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U.S. holds powerful but risky tool to halt North Korea's nuclear progress

By Yeganeh Torbati and David Brunnstrom

 

People carry flags in front of statues of North Korea founder Kim Il Sung (L) and late leader Kim Jong Il during a military parade marking the 105th birth anniversary Kim Il Sung, in Pyongyang April 15, 2017. REUTERS/Damir Sagolj/Files

 

WASHINGTON (Reuters) - The U.S. government is turning the screws on companies that do business with North Korea in violation of U.N. sanctions but has stopped short of taking the more aggressive, and riskier, move of targeting Chinese banks that facilitate Pyongyang's trade in arms and other banned goods.

 

On Tuesday, the Trump administration blacklisted 16 Chinese, Russian and Singaporean companies and individuals for trading with banned North Korean entities, including in coal, oil and metals.

 

The campaign to pressure North Korea's trading partners is aimed at eventually forcing Pyongyang to give up its nuclear and missile programs.

 

The latest measures did not, however, sanction the Chinese banks that experts and former U.S. officials say enable North Korea's international trade, often by laundering funds through the United States.

 

Targeting those banks with measures known as "secondary sanctions" could effectively bar them from making U.S. dollar transactions or moving money through U.S. banks, a death knell for most financial institutions, or subject them to huge fines like those levied on European banks accused of failing to follow sanctions on Iran's nuclear and missile programs.

 

China hawks within the Trump administration who have been frustrated by Beijing's perceived inaction on North Korea have been pressing for secondary sanctions.

 

But a more moderate, pro-business faction, including Treasury Secretary Steven Mnuchin and Trump's chief economic adviser Gary Cohn, is concerned about the impact such sanctions would have on the economic relationship with Beijing.

 

"I am not surprised they held off on (sanctioning) Chinese financial institutions," said Joseph DeThomas, a former State Department official who worked on Iran and North Korea sanctions, referring to Tuesday's actions.

 

"Once we go down the road of hitting a Chinese bank that is deeply connected to the U.S. financial system, things will begin to move very fast and be quite unpredictable."

 

China, the world's second-largest economy, is the United States' largest trading partner in terms of goods and an enormous market for American businesses, making the United States vulnerable to any retaliation by Beijing.

 

Earlier this month, China signed on to new U.N. sanctions on North Korea that banned the export of coal, iron, seafood, and lead.

 

Previous U.N. resolutions had restricted, rather than banned, some of those exports. Chinese and Russian support for the new sanctions was a major diplomatic win for the Trump administration.

 

Dan Fried, the State Department's sanctions coordinator until February, said "as a general rule," Washington should warn China before blacklisting Chinese banks, though that may not always be possible. Sanctioning Chinese companies violating U.N. sanctions by dealing with blacklisted North Korean firms would be a good step before going after banks broadly, he said.

 

"Coal and seafood exports from North Korea are now banned," Fried said. "So we should go after any and all companies importing them."

 

He said Washington should also consider "naming and shaming" companies, particularly in textiles, that use North Korean labor, adding that this could include both Chinese and Western firms.

 

Around 5,200 Chinese companies traded with North Korea from 2013 to 2016, according to an analysis by the non-profit research group C4ADS, a relatively small number that could be vulnerable to enforcement measures, experts said.

 

But David Cohen, a former deputy director of the CIA, said implementing U.N. resolutions likely would not entirely address financial relationships North Korean front companies in Hong Kong or China have with Chinese banks and which are "used to funnel funds back to the regime, particularly from illicit sales."

 

"So that's an area where secondary sanctions could be effective," Cohen said.

 

A broad campaign to cut off North Korea's financial links would have a successful recent precedent: the intensive U.S. effort to halt Iran's nuclear program, which included levying $12 billion in fines against European banks that facilitated Iranian trade.

 

Both the George W. Bush and Barack Obama administrations limited Iran's access to financial channels, and eventually went after Iran's broader trade links. That effort was backed by strong Congressional sanctions.

 

The measures worked. Iran's oil exports dropped by more than half, inflation spiked, the currency plummeted, and economic output shrank 5.6 percent in 2012 and 1.7 percent in 2013, according to the International Monetary Fund. Iran agreed to negotiate over its nuclear program, and eventually reached a deal with the United States and world powers.

 

In a warning shot against North Korea, the U.S. Treasury Department in June targeted a small Chinese bank, the Bank of Dandong, accusing it of laundering money for Pyongyang.

 

Also in June, the Department of Justice said a China-based company was laundering U.S. dollars through American banks for a sanctioned North Korean bank. And a handful of other recent U.S. measures have targeted North Korea's international trade and finance networks.

 

But Washington has not targeted Chinese banks working with North Korea in a broad way, and Congress has not yet imposed the kinds of mandatory secondary sanctions that strengthened the hand of U.S. negotiators when dealing with Iran.

 

Anthony Ruggiero, a former U.S. Treasury official now with the Foundation for Defense of Democracies think tank, believes fears of Chinese retaliation for action against Chinese banks are overblown.

 

"There's a way to do it," he said. "You don't have to freeze their assets; you don't have to cut them off from the United States. You can basically declare that their compliance procedures are not appropriate and that they can get significant fines.

 

"(Then) they will start to ask the right questions."

 

Congress is due to consider legislation requiring U.S. measures against any banks that deal with North Korea. The bill is based loosely on the same Congressional sanctions that were imposed on Iran.

 

"You've seen a series of administrations, Republicans and Democrats, who believed that China would cooperate when it came to applying economic pressure to North Korea," Senator Chris Van Hollen, a Democrat and one of the bill's lead sponsors, said in an interview last week.

 

"We have to move from quiet requests for cooperation to very clear demands that China enforce these sanctions that it signed up for."

 

(Editing by Kieran Murray and James Dalgleish)

 

-- © Copyright Reuters 2017-08-25

[impulse]

And North Korea has a powerful but risky tool when they can print $$ trillions of fake USD (and GBP and Eur) and flood the world with almost undetectable fakes.  Think of the consequences of a loss of confidence in paper notes- even for just a few months.

 

And for those advocating "taking the little man's regime out",  Bannon got one thing right.  Tens of millions around Seoul could die in the first 30 minutes of the old school artillery barrage they could launch with the border being just 30-40 miles north.

 

 

 

[gummy]

The US administration are all "Risky Tools" so these talks will end up as the usual gob <deleted> with no action. Trump and his cronies at like eunuchs,  they now what they would like to do but haven't got the balls to do it.

[maewang99]

39 minutes ago, gummy said:

The US administration are all "Risky Tools" so these talks will end up as the usual gob <deleted> with no action. Trump and his cronies at like eunuchs,  they now what they would like to do but haven't got the balls to do it.

doesn't Guterres run this show just as much as Trump does? and maybe is a better "why" as to why we ain't pushing as hard as Trump and Obama would have......?????

it's UNSC 2371 that names the names.

and US banks are just obligated.... by the very same forces..... that obliged the USA to go to the UN not just on this... but Iraq 1 and Iraq 2????

hellooo?
 

that would be the crowd that shows up to Davos once a year... not the Anti Neo Nazi (in 2017???) little people. or US "general population" as Bill Gates always puts it... the Davos crowd... not American TV viewers and their TV literate president.  not nearly as important as we think. did we win in Vietnam because we had nukes and lots of aircraft carriers?  Nope.  We lost.

  



 

Edited August 25, 2017 by maewang99

[craigt3365]

36 minutes ago, gummy said:

The US administration are all "Risky Tools" so these talks will end up as the usual gob <deleted> with no action. Trump and his cronies at like eunuchs,  they now what they would like to do but haven't got the balls to do it.

You can say the entire world doesn't have the balls to deal with this. It's been going on for decades and no action. Place the blame properly.

[boomerangutang]

48 minutes ago, impulse said:

And North Korea has a powerful but risky tool when they can print $$ trillions of fake USD (and GBP and Eur) and flood the world with almost undetectable fakes.  Think of the consequences of a loss of confidence in paper notes- even for just a few months.  And for those advocating "taking the little man's regime out",  Bannon got one thing right.  Tens of millions around Seoul could die in the first 30 minutes of the old school artillery barrage they could launch with the border being just 30-40 miles north.

They're already printing counterfeit dollars. Lots.  They're also involved with other nefarious activities. I wouldn't be surprised if they're making fentanil pills to clandestinely ship to the US - most likely via Mexico.  

 

As for sanctions affecting China:  If the US has trade wars with China, the US will wind up with the ugly end of the stick.  

[craigt3365]

Here's the big problem.

 

http://edition.cnn.com/2017/08/22/politics/us-treasury-sanctions-china-russia-north-korea/index.html

 

Stop the money flow and things will calm down rapidly.

[impulse]

9 minutes ago, boomerangutang said:

They're already printing counterfeit dollars. Lots.  They're also involved with other nefarious activities. I wouldn't be surprised if they're making fentanil pills to clandestinely ship to the US - most likely via Mexico.  

 

As for sanctions affecting China:  If the US has trade wars with China, the US will wind up with the ugly end of the stick.  

 

True, but they're distributing them for the purpose of generating hard currency to buy Cognac, limousines and technology.  That's a different kettle of fish than printing them for the purpose of flooding the world to crash the economies.

 

America doesn't need China.  We were thriving in the decades before China opened up.  China does need America.  They weren't doing so well before America opened its markets to them.  Most of what America has gotten is cheaper trinkets.  China's gotten 90% of the benefits in the form of hard currency and technology.

 

Edit: To be clear, I'm not neglecting the fact that China holds so much US debt.  But look at how they got it.  And cutting off a heroin, gambling, or debt addict is good for him in all but the very short term.

 

Edited August 25, 2017 by impulse

[gummy]

11 minutes ago, craigt3365 said:

You can say the entire world doesn't have the balls to deal with this. It's been going on for decades and no action. Place the blame properly.

But it is only the US,  Trump in particular, who keep spouting bile at Kim, only for Kim to hold up his middle finger, every time .  And if you are going to apportion blame properly to the current situation and its causes, then the cessation of hostilities in 1953 were due to the incompetence of which country to have the ability and balls to take on a much depleted,  under trained and poorly armed ( compared to the US )Chinese army ?

[mike324]

9 minutes ago, impulse said:

 

True, but they're distributing them for the purpose of generating hard currency to buy Cognac, limousines and technology.  That's a different kettle of fish than printing them for the purpose of flooding the world to crash the economies.

 

America doesn't need China.  We were thriving in the decades before China opened up.  China does need America.  They weren't doing so well before America opened its markets to them.  Most of what America has gotten is cheaper trinkets.  China's gotten 90% of the benefits in the form of hard currency and technology.

 

Edit: To be clear, I'm not neglecting the fact that China holds so much US debt.  But look at how they got it.  And cutting off a heroin, gambling, or debt addict is good for him in all but the very short term.

 

America does need China now, those cheap trinkets allow Americans to have a high standard of living. But I do agree with you, the transfer of technology from the Western world allowed China to developed at a fast pace and help lift the country up. If you cut off China now, America will suffer greatly compare to the other way around. 

[soalbundy]

The biggest weapon would be to totally ignore little fat man and let him get on with it, he cant be stopped so why bother, you cant undo the knowledge that they have already acquired but you can ignore him into insignificance, no tweets no diplomatic replies to his bellicose  announcements, no press conferences, nothing. 

[silverhawk_usa]

2 minutes ago, soalbundy said:

The biggest weapon would be to totally ignore little fat man and let him get on with it, he cant be stopped so why bother, you cant undo the knowledge that they have already acquired but you can ignore him into insignificance, no tweets no diplomatic replies to his bellicose  announcements, no press conferences, nothing. 

I agree with this as there are really no sound options at this point.  I would add negotiating an agreement with the other nuclear nations that if any first strikes are made by N Korea the NK regime will be obliterated by all concerned. 

[soalbundy]

Just now, silverhawk_usa said:

I agree with this as there are really no sound options at this point.  I would add negotiating an agreement with the other nuclear nations that if any first strikes are made by N Korea the NK regime will be obliterated by all concerned. 

He will never launch a nuke, he isn't suicidal, nor is he stupid, he wants to be taken seriously on the world stage and he wants an MAD option to stop any possible invasion (which works) although with China covering his back he doesn't even need that (except to show China he isn't entirely dependent on them ) His nukes have given him a stage on which to strut, take away the audience and he may give up by himself.   

[Dustdevil]

Seems possible to me that ships' computer systems are being hacked causing all the US Navy collisions in Asian waters. Meanwhile, why not have the NSA deploy some Zero Day options targeting N. Korea?

[ilostmypassword]

1 hour ago, impulse said:

And North Korea has a powerful but risky tool when they can print $$ trillions of fake USD (and GBP and Eur) and flood the world with almost undetectable fakes.  Think of the consequences of a loss of confidence in paper notes- even for just a few months.

 

And for those advocating "taking the little man's regime out",  Bannon got one thing right.  Tens of millions around Seoul could die in the first 30 minutes of the old school artillery barrage they could launch with the border being just 30-40 miles north.

 

 

 

You think they've been restraining themselves up to now?

[impulse]

1 minute ago, ilostmypassword said:

You think they've been restraining themselves up to now?

 

Absolutely.  Kind of like a bank robber doesn't hit 10 banks on the same block in an afternoon.  They're better off restraining themselves.  But that doesn't signify any kind of benevolence.

 

[ilostmypassword]

Just now, impulse said:

 

Absolutely.  Kind of like a bank robber doesn't hit 10 banks on the same block in an afternoon.  They're better off restraining themselves.  But that doesn't signify any kind of benevolence.

 

A bank robber restrains himself because he can get caught and put in prison. What further punishment can the US impose on North Korea for making counterfeit currency?

[craigt3365]

55 minutes ago, mike324 said:

America does need China now, those cheap trinkets allow Americans to have a high standard of living. But I do agree with you, the transfer of technology from the Western world allowed China to developed at a fast pace and help lift the country up. If you cut off China now, America will suffer greatly compare to the other way around. 

China's economy isn't good right now. The US is doing ok. China would suffer massively. Other countries would step in and fill the gap left by China. Won't hurt the US that much. China would be devestated.

 

IMHO!

[craigt3365]

5 minutes ago, ilostmypassword said:

A bank robber restrains himself because he can get caught and put in prison. What further punishment can the US impose on North Korea for making counterfeit currency?

Go after those still supporting them. China and Russia.

[impulse]

1 minute ago, ilostmypassword said:

A bank robber restrains himself because he can get caught and put in prison. What further punishment can the US impose on North Korea for making counterfeit currency?

 

Not so much the sanctions or punishment, but passing a few $$$ million here and there is more likely to go undetected, accomplishing their objective of raising hard currency and purchasing what they need.  If they were to flood the market with fake USD, GBP and Eur they could trigger all kinds of unintended consequences that could cripple their ability to meet their needs.

 

[Krataiboy]

2 hours ago, impulse said:

And North Korea has a powerful but risky tool when they can print $$ trillions of fake USD (and GBP and Eur) and flood the world with almost undetectable fakes.  Think of the consequences of a loss of confidence in paper notes- even for just a few months.

And for those advocating "taking the little man's regime out",  Bannon got one thing right.  Tens of millions around Seoul could die in the first 30 minutes of the old school artillery barrage they could launch with the border being just 30-40 miles north.

 

 

 

And North Korea has a powerful but risky tool when they can print $$ trillions of fake USD (and GBP and Eur) and flood the world with almost undetectable fakes.  

 

Ssh! You're just giving the globalists another excuse to inflict the cashless society on us sooner rather than later.

[impulse]

Just now, Krataiboy said:

And North Korea has a powerful but risky tool when they can print $$ trillions of fake USD (and GBP and Eur) and flood the world with almost undetectable fakes.  

 

Ssh! You're just giving the globalists another excuse to inflict the cashless society on us sooner rather than later.

 

 2 minutes after I hit the send button, Bitcoin jumped...

 

[retarius]

There's a pretty simple stark choice here. Kim apparently has learned nuclear bomb technology. This will not be unlearned by sanctions or by anything else bar slaughtering the whole NK race.

The US should forego its desired hegemony of NK and the world should get used to the idea of Kim having nukes for his own protection. Might he use them offensively...no, never he wants to live and he wouldn't if he shot the first one.

[funandsuninbangkok]

North Korea is a satellite state of China. To solve the problem we need to make China stop supporting them. 

 

Going after Chinese banks is step one and should be done now. Full antimissle defence shield in Guam, Japan, India,and Singapore next.  Trade  tariffs next. 

[Srikcir]

46 minutes ago, craigt3365 said:

Go after those still supporting them. China and Russia.

And Thailand.

[soalbundy]

45 minutes ago, craigt3365 said:

China's economy isn't good right now. The US is doing ok. China would suffer massively. Other countries would step in and fill the gap left by China. Won't hurt the US that much. China would be devestated.

 

IMHO!

I doubt other countries would willingly fill the gap or could do, America first has made Trump no friends. The Chinese have a sh1t load of debt but so has America and the EU, if China starts to fall then batten down the hatches because we are all going with her. China also owns a huge amount of American debt, China could also pressure American businesses in China which is why the EU wont jump in to help,they to would be vulnerable, splendid isolation is what uncle Sam wanted it's what he is going to get. 

[impulse]

1 minute ago, soalbundy said:

China could also pressure American businesses in China which is why the EU wont jump in to help,they to would be vulnerable, splendid isolation is what uncle Sam wanted it's what he is going to get. 

 

They've pretty much shot their wad there, as more US companies are leaving than entering.  And a lot that are there, are already on the fence.

 

[soalbundy]

2 minutes ago, impulse said:

 

They've pretty much shot their wad there, as more US companies are leaving than entering.  And a lot that are there, are already on the fence.

 

I doubt that will bother them, technology transfer has already happened. The Chinese have just brought out their new passenger aircraft, not long after Boeing and Airbus started joint ventures there, their cars have also vastly improved after VW and BMW had joint ventures with the Chinese, they have bought the German firm Kuka ( production line robotics). I suspect that if the Americans and Europeans left they wouldn't mind too much, less competition would be good for their industry.

[Krataiboy]

The billionaire leaders of the major powers have too much to lose to start a nuclear war.

 

The real danger is one being started accidentally - as has nearly happened on a number of occasions already - or forcing North Korea's young pretender to the nuclear club into a corner from which he sees no face-saving escape.

 

Diplomacy is the best antidote to Doomsday.

[Scott]

1 hour ago, impulse said:

 

Not so much the sanctions or punishment, but passing a few $$$ million here and there is more likely to go undetected, accomplishing their objective of raising hard currency and purchasing what they need.  If they were to flood the market with fake USD, GBP and Eur they could trigger all kinds of unintended consequences that could cripple their ability to meet their needs.

 

Although the NK's can make high quality notes, the cost of doing so is very, very high.   Syria, years ago (and maybe more recently) also was trying the same thing.   It cost them over $100 to produce one $100 bill.  

 

What the situation is with NK, I am not sure, but economically it's not a worthwhile process.