Marcus Noland on Sanctioning North Korea
First, a note of congratulations to Mr. Noland on being named Deputy Director of the Peterson Institute. Noland also has a paper out on the prospects for disarming North Korea though sanctions. Here’s a teaser, and I’ll let you read the rest on your own:
Given the extremely high priority the North Korean regime places on its military capacity, it is unlikely that the pressure the world can bring to bear on North Korea will be sufficient to induce the country to surrender its nuclear weapons. The promise of lifting existing sanctions may provide one incentive for a successor government to reassess the country’s military and diplomatic positions, but sanctions alone are unlikely to have a strong effect in the short run. Yet the United States and other countries can still exercise some leverage if they aggressively pursue North Korea’s international financial intermediaries as they have done at times in the past. [Marcus Noland, Peterson Institute Working Paper]
What Noland says makes sense to me. While most other states would eventually decide that the loss of international trade and prosperity for their people had made the cost of nukes prohibitive by now, Kim Jong Il is no ordinary dictator. To him, the loss of nukes makes the cost of feeding the people prohibitive, and plenty of North Koreans who can testify to that without speaking a word. As I argued myself in my latest New Ledger piece, sanctions won’t make Kim Jong Il negotiate his nukes away, but if they’re pursued in a way that cuts off the flow of foreign currency on which Kim Jong Il’s rule depends, we might eventually get the chance to negotiate with someone more reasonable.
Will sanctions just drive North Korea into the arms of the Chinese? Yes, to a large extent, but the total capital inflow will still decrease if sanctions are pursued effectively. I think we also tend to miss the emotional and political complexity of the relationship between China and North Korea. North Korea’s extreme nationalism creates a fear of that very dependency and shows in North Korea’s frequent exasperation of Chinese investors (speaking of which, whatever happened with China’s massive investment in the Rajin port? Is it still going the way of Kaesong, or for that matter, of every other major foreign investment in North Korea?). China can and will ignore U.N. sanctions as much as it get away with doing so, despite a few words and displays which I suspect are meant to placate us and throw the dogs off while business as more-or-less usual continues. I suspect that the recent vanadium seizure is such a case, and may have been motivated by domestic economic motives in any event. What would convince me that China isn’t double-dealing us? An end of stories like this, this, this, and this.
But there are limits to how much China can help North Korea dodge sanctions when Chinese companies aren’t willing to expose their assets for the sake of risky investments in the North and risk their own access to the international financial system. Even if U.N. sanctions don’t influence them, Treasury’s efforts to cut off the flow of cash to the North probably still can:
Chinese investment company developing a copper mine in North Korea with a North Korean company sanctioned by the UN Security Council has reportedly called an abrupt halt to the project.
An industry source in China said the investment firm sent a letter to NHI Shenyang Mining Machinery, the company it had commissioned to build facilities for the mine in Hyesan, North Korea, telling it to stop construction. An estimated 400,000 tons of copper are deposited there.
The Chinese firm had signed an agreement with (North) Korea Mining Development Trading Corporation to develop the mine in November 2006. But the North Korean partner was blacklisted by the UN Security Council after North Korea carried out its latest nuclear test. [Chosun Ilbo]
I hope there’s at least some truth to this report. It originally claimed that the project was a bronze mine — it’s since been corrected — not an easy thing to take seriously given the miracle of metallurgy that would require. And that’s not even the most incredible part of the story:
The industry source said, “When Chinese Vice President Xi Jinping visited Pyongyang in June last year, he pledged full support for the development of the Hyesan copper mine so that it could become a model for investment by Chinese business in North Korea. This prompted NHI to hurry construction so that production could start in September this year.”
But he added the Chinese government apparently persuaded the investment firm to stop the project as Beijing takes part in the UN sanctions. “Otherwise, it’s unusual for a project to be stopped at this late stage,” he said. The investment firm reportedly gave NHI no reason for the cancellation.
When pandas fly. A more likely story is that Treasury told the Chinese government that its mining investments in North Korea were on the target list for sanctions under Executive Order 13,382 if they didn’t divest themselves:
Ambassador Philip Goldberg, U.S. coordinator for implementation of U.N. sanctions against North Korea, told reporters that U.N. member states have voiced “a unity of view, a singleness of purpose in implementing these (sanctions) resolutions.”
“That’s the case, certainly, with our Chinese partners,” he said after addressing a closed-door meeting of the Security Council’s sanctions committee on North Korea. “There have been some results, some of those have been reported in the press.” [Reuters]
Yes, that’s just how I’d expect him to put it, but it seems overwhelmingly likely that Goldberg made an issue of investments like this one. Mining investment has long been a major part of China’s economic support for the North and its wealthiest military officers. The North Korean mining industry has long been suspected of involvement in WMD proliferation and has been a frequent target for sanctions. Just today, it was reported that Treasury has announced new sanctions — probably under 13,382 — against Korea Hyoksin Trading Company, a subsidiary of the long-blacklisted Chosun Ryongbon General Corporation. North Korea’s mining industry has also been infamous for its terrible safety record and its use of slave labor.