July 27, 2015 | Joint House Foreign Affairs Subcommittee Hearing

The Iran-North Korea Strategic Alliance

Download full testimony here

Chairman Poe, Ranking Member Keating, distinguished members of the committee, thank you for the invitation to testify at this hearing on the Iran- North Korea Strategic Alliance, and how it will likely be affected by the nuclear deal with Iran.

This is a question with serious implications for the security of America and our allies, not only in the Middle East, but in Asia, and around the globe. I wish the answer were reassuring.

The Administration tells us that the Joint Comprehensive Plan of Action cuts off all Iran’s pathways to the nuclear bomb. That is not true. This deal will not cut off the pathways between Iran and nuclear-proliferating North Korea.

Worse. the JCPOA creates conditions and incentives that are highly likely to result in the expansion of what is already an extensive and profoundly dangerous Iran-North Korea partnership in proliferation.

In the context of the Iran-North Korea alliance, I am listing here four of the most egregious features of the JCPOA. There are many provisions of this deal that are profoundly troubling in any context, but I have focused on those most likely to be exploited by Iran and North Korea working in partnership. I shall then provide further background on the nature of the Iran-North Korea alliance, and why, on this front, the JCPOA is likely to contribute not to peace, but to proliferation.

1) The “snapback” sanctions mechanism, which will actually make it safer for Iran to cheat. In theory, this provision will keep Iran in check. But the snapback is structured in such a way that it provides disincentives for the U.S., or its partners, to confront Iran in the event Iran does cheat (which it has a long record of doing, and has done even during the recent nuclear talks). The JCPOA expressly forbids individual countries to unilaterally impose or reimpose nuclear-related sanctions. If Iran is caught cheating, the penalty must come via the United Nations Security Council, where it would be binary — either nothing, or the official reimposition of all previous U.N. sanctions. In practice, that could take years to implement, if possible at all. But under the JCPOA, Iran could immediately scrap its commitments, pocket its gains, and walk away. The JCPOA itself notes that “if sanctions are reinstated in whole or in part, Iran will treat that as grounds to cease performing its commitments under this JCPOA in whole or in part.”

The disincentive to finger Iran for cheating is already evident in the most recent report from the UN Panel of Experts on Iran sanctions, released this June. The U.N. panel noted that during the year since its previous report, in June, 2014, not a single U.N. Member State had submitted a formal report of Iran’s non-compliance — despite “numerous reports in the media” that Iran’s arms transfers “have actively continued.” The U.N. experts noted that this lack of reporting was unusual, and speculated that while it might be linked to a decrease (they did not suggest an absence) of prohibited Iranian activities, it might also be due to “restraint” by the Member States, “so as not to affect the negotiations process.”

If the Member States were that conspicuously restrained during the talks, we can expect historic inertia in reporting under the deal itself.

What does that mean for North Korea, which is under international sanctions? Given the  incentives the snapback mechanism creates for the world to ignore cheating by Iran, it will actually become safer for North Korea to do illicit business with Iran. Any country wishing to report or penalize North Korea for clear evidence of forbidden traffic with Iran could be left grappling with the large knock-on prospect of potentially triggering the collapse of the entire JCPOA — and the pressure of the international community to show “restraint.”

2) Money. With the lifting of sanctions, Iran obtains access to an estimated $100 billion or more upfront, in unfrozen oil revenues, plus the freedom to sell oil in the world market, without the cost of dodging sanctions. At the margin, this is likely to generate many billions more for Tehran in coming years.

That leaves Iran’s regime with a lot more hard cash not only to fund terrorist proxies such as Hezbollah and Hamas, but also to go shopping in North Korea. Iran has done plenty of illicit business in Pyongyang, maintains a large embassy there, and for Iran, a major benefit of shopping for weapons and weapons technology in North Korea is that the authorities won’t protest. They will be partners on the other side of the deal.

For North Korea, Iran’s JCPOA jackpot may well augur boom times for the proliferation racket. While North Korea economics statistics are elusive, to say the least, political economist Nicholas Eberstadt, of the American Enterprise Institute, estimates North Korea’s total merchandise trade exports for 2011 at about $4 billion, most of that to China. As Mr. Eberstadt wrote to me in a recent email: North Korea’s merchandise trade “is tiny compared to the prospectively unfrozen Iran funds. No less important — North Korea is on a permanent hunt for foreign subventions, and even a very small share of those unlocked monies would be a huge windfall for Pyongyang.”

3) Procurement. Under the JCPOA, Iran obtains access to world markets and the world financial system. While the JCPOA proposes to restrict and supervise Iran’s nuclear procurement, and retains the arms and missile embargoes for five and eight years, respectively, Iran will be broadly free of strictures on commerce. Much of the resulting trade may be legitimate. But the smuggler’s art — in which Iran and North Korea are both well versed — is to hide the illicit wares amid the legitimate goods and transactions. While the snapback mechanism leaves U.N. Member States more reluctant to report violations by Iran, it will become easier for Iran to deal in forbidden goods and services abroad, and harder to detect such traffic — including any weapons-related deals with North Korea. Such deals often run through fronts in third countries, such as China, or multiple cut-outs around the globe.

For an example of how Iran and North Korea’s networks mesh, take the case of a company called Hong Kong Electronics, which was designated by the U.S. Treasury in 2009. If it sounds like a company in Hong Kong, it is not. Hong Kong Electronics was designated as a North Korean front, moving millions in proliferation-related funds, which had “facilitated the movement of money from Iran to North Korea” on behalf of another designated major North Korean proliferator, KOMID.  The address of Hong Kong Electronics is on Kish Island, Iran.

4) Easy access to modern nuclear technology, including defense against nuclear sabotage. Under the JCPOA, developed countries are encouraged to assist Iran with civilian nuclear research. This will involve the transfer of advanced technologies and skills, which Iran, with its personnel pipelines to Pyongyang, could easily pass along to North Korea — potentially for mutual benefit in work that would be well out of sight of any inspectors in Iran.

Not least, the JCPOA envisages “training and workshops” to strengthen Iran’s security against “nuclear security threats, including sabotage.” This is to be provided via cooperation between the P5+1 (the U.S., U.K. France, Russia, China and Germany) “and possibly other states as appropriate.” There can be little doubt that advanced modern training to thwart sabotage would be of interest not only to Iran, but to the North Korea — which, in return, could most easily pay in its own special coin of weapons and weapons technology.