Sanctions

The UN Security Council (UNSC) unanimously passed Resolution 2321 condemning North Korea’s fifth nuclear test, conducted on September 9, 2016. The resolution builds on Resolution 2270 passed by the UNSC only nine months earlier in response to North Korea’s fourth nuclear test by imposing even tougher restrictions on North Korean maritime and financial activities, misuse of diplomatic channels for commercial purposes, and restrictions on North Korean trade. On paper, UNSC 2321 essentially calls upon member states to place North Korea under economic quarantine unless it reverses course on nuclear development. Most notably, the resolution imposes a numerical and volume cap of $400 million or 7.5 million tons/year of coal exports to China from 2017. According to Marcus Noland, this represents a $650 million reduction in coal exports compared to 2016 or an over 20 percent reduction in the value of North Korean merchandise goods exports of approximately $2.7 billion. An additional ban on North Korean exports of copper, nickel, silver, and zinc should cost the North Koreans an additional $100 million. Following the passage of each UNSC resolution imposing even tougher sanctions on North Korea, a pattern has emerged. First, there is the feeling with the release of each UNSC resolution that China has outperformed expectations by agreeing to tougher sanctions than expected. Then, there is the realization that China has left sufficient loopholes and wiggle room to ensure that North Korea pays a price for its nuclear weapons development, but not so large a price that North Korea’s stability is endangered. Finally, just when it becomes clear that China is easing off on the pressure, the cycle repeats itself, and North Korea conducts yet another nuclear or missile test. North Korea’s provocation cycle depends on China’s fundamental interest in peninsular stability to ensure that the umbilical cord from China through which Pyongyang receives essential “livelihood” support is never irreparably cut. Moreover, if early signs of distress were to develop in Pyongyang, China’s choke points to North Korea would quickly become lifelines once again. A similar repeating cycle of debate goes on in U.S. debates regarding the role of cooperation with China in policy toward North Korea. President-elect Donald Trump suggests he may repeat this cycle by suggesting that the United States should leave the North Korea problem to China. But to move toward a solution on North Korea, the Trump administration will have to find a way to break the cycle of dependency on China. Cooperation with China is necessary to exert maximum pressure on North Korea, but cooperation with China by itself may never be sufficient to present Kim Jong Un with an existential choice between survival and denuclearization. Indeed, Kim Jong Un has already rejected the premise that there could be such a choice by adopting byungjin (simultaneous nuclear and economic development), as the fundamental strategic line of the regime and as a source of legitimation for his rule. This leaves U.S. policymakers straining to maximize cooperation with China while simultaneously seeking the missing ingredient independent of cooperation with China that can finally fill the gap.

A decade has passed since North Korea first tested a nuclear weapon, on October 9, 2006. It conducted its fifth nuclear test last September, and there are rumors that a sixth will come within weeks or months. The United States has tried to both negotiate with and sanction North Korea while strengthening deterrence with South Korea and conducting shows of force to underscore the U.S. commitment to South Korean defense, but these measures have not halted, much less reversed, North Korea’s nuclear program. Instead, following the leadership transition from Kim Jong-il to Kim Jong-un, North Korea has elevated its nuclear program to a primary strategic commitment, reigniting debates among U.S. experts over whether the U.S. goal of “complete, verifiable, and irreversible denuclearization” is feasible. North Korea has conducted four tests during the Obama administration, and the president reiterated after the latest one that the United States “does not, and never will, accept North Korea as a nuclear state.” Yet the longer that North Korea is able to expand its nuclear delivery capability, the more empty U.S. condemnations may become and the closer North Korea will edge toward winning de facto acceptance of its nuclear status. North Korea is believed to have twelve to twenty nuclear bombs and recently successfully tested intermediate-range ballistic missiles and submarine-launched ballistic missiles. Its latest nuclear test was estimated to yield ten to fifteen kilotons, and U.S. and South Korean intelligence officials believe that the country now has the capability to miniaturize warheads to fit them on Nodong class medium-range missiles. Amid these developments, a review of North Korean and U.S. official statements surrounding each of North Korea’s nuclear tests over the past decade is useful for understanding the evolution of North Korea’s threat. North Korea’s Initial Intentions “The longer that North Korea is able to expand its nuclear delivery capability, the more empty U.S. condemnations may become and the closer North Korea will edge toward winning de facto acceptance of its nuclear status.” At least eighteen months prior to the Democratic People’s Republic of Korea’s (DPRK) first nuclear test, in October 2006, its foreign ministry signaled Pyongyang’s intentions to carry one out. On February 10, 2005, the ministry announced that North Korea was compelled to “bolster its nuclear weapons arsenal in order to protect the ideology, system, freedom, and democracy chosen by the people.” The following month, the DPRK declared that the Six Party Talks on its denuclearization (negotiations between the United States, China, Japan, Russia, North and South Korea)should be transformed into mutual disarmament talks. It had interpreted the Bush administration’s nuclear posture review as implying that Pyongyang could become a target of U.S. nuclear weapons. It said that the United States should rescind what it called a policy aimed at toppling the DPRK through nuclear war as a prerequisite of its own denuclearization. Although a Six Party Talks joint statement from September 2005 envisioned the DPRK denuclearizing in return for steps toward U.S.-DPRK and DPRK-Japan diplomatic normalization, economic assistance, and the establishment of a permanent peace regime, subsequent talks were stalemated after the U.S. Treasury designated Banco Delta Asia (BDA) a “primary money laundering concern” and froze more than $25 million in North Korean funds. North Korea presented its decision to conduct the test in 2006 as a response to U.S. efforts to “isolate and stifle” the regime. At the time it stated a no-first-use nuclear posture, asserted that it would prevent the transfer nuclear weapons and technology, and pledged to “do its utmost to realize the denuclearization of the peninsula and give impetus to the worldwide nuclear disarmament and the ultimate elimination of nuclear weapons.” The foreign ministry reaffirmed its willingness to return to negotiations. The Evolution of North Korea’s Nuclear Statements North Korea’s statements following subsequent nuclear tests, in 2009, 2013, and 2016, have portrayed them as enhancing its self-defense capabilities and improving peninsular peace and stability. They have also included assurances of safety regarding potential nuclear fallout. After each test, North Korea has claimed dramatic increases in its capability of one or another facet of its nuclear program: ability to independently develop its own technology (2006), explosive power and technology (2009), miniaturization (2013), hydrogen bomb (2016), and standardization of a warhead, which essential to building a strategic nuclear force (2016). At the DPRK’s seventh Workers’ Party Congress, in May 2016, Kim Jong-un put forward the idea that North Korea’s policy emphasizing the country’s nuclear development would be a “permanent strategic line,” but also presented the country as a “responsible nuclear power” that would only use nuclear weapons as a retaliatory measure against a nuclear attack. The DPRK statement accompanying its September 2016 test shows that North Korean strategic objectives had evolved from defensive deterrence to the capability to pursue nuclear retaliation. How the United States Has Responded President George W. Bush responded to North Korea’s 2006 nuclear test by vowing to coordinate a UN condemnation of North Korea, warning of the dangers of North Korean nuclear proliferation, and reassuring U.S. allies in Asia that the United States would continue to meet its security commitments in the face of a growing nuclear threat. Bush also reiterated his administration’s commitment to diplomacy, signaling a desire to return to the Six Party Talks. The talks reconvened in Beijing in December of that year, and, in February 2007, its members reached an agreement on initial actions toward denuclearization. North Korea would declare its nuclear facilities in exchange for the United States easing sanctions and removing it from the U.S. list of state sponsors of terrorism.     “Absent China’s willingness to cut off its economic lifeline to North Korea, North Korea will continue to survive as a parasite, living off of Chinese fears of its collapse or disappearance.”     Obama too has consistently said that North Korea’s nuclear testing is unacceptable, repeated the U.S. commitment to defend South Korea, and characterized the nuclear testing as a self-prescription for isolation and, eventually, regime failure. U.S. allies, including Japan and South Korea, have consistently sought assurances that the United States will honor its commitments to defend against North Korean nuclear weapons. Meanwhile, China has promoted a return to diplomatic negotiations. In response to North Korea’s first nuclear test, Chinese State Councilor Tang Jiaxuan traveled to Pyongyang to facilitate North Korea’s return to the negotiating table. These mediation efforts have foundered, however, since North Korea abandoned the Six Party Talks in 2008. In the process, the DPRK also discarded the “action-for-action” approach that had been embraced by the Six Party Talks, in which it would denuclearize in exchange for normalized diplomatic relations with the United States. Instead, North Korea insisted that the United States abandon its hostility toward its regime as a prerequisite for arms-control discussions. This has shut down prospects for renewed negotiations. North Korea’s Efforts to Shape U.S. Choices North Korea’s nuclear sprint in 2016 appears designed to gain survivability of its nuclear deterrent. It also seems to reinforce the country’s intention to develop a direct-strike capability on the United States to overcome Pyongyang’s vulnerabilities and reframe the U.S.-DPRK relationship as one between two nuclear powers. North Korea believes this sprint will enable it to: 1)      reduce its remaining vulnerabilities from its currently limited nuclear deterrent vis-à-vis the United States by enhancing the credibility of its threats and the range of a potential strike; 2)      exploit potential South Korean concerns that the United States might abandon its commitment to defend South Korea if it fears that North Korea could conduct a retaliatory nuclear strike on the United States; and 3)      claim to domestic audiences that North Korea has achieved at least one part of its goal of being a “strong and prosperous state” by 2020. North Korea has long seen U.S. and South Korean political transitions as opportunities to test the mettle of new leaderships as it pursues its strategic objective of winning acquiescence to its status as a nuclear state. Kim Jong-un likely believes that he can survive as leader and North Korea will prosper if he can win U.S. acquiescence to a nuclear North Korea, and it is not surprising that he might see this course as a viable pathway forward. After all, North Korea has successfully exploited divisions among the China, South Korea, and the United States for a decade now while steadily improving its nuclear capabilities. Still, the United States has kept North Korea in the penalty box as an outlier state due to its pursuit of nuclear weapons. But if its goal of North Korea’s denuclearization is indefinitely suspended, the nonproliferation norm embodied by the Nuclear Nonproliferation Treaty will undoubtedly be weakened. Absent China’s willingness to cut off its economic lifeline to North Korea, North Korea will continue to survive as a parasite, living off of Chinese fears of its collapse or disappearance. This piece originally appeared as a CFR expert brief here.

It has been almost three weeks since North Korea conducted its fifth nuclear test, but China and the United States have not yet reached agreement on the text of a new UN Security Council resolution condemning the country. In the aftermath of the fourth nuclear test, the Security Council took almost two months to come up with a resolution; the average number of days between a North Korean provocation and a Security Council resolution was 27 during the Obama administration’s tenure. Based on the growing length of time following UN condemnation of North Korea’s successive tests since 2006, North Korea’s leadership probably feels affirmed in its judgement that it can effectively exploit geostrategic distrust between the U.S. and China. U.S.-China differences  Moreover, North Korea seeks to use impending transitions in the U.S., South Korea and even at the United Nations to flout UN Security Council resolutions with impunity. Immediately following North Korea’s fifth nuclear test, U.S. Secretary of Defense Ashton Carter publically noted that China “shares important responsibility for this development and has an important responsibility to reverse it.” In response, China’s foreign ministry spokesperson. Hua Chunying, said that “[w]hoever started the trouble should end it” and that the U.S. should “take on its due responsibility.” Sino-U.S. differences over the implementation of the Terminal High Altitude Area Defense (THAAD) system persist, and the task of hashing out agreement on a new UN Security Council resolution condemning North Korea appears to have taken a back seat to the crisis in Syria. A new UNSC resolution On the positive side of the ledger, China cooperated with the U.S. to crack down on the Hongxiang company, which has been revealed to have engaged in and facilitated illicit transactions and dual use shipments of sensitive chemicals for North Korea’s missile and nuclear development as part of the $500 million in trade over five years that the company has conducted with North Korea. These developments have been facilitated in part by two new sanctions reports, evaluated by Steph Haggard, here and here. Negotiations on a new UNSC resolution are reportedly focused on closing “livelihood” loopholes on shipments of North Korean coal products to China and tightening restrictions on North Korean overseas labor to other countries, Sino-DPRK tourism, or exports of North Korean textiles to China. However, it will be necessary to reach out and touch leadership assets and interests to get the attention of Kim Jong Un. What we should do to strengthen sanctions If such sanctions do not prove to be effective due to China’s inability or unwillingness to enforce them properly, the U.S. should be prepared to take the following measures unilaterally: 1. Impose secondary sanctions on Chinese steel companies that use North Korean coal products. Chinese companies should not be allowed to take advantage of cut-rate North Korean coal to unfairly enhance their competitive advantage in the international market while facilitating North Korea’s nuclear weapons development. Chinese consumers of North Korean coal are therefore legitimate targets of U.S. secondary sanctions. 2. Target Chinese small and medium enterprises that continue to do business as usual with North Korea. There are companies similar to the Hongxiang group that play a gateway role for both legitimate trade and embedded North Korean procurement of dual use items. A recent study by John Park and Jim Walsh on North Korean sanctions evasion techniques highlights North Korean efforts to embed cut-out companies as customers in Chinese procurement networks as a primary means of sidestepping sanctions. 3. Push Chinese authorities to crack down Chinese banks that deal with North Korean citizens since they use multiple personal accounts containing millions of dollars for state purposes. Since opening an account requires identification, Chinese authorities should be able to identify and cut off all North Korean account holders. If necessary, impose secondary sanctions on these banks. 4. Strengthen implementation of shipping sanctions to impose a de facto quarantine on North Korea. A report by Asan Institute for Policy Studies and Center for Advanced Defense Studies (C4ADS) highlighting the role of China’s Hongxiang company in sanctions evasion recommends proactive monitoring of North Korea’s foreign flagged fleet to ensure enforcement of the existing UNSC resolution, drawing particular attention to data showing that Cambodia and Sierra Leone are flags of choice for the North Korean shipping fleet. The debate we must make North Korea have Despite external efforts to strengthen the international sanctions regime, there is precious little evidence to suggest that Kim Jong Un hears or cares more about efforts by external actors to convince him to reverse course than he cares about the internal factors that have led him to embrace nuclear development. In this respect, sanctions remain a blunt instrument to the extent that they have thus far failed, in combination with other measures, to induce a more active internal debate within Pyongyang over the question of whether North Korea’s survival without nuclear weapons is a viable option. This post originally appeared on Forbes Asia. See the original post here.

U.S. and international sanctions have battered the Iranian economy and brought Tehran to negotiate over its nuclear program. Lifting them is central to a deal but will be a complex process.

The P5+1 and Iran have announced a framework for negotiating a final agreement to limit the Iranian nuclear program by the end of June. Here are five quick thoughts on the nuclear and sanctions elements: The nuclear limits – particularly those on the Iranian supply chain – are surprisingly strong and significant. The rough scale of Iranian enrichment activities and low-enriched uranium stockpiling that the United States could tolerate has long been pretty clear. (I laid out the basic logic for the sorts of limits that would allow the United States to respond effectively to Iranian breakout in a technical paper a few years ago, and many others have made similar arguments.) The announced framework tracks those understandings. What I’m struck by, though, is the extent of the monitoring provisions, particularly as they apply to the Iranian supply chain. U.S. policymakers have long feared that so long as Iran could conduct some legal nuclear commerce, it would be easier to hide illegal activities, making a secret parallel nuclear program more feasible. The framework includes some pretty strong steps to address this, including a “dedicated procurement channel” for the nuclear program. These may seem like footnotes compared to the rule for centrifuges and uranium stocks, but they’re central. The time it takes Iran to comply with the agreement will depend on its final details. Take one example: Iran is required “to reduce its current stockpile of about 10,000 kg of low-enriched uranium (LEU) to 300 kg of 3.67 percent LEU”. How will this be done? Will Iran ship the material out of country? Will it blend it down to LEU that’s enriched to less than 3.67 percent? Will it convert the LEU into fuel? (Which of these will the final deal allow?) The path it takes will determine how long compliance takes, which will affect the pace of sanctions removal. Similar questions surround many other provisions. It is unclear how sanctions relief will be phased in. If compliance occurs gradually over an extended period, sanctions relief will presumably be drawn out too. Iran faces a host of sanctions on oil sales, financial transactions, travel by senior officials, and other activities. Which sanctions will be pared back first? What milestones will they be connected to? Much of this presumably remains to be negotiated, but the details will be critical to determining the pace with which sanctions are removed – and, in particular, the speed at which full-scale Iranian oil exports come back online. Removing sanctions won’t necessarily lead to a rush back into Iran. The framework notes that sanction could be “snapped back” on Iranian noncompliance. Energy (and other) companies will presumably be slow to invest in Iran given the risk that they could easily find themselves faced with sanctions once again. Financial players may decide that the complexity and risks of dealing with Iran outweigh the limited commercial benefits. Oil traders, though, are more short term in nature, and will presumably reengage quickly. This experience is going to make U.S. policymakers even more sanctions-happy than before. An easy lesson of the Iran experience (presuming that the framework actually leads to a final deal) will be that sanctions, when combined with diplomacy, can yield meaningful results. Political scientists and policy analysts will doubtless debate this until eternity: one can’t say definitively what role sanctions played in bringing about the agreement, nor is there an objective way to know whether the framework deal is better than whatever else might have happened. The reality, though, is that many policymakers will take today’s news as a straightforward affirmation that sanctions work.