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View more articles by Chad O'Carroll
Chad O'Carroll has written on North Korea since 2010 and writes between London and Seoul.
North Korea has become the number one foreign policy issue for the Donald J. Trump administration, multiple conversations between NK News and those inside and out of government suggested in Washington DC last week.
But while earlier this year both government and long-time watchers were talking increasingly about the ‘kinetic’ end of the solution spectrum, it seems cooler heads have since prevailed.
Though ‘all options’ are officially still on the table, the clear message from the administration, for now, is that a policy of ‘maximum pressure and engagement’ is the short to medium-term priority. In other words, getting China to do more while increasing pressure through tightening sanctions, all with an aim of stimulating credible denuclearization talks with the North, is the plan.
But will that really work?
One advocate of increasing pressure, who recently testified before Congress on the issue, told NK News last week he believes China won’t give the U.S. what it needs when it comes to North Korea and that North Korea just isn’t interested in the type of dialogue Washington wants.
However, Anthony Ruggiero, a sanctions specialist and senior fellow at the Foundation for Defense of Democracies, says he believes China will never do enough to satisfy Washington’s overriding goals with North Korea, arguing Beijing only acts when under real pressure.
Consequently, he says it’s increasingly becoming time for the U.S. to pursue those Chinese banks and organizations facilitating North Korean sanctions breaking activities, something Washington’s historically shied away from due to the broader impact such secondary sanctions would have on the emerging Sino-U.S. relationship.
But Ruggiero worries that faced with tough questions, the Trump administration could end up pursuing a freeze of North Korea’s weapons program, something which would likely yield no tangible results.
With the United Nations Security Council set to meet on Tuesday afternoon to discuss options in the aftermath of North Korea’s seventh missile launch this year on Sunday, the question of the efficacity and applicability of sanctions is more important than ever.
— This transcript has been edited for brevity and clarity —
NK News: What level of priority do you think the Trump administration is currently placing on the North Korea issue at the moment?
Anthony Ruggiero: The people we talk to in the administration seem to indicate, in public and in private, that it is the number one issue that they are really focused on.
From what I understand, Secretary Tillerson is very focused on the issue and I think that in the relationships with other countries in Asia, North Korea comes up regularly and obviously the relationship with China is a major factor.
NK News: What do you sense is the direction of play in Washington right now towards the North?
Anthony Ruggiero: Well, it is China, China and China.
I think their approach is trying to get China to do more. They haven’t defined in public what that ‘more’ looks like and they have said and suggested that there is a time limit on their patience.
One thing I would say is the previous administrations – at least the last two – have taken the same approach initially and both then, unfortunately, decided not to act against Chinese interests.
I think the Trump administration has done some of that; moving the military forces into the region and finalizing deployment of THAAD (we’ll see whether that continues under the new South Korean President), but I think they are taking some of those steps.
However, the next step on sanctions with regard to China is a big one and former administrations have been reluctant to take that step.
“It is China, China and China”
NK News: So the next step with China would be secondary sanctions?
Anthony Ruggiero: Secondary sanctions against Chinese companies and Chinese banks.
For the most part, however, administrations in the past decided that their broader relationship with China has been more important than implementing secondary sanctions.
If secondary sanctions are pursued, it could mean taking down several networks inside of China that are helping North Korea with sanctions evasion. This could lead to some type of action against Chinese banks, which means it’s not an easy decision to take.
Ruggiero testifies before Congress in February on North Korea sanctions
NK News: So there may be some time limit in Washington in seeing what China can do vis-a-vis pressuring the DPRK before secondary sanctions are seriously looked at?
Anthony Ruggiero: That is my understanding.
My view – it is a very pessimistic view – is that the Chinese will never do what is necessary without their own interests being threatened. I think that the Chinese have heard this message (Washington’s requests to pressure North Korea) many times over the last decade and they realize they can do just enough to really prevent action and then nothing really happens to them.
Chinese companies typically engage in sanctions-breaching activities with North Korean entities because they know in China nothing will happen to them. Until the U.S. is prepared to either individually or simultaneously take down those networks, the Chinese government is not going to do it for them.
In fact, when you think of examples like Dandong Hongxiang and the Bank of China’s relationship with North Korea’s Foreign Trade Bank, the U.S. acted first and then the Chinese took a small action after that. They didn’t take down the whole network, but the U.S. always has to lead in this instance.
NK News: What do the secondary sanctions look like, for those that are unfamiliar with the logistics of this, how do they work, and what gives the U.S. authority to use them?
Anthony Ruggiero: In a lot of these cases you have companies or banks that need to do transactions in U.S. dollars. It is still one of the currencies that most people use for business and so that gives the U.S. a lot of leverage against those who finance and conduct these operations.
What you will see is networks that are essentially acting on behalf of North Korea – providing either a financial or some other type of service – become designated, which will then mean any assets they have in the U.S. will become frozen and they will be prohibited from doing interactions with U.S. persons.
“Chinese companies typically engage in sanctions-breaching activities with North Korean entities because they know nothing will happen to them”
The question here will be what do they do with Chinese banks?
In the Iran context, the U.S. did designate a Chinese bank, Kunlun Bank, and that bank was prohibited from U.S. dollar transactions, but it was a smaller example.
I think in this North Korea case, for the larger Chinese banks, it is unlikely that the U.S. would use the designation power; I think the U.S. will likely use a regulatory authority instead, such as a significant fine as we saw against telecommunications firm ZTE.
NK News: What would be the potential backlash from implementing secondary sanctions?
Anthony Ruggiero: I think the Chinese will not be happy with any secondary sanctions – they’ve never really been happy with the idea of them.
I think this has always been wrapped up in the way we approach North Korea as opposed to the way that we approached Iran. The way we approached Iran was it didn’t matter where you were in the world, the U.S. was going to present you with a choice: you could continue to do business, in that case with Iran, and you could lose your dollar access and face significant consequences. Alternatively, you could cut that business off with Iran.
Since 2005 we haven’t really taken that attitude and applied it to North Korea, so I wonder if that’s what the Trump administration is looking at now. And in that regard, that would be going to China and saying, ‘It doesn’t matter that you are upset that we are going to go after these different networks or Chinese banks, it’s more about protecting the U.S. financial system, enforcing our laws, and in a lot of cases enforcing UN sanctions’.
At the end of the day, this is a reputational issue for the Chinese and I think they would be embarrassed.
But to be frank they should be embarrassed because every time a new network comes up it is not surprising that China is at the nexus of it. Whether it is the Glocom network, Dandong Hongxiang, Limac Corp, China is at the center of this because they choose not to enforce the sanctions.
“The Chinese will not be happy with any secondary sanctions”
NK News: Can South Korea realistically consider re-opening Kaesong and Kumgang and not worry about secondary sanctions?
Anthony Ruggiero: Kaesong is going to be tough for them. I think that the problem for South Korea is that at the time of its closing, they made clear their suspicion that money from operations went to the nuclear missile programs.
And that is basically a violation of UN sanctions because there are multiple provisions to ensure that if you know money is going to a strategic weapons program, you have to stop that flow.
The second is that the new UN resolution prohibits public and private financing for the purpose of activities with North Korea. Of course, there were subsidies that the South Korean government gave in the past to these projects, so I think there’s going to be a lot of difficulties there.
The other is that given the Trump administration’s focus on overseas labor – where the North Korea regime is really taking money from the backs of the citizens who are in deplorable work conditions like what was going on in Kaesong – I think it is going to be difficult for South Korea to join the United States and pressure countries overseas when Kaesong would be a large mark on that.
I understand people who suggest that maybe the South Korean government will try and get some type of exemption from the UN sanctions, but I think that would be a mistake for the Trump administration to grant.
The Kaesong project was proven not to work; its purpose was to foster the relationship between the two Koreas and somehow get North Korea to be more willing to look at economics versus the weapons program. Yet all it did was funnel money to the weapons program and they were able to just ignore the economic aspect of it.
NK News: What are the risks you see emerging between South Korea’s new President Moon Jae-in and Trump?
Anthony Ruggiero: We may now see a Sunshine 2.0 with a focus on some type of support for sanctions coming from Seoul. But while Moon might right now be able to say he supports North Korea sanctions, if he was consulted on what the Trump administration is planning to do with China, would he approve of broad secondary sanctions against China’s interests?
Assuming that South Korea and China both have a closer relationship, which I think is likely, would Moon be supportive of that level of sanctions?
Overall, I think there is supporting sanctions, and then there is supporting the level of sanctions necessary to give you leverage in negotiations. And I’m not sure that Moon would be ready to support the latter, and that’s where the conflict is going to come.
He would likely support what we’ve been doing so far, which is designating people inside North Korea, but not really focused on the right areas in terms of international business, without which we are not going to get to our goal.
“The Kaesong project was proven not to work… all it did was funnel money to the weapons program”
And it is unfortunate because if Moon truly wants to have real negotiations and real discussions with North Korea, the thing that will get him leverage would be going after North Korea’s international business to prove to Pyongyang that what they are doing now is the wrong path.
NK News: So the goal of sanctions, from what you just said, is to get the North back to the negotiating table?
Anthony Ruggiero: Right. I think most people put a very heavy burden on the idea ‘sanctions would denuclearize the Korean peninsula’.
But I have always looked at it as a sort of a two-stage process.
Unfortunately, because of the last ten years of kicking this can down the road, in my view the only option right now is robust sanctions, leading to the second phase, which is sanctions and negotiations.
The North Koreans don’t want to talk, they don’t want negotiations.This isn’t the scenario where the North Koreans are sort of sitting outside the Diaoyutai State House waiting for Six Party Talks.
They are not interested in that. And even if they were, they would participate in the talks for the purpose of recognizing them as a nuclear state and that is not really the goal of the talks as the U.S. sees them.
I do think that robust sanctions could get us to the point of a negotiated settlement but we have to be willing to make some of those tough choices (on secondary sanctions).
NK News: Do you sense that with all the focus on the ICBM issue of late, we may even be moving towards a place where dialogue could just be about missiles?
Anthony Ruggiero: North Koreans in the past have abided by a missile moratorium, but the testing after that missile moratorium indicated that they were still working on research and development in the background. So, I think a missile deal has the same problems a nuclear deal faces, which is, the U.S. would have to insist on an extremely robust verification regime to make it work.
But it is not clear that the North Koreans will be ready to engage in such verification until the relationship has changed. So, there is a chicken and egg problem, I understand the difficulty there.
If a missile freeze worked, we might be able to delay the program for possibly even years, but at some point the North Koreans could just decide, ‘Hey, we don’t want a missile launch moratorium anymore, and now we are going to do a bunch of missile tests’.
Currently, I’m not sure that we are ready for missile negotiations and I don’t see them as any easier than the nuclear negotiations.
I have commented before that the only time the Chinese have authorized sanctions at the UN have been in response to space launch vehicles and presumably if Pyongyang were to launch an ICBM, that would qualify, and a nuclear test, whether it is a resolution and/or new designations at the UN.
“I think most people put a very heavy burden on the idea ‘sanctions would denuclearize the Korean peninsula’. But I have always looked at it as a sort of a two-stage process.”
All these other missile launches have meanwhile always gotten small press releases (from the UN Security Council) that are really just one step above nothing. I do think that that is part of Pyongyang’s game, maybe even China’s game, to sort of normalize the missile program.
It is problematic. I think the advancements that they are making now, people don’t even bat an eye.
NK News: It seems like you have low faith in freezes being implemented. With there being very widespread agreement that North Korea is unlikely to denuclearize, what else does that leave when it comes to diplomacy between the two countries?
Anthony Ruggiero: I know in the past there have been discussions about POW and MIA talks, et cetera. I think of those as areas where there could be cooperation and there is nothing wrong with having those discussions.
But those are only going to be in areas where there is mutual interest. The U.S. is not going to become an ambassador for Kaesong or something like that.
I just think that the denuclearization issue is still the best call, but the question is how do you get from Point A to Point B there.
I guess I have a different view than most people in that I don’t assume that a freeze is a necessary first step in that process, mostly because I think the problem with the freeze is that it still assumes that North Korea has made the decision to denuclearize.
“The advancements that [the North Koreans] are making now, people don’t even bat an eye.”
And I think if the Trump administration was really interested in negotiations, it would craft a different approach – different than the Agreed Framework, different than the Leap Day Deal, different than the Joint Statement. An approach that would put upfront a test for North Korea on its seriousness in terms of denuclearization: whether that is requiring a nuclear declaration that can be verified or declaring where the nuclear weapons are.
Of course, such a deal would have to come with a hefty payment by the United States. Whether it is releasing sanctions or temporarily halting sanctions or some kind of aid package, or whatever.
But that would be a different approach than what we’ve seen in the past and then a freeze becomes sort of just a signpost in that process. But the Agreed Framework and the Joint Statement process of “let’s negotiate a freeze, and then let’s figure out a way to negotiate some kind of verification regime,” and then at some point you’ll do a declaration, doesn’t work.
It is really just that the North Koreans understand our political process and so they are sort of waiting out, even for eight years as it turned out with the Bush administration or the Clinton administration. So I think the best way, in addition to sanctions being leveraged to help that process along, is trying to think about negotiations in a different way.
NK News: How do you now judge the Trump administration’s chances for success?
Anthony Ruggiero: That depends. I know some people want to focus on the 100 hundred days, but we’re only at 100 days, the North Koreans will have four more years of it. So I’m certainly willing to give them more time.
But I do think that they are going to have to make a tough decision that people haven’t been willing to make, which is confronting China. I certainly worry that like the three presidents before him, the attractiveness of a freeze will distract Trump from getting them to the denuclearization goal and that we will fall into this trap of seeing a freeze as a way to negotiate denuclearization that will never materialize and then we will be back in this loop again.
Unfortunately, for all of us who have done North Korea for a long time, a lot of these discussions are very similar– someone I used to work for used to call it the ‘Sisyphus problem’. It’s like pushing the boulder up the hill. It is very appropriate for North Korea unfortunately.
NK News: Any final thoughts on this issue?
Anthony Ruggiero: I have been very pessimistic throughout, but the point I am optimistic on is that sanctions can work to change North Korea’s calculus.
It did work on Iran in terms of bringing them to the negotiation table and I think that effort could be successful with North Korea.
Edited by Oliver Hotham
Featured image: Whoisgalt