Radio Free Asia has launched an investigative reporting project into the use of North Korean labor on three continents, and the dangers those joint ventures pose not only to the North Korean workers, but to their customers abroad. RFA also published this infographic about where the North Korean workers are, doing everything from logging and construction to staffing medical clinics. No doubt, the conditions in which the North Korean workers labor also vary, which causes some to criticize the description of these workers as “slave” or “forced” laborers. But just try to rationalize this:
Desperate for hard currency, North Korea has been sending tens of thousands of its people abroad to earn cash for the state, dispatching lumberjacks to Russia, construction workers to the Middle East and medics to countries in Africa. Tanzania hosts as many as 12 medical clinics, including four in the capital Dar es-Salaam, that remit about $1 million a year to Pyongyang. The clinics, however, face growing criticism among Tanzanians for doctors who are unqualified and can’t communicate with patients, misdiagnosis of illnesses, unsanitary conditions and poorly labeled medicines that contain toxic metals. [Radio Free Asia]
Throughout history — including in the American South — slaves have always experienced variable degrees of brutality. Nat Turner and Sally Hemmings lived in different circumstances, but the forced servitude of both was disgraceful. The fact that the conditions of servitude for some North Koreans are relatively benign when compared to the conditions experienced by others (at home, or in Siberia) in no way excuses the evil of imposing the terms or conditions of labor on another person, regardless of her will.
Legally, each of these reports is pregnant with legal significance. Any of these reports would be “credible information” that would trigger a mandatory investigation under section 102(a) of the North Korea Sanctions and Policy Enhancement Act. Under section 104(a)(5), persons who knowingly engage in, are responsible for, or facilitate “serious human rights abuses by the Government of North Korea” are subject to mandatory sanctions, including the blocking of their assets and the denial of visas to enter the United States. Executive Order 13722, which implements the new law, blocks the dollars of persons determined by the Secretary of the Treasury 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.” Note that the executive order does not specify “forced” or “slave” labor.
This means that any of these enterprises that run transactions through the dollar system are subject to severe sanctions.
It’s still much too early to say that the new campaign to cut off the hard currency that sustains His Corpulency’s misrule will result in either behavior modification or the termination of that misrule, but we continue to see signs that are consistent with Pyongyang feeling the pressure from sanctions. One of these is its exceptional belligerency of late — exceptional even by North Korean standards. Not a week goes by without news of North Korea violating U.N. sanctions by firing more missiles. North Korea has also increased its UAV flights over South Korean territory, in one case, prompting ROK soldiers to fire warning shots. Most recently, it has jammed GPS signals near the DMZ.
The Ministry of Science, ICT and Future Planning said the GPS disruptions that began Thursday have been repeating at intervals ever since, impacting Seoul’s adjacent city of Incheon, and the surrounding Gyeonggi and Gangwon provinces.
The ministry said 746 airplanes and 621 vessels experienced disruptions, but no significant damage has been reported so far. The disruptions can cause mobile phones to malfunction, and affect planes and ships that rely on GPS for navigation.
Seoul’s defense ministry earlier said that the North’s actions are aimed at raising tensions on the divided peninsula amid mounting international pressure on the North to give up its nuclear weapons programs.
The defense ministry added that there has been no reported negative impact on the South Korean military due to the North’s GPS-jamming provocations. It warned that it will make North Korea pay a “due” price if Pyongyang does not cease its actions. [Yonhap]
These things are certainly threatening and disruptive to South Korean commerce — including at Incheon Airport and the vital sea lane nearby — but South Korea could adapt to them if it had to. After all, aircraft and ships operated before GPS was invented. If they had to, aviators and navigators could relearn the lost art of navigation without it.
The unspoken premise of Pyongyang’s strategy is that electronic warfare is inherently more disruptive to the technologically advanced South than the Luddite North. Nonsense. There can be no better illustration of the potentially disruptive power of signals on the North Korean political system than North Korea’s quarantine of outside information. The fact that North Korea expends so much effort to sustain it — jamming foreign broadcasts, conducting house-to-house searches for illegal DVDs, even importing tracking devices to find and seize the illegal cell phones that help fill its markets and feed its people — tells you that the people with the best information, the North Korean security forces themselves, know that outside information is a grave threat to the stability of the system.
In a must-read report, the New York Times explains how, on a people-to-people level, those cell phones have become a vital link between North Koreans and the outside world, including with their relatives who have escaped from the North, and with people inside and outside North Korea who are hungry for information on the other side of the blockade. But the potential of cell phones as an agent of change is so much greater than this that it’s a mystery to me why one cannot call across North Korea’s southern border just as one can (still, barely) call across its northern border.
Since the start of the current financial isolation campaign, the regime has been exceptionally isolationist — again, even by North Korean standards.
North Korea has been intensifying a “sting operation” to arrest people making contact with South Koreans using mobile phones, especially in border areas near China, sources said Tuesday.
Sources familiar with North Korean affairs said that nearly 10 people have been arrested by security forces since the start of the ongoing 70-day campaign to encourage its people to work harder as the ruling Workers’ Party gets ready to host its first congress since 1980. [….]
A source said that the country’s public security authorities have recently carried out a special operation in the border city of Musan in North Hamgyong Province to round up residents having phone conversations with South Koreans or their relatives living south of the border.
The source said that the security authorities’ sting operations are being conducted in the “Rimgang” area near Musan, where phone connections are relatively good.
According to the source, the North Korean authorities turn off their jamming devices intentionally for two to three hours to make it easier for residents to have smooth telephone conversations and then apprehend them for making the phone conversations that are illegal in the North.
“Some 10 residents have been arrested in such operations since the start of the 70-day campaign,” the source said, adding that there are rumors that those detained will be executed before or after the party congress on charges of espionage.
Despite such crackdowns, the number of people contacting the South or making phone calls with citizens are on the rise, as many rely on support from their relatives to survive in the impoverished country. Money sent can be used to buy goods on the open market. [Yonhap]
As it turns out, North Korea’s jamming of South Korean GPS signals may be collateral damage from a redoubled effort by Pyongyang to strengthen the quarantine by jamming foreign broadcasts, and even blocking websites like Twitter, Facebook, and other applications that foreigners in Pyongyang can access, and use to report information to the outside world. North Korea has always jammed foreign broadcasts, although a 2013 study by Intermedia found that the jamming wasn’t all that effective, perhaps due to the North’s endemic power shortages and the difficulty of sustaining the jamming. Today, however, Pyongyang is sparing no expense to maintain the quarantine.
North Korea has been from the beginning of March continually signal jamming radio broadcasts on the shortwave frequency used by the South Korean non-profit broadcaster Unification Media Group (UMG). Given the present situation, in which North Korean residents might be influenced by outside information condemning the regime and explaining the purpose of the sanctions imposed by the United Nations, the regime has showed the will to block sources of outside information that might cause unrest.
The shortwave frequency in question–7515 kHz, in the 41 meter band–has been actively jammed, making it extremely difficult for North Korean listeners to tune in. [….]
“This is the strongest signal jam in the last few years.As the regime is pushed into further isolation by the strongest round of sanctions yet, they have become concerned that the residents will be awakened by exposure to outside information,” Unification Media Group (UMG) President Lee Gwang Baek said.
“North Korean authorities can not signal jam at high strength across multiple channels, so right now, the most effective thing to do would be to expand our frequencies and signal strength. We need direct [South Korean] government assistance to do that.”
If the government were to grant permission for civil society organizations broadcasting to North Korea to use the former’s powerful and far-reaching medium wavelengths, the broadcasts would be able to reach far more people despite the jamming attempts.
About this, National Intelligence Service First Deputy Director Yeom Don Jae said, “The regime’s efforts to block radio signals from South Korean civic groups is actually confirmation of the potency of these broadcasts. This will cause considerable agitation for the listeners who have become accustomed to tuning in to foreign radio.”
He added, “Therefore, we need to let the North Korean residents know about this situation and use the strength of the regime as a weapon against them. We need to use multi-dimensional methods to pump the North full of information.” [Daily NK]
Exactly right. Regardless of the North’s electronic warfare against the South, the South should be waging an aggressive information war against the North. The campaign should leverage various types of media — broadcasting over short wave, medium wave, and television; and the smuggling of USBs, DVDs, and the devices to read them.
It should focus as much attention on getting information and images out of North Korea as getting them in. Above all else, it should focus on two-way communication, ideally through cell phones, because the information that is most persuasive to North Koreans is what they hear from people they trust. Its message must not only inform North Koreans about the corruption and inequality in their own society, it should also spread a message of peace to counteract the state’s anti-American and anti-South Korean war propaganda. The message should be a variation of the one that worked so well for Marxist revolutionaries a century ago — rice, peace, and freedom.
Even as the information campaign pursues diverse tactics, it must also have a single, cohesive strategy. Calls to establish a pro-democracy movement inside North Korea sound wonderful in the abstract, but how many North Koreans will understand what democracy is, much less the complex ways in which democratic institutions would protect them from fear and hunger? How many North Koreans would risk their lives for abstract ideas? Lately, I’ve become convinced that we should learn from Hamas and the Muslim Brotherhood, which built the foundations of political movements on social service organizations that filled the voids left by uncaring, incompetent, and corrupt governments, while rejecting the terrorist methods they also pursued. In the same sense, clandestine institutions that provide for North Korean’s material needs can establish the organization, resiliency, and credibility to take their messages in more spiritual and political directions later. Again, as the Marxists taught us:
Note that this is not a call to support unconventional warfare, as retired Special Forces Colonel David Maxwell has advocated, or a call for a campaign of nonviolent resistance as the Albert Einstein Institute advocates generally. My view is that both strategies are premature and implausible today, because today, no resistance movement can organize or establish the clandestine political infrastructure that is the prerequisite to all resistance — including nonviolent resistance — to totalitarian regimes.
Seoul is now calling the jamming a violation of the armistice and warning Pyongyang that it will pay a price for it. Certainly information operations can be an effective deterrent, but they can be so much more. They can be the path to Korea achieving its destiny — to be a nation once again.
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Updates: After I published my post, a new Yonhap story tells us that Pyongyang has “strengthened its surveillance of its people in areas bordering China to crack down on those contacting defectors in South Korea ahead of its key party congress.”
“The North is trying to strengthen its control over people in the border areas on the grounds that internal information in North Korea has leaked to the South Korean media,” a source said.
The ministry is carrying out special operations to arrest North Koreans who contact their family members in South Korea via mobile phones, the sources added.
Defectors living in South Korea send money to their kin in the North through brokers in China or the North. They talk over the phone along the border regions where Chinese mobile phones work.
“The authorities have increased the number of agents to monitor North Koreans at public places, such as markets,” the source said. “North Korea has been beefing up its crackdown over its people. Those who are at risk the most are North Koreans who have family members who have defected to the South.” [Yonhap]
My post also drew this response from Colonel Maxwell:
With all due respect to my good friend Joshua Stanton he makes the fatal mistake regarding both unconventional warfare and non-violent resistance (e.g., Gene Sharp) that most non-practitioners, and uninformed policymakers and strategists make regarding unconventional warfare. The resistance in north Korea must be supported and while the conditions may not be ready for the resistance to act (which is why continuous assessment of resistance potential must be made), preparation must occur over time. You cannot just decide to conduct unconventional warfare sometime in the future without any prior preparation. If you want to have that option you have to prepare the environment now and one of the ways to do that is to provide support to the nascent resistance which is what I advocate here. To follow Joshua’s line of reasoning at the end of his article would mean that we never have the option should the Alliance determine that it is one of the ways/means to support Alliance strategy.
But to support Joshua’s call for the (information) war to begin I recently wrote this essay with one recommendation for how to use information to help prepare the Korean people living in the north for unification.
As a non-practitioner, I had not thought that I was proposing anything that would be categorized as “unconventional warfare” by a practitioner, but Colonel Maxwell and I are both saying that the U.S. and South Korea should — immediately — seek to create the technological, social, and political conditions in which resistance (regardless of the form it takes) becomes possible.
Colonel Maxwell also contemplates supporting an armed resistance movement. For today’s purposes, I’ll leave that part of the discussion to the practitioners, although as early as the 1990s, even Wendy Sherman was assuming that this would just happen spontaneously and save us from the nuclear crisis. As the examples of Iran, Syria, and Libya show us, simply letting such things play out on their own seldom ends well.
On the other hand, if widespread popular resistance to the Pyongyang regime becomes a real possibility, it would surely concentrate minds in Beijing and Pyongyang on diplomatic alternatives. Beijing fears chaos in North Korea far more than it fears THAAD — probably even more than secondary sanctions — and the generals in Pyongyang must know that they’re neither equipped, trained, nor financed to wage a nationwide war against their own population.
The measures extend, inter alia, export and import prohibitions to any item (except food or medicine) that could contribute to the development of the operational capabilities of the DPRK’s armed forces. Member states will be required to inspect all cargoes to and from the DPRK on their territories, to ban DPRK chartering of vessels or aircraft and to de-register vessels. They will have to ban flights carrying prohibited items and port calls of vessels engaged in violation of the relevant UNSC resolutions. They will also be required to ban exports from the DPRK of certain mineral products (including coal, iron and gold) and exports to the DPRK of aviation fuel. Member states will be required to expel DPRK representatives and third country nationals involved in the DPRK’s illicit programmes (as identified by the relevant UNSC resolutions).
Moreover, additional financial measures being introduced include:
an asset freeze on government entities associated with the DPRK’s nuclear or ballistic missile programmes or other activities prohibited by UNSC resolutions
an obligation to close:
existing branches, subsidiaries or representative offices of DPRK banks;
existing joint ventures, ownership interests and correspondent banking relationships with DPRK banks; and
existing branches, subsidiaries or banking accounts in DPRK if they could contribute to DPRK’s illicit programme
a ban on private financial support for trade if such financial support could contribute to DPRK’s illicit programmes
The new regulation will become effective when it’s officially published in the EU’s official journal later today. The restrictions on exports and the requirement to inspect all cargo going to North Korea should also limit the supply of European luxury goods to North Korea, although some will invariably continue to leak in through China. It will be interesting to see if the new regulation also expands the definition of “luxury goods.”
The provisions that bear the most careful watching, however, are those that affect finance. The termination of correspondent relationships and the closing of certain accounts should trap large sums of money in European banks. If the dollar is by far the world’s most important reserve currency, the Euro is the second-most important, so this action closes off the most important remaining avenue of escape for those funds.
The Wall Street Journal also quotes EU foreign policy chief Federica Mogherini as saying that the EU “is still considering additional EU-only sanctions on top of the U.N. measures,” and cites unnamed officials as saying that “some preparatory work has started on this.” Previously, the EU has gone beyond U.N. requirements by blocking North Korea’s national insurance company, which is suspected of defrauding European insurers out of millions of dollars.
The new regulation will not completely terminate North Korea’s financial shenanigans on the continent, however. For example, Switzerland and Liechtenstein, two states where large North Korean slush funds are reportedly held, aren’t EU members. North Korean prison camp survivors have called on Switzerland to freeze North Korean assets. The new EU regulation should increase pressure on both states to fully implement UNSCR 2270, and both the U.S. and South Korea can add their own diplomatic voices to that pressure.
Why won’t the Associated Press release the Memoranda of Understanding it signed with the North Korean regime in 2011, in exchange for permission to set up a bureau in Pyongyang? What is it hiding? Plenty of possibilities come to mind, including the signature block. Imagine the AP’s embarrassment if it turned out that, to save time, someone had just pulled an old MOU out of a filing cabinet, crossed out “Josef Goebbels,” and written “Kim Jong-un” underneath it. Practically speaking, that’s about what the AP appears to have done.
The Associated Press news agency entered a formal cooperation with the Hitler regime in the 1930s, supplying American newspapers with material directly produced and selected by the Nazi propaganda ministry, archive material unearthed by a German historian has revealed. [The Guardian]
The AP’s agreement with Goebbels’s propaganda ministry has several disturbing parallels to the AP’s agreement with the Korean Central News Agency, a subsidiary of Kim Yo-jong’s Propaganda and Agitation Department, which was sanctioned by the U.S. Treasury Department last week for censorship. And this is a news agency that claims to be a fearless voice for transparency, freedom of the press, and opposing “Orwellian” control by governments over the images of their leaders.
Associated Press, which has described itself as the “marine corps of journalism” (“always the first in and the last out”) was the only western news agency able to stay open in Hitler’s Germany, continuing to operate until the US entered the war in 1941. It thus found itself in the presumably profitable situation of being the prime channel for news reports and pictures out of the totalitarian state.
The New York-based agency ceded control of its output by signing up to the so-called Schriftleitergesetz (editor’s law), promising not to publish any material “calculated to weaken the strength of the Reich abroad or at home”.
Readers of this blog will recall that in 2014, the cantankerous and inestimable freelance journalist Nate Thayer obtained a draft of the MOU between the AP and the Pyongyang regime. In that draft, the AP agreed to “serve the purpose of the coverage and worldwide distribution of policies of the Worker’s Party of Korea and the DPRK government.” The AP fiercely denies that the draft’s terms reflect the final agreement, yet still refuses to back that up by releasing the final, signed MOUs.
AP also allowed the Nazi regime to use its photo archives for its virulently antisemitic propaganda literature. Publications illustrated with AP photographs include the bestselling SS brochure “Der Untermensch” (“The Sub-Human”) and the booklet “The Jews in the USA”, which aimed to demonstrate the decadence of Jewish Americans with a picture of New York mayor Fiorello LaGuardia eating from a buffet with his hands.
Scharnberg, a historian at Halle’s Martin Luther University, argued that AP’s cooperation with the Hitler regime allowed the Nazis to “portray a war of extermination as a conventional war”.
In June 1941, Nazi troops invaded the town of Lviv in western Ukraine. Upon discovering evidence of mass killings carried out by Soviet troops, German occupying forces had organised “revenge” pogroms against the city’s Jewish population.
Franz Roth’s photographs of the dead bodies inside Lviv prisons were selected upon Hitler’s personal orders and distributed to the American press via AP.
“Instead of printing pictures of the days-long Lviv pogroms with its thousands of Jewish victims, the American press was only supplied with photographs showing the victims of the Soviet police and ‘brute’ Red Army war criminals,” Scharnberg told the Guardian.
“To that extent it is fair to say that these pictures played their part in disguising the true character of the war led by the Germans,” said the historian. “Which events were made visible and which remained invisible in AP’s supply of pictures followed German interests and the German narrative of the war.”
The AP denies that it submits to North Korean censorship, but its failure to cover potentially embarrassing stories just hours (or minutes) from its bureau, while covering gauzy propaganda spectacles and hostage interviews lavishly, calls that into question. The AP’s obvious motive is access.
This law required AP to hire reporters who also worked for the Nazi party’s propaganda division. One of the four photographers employed by the Associated Press in the 1930s, Franz Roth, was a member of the SS paramilitary unit’s propaganda division, whose photographs were personally chosen by Hitler. AP has removed Roth’s pictures from its website since Scharnberg published her findings, though thumbnails remain viewable due to “software issues”.
The AP has also employed North Korean “journalists,” reporter Pak Il Won and photographer Kim Kwang Hyon, in its bureau, although officially, their permanent employer is KCNA, which again falls under North Korea’s the Propaganda and Agitation Department. According to this 2011 report from Reporters Sans Frontieres, North Korean journalists are “government propaganda tools” whose job is “to provide an uninterrupted defence of the regime and its leader.” Andrei Lankov assessed the odds at “99 percent” that Park and Kim “come from the secret police or intelligence services.” His speculation draws support from the reporting of Nate Thayer that men identifying themselves as AP reporters appear to have acted in concert with North Korean interrogators to print carefully selected parts of the “confessions” of detained Americans, who had been coached to manipulate the American people and their government.
The Guardian sees the obvious historical parallel.
In 2014, Washington-based website NK News alleged that top executives at AP had in 2011 “agreed to distribute state-produced North Korean propaganda through the AP name” in order to gain access to the highly profitable market of distributing picture material out of the totalitarian state. The Democratic People’s Republic of Korea comes second from bottom in the current World Press Freedom Index.
A leaked draft agreement showed that AP was apparently willing to let the Korean Central News Agency (KCNA) handpick one text and one photo journalist from its agitation and propaganda unit to work in its bureau. AP told the Guardian that “it would be presumptuous to assume ‘the draft’ has any significance”, but declined to disclose further information on the final agreement.
Significant events, reported in the international media, were not covered by AP’s Pyongyang bureau, such as the six-week public disappearance of North Korean leader Kim Jong-un in September and October 2014, the November 2014 Sony Entertainment hack that had allegedly been orchestrated by a North Korean cyberwarfare agency, or a reports of a famine in South Hwanghae province in 2012.
Then, as now, the lesson of history is that “engaging” totalitarian regimes doesn’t change them; it just changes you. It took 80 years for the truth of AP’s collaboration with history’s most evil regime to come out. If the newsworthiness of The Guardian‘s story today teaches us anything, it’s that history has a long memory for collaborations like these. If the AP thought that the controversy over its Pyongyang bureau would just blow over, it thought wrong.
North Korea’s overseas restaurants are not a significant percentage of its GNP,* but they are an important source of hard currency for Kim Jong-un. As early as 2008, one writer estimated that each restaurant remitted between $100,000 and $300,000 to Pyongyang each year. As of February of this year, there were 130 of them earning $100 million annually. Since then, the South Korean government has told its citizens to stop patronizing the restaurants, and business has fallen dramatically:
On some other night, when the house is packed and the soju flowing, this might set off a drunken singalong, with tables of South Korean tourists clapping wholesomely in the front and smoky huddles of their expat businessmen compatriots leering not-so-wholesomely from the back.
But not tonight.
In the northeast corner of Beijing, the Okryugwan restaurant is feeling the far-flung effects of the latest standoff on the Korean Peninsula. Since the North conducted a nuclear test in January and went ahead with a rocket launch earlier this month, Seoul has instructed its citizens to not patronize the government-affiliated North Korean restaurants that usually pull in a steady stream of curious South Korean travelers, and their precious foreign currency.
“We usually have many tables of South Korean tourists, but business is not good,” North Korean waitress Han Ahn Min said as she poured tea at one of just a handful of occupied tables in a high-ceilinged dining hall capable of welcoming visitors by the busload. [AP]
The Daily NK has reported that the regime had stopped paying the waitresses their salaries.
On the 22, a source close to the issue in China informed Daily NK that female employees at North Korean restaurants were regularly receiving their pay until February (handed out by North Korean managers overseeing each establishment), even if the amounts were meager. However, in February these paychecks failed to materialize, and the outlook for March is also grim.
An additional North Korean source currently residing in China corroborated this news.
“For these female workers from Pyongyang, who scrape by and carefully save every penny, not receiving a month’s pay is a serious and heart-wrenching affair. Unable to voice their complaints over this injustice, these women can only comfort each other during the dark nights before they sleep at night far from home, with tears in their eyes as they think of their parents,” she explained. [Daily NK]
But the greater significance of the restaurants is almost certainly their use for launderingmoney. The restaurants are a stream of “clean” cash for commingling with the illicit funds North Korea’s diplomats and laborers earn abroad. Commingling, the mixing of legally and illegally derived funds, is the essence of what the Men in Blue call “money laundering.” The restaurants’ inflated prices are one indication of this function. Another is the fact they are controlled by Bureau 39, North Korea’s overseas money laundering agency, which is designated and blocked by both the U.S. Treasury Department* and the U.N. Security Council.
So the news that North Korea’s restaurants in China are closing down is more important and better news than Kim Jong-un’s take from selling naengmyeon or soju. Adam Cathcart even posts this picture of a closed-down restaurant on his Twitter feed.
The closure of the restaurants will likely complicate North Korea’s movement of cash from its illegal enterprises to the Chinese banks that still take its deposits.
One question still gnaws at me: if North Korean restaurants abroad are likely fronts for money laundering, handle revenue from other enterprises, and have a utility beyond their own profitability, a simple drop-off in business wouldn’t be enough to shut them down. I wonder if there’s another reason why the restaurants suddenly became unviable. I wonder if it might have something to do with their bank accounts being frozen. Given the restaurants’ reported control by Bureau 39, banks would be taking a very high legal risk by continuing to service those accounts. Indeed, the Daily NK reports that the regime has blamed sanctions for the closure of the restaurants. It will be worth watching whether banks in Europe, Southeast Asia, and other places follow this trend.
~ ~ ~
* Previously said “GDP,” since corrected, because Curtis.
* Previously said “United Nations,” since corrected.
Last week, I posted about the conflicting reports about China’s compliance with the new sanctions on North Korea. Just after I posted that, I noticed that the Daily NK had also added a report of its own, suggesting that amid a regime mobilization to expand coal production, coal exports were being refused by Chinese ports.
“Recently, we’ve seen a full ban on our [North Korean] ships at the Port of Yingkou in Liaoning Province, where coal trade had been most active with China,” a source from Pyongyang told Daily NK in a telephone conversation on Tuesday. “We’ve also received notice that the Port of Rizhao in Shandong Province will also gradually restrict entry.”
An additional source in the capital corroborated this news.
“The news suddenly arrived as a unilateral announcement from China two days ago, leading to chaos at the commerce ministry,” the source explained. “Cadres have been unable to decide whether to turn around all of the other ships at sea, on top of the coal and iron ore vessels that are still awaiting orders after being refused port entry at Yingkou.” [Daily NK]
Contrary to the predictions of sanctions skeptics, the bad economic news is not causing people to rally to the regime.
This setback was reported to the Central Party, but trade officials have instead chosen to admonish others for not taking action in advance to mitigate the problem rather than consider potential solutions. There has also been indirect criticism of the nuclear test and long-range rocket launch, with questions as to why they need to “clean up a mess made by others,” he reported.
Some cadres are reportedly expressing their concerns over the financial implications of these events, exclaiming, “If we can’t export coal any more, we’re done for.” The question of who will be held responsible for the export blockage also has people on edge, with some reminded of Jang Song Thaek shouldering the blame for the country’s failed currency reform and the stalling of construction for the 100,000 homes project in Pyongyang.
The source added that coal workers are also troubled by the export block after having been excited about the prospect of receiving increased rations as a reward for the “70-day battle” production surge. “Cutting off ration supplies [received from China with remuneration for coal] will negatively affect workers and result in diminished output, and by extension impact power plants, the industrial sector, and other aspects of people’s lives. This may in turn ignite a good deal of anger within the public,” he speculated. [Daily NK]
The export ban will affect the operation of the mines in due course. Last year, mine workers weathered another slowdown in Chinese imports because most of the miners’ wives trade in the markets.There will also be many, varied, and complex effects on North Korea’s industrial capacity, some of them completely desirable, and others that may cause the U.S. and China to agree that a use of the “livelihood” loophole in UNSCR 2270 is appropriate.
There will be impacts on the power supply, which has long been spotty, even in Pyongyang where it is disproportionately allocated. No doubt, this will be a good year for the solar panel trade. One positive impact of the last decades of unreliable government services is that North Korea’s poor have learned to be resilient, resourceful, and independent of the state. That’s why, despite last year’s drought and dire predictions of a new famine, North Koreans managed to avert the worst, probably through private agriculture.
It won’t be possible to completely shield the North Korean people from the impact of sanctions, but it is our obligation to mitigate it as much as we can, while telling the North Korean people the real reason why they suffer. Sadly, some short-term hardship may be North Koreans’ only way to escape a future filled with starvation, oppression, and war. The only escape from that future is to break either the regime, or its will to resist change, peace, and openness.
Two weeks ago, I surveyed the evidence of China’s compliance with new U.N. sanctions and found“mixed, yet hopeful signs.” One area in which the signs has seemed especially hopeful was the enforcement of shipping sanctions. The Philippines had already seized one designated ship, the Sierra Leone-flagged M/V Jin Teng, and detained another, the non-designated, North Korean-crewed, Tuvalu-flagged tanker M/V Theresa Begonia. There was also some evidence that Chinese ports were complying, but we’ll get to that later.
Under the resolutions, all member states are required to seize designated ships, like the Jin Teng, but the reasons for the detention of the Theresa Begonia aren’t clear. A report that an unnamed U.N. member state had cancelled its registrations of North Korean ships could be a clue. If the state in question is Tuvalu, the ship might have arrived in port without a valid registration. North Korea’s reflaggers of choice have been Mongolia, Cambodia, Liberia, Sierra Leone, Tuvalu, and Kiribati.
Since then, however, China has pushed the U.S. into supporting the removal by the U.N. of four ships’ designations — the Jin Teng and three other North Korean ships — on the basis that China “discovered” that they were not owned or controlled by U.N.-designated Ocean Maritime Management Company at all. It’s worrying that this decision doesn’t appear to be based on any finding of the Panel of Experts, but on a unilateral conclusion by the Chinese, who pressured the U.S. to accede.
The U.S. did not accede easily. Reuters obtained several diplomatic messages between U.S. and Chinese diplomats, revealing that China threatened to hold up reauthorization of the U.N. Panel of Experts unless the U.S. agreed to removing the designations. This led to what Reuters called a “frustrated back and forth between Washington and Beijing,” in which Samantha Power accused the Chinese of “blackmail.”
The removal of the Jin Teng‘s designation presumably means that Filipino authorities will allow the ship to depart with its crew after the mandatory inspections are completed. Reuters had previously reported that a U.N. inspection team was on the way to the Philippines to inspect the Jin Teng.
It bears careful watching just how often the U.S. will be willing to cave to Chinese demands like these. On balance, it’s probably better to recognize and adjudicate exemptions, designations, and removals of designations than to just go back to what we all used to do — ignore China’s cheating. But there is also a great deal of confusion over how Chinese ports are enforcing shipping sanctions. According to a detailed report in the Asahi Shimbun, the ports of Tainjin, Yingkou, Rizhao, Penglai, Weifang, and Nantong have all barred North Korean ships from entering.
Sources close to Chinese port authorities and trading firms said the port authority in Yingkou, Liaoning province, initially prohibited the entry of all North Korean vessels to Yingkou port based on verbal instructions from the nation’s maritime affairs authority on March 16.
In addition, local port authorities had imposed a ban on entry by North Korean ships at the ports of Rizhao, Penglai and Weifang in Shandong province as well as Nantong port in Jiangsu province and Tianjin port as of March 21.
The five newly-added ports are all major gateways for China’s imports of natural resources from North Korea, while Yingkou port serves as a major hub for coal imports from the belligerent neighbor.
Port authority sources at Penglai and Weifang ports acknowledged that entry by North Korean vessels is prohibited.
“We received a verbal order out of the blue from the customs authority on March 19, and all North Korean vessels are anchored outside the port awaiting permission to enter,” said an official of the Penglai port authority on March 21. [Asahi Shimbun]
Note well that the sources quoted are all local port authorities and traders, rather than national authorities.
According to officials at trading firms involved in China-North Korea commerce, China’s maritime affairs authority has demanded that the operators of North Korean freighters stranded outside the six ports resubmit documents that are required for a port entry application. [Asahi Shimbun]
As a result, North Korean freighters are reportedly hovering offshore, waiting for the Chinese port authorities to review their documents. If the documents check out, they may be allowed to dock. The delays alone will be disruptive to Pyongyang’s finances. Increased inspections could also have a strong impact on North Korea’s lucrative counterfeit cigarette smuggling industry. NK News adds:
While NK News was unable to get confirmation from port authorities at the time of writing, live shipping data shows irregular groupings of North Korean vessels in anchorage off and in close proximity to the listed ports, a possible indicator that the measures are being implemented.
A group of 10 North Korean flagged ships is clustered around Longkou harbour, which is only 40km from Penglai, with a further five North Korean affiliated ships among them. The North Korean flagged Tong Chon is also in close proximity and is around 9km from the port of Penglai.
Four North Korean flagged vessels are also near Bayuqaun, which is within 50km of Yingkou, and are joined by a further eight North Korean affiliated vessels sailing under foreign flags of convenience.
According to the website of China’s Maritime Safety Administration, Yingkou’s port authority also has jurisdiction over Bayuquan port.
“There are an unusually large number of North Korea linked ships near Bayuquan and Longkou, which indicates they could have been rerouted from other ports,” Leo Byrne, Director of Data and Analytics at NK News said.
Another grouping of five DPRK flagged vessels has been seen near the port of Lanshan within the last 24 hours. Lanshan is 35km from the port of Rizaho, which is also on the alleged list of ports banning North Korean vessels from entering. Several of the North Korean flagged ships have since headed away from the anchorages of Lanshan and Rizaho.
“It’s worth noting that if accurate, the Chinese embargo would go well beyond what’s required in Resolution 2270,” Byrne said.
“But questions remain, it’s unclear why North Korean ships would be barred from those ports, yet not Dalian – the most visited port of call for North Korean ships in the area.” [NK News, Hamish Macdonald]
So what do the national authorities say? Beijing has denied implementing “a blanket ban” on North Korean ships, saying, “The reports have no truth,” and that the media should “not invent stories.”
The accusation is preposterous, typical of China’s hostility toward foreign media, and revealing of the pressure China is feeling. The Asahi and NK News reports are well supported and credible. They aren’t inventions, but they are inconsistent with other reports. Last week, for example, Reuters reported that China had banned only U.N. designated ships, and Yonhap reported that the port of Dandong had turned away a North Korean ship “as part of a broader ban on North Korean ships.” Adding to the confusion is the fact that North Korean ships have been turning off their transponders while at sea to avoid tracking.
As I’ve noted before, a complete embargo is more than either U.N. or U.S. sanctions require. U.N. sanctions bar coal imports except for “livelihood” reasons (whatever that means in practice) and require member states to seize ships owned or controlled by designated entities, such as Ocean Maritime Management and the Reconnaissance General Bureau.
U.S. sanctions authorize U.S. Customs and Border Protection to raise inspection requirements for cargo coming from ports and airports where “inspections of ships, aircraft, and conveyances originating in North Korea, carrying North Korean property, or operated by the Government of North Korea are not sufficient to effectively prevent the facilitation of any of the activities described in section 104(a).” Those activities include arms smuggling and WMD proliferation. They also mandate secondary sanctions against Chinese buyers of North Korean coal and other minerals.
In other words, U.N. and (especially) U.S. sanctions directly threaten the interests of local Chinese ports and traders, which is to maintain unfettered access to U.S. markets and the dollar system. Given the choice of trading with North Korea and trading with the U.S., some ports and shippers may — I stress, may — be choosing the latter. That represents a sharp divergence of the ports’ interests from those of Beijing, which is expending diplomatic capital to limit the harm sanctions do to Pyongyang.
This isn’t the only possibility here. The simplest is that Chinese ports and shippers are themselves getting conflicting and confusing instructions from Beijing. There is also some evidence that undercuts this theory. As recently as last week, some Chinese buyers were still accepting North Korean coal, perhaps believing that the “livelihood” loophole applied to their purchases (but see this). And the reportedenforcement of cargo inspections at land border crossing almost certainly was based on instructions from Beijing.
If Beijing is now in a contest with Washington to influence the conduct of ports in northeastern China, then Kim Jong-un has indeed become a serious “strategic liability” for Beijing, just as its economy is slowing. It shows. For example, I’ve never seen the nationalist, anti-American Global Times show so much irritation and pessimism about North Korea. Read that last link. It’s precisely the kind of sentiment the U.S. should be encouraging in China. When North Korea becomes enough of a liability for China, China will rethink its interests, and maybe diplomacy will stand a chance.
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 that. North 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.
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]
“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.”
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.”
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?
How about now?
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).
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, itcouldn’t happen to nicerpeople.
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.
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.
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 beenhoping 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.
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 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;
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;
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.
(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;
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 here. Another 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.
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.
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.
“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.
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]
Meanwhile, along the border with China, the source of most of the goods sold in the markets, the Daily NKreports 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 thesignswe’veseensinceJanuary 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.
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.
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:
It also noted that two KOMID representatives have been regular visitors to Namibia.
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.
This 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]
“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 preoccupiedbyitsowninternaldivisions, 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.
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.
Italy 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]
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.
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?