Now What?

North Korea’s missile test opens up new options for the United States. Here is a list of them.

[Scroll down for updates.] It too easy to say, as many will in the coming days, that there is little that the United States and other nations can do to North Korea diplomatically or economically now that it has done the unthinkably stupid and launched its (taepo)dong and (count ’em!) five smaller missiles [Update: make that six]. Let me express my respectful disagreement with some of the analysts cited by my colleague Richardson below, and let me follow that with a list of specifics.

True, the United States doesn’t have ambassadors in Pyongyang to recall, and there are no direct flights to suspend. Not that either measure is more than cosmetic in any event. There is much, much more that the United States and other nations could do in response to North Korea’s missile test, both unilaterally and multilaterally. That may explain what Stephen Hadley is up to:

The administration quickly launched a diplomatic counter offensive to the missile shots — including one missile capable of reaching the Unites States, but made clear the response will be diplomatic and not military.

“You are going to see a lot of diplomatic activity here in the next 24-48 hours,” said … Hadley.

First, take it in for a moment. It’s a great day to be a hard-liner, and let me be the first to say, “Thank you Father Kim Jong Il.”

Funding the North Korean Human Rights Act: Incredibly, several key provisions of this legislation remain unfunded or underfunded, in large part due to foot-dragging at the highest levels of the U.S. State Department. Most significant among these are the lack of new funds for radio broadcasting or delivery into North Korea. The United States could also decide to fund grants authorized under Section 203, for organizations promoting the human rights of North Koreans who are outside North Korea.

Refugee Protection: Two ideas that have been raised repeatedly in the past are granting temporary protected status to North Korean refugees, which failed in 2004, and more intriguingly, providing immigration inducements to North Koreans who have special knowledge about WMD programs. The draft legislation can be found here, in the North Korean Democracy Act of 2003, which was caught up and smothered in parliamentary procedure.

Trading with the Enemy Act / International Emergency Economic Powers Act. Since President Clinton eased economic sanctions in 1999 — as a reward for North Korea’s missile testing moratorium — it is possible to engage in any number of business transactions with North Korea, including the profligate expenses one must pay to travel there for such occasions as the creepy Arirang Festival. Most imports, exports, and other large transactions require approval from the Office of Foreign Asset Control, a division of Treasury. Look for the United States to tighten restrictions on transactions on the North, with new travel sanctions being especially likely.

The Export Administration Act. Because the North Koreans are listed as state sponsors of terrorism, our options here are limited. Still, South Korea has been pushing the United States to consider lifting these restrictions. That seems unlikely in the extreme today. Beyond that, I’ll refer you to my detailed post on the subject, here.

Executive Order 13,382: See also Proliferation Security Initiative, below. Allows Treasury to freeze the U.S. assets of any entity that helps North Korea acquire WMD components. Already used against numerous Chinese companies.

A New Executive Order? According to this,

The U.S. is readying fresh sanctions against North Korea over the regime’s alleged financial crimes that will be significantly more severe than the ones already in place. [A congressional researcher said that the draft] executive order that would stop any financial firms involved in transactions with North Korea from conducting business in the U.S.

That will mean all banks, brokerage houses and insurance firms and refers not only to illegal transactions but to any financial deals with the North …. Once the regulations are finalized, “the message to financial institutions operating in the U.S. will be that the time has come for them to choose between the U.S. or North Korea….

Racketeer Influenced Corrupt Organizations statute, 18 U.S.C. sec. 1962: While I haven’t had time to research this in great detail, RICO is such a powerful weapon because any activity defined as racketeering can be a basis not just for severe criminal penalties, but for steep civil damages as well. RICO includes such traditional racketeering activities as drug trafficking, kidnapping, and counterfeiting, and may apply to racketerring activities committed abroad. Whether North Korean refugees or U.S. corporations (such as, ironically, tobacco companies) might be able to file RICO suits against North Korea in U.S. courts is an idea that merits further exploration. A RICO prosecution by the Justice Department would hasten the flight of third-country capital from North Korea.

USA PATRIOT Act, Section 311: Just for fun, let’s call this the silent-but-deadly option. This one would hurt, and because it would also hurt South Korea and China, look for the United States to use this as a threat if the South Koreans and Chinese balk at more precise measures.

When the United States designates an entity as one of “special concern” for money laundering — which 18 U.S.C. sec. 1956 defines as almost any transaction involving illegal proceeds — every entity transacting business with the designated entity finds itself in imminent danger of the U.S. Treasury Department freezing a corresponding amount within its reach. The effect? Ask the folks at Banco Delta Asia. Better yet, ask the governments of the Ukraine and Nauru. Treasury has designated each nation under PATRIOT 311 (briefly, in the Ukraine’s case). South Korea and China are both very concerned that the U.S. Treasury Department could designate the North Korean government itself under 311. China is North Korea’s largest trading partner. Because many of its large parastatals also have U.S. assets, many of them would be forced to flee North Korea, regardless of Beijing’s wishes. For South Korea, with its small, incestuous circle of interconnected businesses, it would mean the end of the Kaesong Industrial Park.

Multilateral Activities

Proliferation Security Initiative: We’ve been dropping hints about cracking down on North Korean arms sales since at least 2003, but we’ve yet to actually grow a pair and do it in a sustained and consistent way. While there is no way this would be completely effective if China actively undermined it, the U.S. has already used Executive Order 13,382 to impose sanctions on Chinese entities that helped Iran and North Korea assemble WMD components. The deeper China’s involvement in sanctions-busting, the more pain the U.S. could cause China.

Illicit Activities Initiative: Call this the banker’s answer to the PSI, and it’s apparently having a significant impact. Background here. Like the PSI, the IAI has the advantange of needing no U.N. approval, meaning no Chinese veto. [Update 7/6: The reports that the U.S. might go after Kim Jong Il’s Swiss bank accounts would probably fall under the IAI.]

U.N. Sanctions for Nuclear Activities: In 2003, the International Atomic Energy Agency’s Board of governors passed a resolution condemning North Korea for reactivating its nuclear program. Under pressure from China and South Korea, the U.S. declined to push for sanctions at the Security Council, opting to give diplomacy another chance, and another, and another. The patience of the United States may now be exhausted, but China’s veto isn’t.

An Arms Embargo? I certainly was no fan of the arms embargo the U.N. imposed on Yugslavia, which had little effect on the Serbs, who were already major arms exporters, while the Bosnian Muslims were left fighting with sharp pointed sticks. North Korea is a much better candidate. First, there is little argument that North Korea has a legitimate defense need for more weapons. Second, there is a very strong argument that North Korea ought to be spending that money on grain instead. In the last few years, North Korea has purchased dozens of MiG fighters, at least 18 additional submarines, and 1,000 more artillery pieces. Can anyone seriously argue that North Korea needed those things more than food? It’s hard to see how even South Korea could oppose this with a straight face. China would be inclined to oppose it anyway, but we could let the Chinese know that this would be the cost of U.S. forbearance on PATRIOT 311 sanctions, which would be painful for Chinese companies dealing with the North.

Other Nations

South Korea: With its usual impeccable timing, South Korea announced its intention to ease restrictions on remittances to North Korea, opening the door to a flood of ransom cash for the regime. Expect the United States to object. Korea may go forward with it anyway. There isn’t much lower the relationship between the current U.S. and South Korean administrations could go. The Bush Administration should consider itself blessed that leftist President Roh Moo Hyun’s approval rating, at at an abyssimal 14%, is now just a third of Bush’s. Roh’s own party is beaten and united only by its desire to distance itself from him. Roh may be too weak politically to pick a bare-knuckle fight with the United States. Next year is likely to see a less appeasement-minded administration elected to the Blue House.

Russia: Russia would not be enthusiastic about sanctions, but its interests in North Korea probably aren’t sufficient enough for it to expend political capital to stop them.

Japan: Expect Japan to halt cash remittances to North Korea and ban North Korean ships from port calls. Both would be significant steps. The remittances had been declining until a recent report from an opposition lawmaker suggested that they had risen sharply again by early 2005. How much forex North Korea acquires this way is uncertain, but it probably amounts to several hundred million dollars each year. The port calls mattered for several very important reasons: they were the source of Japanese goodies that rewarded the party elite and graced Kim Jong Il’s table. The Japanese Prime Minister also has new economic weapons at his disposal, cheerly offered up by the Diet. Japan had already followed the U.S. lead in imposing sanctions on banks that laundered North Korean money. North Korea also risks the loss of a significant bilateral trade relationship with Japan. The part about this that the Chinese may hate most could be a decision, probably down the road, to throw out the pacifist clause of its constitution. Japan may be headed for a significant military buildup, with most of the money going to its Navy and Air Force.

China: This is obviously the real question mark, because China keeps North Korea afloat. China’s initial reaction will be anger that North Korea made fools of them. The subsequent reaction will be more paralysis among bickering octagenarians. Some will want to continue milking North Korea as a distraction of U.S. diplomatic and military power. Others see North Korea as a disobedient child and a growing liability. Their hands will be strengthened by any spillover costs to China that result from U.S. economic measures, particularly a PATRIOT 311 designation. They will also argue that North Korea’s threats have driven Japan deeper into the arms of the United States and undermined the presidency of Roh Moo Hyun, very possibly the best the Chinese could hope to get at this stage. In other words, North Korea’s actions could precipitate the sorts of military and diplomatic bonds between Asian nations and the United States that China seeks to loosen.

Two postscripts:

I think Joseph Steinberg is an intelligent (if testy) fellow, but his seemingly favorable treatment of the idea that this whole missile thing was all a hoax was rather odd … even before today.

It also strikes me as odd that this missile failed just after launch. I suppose I will then engage in some unsupported speculation of my own. Any chance that this test failure was assisted by a Standard-3? Curzon offers other explanations (ht Joseph Steinberg).

Update 1: Via the NY Times:

While the test itself was a sign of North Korea’s defiance of the United States, for the administration, the outcome was as favorable as officials could have hoped for: the North’s capacity was called into question, and the North’s enigmatic leader, Kim Jong Il, has now put himself at odds with the two countries that have provided him aid, China and South Korea. “Our hope is that the Chinese are going to be furious,” said one senior American official, who declined to be identified.

Another official noted that only days ago, the Chinese indicated that they were trying to put together an “informal” meeting of the long-dormant six-party talks on North Korea’s nuclear program.

But North Korea had apparently not responded to the Chinese invitation, and American officials said last week that the Chinese would not have made that gesture if they believed that they were about to be embarrassed by the country that they once considered a close ally.

The launching also makes it difficult for the South Koreans to continue their policy of providing aid and investment to the North, a program that has caused deep rifts with Washington.

Administration officials said that Christopher R. Hill, the assistant secretary of state for East Asia and the main negotiator with North Korea, would leave for Asia on Wednesday, and that they expected him to use the launchings to try to bring South Korea and China into the fold on imposing some kind of sanctions.

At the same time, the launching is likely to strengthen the hand of hard-liners in the Bush administration who have long argued that the six-party talks were bound to fail. They now have what one American diplomat called “a clear runway” to press for a gradually escalating series of sanctions, which some officials clearly hope will bring down Mr. Kim’s government.

This is where U.S. and Chinese interests will diverge. China will want to defang Kim Jong Il, not kill him.
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