Fresh North Korea sanctions aim to cripple regime's arms sales profits

The top US envoy on arms control promised Monday that new North Korea sanctions would make it much harder for Kim Jong-il's government to import military supplies and to profit from arms sales.

Robert Einhorn, whose title is special adviser on proliferation and arms control at the State Department, said the strengthened measures were to keep North Korea from getting funds for its nuclear and missile programs and also to stop the import of luxury goods for the elite surrounding North Korean leader Kim Jong-il.

North Korea is earning “hundreds of millions of dollars in hard currency annually” from exports of illicit goods, ranging from missiles to narcotics, and much of the money supports its “nuclear or military programs” as well as “luxury goods purchases,” he said, after discussing the latest US actions with South Korean officials in the capital.

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Mr. Einhorn’s visit to Seoul infused a certain degree of confidence here that Washington is determined to add teeth to sanctions imposed by the UN Security Council last year. Those UN sanctions had come in response to North Korea's testing of a nuclear device for the second time on May 25, 2010. Analysts have long believed that North Korea was circumventing those sanctions as a result of lax controls by contacts in China, its only major ally, as well as Russia and other countries.

Targeting the banks

The new sanctions are expected to go into effect in several weeks. While the list of targeted companies is yet to be made public, the sanctions are expected to impose harsh penalties on any financial institutions and other companies through which North Korea’s top officials have been depositing huge sums over the years from foreign arms sales, including missiles exported to clients in the Middle East.

“They may make it more difficult to make transactions through foreign banks,” says Ha Tae-keung, director of Open Radio for North Korea, which broadcasts news into North Korea that often comes from sources inside the North. “Basically, they’re targeting weapons of mass destruction. Luxury goods are minor.”

The real point of strengthened sanctions, says Han Sung-joo, who has served as South Korea's foreign minister and ambassador to the US, is “they can trace their financial transactions more rigorously” and “they’re going to be hurt by going after financial transactions,” especially when it comes to arms sales and import of badly needed components needed for weapons systems, missiles, and nukes.

North Korean rage over US sanctions – on top of increased military exercises with South Korea in the wake of the sinking of a South Korean naval vessel in March – is sure to increase as North Korea’s shaky financial system feels the impact. The North on Sunday again promised “sacred war based on nuclear deterrent” in retaliation for the exercises.

Different from Banco Delta Asia affair

The strengthened sanctions are potentially stronger than those imposed several years ago after Banco Delta Asia in Macao was revealed as a major conduit for sale of North Korean arms, narcotics, and tobacco as well as counterfeit 100-dollar “supernotes.” The US lifted those sanctions, and arranged the transfer of $24 million in frozen funds from the bank to North Korea, as a prelude to negotiations that culminated in agreements in 2007 for North Korea to give up its nuclear weapons program.

“These sanctions can be much worse,” says Choi Jin-wook of the Korea Institute for National Unification. “The important thing is the heavy impact on the North Koran banking sector.”

Their real effectiveness, he says, is “how much pressure the US will exert” on foreign banks to refuse to deal with North Korean funds. The US cannot order them but can force compliance by banning their dealing inside the US or with US institutions anywhere.

North Korea “made a fuss about Banco Delta Asia,” says Kim Bum-soo, a scholar on international relations and editor of an influential conservative magazine. “This time they are targeting more.” One result, he predicts, is that Kim Jong-il “won’t have enough cash to satisfy his subordinates, for buying gifts for them.”

Former foreign minister Han Sung-joo questions, though, whether stopping luxury goods will have a great impact. “If they can’t buy cognac, what’s the big deal?”

Related:

• US sanctions on North Korea need China's support
• North Korea, don't mess with South, US signals to Kim Jong-Il
• South Korea keeps wary eye on North Korea during war games

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