What re-listing N. Korea as a state sponsor of terrorism would mean

The New York Times is reporting that President Obama is considering re-listing North Korea as a state sponsor of terrorism:

As the United States moves closer to taking Cuba off the list of state sponsors of terrorism, President Obama said he would “review” whether to return North Korea to the list, part of a broader government response to a damaging cyberattack on Sony’s Hollywood studio.

“We have got very clear criteria as to what it means for a state to sponsor terrorism, and we don’t make those judgments just based on the news of the day,” Mr. Obama told CNN in an interview broadcast Sunday. “We look systematically at what’s been done.” [N.Y. Times]

In fact, the standard isn’t clear, and neither is the Foreign Assistance Act’s definition of terrorism, but it wasn’t until I reviewed a post I wrote several years ago that I realized the full significance of a re-listing. I was reminded that Section 2332d of the Criminal Code prohibits financial transactions by U.S. persons with the governments of states designated as sponsors of terrorism, except in accordance with Treasury Department regulations published at 31 C.F.R. Part 596, which require that those transactions be licensed. Because almost everything in North Korea is controlled by the government, this would effectively force most U.S. corporations and their subsidiaries to divest from North Korea, closing one important loophole in our current sanctions. Compare Part 596 to our leaky existing sanctions at Part 510, and you can see the difference clearly.

(What Part 596 would not do, of course, is hit North Korea’s third-party enablers, or its very access to the financial system, as the North Korea Sanctions Enforcement Act would.)

Companies such as the Associated Press and DHL that do business in North Korea would have to scramble to obtain licenses or withdraw. Any U.S. subsidiaries operating in the Kaesong Industrial Park would also be affected. Although Treasury could grant licenses to those choosing to deal with this regime, a re-listing would nonetheless send a powerful signal to lenders and investors everywhere that providing Kim Jong Un with regime-sustaining cash is politically and financially risky.

A re-listing would also require U.S. diplomats to oppose foreign assistance grants and loans by international financial institutions, such as the World Bank, the International Monetary Fund, and the Export-Import Bank. A state sponsor of terrorism also loses its sovereign immunity from civil lawsuits for personal injury caused by the acts of terror it sponsors. North Korea recently lost several such suits in U.S. federal district courts, relating to actions that took place prior to North Korea’s 2008 de-listing. The plaintiffs are now trying to collect nearly $500 million. As recently as July of this year, U.S. District Judge Royce Lamberth found North Korea liable for sponsoring rocket attacks by Hezbollah.

Other effects would be less significant, such as restricting the availability of non-immigrant visas to North Koreans. Theoretically, restrictions on the export of munitions and sensitive technology to North Korea would be further restricted, although the Commerce and Treasury Departments presumably aren’t granting licenses for those exports now.

The re-listing of North Korea is long overdue. President Bush’s decision to take North Korea off the list in October 2008 was an inducement for a disarmament deal on which North Korea had already begun to renege. It was a decision President Obama (while still a candidate) promised to reverse if North Korea didn’t keep its word, but it was President Obama who didn’t keep his when North Korea conducted two additional nuclear tests. North Korea’s de-listing did not follow any North Korean acknowledgement of its past support for terrorism. It actually marked the beginning of a period in which North Korea increased its terrorist threats against the U.S. and South Korea, its assassinations of (and assassination attempts against) exiles and human rights activists, and its shipment of weapons to Hamas and Hezbollah.

A re-listing, if President Obama actually goes through with it, would effectively foreclose the possibility of another nuclear deal with North Korea during the remainder of President Obama’s term, particularly if Kim Jong Un’s reaction is as impulsive as I suspect it would be. It would belatedly challenge Pyongyang’s sense of impunity.