By Mark Fitzpatrick, Executive Director, IISS–Americas, and Minori Fryer, current intern, IISS–Americas
US President Donald Trump’s frustration with China for not putting firm pressure on North Korea was manifested on 29 June by the application of sanctions against two Chinese firms and two Chinese citizens for their alleged ties with illicit North Korean activities. As the first secondary sanctions against Chinese entities since last September, the action was long overdue. Although Russian entities were sanctioned in May, similar measures against Chinese firms were apparently held up while Trump gave Chinese President Xi Jinping the benefit of the doubt in his declared intention to cooperate on North Korea.
It should have been clear to Trump well before now that China was not going to solve the North Korea problem. China is too invested in maintaining a buffer state and in guarding against turmoil that it fears could be unleashed in its northeast border regions if pressure caused collapse of the North Korea regime. But it is also clear that without any risk of such collapse, China could have been doing much more to stop its banks and businesses from aiding the North Korean missile and nuclear programmes.
Why apply secondary sanctions?
A narrow reason for the application of secondary sanctions is to stop foreign assistance to the weapons programmes. But the broader reason is to put pressure on the regime by cutting off sources of finance. China has a declared and real interest in going along with the former, targeted measures. It is less interested in, and indeed conflicted about, squeezing North Korea indiscriminately.
The sanctioned Chinese entities were reportedly involved in financial transactions that supported North Korea’s illicit missile and nuclear programmes, including via money laundering. The most important of the four entities was the Bank of Dandong. Cutting off its access to the US financial system is a targeted measure that will also encourage other Chinese banks to stop any illicit business with North Korea.
Evidence of Chinese firms’ involvement with blacklisted North Korean activities is not hard to find. A report published in September 2016 by Washington-based research group C4ADS in collaboration with the Seoul-based Asan Institute for Policy Studies revealed a complex and vast network of North Korean trading systems that have strong ties to China. The report outlined ‘points of vulnerability that are ripe for targeted disruption’, and listed ‘logistical chokepoints’ that could threaten North Korea’s global system of illicit finance. The United Nations Panel of Experts on North Korea sanctions in February documented other cases of illicit goods being sold or transshipped from China to North Korea.
A new report published in early June by C4DS noted that designated and identifiable entities have continued to operate in China without fear of punishment. For example, a Chinese company was found to have exported US$790,000 worth of radio navigational aid equipment to North Korea in June 2016, including equipment that could be used as guidance devices for ballistic missiles.
Collaboration key to successful sanctions
Secondary sanctions work best when countries work collaboratively. This approach was successful in the September 2016 application of sanctions against Dandong Hongxiang Industrial Development Co., which also became the target of criminal investigations by Beijing authorities. US Treasury Secretary Steven Mnuchin refused to say if the US had warned China ahead of time about the 29 June sanctions. But earlier this month the Wall Street Journal reported that the Trump administration had asked China to take action against 10 Chinese companies and individuals.
Trump’s simultaneous approval on 21 June of an arms-sales package for Taiwan was also overdue, but seeming to link this action with the secondary sanctions muddied the purpose of the latter and may make Chinese cooperation over North Korea even less likely.
The application of secondary sanctions in this case was a targeted, law-enforcement action that was consistent with China’s legal obligations. All states are obliged under UN resolutions to cut off any and all support for North Korea’s nuclear and missile programmes. There was no need to further pressure China via the simultaneity of the Taiwan arms-sales package. Waiting a few more days would have reduced the irritating symbolism. At the IISS Shangri-La Dialogue on 2 June, Major General (Retd) Yao Yunzhu warned ‘never try to sanction China to push it into doing anything.’
On 29 June it was also reported that Malaysia has stopped issuing work permits to North Korean labourers. About 1,000 individuals had been working in Malaysian coal mines and construction sites until the February assassination of DPRK leader Kim Jong-un’s half-brother Kim Jong-nam soured bilateral ties. All states should take similar steps to cut off sources of foreign revenue that could be used to assist North Korea’s nuclear and missile programme. The next UN sanctions resolution should make this step mandatory.