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The Peninsula

Secondary Sanctions on North Korea Should Be About More than China

Published July 19, 2017
Category: North Korea

By Troy Stangarone

In late June, President Donald Trump signaled a shift in the administration’s North Korea policy when he tweeted that “While I greatly appreciate the efforts of President Xi & China to help with North Korea, it has not worked out. At least I know China tried.” Little more than a week later the administration placed sanctions on a Chinese bank and shipping company and two individuals. More recently, there are reports that the administration will continue to increase the pressure on China by placing sanctions on additional small banks and firms doing business with North Korea. While sanctioning Chinese entities that are evading sanctions to do business with North Korea is a key step, the administration should continue to go after non-Chinese actors engaged in sanctioned activities with North Korea.

Shortly before shifting track on China, the administration sanctioned two Russian firms for their ties to North Korea’s weapons programs. Now there may be an interesting new case to consider. Recent investigative reporting by NK News found that Singaporean based OCN (S) Pte Ltd., which built a new commercial development in North Korea and operates two high-end department stores in Pyongyang, has ties to Office 39 and is involved in importing luxury goods banned under UN sanctions. If the claims are corroborated, it could expose OCN to U.S. sanctions. Under tools available to the administration OCN would be subject to U.S. sanctions for both its ties to Office 39, which is an entity sanctioned by the United States and the United Nations, as well as it aid in the facilitation of luxury goods imports into North Korea.

There are three good reasons for the administration to pursue sanctions on entities not based in China. First, for sanctions to be effective against North Korea they need to deprive the regime not simply of access to resources, but the effects need to be felt by the ruling elite in Pyongyang. While North Korea will not give up its weapons due to a few less bottles for cognac or a decrease in other luxury goods, limiting the regimes access to luxury items is one means to create discontent among the ruling elite with the regime’s policies. If the burden of sanctions is only borne by the broader population, it will have little impact on North Korean policy.

Second, while China receives the majority of the attention on sanctions enforcement, as North Korea’s most significant trading partner should, it is not the only source of revenue and goods for the regime. If the administration is able to utilize secondary sanctions against Chinese entities to either restrict North Korean trade or induce greater Chinese cooperation, it also needs to be closing off alternative sources that might be able to provide the regime in Pyongyang a lifeline in a crisis, if not to the same degree as China. Focus on China is necessary, but not sufficient for sanctions to work.

Going after sanctions violating entities in other countries sends a signal to those doing business with North Korea that they are not safe merely by not being a Chinese entity.  It also begins to constrict Pyongyang’s options.

Lastly, targeting third countries provides political space for both the United States and China. China has long opposed the use of U.S. domestic laws to achieve foreign policy goals. However, while China may oppose the method, if the evidence for the violations is solid and firms other than those in China are targeted it may provide space for Beijing to begrudgingly continue to cooperate with the United States. For the United States, it demonstrates that Washington is going after any and all entities that are violating sanctions on North Korea and avoids leaving the appearance of solely targeting China. Maintaining space for Chinese cooperation is important as the United States eventually will need China’s cooperation to deal with North Korea.

Troy Stangarone is the Senior Director for Congressional Affairs and Trade at the Korea Economic Institute of America. The views expressed here are his own.

Photo from aotaro’s photostream on flickr Creative Commons.

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