Europe can play an important role in enforcing U.N. sanctions against N. Korea

With the enactment of UNSCR 2270, the EU foreign policy chief Federica Mogherini says the EU will soon move forward with what EU regulators refer to as “restrictive measures” against North Korea.

“There is scope for the European Union to adopt additional autonomous restrictive measures to complement and reinforce the new U.N. measures,” said a diplomatic note seen by Reuters on the latest discussions.

Germany, France, Spain and Poland want to see what more the bloc can do in areas such as finance and insurance, as well as hitting more North Koreans with asset freezes.

Germany, one of seven EU member states to have an embassy in Pyongyang, also wants better monitoring of the “non-diplomatic” activities of North Korean envoys, EU diplomats said. [Reuters]

Further on, the Reuters story defaults to drearily familiar arguments to impotence that have become de rigeur in reporting about North Korea sanctions. In focusing on irrelevancies such as whether Berlin would cut diplomatic ties to Pyongyang — who cares? — its author reveals little understanding of how modern sanctions work, or of Europe’s financial ties to North Korea. In fact, those ties are substantial, and consequently, so is Europe’s role in making sanctions work well enough to alter Pyongyang’s risk-benefit calculations.

First, despite existing U.N. sanctions, Europe remains a key supplier of luxury goods to North Korea, both directly and indirectly. Until now, its enforcement of the U.N. ban on luxury goods exports to North Korea has been lax to non-existent. Examples abound, including the European snow-grooming equipment at the Masikryong Ski resort, the recent sale of yachts to North Korea by a British manufacturer, and the entire Dennis Rodman/Paddy Power debacle. If the EU tightens the enforcement of its luxury goods sanctions, such as by increasing its due diligence and compliance rules, and by blacklisting Chinese and other vendors known to act as middlemen for North Korea, it can make it much harder for North Korea to maintain the lifestyle of its elites.

Second, Europe has shown us a smart way to shut down North Korea’s smuggling fleet, by going beyond the strict requirements of U.N. resolutions. America should take a cue from the EU’s blocking of the Korea National Insurance Corporation (KNIC). Then, the U.S. and the EU should both go one step further and block the Korea Shipowners’ Protection & Indemnity Association (it’s not entirely clear if KSPIA is a subsidiary of KNIC). As we learned from the Chong Chon Gang and Mu Du Bong incidents, North Korean ships rely on KSPIA to insure the fleet of U.S.- and U.N.-designated Ocean Maritime Management, a notorious arms smuggler. If the U.S. and the EU both designate KNIC and KSPIA, it will be difficult for North Korean ships to obtain third-country insurance or, lacking any insurance at all, to enter ports anywhere. (Paragraph 20 of UNSCR 2270 prohibits third countries from reflagging or insuring North Korean ships.) That would force North Korea to rely on third-country ships, which would fail to inspect the North Korean cargo they carry at great peril.

Third, Europe can lend its diplomatic, economic, and moral influence to campaigns against North Korea’s crimes against humanity. There is a rising consciousness among European nations about North Korea’s human rights crisis. Europe has led diplomatic efforts to hold the perpetrators of those crimes accountable at the U.N., and it should continue to do so. EU nations — specifically Germany — should also ban the sale of items to North Korea that the regime uses to censor and oppress its people, such as the rumored sale by a German company of devices used to track down illegal cell phones. Although North Korean forced laborers in Europe are relatively fewer (and probably better treated, as slaves go) than their counterparts in poorer nations, each laborer in Europe earns Pyongyang disproportionately more hard currency than each laborer in, say, China or Qatar. Does the EU know what that money pays for? If not, it should cut it off.

(One of my disappointments with UNSCR 2270 is that Paragraph 32, the asset freeze provision, only requires member states to freeze assets they “determine” to be associated with North Korean entities involved in violating the resolutions. If the EU wants the sanctions to work, it should begin with the fact that cash is fungible, and the understanding that Pyongyang’s highest priorities are those that violate U.N. sanctions. It should then make the same reasonable inferences that South Korea made about Kaesong, that the “wages” paid there were likely diverted to prohibited uses, and that Seoul could not meet its obligation to “ensure” otherwise. Despite the limits of Paragraph 32, I’ve long argued that Kaesong already violated the resolutions enacted before UNSCR 2270, and 2270 did not make similar arrangements legal. Under the same analysis, the use of North Korean laborers in Europe and other countries also violates U.N. sanctions.)

Finally, according to open source reports, vast amounts of North Korean cash are held in European banks. The catch is that some of these European nations (Luxembourg) are EU members, while other key nations (Switzerland and Liechtenstein*) are not. The EU’s implementing regulation should not simply drive North Korean slush funds into other states with less effective regulators; it should instead freeze North Korean assets, releasing only those it can verify are being spent for humanitarian or “livelihood” purposes. In addition to putting sufficient resources behind its regulations to enforce them, it should also exercise its influence over Switzerland to take a similar and coordinated approach. The EU should join the U.S. in blocking North Korea’s Foreign Trade bank from its financial system. Finally, the EU’s regulations should deny North Korean banks access to the SWIFT network, a measure that put severe pressure on Iran.

Thus far, the U.S. and the EU have each imposed relatively weak sanctions against North Korea; worse, U.S. and EU sanctions each attacked different vulnerabilities. A more coordinated U.S.-EU approach that includes (a) sufficient investigative and regulatory resources, (b) better coordination of strategy and targeting, and (c) coordinated diplomacy to encourage other states to join in that strategy, would help make sanctions work where they have failed before.

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* A previous version of this post said that Liechtenstein was an EU member; it is not. Thanks to reader Sebastian for the correction.

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Update: The EU has taken the first, minimum-requirement steps toward implementing the new sanctions by designating the North Korean persons and entities designated by UNSCR 2270. You can find the EU’s notice of regulation here, and a universal compilation of its restrictive measures here.