who have walled themselves inside an impregnable castle. After a pathetic attempt to breach the walls fails, Sir Bedivere the Wise devises a scheme to do
through guile what could not be done through force. He persuades King Arthur to build a large, hollow wooden rabbit, leave it at the castle gate just before nightfall, and wait for the curious French knights to pull it inside. The French do so, at which point it occurs to the Englishmen that they were supposed to be inside the rabbit. Bedivere’s “ingenious” plan ends with the French catapulting the empty rabbit back onto the humiliated English.

On several levels, this scene is a near-perfect analogy for South Korea’s and our own failed efforts to “engage” North Korea, right down to the French knights’ vitriolic-yet-awkward taunts. (The Korean Central News Agency, for example, has a curious affinity for the word “brigandish.”)

Read the rest at The Weekly Standard.

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The rebirth of an alliance: The U.S., South Korea & Japan are finally getting North Korea policy right

As you and I both know, I spend a lot of keystrokes here kvetching about the lax enforcement of sanctions against North Korea, but I’ve also written that diplomacy is essential to making sanctions work. Now, for the first time I can recall, the U.S., South Korea, and Japan are coordinating their policies as allies should. They’ve coordinated their defense responses to the North’s missile test, their calls for tougher U.N. sanctions, their strategies to strengthen sanctions enforcement, and their recruitment of new partners into this coalition. I can’t remember the last time I saw Seoul, Tokyo, and Washington all pull in the same direction. It’s a welcome change from the incoherence of the past.

Japan is our first case in point. After its 2013 nuclear test, Pyongyang foiled coordinated sanctions enforcement by promising to “re-investigate” its past abductions of Japanese citizens. In exchange, Tokyo relaxed sanctions, just as Seoul and Washington were trying to tighten them.

In due course, Pyongyang reneged, and now, Japan is taking a hard line again. Unilaterally, it has banned all but small humanitarian remittances to North Korea, banned port calls by North Korean ships, and imposed “a complete ban on North Korean nationals from entering into Japan.” (President Trump, Prime Minister Abe on line one.) Multilaterally, it is calling sanctions “one of the important tools … to bring a comprehensive solution” and citing the example of Iran as “clear proof that sanctions do work.” Japanese authorities have also arrested a high-ranking North Korean agent and comrade of Lee Seok-ki.

In Washington, the President is poised to sign (and hopefully, enforce) tough new sanctions legislation that passed Congress almost unanimously. Even the editors of the New York Times have belatedly endorsed it. 

While China temporizes, others are acting. Last week, Congress overwhelmingly approved strict sanctions intended to limit the North’s ability to finance warheads and missiles. President Obama should sign the measure into law. It is aimed at weapons and traders of raw minerals, as well as money launderers and human rights abusers, and its effects are likely to be felt acutely by Chinese companies, which are most involved with the North. [Editorial, N.Y. Times]

Reuters reports that the President “is not expected to veto the bill, given its huge support in Congress.” Deputy National Security Advisor Ben Rhodes said, “I think this is an area where we and Congress are in the same space and agree on the need for increased sanctions.”

The new legislation has drawn enthusiastic support from the South Korean government. Foreign Minister Yun Byung-se said he “expected the secondary boycott clause in the new bill [to] have considerable impact down the line,” and called the bill’s swift passage a sign of U.S. “resolve to tackle this issue.” The South Korean Ambassador even came to Congress to congratulate Ed Royce, who led the congressional revolt against “strategic patience.” Royce, in turn, welcomed Seoul’s decision to shut down Kaesong.

North Korea had a different reaction.

“Unpardonable is the puppet group’s act of totally suspending the operation in the [Kaesong complex], finding fault with the DPRK’s H-bomb test and launch of a satellite,” the committee said in a statement. [….]

“The recent provocative measure is a declaration of an end to the last lifeline of North-South relations, a total denial of the June 15 [2000] North-South Joint Declaration and a dangerous declaration of war, driving the situation on the Korean Peninsula to the brink of a war,” the committee said.

It lashed out at President Park Geun-hye, saying that “South Korea will experience what disastrous and painful consequences will be entailed by its action.” [Joongang Ilbo]

FrenchTaunt

[Your mother was a hamster, and your father smelled of elderberries.]

The decision will have financial costs for Seoul, including the confiscation of property, machinery, and land that it will end up paying for. It will also have to write off $2.5 billion in loans that Pyongyang was never going to repay anyway. Moodys may downgrade Seoul’s credit due to the political risk of increased tensions. (Apparently, Seoul’s previous lack of a coherent counterproliferation strategy was less of a risk.)

The decision will also have political costs for President Park. The Unifiction Minister’s inept walk-back of his claim that Pyongyang was using Kaesong funds for nukes will not help matters. Given the way the U.N. resolutions require payers to “ensure” that their money isn’t spent on WMDs and luxury goods, either way, Kaesong was inconsistent with those resolutions, but the unforced error makes Seoul look foolish.

Seoul was lucky in one regard, however — it escaped Kaesong without a hostage crisis. As I’ve argued, Kaesong had actually become a source of inter-Korean tensions. In the long term, its closure may reduce tensions by giving Seoul and Pyongyang one less thing to fight about.

But the most important consequence of shutting down Kaesong wasn’t its elimination as an irritant or the $120 million it funneled into Pyongyang’s accounts each year. It was the removal of Kaesong as a punchline from any call by Seoul for other countries to enforce “bone-numbing” sanctions.

Publicly, the U.S. supported Seoul’s decision, but privately, it may have done more than that. The Joongang Ilbo reports that the U.S. was “adamant” in demanding that Seoul close Kaesong. Even the Russians and Chinese answered South Korean pleas to enforce sanctions by saying, in effect, “You first.”

Park Geun-hye, who has conditionally supported engagement with Pyongyang for her entire political career, now says, “The only way to stop North Korea’s misjudgement is to make [it] realize that it cannot survive unless it abandons its nuclear program.”

So how will she get that point across? Several ways, starting with persuading other countries to “focus on drying up the financial resources of the Kim Jong-un regime.”

Seoul has already begun to build international support for the new strategy. Last week, Foreign Minister Yun was in Munich, where he met with EU foreign policy chief Federica Mogherini. There, the two agreed that both “the U.N. Security Council and the European Union should impose strong and effective sanctions on North Korea.” Mogherini said that “the EU will join the international community’s efforts to put pressure on North Korea,” reportedly by restricting cash transfers to Pyongyang. Europe has long provided Pyongyang with banking services and luxury goods, so this could be an extremely important shift.

In Munich, Yun also met with diplomats from the U.S., China, Russia, and Britain, and warned North Korea “that any further provocation” would lead to it “being completely cut off from the rest of the international community.” Separately, the Foreign Ministry also asked Australia to support “multidimensional, multilayered” sanctions on the North.

The Donga-Ilbo also reports that Seoul is “moving to expand overseas its efforts to cut off the funding” for Pyongyang’s WMD programs by trying to shut down Pyongyang’s global slave-rental racket, “by asking each country not to use North Korean laborers.” Initially, Seoul will focus its efforts on Southeast Asia, but also plans to make similar pleas to China and Russia. Seoul estimates that slave labor rakes in $300 million a year for Pyongyang, more than double what Pyongyang earned from Kaesong, but less than half of His Corpulency’s annual luxury goods budget.

The allies are also helping ASEAN member nations buy “high-tech scanning equipment” to help “search North Korean ships on the high seas.” South Korea is also considering a secondary shipping boycott against ships that have visited North Korean ports. (Seoul banned North Korean ships from its ports after the sinking of the Cheonan, in 2010.)

Views within South Korea’s foreign policy establishment have also shifted. This summary of an interview of a panel of South Korean scholars will give you the flavor of it.

Moderator: To summarize, we must rid ourselves of the perceived influence that China has wielded over South Korea since the third nuclear test. Inter-Korean relations are something that we must solve without waiting for China. ‘Trustpolitik’ is over, and we must be ready to add independent sanctions, disband the Kaesong Industrial Complex, and deploy the THAAD missile defense system if we are to have adequate means of self-defense. [Asan Institute]

There’s too much there to do justice in this post; read the whole thing for yourself. What’s clear, at least for the time being, is that we’ve entered the post-Sunshine era of Korean history. 

North Korea’s nuclear and missile tests weren’t the only reasons to conclude that the Sunshine Policy had little prospect of reforming or disarming North Korea, or reducing tensions. The recent promotion of Kim Yong-chol, mastermind of the Cheonan and Yeonpyong attacks, was a slap in South Korea’s face, and a clear signal that Kim Jong-un wasn’t interested in improving inter-Korean relations. As they say, personnel is policy. But whether public opinion in South Korea has shifted as strongly remains to be seen, and no policy change can last long without political support.

~   ~   ~

The backdrop to the rise of this new alliance is the U.N. Security Council’s failure to act against Pyongyang, more than a month after its fourth nuclear test. Despite the personal pleas of Park Geun-hye and Barack Obama, China refuses to enforce the very sanctions it previously voted for at the U.N. Security Council.

Meanwhile, a leaked draft of the latest U.N. Panel of Experts report concludes that U.N. sanctions have “failed to prevent Pyongyang from scaling up its nuclear and ballistic missile programs,” and raises “serious questions about the efficacy of the current United Nations sanctions regime.” The report blames member state governments, “particularly in Africa, for failing to fully implement the measures,” but everyone knows who is principally to blame here.

By covering for Kim Jong-un’s obnoxiousness at the U.N., China is causing the allies to look past the U.N. and toward ad hoc coalitions to disarm Pyongyang. Other coalitions that could play useful roles include the Proliferation Security Initiative , the Global Financial Action Task Force, and an Asian military alliance.

Of course, any expectation that U.N. sanctions could work without robust member state enforcement is fantasy. So is any expectation of robust member state enforcement unless developed states help less-developed ones to build better enforcement capacity, or alternatively, threaten them with secondary sanctions. Once the U.S., South Korea, and Japan have recruited the EU, Canada, Australia, and other law-abiding states into an effective coalition against Pyongyang, we’ll be in a stronger position to do both.

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The End of Sunshine: S. Korea suspends ops at Kaesong, “suspected” of funding N. Korea’s WMD programs

Year after year, and almost alone, I have argued that the Kaesong Industrial Park was incompatible with U.N. Security Council resolutions sanctioning Pyongyang. At Kaesong, “South Korea has 124 companies … employing 54,700 North Korean workers … whose wages are paid to a North Korean state agency.” All told, those fees, taxes, and “wages,” which the North Korean workers probably never saw after Kim Jong-un took his cut, totaled $110 million last year alone.

Contrary to Kaesong’s founding purpose of promoting North-South engagement and people-to-people contact, the workers were heavily supervised and prohibited from direct action with their South Korean bosses, who had to relay their directives through North Korean state minders. And because Seoul never really knew how Kim Jong-un used the money, I argued that Kaesong was a violation of U.N. Security Council resolutions that required it to know, and to “ensure” that they money was not used for prohibited weapons programs.

Here, for example, is a quote from the first Chapter VII resolution against Pyongyang, UNSCR 1718:

Screen Shot 2016-02-10 at 6.56.56 AM

And here is UNSCR 2094, which South Korea itself voted for as a non-permanent member of the Security Council at the time:

Screen Shot 2016-02-10 at 6.58.31 AM

Screen Shot 2016-02-10 at 6.58.51 AM Mind you, I said I was almost alone in arguing this, because as then-Treasury Undersecretary David Cohen said in 2013, “Precisely what North Koreans do with earnings from Kaesong, I think, is something that we are concerned about.” I’ve publicly challenged the Unifiction Ministry to say whether it knew how Pyongyang was spending the funds it earned from Kaesong (it never responded).

But with Seoul’s decision today to “temporarily” halt operations in Kaesong comes this stunning admission from the Unifiction Minister himself:

The suspension of activity there comes amid calls from the United States and South Korea for tougher U.N. and other sanctions against the isolated North following the rocket launch and its fourth nuclear test on Jan. 6.

South Korean Unification Minister Hong Yong-pyo told media North Korea was suspected of spending funds from Kaesong on advancing its nuclear weapons and long-range missiles programs, and the suspension of operations was to stop funds being used for that.

“We are not going to be able to crack North Korea’s nuclear and missile programs by sticking to the same kind of response we have taken all along,” Hong told a briefing. [Reuters]

Cue the usual bitching from Kaesong investors who profit from what amounts to slave labor by its workers, and from leftists who say that closing Kaesong (as opposed to Pyongyang’s conduct) will raise tensions. But here in Washington, opinion had shifted decisively against Kaesong, and calls for its closure had become deafening.

Don’t take this the wrong way. I welcome Seoul’s decision and its refreshingly truthful admission. By closing Kaesong, Seoul can now call on other nations to enforce sanctions without having those nations laugh in Seoul’s face. But really, how long did Seoul “suspect” that Pyongyang was using its Kaesong earnings this way? Based on Cohen’s statement, since at least 2013. Seoul’s admission today will make it almost legally impossible for Seoul to reopen Kaesong again under similar arrangements, now that it has admitted, in effect, that those arrangements were in violation of the Security Council’s resolutions. But if Pyongyang ever becomes serious about engagement, change, and reform, perhaps both sides can agree to reopen Kaesong on the condition that all of those wages and taxes are paid in kind, as food aid, distributed to North Korea’s hungry, by the World Food Program.

Dream on. And, God willing, good riddance to the Sunshine Policy, which died today.

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If S. Korea won’t close Kaesong, let it pay N. Korea in food.

The bad news from North Korea’s nuclear test is that its yield exceeded those of its 2006, 2009, and 2013 tests. The good news is that while the blast wasn’t thermonuclear, it was still hot enough to burn away plenty of policy fog. In Congress, sanctions legislation has sailed through the House, and seems to have good prospects in the Senate. Opinions are shifting among Korea scholars here, too. This morning, I had a chance to finish reading last week’s testimony before the House Foreign Affairs Committee’s Asia Subcommittee. It’s telling, and quite gratifying, to see that two of those witnesses, Bruce Klingner (a good friend) and Victor Cha (whom I can’t say I know personally) cited this humblebrag blog in their written testimony. 

It seems the mainstream has caught up with me.

There is also encouraging diplomatic clarity. Just before the test, South Korea and Japan came to an admittedly imperfect but timely agreement on Japan’s wartime sexual enslavement of Korean women, almost as if both governments knew what was to come. The agreement came far too late to undo the harm to those poor women, but may have come just in time to give the last survivors a measure of compensation, and just some of their stolen dignity back. It may also help to protect future generations of Koreans through cooperation with Japan toward shared interests in disarming Kim Jong-un. 

If the agreement holds, perhaps the controversial statue of that young sex slave should be moved to the doorstep of the Chinese Embassy, given all that China’s policies are doing to keep North Korean women in sexual slavery today. After all, there is still time to prevent some of those women from being enslaved and raped by Chinese men.

~   ~   ~

Today, in no small part because of that agreement, South Korea, U.S., and Japan appear to be coordinating their policy responses, like the natural allies they should be. All three governments are pushing for tougher U.N. sanctions, but there is still little public information on the specifics. Deputy Secretary of State Tony Blinken will visit Tokyo, Seoul, and Beijing this week, to talk about a draft U.N. Security Council resolution and sanctions enforcement. Oh, and John Kerry will also visit China later this month.

As a long-time reader would say: “Tremble, Commies.”

South Korea, cognizant of the fact that its own security is the most at risk from North Korea’s nuclear arsenal, is asking Japan to impose tougher sanctionsJapan unilaterally relaxed its sanctions in 2014, after North Korea made a successful divide-and-rule ploy, promising to “investigate” its own past abductions of Japanese. Naturally, that deal has yielded no actual progress on the return of any abductees or their remains.

Seoul is also asking Beijing to support tougher sanctions. Although China says it’s willing to sign on for some sort of resolution on paper, it’s also trying “to water down the U.N.-led sanctions on the North in a familiar pattern following its nuclear and long-range missile tests” and to minimize the sanctions’ impact. China is also stalling, perhaps hoping that other events and priorities will intervene and weaken the U.S. and South Korean position.

In return, South Korean President Park Geun-hye is hinting at the deployment of the THAAD missile defense system in South Korea, apparently as a way to pressure Beijing. 

For the time being, Park has also stopped feeding the South Korean people implausible feel-good Sunshine Lite twaddle about dialogue, Trustpolitik, and reunification. Instead, she’s calling for the “strongest yet sanctions” on Pyongyang and trying to awaken them to the danger posed by nuclear-armed eliminationists with no regard for human life:

On Wednesday, a week after the North’s nuclear test, Park described the South as facing “emergency situations” both in security and the economy.

She voiced concern that Pyongyang’s provocation, allegedly hydrogen-based, may lead to a “fundamental change” in the regional security landscape. Many are anxious about the possibility of an arms race in Northeast Asia, with Japan widely viewed as capable of producing nuclear bombs.

Park said her government will make every diplomatic effort to make the North’s regime feel “bone-numbing” pain through the United Nations. 

[Yonhap]

It’s a welcome step back toward reality for South Korea, which continues its long, slow awakening from the national acid trip known as the Sunshine Policy.

pink elephant in the room

But it also puts South Korea in an awkward position, because Japan, China, and the U.S. can’t help staring at the very thing South Korea doesn’t want them to notice.

~   ~   ~

The elephant, of course, is the Kaesong Industrial Park, a complex just north of the DMZ where regime-picked North Korean workers labor in South Korean-run maquiladoras for “wages” that are either low or non-existent, at least after Kim Jong-un skims his cut off the top. According to some sources, Kaesong provided Pyongyang $90 million in cash annually, even before its most recent unilateral hikes in “wages” and land-use taxes.

Since the January 6th nuclear test, calls to close Kaesong have been growing. The most surprising proponent of this is the usually pro-engagement Daniel Pinkston, who has the eccentric habit of referring to North Korea as “Songun Korea,” complete with diacritical marks (which this blog does not like to display, sadly). I enjoy reading Dan’s views, if only because I never quite know if they’ll cause me to applaud or cock my head like a dog hearing a new sound. When he wrote this comment on one of my tweets that auto-posted to Facebook, I’ll admit to having had both reactions:

KIC was a good experiment, but it operates like it’s the International Space Station. No backward or forward linkages to local enterprises that could be established as part of an opening and liberalization process. We now see that the regime is not interested in becoming integrated with the international economy. They only want cash payments as rents to the KWP. I congratulate and admire Kim Dae-jung for getting KIC started and trying. I supported it at the time. But we tested that hypothesis and the results are in. I think it should be closed down. And better to do it before there is a crisis and the ROK citizens in KIC become hostages. [Daniel Pinkston, Jan. 7, 2016]

That is to say, Kaesong failed to achieve the purpose that justified its establishment — to draw North Korea out of its isolation and into compliance with international norms and standards. As I said last May, Kaesong promised us peace and reform. It delivered conflict, tension, and exploitation.

It also surprised me when Victor Cha, a long-time advocate of “hawk engagement,” wrote this in his testimony last week.

Kaesong Industrial Complex: Another useful asymmetric pressure point is the Kaesong Industrial Complex. A legacy of the sunshine policy, this project now provides $90 million in annual wages (around $245.7 million from December 2004 to July 2012) of hard currency to North Korean authorities with little wages actually going to the factory workers. The South Korean government will be opposed to shutting this down, as even conservative governments in South Korea have grown attached to the project as symbolic of the future potential of a united Korea, but difficult times call for difficult measures. [Victor Cha, Testimony before the House Foreign Affairs Committee, Asia Subcommittee, Jan. 13, 2016]

See also the testimony of Bruce Klingner, who also called for Kaesong’s closure.

South Korea must surely perceive the awkwardness of its position here. No wonder its statements about Kaesong have been so confusing. On January 8th, two days after the test, the Unifiction Ministry said, “At this stage, we don’t think it is appropriate to talk about withdrawal or closure of the complex.” On the 11th, it said it would further limit access to Kaesong, allowing only “businessmen directly involved in the operation of factories” (but no contractors) to stay overnight, reducing the number of South Koreans staying at Kaesong from 800 to 650. South Korea left open the possibility of further restrictions, depending on “relevant circumstances.” The next day, the Unifiction Ministry reverted to its previous talking points, saying, “At this stage, it is too early to talk about a possible closure of the factory zone,” and, “We are not considering shutting down the complex for now.” But then, on the 13th, Park Geun-hye “said the fate of the Kaesong Industrial Complex will depend on the North’s move down the road.”

So, is all that perfectly clear? No?

I’ve written before that until the three allied nations get their act together on sanctions enforcement, North Korea will continue to divide them and nullify the effect of sanctions. North Korea uses abductees to weaken Japan’s sanctions, uses hostages and denuclearization deals to weaken U.S. sanctions, uses hegemonic aspirations and anti-American mischief-making to weaken Russia’s and China’s sanctions, uses the lure of engagement to weaken Europe’s sanctions, and uses ethno-nationalism to weaken South Korea’s sanctions. Without much better cooperation among these governments, a low-overhead regime like North Korea’s can resist reform and disarmament indefinitely. For South Korea’s calls for tougher sanctions to be credible, it must make some sacrifices of its own. After all, its own interests are the most affected by North Korea’s nukes.

I’m under no illusions about the political challenge this presents for Park. She knows that pan-Korean nationalism remains popular among many of her voters. So does the idea of economic cooperation with Pyongyang, for all its failure to produce any positive results for South Korea’s security. But the fact remains — Park can’t credibly ask Japan, China, the U.N. and the U.S. to help it impose “bone-numbing” sanctions while it continues to pour a massive subsidy into Kim Jong-un’s bank accounts through Kaesong. Other governments would rightly view that as Korean Exceptionalism and a sign that Seoul isn’t serious. Years ago, after all, Treasury Undersecretary (and now CIA Deputy Director*) David Cohen had expressed his concerns about how Pyongyang is using that cash.

Maybe Park is fiddling with access to Kaesong and dropping hints about closing it because she can see the awkwardness of her position, and knows she has to feign some toughness for foreign consumption. Maybe these are trial balloons to test the reaction on the streets of left-leaning Kwangju. Maybe she wants to goad the North Koreans into shutting Kaesong down themselves, as they did in 2013, thus saving her the political cost of doing so herself. Maybe she’s signaling to foreign investors that both Korean governments are putting political burdens on Kaesong, in the hope that the whole sordid project will wither during her successor’s tenure.

Unfortunately, South Korea’s security won’t wait that long. Her successor may not share her own clarity about the security risk that her country faces. The choice Park faces now is to continue with what has failed, or to return to what has worked.

~   ~   ~

Having said all this, I doubt Park will have the political courage to shut Kaesong down outright. In that case, she has other alternatives at her disposal that would work almost as well, at less political cost. Rather than closing Kaesong down herself, she need only hold Kaesong to the same international norms and standards that the Sunshine Policy promised to spread into North Korea, but hasn’t.

First, she could set a timeline for Kaesong to comply with International Labor Organization standards, to protect the rights of the workers there. The most important of these rights is the right of each worker to keep her wages. In tandem with this, South Korea should look toward Marcus Noland’s suggestion that all joint ventures with North Korea, including Kaesong, adopt baseline standards for worker protection.

Second, Park should announce the phase-out of subsidies to Kaesong. If Kaesong can’t turn a profit without state subsidies a decade after its establishment, it isn’t really introducing capitalism to the North, it’s just nuclear welfare by another name. Cutting subsidies will also discourage Pyongyang from any more unilateral wage and tax raises.

Finally, South Korea must abide by U.N. Security Council Resolution 2094, paragraphs 11 and 15, which require it to ensure that North Korea isn’t using the proceeds of Kaesong for purposes prohibited by the resolutions. How can South Korea possibly expect to know this? One way would be for Pyongyang to accede, at long last, to a degree of financial transparency about where Kaesong’s proceeds go, and how much the workers are allowed to earn and spend. Not likely, you say. And you’re probably right.

Alternatively, South Korea could comply with UNSCR 2094 by announcing that henceforth, Seoul will only pay Pyongyang for Kaesong rents and labor in kind — in food, fertilizer, seed, medicine, humanitarian supplies, and humanitarian services, all of which would be distributed by the World Food Program. After all, if the U.N. is correct that the vast majority of North Koreans barely get enough to eat and have dismal medical care, does Kim Jong-un really have a sovereign right to spend that money on luxury goods and ski resorts instead? Humanitarian aid has its own diversion risks, but those risks are far fewer than those that come with paying Pyongyang in dollars, no questions asked.

Perhaps Pyongyang will respond by shutting Kaesong down entirely. But then, if Pyongyang has that reaction after all these years of gentle inducements, who can really argue that Kaesong was likely to serve its intended purposes anyway?

~   ~   ~

* A previous version said “Director.” Thanks to a reader for the correction.

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Inter-Korean phone calls can keep the promises of the Sunshine Policy

Twenty years of state-to-state engagement between North and South Korea have not lived up to Kim Dae-Jung’s promises. Pyongyang has taken Seoul’s money, nuked up, and periodically attacked South Korea for good measure. Rather than reforming, it has invested heavily in sealing its borders. Pyongyang sustains itself on foreign hard currency, even as it cuts off the flow of people, goods, and information to its underprivileged classes. It knows that if it fails to do this, members of those classes will achieve financial, material, and ideological independence from the state.

In their efforts to seal the borders, the North Korean security forces’ principal targets have been the Chinese cell phones whose signals can cross a few miles into North Korea, and which provide North Koreans with their last fragile link to the outside world. Today, there is a real danger that this link will be cut, and that the market-driven changes in North Korean society — changes driven by the people, despite the government’s attempts to suppress them — will cease.

Now, imagine if signals from South Korean cell providers began spreading across the DMZ into North Korea, with steadily expanding ranges. You saw how Pyongyang reacted to loudspeaker propaganda, which reached a few thousand conscripts at best. Imagine the subversive potential of North Koreans being able to call their relatives in the South directly, reading the Daily NK on smart phones, sending photographs or video of local disturbances to Wall Street Journal reporters, or downloading religious pamphlets from South Korean megachurches. Small beginnings like these could be profoundly transformational. If, eventually, North Koreans gain the ability to talk to each other, free of the state’s interference, these beginnings could become the foundations of a new civil society in North Korea. That could vastly mitigate the chaos and cost of reunification.

And yet, Seoul hesitates to allow this kind of people-to-people engagement, ostensibly because it is paralyzed by paranoia that North Korean spies would also use this network.

South Korean police expressed concerns over the national security implications of mobile phone conversations between North Korean defectors in the South and their relatives in the North.

A police official who spoke to South Korean press on the condition of anonymity said the security concerns call for the passage of a law at the National Assembly that could step up surveillance, South Korean outlet Financial News reported on Friday.

Many North Korean defectors who have resettled in the South keep in contact with their families, who are able to circumvent North Korea regulations through the use of Chinese mobile phones. One unidentified woman defector said she calls her family in the North 3 or 4 times a week, to confirm money transfers through a broker based in China. [….]

Police officials in Seoul are saying the conversations between family members can leak sensitive information that can pose a threat to South Korea’s national security, but amendments to Seoul’s Protection of Communications Secrets Act could reduce risks. [UPI]

But given the frequency with which North Korean agents are exposed in the South — just keep scrolling — the Reconnaissance General Bureau, the United Front Department, and their assortment of spies, street thugs, slashers, hackersassassinsagents of influence, and fifth columnists in the South seem to be the only North Koreans who aren’t having trouble with “inter-Korean engagement.”

It’s a silly, short-sighted paranoia that’s tantamount to refusing to treat a disease for fear of the treatment’s side effects. The answer to spies using the phones is called law enforcement. More broadly, if Seoul doesn’t want to deal with North Korean espionage and influence operations in perpetuity, it should open a second front in Kim Jong-Un’s information war, and start running a few information operations of its own. 

One of the most important uses of inter-Korean phone links could be their use for money transfers. Plenty of families in the North rely on those remittances to survive, or to start small businesses that provide for their families. Seoul has been ambivalent about these remittances, too:

South Korea technically bans the transfers, but an official at Seoul’s Ministry of Unification, which handles North Korea policy, says that the government has little incentive to stop the remittances.

“They fall into a gray area,” said the official, requesting anonymity because he was unauthorized to speak about the policy on record. “We always say no money should be sent to North Korea in case it is diverted for military purposes. But in this case, we’re not talking about huge amounts. And it’s for humanitarian purposes. So long as that’s the case, we won’t pursue it.” [WaPo, Chico Harlan, Feb. 2012]

Seoul has even fretted that small-time remittances from North Korean refugees to their families back home might violate international sanctions. Which is an argument that takes a lot of chutzpah, if you contemplate the millions of dollars Seoul pours into Pyongyang through the Kaesong Industrial Park each year.

South-to-North remittances have always been risky and expensive. Remitters charge commissions as high as 30%. Today, with Kim Jong-Un’s information crackdown on illegal calls over the Chinese border, money transfers often require North Korean family members and remitters to risk their lives:

In May this year, a North Korean defector in her 40s took a call from an unknown number at her office in the South Korean capital Seoul.

It was from her brother, who she had not seen for more than a decade, calling illegally from North Korea after tracking her down.

He was speaking from a remote mountainside near the border with China, and was in dire need of money to help treat another sister’s late stage cancer, she said.

Accompanied by a Chinese broker, the brother had spent five hours climbing up the mountain, avoiding North Korean security and desperately searching for a signal on a Chinese mobile telephone. Contact with anyone in the South is punishable by death in North Korea, one of the world’s most isolated states. [Reuters, Ju-Min Park, July 2012]

Defectors objected strongly to a 2011 proposal by Seoul to require licenses for South-to-North remittances. Personally, I’m not sure that a licensing procedure is such a bad idea, if it’s administered efficiently. Licensing can help prevent South Koreans from sending money to government officials — and maybe even spy-handlers — while channeling legitimate remittances through the more honest and reliable remitters.

To ease the burden of the new red tape, Seoul might consider a new way to reduce the cost of a remittance, say, by allowing direct South-to-North transfers that don’t have to run through Chinese banks or Chinese cell phones:

Consortiums led by information technology service giants Kakao Corp. and KT Corp. won a preliminary license to launch South Korea’s first Internet-only bank Sunday, the financial regulator said, opening the new business market in the long-slumping banking industry. [Yonhap]

The online bank will start operation by next June, and will team up with KakaoTalk, which is already gaining popularity with North Koreans because of its anonymity and functionality with weak signals. North Koreans already use Kakao to arrange money transfers from South Korean banks to clandestine North Korean hawaladars.

The FSC said Kakao Bank has an innovative business plan with broader customer lists based on KakaoTalk, which has more than 34 million members.

Kakao is already running mobile payment tools such as KakaoPay and BankWalletKakao.

K-Bank is initiated by KT, the largest fixed-wire operator. Its partners involve No. 1 bank Woori Bank, leading IT solution provider Nautilus Hyosung Inc., GS Retail Co. and Hyundai Securities Co. [Yonhap]

For the last 20 years, South has poured $7 billion in no-questions-asked aid and favorable trade arrangements into Pyongyang’s coffers, blithely unaware of how Pyongyang was spending that money. As far as Seoul knows, Pyongyang used some of that money to nuke up. Yet in the name of “engagement” with Kim Jong-Il, Seoul took bold risks to draw North Korea into the global economy and gradually induce it to disarm and reform. It didn’t work, but the money still flows.

Today, however, Seoul is afraid to take a chance on the kind of people-to-people communications that are changing North Korea profoundly. If those communications become regular and safe, suddenly, they start to sound like the first steps in a plausible plan to keep the Sunshine Policy’s gauzy promises about engagement, change, reform, and reunification.

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The Great Engagement Debate: Stanton v. Delury at NCNK

On October 22nd, the National Committee for North Korea invited me and Professor John Delury of Yonsei University to a debate, in which we each offered three proposals for the next president on North Korea policy, all premised on a delusion of grandeur that Donald Trump really cares what either of us thinks.

The debate was held in a beautiful conference room on the top floor of the Hart Senate Office Building overlooking the Capitol. There was a great crowd — probably about 60 people. Stephen Noerper, the Senior Vice President of the Korea Society, moderated.

ncnk3 ncnk2 ncnk1

Naturally, the debate became a debate about the Sunshine Policy, the Sunshine Lite Policy, and other Sunshine hybrids and mutations that have dominated U.S. and South Korean policy for most of the last 20 years. And while I could hardly agree less with Professor Delury on policy matters, I also found him to be an exceedingly likable and genial person. I’m glad to have met him, and honored to have debated him. My only regret is that there wasn’t video, but the transcript is here.

Many thanks to Keith Luse and NCNK for their kind invitation, and to Daniel Wertz for arranging this, and for his careful attention to the transcripts.

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The Myth of North Korean Socialism: How Pyongyang’s Profiteers Fooled the World

Over this long weekend, I’ve been reading Brian R. Myers’s new book, “North Korea’s Juche Myth,” a copy of which Prof. Myers was kind enough to send. Myers argues that juche, that cryptic ideology reporters often mention but never explain, is a sham ideology that is both overblown and seldom understood, by foreigners as well as North Koreans. Very roughly translated, juche means that man must be the master of his own destiny (in contrast to North Korea’s reality, in which individuality is uniquely suppressed). Myers argues that juche is a loanword from the Japanese zhuti, first seen in an 1887 Japanese discussion of Kant, and became a term of common usage in both Koreas. Pyongyang built the Juche Myth to give Kim Il-Sung ideological gravitas, and to decoy naive foreigners away from its real — and more implacable — ideology of racism, nationalism, and xenophobia, which Myers described in “The Cleanest Race.” (You can hear Myers explain his argument here, in an interview with Chad O’Carroll.) Myers argues that Pyongyang maintains this duality (triality?) by code-switching between its foreign propaganda, its propaganda for its elites, and its propaganda for its underprivileged classes. (As we have seen.)

I’m not prepared to declare myself convinced of the entire argument before I finish the book, but I’m already mulling my own companion volume: “North Korea’s Socialist Myth.” The thesis of this book (or rather, this post) will be that Pyongyang’s claims of socialism are a sham, meant to lure naive or self-serving foreigners with more money than good sense, with a mirage that its profiteering represents progress toward ever-receding reforms. In recent years, that mirage has gained Pyongyang $7 billion dollars in South Korean aid, perhaps billions more from other gullible investors, and probably billions in sanctions relief from those who did not want to interfere with these phantom reforms.

By feigning socialism, Pyongyang also gains a small, fanatical, and almost influential following of apologists on the far left — apologists who are themselves willing to overlook not only its gross inequality, but also its racism (Barack Obama: “a wicked black monkey … an ugly sub-human … suitable to live among a troop of monkeys in the world’s largest African animal park, licking at the crumbs tossed by onlookers“), its homophobia (Michael Kirby: “a disgusting old lecher with 40-odd-year-long career of homosexuality”), its misogyny (Park Geun-Hye: “a whore [who] lifts her skirt to lure strangers“), its acts of war, its crimes against humanity, and the violence of their own allies.

Socialist ideology also justifies the economic totalitarianism by which Pyongyang prevents its subjects from achieving economic independence, and the other forms of independence (of thought, of movement, from want, from fear) that would inevitably follow. Socialism is not something that Pyongyang practices, it’s something that Pyongyang imposes on the weak and vulnerable. Its real economic policy is — and has long been — unrestrained state capitalism,* shielded by deceptive financial practices, and revealed only when its agents are caught carrying it out. Which is often, for those who are paying attention. (* See comments.)

Pyongyang has long been a profiteer from the un-socialist vices of gambling (both online and in pachinko parlors), narcotics smuggling, slaverymoney laundering, cigarette smuggling, currency counterfeiting, gold smuggling, pharmaceutical counterfeiting, the trade in endangered species, and even prostitution. For decades, it has permitted as much capitalism as necessary to maintain its elites, its security forces, and its weapons programs, but never enough to allow meaningful interaction between foreign ideas and non-elite North Koreans. The long-predicted penetration of capitalism into North Korean society did happen — not because the regime accepted reforms, but despite Pyongyang’s best efforts to suppress it. (Since the succession of Kim Jong-Un, once touted as a Swiss-educated reformer, the regime has made significant progress toward stanching the flow of goods and information into the peoples’ economy.)

Pyongyang’s controlled isolation was not a difficult thing to foresee, for those who read Nicholas Eberstadt’s quotations of past North Korean policy pronouncements. A sample:

It is the imperialist’s old trick to carry out ideological and cultural infiltration prior to their launching of an aggression openly. Their bourgeois ideology and culture are reactionary toxins to paralyze people’s ideological consciousness. Through such infiltration, they try to paralyze the independent consciousness of other nations and make them spineless. At the same time, they work to create illusions about capitalism and promote lifestyles among them based on the law of the jungle, in an attempt to induce the collapse of socialist and progressive nations. The ideological and cultural infiltration is their silent, crafty and villainous method of aggression, intervention and domination….

As a reflection of Pyongyang’s doctrine, this statement is as true of North Korea’s peoples’ economy as it is irrelevant to Pyongyang’s palace economy. In North Korea, socialism is for little people. For decades, Pyongyang sustained itself on state capitalism while enforcing socialism on the expendable underclasses, wallowing in bacchanalian luxury while a million or two people starved to death. North Korea remains one of the world’s least equal societies.

KJU ski kju airport

This week’s reporting on North Korea’s big parade reenforces the evidence of widening inequality, showing us both the relative prosperity of Pyongyang (James Pearson, Reuters), but also the unabated poverty of the rural provinces (AP, Eric Talmadge), and the hardships of those who must still evade tightened border controls to work in China illegally, to support their families at home (Anna Fifield, Washington Post).

Pyongyang, by contrast, has now had decades of exposure to capitalism, but capitalism has not pacified North Korea, any more than it pacified Hitler’s Germany, Imperial Japan, Baathist Iraq, or Xi Jinping’s China. Rather, in all of these cases, state capitalism fueled each state’s military-industrial complex. The experience of the last two decades provides no basis to believe that capitalism on Pyongyang’s terms will transform North Korea into anything but a more stable, more repressive, and better-armed version of itself.

Of course, to accept what should be obvious by now, one must abandon the hope which sustained a fading generation of American and South Korean policymakers — that Pyongyang will eventually allow more than minimal economic reforms, and that trade (beyond enriching the state and perpetuating its policies of repression at home and extortion abroad) will eventually lead to broad economic, social, and political reforms. Pyongyang’s construction boom, cell phones, traffic jams, and Mickey Mouse merchandise have become the slender reed on which the Sunshine school sustains itself. But so what?

For years, I’ve challenged advocates of “engagement” with Pyongyang — as opposed to engagement with the North Korean people — to name a significant and positive change their policies have brought about. I have yet to hear an answer. The comments are open.

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North Korean Men Cross DMZ (and plant land mines)

By now, you’ve read that South Korea’s government has accused the North Korean military of sending soldiers across the DMZ to plant mines near South Korean guard posts, an act that blew the legs off two South Korean soldiers last week.

The two South Koreans, both staff sergeants, triggered the mines last Tuesday just outside their post, within the South Korean half of the 2.5-mile-wide Demilitarized Zone, a buffer separating the two Korean armies.

One lost both legs in the first blast, involving two mines. The other soldier lost one leg in a second explosion as he tried to help his wounded colleague to safety, the ministry said. [N.Y. Times]

The mines in question were box mines like this one, a copy of a Russian TMD antipersonnel mine.

Screen Shot 2015-08-10 at 8.47.20 AM

[via AFP]

South Korea says it has ruled out “the possibility they were old mines displaced over the border by shifting soil patterns,” but I admit that when I first read the report, I wondered about this. After all, in June, Yonhap reported that North Korea was planting more mines along the DMZ, not to maim or kill South Korean troops, but to maim or kill its own troops, who might want to imitate the embarrassing cross-border defection of a young North Korean soldier in June, the latest in a string of incidents suggesting that morale in the North Korean Peoples’ Army is flagging. This is also the rainy season in Korea — albeit an exceptionally dry one. Still, if the mines were triggered in low-lying areas, it might be possible that summer rains washed them downhill to where the ROK soldiers triggered them.

On further examination, however, an accidental explanation seems unlikely. South Korea claims that the mines were placed on “a known South Korean border patrol path,” and “just outside the South Korean guard post, which is 1,440 feet south of the military demarcation line.” That’s a long way for three mines to travel together, completely by accident, to a place right along a trail and next to a ROKA border post. Worse, the mines “exploded as the soldiers opened the gate of a barbed-wire fence to begin a routine morning patrol,” and were planted “on both sides of a barbed-wire fence protecting the post.” Most of the DMZ is double fenced, and a large mine wouldn’t wash through a fence line.

 

 

Finally, the incident happened near Paju. Along most of the DMZ in that area, the South Korean side is uphill from the North Korean side. Water doesn’t usually wash mines uphill. Screen Shot 2015-08-10 at 6.43.36 PM

Screen Shot 2015-08-10 at 6.44.10 PM

[Google Earth]

These facts strongly suggest that the placement was deliberate. The U.N. Command seems to agree, and “condemns these violations” of the 1953 Armistice. It’s only the latest illustration of the folly of any call for peace talks with a government that won’t abide by an Armistice, or for that matter, any other agreement. There is, of course, a calculated strategic objective behind North Korea’s support for advocates of a peace treaty. Both Pyongyang and its apologists want sanctions lifted before North Korea disarms, and probably whether it disarms or not. (Pyongyang demands that we lift sanctions immediately because sanctions don’t work, of course.) By preemptively giving up their leverage before Kim Jong-Un disarms, the U.S., the U.N., and South Korea would effectively recognize Pyongyang as a nuclear-armed state.

But if calls for a peace treaty are mostly confined to the likes of Code Pink and a few extremists, undermining the effect of sanctions with financial aid for Pyongyang remains politically popular in South Korea, and amounts to almost the same thing for North Korea’s nuclear program. Just as North Korean troops were planting the mines that maimed the ROK soldiers, a coalition of far-left types and business profiteers called on the South Korean government to lift bilateral sanctions against North Korea, known as the “May 24th Measures.” South Korea imposed those measures in 2010 after Pyongyang, with premeditation and malice aforethought, torpedoed and sank a South Korean warship, killing 46 of its sailors. Of course, the May 24th measures still exempted the largest South-to-North money pipe, the Kaesong Industrial Park, which blunted the sanctions’ deterrent effect. If North Korea had complied with South Korea’s demand for an apology, we’d have known that the deterrent was sufficient, and some limited, financially transparent, and ethical re-engagement might have been appropriate. 

It gets worse. Yonhap is now speculating that the man behind this latest incident is none other than Kim Yong-Chol, head of the Reconnaissance General Bureau. In that capacity, General Kim was featured prominently in “Arsenal of Terror” for directing a campaign of assassinations (most of them unsuccessful) of refugee-dissidents in South Korea and human rights activists in China, and for being behind the Sony cyberattacks and threats. Yonhap also says that Gen. Kim was behind the Cheonan and Yeonpyeong-do attacks of 2010, although I’ve also heard Kim Kyok-Shik’s name mentioned. President Bush removed North Korea from the list of state sponsors of terrorism on October 11, 2008. The Obama Administration’s official view is that North Korea is “not known to have sponsored any terrorist acts since the bombing of a Korean Airlines flight in 1987.” Discuss among yourselves.

Clearly, then, there is still a need to deter Kim Jong-Un and his minions, to show them that they will pay a price for their acts of war. August 15th will be the 70th anniversary of Korea’s liberation, and there has been much speculation, not discouraged by Pyongyang, that Pyongyang will celebrate it with some major provocation. At this point, the least-informed reporters covering Korea will seek comment from the least-informed North Korea “experts,” who will say there’s nothing we can do about this, short of (the false choice of) war. By now, of course, all of them should know that this is just plain wrong

Today, South Korea’s military is speaking through clenched teeth, using words that sound like threats of war. Major General Koo Hong-mo, head of operations for the Joint Chiefs, says, “As previously warned on many occasions, our military will make North Korea pay the equally pitiless penalty for their provocations.” The Joint Chiefs themselves have said the North will “pay a harsh price proportionate for the provocation it made.” (Can a price or penalty be both proportionate and pitiless? But I digress.) A spokesman for the South Korean military said, “We swear a severe retaliation.” Tensions are already high in the Yellow Sea, the site of North Korea’s deadly attacks of 2010.

Asked what kinds of retaliation will be taken, Defense Ministry spokesman Kim Min-seok declined to elaborate, only saying that “The substance cannot be disclosed now, but we will wait and see.” Kim highlighted that the military will ensure the punitive action is taken against North Korea because the country’s responsibility for the mine detonation has been clearly proven. [Yonhap]

I certainly hope South Korea doesn’t launch a military response when the U.S. government is such an unsteady guarantor, and when the deaths of a few dozen (or a few hundred) conscripts and civilians on both sides will hardly give Kim Jong-Un any pause and do little to deter him (but much more about that later this week). In fact, I suspect this is more empty talk. I would like to think, however, that South Korea has a more serious response than this in mind:

loudspeakers

[South China Morning Post]

South Korea Monday resumed a propaganda loudspeaker campaign along the tensely guarded border in retaliation for the detonation of a North Korean mine in the demilitarized zone last week, the Defense Ministry said.

The loudspeaker broadcasting, a kind of psychological warfare against the communist North, started during the evening on that day and continued on and off down the road in two spots along the border, the ministry said.

“As part of retaliation for North Korea’s illegal provocation, our military will partly carry out loudspeaker broadcasting along the military demarcation line as the first step,” according to the ministry. [Yonhap]

As a defense doctrine, the notion of shouting to a few hundred conscripts within earshot is very nearly the opposite of “speak softly, and carry a big stick.” As a deterrent, it’s ludicrous. And as an American taxpayer, I can only ask myself: if South Korea isn’t serious about its own defense, why should we be serious about its defense?

Any fool can see that the profiteers and appeasers who’ve dictated the terms of South Korea’s security policy and relations with North Korea have not only made their country less safe, but brought it to the brink of war. A military response would be ill-advised and disproportionate, and would only kill a lot of people who are utterly expendable to those responsible for this attack. If the South Korean government is serious about deterring the next provocation, it should not limit its voice to a few unfortunate conscripts along the border; it should open the medium-wave spectrum to subversive broadcasts to all of the North Korean people, and fund services like Radio Free North Korea and Open News that produce those broadcasts. And yes, it should suspend operations at Kaesong for a few months — or better yet, permanently — to impose a financial price on those responsible for this attack.

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The Korea Development Institute wants to help companies “bypass” U.N. sanctions against N. Korea

Pyongyang’s latest business model for accessing hard currency despite U.N. sanctions is to rent out tens of thousands of its workers to Chinese factory owners. Those workers then labor in exploitative conditions, while Pyongyang steals most of their wages. Now, the Korea Development Institute—an “independent” think tank created under South Korean law in 1970, and “partnered” with several U.N. bodies and at least one South Korean government ministry—is urging small and medium-sized South Korean firms to join these exploitative arrangements.

I’ve often argued that engagement schemes put cash in Kim Jong-Un’s pockets, no questions asked, while the U.N. is ostensibly trying to starve his WMD programs of funds and crimp his lifestyle until he complies with the resolutions. Proponents of these arrangements usually answer these arguments with a see-no-evil approach–hey, we don’t have any reason to think Kim Jong-Un is using our money for nefarious purposes, and all engagement is good engagement! (Is that so?) It’s rare to see them come right out and admit that their deliberate purpose is to help Pyongyang circumvent U.N. sanctions–here, the same sanctions the South Korean government voted for in 2013:

South Korea’s small and medium enterprises (SME) should try to create an industrial park in northeastern China to bypass international sanctions and expand business ties with North Korea, a state-run think tank said Sunday. [Yonhap]

Perhaps the reporter misunderstood them? Well, no:

“More importantly, investment in the city can bypass new investment restrictions imposed by Seoul against North Korea, as well as the United Nations ban on bulk cash reaching North Korea,” it said. The U.N. ban has been imposed after Pyongyang detonated nuclear devices and fired off long-range rockets.

Judging by state-run Yonhap’s report, the reporter sees nothing wrong with this splendid idea, either. He (or she) never cites any of the U.N. Security Council resolutions or quotes their text, nor does he seek comment from any legal experts or South Korean government officials about the legality of this. Least of all, no one bothers to ask a South Korean labor activist about the ethics of this, not that you’d easily find one who isn’t under Pyongyang’s substantial influence anyway.

Instead, everyone seems to blithely accept circumventing U.N. sanctions and enslaving North Korean workers as a swell ideas. What’s not clear is whether they simply don’t care, because they assume China and South Korea won’t enforce the sanctions, or whether they think they’ve found a neat little loophole. Have they? Let’s unpack what the latest of these resolutions, U.N. Security Council Resolution 2094, has to say about this.

First, Paragraph 11 “decides” that all member states “shall … prevent the provision of financial services … by their nationals or entities organized under their laws … any financial or other assets or resources, including bulk cash, that could contribute to the DPRK’s nuclear or ballistic missile programmes.” It also requires member states to prevent “the evasion of” a series of U.N. Security Council sanctions resolutions going back to 2006.

Next, Paragraph 14 “[e]xpresses concern that transfers to the DPRK of bulk cash may be used to evade the measures imposed in” the resolutions, and “clarifies that all States shall apply the measures set forth in paragraph 11 of this resolution to the transfers of cash, including through cash couriers, transiting to and from the DPRK so as to ensure such transfers of bulk cash do not contribute to” prohibited activities, or “to the evasion of” U.N. sanctions.

Finally, Paragraph 15 “decides” that member states “shall not provide public financial support for trade with the DPRK (including the granting of export credits, guarantees or insurance to their nationals or entities involved in such trade) where such financial support could contribute to” prohibited activities, or “to the evasion of” U.N. sanctions.

So KDI’s scheme would be in clear violation of the sanctions. I’ll leave it to others to decide whether KDI didn’t read them or doesn’t care. Many South Koreans have long subscribed to Korean Exceptionalism, which is not so much an argument as an emotional impulse that subordinates the enforcement of law and principle to ethnic solidarity. To Americans, of course, this is another case of South Koreans violating the very rules that were largely written and approved for their own protection.

The onus now shifts to the South Korean government, which is legally obligated to block this. After all, KDI isn’t just an “entity organized under” South Korean law, it’s also under the government’s obvious and substantial influence. The South Korean government can’t allow this plan to move forward without itself violating the resolutions.

One last point–KDI also claims that “[p]roducts made at such factories should enjoy price competitiveness and could be shipped to other parts of China and the world without restrictions,” but this isn’t quite so, either. Executive Order 13570 prohibits the “importation into the United States, directly or indirectly, of any goods, services, or technology from North Korea.” (Emphasis mine, but you knew that.) Willful violations carry severe penalties, including 20 years in prison, a fine of up to $1 million, and a $250,000 civil penalty.

Which isn’t to deny that there are willful violations going on anyway, either for lack of intelligence, lack of interest by the Obama Administration, or both. (Eventually, the North Korea Sanctions Enforcement Act will also make this commerce sanctionable as a product of forced labor or human trafficking.) But like a heat rash, the Obama Administration won’t last forever, and one day, a new administration will come along.

And it will screw this up in a completely different (but almost certainly, less tolerant) way.

Functionally, what KDI wants to do here isn’t that different from Kaesong or any number of similar “engagement” projects run by China, Russia, or other countries. What makes it different is the brazenness with which the proponents admit (in an unguarded moment) what their game is. In doing so, they unwittingly validate my darkest suspicions, not just of KDI’s true motives, but of the true motives behind other engagement projects, too.

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N. Korea’s expatriate labor needs ethical and financial limits

N. Korea increasingly relies on expat labor for hard currency

A series of new reports suggests that the export of labor has become a major source of income for Pyongyang. The Financial Times cites an NGO estimate that the regime earns $1.5 to $2.3 billion a year from contract labor, in line with educated estimates of its annual revenue from missile sales ($1.5 billion) or arms deals with Iran ($1.5 billion to $2 billion). (Update: Marcus Noland questions that estimate, and thinks the more likely figure is between $150 million and $200 million, which is still a lot of bling.) Ahn Myeong-Cheol, a former prison camp guard and leader of the NGO NK Watch, says that there are now 100,000 North Koreans working overseas, double the number it had posted overseas in 2012. Ahn believes North Korea is increasing its use of contract labor to compensate for arms revenue lost to U.N. Security Council sanctions. Marzuki Darusman gives the lower estimate of 20,000. In testimony appended to the end of this post, Greg Scarlatoiu of the Committee for Human Rights in North Korea puts the figure at around 53,000. He also offers this very specific breakdown:

Currently, 16 countries reportedly host workers sent by the North Korean regime: Russia (20,000), China (19,000), Mongolia (1,300), Kuwait 5,000), UAE (2,000), Qatar (1,800), Angola (1,000), Poland (400-500), Malaysia (300), Oman (300), Libya (300), Myanmar (200), Nigeria (200), Algeria (200), Equatorial Guinea (200) and Ethiopia (100).4 Although North Korea is not a member of the International Labor Organization (ILO), all but two of the 16 states officially hosting North Korean workers are ILO members.

Scarlatiou cites this study by the Asan Institute, which I haven’t read, as the source of these figures.* For years, North Korean workers have been sent to stitch BMW headrests in Europe; build political monuments in Africa (at costs that are suspiciously above market value); mine coal in Malaysia; and cut down trees in the 40-below cold of Siberia without proper winter clothing or safety equipment. Recently, Radio Free Asia reported that North Korean managers were deported for pimping out female textile workers in China. Needless to say, such working conditions fall far short of ILO standards.

Media scrutiny causes Qatar to fire N. Koreans over labor violations

Recently, Qatar became a target for criticism by human rights groups for using North Korean labor to build venues for the 2022 World Cup. Pressure on Qatar has led one construction company to fire 90 North Korean workers, or half of its North Korean work force, for “a series of violations and misconduct by the North Korean workers and their supervisors.” A North Korean company called Genco (not to be confused with that other shady front company of literary infamy) employs the workers.

“The Korean supervisors responsible for the wellbeing of their workers have been continuously forcing them to work more than 12 hours a day. The food provided to their workforce is below standards. Site health and safety procedures are ignored regularly,” said one representative of the company, according to the document. [VOA News]

UPI adds that at least one North Korean worker died due to violations of safety standards. A hundred other North Korean workers continue to work at the company’s construction projects in Qatar. The report did not make clear whether the projects were related to the World Cup. The FT found severe conditions at one Gulf State construction project, where North Korean managers forced their workers to keep toiling in the 120-degree heat, when foreign laborers from other Asian countries took shelter.

As a result of this scrutiny, North Korea has tried to impose information blockades around its expatriated workers. In April, Radio Free Asia reported that the regime has directed its workers to physically assault reporters who try to cover them, and smash their cameras. New Focus also reported that the regime had forbidden its workers in China, where dubbed South Korean dramas are broadcast regularly, from watching TV. Workers were previously “allowed some degree of freedom” if they moved in groups of two or three. Now, they’re forbidden from leaving the work area except in groups of 15 or more. Those who break the rules are sent back to North Korea. God only knows what happens to them (and their families) after that.

Workers receive little or none of their “wages”

Whether you define North Korea’s labor arrangements as slave labor may depend on how you define the term, and on the circumstances of each project. How much of their wages North Korean overseas laborers get to keep varies from project to project:

Current and former North Korean overseas workers describe how the vast majority of their nominal wage is lost to management fees and contributions to the ruling Korean Workers’ Party. Their testimonies suggest a common system where managers agree to send a set monthly sum back to North Korea. If funds are short, the workers may be denied their wages or made to contribute to the remittance.

Yet workers can still earn $1,000 for a year’s work — a significant sum in North Korea, where most rely on the black market for sustenance and where bribery can be a crucial means of obtaining professional or other opportunities, such as securing education for their children. “The bribes to get into a good university are expensive — Kim Il Sung University is about $10,000,” says one former overseas worker. [Financial Times]

In some cases, defectors reported that they were left with nothing after party contributions were deducted; their bosses told them to be thankful they got two meals a day. The FT’s sources reported that they received either a small percentage of their nominal wages, or in one case, most of a $4-a-month pittance. One said that the money was enough to buy a decent apartment at home. Another, quoted in The Chosun Ilbo, said he was allowed to keep $100 out of a nominal salary of $750. The fact that North Korean workers in Muslim countries are regularly caught bootlegging alcohol suggests that their take-home earnings are insufficient to feed themselves, and their families. At Kaesong, arguably the most-scrutinized of all these arrangements, it still isn’t clear whether the workers receive any cash wages at all.

Defenders of these labor-export arrangements argue that the North Korean workers there earn more and live better than those who remain behind, but the same justification might also be true of a child prostitute in Cambodia, or other human trafficking victims of any number of nationalities and circumstances. It still doesn’t justify exploitative and dangerous working conditions, which are harmful to the North Korean workers, to workers in the host countries, and ultimately, to those imprisoned inside North Korea by a system perpetuated by exploitation.

Toward a More Ethical Model of Engagement

There are two possible approaches to this problem. One approach is suggested by the conduct of the Qatari firm that fired half its North Korean work force, and warned that the rest would be fired if they failed to comply with labor standards. In this 2014 paper, Marcus Noland argued that Kaesong and other consumers of North Korean labor should agree to a code of ethics, akin to the Sullivan Principles, which were used to pressure South Africa to treat its African work force more fairly. But as Noland notes, the adoption of the Sullivan principles “did not occur in isolation;” companies adopted them under the threat of boycotts, divestment campaigns, shareholder resolutions, and eventually, U.S. sanctions laws. Users of North Korean labor must also comply with the financial transparency requirements of U.N. Security Council Resolution 2094, which prohibits the provision to North Korea of economic resources that could be used for prohibited weapons programs.

If users of North Korean labor agreed on a similar code of conduct, there would be far fewer objections to these arrangements, and the balance of equities in this debate might shift. That code would have to include basic worker safety protections, and guarantees that the workers would receive, spend, and repatriate a living wage. The regime could receive the remaining proceeds to purchase food, medicine, and other humanitarian needs and services in kind.

Because moral suasion doesn’t work on everyone, standards that conflict with profit motives need hammers. In the case of South Africa, the hammers included the fear of reputational harm, and eventually, sanctions. Under Section 104(a)(1)(F) of the North Korea Sanctions Enforcement Act, those who engage in transactions in forced labor or human trafficking would be subject to the blocking of their assets in the dollar-based financial system.

Greg Scarlatoiu’s testimony here: Testimony of Greg Scarlatoiu Final

~   ~   ~

* This is my cue to unburden my soul of something. Some months ago, I bruised an Asan scholar and OFK reader by writing (on reflection, unjustly) that Asan “largely” (then changed to “sometimes”) “reflects the views of, and serves the interests of, the South Korean government.” I’ll keep the original basis for that conclusion to myself, but Asan’s work since then has convinced me that it simply isn’t true. I don’t think there’s any question that Asan is the foremost Korean think tank publishing work on North Korea today. I apologize for the slight.

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Kaesong promised us peace and reform. It delivered conflict, tension, and exploitation.

In April 2013, Kim Jong Un pulled 50,000 North Korean workers out of Kaesong, in retaliation for South Korea’s support for U.N. Security Council Resolution 2094. The shutdown lasted for five months and cost investors (and ultimately, the South Korean government that still subsidizes them) millions of dollars. Kaesong eventually recovered to pre-shutdown levels of operation, but the shutdown probably scared away potential foreign investors for years. A few months after the shutdown ended, a new dispute arose when North Korea told Kaesong investors to pay back taxes for the period of the shutdown.

Today, Kaesong is the subject of another North-South impasse. In February, Pyongyang announced a minimum “wage” increase of $4-per-month-per-worker. Seoul refused to accept the increase, told South Korean firms not to pay it, and threatened those that did with an unspecified “corresponding punishment.” For its part, Pyongyang threatened those that didn’t pay with a 15% “arrears charge.” Some of the South Korean firms (49 out of 124) defied their own government and paid anyway. Now, the North Korean workers have begun a work slowdown:

Seoul has requested its companies not to send out March paychecks, vowing to punish violators. Despite the warning, 49 out of 124 South Korean companies have paid March wages to the North’s workers apparently after threats from the North.

The 10-day period of the wage payment for April began on Sunday, signaling for more tension between the two Koreas. The Ministry of Unification said that there has been a reported work slowdown at the complex.

“South Korea cannot accept North Korea’s unlawful activities,” Lim Byeong-cheol, the ministry spokesman, said in a press briefing. “The North should come to the talks to resolve the wage row after immediately ending such activities.”

Many of the firms receive subsidies from the South Korean government, which is to say, they’re middlemen for subsidies by Seoul to Pyongyang. That makes it hard to say what consequences Seoul’s “punishment” would impose on Pyongyang, or the investors. Either way, it’s fair to say that this won’t help Seoul’s efforts to attract foreign investors.

Renewed attention on Kaesong’s opaque wage arrangements and labor standards won’t help, either. Although the North Korean government — which is undoubtedly behind the slowdown — is borrowing a tactic from independent labor unions, Human Rights Watch reminds us that the workers aren’t behind this slowdown, and probably will not benefit from it:

Although the Kaesong Industrial Complex’s law directs the South Korean companies to pay the salaries in cash directly to the workers, North Korea requires workers’ salaries to be given to the government for distribution to the workers. Not surprisingly, the result is the workers only get a small fraction of what they’ve earned. These opaque and unaccountable arrangements make it unclear whether the workers will benefit from the raise in their salaries, or whether Kaesong’s political commissars will just pocket the increase.

The South Korean media has been speculating beyond the issues of wages to ask whether this action creates a renewed priority on North Korea’s unilateral decision making. Most commentators seem less than interested in the plight of the North Korean workers, who face certain retaliation if they stand up against Pyongyang’s abuses, or in the difficulties faced by the South Korean investors who increasingly have little say in issues of the management of the Kaesong Industrial Complex.

Kaesong’s workers only work for the factory owners indirectly. Their real boss is Kim Jong Un. That makes them pawns in a dispute between their real boss and their stepboss. For the last several years, Pyongyang has earned (by some estimates) $90 million annually from Kaesong, either through direct taxation of the companies that operate there, or “by appropriating an undisclosed amount of salary” from the North Korean laborers. It has never even been clear how much of their “wages” the workers really receive, and it has never been clear what Pyongyang uses the money for, although the Treasury Department is interested in the answer. What’s really at stake here is the $450,000* this “wage” increase would reportedly benefit Kim Jong Un.

The Kaesong Industrial Complex opened in June 2004 and has become an important window for the outside world to peer into a sliver of North Korea. North Koreans from remote, rural provinces learn about the outside world through Kaesong. But that’s not enough to make up for the violation of workers’ basic human rights to receive their pay, to have their say, and to organize their own, independent unions.

The Kaesong law governing working conditions in the complex falls well short of international standards, especially with regard to the workers’ right to organize without hindrance, elect their own representatives, form independent labor unions and bargain collectively. Also forgotten in the rush to raise wages was North Korea’s failure to protect women workers from sex discrimination and sexual harassment, and to keep children away from hazardous labor.

Instead of arguing about the increase in salary, the South Korean government should be demanding that North Korea stop playing middleman and ensure that the workers in Kaesong receive all of their salary directly, not just the slivers of their pay that Pyongyang agrees to share with them. [Human Rights Watch]

North Korean arbitrariness, political risk, and the lack of access to U.S. markets have prevented Kaesong from reaching its full potential. Until Kaesong’s labor and wage arrangements are clarified, competing manufacturers and human rights groups can stop Kaesong’s imports from entering U.S. markets using this regulation, which allows interested parties to petition U.S. Customs and Border Protection to stop imports made with “convict labor, forced labor, or indentured labor under penal sanctions” from landing in U.S. ports. Because Kaesong’s goods are manufactured, in part, in North Korea, their import is also restricted under Executive Order 13570, an order imposed in response to North Korea’s continued weapons development.

Kaesong’s proponents promised us it would drive economic, social, and political change in the North; the reality has been barbed-wire capitalism. Instead of bringing financial transparency to the North, it has clashed with and diluted the financial transparency requirements of U.N. Security Council resolutions. Instead of allowing South Korea to influence and disarm the North, it has been a political lever for North Korea to influence the South, and to deter the South from imposing consequences on its nuclear testing. Instead of easing inter-Korean tension, it has been another source of tension and conflict. Contrary to promises that it would pacify the DMZ, it did not prevent the North Korean attacks on the Cheonan and Yeonpyeong Island in 2010. Contrary to promises that it would become an international manufacturing center, Kaesong’s investors are overwhelmingly South Korean. Indeed, the North’s behavior could be mistaken for a willful design to prevent Kaesong from outgrowing the capacity of its internal security services to monitor everyone who works there.

Once again, we’re left asking, “Who changed whom?” A decade after the start of manufacturing there, there’s little sign that Kaesong will keep these promises, or ease Pyongyang toward meeting the standards that apply to the rest of humanity.

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Why legal investments in North Korea are a money laundering risk

You’ve often seen me write about the importance of “financial transparency” in transactions with North Korea. For a decade, economic engagement has mostly been done by one of two models: (1) controlled interactions with members of the elite, the actual effects of which are negligible at best; and (2) barbed-wire capitalism, where a few North Korean officials relay orders from foreign managers to hand-picked workers, and where the regime seals the whole enterprise off to prevent it from influencing the local community.

The former are, for the most part, of little financial significance. The latter may represent a significant source of income for illegitimate uses, and may also help the regime hide its flows of dirty money.

It wasn’t supposed to be this way by now. The idea behind economic engagement was to gradually draw North Korea into compliance with the rules that the civilized world lives by. Yet ten years later, the South Korean Unification Ministry can’t tell us how much (if anything) Kaesong’s workers receive after the regime takes its cut from their wages, and the Undersecretary of the Treasury recently expressed his concern about just how North Korea is spending that money.

The U.N. Panel of Experts now expresses a related worry — that North Korea could be using its ostensibly legal businesses to conceal and launder the proceeds of illicit activity:Screen Shot 2015-03-03 at 7.32.53 AMScreen Shot 2015-03-03 at 7.33.11 AMA few days ago, we saw that North Korean diplomats have been smuggling gold to earn hard currency for Pyongyang. That’s not just of concern because of how North Korea spends the earnings, but also because of concerns about conditions in which the gold is mined. As noted here, however, North Korea continues to run most of this business through the dollar system.

Screen Shot 2015-03-03 at 7.33.23 AM

Hence, the renewal of FATF’s warning about “countermeasures.”

Recently, a scholar friend emailed me that his opponent in a debate had criticized the effrontery of blocking North Korean assets that are the co-mingled proceeds of legal and illicit activity. In fact, that is standard law enforcement practice, because co-mingling is the essence of how criminal organizations conceal the illicit origin of their earnings.

Defendants often commingle SUA proceeds with legitimate funds. The government need not prove that all proceeds in a transaction were unlawfully derived, but must be able to trace some of the proceeds to a SUA. Criminally derived proceeds deposited with legal funds are considered to be withdrawn last unless the account/business is deemed to be permeated with fraud. This implies that the business operations are so intertwined with fraud that to segregate the legitimate operation and profits is impossible. Special agents should work closely with the attorney for the government when investigations involve commingled funds to ensure the elements of the crime are met. [IRS]

That’s why Congress, and many third-country parliaments, have long given their law enforcement agencies the authority to seize co-mingled funds.

The Treasury Department could do a great deal to regulate transactions with North Korea — and perhaps, put more food into empty bellies and drive the development of a true market economy — simply by requiring OFAC to license them. As a condition of each license, the Treasury Department could ask the applicant for assurances that the ultimate end-use of the funds would be for items that would benefit the people: food, clothing, medicine, consumer goods, materials for civilian construction projects, or electronic items like desktop computers that help to open up information flows.

To make this requirement truly effective, the EU Central Bank could impose similar requirements for Euro-clearing transactions. If Canada, Britain, Australia, and Switzerland joined, they would collectively cover just about all of the world’s convertible currencies, leaving only trades in Chinese Yuan unregulated. Of the latter, the Treasury Department could still target the most egregious with secondary sanctions.

In his paper about labor conditions in Kaesong, Marcus Noland called for investors in North Korea to adhere to a single set of minimal standards, akin to the Sullivan Principles. What I’m calling for here is a financial analogue to the Sullivan Principles — a requirement that investors ensure that their money will be used to better the lives of the North Korean people, rather than being wasted on weapons and luxury goods.

The real flaw in the engagement argument today, ten years after it began, is that it can’t show any significant, enduring, positive impact on North Korea, its treatment of its people, or its relations with the wider world.

It’s unfortunate that so many advocates of engagement are too focused on making nice with their minders to insist that the regime make any of the changes they once promised. Two good places to begin would be transparency in their labor and financial arrangements. If they did, they might strengthen their argument by showing that they’ve made legitimate, positive change in how North Korea does business.

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Somehow, I don’t think this will encourage Kim Jong Un to engage with us.

I think Marzuki Darusman is a good man who means well, but it’s difficult to derive a coherent policy from this:

“This is a new thing, spotlighting the leadership and ridiculing the leadership. In any authoritarian, totalitarian system, that is an Achilles’ heel,” Darusman said in an interview in Tokyo, where he held talks with the government on an investigation into North Korea’s abductions of Japanese citizens.

If this kind of ridicule seeps into North Korea, it could become lethal for the regime, he said. “If they want to preserve their system, the only way to do that is not to close themselves off from the international community but to actively engage,” he said. [Washington Post, Anna Fifield]

OK, so they need “engagement”–presumably, trade–to preserve the system, which we all agree should not be preserved. So should we cut off trade?

But the world also should be actively engaging with the Kim regime to draw it out of its self-imposed isolation, Marzuki Darusman said Friday, calling the United States’ increasingly aggressive approach toward North Korea “unfortunate.”

“In the overall picture, I think much hinges on the way the U.S. acts,” said Darusman, a former attorney general of Indonesia. A harder line against North Korea could “stall or delay the process that needs to be put into place,” he said.

I don’t get it. If ridicule of His Porcine Majesty scares the bejeezus out of the little gray men in Pyongyang, and if we’re supposed to use engagement to mock His Porcine Majesty mercilessly, why does Marzuki suppose that Kim Jong Un would widen engagement rather than stick with the current, controllable kinds of engagement that are serving North Korea’s priorities rather nicely? Meanwhile, Kim Jong Un continues to succeed at smothering the penetration of real capitalism.

Marzuki is a distinguished jurist who has done a great service to humanity by the facts he’s helped to establish. Maybe that’s enough for one man for one lifetime.

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President Park’s unification plan is missing a Phase 2

For months now, we’ve heard Park Geun Hye telling us about how reunification would be a “jackpot” for both Koreas, but we’ve never heard her explain just how she intends to achieve this result. This left some rather important questions unanswered.

Having heard so much from President Park about Phase 3 (profit!) and so little about Phases 1 or 2, at least we know that she’s asking us to resume the collection of underpants:

South Korean Unification Minister Ryoo Kihl-jae said Wednesday that Seoul and Washington should make greater efforts to engage North Korea, saying that dialogues would make pressure on the communist regime more effective. [….]

Until now, Seoul and Washington focused on inducing Pyongyang to change by cooperatively putting pressure upon it. [Yonhap]

Oh, no they haven’t. They’ve simultaneously pursued the mutually inconsistent objectives of economic sanctions and economic subsidies, chasing talks without acquiring the leverage for those talks to succeed.

However, to make the pressure more effective, dialogues and cooperation are also necessary,” Ryoo said during the forum at the Center for Strategic and International Studies (CSIS).

Wow. I can’t believe no one ever thought of that.

“Our two countries should therefore strengthen our coordination for engagement as well. We will need to show Pyongyang clearly what it can earn by giving up the path of provocation and isolation and choosing the path of dialogue and cooperation,” he said.

WADR, Minister Ryoo, I think the North Koreans know exactly what they’d earn, which explains why they continue to choose the path of isolation.

Well, I’ll say this much—I understand Park’s plan better now; after all, how different is it from the same plan we watched Kim Dae Jung and Roh Moo Hyun waste a decade and seven billion-plus dollars on? And just look how far that got us. Of course, some of us observed these Sunshine Lite ideas in Park nearly a decade ago, and her North Korea policy has been a triumph of maddening consistency over experience. I’ll predict, with high confidence, that these plans will end just as well as they have before.

I don’t disagree that the efforts of the U.S. and South Korea to engage the North have often been poorly coordinated. I’m not opposed to bilateral or multilateral talks with North Korea, so long as the terms are strictly coordinated among allies, the positions firm, and the expectations realistic. I’m all for engagement — so long as it doesn’t profit the regime we’re ostensibly pressuring — although I think we’ve mostly been engaging the wrong people and wish we’d engage the right ones.

My suspicion (you could even say hope) is that Ryoo’s position isn’t really about those things, and that it’s really about Park’s current political weakness, and her desire to protect her political flanks from the Northern Wind ploy, than it is about having a coherent vision for changing North Korea’s behavior.

Ryoo also said that it is important to help North Korea actually see the benefits of cooperation with the outside world. That will be a way to “pragmatically improve the quality of life and the human rights situation of the North Korean people,” he said.

What do you mean? They have ski resorts! Problem solved!

Ryoo arrived in Washington on Thursday on a trip aimed at broadening U.S. understanding of South Korean President Park Geun-hye’s trademark push for preparations for unification with North Korea. He is the first South Korean unification minister to visit the U.S. since 2011.

But on the other hand, if Park’s true goal was to tell a weary domestic audience what it wants to hear, why would she send Ryoo to deliver these remarks in Washington, while calling on our government to support this wildly unoriginal vision?

On the face of it, the Obama Administration sounds supportive, except for the immovable object that stands in the way of everything:

U.S. Assistant Secretary of State Daniel Russel expressed staunch support for Park’s unification vision, saying it provides a vivid picture of the benefits the North could reap from reconciliation and denuclearization, as well as the benefits that reunification will bring to South Korea and the region as a whole.

“The U.S. firmly supports this vision. We will never accept a permanent division of the Korean peninsula,” he said. “The ROK (South Korea) and the U.S. will continue to do everything we need to do to keep the peace on the peninsula through a combination of deterrence, and a strong allied defense.”

He also urged the North to give up its nuclear program, stressing that Pyongyang won’t be able to achieve security and prosperity it wants while pursuing nuclear weapons. The North’s “byeongjin” policy of simultaneously seeking economic and nuclear development will never succeed.

“It’s not a policy. It’s a pipe dream. It will not happen. North Korea can’t have its cake and eat it too,” Russel said of the North’s policy. “Our strategy raises the cost of continued defiance and ultimately leaves the DPRK no viable alternative but to honor its commitments and to come into compliance with its international obligations, first and foremost, with its obligations to irreversibly and verifiably denuclearize.”?  [Yonhap]

Is there a single politician in South Korea who remains in firm contact with reality? Unfortunately, U.S. policy toward North Korea has almost always been deferential to Seoul. It’s not hard to guess why that might be.

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Max Fisher’s criticism of the Sunshine Policy is spot-on

Washington Post alumnus Max Fisher, now writing at Vox, presents a graph and data showing how, despite all of its abhorrent behavior, North Korea’s trade (most of it with China and South Korea) has grown, and how that leads to more abhorrent behavior.

The way it’s supposed to work is that North Korea’s belligerence, aggression, and horrific human rights abuses lead the world to isolate it economically, imposing a punishing cost and deterring future misdeeds. What’s actually happening is that North Korea is being rewarded with more trade, which is still extremely small, but growing nonetheless, enriching and entrenching the ruling Kim Jong Un government, even as it expands its hostile nuclear and missile programs. [….]

But it turned out that North Korea was just exploiting the Sunshine Policy as a con. The greatest symbol of this was the Kaesong Industrial Complex, a big production center just on the North Korean side of the border, where South Korean companies and managers contract with North Korean workers. The idea was that this daily contact would ease cultural tension and that the shared commercial interests would give the countries a reason to cooperate. In practice, though, the North Korean government stole most of the workers’ wages, big South Korean corporations exploited the ultra-cheap labor to increase profits, and North Korea didn’t ease its hostility one iota.

The Sunshine Policy ended in 2007, correctly rejected as a failure by South Korean voters. But the trade continued, as did the work at Kaesong. South Korean corporations, which have even more political power there than do American corporations in the US, have come to enjoy this trade as a source of revenue and cheap labor, and push to maintain it. That drop you see in 2013 is actually because North Korea shut down Kaesong for a time as a political provocation — it was the South Koreans, paradoxically, who wanted to reopen the facility that directly funds the North Korean weapons occasionally used to kill South Koreans. [Vox, Max Fisher]

Those South Korean corporate profiteers have since allied themselves with “progressive activists,” who vary from the anti-anti-North Korean to the pro-North Korean, to call on President Park to lift sanctions on the North. It must be the most unlikely alliance since 1939.

I’m not sure how Fisher’s analysis of the problem could have been better, unless he’d driven home the point that the Sunshiners justified their policy by predicting that this preferential trade would catalyze economic reform and liberalize North Korean society. Clearly, that hasn’t happened; in fact, I could make a strong case that the opposite is closer to the truth. In their desperation to catalyze reform, Sunshiners have perpetuated the status quo instead.

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This is why no rational person would invest in Kaesong

North Korea has unilaterally raised those “wages” that South Korean companies pay the North Korean regime for labor at Kaesong—wages that the workers probably never see, and that for all the Unification Ministry knows, are used to buy iron maidens, centrifuge bearings, and 300-millimeter rocket fuses. The Unification Ministry isn’t happy, but only because wage hikes are bad for business:

“Our firm position is that it’s impossible to revise the wage system without consultations between the South and North,” the unification ministry official told reporters on background. The government will soon deliver the position to the North in writing, he added. He pointed out that wages are an important element of the complex’s competitiveness. [….]

The two sides have a 49-point agreement on the working conditions for them. The North abruptly informed the South of its plan to revise 13 of the stipulations last week. The measure includes the scrapping of a 5-percent cap on the annual increase rates in their minimum wages and hikes in overtime payment. [Yonhap]

Remember, these are the people our State Department expects to make and keep a nuclear freeze deal.

I can’t imagine why any sensible investor, lured by the promise of low wages and taxes, would plow his money into one of the world’s most politically risky places, knowing full well that those low wages can unexpectedly turn not-that-low, that the taxes can unexpectedly turn high, and that the products can’t legally be imported into the United States. Knowing all that, doesn’t choosing Kaesong over Thailand or the Philippines seem rather irrational?

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Oh, so this is what pissed the North Koreans off.

Speaking at the International Democrat Union last Friday, Park said this:

In a luncheon meeting with the party leaders, President Park Geun-hye said North Korea’s pursuit of nuclear weapons had resulted in the country’s isolation and dire human rights conditions.

“Now the North Korean people are faced with hunger and a tragic humanitarian situation as the North sticks to the path of… isolation by developing nuclear arms,” Park said during the luncheon at the presidential office Cheong Wa Dae.

“I request consistent attention and support from IDU members as international support and cooperation are vital for improving the North Korean situation and bringing about unification of the two Koreas,” she said. [Yonhap]

So that explains that.

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