North Korean diplomats behaving badly

If you’re a North Korean diplomat, a good general rule is that all publicity is bad publicity. Over the last two weeks, North Koreans, most of them diplomats or former diplomats, have attracted much publicity of the kind they couldn’t have wanted.

The Chinese government reports that “a North Korean consular official” killed two Chinese citizens while driving home drunk in Dandong last month. The North Korean diplomat was on his way home from an “event celebrating North Korea’s launch of a long-range rocket.” So, that’s another way post-launch events may not have worked out quite as His Porcine Majesty might have hoped.

Also this week, Tanzanian authorities expelled a former North Korean diplomat, Kang Sungguk, for using forged passports and for suspected involvement in various unspecified illegal activities. Prior to 2001, Kang had been an “economic councilor” at the North Korean embassy in Dar-as-Salam. Since then, he had been “a prominent North Korean businessman with supposed diplomatic status who ran several businesses from his base in Guangzhou, China.” It’s always China.

The acting Commissioner of Immigration (Border Management and Control), Wilson Bambaganya, said that immigration officers with support from security officers had been watching Kang closely for sometime and observed his various violations of both national and international laws.

“We (Immigration) gathered information about his habit of changing passports with fake names, different dates of births and numbers,” Bambaganya said. “We asked ourselves what his motives were for constantly forging those details, and we realised that for a person of his status to do such things, he must be engaged in some illegal business, although we couldn’t establish exactly what business.”
When Kang was recently interrogated by immigration officers, he failed to produce any traceable legal business links, which only served to raise more suspicions about him, the senior immigration department official said.

“We even tried to communicate with his country’s embassy here in Tanzania, but they also said they had no proper information about Kang and his current businesses. So we finally decided to expel him via a PI note,” Bambaganya explained.

He added: “Even if he (Kang) was a genuine businessman in China or anywhere else, here in our country we have concluded that he was dealing in illegal business activities.” [IPP Media, via The Guardian]

Last week, Sri Lankan authorities detained two North Koreans for carrying $150,000 in cash. That’s U.S. dollars, in case it matters to you which convertible currency discriminating North Korean money launderers prefer. The two — contra the post title, these two probably were not diplomats — were on their way from Oman to China carrying home “wages earned by themselves as well as other co-workers at construction sites in Oman.” Like many governments, Sri Lanka requires persons carrying more than $10,000 in cash to declare it to the authorities.

In China, the two would presumably have deposited the cash into a bank that would have been willing to scrub the subsequent wire transfers of all references to a North Korean affiliation. Not that any Chinese bank would do thatNorth Korea has since demanded the release of the men and the return of the money. Because the money consists of proceeds of North Korean labor exports, it’s subject to blocking under Executive Order 13722, but not under U.N. Security Council Resolution 2270 (unless, of course, it’s associated with WMD programs, weapons trafficking, or luxury goods imports).

North Korean consulates are expected to be self-financing, so North Korean diplomats often find themselves placed under arrest in far-flung, exotic locations, like Mozambique, were North Korean diplomat Pak Chol-jun was arrested in May of last year with ten pounds of rhino horn worth $99,300. South Africa later expelled Pak, who was posted at the North Korean embassy in Pretoria.

Just over a year ago, Son Young-nam, the first secretary of the North Korean embassy in Dhaka was arrested by Bangladeshi authorities carrying 59 pounds of gold, worth $1.4 million, which he hadn’t declared to customs. North Korea later apologized, and Bangladesh expelled the diplomat. Gold smuggling is a traditional method for North Korea to evade sanctions and money laundering crackdowns. UNSCR 2270 requires member states to “prohibit the procurement of” gold by North Koreans.

Also on the slave labor front, the Daily NK has an exposé of the role of North Korean consulates in China in procuring human chattels for rental.

“Starting from about a few years ago, officials in the North Korean consulates in China started to provide young female workers to ethnic Korean owned toll processing businesses for a fee. Recently, one such consulate has been receiving a 200-Yuan per month fee in similar transactions with a wig-making factory. The fee in this case is transferred from the worker’s account in accordance with the contract,” a North Korean source currently residing in China reported to Daily NK on March 18.

This development was corroborated by an additional source close to the issue in China.

The brokering of these deals originated in Shenyang, where ethnic Korean managers of seafood processing and packaging, textiles manufacturing, and wig and artificial eyebrow making factories started hiring young, cheap female workers from Pyongyang. The number of Chinese businesses looking to hire young, pretty, 20-something natives of Pyongyang is so large that the consulates have stepped in to facilitate.

Demand from Chinese businesses in the Northeast cities of Jilin, Heilongjiang, and Liaoning quickly built on the momentum, meeting supply from North Korean authorities looking to export labor for a profit. There is a heavy emphasis on beautiful young girls from big cities like the capital. Even now, in the face of strict primary and secondary sanctions targeting the North Korean regime, the demand for young North Korean female workers has not abated. [Daily NK]

If a plain-looking woman can pack seafood or knit a wig just as efficiently as a pretty one can, it’s unclear why the Chinese employers put such a premium on appearance unless they intend to exploit the women sexually. This goes unstated in the article, but previous reports have alleged that North Korean managers had pimped out female North Korean workers in a food processing plant in Donggang.

Finally, a number of sources are reporting that two countries are about to expel North Korean diplomats who’ve been designated by the U.N. Security Council. North Korea has replaced its Ambassador to Burma after the Security Council designated the incumbent, Kim Sok-chol. The U.S. Treasury Department designated Kim last November for activities on behalf of the Korea Mining Development Trading Corporation, or KOMID, a trading company designated for proliferation.

Egypt is also said to be about to expel North Korean Ambassador Pak Chun-il after his designation. Pak allegedly “played a key role in establishing an Egyptian branch of … KOMID,” and was involved in weapons smuggling and other illegal activities. Egypt has recently come up in multiple reports on North Korea sanctions violations, and was mentioned in the most recent U.N. Panel of Experts report. Last November, the U.S. Treasury Department designated Eko Development and Investment Company, a/k/a, Eko Development and Investment Food Company, a/k/a Eko Import and Export Company, a North Korean trading company based in Cairo, for being a KOMID front. Treasury also designated Egypt-based Ri Won Ho last week, when it first published Executive Order 13722. Treasury describes Ri as “an official of the DPRK’s Ministry of State Security based in Egypt” who was working for KOMID.

Last month, investigative journalist George Turner revealed that Egyptian-U.S. dual national Naguib Sawaris of Orascom/Koryolink infamy was in partnership with North Korea’s Foreign Trade Bank, designated by Treasury for proliferation, through the Orascom-linked, North Korean-chartered Orabank.

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China & Russia alarmed about secondary sanctions, because sanctions never work.

After years of extensive, flagrant, and well-documented violations of U.N. sanctions against North Korea, China is finally reaping the consequences. Americans don’t agree on much anymore, but Beijing’s cheating has achieved a political impossibility — it has united 418 representatives, 96 senators, The New York Times, The Washington Post, and the mainstream of North Korea watchers in support of secondary sanctions on the (mostly Chinese) banks and businesses that are propping up Kim Jong-un financially. That policy is now expressed in law, and the U.S. Treasury Department has taken its first steps toward aggressive implementation.

Not surprisingly, China isn’t happy about this.

The so-called secondary sanctions will compel banks to freeze the assets of anyone who breaks the blockade, potentially squeezing out North Korea’s business ties, including those with China.

Asked whether China was worried the sanctions could affect “normal” business links between Chinese banks and North Korea, Foreign Ministry spokesman Lu Kang said this was something China was “paying attention to”.

“First, as I’ve said many times before, China always opposes any country imposing unilateral sanctions,” Lu told a daily news briefing in Beijing.

“Second, under the present situation where the situation on the Korean Peninsula is complex and sensitive, we oppose any moves that may further worsen tensions there.”

“Third, we have clearly stressed many times in meetings with the relevant county, any so-called unilateral sanctions imposed by any country should neither affect nor harm China’s reasonable interests.” [Reuters]

So far, Treasury hasn’t frozen any Chinese and Russian assets, but it’s delivering a message to Chinese banks to stay away from North Korea, and the banks are listening. Even before the U.N. Security Council approved UNSCR 2270, some Chinese banks and businesses began freezing North Korean assets.

“Any so-called unilateral sanctions imposed by any country should neither affect nor harm China’s reasonable interests,” Lu warned. He said Beijing has stressed this point many times.

The new sanctions “up the ante quite significantly,” said Elizabeth Rosenberg, a sanctions expert at the Center for a New American Security, the new sanctions “up the ante quite significantly.”

“It does impose something akin to a full embargo on persons who do business with North Korea,” she said.

Victor Cha, senior fellow to the Bush Institute on North Korea and director of Asian studies at Georgetown University, said these comments show Beijing is concerned about getting caught in the sanction net. In an interview with Foreign Policy, he said China was especially worried about the slave-labor provisions.

“China imports North Korean slave labor,” he said. “That’s the piece the Chinese don’t like the most, the secondary sanctioning.”

“This is a grade up from the level of sanctions that had been in place before,” Cha added. [Foreign Policy, David Francis]

Russia, too, has actively aided North Korea’s violations of U.N. sanctions, and it’s also upset about “unilateral” U.S. sanctions. Its propaganda machine is churning out tired arguments that sanctions will only hurt the North Korean people, although I don’t recall Russian propaganda outlets complaining that North Korea’s last long-range missile test cost enough to fund World Food Program operations in North Korea for 15 years.

Despite Moscow’s ambivalence about sanctioning Pyongyang, Gazprom just cut its ties to North Korea. Oddly enough, the U.N. sanctions don’t even require this. Sure, it’s possible that Vladimir Putin has had a change of heart and decided to pressure Kim Jong-un, but it seems more likely that Gazprom is concerned about the legal risks from Treasury’s sectoral sanctions on North Korea’s energy industry.

The reports on China’s compliance with the sanctions continue to be mixed. Defense Secretary Ashton Carter says, “China could do much more than it has to get North Korea to ‘stop provocations,’” while a senior State Department official recently told the Senate Foreign Relations Committee that China was “ready to work with us on detailed implementation and consultation on a range of issues.” Both of those things could be true, I suppose, but they yield different headlines.

Until recently, cargo had transited the land border between China and North Korea more-or-less unimpeded, but now, according to both Yonhap and the Chosun Ilbo, China has stepped up inspections at its border crossings, too. With respect to maritime cargo, Yonhap cites South Korean government sources who claim that Beijing has directed local governments to bar the 31 U.N.-designated North Korean ships from its ports. The Asahi Shimbun reports that “China has banned the entry of North Korean vessels to Yingkou port in Liaoning province, a major gateway for China’s coal imports” from the North.

As of March 18, two North Korean ships were stranded outside the port, located about 200 kilometers northwest from the border between the two countries. The vessels have reportedly decided to return to North Korea. “China will likely impose a similar embargo at other ports from now on,” a source familiar with the matter told The Asahi Shimbun. [Asahi Shimbun]

Two press reports dated the same day contradict each other about whether China is enforcing the ban on importing North Korean coal. Reuters says that the Chinese government hasn’t told Chinese coal buyers to stop importing North Korean coal; the Joongang Ilbo says it has. To further complicate matters, the U.N. sanctions have a “livelihood” loophole, while U.S. sanctions have much narrower humanitarian exceptions. A reasonable, middle-ground approach that’s completely consistent with both authorities would be to interpret “livelihood” to require payment in food, humanitarian supplies, or donations to the World Food Program or other humanitarian aid programs. It should prohibit payment in gold, dollars, or other convertible currencies.

U.N. sanctions ban mineral imports from North Korea and require member states to seize property of designated entities, including Ocean Maritime Management and the Reconnaissance General Bureau, which also reportedly operates a small fleet of ships . They do not impose a blanket embargo on North Korean trade. U.S. sanctions do not impose a trade embargo, either, but do authorize U.S. Customs to step up inspections of cargo coming from ports that fail to inspect cargo coming from or going to North Korea. This amounts to a secondary sanction.

On the financial front, the Chosun Ilbo quotes “sources” as claiming that the Dandong branch of the U.N.- and U.S.-designated Korea Kwangson Banking Corporation has closed. In 2013, it simply went underground for a while, but this time, it actually appears to have closed. The Chosun also reports that “[a] growing number of North Korean restaurants in northeastern China are closing down.”

Meanwhile, the U.S. and South Korea are meeting this week to “review and discuss ways to maximize pressure on North Korea by effectively applying the three axes of the Security Council resolution, unilateral sanctions imposed by South Korea and the U.S., and pressure by the international community.” In Seoul, Sung Kim, the U.S. representative to the six-party talks, says our government intends to enforce U.N. sanctions with “vigor and energy,” but undercuts that conclusion with this:

Asked if Russian and Chinese companies employing North Korean workers would be subject to the sanctions, Fried said the new executive order provides “very broad authorities” to deal with the issue. “It doesn’t mandate anything in particular, but the authorities are there if needed,” he told reporters, standing next to Sung Kim. [Yonhap]

Ambassador Kim is mistaken. The executive order implements a statute whose sanctions are mandatory. Recently, China has expressed interest in three-way consultations with the U.S. and South Korea about enforcement of the sanctions. Expect those consultations to be tense. The left-leaning Hankyoreh Sinmun reports that the South Korean and Chinese foreign ministers “clashed” over the enforcement of sanctions against the North in a recent phone call. Securing our interests will require firmness and resolve, but it would still be preferable for all involved if China implements the sanctions “voluntarily.”

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Designation of N. Korea’s propaganda agency could mean trouble for AP Pyongyang

Yesterday, a reader — he can identify himself if he chooses to do so — asked me an excellent question that had not occurred to me: what are the implications for the Associated Press’s Pyongyang Bureau of the Treasury Department’s designation of North Korea’s Propaganda and Agitation Department for censorship? From Treasury’s Wednesday press release:

OFAC has designated the Workers’ Party of Korea, Propaganda and Agitation Department (the “Propaganda and Agitation Department”) as an agency, instrumentality, or controlled entity of the Government of North Korea. The Workers’ Party of Korea has full control over the media, which it uses as a tool to control the public. The Propaganda and Agitation Department also engages in or is responsible for censorship by the Government of North Korea. Each month, the Propaganda and Agitation Department delivers party guidelines explaining the narrative that all broadcast and news reporting plans must follow. The North Korean media must follow all Party guidelines. The Propaganda and Agitation Department is also the primary agency responsible for both newspaper and broadcast censorship.

The designation was compelled by NKSPEA § 104(a)(4), which requires the President to designate any person who “knowingly engages in, is responsible for, or facilitates censorship by the Government of North Korea.” Yesterday’s executive order translates this as follows, in section 2(a)(vi):

Sec. 2. (a) All property and interests in property that are in the United States, that hereafter come within the United States, or that are or hereafter come within the possession or control of any United States person of the following persons are blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in: any person determined by the Secretary of the Treasury, in consultation with the Secretary of State:

[….]

(vi) to have engaged in, facilitated, or been responsible for censorship by the Government of North Korea or the Workers’ Party of Korea;

Critically, section 2(a)(viii) of the E.O. clarifies that a designation also includes persons who are “owned or controlled by, or … have acted or purported to act for or on behalf of, directly or indirectly, any person” designated under the new executive order. That means that if an entity is designated, its subsidiaries, sub-agencies, officers, and employees are designated, too.

The nexus to AP didn’t occur to me until my reader raised it, but a few moments of googling brought me to this post by Michael Madden at 38 North. Can you read the second box from the left?

madden

How about now?

Screen Shot 2016-03-17 at 9.56.24 PM

Uh-oh. So, if that’s true, the designation of the Propaganda and Agitation Department is also a designation of KCNA, the Korean Central News Agency, the world’s least credible news agency. The same KCNA that AP signed its still-undisclosed MOUs with, establishing its Pyongyang Bureau, and detailing two North Korean minders journalists to report for it.

Well, maybe if the AP has an OFAC license, it can be grandfathered in, right?

(b) The prohibitions in subsection (a) of this section apply except to the extent provided by statutes, or in regulations, orders, directives, or licenses that may be issued pursuant to this order or pursuant to the export control authorities implemented by the Department of Commerce, and notwithstanding any contract entered into or any license or permit granted prior to the effective date of this order.

No such luck, then. But if the AP doesn’t pay KCNA any money, there’s no need for a license. Only, when is the last time North Korea gave anything away for free? Also, the draft AP-KCNA MOU Nate Thayer obtained certainly suggests that money has changed hands. AP denies the authenticity of the draft, but it hasn’t released the signed, final MOU, either. Maybe this would be the time to do that.

Or, maybe one of OFAC’s new general licenses covers AP. I guess if any of them is a fit, it would be General License Number 7, which says:

(2) This general license does not authorize:

(i) The provision, sale, or lease of telecommunications equipment or technology; or

(ii) The provision, sale, or lease of capacity on telecommunications transmission facilities (such as satellite or terrestrial network activity).

Um….

So, to summarize: The executive order blocks persons who are designated for engaging in censorship on behalf of the North Korean government. It also blocks persons or entities who are owned or controlled by those who are designated and blocked. Treasury designated the Propaganda and Agitation Department, and there’s publicly available, credible evidence that the Propaganda and Agitation Department controls KCNA. If that evidence is correct, KCNA is also blocked, and no U.S. person may transfer funds to KCNA. If AP had an OFAC license before yesterday, the new executive order voided it. Also, none of OFAC’s general licenses appear to apply here.

I see three options for the AP: either (1) AP gets an OFAC license (or general license) to keep paying KCNA; (2) North Korea lets AP run a bureau for free of charge; or (3) AP closes its bureau and visits Pyongyang when something interesting happens, just like it did before 2011, when its North Korea coverage was actually better. Also, AP can’t fly any more North Korean “journalists” and propagandists to New York for Kim Il-sung commemorative photo exhibitions. Section 4 of the E.O. bars designated entities’ employees from the United States.

Or, the AP can find a business partner in North Korea that isn’t censoring North Koreans’ rights to free expression, committing crimes against humanity, running guns, or proliferating WMDs. The legal obstacles to this would seem significant, given the breadth of the executive order’s blocking of all interests in property of the government of North Korea.

460. Can U.S. persons do business with entities in North Korea?

No. Unless authorized pursuant to a general or specific license from OFAC and/or BIS, the new E.O. prohibits new investment in North Korea by a U.S. person and the exportation or reexportation, from the United States, or by a U.S. person, of any goods, services, or technology to North Korea. [Published on 03-16-2016]

By now you may be wondering: Josh, are you really devious enough to have induced a nearly unanimous Congress and the President of the United States to get the AP kicked out of Pyongyang because you despise the secrecy and corruption of its dealings with Pyongyang? Tempting as it is to tent my fingers and declare in a serpentine Montgomery Burns hiss, “Now I am become death, the destroyer of worlds,” I swear I’m not. I do admit that when we drafted the legislation that became H.R. 757, it was my idea to make censorship a basis for designation. But although this is a new idea for North Korea — there was no comprehensive North Korea sanctions law before H.R. 757 — it’s not a new idea for Earth. Other states (Iran, Syria) have been sanctioned for censorship before, just like other states (but not North Korea) had been sanctioned for human rights violations before. I just stole the idea from the people who drafted those sanctions, because like most Americans, including at least 418 members of Congress, 96 senators, and the President of the United States, I hate censorship.

But mostly, I assumed OFAC would issue a general license for journalistic activities in North Korea, as it did for Cuba, Iran, and other sanctioned countries. AP has a bureau in Tehran, despite censorship sanctions that apply to Iran’s government. And maybe AP will get one for its Pyongyang bureau, too.

But I’d be lying if I denied that this thought had crossed my mind: if the AP experiment fails because of this, it would be for the good of journalism and humanity, and also, it couldn’t happen to nicer people

Some people will say that the withdrawal of the AP would be a setback for efforts to open up North Korea. Those people will be wrong. It would really be a setback for the co-option and corruption of our news media by genocidal totalitarians who want to buy down press criticism. The AP didn’t change North Korea; North Korea changed the AP. KCNA didn’t start broadcasting truthful and objective news because the AP came to Pyongyang. AP came to Pyongyang and promptly abandoned its principles, submitted to North Korean censorship, and broadcast a stream of North Korean propaganda, fakery, hostage videos, and vox populi interviews with obvious (to me) plants to hundreds of millions of people around the world. And called it “journalism.”

And for what prize did AP sell its soul? Nothing newsworthy that was exclusive, and nothing exclusive that was newsworthy. It failed to confirm or refute credible reports of a famine in South Hwanghae Province in 2012, just an hour’s drive from Pyongyang. Or any of the dozens of rumors of purges or prolonged disappearances by North Korean generals, or of Kim Jong-un himself. Or about North Korea’s deplorable crimes against humanity, as the world’s attention turned to them so belatedly.

Or, that time an apartment building fell down—what, ten minutes away from its bureau?—possibly killing hundreds of people, when the AP never even reported from the scene. A Rimjingang reporter risked his life to take clandestine photos and predict this disaster. NK News found imagery online and published time-lapse photography of the building vanishing from the Pyongyang skyline … from a thousand miles away. And then, last year, when the most famous hotel in Pyongyang caught fire, the AP, just ….

shrug

Journalism is about asking uncomfortable questions, digging for the truth and telling it, and unmasking lies. Whatever the AP is doing in Pyongyang, it isn’t journalism. That’s why OFAC could grant AP a license, but shouldn’t. It’s why if the AP has any shame, it won’t even ask for one. It will silently acknowledge what the rest of us have said for years, collect as much of its dignity and its equipment it can, and drive them to back across the DMZ to Seoul.

~   ~   ~

Update: Oh, and the Propaganda and Agitation Department is headed by Kim Jong-un’s sister, Kim Yo-jong, whom some Korea-watchers expected to be designated individually (she wasn’t).

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Obama blocks N. Korean assets, bans labor exports, sanctions ships and banks.

Just this morning, I was writing about reports that President Obama would sign a new North Korea sanctions executive order. The Executive Order the President signed this afternoon takes several important steps toward implementing the North Korea Sanctions and Policy Enhancement Act, and to a lesser extent, U.N. Security Council Resolution 2270. Full implementation will require years of aggressive investigation and designation of targets, but this is a good start.

The text of the E.O. itself is strong, exceeding in several regards what both Congress and the U.N. require. It’s encouraging that Treasury was willing to go beyond the minimum requirements of the law and U.N. consensus. Aid groups will be relieved that Treasury has issued the implementing guidance and general licenses I’d been hoping it would get done quickly.

As mandated by NKSPEA 104(c), the E.O. freezes all North Korean government and ruling party assets in the dollar system. It also goes beyond the NKSPEA in banning U.S. persons from exporting any goods, services, or technology to North Korea; from making any new investments in North Korea; and from facilitating transactions banned under the E.O.

So in retrospect, maybe it wasn’t such a great idea for James Passin to talk to the New York Times about his big North Korean oil bonanza.

I can no longer make the claim that our North Korea sanctions aren’t comprehensive. This is comprehensive, although I’ll want to see what the new regulations say. In one important regard, however, the E.O. falls short of UNSCR 2270, by failing to prohibit correspondent relationships with North Korean banks. (Update: Treasury might take the view that blocking subsumes that.)

The E.O. also goes beyond the NKSPEA’s requirements by imposing sectoral sanctions on four North Korean industries: transportation, mining, energy, and financial services.

The North Korean regime is resourceful in its abuse of the international financial system to evade sanctions and fund its illicit programs.  OFAC designated Ilsim International Bank and Korea United Development Bank for operating in the financial services industry in the North Korean economy.  Ilsim International Bank is affiliated with the North Korean military and has attempted to evade United Nations sanctions.  Ilsim International Bank has a close relationship with Korea Kwangson Bank (KKBC).  KKBC was designated pursuant to E.O. 13382, in part for providing financial services to UN-listed Tanchon Commercial Bank.  Tanchon Commercial Bank was identified by the President as a weapons of mass destruction (WMD) proliferator in the Annex to E.O. 13382.  KKBC was also singled out under UNSCR 2270 as subject to an asset freeze.

This seems to foreshadow a determination that North Korea is a Primary Money Laundering Concern. Treasury also released a list of new designations, including 10 shipping companies and 20 more ships, mostly the same ones that appear in Annex III of UNSCR 2270. Sectoral sanctions worked against Iran and Burma. This is a good sign that Treasury will have free reign to put His Porcine Majesty on a diet.

The E.O. also freezes any assets subject to U.S. jurisdiction of any “person” (a legal term that includes individuals, businesses, or entities) the Treasury Secretary (in consultation with the Secretary of State) determines to have engaged in certain categories of conduct. The categories loosely track NKSPEA 104(a), starting with the prohibition on mineral exports that also appears (in different forms) in NKSPEA 104(a)(8) and UNSCR 2270.

(ii) to have sold, supplied, transferred, or purchased, directly or indirectly, to or from North Korea or any person acting for or on behalf of the Government of North Korea or the Workers’ Party of Korea, metal, graphite, coal, or software, where any revenue or goods received may benefit the Government of North Korea or the Workers’ Party of Korea, including North Korea’s nuclear or ballistic missile programs;

From Treasury’s press release:

North Korea generates a significant share of the money it uses to fuel its nuclear and ballistic missile programs by mining natural resources – often exploiting workers in slave-like conditions – and selling those resources abroad.  In particular, coal generates over $1 billion in revenue per year for North Korea.  OFAC designated the following companies for operating in the mining industry in the North Korean economy:  Singwang Economics and Trading General Corporation and the Korea Foreign Technical Trade Center.  Singwang Economics and Trading General Corporation is a subordinate of the DPRK’s Ministry of People’s Armed Forces.  The Korea Foreign Technical Trade Center supports the North Korean special weapons research entity Pongwha Research Center.

UNSCR 2270’s potentially troublesome “livelihood” exception doesn’t appear in this E.O., although the general licenses and implementing guidance contain much, much narrower humanitarian exemptions, which I’ll discuss below.

Next, the E.O. freezes the assets of those designated for human rights abuses, as required under NKSPEA 104(a)(5).

(iii) to have engaged in, facilitated, or been responsible for an abuse or violation of human rights by the Government of North Korea or the Workers’ Party of Korea or any person acting for or on behalf of either such entity;

Yet still, not one North Korean official or agency — least of all, His Corpulency — is designated for human rights abuses or crimes against humanity. Which means I still have my talking points about how officials in Burundi are blocked over human rights abuses, but officials in North Korea aren’t. I can keep flogging the point that all of the top officials of the governments of Belarus and Zimbabwe are blocked, but none of the top officials of North Korea are.

I get that the traditional approach in sanctions enforcement is to go bottom-up, but after so much time has been wasted, and more than two years after a U.N. Commission of Inquiry reported evidence of crimes against humanity, I’d expect to see things go bottom-up pretty damn rapidly.

Boy-that-escalated-quickly

Although I took the position that labor exports were already subject to mandatory designation under this paragraph, Marcus Noland will be pleased (and so was I) to see that Treasury specifically made labor exports sanctionable:

(iv) to have engaged in, facilitated, or been responsible for the exportation of workers from North Korea, including exportation to generate revenue for the Government of North Korea or the Workers’ Party of Korea;

Next, in accordance with the mandatory sanctions for cyberattacks, per NKSPEA 104(a)(7):

(v) to have engaged in significant activities undermining cybersecurity through the use of computer networks or systems against targets outside of North Korea on behalf of the Government of North Korea or the Workers’ Party of Korea;

Notably absent from the designations here: the Chilbosan Hotel in Shenyang, where Unit 121 allegedly carried out the Sony cyberattack.

Then, per NKSPEA 104(a)(4), there are mandatory sanctions for censorship:

(vi) to have engaged in, facilitated, or been responsible for censorship by the Government of North Korea or the Workers’ Party of Korea;

Here, there was a surprising designation:

OFAC has designated the Workers’ Party of Korea, Propaganda and Agitation Department (the “Propaganda and Agitation Department”) as an agency, instrumentality, or controlled entity of the Government of North Korea. The Workers’ Party of Korea has full control over the media, which it uses as a tool to control the public. The Propaganda and Agitation Department also engages in or is responsible for censorship by the Government of North Korea. Each month, the Propaganda and Agitation Department delivers party guidelines explaining the narrative that all broadcast and news reporting plans must follow. The North Korean media must follow all Party guidelines. The Propaganda and Agitation Department is also the primary agency responsible for both newspaper and broadcast censorship. Today’s action implements provisions of the North Korea Sanctions and Policy Enhancement Act of 2016, which includes mandatory designation criteria for persons engaging in censorship in North Korea.

Music to my ears.

Now, you may be wondering why the new E.O. doesn’t cover other provisions of NKSPEA 104(a), relating to, say, WMD technology transfers or arms trafficking. I can only presume that’s because that conduct is already sanctionable under Executive Order 13382 and Executive Order 13551, respectively. Of course, those executive orders have existed since 2005 and 2010, and both have been underutilized ever since.

The new E.O. would seem to subsume the Executive Order the President signed just over a year ago, E.O. 13687, but today’s designations actually include two new “DPRK2” designees under that order, Jo Yong-chol and Ri Won-ho, officers of North Korea’s Ministry of State Security living in Syria and Egypt, respectively.

OFAC designated Ri Won Ho and Jo Yong Chol pursuant to E.O. 13687 for being officials of the Government of North Korea.  Ri Won Ho is an official of the DPRK’s Ministry of State Security based in Egypt.  Jo Yong Chol is an official of the DPRK’s Ministry of State Security stationed in Syria.  They both facilitate North Korea’s Mining Development Trading Corporation’s (KOMID) business in Egypt and Syria.  KOMID was identified by the President in the Annex to E.O. 13382 and designated pursuant to E.O. 13687.  It was also designated by the United Nations Security Council pursuant to UNSCR 1718.  KOMID is North Korea’s premier arms dealer and main exporter of goods and equipment related to ballistic missiles and conventional weapons.

I was also pleased to see that, along with the new E.O. and designations, OFAC also issued a series of general licenses — effectively, exemptions to the sanctions — that will help avoid adverse consequences for innocents, and for the sorts of changes we want to promote in North Korean society. The highest-profile of these covers humanitarian work:

(1) Activities to support humanitarian projects to meet basic human needs in North Korea, including drought and flood relief; food, nutrition, and medicine distribution; the provision of health services; assistance for individuals with disabilities; and environmental programs;

(2) Activities to support democracy building in North Korea, including rule of law, citizen participation, government accountability, universal human rights and fundamental freedoms, access to information, and civil society development projects;

(3) Activities to support education in North Korea, including combating illiteracy, increasing access to education, international exchanges, and assisting education reform projects; and

(4) Activities to support non-commercial development projects directly benefiting the North Korean people, including preventing infectious disease and promoting maternal/child health, sustainable agriculture, and clean water assistance.

( 5) Activities to support environmental protection, including the preservation and protection of threatened or endangered species and the remediation of pollution or other environmental damage.

I’m also pleased that OFAC also granted a general license to allow refugees to send remittances home to their relatives in North Korea, for reasons I’ve described hereAnother general license permits “transactions necessary to the receipt and transmission of telecommunications involving North Korea,” which would seem to allow cross-border phone calls, but “does not authorize (i) The provision, sale, or lease of telecommunications equipment or technology; or (ii) The provision, sale, or lease of capacity on telecommunications transmission facilities,” which presumably would not authorize, say, Naguib Sawaris’s investments in Pyongyang. But  I’ll let Naguib hire his own lawyer.

Treasury’s F.A.Q.s here, Yonhap’s take here, reaction from the Blue House here.

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U.S. will announce new North Korea sanctions as early as this week.

At this event at the Heritage Foundation yesterday, I emphasized that U.S. and U.N. sanctions are mutually complementary, and that for the U.N. sanctions to work, the U.S. must show its determination to back them with the new authorities in H.R. 757, and by harnessing the power of the dollar.

The signs I’m seeing this week all suggest that the Obama Administration finally gets this. On Monday, President Obama said “that effective enforcement of sanctions on North Korea is one of the key tasks facing the country.” Yesterday, Treasury Secretary Jack Lew briefed a congressional committee on his talks with Chinese officials about enforcing North Korea sanctions, which he described as only “theory until you implement them” through “sustained efforts.” Said Lew, “We know from these sanctions programs that it’s grueling day-to-day work. You’ve got to identify the entities, act against the entities.” Exactly right.

The administration has also begun the hard work of financial diplomacy:

Adam Szubin, acting undersecretary of Treasury of terrorism and financial intelligence, will be in Beijing and Hong Kong on Monday and Tuesday to meet with senior government officials and compliance officers to discuss “a range of issues of mutual interest,” according to an advisory notice from Treasury. It comes in light of recent United Nations and U.S. sanctions on North Korea imposed this month, Treasury said.

“This trip provides an important opportunity for discussions of ways to strengthen U.S.-China coordination in response to North Korea’s destabilizing behavior and to ensure sanctions targeting the North Korean regime are as effective as possible,” the advisory notice said. [WSJ, Risk & Compliance Blog]

According to Channel News Asia, Szubin was to meet “with both government officials and the private sector” with regard to the implementation of both U.N. and U.S. sanctions. Reading the reports together, Szubin appears to have met with officials of certain banks that may hold North Korean assets. It may be a complete coincidence that Szubin visited Hong Kong just as HSBC froze Sam Pa’s accounts, and that HSBC’s top legal officer is Stuart Levey, Szubin’s predecessor. Coincidences do happen.

What we often forget about Treasury’s anti-money laundering effort against North Korea in 2005 and 2006 is that it was more than an action against one dirty bank. It was a broader campaign of financial diplomacy, led by Levey and Daniel Glaser (who is still a senior Treasury Department official today). It looks like we’re starting to see a similar strategy re-emerge now. There’s no question that implementing it will be challenging, based on what the U.N. Panel of Experts told us last week about North Korea’s extensive use of deceptive financial practices.

179. The financial sanctions notwithstanding, the Democratic People’s Republic of Korea continues to gain access to and exploit the global international financial system (including banking and insurance) through reliance on aliases, agents, foreign individuals in multiple jurisdictions, and a long-standing network of front companies and embassy personnel, all of which support illicit activities through banking, bulk cash and trade.

180. The Panel has concerns about banks without adequate banking regulations and the intent to enforce them, especially in countries lacking effective laws and compliance institutions.91 Transactions originating in foreign banks have been processed through corresponding accounts in the United States and Europe. The enhanced due diligence required under the resolutions in the case of the Democratic People’s Republic of Korea is frustrated by the fact that companies linked to the country are often registered by non-nationals, who also use indirect payment methods and circuitous transactions dissociated from the movement of goods or services to conceal their activity.

Cooperation and information sharing among member states will be essential to the success of the strategy.

181. The implementation of financial sanctions becomes more complex as it moves from targeted financial sanctions based on designation lists to activity-based sanctions,92 an endeavour that requires first establishing whether an entity is being controlled or used by a designated entity. The situation is complicated because lists of aliases are never exhaustive, not least because of alternative ways to transliterate Korean names. In addition, the Panel is hampered in updating information on designated entities owing to time lapses in responses to its inquiries, allowing entities more room to continue their activities.

Yonhap also reports that “[t]he U.S. is putting together a package of unilateral sanctions against the North to carry out the Security Council sanctions and the recent congressional legislation tightening the screws on Pyongyang.” Special Envoy for Human Rights Robert King adds, “There is an Executive Order being drafted right now that will deal with these additional sanctions.”

This is welcome, if unexpected. After all, what could a new executive order do that Executive Order 13687, which the administration has barely used, doesn’t already do? (Search “DPRK2.”) I suppose it could further clarify that the President may impose secondary sanctions on persons who engage in arms trafficking with North Korea, insure or reflag its ships, or maintain correspondent accounts for its banks, but H.R. 757 already gives the President the authority to address those things. What would be more useful would be a round of designations under section 104.

Treasury also sorely needs a better set of sanctions regulations to replace the weak ones at 31 C.F.R. Part 510. Instead, it needs something broadly analogous to the more comprehensive regulations that apply to Syria (Part 542), or to Iran (parts 560, 561, and 562). One important part of the new regulation would be its general licenses for humanitarian transactions, subject to the limits of section 208. Another would expansive definitions of “arms or related materiel” (to include technical assistance) and “severe human rights abuses” (to include the use of North Korean forced labor). Let’s hope Treasury is working on that, too, but for now, the good news is that Treasury is working.

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President Park demands end to North Korea’s “tyranny”

Park Geun-hye has a long and distinguished history of saying next to nothing about human rights in North Korea, so these remarks are another welcome step in the right direction:

“I will sternly and strongly deal with North Korea … until North Korea embarks on the path toward denuclearization and ends the tyranny of oppressing the human rights of North Korean people and pushing them to starvation,” Park said in an annual meeting with South Korea’s top envoys around.

A U.N. report showed last year that about 70 percent of North Korea’s 24 million people are suffering due to food shortages. It said 1.8 million, including children and pregnant women, are in need of nutritional food supplies aimed at fighting malnutrition. [Yonhap]

With the U.N. increasingly calling for the prosecution of His Corpulency for crimes against humanity, South Korea risks being sidelined by foreigners as a force in its own history. Park’s words are welcome, but the ones who really need to hear them are the North Koreans themselves. South Korea could gradually, patiently, and clandestinely build a base of influence among them by helping to provide for the unmet needs that their own government refuses to meet.

 

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So far, sanctions are cutting off Pyongyang’s cash while sparing North Korea’s poor.

A month after the President signed the North Korea Sanctions and Policy Enhancement Act and two weeks after the U.N. Security Council approved Resolution 2270, enough information has emerged from North Korea to allow for a preliminary assessment of how the sanctions are affecting those they are meant to target, and those they are meant to spare. 

Sanctions have begun to hit their intended targets. The Daily NK reports that the donju, the well-connected traders who help finance Pyongyang’s priorities through trade with China, initially refused to believe (or plan for) the possibility that China would cooperate with sanctions or cut off the coal trade.

Donju are the fulcrum of North Korea’s coal industry, their massive dollar investments propping up foreign-currency earning enterprises tasked with production and export of a product providing North Korea with much-needed cash from a resource-strapped China.

Now, they’re panicking. Those who are “connected to the export of minerals are reeling after hearing that trucks bound for export have been stopped at the customs office in Sinuiju, North Pyongan Province.” 

“On news that coal exports have come to a halt, donju, the chief actors in the country’s coal distribution industry, have stopped investing,” a source from South Pyongan Province told Daily NK on Tuesday. “Some had been thinking of completely giving up their coal handling and storage facilities, but with the new rumors surfacing about exports resuming in a few months, they’re now mulling over whether to reinvest.  [Daily NK]

The regime is worried that “a prolonged strangle on donju investment could eventually challenge the operation of the mines themselves, and by extension stymie a robust source of funds buttressing the leadership.” This could have long-term consequences for the regime’s financial stability. To maintain the confidence of the donju and keep their money flowing, the regime is spreading rumors that the mineral export ban won’t last for long.

At first, market traders also panicked about the sanctions, fearing that they could lose access to their Chinese sources of merchandise. Some citizens also reacted angrily, according to the Daily NK, saying, ‘‘Those cadres don’t care if us normal people starve,” and, “This is what happens when the authorities pursue useless things [nuclear weapons, missiles] and go around bragging about it.”

All true, and actions by the regime may have been greater immediate causes of hardship. In the build-up to the party congress I prefer to call the Ides of May, the state has cracked down on street stalls, restricted the opening hours for markets, and mobilized people for forced labor (as always, exemptions can be had for a price). At first, some traders hoarded food, but the markets have been resilient, and food prices have stabilized:

“There had been concern we would see fewer goods in the market because of UN sanctions, but in reality, there hasn’t been much difference,” a source from North Pyongan Province told Daily NK in a telephone conversation on Sunday. [….]

Further confirming trends previously reported by Daily NK last week, an additional source in North Hamgyong Province reported yesterday that some people had stocked up food worried about sanctions from the UN, but that this hasn’t led to a violent gyration in prices. “Actually, in some regions, we’re seeing prices of certain products drop,” he noted. [Daily NK]

One of the more interesting effects of the sanctions is that in some ways, they’ve actually increased the supply of fuel and food. Prohibitions on coal exports have diverted more coal into the markets, so despite the cold weather in Korea, coal and firewood are cheap. Incredibly for a country that depends on international food aid and has a massive malnutrition problem, North Korea earns hard currency by exporting food, such as seafood and pine mushrooms. Recently, however, China has halted or sharply curtailed maritime traffic from North Korea, so state-controlled trading companies have dumped their wares on the markets, where ordinary North Koreans can buy them.  

“These days items that were previously hard to find because they were earmarked for export are suddenly emerging at the markets,” a source from North Hamgyong Province told Daily NK on Thursday. “The price haven’t gone down enough yet, so you don’t see too many people actually buying them. But you do see flocks of curious people coming out to the markets to see all the delicacies for sale.”

She added, “High-end marine goods like roe, sea urchin eggs, hairy crab, and jumbo shrimp and produce like pine nuts, bracken, and salted pine mushrooms were once considered to be strictly for export, but now they’re easy to find. The number of such products, referred to as ‘sent back goods,’ at Sunam Market and other markets around Chongjin is growing by the day.”

Additional sources in both North and South Hwanghae Provinces reported the same developments in those regions. [….]

Unlike in the past, when they had to pick out the high-end fisheries goods only to hand over to state foreign-currency earning enterprises, now they can sell the entire load to wholesale merchants.

“People are getting their hopes up, saying they might be able to eat some of the highest quality fish for a cheap price, if the UN sanctions continue to carry weight until the summer,” she explained. “They’re actually welcoming the sanctions now saying that for average people they’re bringing good fortune since the number of goods they can get their hands on are continually on the rise.” [Daily NK]

Why would Chinese ports reject these shipments? As immoral as it may be for a hungry nation to export food, neither the U.S. nor U.N. sanctions prohibit food exports (although perhaps they should). One possible explanation is the fact that North Korea’s seafood trade is controlled by none other than the Reconnaissance General Bureau, or RGB, which was just designated by the U.N. under UNSCR 2270.

The bureau owns dozens of ‘trade vessels’ that it uses for missions and also to secure capital. Along main ports near the West and East Sea, the bureau employs cargo ships like Chong Chon Gang that are tens of thousands of tons in size, or ‘trade vessels’ and ‘reefer ships’ such as Nam San 1, 2, Kum Gang San, Mu Bong 1, 2, Po Thong Gang 11, 12, Seung Ri, and Myong Song, which are 800 to 1,000 tons.

North Korea has given vessels like Po Thong Gang and Mu Bong a monopoly on king crabs, shrimp, and conch fishing. Therefore, they’re able to secure some 1,000 tons annually in marine goods and sell them to individual companies in Japan to buy the necessary reconnaissance equipment.

These bureau vessels also conceal their true origins and engage in trade as regular ships. Especially when they are subject to international sanctions and unable to make port entry, they use tactful tricks such as remaining in international waters, where Chongryon (General Association of Korean Residents in Japan, an entity holding strong ties with Pyongyang) companies will come to their aid in trade.

The reconnaissance bureau operates the ‘Birobong Trading Company’ to earn foreign currency, and under this are needlework and garment factories, as well as marine stations for fishing. Also, it uses the Unit 96 equipment supply station in Pyongyang’s Sonkyo District to buy reconnaissance supplies from overseas and then transfer them to subordinate military installations who will then distribute the equipment to each associated military corps. [Daily NK]

In related news, the Donga Ilbo reports that China has also begun to inspect air cargo to and from North Korea. We’ll see how that affects the flow of jewelry and flat-screen TVs into Pyongyang.

Meanwhile, along the border with China, the source of most of the goods sold in the markets, the Daily NK reports that “[d]espite the sanctions that have already kicked in, products from China are still flowing into North Korea.” The Economist also reports that non-sanctioned trade continues to flow freely in both directions — and spins this as a failure of the sanctions. But neither U.S. nor U.N. sanctions attempt to impose a blanket trade embargo. Their objective is to target the currency reserves and income that sustain the regime — to starve it of cash without starving the ordinary people. That is an important distinction that some reporters don’t seem to understand.

The news bears careful watching, but so far, the sanctions show signs of constricting the cash flows that fund the regime, without starving the poor and underprivileged. As Yonhap quotes me today, much could still go wrong, and it’s much too early to declare victory.* The U.S. and U.N. member states have only begun to implement the sanctions. Effective enforcement will require more investigative resources, long months of rat-catching, and sustained political will. The U.S. and its allies must avoid unforced errors that cause adverse humanitarian impacts and deny the effort the political support it will need. There will be more provocations, tests, and war scares. Those things are the inevitable costs of belatedly confronting a problem, rather than applying palliatives to its symptoms. But the signs we’ve seen since January are the signs I’d expect to see at this stage if my theory was right.

~   ~   ~

* Errata: My reference to section 302 was incorrect. It’s actually section 304. Thanks to the encyclopedic mind of Professor Lee for catching this. Also, “His Corpulency” and “His Porcine Majesty” are registered trademarks of OneFreeKorea.

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HSBC freezes “at least” $87M in assets of North Korea-linked Chinese tycoon

You all remember Sam Pa, right? He’s the Chinese ex-spy with a history of dubious business dealings in Africa, for which he was eventually sanctioned by the Treasury Department. Pa’s 88 Queensway group also had dealings with Korea Daesong General Trading Corporation, a financial arm of North Korea’s Bureau 39, for which he was not designated. Today, this happened:

HSBC has frozen more than $87m in accounts linked to a Chinese tycoon behind several multibillion-dollar deals in Africa, while it investigates allegations of “serious financial crimes”.

Accounts controlled by Sam Pa and his business associate Veronica Fung were blocked by the bank a year ago, but its internal investigation is still going, court documents have revealed. Last week, a Hong Kong judge declined Mr Pa and Ms Fung’s request that he order HSBC to release the funds, which are “extremely substantial”, according to the ruling. One account alone contains $87m, the documents show.

Mr Pa has built a network of interests in oil, minerals and infrastructure by cultivating regimes regarded as among the world’s most repressive and corrupt, from Angola to North Korea — often blazing a trail for Chinese state-owned groups. [Financial Times]
The story included no suggestion that the action was related to Pa’s links to North Korea. Oh, and you all remember who’s in charge of compliance at HSBC, right? Good for HSBC.

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Namibia’s prohibited arms deal with N. Korea triggers mandatory sanctions under U.S. law.

Namibia is a beautiful desert country with a turbulent history. Some years ago, when I worked in South Africa, I flew from Johannesburg to Cape Town, took a bus across the border to Keetnamshoop, and hitch-hiked to the isolated town of Lüderitz, which sits where the barren dunes of the Namib Desert spill into the cold waters of the Atlantic Ocean. Lüderitz was established by German colonists in the 19th Century; today, many of their descendants still live in the German-style homes their ancestors built. (Thanks to a friendly local I met on the bus, I was an overnight guest in one of those houses.) Hitch-hiking out proved more difficult than hitch-hiking in, but the hours spent waiting on the roadside, amid the dunes, eventually paid off. I hitched a ride out just before a thermonuclear sunset lit the faces of the dunes with a Martian-red glow that should have had a soundtrack by Igor Stravinsky.

My visit to Namibia came just months after the country became independent, and after the end of a bloody bush war that pitted Cuban-backed SWAPO guerrillas against the South African Army. SWAPO has won every election since then by an overwhelming margin. Evidently, SWAPO’s old ties to fellow alumni of the old Soviet bloc endure. The most recent U.N. Panel of Experts report finds that as early as 2002, the Namibian Ministry of Defence hired Korea Mining Development Trading Corporation, or KOMID, a North Korean entity designated by the U.N. and the U.S. Treasury Department, to build it a weapons factory:

101. KOMID reportedly conducted business activities in Namibia until at least early 2015, including through the construction of a munitions factory at Leopard Valley, in the Windhoek area, in cooperation with, or using the alias of, Mansudae Overseas Project Group companies.56

102. Namibia informed the Panel that it had contracts with the Democratic People’s Republic of Korea concerning arms and related materiel before 2005. One covered the construction of the Windhoek munitions factory from 2002 to 2005, involving a subsidiary of Mansudae. Namibia also confirmed that it had received training and technical assistance relating to arms, but stated that, given United Nations sanctions, the relevant experts had returned to the Democratic People’s Republic of Korea.

103. Namibia confirmed that Mansudae was involved in several military construction projects, including the military academy and the ongoing construction of the headquarters of the Ministry of Defence. It denied knowledge of links between Mansudae and KOMID (see annex 70).

104. However, satellite imagery shows that construction at the military base at Leopard Valley was continuing in September 2014 (see annex 71). The Mansudae company brochure also advertised the 2010 contract with the Ministry of Defence for the construction of facilities at Leopard Valley (see annex 70).

105. The Panel confirmed that, as at August 2015, workers from the Democratic People’s Republic of Korea were undertaking construction activities at another military base in Suider Hof (see fig. 23). At the time of writing, Namibia had not replied regarding the purpose of the facility under construction.

106. The construction of any munitions factory or related military facilities is considered to be services or assistance relating to the provision, manufacture or maintenance of arms and related materiel and therefore prohibited under the resolutions. [Panel of Experts, 2016]

The Panel published this photograph of the factory:

Screen Shot 2016-03-14 at 7.06.30 AM

It also noted that two KOMID representatives have been regular visitors to Namibia.

Screen Shot 2016-03-14 at 7.05.32 AM

Both Kil and Kim were designated by the U.S. Treasury Department under Executive Order 13687 on January 2, 2015.

Since the publication of the Panel’s report, the Namibian government has admitted to the relationship, but denied violating the resolutions, offering a spurious interpretation of them:

DEPUTY prime minister and international relations’ minister Netumbo Nandi-Ndaitwah has confirmed the existence of a North Korean-built munitions factory in the country, but said the factory was not in contravention of any United Nations’ sanctions against the Democratic People’s Republic of Korea.

Nandi-Ndaitwah said the Namibian government was not involved in anything untoward, and that government has cooperated with the United Nations and openly answered and forwarded information requested by the UN. [The Namibian]

The Namibians point out that the ventures date back to as early as 2002, and that “relations between the two countries date back to Namibia’s liberation struggle.” But what is at issue here is conduct occurring after October 2006, when UNSCR 1718 banned the trade in major weapons systems with North Korea, and 2009, when UNSCR 1874 extended the ban to all arms and related material. Over the following years, those sanctions were further clarified to eliminate loopholes. The U.N.’s designation of KOMID in April 2009 removed all doubt that any dealings with it since then have been clear violations of the resolutions.

Today, with the passage of UNSCR 2270, there is no doubt that any arms-related transactions with a North Korean entity are prohibited. Namibia is obligated to terminate its relationships with KOMID, freeze all of its assets and property, and send its representatives home.

Namibia also confirmed that it had received training and technical assistance relating to arms, but stated that given United Nations’ sanctions, the relevant experts had returned to the Democratic People’s Republic of Korea. […]

She added that the sanctions against North Korea covered mainly nuclear weaponry, and Namibia is not prohibited from having diplomatic ties with that country.

This is a blue answer to a green question. Of course Namibia is permitted to have diplomatic relations with North Korea; that is not the issue. Of course the U.N.’s North Korea sanctions don’t just cover nuclear weapons; they also ban North Korea’s arms trade, which almost certainly finances its nuclear and missile programs. The Namibian government needs to read the resolutions and comply with them.

She confirmed that a munitions factory was built, but that it was a Namibian project, adding that the North Koreans worked on projects such as the construction of State House, Heroes’ Acre, the military museum, the Independence Museum and other military construction projects.

If KOMID or another U.N.-designated entity is involved in these deals, they’re also prohibited. As with Kaesong, the arrangements are also arguably violations of UNSC provisions requiring member states to freeze any assets that could be used to further North Korea’s nuclear and other prohibited programs.

The UN report stated that the munitions factory was built at at Leopard’s Valley in the Windhoek area, while government confirmed to the UN that Mansudae was involved in several military construction projects, including the military academy and the ongoing construction of the headquarters of the Ministry of Defence.

The Namibians are having trouble getting their story straight.

The deputy prime minister also came to the aid of her colleague, defence minister Penda ya Ndakolo, who flatly denied the existence of a project between Namibia and North Korea to build an armaments factory.

She said Ya Ndakolo was referring to a project which is underway since the munitions factory’s construction project has long been completed. “We are not hiding it,” she stated.

Perhaps the Namibians doubt that the U.N. will enforce its writ and that this will all blow over. A year ago, that might have been a reasonable assumption. Perhaps they’re simply unfamiliar with what the resolutions require, although I suspect the Panel of Experts has since rectified that through bilateral communications. But even if the U.N. can’t enforce its writ, the U.S. Treasury Department can — and must — because of the new North Korea Sanctions and Policy Enhancement Act. Among the conduct that triggers mandatory sanctions is this:

(a) Mandatory Designations.—Except as provided in section 208, the President shall designate under this subsection any person that the President determines—

[….]

(2) knowingly, directly or indirectly, provides training, advice, or other services or assistance, or engages in significant financial transactions, relating to the manufacture, maintenance, or use of any such weapon, device, or system to be imported, exported, or reexported to, into, or from North Korea;

[Update: Rereading this, a closer fit may be section 104(a)(9), which applies to any person the President determines “knowingly, directly or indirectly, imports, exports, or reexports to, into, or from North Korea any arms or related materiel.” Under the sanctions regulations in 31 C.F.R., the term “arms or related material” typically includes (by inference) technical assistance other than for peace-keeping purposes. In the specific context of North Korea, the U.N. also includes technical assistance within the meaning of the term “arms and related materiel.”]

The Namibian MoD’s violations of “applicable U.N. Security Council Resolutions” could also trigger discretionary sanctions under section 104(b)(1)(A), which authorizes the designation of any person who “knowingly engages in, contributes to, assists, sponsors, or provides financial, material or technological support for, or goods and services in support of, any person designated pursuant to an applicable United Nations Security Council resolution.”

A section 104 designation triggers a series of consequences, starting with the blocking of any assets that enter the U.S. financial system, potential prohibitions on transactions in foreign exchange or credit between financial institutions, and a travel ban on Namibian MoD officials.

Namibia’s open defiance of the U.N. Security Council will be an important test of the Obama Administration’s determination to enforce the new law. I can’t speak for Congress, but Congress would probably allow the administration a reasonable opportunity to use diplomacy to get the Namibians to terminate these relationships with North Korea. Failing this, the law requires that the Namibian MoD officials responsible for the dealings with KOMID, and other designated entities, be designated under section 104.

~   ~   ~

Update: Well! Good morning, Namibia!

Screen Shot 2016-03-14 at 11.00.48 PM

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Park Geun-hye finds her inner Thatcher

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Before Josef Schwartz spends an eternity in Hell, would Austria please send him back to prison?

Reading through the new Panel of Experts report, I saw a finding, at Paragraph 108, relating to two 2011 “[s]hipments of spare parts and equipment for submarines and military boats brokered by Green Pine” — a North Korean trading company designated by the U.N. over proliferation concerns — “from Austria to Angola and Viet Nam.” Reading on, I saw that “[t]he consignments were shipped from Vienna by an Austrian national, Josef Schwartz, through his company, Schwartz Motorbootservice.” Remember him? Sure you do. 

Azimut yachtItaly blocked the multimillion-dollar sale of two luxury yachts that Italian police say were destined for North Korean leader Kim Jong Il in violation of international sanctions.

The 105-foot and 95-foot Italian-made seafaring vessels were ordered from the Azimut-Benetti boatyard, a maker of luxury yachts near Turin, by an Austrian company. A Chinese company stepped in later to complete the purchase, Italy’s Economic Development Ministry said.

Italian financial police said the Chinese company paid a Hong Kong business to take delivery of the vessels, valued at nearly €13 million ($18.5 million).

An investigation determined that the yachts ultimately were bound for the reclusive communist nation in violation of international sanctions barring sale of luxury goods to North Korea, the ministry said.

Col. Antonio Leone, the financial-police commander in Lucca, said “it is an irrefutable fact” that Mr. Kim was the intended final recipient, according to Reuters. “There has been a thorough investigation, partly in Austria, backed up by confessions and investigative breakthroughs,” he said. [Wall Street Journal, July 24, 2009]

Europeans and American treat it like a joke when the quirky rulers of starving subjects buy yachts and limousines. But it’s no joke. It’s a crime, against humanity, and against the laws of the European Union. That the Italians stopped the sale is more than I can say for the British authorities, who let another yacht sale to the North Koreans slip through a few years ago. 

And then there are the Austrians, who let Josef Schwartz run free, despite his long history of repeatedly violating EU sanctions regulations. Austrian authorities prosecuted Schwartz for the yacht sale and sentenced him to nine months in prison. Evidently, that wasn’t enough to get the point across, because Schwartz has now been called out by name in no less than three Panel of Experts reports. This is from the 2012 Panel of Experts report:

84. The Panel obtained copies of contracts for the purchase of two yachts concluded by the Austrian firm Schwartz Motorbootservice und Handel GmbH. It also obtained associated financial records and copies of contracts transferring rights and responsibility for making payments from the Austrian firm to a Chinese firm, Complant International Transportation (Dalian) Company Ltd. Member States provided information that Josef Schwartz, during questioning by Austrian police, admitted to being aware of the triangulation that Complant was planning to carry forward, with the intent of selling the ships, subsequently, to the Democratic People’s Republic of Korea. He was convicted by an Austrian court of violating applicable law of the European Union on restrictive measures against the Democratic People’s Republic of Korea both for his attempt to export yachts and in a related case of exporting luxury automobiles to the Democratic People’s Republic of Korea, fined, and sentenced to a nine-month prison term (on parole for a period of three years).

85. The Austrian court judgement records Schwartz’s purchase of eight S-class Mercedes automobiles for the Democratic People’s Republic of Korea. The Chinese firm Complant International is identified as a falsely declared end user for some of these vehicles. Austrian authorities learned that Schwartz purchased the vehicles at the order of Kwon Yong Rok, a citizen of the Democratic People’s Republic of Korea and formerly long-term resident of Austria (he has since left). Numerous media reports and several books have linked Kwon Yong Rok to Office 39 of the Democratic People’s Republic of Korea. He was associated with Golden Star Bank in Vienna (a subsidiary of Korea Daesong Bank, itself subordinated to Office 39)57 before it was shuttered by regulators.

Schwartz gets another dishonorable mention in the 2014 report:

177. The Panel knows that the Democratic People’s Republic of Korea has used indirect payments in attempts to acquire prohibited items. It included in its 2012 final report a 2009 attempt to buy two luxury yachts in Italy.107 Financial techniques used to evade paragraph 8 (a) (iii) of resolution 1718 (2006) included pooling of funds in the Austrian bank account of Josef Schwartz, the owner of Schwartz Motorboot service, who signed the purchase contract. Funds were wired in various amounts from a number of companies in different locales as well as from banks in the Democratic People’s Republic of Korea itself.108 While under investigation, Schwartz reassigned the contract to a second company, Complant International Transportation (Dalian) Co., Ltd, which continued the subterfuge to conceal the actual destination. It used yet another company to wire at least a portion of more than €5 million paid to the shipbuilder, according to Italian authorities.

And yet, Schwartz is free again, enriching himself on money stolen from starving children. A guy with ethics like these probably doesn’t believe there will be retribution in Hell, but can’t someone at least lock up this repeat offender against the laws of man?

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Convicted N. Korean spy now protesting against sanctions in front of the Pentagon

Years before the Democratic Labor Party lawmaker Lee Seok-ki was recorded on a wiretap plotting violent attacks in support of a proposed North Korean invasion, the DLP was rocked by another North Korean fifth column scandal — the alleged Il Shim Hue spy ring.

On October 24th, 2006, South Korea’s state intelligence agency, the NIS, arrested three men: Michael Jang, former Democratic Labor Party (DLP) central committee member Lee Jeong Hun, and the head of a private education institute, Son Jeong Mok. According to investigators, the three were suspected of forming the core of a shadowy group called “Ilsimhoe.” They and two others were said to have visited China in March that year, whereupon information was passed to North Korean agents on a range of matters, including personnel data on a South Korean political party.

The Democratic Labor Party, heavily implicated in the affair, accused state intelligence of seeking to fabricate an “anti-North, anti-unification frenzy” through “false accusations.” However, the Supreme Court ruled against this speculative version of events. Instead, the accused were found guilty of violating South Korea’s controversial National Security Law, which forbids so much as contacting North Koreans, much less passing them sensitive information. [Daily NK, Han Ki-hong]

Eventually, five men would be arrested in connection with Il Shim Hue: Jang, whose Korean name is Jang Min-ho; Lee Jin-gang, an employee in Chang’s firm; Sohn Chong-mok, who had also been a student activist; Lee Jung-hoon, a former DLP leader and head of a group calling itself “Struggle Committee for Liberation of the Masses, Attainment of Democracy and Unification of the Nation”; and Choi Ki-young, the DLP Vice Secretary General, who had also been a leader of violent anti-U.S. demonstrations at Camp Humphreys in 2005.

Long-time OFK readers will recall that the spies were uncovered by South Korea’s National Intelligence Service, or NIS, in 2006, right around the apex of the Sunshine Policy, when the leftist Roh Moo-hyun was still President. The group’s handlers, almost certainly members of North Korea’s Reconnaissance General Bureau, ran the operation out of a safe house on the outskirts of Beijing, where the members had sworn loyalty oaths to North Korea’s ruling Workers’ Party.

From beginning to end, the NIS investigation into the alleged spy ring swam against a mighty current of presidential ambivalence, and it’s not hard to see why. Some reports — most sourced to the NIS and unconfirmed — claimed that Il Shim Hue had used its influence within South Korea’s political left to play kingmaker in the May 2006 Seoul mayoral election, and that it even had a mole inside the Blue House. (The name of a Blue House Secretary was reportedly found among Jang’s papers when his home was searched.) Chang’s own wife worked as a secretary in U.S. Forces, Korea. Jang himself had joined the U.S. Army in 1989 and served in Korea. According to various reports, the group had penetrated “major government offices” and fed confidential information about the six-party talks to Pyongyang. One report alleged that it also plotted violent attacks (foreshadowing Lee Seok-ki’s case years later).

Unfortunately, most of those reports went no further than the pages of the Joongang Ilbo and the Chosun Ilbo and were never tested in court. Just as the investigation was reaching its apex, NIS head Kim Seong-Kew unexpectedly resigned, hinting that he had come under political pressure from above. The case was quickly brought to trial, where a South Korean court convicted Jang and the other four defendants of spying for North Korea, but acquitted them of forming a ring, saying that the organization was too loose to be described as such. In his statement to the court, Jang described the group as “a private unification project group.” So noted. (In their communications with one another, the defendants called their group a “Valentine Club.”)

Jang got nine years, and has since paid this modest debt to society in full. So where is he now?

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[Original article in Korean.]

Apologists for North Korea, mostly those on the far left, are fond of crying “McCarthyism” when their views are compared to Pyongyang’s and found to be strikingly similar, or when it is noted that one influential Korean-American “peace” activist frequently appears at political rallies in North Korea, or in the pages of the Rodong Sinmun while meeting with senior North Korean officials. It should go without saying that not all of those who favor soft-line policies toward North Korea sympathize with the regime or apologize for its crimes against humanity. (I’m not so fond of the recent calls for a “decapitation” strike against Pyongyang myself.)

It would be equally false, and dangerously naive, to deny that there are North Korean sympathizers — and perhaps, agents of influence — among the anti-anti-North Korean left, including here in the United States. McCarthy’s category error was to make broad-brush allegations of foreign influence against those with left-leaning views based on spurious evidence and innuendo. The extreme left answers with a category error of its own, by redefining McCarthyism to include any citation of evidence of another’s extreme left-wing views, even when that evidence includes their own words, or the judgments of competent courts of law.

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N. Korea sanctions are failing because of China. That’s why we need secondary sanctions.

Last November, I put up a post cataloging China’s long and deep history of breaking U.N. sanctions against North Korea. The post, which relied heavily on reports of the U.N. Panel of Experts monitoring North Korea sanctions, attracted a great deal of attention, including from Senate staff as they considered the North Korea Sanctions and Policy Enhancement Act. The new POE report, released yesterday, is almost 300 pages long (including exhibits) and has more than enough material to make a rich sequel to that post. It has almost as much evidence of China’s willful blindness or outright duplicity as the rest of the reports combined.

Yesterday, I singled out one of the most brazen examples, in which the Bank of China told a North Korea-linked customer to hide those links when it processed $40 million in wire transfers through the U.S. financial system (the Chinese government delayed the release of the report because of its objection to that finding).

And there is so much more. For example, multiple U.N.-designated North Korean arms smugglers and proliferators are still operating openly in China. Leader Trading Company and Korea Taesong Trading operate out of Dalian and possibly Dandong (paras. 169-170), while Korea Tangun Trading Corporation still operates out of Shenzhen, under the alias Ryungseng Trading Corporation (para. 174).

They’re keeping busy, too. A cargo of missile-related parts seized on its way to Syria passed through Dalian, despite being linked to Leader Trading Company and Korea Mining Development Trading Corporation, or KOMID (also designated). The North Koreans “used two companies, Dalian Union International Trading Co., Ltd. and Dandong Yongxinghe Trade Co., Ltd. … to procure the items” from China, Hong Kong, Taiwan, and other locations.

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Few of the suppliers asked who the end users were, but in the one case when one did, the Chinese middlemen didn’t answer (paras. 62-70). In the annexes, you can see multiple documents associated with Leader Trading and KOMID’s shipments to Syria, listing addresses in China.

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In 2013, an unnamed member state intercepted a shipment of SCUD missile parts on their way from Beijing to a trading company in Egypt. (Sharp-eyed readers may wonder if this is the same Egyptian trading company the Treasury Department designated here, under Executive Order 13687 last year. It wasn’t, which suggests that Egypt’s links to North Korea aren’t just a one-off, but an issue that deserves more diplomatic attention than it’s getting.) The North Koreans flew the parts to Beijing aboard Air Koryo. The shipper, Ryongsong Trading Co. Ltd., used the same address as North Korea’s embassy in Beijing (paras. 71-75).

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The North Koreans obtained UAVs with military applications from suppliers in China, or from Chinese intermediaries (paras. 78-91). There are many documents on this in the exhibits, mostly from Chinese suppliers.

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Remember when the South Koreans recovered UAVs that had overflown the Blue House and Baekryeong Island? This seems rather damning.

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Remember those special “logging” vehicles the North Koreans bought from Hubei Sanjiang Space Wanshan Special Vehicle Company — quite possibly the world’s only manufacturer of extraterrestrial logging equipment — until they showed up in a parade hauling missiles through downtown Pyongyang? Senator Cruz gave that one an honorable mention in an angry letter he sent to President Obama this year, calling for secondary sanctions on China.

Well, guess what just happened again? This time, Chinese trucks are being used to haul 300-millimeter rockets, which are a serious threat to Seoul, and to U.S. military installations in South Korea (paras. 96-100). China’s defense is that it told the North Koreans to use these $50,000-a-pop trucks strictly for commercial purposes only. (I’m guessing the trucks North Korea actually uses for strictly commercial purposes have somewhat lower Kelly Blue Book values than this.) Except when North Korea lies about end-uses to normal, law-abiding countries, said countries tend to stop selling them those things. Now, UNSCR 2270 prohibits the sale of dual-use trucks.

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A Chinese middleman, George Ma, procured at least four armored Mercedez S-Class sedans for His Corpulency. The cars were purchased from Germany and customized in the United States (I’m guessing the services included putting in extra-strong rear springs). There’s no evidence in the reports to suggest that the German supplier or the American customizer knew where the cars were headed, but the U.S. shop appears not to have done its due diligence on the Chinese purchaser (paras. 118-121), which revealed its North Korean connections on its website. Depending on the timing and other factors, this could be a violation of Executive Order 13551.

I wonder how many kids you could feed for what one of those cars cost. Remember, it’s the sanctions that are starving North Koreans. Just keep repeating that until you believe it.

Screen Shot 2016-03-08 at 10.16.00 PMMirae Shipping, a subsidiary of U.N.-designated Ocean Maritime Management, helped broker the 2013 Cuba arms deal from its office in Shenzhen. From there, things get so unbelievably weird that I’ll just put it out there and let you read it for yourself:

143. Around the time of the designation, in July 2014, Mirae operated several foreign-flagged vessels as charter parties. However, it failed to make its payments, given that it was experiencing financial difficulties. The vessels’ owner companies and mortgagees (“the claimants”) requested maritime courts in Wuhan and Qingdao, China, in August and September 2014, respectively, to arrest and detain several vessels, including the Great Hope and the Benevolence 2. 71

144. In response, the Harbour Superintendence Authority of the Democratic People’s Republic of Korea arrested and detained the claimants’ vessels in the country’s ports on the pretext of “tax evasion” (see annex 87). Another vessel owned by the claimants was already being detained by the country owing to a prior dispute between the charterer and the Korean Ocean Shipping Agency.

145. Subsequently, the Ministry of Land and Marine Transport intervened on behalf of OMM. The Ministry/OMM then led the negotiation by framing the disputes as a single package deal. The negotiations resulted in a set of complex arrangements aimed at achieving the simultaneous releases of multiple vessels among the various parties. The Panel notes the clear influence exerted by the Ministry/OMM over the Harbour Superintendence Authority and the country’s other shipping companies.

146. The negotiations were settled in December 2014 with the release by the Democratic People’s Republic of Korea of the claimants’ vessels in exchange for the claimants’ release from China of the Mirae-operated vessels (see annex 87).72 The settlement’s terms significantly favoured OMM. Mirae was released from outstanding debts. The claimants were forced by the Ministry/OMM to abandon another vessel, which was then transferred to Korea Tong Hung Shipping and Trading (the vessel’s operator) at no cost.

The upshot:

That OMM and the Ministry of Land and Marine Transport, in particular the Ministry’s senior official, Mr. Kim Yu Il, coerced the claimants to transfer to the Democratic People’s Republic of Korea at least two vessels (Benevolence 2 and Great Hope) operated by Mirae (acting on behalf of OMM), which constitutes evasion of the sanctions imposed under paragraph 8 (d) of resolution 1718 (2006) and paragraphs 8 and 11 of resolution 2094 (2013). The Ministry acted on behalf of OMM and assisted in its evasion of sanctions;74

China wasn’t alone in being implicated in the report:

  • Para. 30-33. North Korea’s KN-08 ballistic missile looks like a clone of the Soviet 9M79. Unfortunately, the report doesn’t say how the North Koreans got the plans for the missiles, or whether they got them after the U.N. first imposed its sanctions in 2006. The KN-11 submarine-launched missile also looks a lot like a Soviet SS-N-6/R-27, because the North Koreans obtained one from the Soviets in the 1990s and reverse-engineered it.
  • Para. 61. Burma continues to purchase suspicious nuclear-related items.
  • Para. 94. Eritrea appears to be doing some kind of arms deal with the North Koreans.
  • Paras. 101-106. Namibia got busted hiring KOMID to build it a weapons factory. The key North Korean personnel are diplomats posted in South Africa, who shuttle back and forth between the two countries.
  • In multiple parts of the report, it’s clear that Syria continues to be a major North Korean arms client.
  • Paras. 112-117. Uganda and Viet Nam have both hired North Korean military or police advisors, something that the Panel of Experts thinks was already a violation of past resolutions (me, too), but which is now a definite no-no under UNSCR 2270.
  • Para. 123-129. Israel sold North Korea $346,726 in gold, India sold them $1,913,677 in precious metals and stones, Thailand sold them$262,908 worth of cars, and Brazil sold them some unknown amount of jewelry. Once again, with feeling: sanctions starve babies.
  • Para. 182-186. A Taiwanese company, Royal Team Corporation, sold pressure sensors to North Korea for its missile program, and not for the first time. RTC has been supplying the North Koreans continuously since 2004, often hand-carrying the merch to Pyongyang through (you guessed it) Beijing and Macau. In 2008, a Taiwanese court even convicted RTC for supplying sensitive technology to North Korea. RTC needs to be sanctioned to extinction. Then, its officials should be locked away Supermax, its factory razed, and the grounds sown with salt.
  • Annex 1. The POE is investigating possible attempted North Korean arms dealing involving the UAE, Malaysia, and Ethiopia.

There is also more evidence of North Korea’s abuse of engagement programs to obtain sensitive technology, including from The Centre for Space Science and Technology Education in Asia and the Pacific (para. 46) and the International Astronautical Federation (paras. 55-58 and this post).

Overall, the Panel concludes that North Korea is as determined as ever to acquire nuclear weapons and ballistic missiles, and that sanctions are failing due to member states’ failure to enforce them.

Given the stated intentions of the Democratic People’s Republic of Korea and its continued efforts to enhance the scope of its nuclear and missile programmes and to seek international acceptance and legitimacy for these prohibited programmes, there are serious questions about the efficacy of the current United Nations sanctions regime.

The Panel’s investigations have shown that the Democratic People’s Republic of Korea has been effective in evading sanctions and continues to use the international financial system, airlines and container shipping routes to trade in prohibited items. Designated entities conceal their illicit activities by embedding agents in foreign companies. They use diplomatic personnel, long-standing trade partners and relationships with a small number of trusted foreign nationals. Its designation in July 2014 notwithstanding, Ocean Maritime Management Company, Limited continues to operate through foreign-flagged vessels, name and company reregistrations and the rental of crews to foreign ships. This enables it to obtain access to foreign ports in the region and beyond, as well as maritime insurance, a prerequisite for operation. [….]

All these activities are facilitated by the low level of implementation of Security Council resolutions by Member States. The Panel has consistently highlighted the problems of non-implementation of the resolutions, which allows prohibited activity to continue. The reasons are diverse, but include lack of political will, inadequate enabling legislation, lack of understanding of the resolutions and low prioritization.

The introduction calls out Africa and the Middle East — and certainly, there is evidence of violations there. Indeed, many other states have failed to turn in their compliance reports, or have provided reports of low quality, including non-permanent members of the Security Council. But for the Panel to fail to mention the one state that’s involved in facilitating just about every last one of these violations, either through its banks, intermediaries, immigration authorities, or ports, is telling, especially given the delay in publishing the report. I can only assume that the Chinese representative pressured the Panel to water down this language.

Despite the otherwise excellent investigative work of the Panel, its report shows us that the moral suasion of U.N. alone isn’t enough to make sanctions work. That will require a credible threat of secondary sanctions to get Chinese banks, ports, and businesses to comply, and that will probably require making some examples. For conduct that happens after February 12, 2016, there will be some new rules, and there should also be some very hard consequences.

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Beyond sanctions: S. Korea should open direct, people-to-people cell service for N. Koreans

With much of the North Korea policy debate understandably focused on sanctions this week, I hope North Korea watchers won’t miss this new report from Amnesty International on the efforts by “Swiss-educated reformer” Kim Jong-un to seal off all unauthorized contact between his subjects and the outside world. In recent years, the principal medium for such contact has been the use of Chinese cell networks whose signals penetrate a few miles into North Korea. Those calls had become an important lifeline for refugees in China and South Korea to communicate with and support their families, to broker escapes and migrations, and for smugglers to send food, money, medicine, and other needed goods to North Koreans.

Perhaps in response to these developments, after coming to power in 2011 Kim Jong-un tightened border security, resulting in a dramatic reduction in the number of North Koreans arriving in South Korea that had been steadily increasing in previous years. Individuals who spoke to Amnesty International reported a similar tightening of control over communications near the border in order to stop the cross-border movement of people and to exert more control over the grey market trade. North Korean specialists as well as some interviewees reported that the state has increased monitoring and often blocked mobile signals on the Chinese networks, and imported state-ofthe-art surveillance devices. Individuals’ testimonies also confirmed findings of the Commission, which reported that a special department of the State Security Department had sophisticated equipment to pick up the emissions of “Chinese mobile phones”. Individuals who reported having experienced the surveillance and the jamming of signals first hand told Amnesty International that they saw these actions as a tactic to intimidate potential users of “Chinese mobile phones.” [Amnesty International]

Amnesty’s report is also accompanied by this interactive “explainer,” which includes a video and slide show.

Most experts are skeptical that sanctions will pressure Kim Jong-un into giving up his nukes at the bargaining table, and I’ll confess that I also have my doubts. It’s unlikely that anything short of a fundamental shift in the North Korean government’s world view — most likely, through a coup d’etat, or a breakdown of social control — will allow for a conclusive solution to its nuclear or humanitarian crises in the next five years. After that, it may be too late — North Korea will already be an effective and aggressive nuclear power.

Sanctions have multiple purposes, but none of them is more important to a broader North Korea policy than shifting North Korea’s internal balance of power. Sanctions can weaken the regime’s apparatus of control by denying it the means to pay and equip security forces, and convince official and military officers that the good times are over, and that time is against them. But this is only half of the strategy.

The other half of this strategy is to break the fear, hopelessness, dependency, and docility of the North Korean people, and to help them organize and rebuild a civil society from the foundations up. Information is power. Free communication will introduce North Koreans to the truth about life in the outside world. It will help spread a message of rice, peace, and freedom, raise North Koreans’ independent political consciousness, and stimulate a yearning for a better life than one lived under Kim Jong-un’s heavy boot. It will rebuild connections within separated and divided families. It has helped refugees in the South support their families in the North through a primitive hawala-like remittance system (that is inexplicably still illegal in South Korea). It will help South Korean NGOs fund the growing of food and its distribution to the needy, and to provide for North Koreans’ spiritual and medical needs. One North Korean woman has already used it to send cancer drugs to her sister. Eventually, it will help North Koreans organize and establish underground newspapers, unions, and political organizations. It could also help Seoul set up a well-regulated cross-border banking system to finance all of it.

But how? Creative minds are coming up with many brilliant ideas — and I hope they’ll keep working at it — but I think the technology and the infrastructure already exist.

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

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

The FSC said Kakao Bank has an innovative business plan with broader customer lists based on KakaoTalk, which has more than 34 million members. Kakao is already running mobile payment tools such as KakaoPay and BankWalletKakao.

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

The free flow of information and money is the sine qua non of an engagement strategy designed to reach the people who want change, rather than a regime that resists it. For the last 20 years, Seoul poured $7 billion in no-questions-asked aid and favorable trade arrangements into Pyongyang’s coffers, blithely unaware of how Pyongyang was spending that money, including just maybe using its money to nuke up. In the name of “engagement” with Kim Jong-Il, we were told, Seoul had to take bold risks to draw North Korea into the global economy and gradually induce it to disarm and reform. By now, the results of this experiment speak for themselves. Pyongyang has taken Seoul’s money, nuked up, and rather than reformed, has invested heavily in sealing its borders. 

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[Via Amnesty International]

Why is it, then, that China builds cell towers along the North Korea border, but South Korea does not? Why is it that one can call from Yanji to Musan, but not from Busan to Kaesong? Why is the Yalu River the only front in North Korea’s information war? Why does South Korea waste so much effort on small-ball games with leaflets and loudspeakers, when it could inaugurate Tongilnet, the first South-to-North cell phone service, operating on the same frequency as the recently confiscated Koryolink network? In an instant, it would become possible to call from the top of Halla-san to the foothills of Paektu-san. There’s no way Pyongyang could hire enough censors to monitor all the calls.

This is what strikes me as so dull-minded about Korea-watchers who say that with the closure of Kaesong, Seoul has lost its last bit of leverage over Pyongyang. Nonsense. Just imagine if signals from SK Telecom and other South Korean cell providers also leaked into North Korea, with steadily expanding ranges. Imagine the subversive potential of North Koreans chatting with their relatives in the South, reading the Daily NK on smartphones, sending photographs or video of local disturbances to Wall Street Journal reporters, or downloading religious pamphlets from South Korean megachurches. 

Why not do it now? Until now, political paralysis and appeasement have prevented Seoul from a step as modest as opening up the AM band to South-to-North broadcasts (which Seoul should do). Seoul’s own paranoid security services are also paralyzed by the fear that North Korean spies would also use this network, which is odd. After all, the handlers of Pyongyang’s spies, agents of influence, and fifth columnists in the South seem to be the only North Koreans who aren’t having trouble with “inter-Korean engagement.” It’s a silly and short-sighted policy. Times have changed, and so has the technology. It’s time for imagination and policy to catch up with the times and the technology.

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Update:

Cellphones have the potential to change North Korea by empowering its citizens, Eric Schmidt, executive chairman of Alphabet Inc., which owns Google, said Wednesday. Schmidt, who was in Seoul to watch a Go match between artificial intelligence and a human player, visited North Korea in 2013.

“Since then I don’t think the situation in North Korea has gotten better; I think it’s probably gotten worse overall,” he told reporters. “I think all of us believe that the mobile phone is a strong, strong empowerer of individuals and that eventually the mobile phone penetration in North Korea will be a material impact in its internal structuring. That has not happened yet.” [Bloomberg, Peter Pae]

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U.N. report: Bank of China told shipper in illegal arms deal to hide N. Korean links

Today, the U.N. Panel of Experts monitoring (non-)compliance with its North Korea sanctions released its latest report, and it’s a doozy. Including exhibits, it’s almost 300 pages long, and the substance should be material for several posts. Our first installment comes from the December 2015 conviction of Chinpo Shipping over the 2013 Cuba arms shipment. Remember last July, when I asked, “What about the Bank of China?” Well, we have our answer, and from the look of it, the Bank of China had better lawyer up:

190. In a rare proliferation financing prosecution, the Singapore District Court charged Chinpo Shipping Company (Private) and its Director, Tan Cheng Hoe, with providing financial services or transferring financial assets or resources to OMM (see paras. 137-141). On 14 December 2015, the Court found that Mr. Tan had transferred $72,016.76 to a foreign shipping agent for the shipment aboard the Chong Chon Gang in July 2013 (intercepted by Panama).

191. The judge, Jasvender Kaur, stated that Chinpo “had conducted no due diligence whatsoever” before transferring the funds on 8 July 2013. She found that Chinpo had applied for 605 outward remittances totalling $40 million between 2009 and 2013 on behalf of nationals of the Democratic People’s Republic of Korea. The accused described himself as a “payment agent” for OMM.

192. Court documents provide ample evidence of both the implementation and the evasion of targeted financial measures. The documents indicate that, although Chinpo at one time indicated vessel names in its outgoing remittance forms, it ceased that practice in the second half of 2010. According to Mr. Tan’s statement, “more questions were asked by the bank in the United States when the vessel name was included, and some processing banks will reject the transaction after asking for more information”. He then stated that the Singapore branch of Bank of China, from which Chinpo had undertaken the transaction of $72,016.76, “had advised [Chinpo] to leave out the vessel name in transactions, that bank was aware that the remittances were being conducted on the behest of Democratic People’s Republic of Korea entities”.95 Apparently, as a result of that advice, Mr. Tan began to remove vessel names from the payment details. Chinpo similarly advised entities of the Democratic People’s Republic of Korea on multiple occasions not to include such names in inward remittances, further assisting sanctions evasion. An employee stated that she had been instructed to include that reminder in outgoing e-mails. Another employee elaborated that that instruction had been included “partly because Chinpo wanted to get the money and the funds would be blocked by the US if the US knew that the transfers were made in relation to a Democratic People’s Republic of Korea vessel”.96 The Panel notes that such information-stripping is consistent with the evasion practices used by other OMM entities and individuals.

Got that? The Bank of China, in violation of Executive Order 13551, deliberately advised a customer to strip data out of series of transactions with a North Korean puppet, who was doing an illegal arms deal through the U.S. financial system. Whether the BoC knew the ultimate purpose of the transactions is no defense. Its legal obligations were to perform due diligence and know its customers, especially when that customer was linked to North Korea.

Stripping the North Korean affiliations out of a wire transfer gives this story the whiff of straight-up money laundering, not unlike the conduct that cost Barclays Bank a $2.5M hit for moving $3.3M for Zimbabwe, or caused Credit Agricole to eat a $300M fine for violating Sudan, Cuba, and Iran sanctions. Et cetera, et cetera.

Historically, $40 million hasn’t been a trivial amount of money to the Treasury Department’s Office of Foreign Assets Control, especially when the data-stripping is willful. It is, to use the technical legal term, a “B.F.D.” This may be the point when we figure out whether the Obama Administration is finally serious about enforcing the law against North Korea or not.

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Update: Yup, called it:

In the Bank of China’s case, Beijing’s diplomats have privately raised concerns about the panel’s decision to name the Chinese bank. They have argued that the only evidence comes from a Singaporean court and that the experts should have relied more on the word of Chinese authorities. [Foreign Policy, Colum Lynch]

Read the whole thing.

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China’s compliance with North Korea sanctions, so far: mixed, yet hopeful signs.

As I’ve long argued in these pages, China has a long history of evading and violating the North Korea sanctions it votes for at the U.N. Without the threat of secondary sanctions, it will revert to non-enforcement. When the next U.N. Panel of Experts report is published in the coming days, it will reveal yet more extensive evidence of sanctions violations by Chinese banks, ports, and businesses, often with the knowledge of the government agencies that regulated them.

Since early February, however, evidence has begun to emerge that some Chinese banks, business, and ports are cutting off their North Korean clients. The question is how comprehensive the enforcement is, and how sustained it will be.

Financial Sanctions

In February, we saw the first reports that Chinese banks were freezing North Korean accounts. Last Wednesday, according to the Chosun Ilbo, “banks in the Chinese border town of Dandong suspended all money transfers to North Korea at the instruction of Chinese financial authorities,” in both dollars and Renminbi. According to the report, “[t]he move makes it impossible for North Korean trade officials and hard-currency earners in China to send money home through official channels.”

Russia Today also relays a report from the Tokyo Shimbun that “[t]he four largest Chinese banks” — the Bank of China, Construction Bank, Industrial and Commercial Bank and Agricultural Bank — “have stopped yuan and dollar cash transfers to North Korea.”

These developments are encouraging, but not conclusive. In 2013, three months after the Security Council approved UNSCR 2094, two months after the U.S. Treasury Department blocked North Korea’s Foreign Trade Bank, and ten days after the first version of the North Korea Sanctions Enforcement Act was introduced in Congress, the same four big Chinese banks also halted money transfers to North Korea or froze North Korean accounts. Then, unlike now, however, it was still business as usual in the border city of Dandong, where the Bank of Dandong continued to transfer funds for Pyongyang, and in the Chinese ports of Dandong and Dalian. And within a few months, it was business as usual everywhere else.

What we still don’t know is whether smaller Chinese banks and non-bank institutions are being as careful. So while the preliminary signs are good, the lesson of 2013 is that those effects won’t be sustained unless the U.S. and its allies show a determination to keep enforcing these sanctions, even after North Korea fades from the headlines.

Over the coming months, North Korean operatives will try to move payments through non-bank institutions and cash smugglers, or in the form of gold, bitcoins, and stored value cards. It seems unlikely that a government of a country of 23 million people can operate this way for long, but whether China cracks down on cash and gold smuggling will be a key test of its willingness to pressure North Korea into disarming. Failing that, it will be a test of our willingness to pressure China.

Shipping Sanctions

Last week, the Philippines seized and began to search a North Korean-crewed, Sierra Leone-flagged ship, the M/V Jin Teng, IMO 9163166. The Jin Teng is designated in Annex III of UNSCR 2270 as a vessel owned or controlled by U.N.-designated Ocean Maritime Management (OMM). According to the AP, the ship is “owned by a company based in the British Virgin Islands and managed by a firm in China’s Shandong province.” Although no contraband has been found about the ship yet, a U.N. inspection team is on the way. The Filipino government says it will deport the crew without their ship.

Other countries in the region are cracking down on North Korean shipping. South Korea will impose new bilateral sanctions this week, including “banning the entry of ships to South Korean ports from third-party countries that have been to North Korea.” Reuters reports that China’s Ministry of Transport has told its port directors to “blacklist” the 31 North Korean ships — make that 30 — owned or controlled by OMM, and to notify the ministry if those ships enter Chinese ports or waters. UNSCR 2270 requires member states to seize those ships, and China’s action may mean that it would seize OMM ships, effectively denying them access to its ports.

For reasons that aren’t clear, Chinese ports may also be turning other North Korean ships away. According to a Yonhap report from last week, “A Chinese businessman … in Dandong said his recent request for a North Korean ship to enter the seaport in the Chinese city has been rejected by port authorities,” as part of a broader ban on North Korean ships.

As I noted earlier this week, and assuming the report is true, this would exceed the requirements of UNSCR 2270. Either North Korean captains are refusing to let Chinese Customs inspect their cargo, the Chinese authorities don’t have enough customs officers to do the inspections (an explanation Bill Newcomb discounts, at around 5:30 into this podcast), or the ports directors are turning North Korean ships away on their own, perhaps because they fear blacklisting by U.S. Customs, under NKSPEA section 205.

Expect North Korea to burrow down into its web of shell companies and foreign enablers to find people willing to register and re-flag its remaining ships. I hope someone is tracking OMM’s fleet on NK News.

Mineral Exports

The reports conflict with respect to China’s compliance. At least one report shows that China was still importing North Korean coal the day after the U.N. banned member states from doing so, except for “livelihood” purposes.

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[Click for link to video]

Other reports claim that North Korean coal and mineral shipments were being stopped or turned back at land border crossings. In late February, NK News and Yonhap reported that China’s Commerce Ministry had ordered a company in Dandong to stop buying North Korean coal on March 1st. The Chosun Ilbo quotes a Japanese newspaper, the Nihon Keizai Shimbun, as saying that China halted imports of North Korean minerals through Dandong on March 1st.

On Monday 130 North Korean trucks crossed the bridge linking Dandong with Sinuiju in North Korea and passed the Dandong customs checkpoint, but on Tuesday their number had fallen to 70, it said.

A Chinese customs official told the Japanese daily that the North appears to have hurried to transport as much coal as possible before the ban was imposed.

Once the UNSC adopts a fresh round of sanctions, other Chinese ports will also ban imports from the North, the paper added. [Chosun Ilbo]

The Daily NK‘s network of intrepid informants also reports that China has enforced the ban. They report that “mineral exports such as coal and ore have not been allowed to pass through Chinese customs into China.” It claims that the loaded trucks are sitting in front of Chinese Customs posts along the border, while their drivers wait for instructions.

The Chosun Ilbo later reported that by Wednesday morning, the day after the sanctions vote at the U.N., no trucks carrying coal or minerals crossed the Yalu River headed north. The same day, the Donga Ilbo reported that the coal trade would be “suspended,” but might be resumed in May. 

Other Trade

Sone commentaries on the new sanctions say that their effect will be limited by the resilience of other cross-border trade with China. What these analysts are missing is the complexity of this trade. It includes some commerce that benefits the regime, and a great deal of trade in food and consumer goods that mainly benefits the North Korean people. A cutoff of all cross-border trade would be a bad sign, because it would hurt the wrong people. Fortunately, the signs so far do not indicate that this is the case.

report by the Joongang Ilbo dated March 2nd observed business as usual along the border, but did not specifically mention the presence or absence of North Korean mineral exports. If this report means that other commerce continues, that should be viewed as a sign of resilience in the markets that support most North Koreans.

Christopher Green reports that food prices have risen only modestly since the sanctions took effect, and that even this may be more due to seasonal reasons, regime-imposed market restrictions, and mass mobilizations than the effect of sanctions.

The Chosun Ilbo claims that some North Koreans have been hoarding food and fear another famine, and that markets in Chongjin have almost stopped working, but also attributes this mostly to mass mobilizations and regime-imposed market restrictions ahead of a scheduled party congress in May. It is too early to draw firm conclusions, but food prices will bear close watching over the coming weeks and months.

Analysis

The White House thinks it’s too early to judge how well the sanctions will work, and it is. Still, we can expect these effects to amplify over the next six months as more U.N. member states impose their own national sanctions, and key deadlines approach under both U.N. and U.S. sanctions.

First, under Paragraph 33 of UNSCR 2270, U.N. member state banks must close the correspondent accounts of North Korean banks, freeze North Korean funds, close the branches of North Korean banks, and deport North Korean arms dealers and money launderers. Most of those steps must be taken within 90 days.

Second, under NKSPEA section 201, the Treasury Department will have to decide by July whether to designate North Korea as a primary money laundering concern.

Third, when the U.N. Panel of Experts (POE) releases its next report next week, Congress could issue an NKSPEA section 102 letter, requiring the President to open investigations into whether North Korean operatives and third-party enablers implicated in the report should be designated under section 104. That will be an important test of the administration’s willingness to back its diplomacy with steel.

What does this tell us? What we’ve known all along — that sanctions can exert severe pressure on Kim Jong-un, if we sustain the political will to enforce them, and if we reflect that political will in skillful diplomacy and tough-minded law enforcement.

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WaPo editorial: “China’s switch” on N. Korea sanctions “had a lot to do with” H.R. 757.

After the President signed H.R. 757 into law, but before the U.N. Security Council approved resolution 2270, sanctions skeptics predicted that the new U.S. law would complicate diplomatic efforts to get China to enforce U.N. sanctions. Events thus far have refuted that view. After the President signed the new law, China, which had inflexibly opposed new U.N. sanctions for weeks, reversed course and voted for the strongest North Korea sanctions resolution so far. Even before China’s official retreat, China’s banks had already begun to freeze North Korean accounts. What explains this shift? The editors of The Washington Post offer this guess:

SECRETARY OF State John F. Kerry emerged frustrated from a meeting with China’s foreign minister in late January after proposing new U.N. sanctions on North Korea. Beijing balked, saying it was not willing to take steps that risked destabilizing the regime of Kim Jong Un even after the regime conducted what it claimed was a hydrogen bomb test. On Wednesday, China seemingly reversed course, joining a unanimous U.N. Security Council in imposing the toughest sanctions applied to North Korea in more than a decade.

What prompted this welcome change? Mr. Kerry and his State Department team spent weeks negotiating with their Chinese counterparts — and North Korea’s launch of a long-range rocket last month over Beijing’s objections may have spurred a U.S.-Chinese convergence. Our guess, however, is that China’s switch had a lot to do with steps taken by South Korea and Congress.

In Seoul, the government of President Park Geun-hye, which Beijing has been courting, decided to move forward on plans for deploying a U.S. missile defense system that China regards as a threat. Meanwhile, Congress adopted new U.S. sanctions that could penalize Chinese companies and banks that do business with North Korea. In other words, the Chinese leadership finally was forced to consider tangible consequences for its coddling of the reckless and increasingly dangerous North Korean ruler.

The result is sanctions that, on paper, could have the most damaging impact in Pyongyang since the George W. Bush administration succeeded in locating and freezing the regime’s foreign financial assets in 2005. The new resolution orders the inspection of all cargoes entering and leaving North Korea, bans its export of some minerals and import of arms, and mandates a shutdown of its international banking activities. It also cuts off supplies of most aviation fuels and expands the list of luxury items the elite cannot receive. [Editorial, Washington Post]

In other words, and as I argued last month, the new U.S. sanctions law actually gave the Obama Administration more leverage to succeed in its diplomacy with China. As I argued last week, U.S. and U.N. sanctions are not contradictory, but complementary and mutually reinforcing. Indeed, the timing of the Chinese banks’ actions suggests they may be more responsive to Washington than they are to Beijing. I can’t overstate my doubts that China has had a willing conversion, and has decided to enforce the spirit and letter of U.N. sanctions. But the evidence increasingly shows that whether or not China’s government can be persuaded to enforce sanctions, its banks and ports can be.

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North Korea denounces “rubbish-like provisions” of H.R. 757

It is my great honor to report, if somewhat belatedly, that for the second time, North Korean state media have denounced something I had a part in writing. While searching the Korean Central News Agency for an article on UNSCR 2270, I stumbled upon this:

A spokesman for the DPRK Foreign Ministry issued the following statement on Saturday;
The U.S. is getting evermore frantic with the anti-DPRK campaign obsessed with inveterate hostility toward it.
“2016 North Korea Sanctions Enforcement Act” passed through the U.S. Senate and House of Representatives and it took effect after Obama signed it on February 18. The act is peppered with rubbish-like provisions calling for obstructing the normal economic and trading activities of the DPRK while intensifying psychological warfare for internal destabilization and plot-breeding over “human rights issue”.
The U.S. scenario to hold in check the DPRK’s implementation of the line of simultaneously developing the two fronts through despicable sanctions and psychological warfare is as foolish as trying to get the sun eclipsed by palms.

KCNA is unlinkable, so I’ve posted the full article below the fold for posterity.

Recall that last May Day, no less, the North Koreans also denounced my report documenting North Korea’s extensive state sponsorship of terrorism. So while I have not earned the supreme honor of being called “human scum,” “plot-breeder, with oak leaf cluster” is still a high honor.

When I was a boy, my father once dissuaded me from fighting with my younger brother by teaching me that a man is judged by the size of my enemies. I don’t suppose he imagined then that one day, I would have enemies with nuclear weapons and assassination squads.

In conclusion, it has been quite a week.

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