Archive for Sanctions

So, what “appropriate measures” *did* the feds take against Dennis Rodman for violating N. Korea sanctions?

The newest U.N. Panel of Experts report* on North Korea sanctions enforcement contains this buried treasure:

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The first question this raises is what those appropriate measures were. The use of passive voice conceals whether the feds took any measures at all.

The second question is why there should be a “lack of information” from Rodman, when the Commerce and Treasury Departments have subpoena powers and an obligation to cooperate with U.N. authorities enforcing North Korea sanctions. The law applies to superpowers and celebrities, too.

There is video evidence of Rodman personally giving Kim Jong Un banned luxury gifts in violation of Commerce Department regulations and Executive Order 13551. I previously explained here why that’s a felony, and there’s no question that at least some of the goods presented are listed on Supplement 1 and were luxury goods.

Don’t get me wrong here. There are bigger fish in this sea than Dennis Rodman. I don’t believe this is the sort of thing that justifies prison time, but it does compel making an example of Rodman and his assortment of camp followers and opportunistic sociopaths, even if only through a modest civil penalty and a (publicly posted) cautionary letter. Ignorance (or willful ignorance) of the law may mitigate punishment, but it’s not a defense.

Having said that, this sort of thing does matter. Cutting off Kim Jong Un’s luxury goods is ultimately about North Korea’s chronic food crisis and the completely needless suffering of its people. The purpose of the ban is to force him to prioritize feeding the 80% of North Koreans who are barely getting through the lean season each year. Conduct like Rodman’s sends a message that the world doesn’t care about their suffering, and that it’s willing to give Kim Jong Un access to the fruits of the world’s fleshpots anyway.

Overall, the POE report paints a picture of a sanctions framework that is being ignored by most U.N. member states. There’s a display of concern when North Korea does something hideous that actually makes headlines, and then everyone goes right back to ignoring them. How are North Korea’s arms clients in Uganda, Tanzania, and Ethiopia supposed to react if the U.S. doesn’t appear to be serious about enforcing them, either?

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* This is from a draft leaked to me; the final still isn’t published.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

More food for hungry North Koreans is not “bad news” for sanctions proponents.

I don’t always agree with Scott Snyder’s views, but I’ve always enjoyed reading his work. In almost every case, I’ve found it to be well-researched and objective. In a blog post for the Council on Foreign Relations, Snyder cautiously concludes that North’s cereal production is “stable and improving” — from 5.93 million tons last year to 5.94 million tons this year, a more generous characterization than the U.N. Food and Agricultural Organization report he cites, which calls North Korea’s food production “stagnant.” My own characterization would be “suspiciously constant.”

The UN FAO estimates that this year’s deficit will be 407,000 tons. That’s still low by historical North Korean standards, but hardly a sign that happy days are here again. The FAO also tells us that the impoverished government of North Korea only intends to import 300,000 tons, leaving an “uncovered deficit” of 107,000 tons. Here is Mercy Corps’s cue to tell us all how desperately North Korea needs food aid.

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[Above: An actual sanctions target, riding aboard another sanctions target.]

At least the World Food Program shouldn’t have to worry about any lack of transport to do monitoring and assessment visits. Maybe His Porcine Majesty can even give Christine Ahn a ride in it, the next time she’s in Pyongyang to complain about how U.S. sanctions are starving North Korean babies.

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Snyder is honest enough to admit some weaknesses in his conclusion. For one, the UN FAO estimate he cites relies on Pyongyang’s own food production statistics, because this year (glasnost alert!), Pyongyang wouldn’t let the FAO do an on-the-ground food security assessment. But that’s no cause for alarm; after all, North Korea wouldn’t try to falsify information about its food supply or manipulate aid agencies, would it?

Snyder also admits that North Korea’s winter crops are falling well short of forecasts, a point that caused aid groups to warn of another food crisis recently:

“We’re concerned about seed scarcity and the low level rain and snowfall,” John Aylieff, deputy Asia director at the U.N.’s World Food Program, said from Pyongyang. “All of these things are raising concerns about the winter harvest this year.”

Winter crops — including wheat and barley — should be growing now, but after an exceptionally dry year in 2014, rainfall around the country has been markedly lower than usual so far this year, particularly in the “cereal bowl” provinces of Pyongan in the west and Hwanghae in the south.

Although the winter harvest makes up only 5 percent of North Korea’s domestic food supply, it is a critical time because the crops see the country through the lean season known locally as the barley hump — the period between May and August before rice and corn crops are harvested.

“If there is a big gap, this could prolong the lean season and it could prove a ‘flash point’ for malnutrition,” Aylieff said.  [WaPo, Anna Fifield]

Take this with a grain of salt, too. I’ve often suspected that some aid groups exaggerate conditions in North Korea, whether to influence policy debates here or to rake in more donations. You can’t even blame them for it. If they don’t know where the trends are heading, they almost have to raise the alarm prematurely to be able to respond to a catastrophe in time.

Snyder also cites Andrei Lankov’s recent writings, which, as I’ve argued here and here, don’t look very well sourced to me, and haven’t held up well against better-sourced evidence. As a friend said about Andrei today, he’s always interesting, and often brilliant, even when he’s wrong. It still looks like wishful thinking to me — evidence that’s mostly apocryphal, ephemeral, or parochial, or a misattribution of market trends unrelated to regime policies.

We’ll know better by November. Meanwhile, obsessing over North Korean agricultural policies is like watching the paint dry on the side of a burning house. Hardly anyone still argues that Pyongyang is interested in broad, serious, structural reforms to its agricultural, economic, or political systems. No one believes they’ll cede their nuclear weapons. I doubt that anyone really knows what the true food situation is, including in Pyongyang. How could it be otherwise in a country where those who do not hoard, starve?

This bring us to another problem. Even if North Korea is growing more food, that doesn’t mean the people are eating more of it. It’s no good to produce more food if regime officials simply seize what they consider to be “surplus” crops for export. And as Snyder concedes, “growing income inequality in North Korea has resulted in continuing malnutrition among some sectors of the population, especially in rural areas.”

Two other interesting points in Snyder’s post reinforce this suspicion: first, North Korea has cut way back on its commercial food imports since the famine years. Second, it raised them again to adjust for a decline in external food aid. In other words, Pyongyang seems to be using commercial imports to calibrate the domestic food supply to a level that, according to the best evidence we have, is a pretty marginal one for 84% of North Koreans. That’s why I call the North’s food supply statistics “suspiciously constant.” We’ll pick that point up again in a moment.

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My main issue with Snyder’s post, however, is his conclusion:

North Korea’s apparent economic progress is bad news for those who expect increased sanctions to be decisive in driving North Korea to make a strategic choice to give up its nuclear weapons. So far, the effects of increased sanctions have been far from generating sufficient economic pressure to induce North Korea to make such a choice. Under current circumstances, there is nothing to stop North Korea from having its cake and its yellowcake, too.

Well, where does one begin with that? First, here again is the urban legend that our sanctions against North Korea have been strong, and thus properly tested as a tool of policy. For those who haven’t yet read it, I’ve refuted that argument here. It’s certainly true that sanctions have been enforced poorly by just about everyone — from the Chinese, to the South Koreans, to the Obama Administration, and most recently, the Russians. Private jets don’t import themselves, after all.

My real problem with Snyder’s argument, however, is its implication that sanctions would target North Korea’s food supply. I don’t know a single sanctions proponent who wants to target North Korea’s food supply or starve innocent people. Let’s have a look at the care H.R. 757, the North Korea Sanctions Enforcement Act, takes to avoid that, starting with Section 207(a)(2), which provides exemptions for imports of food and medicine:

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There’s also a catch-all waiver provision at Section 207(b)(3) in the event a particular sanction has unintended humanitarian consequences:

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We even wrote a provision at Section 207(d) that would allow the Treasury Department to license a responsible foreign bank to handle transactions to bring food and other humanitarian supplies into North Korea:

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Of course, some banks could adopt excessively cautious interpretations of the law. The answer to that problem is for the Treasury Department to publish guidance and general licenses to give the banks peace of mind that transactions in food and aid don’t violate the law — promptly. As in, Treasury should start drafting that guidance now.

I’ll take this a step further: those of us who advocate for Kim Jong Un’s Götterdämmerung, and for policies that are just as content to catalyze that outcome as to extract change diplomatically, want the North Korean people to have more food, not less. Not only would that be far better for the North Korean people, it might hasten the regime’s overthrow. I’ve long argued that the regime uses hunger as a tool of control: it seeks to keep its people too weak and too exhausted to think of anything but survival. Historically, starving people do not overthrow their oppressors. People who overthrow their oppressors have enough to survive, and to seethe against the ruling class. It is the envy of oligarchs, not famine, that causes revolutions. An ample food supply would not preempt North Korea’s class war, but it would do much to free those on the lower regions of the songbun ladder to contemplate the differences between existence and life.

In short, there would be no “bad news” for any sanctions proponent in a rise in North Korea’s food supply. Pending sanctions legislation takes extreme pain to avoid reducing it. It is wrong to suggest that so many proponents of targeted sanctions legislation — chief among them, longstanding human rights advocates — are so callous about human life and suffering as to intentionally attack the food supply of Kim Jong Un’s victims. It’s an offense that could easily have been avoided by taking the time to read and understand the sanctions before implying as much.

Introducing H.R. 757: The North Korea Sanctions Enforcement Act of 2015

Ed Royce and Elliot Engel, the Chairman and Ranking Member of the House Foreign Affairs Committee, have introduced the new, improved, post-Sony version of H.R. 1771.

Why I’m concerned about the overuse of financial sanctions

As much as I’ve advocated the use of financial sanctions as a potentially effective tool against North Korea, and as much as financial sanctions against Russia appear to have played a significant role in crashing the ruble, it worries me that if we use this tool too much against the wrong targets, we risk blunting the power of our financial weapon.

I think North Korea is a good target for financial sanctions because it is (a) dependent on the financial system, (b) misusing the system in ways that raise traditional law enforcement and money laundering risks, (c) not an important trading partner to anyone, and (d) subject to theoretically strict financial safeguards under U.N. Security Council resolutions.

That is to say, this weapon is for the worst of the worst–rogue states with weak links to the financial system, where there is (or could be) broad international agreement that financial sanctions are an appropriate countermeasure. (In the case of Russia and the Ukraine, better training and weapons for the Ukrainians might have been a better response. Russia’s history of losing wars to smaller neighbors is older than the Winter War against Finland and more recent than Afghanistan).

In this post, Walter Russell Mead worries that financial sanctions might have been the wrong tool against Russia, and that it might cause more states to agree that they need an alternative reserve currency. It’s a concern I share. In the case of Russia, for the first time ever, we’ve blocked out a large, interconnected economy without basing that action on concerns about money laundering, terrorist financing, or proliferation.

Three Cheers for Obama’s Sony attribution, a golf clap for his “proportional” response.

In The Washington Post, Ellen Nakashima describes how Sony’s decision to cancel the premiere of The Interview catalyzed the Obama Administration’s decision to blame North Korea publicly:

The next day, alarmed by the surrender, President Barack Obama convened his top officials in the White House Situation Room and, based on their unanimous recommendation, decided to take an action the United States had never dared before in response to a cyberattack by another nation: name the government responsible and punish it. [….]

The blocking of Sony’s freedom of expression, on top of a highly damaging hack, is what ultimately compelled officials to act, in the name of deterrence.

“The argument I made was the whole world is watching how we as a nation respond,” said Adm. Michael Rogers, the director of the National Security Agency, who, other officials said, was at the previously undisclosed meeting.

“And if we don’t acknowledge this, if we don’t name names here, it will only — I’m concerned — encourage others to decide: ‘Well, this must not be a red line for the United States. This must be something they’re comfortable [with] and willing to accept,’ ” Rogers said at an international cybersecurity conference at Fordham University last week.

There “was a significant debate within the administration about whether or not to take that step” of naming North Korea, a senior administration official said. “Attribution is hard, and there are all sorts of reasons we don’t normally want to do that,” including setting a precedent that would increase pressure to name other countries in future incidents and antagonizing the offending governments.

But the attack on Sony’s right to screen a movie struck a nerve. The entertainment company may not be “critical” to national security, but free speech is “a core value,” said the official, who spoke on the condition of anonymity to describe internal discussions. “Yes, it was a Seth Rogen comedy, but next time it might not be,” he said. What he described as the hack’s “destructive” nature combined with the element of coercion against Sony “crossed the threshold,” he said. “It took us into a new realm.”

The attack was a violation of U.S. sovereignty “coupled with an attempt to interfere with freedom of expression,” said Christopher Painter, State Department coordinator for cyber issues. “You had, in many ways, the perfect storm of all these things coming together that were really important.” [WaPo, Ellen Nakashima]

I applaud this unreservedly. It was the right decision for the right reasons.

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The administration has stumbled twice since then, however. For several weeks, the administration failed to challenge inside-job theories from some IT security experts. Some of them challenged the sufficiency of the publicly available evidence, which is fair enough. But to argue that North Korea didn’t do it is much more problematic. Some of the inside-jobbers lost sight of the possibility that they were arguing based on incomplete information. Others may have been motivated by grudges against the administration over the Snowden revelations, or other biases. Yet others, including inmates of the Alex Jones, Christine Ahn, and Ron Paul asylums, shared the sort of skepticism that’s unique to the world’s most gullible people.

The administration continued to lose this argument for several weeks before FBI Director James Comey publicly reaffirmed that he was certain that the North Koreans did it. Comey’s call to declassify more of the evidence is now being answered by the National Security Agency:

Spurred by growing concern about North Korea’s maturing capabilities, the American spy agency drilled into the Chinese networks that connect North Korea to the outside world, picked through connections in Malaysia favored by North Korean hackers and penetrated directly into the North with the help of South Korea and other American allies, according to former United States and foreign officials, computer experts later briefed on the operations and a newly disclosed N.S.A. document.

A classified security agency program expanded into an ambitious effort, officials said, to place malware that could track the internal workings of many of the computers and networks used by the North’s hackers, a force that South Korea’s military recently said numbers roughly 6,000 people. Most are commanded by the country’s main intelligence service, called the Reconnaissance General Bureau, and Bureau 121, its secretive hacking unit, with a large outpost in China.

The evidence gathered by the “early warning radar” of software painstakingly hidden to monitor North Korea’s activities proved critical in persuading President Obama to accuse the government of Kim Jong-un of ordering the Sony attack, according to the officials and experts, who spoke on the condition of anonymity about the classified N.S.A. operation. [N.Y. Times, David E. Sanger & Martin Fackler]

The CIA’s malware was built on its highly successful Stuxnet worm:

For about a decade, the United States has implanted “beacons,” which can map a computer network, along with surveillance software and occasionally even destructive malware in the computer systems of foreign adversaries. The government spends billions of dollars on the technology, which was crucial to the American and Israeli attacks on Iran’s nuclear program, and documents previously disclosed by Edward J. Snowden, the former security agency contractor, demonstrated how widely they have been deployed against China. [N.Y. Times]

For those incapable of wrapping their heads around the idea of North Korea being technologically sophisticated enough to hack someone, the Times story also provides an extensive history of Unit 121, and an interview with two defectors with insider knowledge of the unit’s operations.

See also CNN and CBS News (quoting Comey, “We could see that the IP addresses that were being used to post and to send the e-mails were coming from IPs that were exclusively used by the North Koreans.”).

Interestingly enough, just a few weeks before the Sony hack, Director of National Intelligence James Clapper had dinner with Kim Yong-Chol, the head of North Korea’s Reconnaissance Bureau (RGB), the man responsible for overseeing North Korea’s hackers, and also for multiple attempts to assassinate human rights activists and North Korean dissidents in exile. The RGB’s assets are blocked, but Gen. Kim’s are not. I can’t help wonder if Gen. Kim smiled at the thought of how Clapper would react to the Sony attacks. Let’s hope that the Obama Administration gives Gen. Kim cause to regret this lapse of malignant egomania.

It amuses me some to wonder whether there was a small bandage on Mr. Clapper’s right palm when the two men shook hands.

~   ~   ~

Which brings us to the President’s second stumble: his failure, so far, to respond credibly, to deter others from crossing the red line that North Korea crossed in November, and also to deter others from blunting President Obama’s response by undermining sanctions.

It did not take long for American officials to conclude that the source of the attack was North Korea, officials say. “Figuring out how to respond was a lot harder,” one White House official said. [N.Y. Times]

That’s becoming more painfully obvious by the day. President Obama has said that Executive Order 13,687 and the designations of January 2nd were only a beginning, and let’s hope he’s right about that. Sanctions work better when they hit with a shock than when they’re applied incrementally, and give the target time to adapt. If my guess is right, however, Treasury needs more time to do that, because this administration hasn’t made North Korea a priority in its financial intelligence targeting. But so far, as former CIA Director Michael Hayden said, the administration’s new sanctions have been “symbolic at best,” for reasons I explained here. Worse, our apparent lack of determination is inviting troublemakers to undermine the administration’s negative reinforcement.

Here is Vladimir Putin’s cue to enter stage left.

According to this article, Russia has recently begun to service transactions for the U.S. Treasury-sanctioned Foreign Trade Bank of North Korea in rubles. Treasury sanctioned the FTB in March 2013 for its involvement in servicing WMD-related financial transactions. The article’s author, whose work reads like that of a Putinjugend fangirl, may not have considered the possibility that the Russian businesses involved could still be cut out of the financial system under EO 13,687 or (one day in the not-too-distant future, according to Chairman Royce) the North Korea Sanctions Enforcement Act. However unwittingly, fangirl has done us a great public service by bringing this information to our attention.

In his State of the Union speech, President Obama promised to defend us against cyberattacks. He didn’t mention North Korea by name, but the reference was obvious. Deterrence is a critical part of defense. Imposing new cybersecurity laws and regulations on industry alone will not be a complete answer, and the new requirements will come with massive costs to American industry. Even if the administration has good reasons to delay the main thrust of its response to Kim Jong Un until it finds a critical mass of North Korea’s financial nodes, it still needs to make a bold demonstration that it’s unwilling to tolerate the willful subversion of its policies by Russia and others. If the sanctions of January 2nd are the only price a foreign enemy pays for a devastating and chilling attack on the central principle of our political system, those sanctions will mean less than no deterrent at all.

Wanna read about North Korea sanctions law? You know you do.

In the Fletcher Security Review, I attack the myth that our North Korea sanctions are strong, summarize the authorities, describe what has and hasn’t worked, and explain how to make sanctions work as part of a more coherent and effective North Korea policy.

~   ~   ~

Update: See also this Wall Street Journal column, citing yours truly, which I swear I didn’t see coming. If only the author had cited the paper linked above, after I knew the answer to the question posed. But just the same, the article shows a good understanding of the subject matter. It’s gratifying to be read, to be getting through to people, and to be changing the conversation.

NHK Documentary: Money & Power in North Korea

I haven’t watched it all — was busy finishing another project — but it looks to be an interesting examination of the subject that interests me most about North Korea: its money. It talks about the regime’s “gift politics,” luxury goods trade, the “royal court economy,” money laundering, and hunger.

Although the documentary itself is new, some of the info seems a bit dated. There were other things I didn’t know. For example, it claims that in Pyongyang, there’s a massive vault filled with yen, dollars, and euros, in cash. It also claims that North Korea continues to operate out of Macau, selling gold (among other things). It also discusses North Korea’s statue-building business in Africa, and its slave-labor exports.

The documentary also claims that Jang Song-Thaek was purged because of a shortage of funding and because his control of wealth was seen as a threat. That makes sense to me, but I would still treat any “insider” accounts with great suspicion.

~   ~   ~

Update: OK, I finished watching it. It’s well worth seeing, although based on other information I’ve seen, I don’t agree that Kim Jong Un’s hard currency streams are dwindling. Just look at this chart.

Actually, sanctions are looking like the best thing that ever happened to engagement

Since December 19th, when the President blamed North Korea for the Sony hacking and cyberterrorism attacks, Congress has been pushing for tougher sanctions against North Korea, and it has looked increasingly like it has been pushing against an open door. And suddenly, a North Korean leader who has never gone abroad or met a foreign leader during his three-year reign (no, Rodman doesn’t count) has taken a sudden — even urgent — interest in personal diplomacy.

On January 1, Kim Jong Un made a highly conditional suggestion that he might be interested in meeting Park Geun-Hye. Park, with record low approval ratings and a desperate need to change the subject, seized on the offer and has pushed Kim to hurry along to Seoul.

The next day, President Obama issued an executive order authorizing sanctions against all entities and officials of North Korea’s government and ruling party, and (more importantly) against the third-country entities that provide Pyongyang its regime-sustaining hard currency. The order was potentially sweeping and devastating. In its actual impact, it reached only three entities that were already sanctioned, and ten mid- to low-level arms dealers. But the President also said that this was only a first step, which left Pyongyang scurrying to secure its financial lifelines.

Suddenly, within a week, press reports said that Shinzo Abe might visit Pyongyang, and that Kim might accept Putin’s invitation to Moscow in May.

Kim even reached out to Washington a little, offering a nuclear test freeze if Washington cancels annual military exercises. This was enough to fool the gullible editors of The New York Times, but not President Obama. Still, it’s more than North Korea has offered Washington for the last year.

Today, North Korea’s Central Bank responded to an obviously planted question from its state news agency by “committ[ing] itself to implementing the action plan of ‘international standard’ for anti-money laundering and combating the financing of terrorism.” (quote from KCNA; Reuters report here.) Kim surely knows that international efforts to enforce financial sanctions against Pyongyang will determine their success.

All of this is great news if you believe that talks are an end in themselves, rather than a means to achieve concrete interests. But it’s also great news if you’re searching for a strategy that raises enough colon-clenching horror in the palaces and ministries of Pyongyang to modify the regime’s behavior.

There’s little question that Kim Jong Un’s sudden interest in diplomacy is fundamentally about frustrating U.S. interests, rather than disarmament or genuine reform. Pyongyang is bracing for financial warfare — trying to break up the formation of an international coalition against its finances, protecting key cash cows like Kaesong, and shoring up its financial lifelines to resist sanctions. But at least for now, despite all of the “expert” opinion that sanctions can do no more, we’ve heard, however indirectly, from the best authorities on that subject — the ones in Pyongyang.

White House considers sanctions, psyops, and cyber responses to N. Korea

Because I’ve begun to develop a certain sense of when interesting events are about to get much more interesting, yesterday morning, I decided to check the web site of KCNA, North Korea’s official “news” service. The site did not load, but it has always been slow to load. Then, news sites began to report that North Korea’s internet access had gone down, and that the White House wasn’t denying that it had a hand in this.

This morning, kcna.kp loaded with its usual masikryeong speed. Let’s all hope that our government has the will and the means to respond more potently than this. Kicking North Korea out of the Internet is like kicking Alabama out of the World Cup, and North Korea without internet is like North Dakota without surfing, Ireland without sunshine, or a Kardashian without a job. Meanwhile, the Japanese mirror site of KCNA kept right on squawking its threats to attack the White House:

Our target is all the citadels of the U.S. imperialists who earned the bitterest grudge of all Koreans. The army and people of the DPRK are fully ready to stand in confrontation with the U.S. in all war spaces including cyber warfare space to blow up those citadels.

Our toughest counteraction will be boldly taken against the White House, the Pentagon and the whole U.S. mainland, the cesspool of terrorism, by far surpassing the “symmetric counteraction” declared by Obama. This is the invariable toughest stand of the army and people of the DPRK.

Fighters for justice including “guardians of peace” who turned out in the sacred drive for cooperation in the fight against the U.S. to defend human justice and conscience and to dismember the U.S. imperialists, the root cause of all sorts of evils and kingpin of injustice, are sharpening bayonets not only in the U.S. mainland but in all other parts of the world. [KCNA.co.jp]

President Bush removed North Korea from the list of state sponsors of terrorism on October 11, 2008. The Obama Administration’s official view is that North Korea is “not known to have sponsored any terrorist acts since the bombing of a Korean Airlines flight in 1987.” Discuss among yourselves.

I can only guess, but if this was an attack, I’d guess that the U.S. government wasn’t behind it, and that independent hackers were. That’s also what I’m hoping, because if this is the worst that the world’s most powerful nation can do to a blighted hell-hole like North Korea, it would be wholly inadequate to deter any other despots who would censor and control our discourse through cyberwarfare and cyberterrorism. A nine-hour DDOS attack wouldn’t do much to deter Kim Jong Un, or contribute to solving the greater problem — the fact that he rules a country to begin with. That level of response, together with the President’s description of North Korea’s attacks as “cybervandalism,” would imply a junior-varsity insouciance about the gravity of this threat:

Sen. John McCain rejected Obama’s characterization of the North Korean hack as “an act of cybervandelism,” instead calling it “a new form of warfare” on CNN’s State of the Union.

“The President does not understand that this is a manifestation of a new form of warfare when you destroy economies, when you are able to impose censorship,” McCain, a Republican from Arizona, said. “It’s more than vandalism. It’s a new form of warfare that we’re involved in and we need to react and we need to react vigorously.” [CNN]

McCain, the incoming Chairman of the Armed Services Committee, promised to call hearings on the issue when the new Congress convenes.

Sen. Lindsey Graham of South Carolina called it “an act of terrorism” and favored reimposing sanctions and adding North Korea to the terrorism list. The United States needs to “make is so hard on the North Koreans that they don’t want to do this in the future,” Graham said. [Joongang Ilbo]

Fortunately, a report from The New York Times claims the White House is considering better alternatives, starting with asking the Pentagon’s Cyber Command for a list of options:

“What we are looking for is a blocking action, something that would cripple their efforts to carry out attacks,” one official said. [….]

For now, the White House appears to have declined to consider what one Defense Department official termed “a demonstration strike” in cyberspace, which could have included targets such as North Korean military facilities, computer network servers and communications networks.

United States officials said that American efforts to block North Korea’s access to the Internet, which is available only to the military and the elite, would necessarily impinge on Chinese sovereignty.  N.Y. Times]

Sort of like China and North Korea just impinged on ours, then.

Tom Kellermann, a former member of the presidential commission on cybersecurity, said one option was what security experts refer to as a “hack back,” in which they use the attackers’ own computer footprints and back doors to deploy an attack that destroys North Korea’s attack infrastructure, or compromises the integrity of the machines that did the hacking. For example, the United States could deploy a malicious payload that encrypts the data on North Korea’s machines, or renders them unable to reboot — clearly “proportional,” in the president’s words, because that was what happened to Sony’s computers.

The White House is also considering financial sanctions, “mirroring those recently placed on Russian oligarchs and officials close to President Vladimir V. Putin,” to “cut off their access to cash … that allows the elite surrounding Kim Jong-un, the North Korean leader, to live lifestyles their starving countrymen can barely imagine.” The Times even invokes the example of Banco Delta Asia, calling it “the one sanction in the past decade that caused the most pain to the North Korean leadership.”

They’re starting to sound like Ed Royce, who is starting to sound like a man ahead of his time.

Finally, they’re considering an offensive of information operations — or if you prefer, psyops, “in which the United States plays on North Korea’s worst fears by using its access to the North Korean domestic computer and radio systems to deploy propaganda inside North Korea’s closed media bubble.”

A combination of those three options could be a serious response, although I’ll reserve judgment until I see the administration actually enforce it.

~   ~   ~

Update: Reuters suggest some other alternatives:

U.S. cyber teams could also go after the hackers aligned with Pyongyang and make their lives miserable. It’s an effective tactic. Bullies are notoriously susceptible to bullying.

Since the FBI has declared that the attack came from North Korea, there’s a good chance the bureau’s experts know which computers and even which hackers it came from. Hackers generally have robust online lives. They use social networks, maintain a presence in online forums and chatrooms and transfer money using Bitcoin or other cryptocurrencies. Washington could make their lives uncomfortably complicated.

It could break into the hackers’ email accounts and publish them – just as the hackers did to Sony Pictures executives. It could ban their Internet protocol addresses or infect their computers with destructive viruses and malware that could store every keystroke the hackers type. Every password, email, website visited would be recorded and stored in a U.S. database. It might only sideline the hackers, by making them spend time and energy fixing the problem or even force them to buy entirely new hardware — a hacker’s worst case scenario.

U.S. cyber teams could also pose online as commentators and ruin the hackers’ reputations among any communities they belong to. For example, they could upload faulty software to the black markets as the Guardians of Peace.

In the long run, those tactics might damage the North Korean hackers’ capabilities, but wouldn’t do much to deter North Korea or other copycat cyberterrorists.

~   ~   ~

This post was edited after publication.

~   ~   ~

Update 2: These hackers claim responsibility for taking down North Korea’s internet. HT: Steve Herman.

What re-listing N. Korea as a state sponsor of terrorism would mean

The New York Times is reporting that President Obama is considering re-listing North Korea as a state sponsor of terrorism:

As the United States moves closer to taking Cuba off the list of state sponsors of terrorism, President Obama said he would “review” whether to return North Korea to the list, part of a broader government response to a damaging cyberattack on Sony’s Hollywood studio.

“We have got very clear criteria as to what it means for a state to sponsor terrorism, and we don’t make those judgments just based on the news of the day,” Mr. Obama told CNN in an interview broadcast Sunday. “We look systematically at what’s been done.” [N.Y. Times]

In fact, the standard isn’t clear, and neither is the Foreign Assistance Act’s definition of terrorism, but it wasn’t until I reviewed a post I wrote several years ago that I realized the full significance of a re-listing. I was reminded that Section 2332d of the Criminal Code prohibits financial transactions by U.S. persons with the governments of states designated as sponsors of terrorism, except in accordance with Treasury Department regulations published at 31 C.F.R. Part 596, which require that those transactions be licensed. Because almost everything in North Korea is controlled by the government, this would effectively force most U.S. corporations and their subsidiaries to divest from North Korea, closing one important loophole in our current sanctions. Compare Part 596 to our leaky existing sanctions at Part 510, and you can see the difference clearly.

(What Part 596 would not do, of course, is hit North Korea’s third-party enablers, or its very access to the financial system, as the North Korea Sanctions Enforcement Act would.)

Companies such as the Associated Press and DHL that do business in North Korea would have to scramble to obtain licenses or withdraw. Any U.S. subsidiaries operating in the Kaesong Industrial Park would also be affected. Although Treasury could grant licenses to those choosing to deal with this regime, a re-listing would nonetheless send a powerful signal to lenders and investors everywhere that providing Kim Jong Un with regime-sustaining cash is politically and financially risky.

A re-listing would also require U.S. diplomats to oppose foreign assistance grants and loans by international financial institutions, such as the World Bank, the International Monetary Fund, and the Export-Import Bank. A state sponsor of terrorism also loses its sovereign immunity from civil lawsuits for personal injury caused by the acts of terror it sponsors. North Korea recently lost several such suits in U.S. federal district courts, relating to actions that took place prior to North Korea’s 2008 de-listing. The plaintiffs are now trying to collect nearly $500 million. As recently as July of this year, U.S. District Judge Royce Lamberth found North Korea liable for sponsoring rocket attacks by Hezbollah.

Other effects would be less significant, such as restricting the availability of non-immigrant visas to North Koreans. Theoretically, restrictions on the export of munitions and sensitive technology to North Korea would be further restricted, although the Commerce and Treasury Departments presumably aren’t granting licenses for those exports now.

The re-listing of North Korea is long overdue. President Bush’s decision to take North Korea off the list in October 2008 was an inducement for a disarmament deal on which North Korea had already begun to renege. It was a decision President Obama (while still a candidate) promised to reverse if North Korea didn’t keep its word, but it was President Obama who didn’t keep his when North Korea conducted two additional nuclear tests. North Korea’s de-listing did not follow any North Korean acknowledgement of its past support for terrorism. It actually marked the beginning of a period in which North Korea increased its terrorist threats against the U.S. and South Korea, its assassinations of (and assassination attempts against) exiles and human rights activists, and its shipment of weapons to Hamas and Hezbollah.

A re-listing, if President Obama actually goes through with it, would effectively foreclose the possibility of another nuclear deal with North Korea during the remainder of President Obama’s term, particularly if Kim Jong Un’s reaction is as impulsive as I suspect it would be. It would belatedly challenge Pyongyang’s sense of impunity.

We are all North Koreans now

As far as I know, I didn’t liberate a single North Korean during my four-year tour with the Army in South Korea, although I’ve argued their distant and forgotten cause ever since I came home. The crimes of Kim Jong Un were still distant just five weeks ago, when Professor Lee and I, writing in The New York Times, sounded a lonely warning about Kim’s efforts to censor his critics in the South with terror and violence, writing that “[c]aving into blackmailers merely begets more blackmail.” To some, that probably seemed absolutist, even hyperbolic. It should seem more prophetic now.

One morning this week, I awoke to the realization that the rights I’m arguing for are my own—in my own home, and in my own neighborhood. Here, in America. In the suburbs of Washington, D.C.  Today, in a very small way, we are all North Koreans. Most of us have spent the last several decades ignoring the men who oppress North Koreans. Now, in a small but incalculably important way, the same men have oppressed us. Here is the FBI’s statement about the Sony hack, and the terrorist threats that followed it:

As a result of our investigation, and in close collaboration with other U.S. government departments and agencies, the FBI now has enough information to conclude that the North Korean government is responsible for these actions. While the need to protect sensitive sources and methods precludes us from sharing all of this information, our conclusion is based, in part, on the following:

- Technical analysis of the data deletion malware used in this attack revealed links to other malware that the FBI knows North Korean actors previously developed. For example, there were similarities in specific lines of code, encryption algorithms, data deletion methods, and compromised networks.

- The FBI also observed significant overlap between the infrastructure used in this attack and other malicious cyber activity the U.S. government has previously linked directly to North Korea. For example, the FBI discovered that several Internet protocol (IP) addresses associated with known North Korean infrastructure communicated with IP addresses that were hardcoded into the data deletion malware used in this attack.

- Separately, the tools used in the SPE attack have similarities to a cyber attack in March of last year against South Korean banks and media outlets, which was carried out by North Korea.

We are deeply concerned about the destructive nature of this attack on a private sector entity and the ordinary citizens who worked there. Further, North Korea’s attack on SPE reaffirms that cyber threats pose one of the gravest national security dangers to the United States. Though the FBI has seen a wide variety and increasing number of cyber intrusions, the destructive nature of this attack, coupled with its coercive nature, sets it apart. North Korea’s actions were intended to inflict significant harm on a U.S. business and suppress the right of American citizens to express themselves. Such acts of intimidation fall outside the bounds of acceptable state behavior. The FBI takes seriously any attempt—whether through cyber-enabled means, threats of violence, or otherwise—to undermine the economic and social prosperity of our citizens. [FBI Press Release]

The feds sound very confident about their conclusions:

Intelligence officials “know very specifically who the attackers are,” said one individual familiar with the investigation, who like others spoke on condition of anonymity because the case is ongoing. [Washington Post]

As with the Cheonan incident, it’s almost as if North Korea wants everyone to know it did it, while leaving just enough doubt to let its apologists do their work. That strategy worked well for them in South Korea, which never responded to the two deadly attacks on its territory in 2010. Why should Kim Jong Un believe that attacking us would lead to different results? That’s one reason why I’m so glad the President said something about the importance of protecting free speech:

“We cannot have a society in which some dictator someplace can start imposing censorship here in the United States,” Obama said. “Because if somebody is able to intimidate folks out of releasing a satirical movie, imagine what they start doing when they see a documentary that they don’t like or news reports that they don’t like.

Obama said he wished Sony had “spoken to me first,” adding: “I would have told them, ‘Do not get into a pattern where you get intimidated by these criminal attacks.’ ” [Washington Post]

Well, depending on who you believe, maybe they did. Still, that’s a welcome change, coming from the President who asked YouTube to take down “The Innocence of Muslims,” and whose Justice Department hustled Nakoula Nakoula off to jail to appease the whooping loonies who dominate the Middle East’s political culture today. But not to worry—the CEO of Sony Pictures says he’s “considering some sort of release on the Internet.”

I’ve never been much of a George Clooney fan, but he’s one of the few people in Hollywood with the spine to stand against North Korea’s terrorism:

“We’re talking about an actual country deciding what content we’re going to have,” he told Deadline. “This affects not just movies, this affects every part of business that we have.”

“What happens if a newsroom decides to go with a story, and a country or an individual or corporation decides they don’t like it? Forget the hacking part of it. You have someone threaten to blow up buildings, and all of a sudden everybody has to bow down. [CNN]

Our attention now turns toward what President Obama will do. Let’s hope it exceeds my low expectations, and Pyongyang’s:

Even in my myopic world view, these attacks raise far weightier questions than what our North Korea policy should be. The President’s response must be enough to restore U.S. deterrence of North Korea, and the confidence of our artists, media, journalists, and lowly bloggers that our government will protect them from the world’s petty despots:

“We will respond proportionally,” Obama said, “and we will respond at a place and time that we choose.”

U.S. officials have made clear for several years that they have a range of diplomatic, economic, legal and military options at their disposal in response to cyberattacks. Those steps might include indicting individuals believed to be behind the attack, asking like-minded states to join in condemning the intrusion, and if North Korea persists, undertaking a covert action to dismantle the computer systems used in the operation. [Washington Post]

I’ve already written here about what that response should include. One of those possible responses seems almost inevitable, now that Senator Bob Menendez has asked Secretary of State John Kerry to put North Korea back on the list of state sponsors of terrorism. It’s difficult to see how he could avoid doing that, given the destructive power of the attack, its chilling effect on free speech, and the extensive evidence that North Korea was already sponsoring terrorism even before this incident.

“The United States condemns North Korea for the cyber-attack targeting Sony Pictures Entertainment and the unacceptable threats against movie theaters and moviegoers,” he said in written statement.

“We encourage our allies and partners to stand with us as we defend the values of all of our people in the face of state-sponsored intimidation,” Kerry added.

Separately, State Department spokeswoman Jen Psaki said U.S. and Chinese officials had met in Washington and Beijing to discuss the issue, adding that: “Both China and the United States agree that conducting destructive attacks in cyberspace is outside the norms of appropriate cyber behavior.” [Yonhap]

As is customary among journalists, The New York Times and Reuters printed the standard-issue, off-the-record-senior-State-Department-official talking point that North Korea sanctions are maxed out, without bothering to read the sanctions. This talking point sometimes comes without any citation of authority whatsoever, and sometimes cites “experts” who appear not to have ever read a sanctions regulation. When I pointed out to these Bloomberg reporters that they’d cited a cybersecurity expert‘s analysis of a legal question–and that the analysis was wrong–I received a polite and interested reply, suggesting that the reporters genuinely intend to research the question. In the case of Reuters, in particular, the propagation of this false narrative is disappointing, because most of the Reuters reporters I follow check their facts painstakingly before publishing them.

The Wall Street Journal’s Jonathan Cheng and Jeyup Kwaak did a better job:

On the financial front, the U.S. has wide latitude to target the North’s financial capabilities and its links to the global banking system, says Joshua Stanton, a Washington, D.C. lawyer and blogger who has advised the U.S. House of Representatives’ Foreign Affairs Committee on North Korea sanctions legislation.

Mr. Stanton says the U.S. can designate the North’s banking system as a money-laundering concern, add the country back to a list of state sponsors of terrorism, and move toward blocking U.S. tourism to the North.

“Our North Korea sanctions are weaker than our Zimbabwe sanctions,” Mr. Stanton said in an interview. “All of the top officials in the government of Zimbabwe have their assets blocked, and none of the top officials in the government of North Korea do.” [….]

“The single biggest thing that we can do is to designate the country as a primary money-laundering concern,” Mr. Stanton says, which he says would block the regime from conducting dollar-denominated transactions through the U.S. financial system, as its institutions can now do.

“That would have a very big impact on North Korea—banks around the world are very reputation-conscious,” he says, and would shy away from conducting any transactions with institutions tied to Pyongyang.

Some defectors from North Korea say Pyongyang has learned from the Banco Delta Asia sanctions, and now keeps much of its money outside the traditional banking system, which could limit the impact of such a move.

Mr. Stanton also notes that U.S. sanctions list just 63 North Korean ships, companies and individuals, far fewer than those for Myanmar or Cuba. He also says that U.S. Congress could start moving legislation that would impose similar restrictions blocking U.S. citizens from traveling to North Korea and spending money. [Wall Street Journal, Jonathan Cheng and Jeyup S. Kwaak]

Bruce Klingner of the Heritage foundation was also battling against this myth:

Oh, and for the record:

A North Korean U.N. diplomat said Pyongyang had nothing to do with the cyber attack. “DPRK (North Korea) is not part of this,” the diplomat told Reuters on condition of anonymity. [Reuters]

I think I speak for all of humanity when I sincerely hope this isn’t all Barack Obama’s pretext to advance Joe Biden’s cryptic plot to dominate North Korea’s vast riches of coal, meth, and refugees.

One thing that seems far more likely today is that the House and Senate will make North Korea sanctions legislation a higher priority. Even before the FBI fingered North Korea for this attack, and before President Obama announced his outreach to Cuba, Senator Menendez introduced a sotto voce version of the North Korea Sanctions Enforcement Act, S. 3012. That bill is too weak to be worth passing in its current form, but it’s structurally similar enough to what the House passed last year that it should be viewed as a serious opening bid and a welcome step toward a good compromise.

A friend on the Hill told me yesterday that in terms of seizing Congress’s attention, the events of this week are the equivalent of “two or three nuke tests.” A Chinese Security Council veto of U.N. human rights sanctions–sanctions that were just recommended by the full General Assembly–should be the equivalent of another. At an exceptionally formative moment, Congress’s attention has been focused on North Korea. The administration is distinguishing North Korea from Cuba, is almost certainly considering new sanctions, and has probably just scrapped its plans for Agreed Framework 3.0. If a bipartisan, centrist consensus concludes that the agony of North Koreans is no longer a problem we can treat as remote and irrelevant, and that it’s time to discard the failed solution of appeasement, we will have reached an inflection point in our North Korea policy.

One avenue of response I hope the President won’t overlook is that information warfare works both ways. Certainly, carefully targeted sanctions can play an important part in defunding and disrupting the regime’s capacity to censor and oppress its people. Symbolically and practically, however, no response–not even sanctions–would do more to alter North Korea than to wage a quiet, non-violent war against its information blockade. It is difficult to imagine that despite all of America’s innovative potential, it still lacks the means to bring free speech to the people of North Korea, and to help them find their own way to rid themselves of the accursed men who tread them–and us–down.

Of course, a better North Korea policy means more than sanctions

Professor Haggard is skeptical that a “sanctions only approach” toward North Korea could work, which compels me to expand on why I agree, and on what a better approach would look like.

It should go without saying that no act of Congress can ever be more than part of a complete foreign policy, something that, by constitutional design, only the executive branch can wield. Certainly the imposition and enforcement of tough sanctions are at the heart of the North Korea Sanctions Enforcement Act, H.R. 1771, because tough sanctions enforcement is a necessary (and presently, a missing) element of a better policy, and because sanctions are also an area where Congress can express its will. H.R. 1771 sets strict conditions for relaxing sanctions to avoid repeating President Bush’s errors of 2007, but those conditions (see sections 401 and 402) clearly contemplate using sanctions as leverage for better, more effective diplomacy and engagement — assuming that’s still possible.

In an acknowledgement that a better policy has more dimensions than sanctions alone, H.R. 1771 also calls for more efforts to fund the free flow of information into North Korea (section 301), and the publication of reports on North Korea’s crimes against humanity (section 302). These, too, are areas where our government has lagged. There is much speculative debate about whether engagement with the regime is realistic at all; certainly, there is little evidence that it has transformed this regime materially, or that its effects are remotely comparable to the transformational effects of markets and smuggling. Nevertheless, H.R. 1771 tests the regime’s trustworthiness and readiness for good-faith negotiations by demanding the cessation of its counterfeiting and the release of its abductees, by demanding the free and fair delivery of food aid, and by demanding material improvements in the conditions in its prison camps.

The regime’s stonewalling on all of these outrages — despite decades of engagement and appeasement — illustrates the flaw of strategies based on obedient supplications and obsequious tribute. Outsiders have focused most of their efforts to “engage” North Korea on an oligarchy whose physical survival depends on the enforcement of the status quo, while overlooking the common people who sincerely seek change that might give them a chance at lives worth living. Wouldn’t a smarter engagement strategy emphasize them instead?

In addition to sanctioning, defunding, and degrading the security forces that are closing North Korea’s borders and suppressing change, a smarter engagement strategy would increase our support for things that really might change North Korea in very real and tangible ways — broadcasting, an independent cellular network, the smuggling of food and information, remittances, quasi-legal private agriculture, clandestine cross-border banking, and whatever else would catalyze the growth of markets that provide food, goods, and information to those who are hungriest for them. Eventually, engaging the North Korean people would create the conditions for the rise of independent trade networks, unions, churches, and political organizations. Certainly, this will require more creativity than the conventional approaches that have failed so consistently. By now, you realize that this isn’t an argument against engagement. It’s an argument that we’ve been engaging the wrong people.

At the same time, every member of the Security Council has agreed, in principle, that sanctions against the regime are a necessary element of a policy designed to alter its behavior (or failing that, its very nature). That does not mean that a better North Korea policy can be based on sanctions alone. An orchestra can no more play a symphony with brass alone than it can play one without it. A better policy will require our government to devote more intelligence, investigative, law enforcement, and (yes) diplomatic resources to this problem. As with engagement, there is no argument against diplomacy to be found here, only an argument that our diplomacy is out of sequence. The initial focus of our diplomacy should be on building unity and cohesion among allies in enforcing sanctions consistently, and as the U.N. has agreed (see section 202). Unanimity among allies can strengthen our capacity to force China and Russia to enforce those sanctions, too. Only then, when sanctions enforcement is broad and consistent, can diplomacy with North Korea have any hope of success. That means that North Korea’s should be the last government we approach, not the first. Diplomacy with a target like North Korea, in particular, requires enough leverage to persuade it to give up things it would rather keep.

As for whether a deal with North Korea is still possible, I personally espouse what I’ll call strategic ambivalence. Either sanctions — in concert with these other elements of a smarter policy — can coerce policy changes in Pyongyang, or they can hasten the destabilization of the regime. The choice lies with Kim Jong Un (and to a lesser extent, with Xi Jinping and Putin) as to which direction the policy will have to follow. As long as the countries that have agreed to sanction Pyongyang subsidize it instead, and until Pyongyang fears that collapse is a real and imminent danger, Pyongyang will be able to choose the status quo, and therefore, it will.

Robert Potter’s “third way” is a good way, but it’s really a second way

Writing at The Diplomat, Potter takes on the futile task to navigating between pro-engagement extremists like Mike Bassett, Felix Abt, and someone named Joe Terwillager, on one hand, and anti-engagement extremists like me, on the other. Potter proposes this third way:

Sanctions of the right kind can ensure that the Kim dynasty never becomes wealthy enough to close the markets down, but removing them entirely could empower the Kims and make the regime less likely to tolerate change. As for engagement, pointing it towards the people of North Korea and working to empower their underground economy could allow those market forces to develop further. This combination of sanctions and support for the developing markets is perhaps the only truly different policy option that has not yet been tested, and it is one that could mobilize the two existing highly divided constituencies. [Robert Potter, The Diplomat]

I enjoyed Mr. Potter’s piece so much that I hardly have the heart to point out that I’ve advocated the same ideas for years. As I must occasionally point out, however, I’m not opposed to engagement, I just think we’ve been engaging the wrong people.

Nor have I ever believed that sanctions alone could transform North Korea. They can only do that as part of a broader strategy, along with subversive information operations and competent diplomacy that seeks international consensus toward forcing real change. Sanctions can target the regime’s military, elites, security forces, and border control. If sustained, they would shift the balance of economic power toward the common people, and toward a nascent middle class that the regime has done its best to tread down.

Must see: An opinion about N. Korea sanctions from an actual sanctions expert (really!)

William Newcomb, formerly of the U.S. Treasury Department and the U.N. Panel of experts (UNPOE), was at The Korea Society last Friday to talk with Stephen Noerper about North Korea sanctions, what they are, and how to make them a useful policy tool again.

Newcomb didn’t have time to explain all of the authorities and their provisions in detail, but he did make some important points.

First, Newcomb blames “politics” for the fact that the UNPOE hasn’t designated a number of “bad actors” that are violating the sanctions, and for the slowness of the UNPOE in obtaining the designation of Ocean Maritime Management. That delay was critical, because financial sanctions need to strand money to work, and after the 2013 seizure of the Chong Chon Gang in Panama, the North Koreans had plenty of scurry time after the light switch flicked on. It isn’t hard to see that Newcomb means China, although I can’t imagine Russia has played a constructive role.

Second, there are more bad actors that we could designate, but haven’t. Newcomb references the relatively small number of North Korean entities on the list of Specially Designated Nationals, something I’ve kvetched about for years now.

Third, Newcomb doesn’t think we have the equivalent of a Banco Delta Asia anymore—that is, a single point of failure that we can attack to cause instant disruption to Pyongyang’s palace economy. That’s not a shock to me, either, although I wonder if we’re even gathering the financial intelligence to know that for certain. After all, most North Korea transactions still don’t even require a license under 31 C.F.R. Part 510.

Certainly, some alternative points of failure come to my mind, but people in Pyongyang, Dar-as-Salaam, Nairobi, Kampala, Phnom Penh, and Ulan Bator read this site, so I’ll keep those thoughts to myself for now. Even so, the hard reality may well be that the North Koreans have squirreled away most of the low-hanging fruit. A financial constriction strategy will take longer to work today than it did in 2007 2005, but if implemented aggressively, it still shouldn’t take as long as it took us to bankrupt Osama bin Laden.

FATF and FINCEN again call for “countermeasures” against N. Korean money laundering

If you will permit me to extend a metaphor for North Korea’s stature in the world of global finance, Pyongyang may have been invited to one Boy Scout jamboree, but it’s still on the sex offender registry. If anything, it has reached a co-equal status with Iran:

Since June 2014, the DPRK has further engaged directly with the FATF and APG to discuss its AML/CFT deficiencies. The FATF urges the DPRK to continue its cooperation with the FATF and to provide a high-level political commitment to the action plan developed with the FATF.

The FATF remains concerned by the DPRK’s failure to address the significant deficiencies in its anti-money laundering and combating the financing of terrorism (AML/CFT) regime and the serious threat this poses to the integrity of the international financial system. The FATF urges the DPRK to immediately and meaningfully address its AML/CFT deficiencies.

The FATF reaffirms its 25 February 2011 call on its members and urges all jurisdictions to advise their financial institutions to give special attention to business relationships and transactions with the DPRK, including DPRK companies and financial institutions. In addition to enhanced scrutiny, the FATF further calls on its members and urges all jurisdictions to apply effective counter-measures to protect their financial sectors from money laundering and financing of terrorism (ML/FT) risks emanating from the DPRK. Jurisdictions should also protect against correspondent relationships being used to bypass or evade counter-measures and risk mitigation practices, and take into account ML/FT risks when considering requests by DPRK financial institutions to open branches and subsidiaries in their jurisdiction. [FATF Public Statement, Oct. 24, 2014]

Treasury’s Financial Crimes Enforcement Center followed that statement with its own advisory today.

Uganda is violating U.N. sanctions against North Korea

When North Korea sends its diplomats to Africa, presumably to ask for their votes against a General Assembly resolution that would refer Kim Jong Un to the ICC, I hope it sends at least some of the same diplomats who called Botswana’s U.N. Ambassador a “black bastard,” if only to show the hypocrisy of the African leaders who received them:

President Yoweri Museveni of Uganda gave a state banquet late Thursday in honor of North Korea’s ceremonial head of state, praising Pyongyang for what he said was its prominent role in fighting imperialism.

Kim Yong Nam, the president of the country’s parliament, is in Uganda as part of a rare tour of Africa, where North Korea has actively tried to cultivate potential allies like the long-serving, increasingly anti-West Museveni.

The North Koreans are training Ugandan police in martial arts and Museveni hailed North Korea for helping to mechanize Uganda’s military over the years. North Korea is also training Ugandan military pilots, he said.

Kim visited Sudan and the Republic of Congo before arriving in Uganda for “an official goodwill visit,” according to the Korean Central News Agency. [AP]

Any training in the use of “arms and related materiel” would violate UNSCR 1874:

“9.   Decides that the measures in paragraph 8(b) of resolution 1718 (2006) shall also apply to all arms and related materiel, as well as to financial transactions, technical training, advice, services or assistance related to the provision, manufacture, maintenance or use of such arms or materiel;

“10.  Decides that the measures in paragraph 8(a) of resolution 1718 (2006) shall also apply to all arms and related materiel, as well as to financial transactions, technical training, advice, services or assistance related to the provision, manufacture, maintenance or use of such arms, except for small arms and light weapons and their related materiel, and calls upon States to exercise vigilance over the direct or indirect supply, sale or transfer to the DPRK of small arms or light weapons, and further decides that States shall notify the Committee at least five days prior to selling, supplying or transferring small arms or light weapons to the DPRK;

Here’s a link to UNSCR 1718, in case you want to pursue that, too. The North Korean military relationship with Uganda goes back to at least 2010, when North Korean instructors first began to train Ugandan police officers in tae kwon do. Having drawn no reaction from the State Department for that, the Ugandans apparently decided that it was safe to expand the relationship to clear violations of the resolutions.

U.S. relations with Uganda have been under strain recently, because of the latter’s extreme anti-gay legislation. I’d say cut their aid and cancel a military exercise, but we just cut their aid and canceled a military exercise. Still, the U.S. recently “ordered a sharp increase” in the deployment of U.S. Special Operations forces to Uganda to hunt down warlord Joseph Kony.

Off-hand, I can think of several places where those forces are needed more badly to defeat a more direct threat to U.S. interests. Indeed, North Korea’s proliferation and its violation of U.N. sanctions are a greater threat to our national interests than the doings of a local warlord in Central Africa, and the humanitarian crisis in North Korea is far greater than the one in Uganda. Perhaps it’s time to force Uganda to choose between having a military relationship with North Korea, and a military relationship with the United States.

How to write like an expert on sanctions: Step 1, read the sanctions.

I don’t doubt that Stanford scholar Yong Suk Lee’s minor premise—that Pyongyang shifts economic pain to the proles and peasants—is correct. To extend this into a convincing policy argument, however, that Pyongyang would only shift the pain of sanctions to the North Korean people, requires a more convincing case for his major premise–that the deprivation of the North Korean people is a function of sanctions, rather than state policies that willfully impose that deprivation. It’s a case that Lee fails to make, in part because he fails to demonstrate a basic understanding of the subject matter through the citation, analysis, and explanation of the sanctions themselves. You don’t have to be a lawyer to do this. Treasury’s summary of U.S. sanctions on North Korea is simple, readable, and publicly available.

Yet nowhere does Lee cite 31 C.F.R. Part 510, the North Korea sanctions regulations, or tell us what they do and don’t do. Nowhere does he discuss the main executive orders that apply—13382 (proliferation sanctions), 13466 (a place-holder for sanctions that weren’t lifted in 2008), 13551 (belatedly implementing UNSCR 1718), and 13570 (banning imports from North Korea, of which there were virtually none anyway). Nowhere does he count or track the North Korean entities on the SDN list–and it’s not that hard to count to 63–or compare their significance or number to those of other sanctions targets (hundreds each in the case of Iran, Cuba, and the Balkans).

Of course, there are also sanctions authorities promulgated by the U.N., the EU, and Japan. In the case of China, there is the notable lack thereof. That matters very much, because China is North Korea’s largest natural and historic trading partner, and China isn’t enforcing U.N. sanctions, including in luxury goods and missile carriers lumber trucks. If Pyongyang can sell and buy pretty much anything it wants, but for some reason still isn’t feeding and providing for anyone beyond the limits of Pyongyang, that would tend to kick the major premise out from under Lee’s syllogism.

Lee’s failure to understand his subject matter means he misses the yawning gaps in current U.S. and U.N. sanctions, and the negligible effect they’ve consequently had, except between September 2005 and February 2007. Instead of a detailed legal and historical analysis of the sanctions, Lee instead offers an incomplete selection of high-profile events that either sanction or aid the regime, and ends up blending and baking this into one simple integer to describe the strength of “sanctions,” without regard to their very different authorities, targeting, and impact. The result, in Table 1 at page 28, looks more like the product of a 20-minute Google search than the result of a careful, year-on-year observation sanctions as they’ve been imposed, relaxed, or simply not enforced. In doing so, Lee subtracts food aid from sanctions targeted at proliferation—which is an apples-to-artichokes comparison.

This methodology causes Lee to make significant errors. For example, he notes North Korea’s placement on the list of state sponsors of terrorism, but fails to register President Bush’s removal of North Korea from the list in 2008–discuss among yourselves–or the lifting of Trading With the Enemy Act sanctions. He speaks of “a unanimous UN Security Council Resolution that restricted North Korean activities in all dimensions,” which would certainly make Kim Jong Un giggle as he schusses down the slopes of his new ski resort. Judging from Table 1 of Lee’s paper, this is a rather wild exaggeration of UNSCR 1874 (Lee fails to mention the more significant UNSCR 1718 and 2094). Lee’s table also refers to U.S. restrictions on financial transactions, but with the exception of transactions specifically tied to proliferation, where are those? (Hint: read 31 C.F.R. 510.201; they aren’t there.)

Lee even bumps his integer upward in 2007, just as the Bush Administration was busy weakening North Korea sanctions. An annotation in Table 1 says of the U.S., “impose license requirements for export to DPRK and travel further regulated.” Lee misapprehends that any changes to export license requirements that year were actually the replacement of stronger regulations with weaker ones. As for travel sanctions, there are no travel sanctions against North Korea. If you don’t believe the U.S. Treasury Department, just ask Kenneth Bae.

At pages 24 through 27, Lee then even attempts to tie his sanctions index to the amount of light visible in North Korea in satellite photos at night in graphic form, producing a chart that assumes that sanctions became tougher throughout the entire duration of George W. Bush’s presidency—again, when they were substantially weakened!—as well as that of President Obama.

A more accurate sanctions chart would have shown sanctions largely outweighed by aid from 1994 to 2001 (and most likely a negative value), then rising and peaking in late 2006, falling precipitously through 2009, and then showing some small peaks in 2010, 2011, and 2014. I didn’t bother to make that chart myself, because it would have been a data loaf that combines very different kinds of sanctions and tells us nothing. Furthermore, all of these increases and increases would be relative, thus overlooking their small significance in absolute terms (again, with the exception of the 2005 to 2007 years). One could just as well take note of the serious and determined relative mass movement of every passenger and deck chair during the Titanic‘s last hour. The absolute effect would still be negligible.

It is certainly true that the wrong kind of sanctions, or carelessly targeted sanctions, could have adverse effects on the North Korean people–which is why Section 207 of this sanctions law is riddled with exemptions and flexibilities to avoid those consequences. The obvious off-limits targets include food, medicine, and inexpensive clothing, but sanctions on fuel, for example, could have adverse secondary effects on agricultural production (tanks and tractors both burn diesel). On the other hand, it’s difficult to conceive of how blocking the funds involved in purchasing a ski lift, a centrifuge, or a Pullman limousine will turn off the lights or cause mass starvation in Chongjin (although it’s easy to see how Europe’s laissez-faire trade policies toward Pyongyang might contribute to it). By grouping dissimilar sanctions with dissimilar impacts and policy implications, Lee ends up with a product that is useless for policymakers.

Given the lack of empirically verifiable data about North Korea, Lee is to be commended for his creative pursuit of information and relationships, but the linkage in the relationship he seeks to prove is a weak one. Most of North Korea’s electricity is from domestically produced coal and hydroelectric power, and its electricity shortages are more a function of rationing and governmental incompetence–its inability to maintain a functioning power grid despite its ability to access just about any product whose procurement it really prioritizes. Even if Lee had understood the sanctions well enough to empiricize them, any correlation he might have shown between sanctions and luminosity could just as well have been a case of coincidence as causation.