The first mid-term report of the U.N. Panel of Experts should be out any day now, and among its revelations will be yet more evidence that Pyongyang is helping Assad gas his own people:
Two North Korean shipments to a Syrian government agency responsible for the country’s chemical weapons program were intercepted in the past six months, according to a confidential United Nations report on North Korea sanctions violations.
The report by a panel of independent U.N. experts, which was submitted to the U.N. Security Council earlier this month and seen by Reuters on Monday, gave no details on when or where the interdictions occurred or what the shipments contained.“The panel is investigating reported prohibited chemical, ballistic missile and conventional arms cooperation between Syria and the DPRK (North Korea),” the experts wrote in the 37-page report. [Reuters]
Yesterday, the North Korean threat finally crossed the ocean to our shores. As it is after every fresh outrage from Pyongyang, the question many will ask is, “Now what?” Certainly, there are plenty of legal, financial, and diplomatic options on this list that President Trump’s cabinet can exercise. Congress is also ready to act, or nearly so. You should expect to see the Senate move legislation you’ve seen (or something similar to it) and legislation you have not yet seen. That is good, but is there still time? After years of indecision and neglect, it will take concerted diplomatic and law-enforcement efforts for financial pressure to show its effects on Pyongyang, and no pressure that fails to threaten the very end of Kim Jong-Un’s misrule will be sufficient.
As you read this, “experts” across Northwest D.C., including some of those who are most responsible for getting us into this mess in the first place, are proof-reading their next op-eds calling for us to beg for a deal that Pyongyang doesn’t want and wouldn’t keep. As Pyongyang has said repeatedly (though too many of us choose not to hear it) it will not negotiate away its nuclear arsenal. A freeze would only trade away valuable concessions until Pyongyang seizes on the slightest pretext to renege on it. Those who tell us that we must talk to North Korea ignore the evidence of how often we have tried. Indeed, it is they who aren’t listening to North Korea. These people are deluding everyone — most of all themselves. Pyongyang did not starve millions of “expendable” people to build a nuclear arsenal so that it could trade that arsenal away. Kim Jong-Un does not want nuclear weapons merely to defend himself from us. He will use them to blackmail Seoul into a “peace process” that would achieve the incremental surrender of South Korea and ultimately, the legacy to which his father and grandfather devoted their lives — the reunification of Korea under his rule. I believe he now sees that goal as within his reach. He may be right.
Can we learn to live with a nuclear North Korea that sold missile technology to Iran, built a nuclear reactor in a part of Syria now controlled by ISIS, and threatened to sell nuclear weapons to terrorists? That attacked our South Korean treaty ally or U.S. forces stationed in Korea in 1968, 1969, 1970, 1976, 1983, 1987, 1998, 2002, 2010, and 2015, killing 50 South Koreans in 2010 alone? That sends assassins to murder human rights activists and dissidents in exile? That has launched cyberattacks against banks, newspapers, nuclear power plants, and the Seoul subway? That launched another cyberattack against a Hollywood movie studio, made terrorist threats against movie theaters in the United States, and chilled the freedom of expression that Americans cherish and have given their lives for? That murdered the half-brother of its tyrant with a deadly nerve agent, in a crowded airport terminal, in the capital city of a friendly nation, 5,000 miles away? That may already be able to strike the United States with a nuclear weapon? The very idea is madness. One day, Kim Jong-Un, whose tolerance for risk always exceeds the calculations of our “expert” class, will go further than we are prepared to tolerate. Down this path lies war — a war whose potential will grow more destructive with each passing year.
Any fool who can hear the rising roar and see the boiling cloud of mist ahead knows where this current is carrying us. We cannot live with a nuclear North Korea if it means — as it assuredly does — the end of nonproliferation and the beginning of an age in which nuclear, chemical, biological, and cyber-terrorism will cease to be theoretical and become imminent and frequent. Fundamentally, the question isn’t really whether we can live with a nuclear North Korea, but whether a nuclear North Korea so inculcated with hatred of America, and with contempt for our open and democratic society, would live with us.
For now, I doubt we’ll make much progress with Russia or China at the U.N., though I think we should give it a token try. One additional provision that’s now worth asking for is an air and sea blockade in which only imports of food, non-luxury consumer goods, and humanitarian supplies should go through. But China and Russia would not agree to this, and I increasingly incline toward not wasting our political capital there. Instead, we should re-focus our diplomatic energy on progressive diplomacy to build a coalition outside of the U.N. to enforce existing U.N. sanctions and deny the North Korean regime the funds that sustain it. But is there still time? And more importantly, don’t Pyongyang’s escalations call for a reassessment of what sanctions are meant to achieve, and therefore the targeting strategy?
The U.S. Attorney for the District of Columbia issued a press release this afternoon announcing that it has filed a complaint under the civil forfeiture statute at 18 USC 981, to forfeit $1,902,976 from Mingzheng International Trading Limited of Shenyang, China. According to the complaint, Mingzheng conspired to evade sanctions and launder money through the United States on behalf of the Foreign Trade Bank of North Korea (FTB). Treasury designated the FTB under Executive Order 13382 in March 2013, for proliferation financing. Under the International Emergency Economic Powers Act, a designation blocks the target out of the dollar system. Knowingly dealing with a designated person using the dollar system is a violation of the IEEPA. According to DOJ:
The action represents one of the largest seizures of North Korean funds by the Department of Justice.
“This complaint alleges that parties in China established and used a front company to surreptitiously move North Korean money through the United States and violated the sanctions imposed by our government on North Korea,” said U.S. Attorney Phillips. “Sanctions laws are critical to our national security and foreign policy interests, and this case demonstrates that we will seek significant remedies for those companies that violate them.”
According to the complaint, Mingzheng is owned by a Chinese national and is based in Shenyang, China. Mingzheng allegedly operated as a front company for a foreign-based branch of the North Korea-based Foreign Trade Bank (FTB). In March 2013, the U.S. Treasury Department designated the Foreign Trade Bank as a sanctioned entity pursuant to the Weapons of Mass Destruction Proliferators Sanctions Regulations. The designation noted that the Foreign Trade Bank is a state-owned bank, and “acts as North Korea’s primary foreign exchange bank.” The designation further noted that North Korea uses the Foreign Trade Bank to facilitate millions of dollars in transactions on behalf of actors linked to its proliferation network.
Under 18 USC 981, the feds can forfeit property that constitutes proceeds of, or that is “involved in,” a specified unlawful activity (as defined in 18 USC 1956(c)(7)), the money laundering statute. The specified unlawful activities alleged here are conspiracy and violations of the IEEPA.
An FBI investigation revealed that Mingzheng’s alleged activities mirror this money laundering paradigm. Specifically, Mingzheng acts a front company for a covert Chinese branch of the Foreign Trade Bank. This branch is operated by a Chinese national who has historically been tied to the Foreign Trade Bank.
According to the complaint, Mingzheng used its accounts at China Merchants Bank, Bank of Communications, and Shanghai Pudong Development Bank to launder money on behalf of the FTB. All three banks were also involved in the Dandong Hongxiang money laundering case. In that case, the Justice Department said at the time that the Chinese banks were not suspected of wrongdoing. This time, DOJ’s press release doesn’t say one way or the other; however, the transactions alleged here all predate the new Treasury regulation establishing heightened due diligence obligations for North Korea.
The government is seeking to forfeit $1,902,976 that was transacted in October and November of 2015 by Mingzheng, via wire transfers, using their Chinese bank accounts. These U.S. dollar payments, which cleared through the United States, are alleged to violate U.S. law, because Mingzheng was surreptitiously making them on behalf of the Foreign Trade Bank, whose designation precluded such U.S. dollar transactions.
Interestingly, this complaint doesn’t have anything to do with the conduct unmasked in C4ADS’s latest report this week. Rather, this is more of a sequel to the Dandong Hongxiang case filed in the District of New Jersey last September, which arose from the first C4ADS report on North Korea. The new complaint makes the link:
48. The criminal complaint identified Luo Chuanxu as one of the Dandong Hongxiang co-conspirators. The complaint indicates that Luo is a Chinese National who established multiple front companies in Hong Kong, Anguilla, and the British Virgin Islands to facilitate payments on behalf of KKBC, a sanctioned North Korean bank. Luo handled these payments as an employee of Dandong Hongxiang, and was working to assist KKBC in violation of U.S. laws. The criminal complaint noted that Deep Wealth was owned or controlled by Dandong Hongxiang, at least as of June 10, 2015.
49. Additionally, Luo facilitated numerous payments to Mingzheng using Deep Wealth Ltd. (“Deep Wealth”), a Dandong Hongxiang front company established in Anguilla, in the months prior to the transactions related to the Defendant Funds.
50. Specifically, Luo received confirmation of two large payments to Mingzheng from Deep Wealth in 2015. On July 31, 2015, Luo received confirmation from China Merchants bank showing that Deep Wealth remitted $660,000 to Mingzheng’s account ending in 6150. On August 04, 2015, Luo received another confirmation from China Merchants Bank showing that Deep Wealth remitted $900,000 to the same Mingzheng account. These payments are consistent with the North Korean money laundering activities observed between sanctioned North Korean banks via related front companies.
The complaint is available on the federal public docket system (PACER), under United States v. $1,071,251.44 of Funds Associated with Mingzheng International Trading, Ltd., No. 17-cv-01166-KBJ. Unfortunately, WordPress doesn’t like to post pdfs, but you can pull it yourself if you have a PACER account. Civil forfeiture cases have odd case names because they’re in rem actions, which means the property is the defendant. In this case, the case name is based on the first of several listed bank accounts “associated with” Mingzheng. Claimants to the defendant property then have an opportunity to file claims for the defendant property (such as innocent ownership, or contesting the connection between the property and the specified unlawful activity).
With impeccable timing, His Porcine Majesty has sent friendly greetings to one of his best customers:
North Korean leader Kim Jong-un has sent a congratulatory message to Syria over the founding anniversary of the country’s ruling party, Pyongyang’s media said Friday, amid global condemnation against Damascus’s suspected chemical weapon attack on civilians.
The North’s leader sent the message to Syrian President Bashar al-Assad to mark the 70th anniversary of the creation of the controlling Ba’ath party, according to Rodong Sinmun, North Korea’s main newspaper.
The move is seen to be aimed at showing friendly ties between Pyongyang and Damascus as about 90 people were killed by the Syrian government’s suspected uses of chemical weapons Tuesday against a rebel-held area in the northern part of the country.
“The two countries’ friendly relations will be strengthened and developed, given their fight against imperialism,” Kim was quoted as saying by the newspaper. North Korea has long been suspected of cooperating with Syria over nuclear programs. [Yonhap]
A few years ago, I noted the extensive and well-documented evidence of North Korea’s support for Syria’s chemical weapons program. Joseph Bermudez has also summarized some of that evidence, including photographs published by the U.N. Panel of Experts of some of the thousands of chemical suits, masks, and agent indicator ampules intercepted by Greece, South Korea, and Turkey while in transit from North Korea to Syria (mostly through China).
U.S. intelligence officials also believe North Korea has links to the Syrian Scientific Studies and Research Center, which the New York Times calls Syria’s “main research center for work on biological and chemical weapons.”
Although North Korea’s support for Syria’s chemical weapons programs predates the Syrian Civil war, Bruce Bechtol has described how it increased during the war. Other reports have alleged that North Koreans have been present in Syria during the civil war, where they have advised Assad’s army in a number of ways, including by helping it operate vacuum dryers used to dry liquid chemical agents and the SCUD missiles that are sometimes used to deliver those agents.
In Idlib, the murder weapon was probably sarin, another nerve agent North Korea is believed to possess in quantity, but which Syria most likely produced domestically with North Korean technical assistance. If Assad was the murderer of Idlib, then, Kim Jong-un was likely an accessory.
In another sense, we should feel fortunate that Assad’s use of WMD against his own people is merely chemical. As Yonhap’s story also notes, North Korea built (and had nearly completed) a nuclear reactor in the Syrian desert near Deir-al-Zour, in an area now under the control of ISIS, before the Israeli Air Force destroyed it. This CIA video summarizes North Korea’s involvement in the construction of that reactor here:
For now, it is good that Assad knows that he cannot use WMD with impunity, and that whatever affection existed between Trump and Putin before is over for now. The President may also think he can intimidate Xi Jinping by taking in bomb damage reports while coolly telling his dinner guest to try the veal. Still, consider the possibility that Xi will be salivating for an entirely different feast if he thinks we’re about to tie ourselves down half a world away.
Our response to the use of nerve gas against children and families — or in places crowded with them — must be more than nothing. But that response must also be less than stage-diving into the quicksand of the Middle East, and a very real risk of conflict with Russia, without a plausible plan to end the slaughter. It is wrong to say that Syria is not our problem; it is. It nearly destroyed Iraq, it’s destroying Europe, and it may yet destroy Jordan and destabilize Turkey. It could flood the world with a generation of terrorists and incubate another generation that will follow them.
It is also wrong to believe that there is any quick solution to this crisis, given the state to which things have descended today. That’s why I was skeptical of President Obama’s abortive, too-little, too-late intervention in 2013. Those same questions remain relevant today.
The only permanent solution to the horrors in Syria will be to arm, train, and equip enough moderate and secular Syrians to retake most their country, stabilize the front lines, raise the political and financial costs for Russia and Iran, and negotiate either a peace or a sustainable division of the country. Do any moderate or secular Syrian forces still survive between the hammers of ISIS and Al Qaeda, and the anvils of Assad, Hezbollah, and Putin? The history of how Obama allowed these people to be slaughtered — even as he allowed a morbidly obese high school dropout who tortures small animals and masturbates to bondage porn get a nuclear arsenal — ought to fill the main lobby of his presidential library.
gotta put this 2014 “fact” “check” into some sort of hall of fame pic.twitter.com/wnL2BwHDkx
— Logan Dobson (@LoganDobson) April 5, 2017
Which brings me to my final question. Who still remembers yesterday, when North Korea was our greatest national security threat? Even in light of what happened in Idlib, isn’t that still the case? Wasn’t North Korea supposed to be the topic of tonight’s dinner conversation? Can we pressure, contain, and deter Kim Jong-un if our forces and our national will are invested half a world away? Do our plans for Syria and North Korea involve being prepared to fight two wars on different sides of the world if necessary? Must North Korea always be the crisis that builds while America is distracted on other continents? Could we have at least taken the modest step of putting North Korea back on the list of state sponsors of terrorism before we bombed Syria? There may be good answers to all of those questions. Now is the time to ask them.
A new report from the Wall Street Journal, quoting “U.S. and Asian officials,” says that the Trump Administration is considering “increasing financial penalties on Chinese companies in response to growing evidence of their support for North Korea’s weapons programs.” Such as:
In a case that particularly alarmed the Trump administration, a North Korean businessman attempted to use Pyongyang’s embassy in Beijing to export a lithium metal that is used to miniaturize nuclear warheads, according to the U.N. report. [Wall Street Journal, Jay Solomon]
As for that “growing evidence,” this year’s report from the U.N. Panel of Experts monitoring the (non-) enforcement of sanctions against North Korea is packed with so much of it that I couldn’t even jam a Cliffs Notes summary into one post. This post will cover the evidence that China is allowing known, U.N.-designated North Korean proliferators to operate from its territory, often openly. We’ll turn to China’s tolerance for (and abetting of) North Korean money laundering later this week, as soon as I find the time to write it up. Bear in mind, this post itself is a sequel to other posts I’ve written in previous years, also documenting China’s flagrant cheating on the sanctions, or its simple refusal to enforce them.
[“Logging vehicles” made by a state-owned company in China, via the U.N. Panel’s 2013 and 2015 reports]
Solomon’s report also adds to the leaks I discussed here, suggesting that the Trump administration will opt for a harder line, including secondary sanctions, against Chinese companies that aid and abet those violations.
But Trump administration officials have signaled there will be even greater financial pressure placed on Beijing if it doesn’t cut off North Korea, a step that risks Chinese retaliation. “We are putting the world on notice: The games are over,” Commerce Secretary Wilbur Ross said while announcing the sanctions on ZTE last week. [….]
U.S. officials said Mr. Tillerson would be discussing North Korea at all his stops in Asia, including the issue of “secondary” sanctions against non-North Korean companies that have been aiding Pyongyang. “All of the existing tools that we have to try to bring pressure on North Korea are on the table, and we’ll be looking to try to see what the most effective combination is,” said a senior U.S. official briefed on the Asia trip.
Republican senators wrote Treasury Secretary Steven Mnuchin last month and called for an investigation into the Bank of China and other Chinese firms for their alleged roles in helping North Korea. [Wall Street Journal, Jay Solomon; link to senator’s letter here]
More on that here, via the New York Times. To be clear, some of this cheating is willful, but most of it is what I’d call willful blindness, where the Chinese authorities knowingly permit North Korean proliferators to operate on their territory, even when the front companies and their agents were designated by the U.N. years ago, and often long after being put on clear notice by the U.N. Panel. In a few cases, China clings to obtuse interpretations of the resolutions to avoid complying with them. What all of these cases have in common is that U.N. experts were able to find violations on Chinese soil, in plain sight, that Chinese government officials somehow could not.
Kumsan Trading. Member states are supposed to freeze the assets of, and expel the representatives of, companies involved in North Korean nuclear, missile, and other WMD proliferation. According to the Panel, the Korea Kumsan Trading Corporation is a front for North Korea’s General Bureau of Atomic Energy and helps it procure materials and fund its operations. Kumsan advertises itself online openly as dealing in sanctioned products, including vanadium and precious metals, with locations in both Moscow and Dandong. (Paras. 18-20.)
Korea Mining Development Trading Corp. (KOMID) is North Korea’s main arms dealer. It was designated in 2009 for WMD proliferation, but probably earns most of its revenue through violations of an embargo on conventional arms sales, by selling to governments in Africa and the Middle East. KOMID operates through multiple front companies that do business more-or-less openly in China. China is required to expel the representatives of these companies, but it almost never does. When one of them is exposed, it may revoke a business license or registration, but the operative goes right back into business under a new name at a new address. The Panel also found that at least nine KOMD representatives traveled through China in 2016, despite a requirement that member states deny them entry. (Table 8, Page 68.)
One of KOMID’s fronts is Namchongang Trading, which was designated by the U.N. in 2009 for procuring nuclear-related items. It operates openly in Beijing and Dandong, China, through several Chinese commercial websites. (Para. 156.) Namchongang has also operated as (or in cahoots with) Taeryonggang Trading, Namhung Trading, and Sobaeksu United Corporation, which operates in Beijing, Yingkou and Dandong. The EU designated Sobaeksu in 2010 for “the research and acquisition of sensitive products and equipment.” The Panel suspects that this entire network is involved with KOMID. (Paras. 156-59.) KOMID also does business through a front company called Beijing New Technology. (Para. 163.)
Another KOMID front, Korea Heungjin Trading, which was designated in 2012, for nuclear, missile, and other WMD proliferation, also operates openly in Dandong and Dalian. A North Korean diplomat posted at the embassy in Beijing serves as its director. (Para. 187-89.)
Green Pine Associated was designated by the U.N. in 2012 for its involvement in North Korea’s nuclear, missile, and other WMD programs. It’s still doing business openly in both Beijing, Shenyang, and Hong Kong as Green Pine, Natural Resources Development Investment Corporation, King Helong International Trading, Korea Unhasu Trading Company, and Saeng Pil Trading Corporation. (Paras. 166-83.) Green Pine is the company behind the attempted sale of the lithium from … guess where:
24. The Panel investigated the 2016 attempted online sale of lithium metal by the Democratic People’s Republic of Korea. The enriched lithium-6 isotope, and products or devices containing it, are on the list of prohibited nuclear-related items adopted by the Security Council (see annex 4-4). According to IAEA, lithium-6 is used to produce tritium, an isotope found in boosted nuclear devices. This sales attempt suggests that the Democratic People’s Republic of Korea has access to remaining quantities of the material.
25. Li-6 is advertised for sale by a company of the Democratic People’s Republic of Korea, General Precious Metal, which the European Union has identified as an alias of Green Pine Associated Corporation (Green Pine). Mr. Chol Yun was listed as the contact person of General Precious Metal for sale of the mineral and has an address and phone numbers in Beijing (see annex 4-5). The same name appeared as third secretary of the embassy of the Democratic People’s Republic of Korea in Beijing on an official diplomatic list dated 24 September 2012 (see annex 4-6). The Panel notes a pattern whereby the Democratic People’s Republic of Korea has accredited Green Pine overseas representatives as diplomats. The Panel continues to investigate this diplomat’s involvement in prohibited activities and his possible connection with another prohibited activity (see para. 91).
Korea Ryonha Machinery Joint Venture was designated in 2013 for WMD proliferation, mainly for buying, selling, and manufacturing machine tools used for making both conventional weapons and WMDs. It shows up in POE reports year after year because it continues to operate, and to display its wares at trade shows, in both Russia and China. In 2016, a Chinese company exported several machine tools to North Korea, and the Chinese government was reportedly investigating (!) Ryonha’s involvement. (Para. 196.)
[From the U.N. Panel’s 2014 report]
Training of scientists. The resolutions ban member states from training North Koreans in sensitive technology that could be used for North Korea’s WMD programs. The North Korean universities that train the country’s nuclear and missile scientists have exchange agreements with universities in Russia and China. The Panel asked the Chinese universities to explain, but they never responded. (Para. 135.)
Kwangmyongsong missile parts. Someone, presumably the U.S. Navy, recovered the pieces of a Kwangmyongsong missile North Korea launched in February 2016 and found that it contained “ball bearings and engraved Cyrillic characters … identical to those from the 2012 Unha-3, and a “camera [and] EMI filter” from a “Chinese manufacturer, Beijing East Exhibition High-Tech Technology Co. Ltd.” (Paras. 57-58.) That “someone” also discovered the Pyongyang had imported pressure transmitters from the U.K. and Ireland, via the manufacturer’s distributor in China, via middlemen in China. (Para. 59.) This suggests several layers of violations — China’s failure to expel North Korean representatives of sanctioned entities, to enforce export controls, or to inspect cargo going to North Korea.
Shipment of Scud parts to Egypt. Paragraphs 71-77 of last year’s report discuss a shipment of Scud missile parts to Egypt. Since then, the Panel has determined that the whole scheme was run out of the North Korean embassy in Beijing. (Paras. 88-89.) The shipper was Ryongsong Trading Company, and the seller was Rungrado Trading Company, which you may remember for its human trafficking in Europe. Rungrado was designated by the Treasury Department last year for “the exportation of workers” from North Korea to earn foreign currency for Pyongyang, some of which went to North Korean agencies that were designated for supporting WMD programs. South Korea considers Rungrado to be an alias for Ryongsong. (FN.99.) Although the U.S. Treasury Department routinely designates aliases, it has not designated Ryongsong.
North Korea is subject to a U.N. embargo on the import, export, sale, or purchase of weapons, including weapons components, technology, services, training, and dual-use items. Since March, China has been required to inspect all cargo “that has originated in the DPRK, or that is destined for the DPRK, or has been brokered or facilitated by the DPRK or its nationals, or by individuals or entities acting on their behalf or at their direction, or entities owned or controlled by them, or by designated individuals or entities, or that is being transported on DPRK flagged aircraft or maritime vessels.” (Para. 18.) Pretty clearly, that isn’t happening.
Syria rocket shipment. You’ve already read my post on this, right? Last August, Egyptian authorities seized a record haul of North Korean weapons, mostly PG-7 antitank rockets, hidden under iron ore aboard the M/V Jie Shun. I guessed that Syria was the destination because of the geography, but it’s possible that the client could have been Hamas or Hezbollah (which have also been Pyongyang’s arms clients).
This transaction also relied heavily on North Korean agents based in China. The bill of lading lists a shipper whose address is a hotel room in Dalian, a city often used by North Korean operatives. (Para. 63.) The holder of the ship’s compliance document was one Fan Mintan. A second man, Zhang Qiao, was its emergency contact, arranged for the ship’s insurance, and registered the ship’s operator in the Marshall islands. (Paras. 65-66.) Zhang is also involved in the coal trade with North Korea (para. 68), and thus played a role in violating UNSCR 2270 and 2321. He is also linked to another suspected North Korean smuggling ship, the M/V Light. A third man, Li Anshan, whom the Panel links to Ocean Maritime Management, a North Korean shipping company designated by the U.N. for arms smuggling, helped arrange for the Jie Shun’s Cambodian registration.
Eritrea radios shipment and Glocom. I previously posted about Glocom, the Reconnaissance General Bureau front company that manufactured sophisticated military radios and was based in Malaysia. Glocom made headlines after it was exposed just after the assassination of Kim Jong-nam. Starting at Paragraph 72 of its report, the Panel described how Glocom shipped radios to Eritrea. According to the Panel, that shipment “originated in China.”
75. The air waybills listed the shipper as Beijing Chengxing Trading Co. Ltd. According to the Chinese business registry, the company is still active, mainly trading in electronics, mining equipment and machinery (see annex 8-3). Mr. Pei Minhao (???) was listed as a legal representative until 26 February 2016 and still owns most shares in the company (see para. 164).
Glocom had North Korean representatives based in both Malaysia and China; had bank accounts, front companies, and procurement agents in both Malaysia and China; used mostly Chinese suppliers; and shipped its components to Beijing or Dandong for assembly (the report didn’t specify where). (Para. 77-84, 164.) Glocom did most of its business in U.S. dollars or euro through a sanctioned bank, Daedong Credit Bank, “to transfer funds to a supply chain of more than 20 companies located primarily on the Chinese mainland; in Hong Kong, China; and in Singapore.” (Paras. 233-25.)
Naval vessel repair & construction. Last year, the Panel reported that Green Pine had refurbished military patrol boats for Angola in violation of the arms embargo. The parts were shipped from China, the Panel has asked China for an explanation, and China still hasn’t given one. (Para. 103.)
North Korean UAV that crashed in South Korea. A Beijing company, Microfly Engineering and Technology, made it. After that, the trail leads to another Chinese company and two middlemen, who either point fingers at one another or deny all involvement. The Panel asked China to investigate, but China hasn’t responded. (Para. 107.)
When reporters try to make sense of China’s inconsistent and shifting explanations for why it won’t enforce sanctions against North Korea, they often settle on the consensus that China doesn’t really want North Korea to have nukes, but that it’s afraid that strict enforcement of sanctions will cause North Korea to collapse. This evidence should cause us to question that consensus. When China hosts all of these entities that spend scarce North Korean resources on nuclear components instead of food and consumer goods that might stabilize the regime, you have to look beyond regime preservation to explain China’s motives. Frankly, I can’t buy the consensus that Beijing doesn’t want North Korea nuked up when I see this much evidence that it’s helping to make that happen. Maybe the scholars our scholars are talking to don’t want a nuclear North Korea, but I’m not sure those scholars necessarily speak for China’s defense establishment.
Since last year, this blog has covered SWIFT’s continued provision of financial messaging services to North Korean banks, despite suspicions that North Korea was involved in stealing almost $100 million from the Bangladesh Bank by hacking into SWIFT’s messaging software. Later, I wrote about an effort in the last Congress to ban North Korean banks from SWIFT, mirroring a sanction that was one of our most effective measures against Iran. SWIFT is effectively the postal service of the financial system, sending instructions between banks to credit and debit accounts to facilitate payments. Losing SWIFT access makes it slow, costly, and inefficient for a bank to operate.
The U.N. Panel of Experts’ latest report, released over the weekend, now confirms that SWIFT continued to provide services to three North Korean banks — Bank of East Land, Korea Daesong Bank, and Korea Kwangson Banking Corporation, the object of this recent Justice Department indictment — long after those banks were designated by the U.N. and the U.S. Treasury Department. Worse, the Belgian government authorized that. Generally speaking, both sets of designations require the freezing of any of the target’s assets, and prohibit any action that facilitates the target’s transfer of property or interests in property.
248. In response to inquiries by the Panel, SWIFT confirmed to the Belgian authorities that it provided financial messaging services to designated banks of the Democratic People’s Republic of Korea. As part of its procedure for doing so, SWIFT requests authorization from the Government to receive the moneys owed for the services. Upon receipt of such authorization, SWIFT receives payment for its services from the designated banks. The payments are then entered in its books and recorded as revenue. The Belgian authorities have authorized SWIFT to receive the amounts set out in tables 13 and 14 from designated banks in exchange for the provision of financial messaging services, the provision of the SWIFT handbook, training in the use of the SWIFT network and maintenance costs.
SWIFT stopped providing services to four other North Korean banks — Amroggang Development Banking Corporation, Daedong Credit Bank, Tanchon Commercial Bank, and Korea United Development Bank — not because SWIFT was even minimally principled, but because “those banks themselves requested SWIFT to do so.”
Paragraph 8(d) of UNSCR 1718 requires all Member States, and all persons subject to their jurisdiction, to “ensure that any funds, financial assets or economic resources are prevented from being made available by their nationals or by any persons or entities within their territories, to or for the benefit of” designated entities. The whole point of financial messaging services is to make economic resources available. I can’t for the life of me see how financial messaging on behalf of designated North Korean banks is anything but a clear violation of 1718.
The unavoidable fact of SWIFT messaging is that it enables banks to effect financial transfers. Thus, messaging services that facilitate designated banks’ financial transactions violate a Member State’s duty (in this case, Belgium’s) to “prevent” the funds “from being made available” to designated entities, per paragraph 8(d) of UNSCR 1718 (2006), paragraph 11 of UNSCR 2094 (2013), and paragraph 10 of UNSCR 2270 (2016). To authorize the acceptance of payment from designated DPRK entities would permit those entities to purchase goods and services and access the global economy, which would contravene the plain meaning of an asset freeze. That’s exactly what Belgium and SWIFT did here. Bear in mind that last summer, the Justice Department indicted Dandong Hongxiang for using an off-the-books ledger system to move funds for one of the very same banks.
Then, there is the question of whether SWIFT provided “financial services” to North Korean banks. In relevant part, Paragraph 11 of UNSCR 2094 requires Member States to “prevent the provision of financial services . . . by their nationals or entities organized under their laws . . . of any financial or other assets or resources . . . that could contribute to” activities prohibited by the Security Council’s resolutions. By citing Paragraph 8 (d) of UNSCR 1718 (2006), this provision specifically applies to entities that have been designated by the Security Council.
Now, I take it that SWIFT’s highly-paid lawyers and lobbyists (at least, more highly paid than me) have gone to great lengths to persuade people that financial messaging services aren’t “financial services.” In paragraph 249 of the Panel’s report, Belgium cites domestic and EU law to that effect. At best, that’s a valiant effort to make chicken salad from chicken shit. To its credit, the Panel didn’t buy that, although it focused on a different angle — the receipt of fees by SWIFT from North Korean banks.
The Panel notes that, in the absence of a determination by the Committee that these payments fall under the exemptions in paragraphs 9 (a) and/or (b) of resolution 1718 (2006), the receipt of funds from a designated entity is a violation of the asset freeze pursuant to paragraph 8 (d) of resolution 1718 (2006) and paragraphs 8 and 11 of resolution 2094 (2013).
Myself, I’m much less concerned about the minuscule fees SWIFT received — a few thousand dollars — than the (undoubtedly, much larger) sums SWIFT’s messaging services helped those designated banks to move.
With U.N. resolutions, we’re lucky if many states’ officials read them at all. For the resolutions to have any chance to work as intended, thousands of officials in hundreds of member states have to interpret and apply them consistently. Not all of those officials are banking lawyers. Pedantic interpretations of resolutions that fly in the face of their plain meaning are a recipe for exceptionalism. That’s what happens when a Member State’s interpretation of its domestic law is allowed to contravene the plain meaning and purpose of the resolutions.
Belgium, of all places, now finds itself cast as a unilateralist rogue state defying U.N. resolutions and flirting with money laundering. Given SWIFT’s influence on both sides of the Atlantic, it probably saw itself as above the law. There is nothing on SWIFT’s website reacting to that revelation at the time of posting. But with the truth of SWIFT’s enabling of dirty North Korean banks now revealed, it’s hard for me to believe that it will be business as usual. At a bare minimum, I’d expect SWIFT to disconnect the three designated banks. The next move may well be up to Congress. For SWIFT, that’s a lot of risk to take to feed the hand that bites them.
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— Joshua Stanton (@freekorea_us) March 8, 2017
By this time tomorrow, we’ll know whether initial reports that Kim Jong-nam was assassinated by two North Korean women with a poison needle at the Kuala Lumpur Airport were wrong or only half-wrong. For now, I’ll dwell on grading the Trump administration’s answers to its first North Korean test — the test of a missile system whose moderate range belies its potential dangerousness, given its potential to be launched from a mobile carrier or a submarine. So far, that grade is a C-minus, but it’s still only the first quarter.
No doubt, the North Koreans knew that Trump would get the news during dinner with Shinzo Abe at Mar-a-Largo. That Trump devoted two days to meeting with Abe and restoring the confidence of an important ally is praiseworthy. Trump’s immediate reaction to the test, however, attracted criticism that he, Abe, and their aides held a sensitive (and perhaps, classified) discussion in an open, non-secure area. That was followed by a short, overly cautious, obviously scripted (good!) statement from a glowering Trump, who said nothing except that he would stand by Japan. The next day, Trump called North Korea “a big, big problem” and promised, without elaborating, to “deal with that very strongly.” So?
So, the administration is hinting at another Air Force flyover in Korea. That’s fine for reassuring the South Koreans, but I strongly doubt that Kim Jong-un cares.
The U.S., South Korea, and Japan also agreed to take the matter straight to the U.N., but they walked away with no better than a pro-formastatement, which has no legal effect. I didn’t expect a resolution, but I would have at least expected Trump to direct Ambassador Haley to push for some additional U.N. designations — of Air Koryo, the Korean National Insurance Corporation, various slave-labor exporters, or at the very least, some additional ships (such as those the Obama administration recently undesignated). It’s possible that behind the scenes, the U.S. and its allies are still pushing for this; we’ll know within a few days. The U.S. and its allies could also carry their frustrations with North Korea and China into the bargaining over the text of the U.N. Panel of Experts’ next report, which is due to be released in a month or so, and which is sure to contain at least one (literally) explosive revelation.
To back up its negotiating position with a threat of consequences, the Treasury Department could do another round of designations of North Korean targets, or (better yet) Chinese targets that are helpingNorth Korea break sanctions. The latter option is (a) what’s needed, (b) what Congresswants, and (c) what Rex Tillerson promised in his confirmation hearing.
Republican Senator Cory Gardner of Colorado on Sunday issued a statement on Pyongyang’s latest missile test, urging the Trump administration “to immediately pursue a series of tough measures, to include additional sanctions designations and show-of-force military exercises with our allies in the region, to send a message to Kim Jong-un that we remain committed to deterring the North Korean threat.”
Gardner, the chairman of the Senate’s Foreign Relations Subcommittee on East Asia, the Pacific, and International Cybersecurity Policy, authored the North Korea Sanctions Policy and Enhancement Act enacted last year through which Washington imposed landmark unilateral sanctions on Pyongyang.
He said that the latest missile test is an example of why “U.S. policy toward North Korea should never be ‘strategic patience,’ as it was during the Obama administration.”
On Friday, Gardner sent a letter to Trump to urge his administration to take a “determined and resolute U.S. policy toward North Korea.”
In the letter, Gardner urged the Trump administration to fully enforce existing U.S. and multilateral sanctions regarding North Korea and impose additional sanctions as necessary, highlight the regime’s illicit nuclear and ballistic weapons programs, human rights abuses and malicious cyber activities.
He also urged Trump to “employ all diplomatic tools to pressure” Beijing to fully enforce its North Korea sanctions commitments and encouraged secondary sanctions on any China-based entities that are found to be in violation of U.S. and UN measures.
Gardner called upon Trump to enhance Washington’s “defense and deterrence posture in East Asia,” especially urging the placement of the U.S.-led Terminal High Altitude Area Defense, or Thaad, system in South Korea.
“We must not allow China’s unprecedented pressure campaign against the ROK (Republic of Korea) to cancel the Thaad deployment succeed,” he wrote. [Joongang Ilbo]
Recent events give us a strong basis for optimism in this regard. On February 3, following an Iranian missile test, Treasury’s Office of Foreign Assets Control (OFAC) designated 13 individuals and 12 entities. Of these, three of the individuals had Chinese names or nationalities, and one of the entities was Chinese. This drew the usual howls of protest from the Forbidden City, which is firmly opposed to unilateral sanctions, exceptwhenit isn’t. The designations of Chinese entities working with Iran could mean that China’s days of immunity to U.S. sanctions are over.
Finally, the missile test could influence the new administration’s review of its North Korea policy and help it decide how to improve on “strategic patience.” Michael Flynn’s resignation last night could impact the contours of the new policy, depending on who succeeds him. Whatever Flynn’s other faults — and this is a blog about North Korea, so I’ll leave that discussion to others — he said nothing about North Korea that I disagreed with. Critical to that policy review will be the question of whether the U.S. will be willing to take diplomatic, overt, covert, or clandestine action to subvert Kim Jong-un’s political control inside North Korea itself. Such a strategy, in tandem with strong sanctions enforcement, will probably be a necessary element in convincing the generals in Pyongyang that they can only survive by coming to an accord with the U.S. and South Korea.
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Updates: Have you heard that thing where they say “take him seriously, but not literally?”
The real story here is why are there so many illegal leaks coming out of Washington? Will these leaks be happening as I deal on N.Korea etc?
— Donald J. Trump (@realDonaldTrump) February 14, 2017
I guess “on” is better than “with,” so take from that what you will, if anything at all. Ambassador Haley sent a clearer signal:
— Nikki Haley (@nikkihaley) February 13, 2017
Haley may be a novice in foreign policy, but she pretty obviously gets it. Experience is no substitute for good judgment.
It wasn’t the council condemnation that was significant and notable, but rather the print statement issued by new US Ambassador to the UN Nikki Haley as she entered the consultations room.
Just weeks into her position, the tough-talking diplomat said Monday, “It’s time to hold North Korea accountable, not with our words, but with our actions.” Also in contrast to other recent US ambassadors, there was criticism aimed at China over its support of Pyongyang.
Haley wrote, “We call on all members of the Security Council to use every available resource to make it clear to the North Korean regime, and its enablers, that these launches are unacceptable.”
Enablers? No doubt a Trump administration shot across the bow aimed at Beijing. China went along with the council statement issued Monday night calling the launch a grave violation of its obligations under Security Council resolutions.
Haley’s veiled shot at China is not the diplomatic norm at the United Nations. Usually, harsh words among the big powers are expressed behind closed doors, though former US Ambassador Samantha Power and Russian Ambassador Vitaly Churkin went at it during public council meetings on Syria, the anger spilling over after years of war.
President Trump said last week he had agreed that Beijing is the one China in the US relationship, not Taiwan, but the Haley comment means relations among the big permanent five countries on the Security Council are likely to be in potential roller-coaster mode for the next four years. [CNN]
Relations with China may have to get worse before they can get better.
As of yesterday, and for the first time ever, the U.S. Treasury Department has frozen the assets of Chinese entities for violating North Korea sanctions, and the Justice Department has indicted them for sanctions violations, conspiracy, and money laundering. The company in question is the Liaoning Hongxiang Group of companies, of which Dandong Hongxiang Industrial Development Company Limited, or DHID, is the largest component. The individuals are Hong Jinhua, Luo Chuanxu, Zhou Jianshu, and Ma Xiaohong, the CEO of the Liaoning Hongxiang Group.
All were first implicated by the remarkable investigative work of the Center for Advanced Defense Studies and the Asan Institute, which is wonderful and also troubling, in that it should not have been left to a small nonprofit research group with funding from a South Korean think tank to do the work that the Treasury and Justice Departments should have done — protecting such core U.S. security interests as global nonproliferation, the integrity of the financial system, and freedom of speech in our own towns and neighborhoods. It is wonderful and disturbing that two very young and very bright people with a tiny budget and no security clearances have now done more damage to the financial networks that sustain His Corpulency’s misrule than the Obama administration did on its own in eight years. (Full disclosure: I met with C4ADS a few times since they started work last fall, to help them focus and target their investigation.) Here is how they did it.
To map these growing overseas networks, this report used open source databases, including corporate registries; court filings; Equasis maritime database records; customs and trade data provided by Panjiva, a customs trade data aggregator; and real time data on ship activities provided by Windward, a maritime data and analytics platform. The compiled information was consolidated using Palantir’s Gotham network analysis platform.
In Part I, we focused on building bulk datasets on companies, individuals, and ships. By using corporate and tax registries in East Asian countries, we were able to identify significant points of convergence across seemingly disparate networks and identify 562 ships, companies, and individuals within one degree of separation from known DPRK illicit and regime entities.
In Part II, we identified key nodes from our expanded dataset for a more in depth investigation. We focused, in particular, on one Chinese trading conglomerate that has conducted over $500 million of trade with the DPRK in the past five years. Within this network, we were able to identify its subsidiary and affiliated entities that have transacted an additional $300 million with sanctioned Burmese and North Korean entities, helped maintain the cyber infrastructure of the DPRK, and traded in various goods and services that raise serious non-proliferation concerns. [C4ADS]
The researchers also pulled and read court filings in China, Japan, and Hong Kong to uncover what appear to be significant pieces of North Korea’s overseas financial support and shipping networks. Typically for criminal networks, the North Koreans mix legal and illegal business to conceal their illicit activity and disguise the origin of their profits. The result is that some businesses “are likely to be inadvertently facilitating North Korean illicit activity,” while others, like DHID, do so willingly. I won’t try to do justice to C4ADS’s report here; just read the whole thing. Among its findings —
- The report uncovered 248 companies, mostly registered in Hong Kong, that operate North Korea’s shipping fleet, much of it concealed behind shell companies and flags of convenience.
- Liaoning Hongxiang Group is directly responsible for operating 10 of those ships, which import North Korean coal and help Pyongyang get around the “livelihood” loophole in UNSCR 2270.
- DHID’s parent company, the Liaoning Hongxiang Group, helped to run the Cambodian ship registry, which Cambodia is currently in the process of nationalizing. C4ADS found that Cambodia in the principal registrar of reflagged North Korean ships. UNSCR 2270 prohibits the reflagging of ships owned, controlled, or crewed by North Korea.
- DHID’s annual trade volume with North Korea was more than twice that of the Kaesong Industrial Complex, and more than enough to fund North Korea’s nuclear program.
- DHID may have facilitated North Korean exports to the United States, which would violate Executive Order 13570.
- DHID has an equity stake the Bank of Dandong, which has previously been implicated in handling money transfers to North Korea, in violation of U.N. sanctions.
- The Liaoning Hongxiang Group’s Vice Chairman had dealings with a sanctioned Burmese tycoon, Tay Za, who also bought a nuclear reactor from North Korea.
- DHID entered into a joint venture with the Korea National Insurance Corporation, which defector Kim Kwang-jin has accused of insurance fraud, and which has been designated by the EU for the freezing of its assets for proliferation-related activities.
DHID’s parent company is a key facilitator of North Korea’s cyber architecture, which North Korea used in cyberattacks against SWIFT; against South Korean banks, nuclear power plants, and news media organizations; and against Sony Pictures. The empty brackets are for Chinese characters that WordPress can’t read:
Companies associated with the Liaoning Hongxiang Group provide services that are critical to the underlying cyber architecture of the DPRK, including the country’s primary email relay service, facilities from which hackers are alleged to operate, and IT firms producing software with possible military and regime applicability as will be discussed in this section. The Chilbosan Hotel [ ] in Shenyang, one of Liaoning Hongxiang’s joint ventures with the DPRK,117 is alleged to be the staging area for Bureau 121, a group of North Korean hackers.118 119 The source of the allegations is a North Korean defector, Kim Heun Kwang, a former computer science professor in Pyongyang, who escaped from North Korea in 2004 and gave detailed testimony on Bureau 121, a group that began large-scale operations in China in 2005.120 The group is reported to be comprised of about 1800 “cyber-warriors” and is considered the “elite of the military.”121 It has been widely reported that Bureau 121 may have been responsible for the 2014 Sony hack.122 The Chilbosan Hotel is majority owned by the North Korean Pyongyang Economic Exchange Society [ ], 123 which controls a 70% share of the company.124 The remaining 30% is owned by Liaoning Hongxiang Group member Dandong Hongxiang Industrial Development Co. Ltd.
The Chilbosan Hotel also shares a physical address with a company called Silibank.127 128 Silibank is an email relay service that charges for sending and receiving email through servers that connect from the DPRK, through China, and then to the outside world. Established in September 2001, Silibank is reportedly the DPRK’s first ISP provider,129 charging for its service in USD for each kilobyte sent.130 The company’s domain, silibank.com, is currently registered to a Chinese company called Liaoning Zhongtian Real Estate Development Co. [ ].
And finally, C4ADS found a link between DHID and North Korea’s WMD-related procurement operations:
Information found on Dandong Hongxiang Industrial Development Group shows that in several online classified ads and databases, Dandong Hongxiang sold products that could qualify as potential military and nuclear dual use products under the U.S. Department of Commerce Bureau of Industry and Security export restrictions.105 These goods included at least four dual use products: 99.7% pure aluminum ingots,106 aluminum oxide (Al2O3), ammonium paratungstate (APT), and tungsten trioxide (WO3).107 Information discovered using Panjiva customs records shows that Dandong Hongxiang Industrial Development Group sent two shipments of aluminum oxide worth a total of $253,219 to the DPRK as recently as September 2015.108 Classified ads posted by Shenyang Hongyang Fine Cermaics Co., which according to the Chinese business registry is owned by a Chinese national named Ma Xiaohong ???, listed “industrial spaceship” as a potential application for aluminum oxide (further investigation is required to confirm if they are the same individual).109 110
We cannot definitively identify the end-user of such goods, but there are clear dual use applications for the products listed. According to a leaked government cable, North Korea has sought to aquire aluminum ingots in the past. The cable further states that “these commodities have dual-use applications for the products listed. According to a leaked government cable, North Korea has sought to aquire aluminum ingots in the past. The cable further states that “these commodities have dual-use applications and could possibly be linked to the North Korean nuclear program.”111 Ammonium paratungstate and tungsten trioxide are byproducts of separating tungsten from its ore.112 A U.S. patent filed in 2010 states that tungsten trioxide is one of several oxidizing agents appropriate for use in a missile design with increased aerodynamic stability.113 According to the U.S. Nuclear Regulatory Commission, aluminum oxide is a component used to resist corrosion in gas centrifuges during uranium enrichment.114 In April 2013, a British company discovered that a firm they had been sending aluminum oxide to had links to the Iranian government’s nuclear program and immediately “ceased transactions. The article stated that “Aluminium oxide is an important material in gas centrifuges used to enrich uranium.”115 [C4ADS]
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Strictly speaking, the Treasury and Justice Departments sanctioned and prosecuted almost none of this conduct. Let’s turn to the Treasury Department designations first. The “NPWMD” means the assets were frozen under Executive Order 13382, which makes any transaction that facilitates North Korea’s WMD procurement not only sanctionable, but punishable with criminal penalties under section 206 of the International Emergency Economic Powers Act, or IEEPA.
“Today’s action exposes a key illicit network supporting North Korea’s weapons proliferation,” said Adam J. Szubin, acting Under Secretary for Terrorism and Financial Intelligence at the U.S. Department of the Treasury. “DHID and its employees sought to evade U.S. and UN sanctions, facilitating access to the U.S. financial system by a designated entity. Treasury will take forceful action to pressure North Korea’s proliferation network and to protect the U.S. financial system from abuse.”
OFAC designated China-based DHID for acting for or on behalf of North Korean-based KKBC. Specifically, DHID used an illicit network of front companies, financial facilitators, and trade representatives to facilitate transactions on behalf of KKBC. Ma Xiaohong, Zhou Jianshu, Hong Jinhua, and Luo Chuanxu were designated for acting for or on behalf of DHID.
KKBC was designated by OFAC under E.O. 13382 and the UN pursuant to UN Security Council Resolution (UNSCR) 2270 for providing financial services in support of the previously designated entities Tanchon Commercial Bank and the Korea Hyoksin Trading Corporation. Both of those entities were designated pursuant to E.O. 13382 and UNSCR 1718 for their roles in North Korea’s WMD and missile programs. [Treasury Department press release]
As a result of Treasury’s designations, all dollar-denominated assets of the five targets are frozen, and U.S. persons are prohibited from doing business with them.
Not to be outdone, the Justice Department has unwrapped an early Christmas present by unsealing an indictment of Hong, Luo, Ma, and Zhou, and DHID for conspiracy, money laundering, and IEEPA violations, for helping a sanctioned North Korean entity circumvent sanctions. That’s about as much as you’ll see about proliferation in these indictments; the only link to proliferation is the money DHID moved for a North Korean bank that had been sanctioned for proliferation. The Justice Department also filed a civil forfeiture action against 25 bank accounts belonging to DHID, deposited in a who’s-who of Chinese banks. Want to know the names of the Chinese banks? You know you do.
- China Merchants Bank
- Shanghai Pudong Development Bank
- Agricultural Bank of China
- Bank of Communications Co. of China
- Bank of Dandong (as predicted)
- China Construction Bank
- Guangdong Development Bank
- Industrial & Commercial Bank of China
- Bank of Dalian
- Bank of Jinzhou
- Hua Xia Bank
- China Minsheng Banking Corporation
Contrary to what some news reports have written, a forfeiture action does not freeze assets; if effectively confiscates them. The ownership interest of the person who thought he owned the assets is legally extinguished if the government proves that assets are “involved in” illicit activity.
The banks themselves have no standing to challenge the forfeiture unless they can prove that they’d already closed the accounts. Typically, the feds will use 18 U.S.C. 981(k) to take an equivalent amount to the asset right out of the foreign bank’s U.S.-based correspondent account. It’s up to the foreign bank to make itself whole by taking an equivalent sum from the account holder, something that account holders usually agree to in the fine print of their account-holder agreements.
The actions are venued in the District of New Jersey because the Chinese banks that serviced DHID and the numerous shell companies it set up used Standard Chartered Bank and Deutsche Bank as their U.S. correspondent banks, and both banks based their dollar-clearing operations in New Jersey. I’ve explained how this works a few times before, but DOJ explained it well in its forfeiture complaint.
32. An interbank, also known as a correspondent bank, is a financial institution that provides services on behalf of another financial institution. It can facilitate wire transfers, conduct business transactions, accept deposits and gather documents on behalf of another financial institution. Correspondent banks are able to support international wire transfers for their customers in a currency that their customers normally do not hold on reserve. Correspondent banks in the U.S. facilitate these wire transfers by allowing foreign banks, located exclusively overseas, to maintain accounts at the correspondent bank in the U.S.
33. To obtain goods and services in the international market place, as North Korea must, it needs access to U.S. dollars as some international vendors require purchases to be made in U.S. dollars. As a result, North Korean entities, including designated entities such as KKBC, need access to the U.S. financial system.
The New Jersey venue is interesting, in that most correspondent banks operate in New York. (I wonder if that means we can expect to see another indictment in the Southern District of New York one day soon.)
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Although news reports have said that the indictment was for aiding North Korea’s WMD programs, that’s only indirectly true. The crux of the government’s case is that after August 2009, when Treasury designated Korea Kwangsong Banking Corporation (KKBC) for WMD proliferation and blocked its access to the dollar system, DHID stepped in to serve as KKBC’s workaround and to launder its money. (Broadly defined, money laundering means moving or spending money that is “involved in” certain specified unlawful activity, whether as proceeds or as an instrumentality.) I’m often asked at this juncture why the North Koreans don’t just use Renminbi. I’ll let the Justice Department answer that.
35. Following the KKBC’s designation as an SDN by the U.S. Department of the Treasury in August 2009, DHID began working to find ways to conduct trade on behalf of KKBC despite the U.S. sanctions. One means of doing so was to use Chinese currency rather than U.S. dollars to conduct commodities transactions, so as to avoid sending money through the U.S. in violation of IEEPA. In July 2010, the City of Dandong, China highlighted press reports of a pilot program between DHID and KKBC to allow Chinese Renminbi (RMB) transactions to facilitate trade between China and North Korea.
36. North Korea’s trading needs, however, cannot be met using only Chinese currency. As a result, KKBC has continued to access the U.S. financial system to facilitate the purchase of goods in violation of U.S. sanctions. KKBC has done so by using DHID and its front companies.
When KKBC wanted to buy something in dollars — in this case, sugar and urea (used for fertilizer and explosives, and also, ewww) — it would place an order with DHID, which then bought the merchandise at a substantial mark-up — as much as 23 percent, through any one of 22 different front companies or shell companies it set up for just that purpose. That’s the kind of premium that, at least according to our friends in the FBI, people only charge to take the risks associated with breaking the law. Ma and DHID were initially well-positioned to charge these commissions due to Ma’s connections with Jang Song-thaek. Only when the guns of Jang’s firing squad fell silent, Ma’s business kept right on booming.
DHID and KKBC kept a ledger where KKBC would credit or debit DHID’s dollar account in KKBC in Pyongyang. The most suspicious transactions — those that involved a North Korean nexus — were all kept off the wires. Instead, DHID set up a whole series of shell companies, mostly registered in the British Virgin Islands or the Seychelles, and listing fictitious addresses in Hong Kong.
And how did DOJ find all of this out? Much of it obviously began with the C4ADS-Asan investigation, but there is much evidence in the indictment and forfeiture complaint that C4ADS didn’t write about. And why sugar and urea instead of, say, aluminum oxide? I can only speculate that those transactions were the easy ones to prove. Prosecutors prefer to charge the conduct that’s easiest to prove, especially if some of the other transactions with more jury appeal might also require proving up a longer, more complex chain of shell companies and beneficial owners.
All of which is our cue for a round of “Panama Papers Bingo,” which will allow you to read fun stuff about the shell companies named in the indictment and their corporate officers. By all means, leave a comment if you find something interesting in there, although I may hold your comment unpublished for a while for legal reasons.
Although the forfeiture action doesn’t say how much money was in the 25 accounts, it describes multiple transactions in the millions of dollars, including one that was for around $11 million. It wouldn’t surprise me if we learned that the total was well over $25 million, the amount that was blocked (but not forfeited) in the case of the Banco Delta Asia action.
Anyway, now you know why we wrote a section on “forfeiture of property” into the NKSPEA. Originally, we tried to create a special fund to pay for North Korea sanctions enforcement, broadcasting, and humanitarian purposes. Because that funding provision ended up on the cutting-room floor, the Justice and Treasury Departments will put the forfeited money into their respective forfeiture funds and use the money to pay for law enforcement operations. Where, as here, DOJ and Treasury worked the case together, they’ll typically work a deal for splitting that money up between them.
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So what will the impact of all of this be? Financially speaking, DHID and Ma aren’t likely to survive the experience. Because 80% of DHID’s business was North Korea-related, His Porcine Majesty will probably feel a significant impact. DOJ’s indictment quotes a DHID powerpoint presentation that claims that as of 2012, DHID handled 20% of the volume of Sino-North Korean trade, and claims that DHID’s business was growing at 30 percent each year. I have no way of knowing if that’s true or not, but my guess is that these figures are exaggerated for shareholder consumption. After all, DHID was willing to file a false certification with a certain Panama-based law firm — any guesses, kids? — denying that it had any links to North Korea (exhibit 3).
The greater effect may be the in terrorem impact this action will have on companies like the 88 Queensway Group that had dealings with sanctioned North Korean entities and felt untouchable, possibly because they thought their Chinese political connections would protect them from Uncle Sam. Ma herself was a made member of the Chinese Communist Party, and Sam Pa was a former Chinese spy. Equally well-connected figures may feel less invincible today.
The bad news? Not only the fact that no Chinese banks are facing indictments for facilitating Hongxiang’s willful, long-standing money-laundering scheme, but also, the fact that in its press release, the Justice Department said that “[t]here are no allegations of wrongdoing by the U.S. correspondent banks or foreign banks that maintain these accounts.” I’ll discuss that in more detail in tomorrow’s post.
It’s grim vindication this morning to see my prediction from two months ago now validated. This bomb appears to have had a higher yield than those that preceded it, and may show progress toward miniaturization. I’d already posted my recommendations for how to respond to this test, back in July. For the U.N. Security Council, the response should include new rounds of designations and the closing of sanctions loopholes. I hope Samantha Power will also push for bans on North Korea’s exports of food and labor.
For the administration, the answer is simpler — it should enforce the law the President signed in February. Ed Royce, the Chairman of the Foreign Relations Committee, has now added his voice to Senator Bob Corker’s prescient call for just that.
“The North Korean regime’s continued belligerence demands a strong and swift response. The United States cannot accept a nuclear North Korea that threatens America and our foreign partners with mass destruction. That’s why, earlier this year, Democrats and Republicans in Congress joined together to help impose unprecedented new sanctions on the Kim regime. Sadly, however, it is clear the Obama administration’s enforcement efforts are falling short.
“Most notably, the administration has yet to impose sanctions on any of the many Chinese companies and banks that, according to a recent U.N. report, continue to support the North Korean regime. This must change. We’ve seen before that China will only comply with sanctions if Chinese banks face real consequences for doing business in North Korea.
“The United States and our foreign partners should also act quickly to sanction North Korea’s state-owned airline. Air Koryo continues to flagrantly violate the ban on luxury goods and has been implicated in the proliferation of SCUD missile parts. At the same time, the administration must also work with European governments to better block luxury items – including cars, watches, and liquor – from reaching North Korea’s repressive ruling elite.
“Aggressive sanctions enforcement, along with a renewed focus on stopping the North Korean regime’s export of slave labor, is key to cutting off the cash needed to sustain Kim Jong Un’s power, and his illicit weapons programs. Today’s detonation wasn’t just about testing nuclear technology. It was also about testing America’s resolve. Now is the time for this administration to act.” [link]
Yes, there are more sanctions we can add that would confront Pyongyang with a clear choice between disarmament and extinction. Banning North Korea from SWIFT seems especially likely to be effective, and overdue. For the safety of our citizens alone, we’re long overdue for a tourist travel ban. And because the evidence is overwhelming that North Korea sponsors terrorism, the State Department should at least stop lying to the American people and denying that.
I don’t blame President Obama for the fact that Kim Jong-un is a psychopath. I blame President Obama for not recognizing that Kim Jong-un is a psychopath, and for not recognizing the implications of that. Above all, I blame President Obama for not enforcing the law he signed in February, after the fourth nuke. Wasting eight critical years without agreeing on or implementing a North Korea policy may not stand out as one of this administration’s greatest foreign policy failures yet, but that’s only because it sits alongside his failure to support the Green Revolution in Iran, his non-response to the Syrian genocide, the fall of Anbar, the rise of ISIS, and a refugee crisis that threatens to destroy the European Union and its liberal social order.
No wonder Obama, sensing the weakness of his position, is now calling for “serious consequences” for North Korea. He holds the power to impose them now, but it sounds like he’s about to send Samantha Power back to the Security Council to bicker with the Chinese over the next resolution, too. He can enhance her bargaining power by sanctioning the Bank of China for laundering Kim Jong-un’s money, and by having someone in the Treasury Department leak a report that the Bank of Dandong is under investigation for the same. If we’re serious about avoiding war in Korea, we must be willing to shake the foundations of the Chinese banking system.
Park Geun-hye, on the other hand, gets it, however belatedly, and seems to realize exactly what’s at stake here. Her shrewd diplomatic and psychological warfare against Pyongyang has probably done far more damage to Kim Jong-un than anything Obama has done yet. She should now move beyond loudspeakers and open a second front in the information war for the hearts and minds of the North Korean people. As her opening act, as soon as the atmospheric conditions are favorable for good TV reception in Pyongyang, she should put Thae Yong-ho on the air to deliver a revolutionary manifesto to the Pyongyang elites. She should build a row of cell phone, AM radio, and TV towers on the mountaintops all along the DMZ. Then, she ought to get behind a guerrilla engagement strategy to undermine the regime’s control over the countryside.
For now, the calls in Seoul for nuclear armament and preemptive strikes are probably just talk, but they’ll continue to grow. The economic and security frameworks of the whole region are in greater danger than most of us realize.
As I said all along, the U.S. and South Korean election years almost guaranteed that this test would happen. I’ve also said that in the short term, sanctions would aggravate His Corpulency and force him to react. Anyone who knows anything at all about sanctions knows that they would take at least year or two to show significant impact, and that’s assuming they’re enforced. Unfortunately, they haven’t been — despite the fact that a string of high-profile defections has probably yielded more fresh financial intelligence about where Kim Jong-un’s money is than we’ve had in years. It’s long past time we used it.
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Update: To be clear here, I have no knowledge that the Bank of Dandong is under investigation or isn’t, but the BoD has been mentioned in previous reports as a holder of North Korean funds, and I expect to see more reporting in the coming weeks buttressing the case that they should be investigated.
Have you ever heard the late Christopher Hitchens speak about his visit to North Korea, and how he promised himself that he would not use the “1984” cliche? “Eventually,” Hitchens said, “They make you do it.” I believe it was sometime around 2007 that I made the same promise to myself about the Hans Blix scene in “Team America” when speaking of the U.N.’s response to North Korea’s increasingly brazen behavior. It has become another cliche, but they also make you do it.
This week, Samantha Power went to the Security Council and said this:
The DPRK’s missile tests help it to threaten the territory of even more countries in the region, whether through its land-based missiles or now via its recently tested submarine-launched ballistic missiles.
Once the DPRK has the capability to do so, we know what they intend to do with these missile systems, because they have told us. They are explicit: they intend to arm the systems with nuclear weapons. Kim Jong Un said this himself yesterday, according to the DPRK’s official news agency. [….]
The Security Council must remain unequivocal and united in condemnation of these tests, and we must take action to enforce the words we put on paper – to enforce our resolutions.
Meanwhile, at the State Department, words words words or something. At least the White House made a feint at meeting the test posed by Power’s last clause when it refused to rule out more sanctions, but there aren’t any signs that it means to impose any, either. Contrary to the overwhelming evidence, spokesman Josh Earnest (whose name is an oxymoron) said that the U.S. and China have worked “cooperatively in a coordinated fashion” to “steadily ratchet up” the pressure on North Korea. Unless Earnest really means that we’re cooperating with Beijing because we’ve capitulated to it, this is just more bullshit.
Despite the evidentiary and analytical challenges of calculating North Korea’s trade with China, the best evidence we have suggests that China continues to exploit the “livelihood” loophole for coal and iron ore exports to prop up Kim Jong-un’s rule. Despite the importance of drawing distinctions between trade that feeds the North Korean people and trade that props up the regime, bilateral trade hasn’t fallen much overall, and the small decline may owe more to China’s sagging economy than to its enforcement of sanctions. To make up for the drop in the coal trade and falling prices, China is sending more tourists to North Korea and accepting more slave labor from North Korea, including those formerly employed at Kaesong. Beijing is also engaging in public displays of affection with Pyongyang to show how much more worried it is about South Korean missile defense than it is about North Korean missiles.
China’s recent purchase of North Korean fishing rights was unconscionable and inhumane. It took away a source of food that should fill the markets that feed North Korea’s poor, and replaced it with another source of unrestricted cash for the ruling class in Pyongyang. By doing so, it arguably violated the U.N. Security Council resolutions.
To state what should be obvious, Kim Jong-un is politically invested in his weapons programs and won’t change his behavior unless the world can unite to coerce that change. Evans Revere, a recovering engager whom I probably wouldn’t have cited approvingly a few years ago, is almost certainly correct when he says, “The only way to get North Korea’s attention is to put at risk the one thing that North Korea values more highly than its nuclear weapons. That’s the future existence of the regime.” Revere now concedes that positive incentives haven’t worked on Pyongyang, and with North Korea “rapidly improving its ability to deliver nuclear and other weapons toward specific targets accurately,” we can’t rule out the possibility that it “might seek to use nuclear weapons to blackmail one or more of its neighbors.” Well, yes.
Japan and South Korea are both calling for more sanctions to prevent this outcome, but it’s fairly clear that the Obama administration isn’t pushing for any, and is mostly concerned with avoiding any sort of crisis before it slinks out of town, after having wasted eight critical years. South Korea’s foreign and defense ministers will visit Washington in October to make their case for “specific measures” again. Seoul thinks this may be its last chance to prevent North Korea from reaching nuclear breakout and subjecting it to the slow strangulation of nuclear blackmail, and I suspect that they’re probably right about that. Hopefully, when President Obama met with President Park instead of the President of the Philippines, she made that case forcefully. Nothing less than South Korea’s survival as a democracy depends on it.
With our time quickly running out, the idea of settling for a piece of paper from the U.N. is madness. Although the U.N. statement hints at “significant measures,” a Japanese diplomat is quoted as saying that “many council members supported the idea of further measures,” but “fell short of a consensus.” So presumably, China continues to be unhelpful and obstructionist, the Obama administration continues to be weak and indecisive, and no further resolutions will be forthcoming until Pyongyang does something else, like another nuke test. And perhaps, not even then.
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As for what sanctions we should impose now, I posted my own wish list in July. It includes:
(1) the designation of North Korean entities, such as Air Koryo, the DPRK Central Bank, and North Korea’s state insurance companies, all of which are facilitating sanctions violations;
(2) the closing of loopholes left over from UNSCR 2270, including the “livelihood” loophole for coal and iron ore exports; and
(3) new measures, including a ban on labor and food exports by North Korea, and a requirement to disclose beneficial ownership by North Korean nationals to the Panel of Experts.
In the case of Air Koryo, there’s no question that it flagrantly violates the luxury goods ban; journalists have tweeted photographs of huge flat screen TVs being loaded aboard its flights. The U.N. Panel of Experts has implicated Air Koryo in the proliferation of SCUD missile parts, and notes that the dual civilian and military use of some of its aircraft could itself constitute a violation of the arms embargo. The Panel of Experts has also noted that Air Koryo holds a number of suspicious debts to recently formed shell companies, implying that Air Koryo is involved in money laundering or sanctions evasion. According to South Korean press reports, Air Koryo is also used to ferry bulk cash to evade U.N. sanctions.
As for concerns that Air Koryo also engages in legitimate civilian business, I would respond that if Air Koryo were to be designated, third-country airlines would take over its routes, because Pyongyang needs to have air commerce of some kind. The same can be said of North Korea’s financial, shipping, and insurance industries. Pyongyang has repeatedly used all of these state-owned industries for sanctions evasion and proliferation. If those industries were sanctioned and shut down, then third-country airlines, insurers, ships, and banks — which would presumably have more incentives to follow the law — would take up the slack. That would make it much more difficult for Pyongyang to violate U.N. sanctions.
Above all, however, U.N. member states must be willing to use their national laws to impose secondary sanctions on entities — especially Chinese entities — that knowingly help Pyongyang violate U.N. sanctions. This is now a requirement under U.S. law, and I remain concerned that the Obama administration isn’t following it. Without secondary sanctions — and most critically, the strict enforcement of secondary financial sanctions against North Korea’s bank accounts in China and elsewhere — North Korea will find ways around the sanctions, because plenty of Chinese companies will be willing to help it find those ways. Are we serious about global nonproliferation, the security of the world’s most economically vital region, and the protection of the democratic system of our treaty ally in South Korea? I’m searching in vain for any evidence that we are.
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Update: Stop the presses. Maybe President Park was persuasive after all.
It is fitting that Groundhog Day was a busy day in North Korea. On the same day that Pyongyang announced that it would test a long-range missile, the U.N. released $8 million from its emergency aid fund “to assist [the] most vulnerable women and children” in North Korea.
Bangkok, 2 February 2016) United Nations Secretary-General Ban Ki-moon on 29 January 2016 released US$ 8 million from the UN Central Emergency Response Fund (CERF) for severely underfunded aid operations in the People’s Democratic Republic of Korea (DPRK). These funds will enable life-saving assistance for more than 2.2 million people most vulnerable and at risk of malnutrition. The DPRK was one of nine countries to receive such grants within the overall $100 million allocation to underfunded emergencies.
Undernutrition is a fundamental cause of maternal and child death and disease: in DPRK, chronic malnutrition (stunting) among under-five children is at 27.9 per cent, while 4 per cent of under-five children are acutely malnourished (wasting). Around 70 per cent of the population, or 18 million people, are considered food insecure. Food production in the country is hampered by a lack of agricultural inputs and is highly vulnerable to shocks, particularly natural disasters. Due to drought in 2015, 11 per cent of the main harvest was lost.
Health service delivery, including reproductive health, remains inadequate, with many areas of the country not equipped with the facilities, equipment or medicines to meet people’s basic health needs. Under-five children and low-birth-weight newborns are vulnerable to life-threatening diseases, such as pneumonia and diarrhoea if they do not receive proper treatment or basic food, vitamins and micronutrients.
CERF funds will be used to sustain critical life-saving interventions aimed at improving the nutrition situation in the country through reduction of maternal and under-five child mortality and morbidity. More than 2.2 million people, including 1.8 million under-five children and 350,000 pregnant and lactating women, will benefit from assistance provided by CERF funds. “The commitment and support of the international community is vital. Protracted and serious needs must be addressed” said United Nations Resident Coordinator for the DPRK, Mr. Tapan Mishra. “Humanitarian needs must be kept separate from political issues to ensure minimum living conditions for the most vulnerable people.” The United Nations will continue to work towards addressing the structural causes of vulnerabilities and chronic malnutrition through its interventions agreed with the DPRK Government. [Relief Web]
Separately, UNICEF recently warned that “25,000 children in North Korea require immediate treatment for malnutrition after a drought cut food production by a fifth and the government reduced rations.” But the true “structural cause” of the “vulnerabilities and chronic malnutrition” Mr. Mishra cites is staring us in the face.
The fact that donor nations can see this is why the U.N. must dip into its emergency fund to provide for the most urgent needs of North Korean children. No other industrialized country has ever experienced such a prolonged food crisis. Most readers probably have a general idea that Kim Jong-un could afford to feed his population by spending less on weapons, but let’s examine the figures in greater detail. First, $8 million is a small sum compared to $200 million, the total cost of the World Food Program’s (WFP) current two-year program to assist 2.4 million vulnerable women, children, and families. That’s an annualized cost of $100 million per year.
A close reading of WFP Inspector General reports reveals that a substantial, but unquantifiable amount of this is overhead — salaries of the aid workers, salaries of the North Korean workers provided to the WFP by the North Korean government, fuel purchased from the North Korean government, and other costs (such as storage) paid to the North Korean government. In other words, the actual food costs are likely just a fraction of that $100 million a year.
It also bears repeating that 2.4 million North Koreans represents a small percentage of the North Koreans who are food insecure. Recent U.N. studies have placed the percentage of North Koreans who are food insecure at between 70 percent and 84 percent, out of a population of roughly 23 million people. Before the North Korean government expelled most international aid workers in 2006, the WFP was feeding 6.5 million North Koreans.
For comparison, North Korea spent $1.3 billion on its missile programs in 2012 alone. In 2013, it spent $644 million on luxury goods, which U.N. resolutions prohibit it from importing. Let no one say that North Korea’s missiles never killed or hurt anyone.
Yet in listing the causes of the food crisis, the World Food program lists droughts, floods, typhoons, deforestation, an “economic downturn,” a “lack of agricultural inputs such as fertilizers,” and “limited capacity to access international capital markets and import food.”
In 2015, a U.N. Panel of Experts monitoring international compliance with sanctions against North Korea found that the North Korean government had placed an intelligence officer inside the WFP’s Rome headquarters.
Recent evidence, however, suggests that the North Korean government has no difficulty importing the things it really wants.
Satellite imagery of North Korea’s Nampho port reveals what appears to be a new 50-meter pleasure craft, according to Radio Free Asia (RFA).
The boat which was first spotted by Curtis Melvin at the U.S.-Korea Institute in Washington D.C., and can be seen docked at the naval headquarters of North Korea’s West Sea fleet. [….]
“No visitors have reported seeing or photographing this boat. We are under the impression that this boat was imported, at one point or another,” Melvin added, though admitted more me definite proof (sic) had so far been hard to come by. [….]
The new boat joins a number of other pleasure craft visible on satellite imagery around the DPRK’s coasts. In 2013, an NK News investigation revealed Kim Jong Un’s $7 million yacht, originally manufactured by British company Princess.
UN sanctions prohibit the sale of pleasure craft, cars and other luxury items to North Korea, but patchy implementation often means that prohibited goods can still find their way across the DPRK’s borders. [NK News, Leo Byrne]
Photos obtained by NK Pro reveal North Korea’s new gondolas at the Masikryong ski resort originally came from Austria, in what could constitute a breach of UN luxury goods sanctions and EU regulations.
The recently installed cable car system now running up the Taehwa Peak in the DPRK’s Kangwon Province, once ferried passengers around the high end Ischgl resort on the border between Austria and Switzerland as part of network of 45 ski lifts and cable cars.
Coming amid momentum for fresh United Nations sanctions to respond to the DPRK’s fourth nuclear test, the gondola is the latest in a string of controversial purchases by the North Korean resort, which also include skiing equipment and specialized machinery sourced from Europe and Canada. [NK News, Leo Byrne]
A government that can import yachts and ski gondolas surely has the means to import rice.
In its 2014 report, a U.N. Commission of Inquiry that found evidence of crimes against humanity in North Korea discussed Pyongyang’s “systematic, widespread and grave violations of the right to food” in extensive detail.
660. Large amounts of state expenditure are also devoted to giant bronze statues and other projects designed to further the personality cult of Kim Il-sung and his successors and showcase their achievements. These projects are given absolute priority, which is also evidenced by the fact that they are often completed in a short period of time. The DPRK Minister of Finance, Choe Kwang-jin, reported about the 2012 budget of the DPRK:
Of the total state budgetary expenditure for the economic development and improvement of people’s living standard, 44.8 per cent was used for funding the building of edifices to be presented to the 100th birth anniversary of President Kim Il-sung, the consolidation of the material and technological foundation of Juche-based, modern and self-supporting economy and the work for face-lifting the country.
661. In 2013, Kim Jong-un ordered the KPA to construct a “world-class” ski resort that would rival the winter sports facilities that are being built in the ROK in preparation of the ROK’s hosting of the 2018 Winter Olympic Games. When visiting the site in May 2013, Kim Jong-un reportedly “was greatly satisfied to learn that soldier-builders have constructed a skiing area on mountain ranges covering hundreds of thousands of square meters, including primary, intermediate and advanced courses with almost 110,000 meters in total length and between 40 and 120 metres in width.”
662. A number of similar prestige projects that fail to have any immediate positive impact on the situation of the general population have been pursued, including the construction of the monumental Munsu Water Park in Pyongyang, the Rungna Dolphinarium and Pleasure Park in Pyongyang and a beach resort town in Wonsan.
(f) Purchase of luxury goods
663. The DPRK continues allocating a significant amount of the state’s resources for the purchase and importation of luxury goods, as confirmed by the reports of the United Nations Panel of Experts established pursuant to Security Council Resolution 1874 (2009), which inter alia monitors the implementation of the Security Council sanctions prohibiting the import of luxury goods. In one report, the Panel of Experts described the confiscation, by Italy, of luxury items such as high quality cognac and whiskey worth 12,000 euros (USD 17,290) and equipment for a 1,000-person cinema valued at Euro 130,000 (USD 187,310). The report further revealed that the DPRK has attempted to purchase and import a dozen Mercedes-Benz vehicles, high-end musical recording equipment, more than three dozen pianos and cosmetics.
664. Luxury goods expenditure by the DPRK rose to USD 645.8 million (470 million euros) in 2012. Reportedly, this was a sharp increase from the average of USD 300 million a year under Kim Jong-il in October 2013. [U.N. Commission of Inquiry report on Human Rights in N. Korea, Feb. 2014]
In response to North Korea’s missile test, a State Department spokesman called on Pyongyang to “put food in the mouths of the North Korean people instead of spending money on dangerous military capabilities.” There is fresh evidence that this message would resonate with North Koreans, too. Although the North Korean government’s propaganda blames international sanctions for causing food shortages, the claim is nonsense. Professor Lee and I debunked it here, in the pages of the New York Times. The North Korean people also question that narrative.
Q: North Korea may be sanctioned again by the international community. I presumed that only ordinary people will suffer, not the upper class. What do you think about that?
A: Our life is so miserable; we are so poor with or without sanctions. We make a living selling in the marketplace, because the government no longer provides rations as they used to. Sanctions make any difference. [….]
Q: North Korean official media are showing scenes of people in Pyongyang celebrating the success of the hydrogen bomb test. How about in the provincial towns?
A: There haven’t been any meetings or gatherings regarding the nuke test. No one has any interest in it. A successful test will not provide a single teaspoon of rice. We are only concerned about the price of rice. We don’t care about that shitty bomb story; we are too busy trying to feed ourselves. [Rimjin-gang]
And separately, this:
Q: How do the people feel about the hydrogen bomb test?
A: I doubt that many people would have pride about that (the nuke test)! We don’t have enough food to eat! Everyone is making an outcry since they are doing that kind of thing even though we are so hungry! [Rimjin-gang]
North Korea watchers often speculate that the regime uses bomb and missile tests to create an us-versus-them mentality, to bolster national pride in the regime, and to distract the people from the hardships they endure. As The New York Times notes, “Most of the country, especially outside the capital, remains in dire poverty, a fact that analysts say has spurred Mr. Kim to focus attention on his nuclear program.” There’s evidence that it’s not working anymore.
She said, “People here are more apprehensive than boastful. They say the regime has finally blown it after the repetitive talks about the nuclear test. People in the markets also argue, ‘The government should have spent the money on food supplies. The state media announced that the nuclear test was a success, but who knows whether it was.’ ”
The situations in the North Korean border region remain unchanged; the residents are largely indifferent to the success of its nuclear test. The regime propagated justifications for possessing nuclear weapons and its success on the 4th nuclear test, on the basis that it defends peace and protects from the United States and its other enemies.
In the past, people in the DPRK have been proud of nuclear test success and its purported power to defend the state. But public opinion has turned against nuclear weapons over the years, with people’s perception of nuclear arms development going from ‘possession of national defense power’ to ‘waste of financial resources’. [New Focus Int’l]
The South Korean government has just announced that it will increase its loudspeaker propaganda broadcasts along the DMZ. If Seoul ever develops and deploys a comprehensive information operations strategy for broadcasting to the North Korean people, it should make the true causes of hunger in North Korea a centerpiece of its message. Seoul’s message to the people of North Korea should be a variation on a message that has long proven effective when delivered to oppressed people: rice, peace, and freedom … and reunification.
Next Wednesday, the full Senate will vote on, and almost certainly pass, the North Korea Sanctions and Policy Enhancement Act, an almost unprecedented bipartisan vote of no confidence against a sitting president’s foreign policy. If the bill becomes law, it will legislate the biggest shift in our North Korea policy in more than two decades.
Meanwhile, our Asian allies are holding another, quieter vote of no confidence on our North Korea policy. During the power vacuum of the Obama years, China accelerated its military buildup and made a series of spurious territorial grabs in the Pacific. Japan responded to China’s buildup and its claims to the Senkaku Islands with its own rearmament program. Despite the presence of nearly 30,000 American military personnel in South Korea, North Korea sank a South Korean warship, shelled South Korean territory, planted the mines that maimed two South Korean soldiers, and got away with all of it without losing China’s financial backing. Then, last week, two Chinese aircraft intruded into South Korea’s Air Defense Identification Zone over the disputed reef of Ieodo.
Clearly, the deterrents that protected South Korea since the 1950s aren’t working anymore. Outwardly, South Korea still relies on the U.S. to guarantee its security. Its decision to accept a deployment of the THAAD missile defense system will offer some protection against North Korea’s nuclear missiles, but no practical defense against North Korea’s long-range, chem-and-bio-capable, multiple-launch 300-millimeter artillery rockets.
If the Sunshine Policy was South Korea’s all-night borrachera, its hangover was to wake up next to a morbidly obese high-school dropout with a penchant for the NBA, torturing small animals, bondage porn, and gruesome executions, and who has nukes and the apparent intent to keep them. If South Korea is starting to see its security differently, so would you if you were South Korea. How would you calculate the potential outcomes of North Korea’s escalating provocation cycles once His Corpulency has an effective nuclear monopoly on the Korean peninsula?
America’s political uncertainties can’t offer much reassurance, either. If the very words “President Trump” don’t scare you enough, ask yourself whether a President Trump or a President Cruz would stay engaged in the region. Would Hillary Clinton, who never formed a coherent strategy to disarm North Korea or executed any other policy with particular competence as Secretary of State, suddenly come up with and execute one as president? Would President Sanders really threaten nuclear retaliation against a North Korean first strike? Even if he did, would Kim Jong-un believe him or gamble that he was bluffing? If I couldn’t nuke Pyongyang, I can’t imagine that Bernie Sanders could.
My point here is that a promise to nuke an enemy for a friend assumes more than a security or fiscal burden. It assumes a moral and historical burden that may well be unbearable for modern America, especially given all that could happen in today’s world. The world might forgive South Korea for massive retaliation, but it would never forgive us. That’s why I wonder how much America’s so-called nuclear umbrella is really worth today, and so do a growing number of people in Seoul:
The South feels insecure because of the nuclear threat by the North and, more importantly, the lack of a counterpunch it pack have to prevent the North from using nuclear weapons against it.
Thereby, the next question for the South is whether the U.S. nuclear umbrella is good enough to cope with this fast-changing status. Obviously, it’s not.
Above all, the umbrella is a deterrent. To borrow a metaphor, the umbrella was not made for a new purpose ? the North, a rogue state led by an unpredictable 32-year-old dictator. More importantly, it has never been used so its effectiveness is still in question.
First, would the U.S. act in kind, if the North attacked the South with its nukes? In the era of MAD, a nuclear war would have meant a world war and the Americans would have been the first targets of the Soviets.
Against the North, a small country with a population of 20 million, the U.S. would be bound to think twice, especially when it is incomparably stronger in conventional weaponry and few of its people would get killed.
A blood stain is still on its collective conscience as the only country that has ever used nuclear devices against humans, Hiroshima and Nagasaki during its war with Japan in the Second World War. From the U.S. perspective, it is no 9/11 or even the attack on the Pearl Harbor. This alone means a great reduction in the credibility of the U.S.-extended deterrence. [Oh Young-jin, The Korea Times]
I’ve never been a great fan of Oh Young-jin, but his perspective is probably a fair reflection of the hawkish and nationalist inclinations of many South Koreans today. The idea of a nuclear South Korea has just entered the country’s political mainstream.
“It is time to possess a peaceful nuclear program for the right of self-defense.”
This declaration came not from North Korean state media, but South Korean lawmaker Won Yoo-cheol of the ruling Saenuri Party on January 7, the day after Pyongyang’s fourth nuclear test.
More politicians from the ruling party have echoed this argument, saying “only South Korea is isolated from nuclear (power) in Northeast Asia.” This is far from the first time that South Korean politicians have spoken in favor of nuclear arms: Former ruling party presidential candidate Cheong Mong-joon openly called for independent nuclear development in 2012, saying South Korea could “achieve peace without the ‘balance of fear.’”
Well-known columnist Kim Dae-jung of South Korea’s most influential newspaper, the Chosun Ilbo, also spoke in favor of starting a conversation on the nuclear possession on February 2, saying that withdrawal from the Non-Proliferation Treaty may be necessary.
A certain segment of academia in Seoul has also spoken in favor of nuclear development. Cheong Seong-chang of the Sejong Institute, generally an engagement-inclined expert, has recently been asserting the necessity of nuclear arms, even as he argues for the need to talk with North Korea following most inter-Korean incidents. [NK News, Choi Ha-young]
Yonhap, noting that “calls” for “the South to have its own nuclear deterrence … have grown,” quotes President Park Geun-hye as saying “she understands such a sentiment but made clear that her administration will stick to the policy of denuclearizing the entire peninsula.”
Since at least 2009, South Korea has been bargaining hard with the U.S. on a nuclear cooperation accord it wants to expand, to allow South Korea to “close the nuclear fuel cycle” by enriching and reprocessing nuclear fuel. Left mostly unsaid, but often implied, is the U.S. worry that South Korea may want to use its nuclear energy industry as a cover to develop its own nuclear deterrent.
Openly withdrawing from the NPT or declaring an intent to build nuclear weapons would draw disastrous diplomatic consequences for Seoul, so it would want to nuke up quietly. Politicians who want to nuke up would have to stay ambiguous about it, just like Israel, South Africa, India, and Pakistan all did. Japan, which can reprocess nuclear fuel, reportedly has a “bomb in the basement,” with enough plutonium to go nuclear within as little as six months.
The drawbacks of a nuclear South Korea for the U.S. are obvious, starting with the collapse of global nuclear nonproliferation, severe strains on the U.S.-Korea alliance, and the fact that South Korea’s nukes will reinforce North Korea’s nuclear status while doing nothing to deter the real North Korean threat to the United States — that North Korea sells a nuke to a terrorist (which it has threatened to do) or nuclear technology to another state that arms terrorists (which it has tried to do).
It’s certainly not an ideal outcome. The ideal outcome would be a nuclear-free Korean Peninsula, bread that tastes great and doesn’t make you fat, and commuting over I-66 in a pod racer. But if the ideal solution is out of reach, the next-best solution would be not giving the most aggressive, most brutal, and least restrained regimes on the block an effective nuclear monopoly.
Of course, China would have fits about being surrounded by nuclear-armed neighbors, but there’s a certain justice in that, given all that China has done over the years to nuke North Korea up. And if you’re a small nation under the rapacious gaze of China and North Korea, nuclear weapons are a cheap and effective way to protect yourself. If you’re Taiwan, a marginalized ally with little reason to believe it’s still under Uncle Sam’s umbrella, nuclear weapons make particularly good sense.
Not for the first time in recent years, the weak diplomacy of well-meaning, peace-loving politicians and diplomats has undermined the very policies that preserved peace and averted conflict, and tempted states to reach for more forceful ones. The Obama Administration’s weak deterrence and weaker sanctions against North Korea have undermined the security framework that protected peace and incubated prosperity in (what is now) the world’s most dynamic region. It’s a future full of dreary ironies. The greatest of these is that a President who wanted a world without nuclear weapons may have, as his legacy, that he scared half the world into nuking up.
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Update: I’ve always been impressed by how quickly ideas catch fire in South Korea.
A right-wing South Korean journalist insisted on Friday that South Korea and Japan push for their own nuclear armament for protection from North Korea’s nuclear and missile threats.
In a contribution to the conservative Japanese daily Sankei Shimbun, Cho Gab-je said that the two countries should be nuclear-armed for legitimate self-defense as long as a neighboring enemy is armed with atomic bombs.
Cho, former president of Monthly Chosun, said nuclear armament is a very natural option for the sovereign countries whose existence is being jeopardized constantly.
He also said the two countries should be able to ask for the revision of the nuclear Nonproliferation Treaty (NPT) so that they are able to push for their nuclear armament under Article 10 of the NPT.
“It is possible for the two countries to give prior notice for the withdrawal from the NPT as they are faced with a crisis of national existence due to constant nuclear threats,” he said.
“South Korea and Japan should ask the United States to participate in the decision-making process of the U.S. nuclear umbrella strategy,” Cho said, insisting the U.S. nuclear umbrella promised to both countries, respectively, will have to be revamped into a combined command system among the three countries.
The reports have Xi Jinping’s attention, and he doesn’t sound happy:
Chinese President Xi Jinping said Friday that there should be neither nuclear weapons nor war on the Korean Peninsula as he spoke by phone with President Park Geun-hye for the first time since the North’s nuclear test last month.
Xi also said that all relevant parties should deal with the situation in a “cool-headed” manner from the perspective of peace and stability on the Korean Peninsula while sticking to the principle of dialogue and negotiations, according to the Chinese Foreign Ministry.
“Under any circumstances, China will consistently make efforts to realize Korean-Peninsula denuclearization, safeguard peace and stability on the peninsula and resolve problems through dialogue and negotiations,” Xi was quoted as saying.
And yet, when President Park asked Xi to help disarm North Korea through economic pressure, Xi pretty much gave Park the big F-U, just like his Foreign Minister did with John Kerry. I’m not saying that South Korea should nuke up or shouldn’t, but Xi shouldn’t be surprised that ideas like these gain currency when he won’t lift a finger to help protect South Korea’s fundamental national security interests from threats by one of his clients.
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Update 2: Don Kirk, who has been covering Korea long enough to give almost any story its full historical context, relates the long history of South Korea’s nuclear program, and how the U.S. pressured Park Chung-hee to end it. Then, as now, the program was driven by the fear of an aggressive North Korea, and a fear of U.S. disengagement. Given that North Korea got its first experimental nuclear reactor in the 1960s, I wonder whether Park or Kim Il-sung was the first to get the idea of going nuclear. What matters, in the end, is that Park’s backers forced him to end his nuclear program, and Kim’s backers just threw money at him and his successors.
North Korea has just announced that it tested a hydrogen bomb. The announcement came shortly after the U.S. Geological Survey measured an artificial earthquake in the vicinity of North Korea’s Punggye-ri test site (Google Earth images of the site, and the gulag next to it, here).
Events are moving faster than reporters can type right now, but the most comprehensive reports at this moment are at NK News, the Wall Street Journal, the New York Times, and the Washington Post.
This would be North Korea’s fourth nuclear test, and its third during the Obama Administration. On the Richter Scale, the test measured 5.1, compared to 4.9 in 2013, 4.7 in 2009, and 4.2 in 2006. The Richter Scale is logarithmic, which means that a 5.0 is ten times more powerful than a 4.0.
Last month, when North Korea first claimed to have built an H-bomb, most experts reacted skeptically, but North Korea has surprised us before. To confirm that this was an H-bomb, we’ll send a plane to fly through the plume from the blast, collect air samples, and analyze them. That will take days, if not weeks.
This is the first North Korean nuke test that didn’t follow the usual pattern of a missile test as the opening act, unless you count (and believe) reports that Pyongyang recently carried out a successful test of a submarine-launched missile. Once North Korea has a serviceable SLBM, it will no longer need a long-range ballistic missile to hit the United States. North Korea’s ICBM program has struggled, but its short- and medium-range missiles are relatively accurate and reliable.
I’m glad Professor Lee and I mentioned this possibility in our latest op-ed, just published yesterday in The Wall Street Journal. Frankly, that op-ed works well enough as a prescription for how to respond to a nuke test as the cyberattack we never really called Kim Jong-un to account for. I’m glad we timed this one so well, and I’m glad the right people are taking notice of that.
— Alex Wong (@alexnwong) January 6, 2016
Now comes the part where I have to read “experts” who’ve never once read 31 C.F.R. Part 500 or an executive order tell us that North Korea is already so heavily sanctioned — all without screaming and waking the neighbors.
If the President doesn’t impose some actual, legitimately tough sanctions now, I really don’t know what to say for him. He’s just lost all political cover to do a deal with the North Koreans in the last year of his administration. What does he have to lose now?
And, of course, this is an election year, and an exceptionally volatile one. That won’t make it any easier for the President to continue with his avoidant North Korea policy.
As for Congress, it has strong North Korea sanctions bills pending in both houses now. If it doesn’t put a tough bill on the President’s desk now, it will forfeit the credibility of its criticisms of one of this administration’s — and the last administration’s — great foreign policy failures.
Internationally, the administration should put resources and capital behind a program of progressive diplomacy, to unite our allies in exerting coordinated pressure on Pyongyang, building capacity for smaller states to enforce existing U.N. Security Council sanctions, and building a larger coalition that would leave North Korea’s few remaining enablers increasingly isolated.
Speaking of enablers, the other party that might be rather exasperated right now is China. It was reportedly trying to arrange a visit to Pyongyang by a senior diplomat. I assume the purpose of this would have been to dissuade His Porcine Majesty from going through with the test. That, combined with the recent Moranbang fiasco, Kim Jong-un’s failure to visit China, and the fallout (sorry) from the Jang Song-thaek purge, give China reasons for exasperation. It still won’t cut off aid to North Korea, but I’m guessing it won’t put up much of a fight when Samantha Power asks the Security Council to approve another sanctions resolution.
Which China will then proceed to ignore, just like all the rest of those resolutions. Of course, we don’t have to just keep watching them do that. With China’s economy and stock market tanking again, the last thing it needs is for its banks to get fined, or even lose their access to the dollar system, for helping North Korea break U.N. sanctions.
The outcomes we should seek now are, first, China’s good-faith implementation of the sanctions it has been voting for and willfully violating since 2006, and second, China’s abstention on a resolution referring Kim Jong-un to the International Criminal Court for crimes against humanity, even if the only consequence of that is to isolate Putin as the lone veto.
Finally, it’s time to acknowledge that none of the problems North Korea continues to create for its people and ours are going to be solved without a fundamental change in the character of its government. Those around Kim Jong-un must understand that their only choices are to reform or to perish. China, for its part, must understand that Kim Jong-un’s oppressive and dangerous ways will inevitably bring something resembling the chaos and violence of Syria to its frontier. There is much China can do to encourage internal change, followed by gradual, negotiated reform and disarmament, if it wants to.
Failing this, the way to force change at the top is to refocus our engagement efforts toward the bottom. That means denying the regime the hard currency that sustains it, but it also means giving North Korea’s hungry and dispossessed the capacity to communicate, organize, resist, and build institutions that can challenge the state.
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Update: A few additional thoughts on what we should ask the U.N. Security Council to do.
First, expect the Security Council to meet in emergency session to consider yet another sanctions resolution. The most important thing that resolution could require is for member state banks to report any deposits, accounts, or property suspected to be owned or controlled by North Korean officials to the U.N.’s 1718 Committee. That will help build an international database of North Korean funds, and help the Security Council trace North Korean funds, identify violations, and better deter North Korean provocations.
Above, I argued that the U.S. should now push to refer Kim Jong-un to the International Criminal Court. If China and Russia absolutely refuse to go along with a new resolution that directly holds Kim Jong-un accountable for crimes against humanity, there are also more indirect ways to do this. One would be to add new provisions prohibiting the use of forced labor from North Korea, which would cut off a major source of funds for Pyongyang. China and Russia would argue that this crosses a new rubicon, but that’s not so. After all, John Bolton persuaded them both to go along with prohibiting North Korea’s imports of luxury goods as early as 2006. The intent behind that sanction was that Pyongyang had no business importing Swiss watches and luxury sedans while the North Korean people went hungry. That provision had no direct bearing on proliferation. It was about human rights.
Whatever the Security Council does is likely to continue to focus on squeezing North Korea’s shipping networks. And while I can certainly think of some useful provisions for a new resolution in this regard, what may be more desperately needed to make sanctions work at last is new designations under the old resolutions. Targets should include shipping companies, air cargo carriers under military control, state insurance companies that facilitate arms shipments, businesses that are known to be fronts for money laundering, and third-country entities that reflag North Korean ships or otherwise help it break sanctions. For example, the Treasury Department has sanctioned China’s 88 Queensway Group for breaking sanctions against Zimbabwe. To show its seriousness, Treasury should also designate 88 Queensway and its head, Sam Pa, under Executive Order 13687, for all it has done to break sanctions against North Korea.
The Security Council should also approve the designations of higher-level North Korean officials, including Kim Jong Un-himself, and the members of his Organization and Guidance Department, which would effectively freeze their assets.
Finally, the Security Council must also revamp and streamline the moribund and bureaucratic 1718 Committee, which approves the designations, and require it to make regular reports to the Security Council.)
The Committee for Human Rights in North Korea has published a detailed new report on Camp 16, the subject of this extensive OFK post from April 2012. It’s always validating when the findings of an experienced professional imagery analyst like Joseph Bermudez are generally consistent with mine. Picking up at about the same time my post left off, Bermudez finds that “[d]uring the period under study, there has been an increase in the number of housing units and support buildings,” and most likely, the prisoner population:
If those working at the camp are prisoners, the prisoner population within the camp has likely expanded over the period examined. The camp population maintains the agricultural fields, orchards, and livestock, and work in the camp’s logging activities and wood products, light industrial facilities, and mines. [HRNK]
Bermudez’s report is documented extensively with detailed, annotated imagery.
From the context of the whole report, Bermudez seems convinced that Camp 16 is indeed a prison camp. Presumably, his caution is a function of having no eyewitness confirmation; however, in 2013, Amnesty International published this account:
In an interview conducted in November 2013, Mr. Lee (full name withheld), who was a security official in kwanliso 16 in the 1980s until the mid-1990s, told Amnesty International of other forms of executions he had witnessed where inmates were forced to dig their own graves and then killed by hammer blows to their necks by prison authorities. In another instance, he had seen prison authorities strangling and then beating inmates to their death with wooden sticks. He also recounted that several women inmates disappeared after they had been raped by officials and he concluded that they had been executed secretly. [Amnesty International]
This witness left North Korea long before the beginning of nuclear testing at Punggye-ri. Like me, Bermudez was interested in whether the evidence in the imagery supported reports that North Korea uses prisoners from Camp 16 at the adjacent Punggye-ri nuclear test site. Like me, he found nothing in the imagery to support that, although he notes:
It is important to reiterate the analytical caution presented in previous reports (such as North Korea: Imagery Analysis of Camp 155 and North Korea’s Camp No. 25 Update6 ) produced by HRNK and AllSource. North Korean officials, especially those within the Korean People’s Army and internal security organizations, clearly understand the importance of implementing camouflage, concealment, and deception (CCD) procedures to mask their operations and intentions. It would be reasonable to assume that they have done so here. [HRNK]
Of course, my analysis was also based on the geographical convenience of moving prisoners directly from Camp 16 to Punggye-ri, in that the west side of Camp 16 is the east side of Punggye-ri. If the kuk-ga anjeon bowibu guards wanted to bring prisoners from Camp 16 to Punggye-ri, wouldn’t the most convenient and secure way to do that be to drive them out a gate on the western side of the camp? Perhaps, but not necessarily. Most of the camp’s population is located on the southeastern part of the camp, near the main gate. There is a road that goes from that vicinity westward to Punggye-ri, outside the camp’s boundaries. It wouldn’t be that great an inconvenience to simply load the prisoners onto trucks, drive them out the gate, and then a few miles to the west, and then to the north, around the camp’s southern and southwestern circumferences.
The other big question I hope we’ll answer one day: was Camp 16 the ultimate destination for the survivors of Camp 22? If so, how many survivors arrived at Camp 16? Until we get more information from witnesses to either Camp 16, Camp 22, or Punggye-ri, all we can do is watch, and follow the evidence to wherever it takes us.
Amid all of the slaughter and chaos sweeping over us, Senator Cory Gardner doesn’t want us to forget which government built a nuclear reactor in Syria in 2007, and that may soon be able to put a nuclear warhead on an intercontinental ballistic missile.
It is time to ratchet up the pressure. That is why I’ve introduced the North Korea Sanctions and Policy Enhancement Act. This bill would require the president to impose sanctions on people who have contributed to North Korea’s nuclear program, enabled its human rights abuses, and engaged in money laundering, counterfeiting or drug trafficking that benefits the regime.
North Korea skirts financial sanctions by setting up shell companies in countries like China. This bill would add pressure by asking the Treasury Department to designate North Korea “a country of primary money laundering concern” under the Patriot Act.
Similarly, North Korea evades U.N. embargoes on arms trafficking. This bill would authorize the Department of Homeland Security to seize any ships the regime uses for smuggling if they enter U.S. waters. It also asks the president to identify foreign ports that are not doing enough to prevent smuggling.[Sen. Cory Gardner, Wall Street Journal]
Senator Gardner’s bill, S. 2144, shares most of its content with H.R. 757, a bill introduced by Rep. Ed Royce (R., Cal.) and Rep. Elliot Engel (D., N.Y.). In several ways, S. 2144 improves on its elder sibling. Hopefully, as the bills work their way through their respective committees and chambers, they will converge in a form that combines their best elements. That needs to happen soon, because we’re already near the end of the first session of this Congress. Time is finite, and unfortunately, it seems the only person who can get the whole Congress’s attention is Kim Jong-Un.
Events may soon favor Sen. Gardner’s call, because Kim Jong-Un also doesn’t want us to forget about Kim Jong-Un. The day after the Wall Street Journal published Sen. Gardner’s op-ed, 38 North published images showing that North Korea is digging a new tunnel at its nuclear test site at Punggye-ri. Perhaps, then, tomorrow’s crisis might crowd into a few of the news cycles that have been preoccupied, lately, with the slaughter of the week. If that’s what it takes to get us toward a policy that recognizes the North Korea that is, rather than the North Korea we would prefer to believe in, so much the better.
Historically, North Korea’s nuclear tests have come every three or four years, so we’re about due. If what His Porcine Majesty most needs now is to whip up xenophobic hostility to distract his ruling class from their fears of him, and if he thinks he’s reached the limits of what Park Geun-Hye will tolerate, maybe a nuclear test is just what he needs in the short term. But if his survival depends on ready access to hard currency in his Chinese and Swiss bank accounts, in the long term, this might mean the end of him.
Although I suppose it’s probably a complete coincidence that Treasury finally blocked the assets of four North Korean proliferators in Burma last Friday, I’d like to think it stung a bit when, a few weeks ago, at this conference at the Johns Hopkins School of Advanced International Studies, I said this:
Here’s a link to Treasury’s announcement of the designation of four individual North Koreans, including Pyongyang’s Ambassador to Burma:
HWANG, Su Man (a.k.a. HWANG, Kyong Nam); DOB 06 Apr 1955; nationality Korea, North; Passport 472220033 (Korea, North) (individual) [DPRK2] (Linked To: KOREA MINING DEVELOPMENT TRADING CORPORATION).
KIM, Kwang Hyok, Burma; DOB 20 Apr 1970; nationality Korea, North; Passport 654210025 (Korea, North); Korean Mining Development Trading Corporation Representative in Burma (individual) [DPRK2] (Linked To: KOREA MINING DEVELOPMENT TRADING CORPORATION).
KIM, Sok Chol, Burma; DOB 08 May 1955; nationality Korea, North; Passport 472310082; North Korean Ambassador to Burma (individual) [DPRK2].
RI, Chong Chol (a.k.a. RI, Jong Chol); DOB 12 Apr 1970; Passport 199110092 (Korea, North) expires 17 Mar 2014; alt. Passport 472220503 (Korea, North) expires 06 Jun 2018; alt. Passport 654220197 (Korea, North) expires 07 May 2019 (individual) [DPRK2] (Linked To: KOREA MINING DEVELOPMENT TRADING CORPORATION).
The bracketed “DPRK2” means the designations were under the potentially sweeping but still barely used new Executive Order 13687, which allows Treasury to designate any North Korean government or ruling party official, entity, or enabler. This means Treasury doesn’t have to publish detailed reasons for its designations. According to GAO, this should make the process of designating North Korean entities much easier, although we’ve seen relatively little action from Treasury since the order was signed on January 2nd, shortly after President Obama blamed Pyongyang for the Sony hack and cyberterrorist threat.
Treasury’s announcement doesn’t give a specific reason for the designations, but does say that the targets are linked to the Korea Mining Development Corporation (KOMID), which has been designated for WMD proliferation since the George W. Bush administration. Treasury also designated a North Korean trading company in Egypt.
EKO DEVELOPMENT AND INVESTMENT COMPANY (a.k.a. EKO DEVELOPMENT & INVESTMENT FOOD COMPANY; a.k.a. EKO IMPORT AND EXPORT COMPANY), 35 St. Abd al-Aziz al-Sud, al-Manial, Cairo, Egypt [DPRK2].
According to Yonhap, EKO is “a North Korean government entity located in Egypt,” and was designated “for helping KOMID market North Korean weapons systems to foreign countries.” You can find references to similarly named entities through a Google search.
“Today’s action is designed to counter North Korea’s attempts to circumvent U.S. and United Nations (UN) sanctions, as well as maintain the effectiveness of U.S. sanctions on individuals and entities that are linked to the North Korean Government’s weapons of mass destruction procurement network,” the department said. [Yonhap]
Let’s start by accentuating the positive. The designation of a sitting ambassador represents a notable and long-overdue escalation in Treasury’s designations.
The Ambassador was reportedly paid by the sanctioned DPRK company and arranged meetings on their behalf.
“‘The designation of the DPRK Ambassador to Burma is unprecedented. It is a strong signal to the new Burmese government that the US has persistent concerns about the relationship between North Korea and the country’s military which it expects to be promptly addressed,” Andrea Berger of the Royal United Services Institute (RUSI) told NK News.
“The January EO is much broader in scope and therefore involves a different standard of evidence: it is only necessary to demonstrate that a person is a North Korean official or has materially assisted the North Korean government. There is no doubt that the Ambassador meets these criteria,” Berger added. [NK News, Leo Byrne]
Ordinarily, the Vienna Convention protects the activities of diplomats as inviolable. North Korea’s abuse of these protections, however, is so widely acknowledged that even the U.N. Security Council’s latest North Korea sanctions resolution calls for the “targeting the illicit activities of diplomatic personnel,” expresses concern that Pyongyang “is abusing the privileges and immunities accorded under the Vienna Convention on Diplomatic and Consular Relations,” and calls on member states “to exercise enhanced vigilance over DPRK diplomatic personnel so as to prevent such individuals from contributing to the DPRK’s nuclear or ballistic missile programmes, or other activities prohibited by” U.N. resolutions. By itself, however, the designation of four individuals and one trading company represents a small dent in a global network.
“North Korea’s continued violation of international law and its commitment to the proliferation of ballistic missiles and weapons of mass destruction pose a serious threat to the United States and to global peace and security,” Acting Under Secretary for Terrorism and Financial Intelligence Adam J. Szubin said in the statement.
“Today’s designations underscore our ongoing efforts to obstruct the flow of funds used to augment North Korea’s nuclear capabilities,” he said.
To get an idea of what a serious and sustained sanctions enforcement program would look like, you need look no further than Treasury’s own sanctions search tool, which reveals that there are no less than eleven sanctions programs dedicated exclusively to Iran, compared to two dedicated to North Korea. The number of designations is even more telling. Hold down your “control” key and click “561List” (signifying 31 C.F.R. Part 561), EO13622 (signifying the executive order of the same number), EO13645, FSE-IR, HRIT-IR, IFSR, IRAN, IRAN-HR (human rights), IRAN-TRA (under this statute), IRGC (Iran Revolutionary Guards Council), and ISA. You should get 845 results. Because these programs still exclude designations under other sanctions programs, such as “NPWMD” (for WMD proliferation) and “SDGT” (for terrorism), it’s entirely possible that Treasury has designated more than 1,000 Iranian and Iranian-linked entities, compared to around 90 in North Korea’s case.
An effective sanctions program will require years of sustained and determined effort, and the political will to designate North Korea’s banks, higher-level ministries, senior officials, and third-country enablers. Such an effort begins by requiring all transactions with the North Korean government to be licensed by OFAC, which is one way Treasury can begin to gather financial intelligence on where North Korea’s money is, and how it moves. As of now, however, there’s no such comprehensive requirement. The most optimistic way to view this is as a small but welcome start.
The first hearing, entitled, “The Persistent North Korea Denuclearization and Human Rights Challenge,” will be held Tuesday at 10 a.m., before the full Senate Foreign Relations Committee. The witnesses will be Sung Kim, the State Department’s Special Representative For North Korea Policy And Deputy Assistant Secretary For Korea and Japan, and Robert King, State’s Special Envoy For North Korean Human Rights Issues.
The second hearing will be before the House Foreign Affairs Committee’s Subcommittee on Terrorism, Nonproliferation, and Trade, on October 22nd at 2 p.m. It will be entitled, “North Korea: Back on the State Sponsor of Terrorism List?”
(Coughs, clears throat, looks down at shoes.)
The witnesses will be Sung Kim and Ms. Hilary Batjer Johnson, State’s Deputy Coordinator for Homeland Security, Screening, and Designations.
NK News is reporting that North Korea’s National Aerospace Development Administration, whose name yields the unfortunate acronym “NADA,” has been accepted as a member of the International Astronautical Federation, a group that describes itself thusly:
Founded in 1951, the International Astronautical Federation (IAF) is the world’s leading space advocacy body with 246 members from 62 countries on six continents including all leading agencies, space companies, societies, associations, universities and institutes worldwide.
Hat tip to Chad O’Carroll for the link. As O’Carroll concedes, however, the source of his story is “an attendant of an annual congress event organized by the federation,” and the IAF itself hasn’t confirmed this. Let’s hope it backs off promptly, because in a report published earlier this year, a U.N. Panel of Experts monitoring compliance with international sanctions on North Korea found extensive links between NADA and North Korea’s banned missile programs, and recommended that NADA be designated and sanctioned by the Security Council.
First, the Panel’s findings:
Now, the Panel’s recommendations:
A designation would require all U.N. member states to immediately freeze all of NADA’s assets, and to expel its representatives from their countries.
As conspicuous a blunder as this is on IAF’s part — assuming this isn’t just the statement of one rogue member — the systemic problem it points to is the failure of the U.N. bureaucracy to act on the consistently superb reports of its own Panel of Experts. Eight months after the publication of the Panel’s latest report, the U.N.’s 1718 Committee, which is responsible for approving the designations, still hasn’t designated NADA. Meanwhile, NADA is free to pursue sensitive technology and international legitimacy, and to conceal its funds and operations.
Nor is this the first time the 1718 Committee has dropped the ball. It took the 1718 Committee a full year after the Chong Chon Gang incident to designate Ocean Maritime Management, the North Korean shipping company that was smuggling MiGs and missiles from Cuba to North Korea, in flagrant violation of U.N. sanctions. Each time the 1718 Committee is inexcusably slow in reacting to Panel of Experts reports, it becomes more apparent that it is a weak link in U.N. sanctions enforcement, either for political reasons, or because of the simple incompetence of its management.
Either way, as Security Council members continue to consider possible responses to a North Korean missile or nuclear test, they should be thinking about more than passing new sanctions. New sanctions on financial messaging, shipping, reflagging, air cargo, and insurance might be useful, but the Security Council should also focus on making the existing sanctions work better.
The obvious alternative is to simply do away with the 1718 Committee entirely, although that would depart from standard U.N. procedure. This panel-committee formulation isn’t unique to North Korea. A similar committee was also set up to approve Iran (and other) sanctions designations. The political reality is that member states will want to retain some control over designations. In that case, why not allow the recommended designations of the Panel of Experts to go into effect within 30 days, unless a majority of members of the 1718 Committee vote to disapprove them? That would have the advantage of forcing China and Russia to engage in their obstructionism more openly.
Another suggestion, which isn’t mutually exclusive with the last one, is to do what the Security Council’s resolutions did in the case of Iran — require the Committee to report to the Security Council regularly on its enforcement actions. That will ensure that the P-5 keep a careful eye on the enforcement of the sanctions resolutions, and hold the 1718 Committee accountable for the slovenly pace of its actions.
(By the way, I’d like to give my special thanks to the U.N., proprietor of possibly the world’s worst website, for effing up all of its hyperlinks and all of my bookmarks to its committees and designations. Sanctions geeks may wish to update their bookmarks with the U.N.’s consolidated sanctions list.)
In the end, however, it will be up to individual member states to impose national sanctions in appropriate cases, without waiting for a dilatory U.N. Committee. That’s not only plausible, it has happened. The EU sanctioned the Korea National Insurance Corporation, which is not designated by the U.N., and the U.S. Treasury Department has sanctioned the Foreign Trade Bank of North Korea, also not sanctioned by the U.N. A good first step would be for the U.S. and the EU to harmonize their own designations mutually. Next, they should seek the cooperation of Japan, South Korea, Switzerland, and other key middle powers holding North Korean property. Finally, they can reach smaller states, such as those that reflag North Korean ships and buy its weapons, and convince them to shun North Korea’s business. That strategy of progressive diplomacy will make it harder for the Chinese and the Russians to succeed in their obstructionism.
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Update: Well, well. It seems after the IAF got some mail from concerned citizens in the U.N. Panel of Experts and the South Korea government, they revoked NADA’s membership. Chad O’Carroll has the rest of the story.