In New North Korea Sanctions, China Escapes

The U.S. Treasury Department yesterday sanctioned nine entities and three individuals. The sanctions cover a wide range of North Korea’s activities—weapons procurement, intelligence activities, cyber activities, oil imports, and coal and zinc exports—but they do not include Chinese persons and entities that aid Pyongyang’s nuclear weapons and missile programs.

While the latest designations turn a blind eye to the role of Chinese facilitators, North Korea’s activities in Russia do feature prominently. First, Treasury designated one Russian company and its director for supporting the UN and U.S.-designated Korea Tangun Trading Corporation, which was sanctioned in 2009 for its involvement in North Korea’s WMD and missile programs. A separate Russian company and its subsidiary were sanctioned for signing a contract to provide oil to North Korea, providing over $1 million in petroleum products to North Korea, and Treasury noted the company may have circumvented North Korean sanctions. The confirmation of illicit Russia-North Korea ties are troubling in light of reports that Moscow is increasing trade with Pyongyang in areas where Beijing has pulled back.

Another target of yesterday’s sanctions was a North Korean banker operating in China, Ri Song Hyok, a Beijing-based representative of the U.S.-designated Koryo Bank and Koryo Credit Bank. Treasury noted that Ri established “several front companies in order to procure items and conduct financial transactions on behalf of North Korea,” but did not identify the front companies or Chinese persons likely aiding his sanctions evasion. This is a familiar U.S. approach over the past decade where Washington pulls its punches so as not to embarrass Beijing, yet the only result is to affirm Chinese impunity, not to encourage tougher enforcement.

Treasury’s designation of the Korea Computer Center (KCC), which has offices in Germany, China, Syria, India, and the UAE, also underscores the problem of third-party complicity. Treasury stated that as of 2014 KCC earned money for UN and U.S.-designated Munitions Industry Department, which was sanctioned for overseeing North Korea’s ballistic missiles. In 2011, South Korea accused North Korean hackers at KCC of working with Chinese hackers to use online games to steal money. The U.S. should press countries to expel all individuals associated with North Korean information technology and those affiliated with KCC, especially given Pyongyang’s aggressive cyber activities.

The problem of impunity for third parties is visible again in Treasury’s targeting of two North Korean coal and zinc exporters, while failing to provide information about their customers. Treasury’s designation of the Songi Trading Company, a North Korean coal exporter, raises important questions since China, the main customer for North Korean coal, said in February that it is no longer importing it. This could be an indication that reports of North Korean vessels delivering coal to China are true, and if so Treasury should have designated any Chinese companies involved. On a related note, Treasury identified Korea Zinc Industrial Group as a major company and the zinc trade as a vital source of revenue for North Korea, but did not identify or sanction its customers.

Yesterday’s sanctions are an important step forward in countering North Korea’s overseas network. Yet sanctions against North Korea that ignore China’s role continue the failed sanctions policy of the past and will not curb the Kim regime’s pursuit of an intercontinental ballistic missile that can deliver a nuclear weapon to the United States.

Anthony Ruggiero, a senior fellow at the Foundation for the Defense of Democracies and its Center on Sanctions and Illicit Finance, was an advisor to the U.S. delegation to the 2005 rounds of the Six-Party Talks, and spent 17 years in the U.S. government. Follow him on Twitter @_ARuggiero. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.