Robert Einhorn, President Obama’s special adviser for non-proliferation and arms control, is visiting Seoul and Tokyo this week. He is accompanied by Daniel Glaser, who works with Treasury’s Undersecretary for Terrorism and Financial Intelligence, and who was a key architect of the Banco Delta Asia sanctions in 2005 and 2006. At the risk of making a comparison that Glaser might not necessarily welcome, his presence in Seoul has far more deterrent value than parking an aircraft carrier off the coast of Nampo.
[Robert Einhorn and his South Korean counterparts. Photo: Korea Herald]
Einhorn and other U.S. officials have given more hints about what financial measures the government is like to take, and what they’re doing to secure international cooperation with them. What’s less clear is whether financial measures are a means to get North Korea to talk, to disarm, or to overthrow a regime determined to do neither. The answer probably depends on how North Korea responds to the pressure over the next year. I’ll predict now that once it begins to have an effect, North Korea will coo seductively about disarmament talks … if only we’d just lift the sanctions. That’s when the administration will be tested again.
Even so, a solid Plan B appears to be taking shape, just as I was about to give up on the Obama Administration. Even if the new policy reflects nothing more than new strength and gravitas about the relationship between pressure and diplomacy, this would be progress.
HOW WILL THE SANCTIONS WORK?
The precise form the measure will take still isn’t clear, but ought to be clearer later this week as Treasury and State add further detail to their plans. We do have some idea of the targeting and methods, however. Treasury will target “North Korea’s illicit transactions and activities regarding luxury goods and arms trade,” will allow for the public designation of “entities and individuals involved in” those activities, to include dollar counterfeiting, and will provide for the blocking of those entities’ assets and property. At least one report advises us to expect a new executive order to this effect:
Under the measure, the U.S. government will reportedly pinpoint North Korean businesses, authorities and individuals associated with illicit transaction or activities and then require U.S. financial institutions to take measures to block their activities and freeze their assets in the United States. [Korea Times]
“By publicly naming these entities, these measures can have the broader effect of isolating them from the international financial and commercial system,” he said. Einhorn was accompanied by Daniel Glaser, a senior Treasury official overseeing efforts to combat terrorist financing and financial crimes. [AFP]
It bears repeating that these criminal enterprises enrich the North Korean elite, but do nothing to feed the hungry:
“These measures are not directed at the North Korean people, but our objective is to put an end to [North Korea's] destabilizing proliferation activities, to halt illicit activities that help fund its nuclear missile programs and to discourage further provocative actions,” Einhorn told reporters, according to a copy of his prepared remarks. [....]
Einhorn said the aim of the sanctions is to go after North Korean sources of “hundreds of millions of dollars” in hard currency, including counterfeiting U.S. currency, narcotics smuggling and other illegal activities. U.S. officials have said that the illicit sale of cigarettes, liquor and exotic food helps provide funding for North Korea’s burgeoning nuclear program. [CNN]
GAINING INTERNATIONAL COOPERATION
I think it’s pretty obvious to everyone whose cooperation has been the most conspicuously lacking, and the statements from the Administration about China and North Korea this week are really something to behold. They’re more strident than anything I can recall seeing from any senior U.S. officials, quite possibly to include John Bolton, in the last two decades. They suggest a real readiness to impose real consequences on China’s economic and security interests.
Einhorn appealed to China, the North’s sole major ally and economic lifeline, to back the sanctions on both countries and not to take advantage of restraint by other countries.
“We want China to be a responsible stakeholder in the international system,” he said. “That means co-operating with the UN Security Council resolutions and it means not backfilling or not taking advantage of responsible self-restraint of other countries.” [AFP]
That’s a strikingly honest acknowledgment of what the economists have been telling us about China undermining UNSCR 1718, and would be a strong statement even if it had been off the record. It gets better:
“China is suffering the indignity of exercises close to its shores, and though they are not directed at China, the exercises are a direct result of China’s support for North Korea and unwillingness to denounce their aggression,” Deputy Secretary of State James Steinberg told a forum at the Nixon Center Tuesday, according to the center’s Web site. [....]
“China is also reflecting on the consequences of all parties’ inability to deter North Korean provocations,” Steinberg said. [....]
“The U.S. should exercise patience and send a message to Pyongyang that their old tactics will no longer work,” he said. “The administration’s strategy and policy should not be altered.” [Yonhap]
Steinberg’s tone, which appeals to Chinese government’s obsession with place and stature, is calculated to put its government under domestic pressure and show the Chinese people that its irresponsible shielding of North Korea has backfired.
State is also putting pressure on Burma to stop buying North Korean weapons.
The chocolate-making countries, which may hold up to $4 billion in North Korea’s infant formula fund personal assets of Kim Jong Il and/or Kim Jong-Eun, are promising to cooperate as well. That includes Switzerland, better known as the country that failed to see anything amiss about selling the North Koreans the same intaglio printing presses and optically variable ink used by the U.S. Bureau of Engraving and Printing:
RFA cited Roland Vock, a senior official of the Sanctions Unit at the Swiss State Secretariat for Economic Affair, as saying that Switzerland is complying with sanctions on Pyongyang applied under UN Security Council resolutions 1718 and 1874.
“Any financial assets that fall under the scope of the resolutions would have to be frozen,” Vock was quoted by RFA as saying. Vock told RFA that if they are provided specific information about illegal financial transactions by North Korea through even unlisted bank accounts, they will start an investigation. [Joongang Ilbo]
Am I reading too much into Vock’s comments to say that I detect an undercurrent of skepticism?
“Give me the information,” he said. “Which bank [of about 500 Swiss banks], what money talking about, where money is coming from, then I can pass information to” the Swiss intelligence agency so that it can begin its probe. He said he meets American officials “very regularly” to exchange information.
Earlier on, Luxembourg also said that under the UN and U.S. sanctions, the country is closely watching for any illegal activities by the North using accounts there and will take “appropriate legal steps” if it finds them.
North Korean leader Kim Jong-il’s slush funds in banks in Switzerland and Luxembourg are estimated at more than US$4 billion. [Chosun Ilbo]
More on Luxemburg’s assurances of cooperation here. North Korea is already reported to be trying to move large amounts out of some of its accounts there. The suggestion is that this is to bequeath them to Mini-Me, but one need not physically move a bank account to change its ownership or control. It seems more likely that any large movement of funds is designed to save those funds from being blocked, but it’s also plausible that as North Korea heads into the succession process and the September party conference, that it needs more goodies for its minions.
WILL IT WORK?
That depends on the objective, of course, but the objective still isn’t entirely clear. Here’s the official explanation:
State Department spokesman Philip Crowley said, “We don’t take a cookie-cutter approach here. Iran and North Korea are two different countries. Iran has resources, particularly in the energy sector. North Korea does not. So we will apply measured sanctions against North Korea as we have in the past, and tailored to help influence the thinking of the government and those who support the government.”
“Likewise, we are directing sanctions at Iran and it’s the agencies that are linked to the concerns that we have — proliferation, nuclear concerns… But they are different,” he added. [Chosun Ilbo]
The Chosun Ilbo’s correspondent seizes on plans for a new executive order and the lack of present plans for new legislation as “confirmation that Washington will not slap the same strong sanctions on the North that it has imposed against Iran,” but the latter doesn’t follow from the former. For months, my spies have told me that Treasury’s most enforcement-minded officials have said that the legal authorities needed to put real pressure on North Korea are already there. As I’ve said for years, this could all be done with a series of executive decisions. And because the Daily NK’s Chris Green reads this blog, he naturally does a superior job of informing his readers:
Over the weekend, some concerns were raised about rumors that the U.S. is planning to pursue sanctions through an executive order, thus bypassing domestic legislative processes, and that this somehow signified a weakening of the proposed sanctions. However, this was refuted by South Korean experts, who noted that an executive order may be better in terms of handing the U.S. government the ability to act quickly in the face of North Korean changes.
Kim Sung Han, a Professor of Institute of Foreign Affairs and National Security at Korea University, analyzed during the phone call conversation with The Daily NK, “The domestic law and administrative order is a matter of flexibility in the United States’ policy, not to distinguish the level of the sanctions. In order for the U.S. to take the initiative and respond to changes quickly, an administrative order, which is free from the unnecessary intervention of Congress, is better.” [Daily NK, Chris Green]
So I don’t take much from the fact that the administration isn’t asking for new legislation now, because I agree that it isn’t really needed yet. The comparison to Iran sanctions is off the mark. Iran, unlike North Korea, has strong trade relations with other countries and oil to sell that other countries — including this one — will continue to buy. Until we can learn to live without Iran’s oil, financial sanctions on Iran are far less likely to put its regime under real pressure. If the administration is asking for new legal authorities against Iran, it’s probably because it knows how much more difficult Iran’s financial links are to cut. But North Korea’s financial links to the Outer Earth are fragile and largely illicit. There is nothing that North Korea sells that anyone really needs.
Assuming, then, that the U.S. government is serious, exactly what is it serious about? There is some ambiguity here, if you believe this second report from the Daily NK, which relies in part on anonymous sources. It reports that the Cheonan Incident was “a turning point” in South Korea’s approach to the North, and has since been migrating in the direction of using sanctions to catalyze “fundamental changes in the country.” It reports that U.S. officials, despite their willingness to “target the North Korean leadership and their assets,” aren’t yet ready to support such an approach, but might be later if North Korea continues to refuse to “show its sincerity” about disarmament.
Those aligned with the Chinoy-Ahn axis are working overtime to mobilize opposition to the administration’s financial strategy. Their argument, offered with an unpersuasive amount of desperation, is that pressure won’t force North Korea to negotiate and will spoil the gemÃ¼tlichkeit for talks. But if they really believe this, why the desperation? And more to the point, why did North Korea begin hinting at returning to the six-party talks just as press reports began to emerge that Washington would implement comprehensive financial sanctions? To its credit, the Obama Administration gets this, and openly questions the sincerity of North Korea’s belated expressions of interest in negotiations.
Critics of financial pressure could make a more accurate criticism if they were honest enough to make it: financial pressure still won’t “to convince Pyongyang to change course and pursue denuclearization.” For what little it’s worth, I believe we should remain open to the exceedingly unlikely possibility of a negotiated, verifiable, irreversible nuclear disarmament of North Korea, though this would require a fundamental transparency that the Kim Dynasty won’t ever accept.
By itself, the emerging Plan B probably won’t crumple the Kim Dynasty, either, though the succession of the grossly underqualified Kim Jong Eun increases the odds that it might. Mostly, financial pressure can gravely damage the regime’s capacity to proliferate, and inhibit its capacity to repress the latent dissent that will eventually destroy it.