WASHINGTON (CN) – Experts told lawmakers Wednesday that low-level Chinese businessmen dabbling in money laundering and the trafficking of materials for nuclear power reactors in North Korea are making effective sanctions on Pyongyang close to impossible.
The House Financial Services Committee met to discuss the difficult task still plaguing the U.S. government: how to dissuade a nation from easing its nuclear ambitions by restricting its financial access, and the question of what to do when policy is undermined by shady backroom deals with international partners.
“If we are to change North Korea’s calculation, we must confront why economic sanctions have failed. More of the same is unacceptable,” said Rep. Andy Barr, R-Ky.
After the death of American student Otto Warmbier last month, an $81 million heist from the Bangladesh Central Bank which officials say North Korea is wholly responsible for, and the ongoing abuses in forced labor camps, Rep. Barr said that when it comes to North Korea, the U.S. must be “more realistic and more ambitious.”
“That may mean sowing dissent among North Korea elite and convincing China that the long-term cost of sanctions require it to lean on the Kim regime,” he said.
When speaking of sanctions and North Korean leader Kim Jong Un, the conversation never strays far from China.
Dr. John Park, director of the Korea Working Group at Harvard’s Belfer Center for Science and International Affairs, said that low-level Chinese businessman regularly make extensive use of embassies as their “vehicles for procurement.”
It’s also in the numbers, he said. Chinese trade with North Korea has increased 25 percent in the first five months of 2017, with an 18 percent rise in oil. Meanwhile, illegal iron ore exports from North Korea to China have increased by 34 percent, according to Park.
William Newcomb, a scholar with the U.S Korea Institute at Johns Hopkins University, said the pressure points used on China before – like the renegotiation of a ban on coal exports – have been unsuccessful.
“We have photographs and tracking images that show North Korean ships containing coal occasionally calling to Chinese ports. China does nothing to dent the trade in iron ore since they classify all of it, in effect, under ‘humanitarian purposes.’ You can only alter the China-North Korea link by changing the risk profile and you do that making sure companies have engaged all consequences,” Newcomb said.
North Korea sits fifth behind Ukraine, Russia, Syria, Iran and Iraq in terms of sanctions, said Anthony Ruggiero, senior fellow at the D.C.-based conservative think tank, Foundation for Defense of Democracies.
Hitting banks with more thorough oversight possibly involving the U.S. Chamber of Commerce could help, Ruggiero and Park agreed. But that will likely not be enough to help rein in North Korea’s economic ambitions around the world – not without Chinese cooperation, Ruggiero said.
“But China is not going to do this. They won’t go after companies or individuals and the reasons why these Chinese companies are doing it is because they know there’s no punishment,” Ruggiero said. “But if you have a regime not interested in negotiating its nuclear program than success will look like protecting ourselves and trying to reduce the capabilities of their nuclear missile programs and squeezing the revenue.”
“That’s essentially where we are in the 11 years after their first nuclear test,” he added.
Rep. Gwen Moore, D.-Wis., looked at Ruggiero during her speaking time.
“This really sounds like we’re trying to get the camel through the eye of the needle here,” she said to the panel.
Park suggested alerting China to North Korea’s uptick in manufacturing counterfeit Chinese currency.
Ruggiero warned against another temporary freeze on North Korean missile tests, saying that there was no evidence it would be effective.
“During the last freeze, they developed their covert enrichment program and built a nuclear reactor in Syria,” he said.
As the hearing wrapped, Elizabeth Rosenberg, a senior fellow at the military think tank the Center for a New American Security, suggested the committee consider expanding the use of the USA PATRIOT Act – particularly section 311 of the act, which allows domestic financial institutions to take “special measures” against foreign entities when they’re involved with money launderers or terrorist financiers.
It also permits the institutions to take action without any prior public notice or comment.
“To target North Korea, the ability to use that specific tool… when a 311 is made, there’s an awful lot of information that becomes available to companies, manufacturers and banks that are in the position to help or prevent North Korean trade,” she said.