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The international discourse on North Korea centers almost entirely on sanctions these days, but also on an outpouring of news on sanctions evasion. Today, I simply line up some of the news on these topics, following on the blog’s weekly lead yesterday on North Korea’s widening current account deficit with China.
First up, kudos to NKNews and Justin Rohrlich for an excellent piece of journalism on luxury shops in Pyongyang catering to the elite that appear to be run by a Singapore entity OCN (S) Pte. (here and here). Known in Pyongyang as the “Singapore shops,” the three locations—nicely geo-located on a map—carry outrageously high-end items from cognac and Montblanc watches to flat screen TVs. As Marc and I noted in Hard Target, the luxury ban is pretty much of a joke since a. China has a very restricted list of luxury items and b. European, Japanese and American manufacturers of these items have little way of knowing who their end users are, particularly given point “a.” Nor is Singapore to be blamed; these violations are not self-evident and someone like the Panel of Experts or enterprising journalists like Rohrlich need to track this stuff down. But once they do, Singapore needs to act (unless it too wants to not define $1000 cognac as a luxury good).
On a similar note, there is more news this week of North Korea using its embassies for commercial purposes. Bloomberg has a story covering the Berlin embassy-hostel that we ran earlier, but also some new and particularly ironic cases in Sofia and Warsaw as well. These lavish sites, legacies of the socialist era, have hosted tech companies and even an event planning company (pictures here). Peru has downsized its North Korean embassy staff and Bulgaria and Italy have recently taken similar actions.
But emblematic of how China is moving the other way is a story from Russia’s Sputnik no less that the North Koreans are building a new structure in their Beijing compound that might be used as a hostel or residence. For the Chinese ambassador’s defensive reaction to stories about China’s trade with the North, see his speech addressing the issue here. The message: “this is ultimately not our problem, but one that the US has to address.”
In another excellent piece of journalism, Anna Fifield has tracked down Ri Jong Ho in Virginia. Ri ran smuggling and sanctions evasion operations in North Korea before defecting in 2014 and ultimately ending up in the US. His story line: “sanctions, what sanctions?” He describes being able to move tens of millions of dollars back into the country simply by handing it to trusty intermediaries in the Chinese port of Dalian or by giving it to couriers crossing over from China to North Korea by train. In particular, Ri confirms something we have said repeatedly on this blog: that the idea of trying to separate commercial from WMD-related trade is a shell game. Ri: “North Korea is a 100 percent state enterprise, so these companies just change their names the day after they’re sanctioned. That way the company continues, but with a different name than the one on the sanctions list.”
So what is to be done about it? The first thing is to understand that this is not a silver bullet problem, but rather a long financial forensics slog. Nonetheless, there are some more radical ideas floating around on the Hill that might just get traction if nothing breaks. One brought to our attention by Leo Byrne at NKNews, is to abandon the incremental whack-a-mole approach and to go for across the board secondary sanctions. Legislation introduced by Senator Cory Gardner (R-CO), Chairman of the Subcommittee on East Asia, the Pacific, and International Cybersecurity, would “ban any entity that does business with North Korea or its enablers from using the United States financial system and to impose U.S. sanctions on all those participating in North Korean labor trafficking abuses.”
The other non-mutually exclusive route is to just chip away. Again, in the credit-where-credit is due department, Andrea Berger at Arms Control Wonk looks at the decision to delay the lifting of sanctions on Sudan. Most analysis has seen this as yet another example of the US being unable to act on some issue because of the lack of specialist staff, in this case on Africa. But Berger notes that North Korean sanctions were mentioned in passing, and that as recently as the last two years, Sudan was still importing sophisticated conventional weapons systems from North Korea through shape-shifting front companies. The Trump administration might have stumbled into the right policy in this case, but from Singapore, to Bulgaria and Poland, to the Sudan, this is a slog of doing the hard work to cut off sources of external finance.
Finally, I have said many times that all is fine until it isn’t. This week, a possible leading indicator: in a month of declining appearances Kim Jong Un noted in a speech to the Korea Children’s Union that more belt-tightening might lie ahead. We’ll see, but the fact that the Young General is putting it out there suggests an effort to lay the groundwork for austerity.
