Procurement: Follow The North Korean Money

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May 1, 2017: Economic sanctions have not persuaded North Korea to halt its ballistic missile and nuclear weapons programs. For a long time the main reason the sanctions did not work was because China would not participate or, if they did, would not enforce them. China is notoriously corrupt, something the Chinese government has been forced to admit because of growing public anger over how government (Communist Party) officials have long resisted attempts to curb their main sources of personal wealth. But now China has been forced, again by a growing anger among the Chinese public, to make a serious effort to curb domestic corruption and enforce sanctions against North Korea. The sanctions effort has been crippled by corruption, meaning that North Korea could still get a lot of key items for nuclear weapons and ballistic missile development if they are willing to pay the extra costs (bribes). The Chinese public, even with a heavily censored local Internet, made it clear they were not happy with a North Korea armed with nukes and ruled by a homicidal (and increasingly hostile to China) tyrant.

Yet the sanctions have hurt North Korea and crippled their armed forces and is increasingly vulnerable to sanctions that reduce access to imports essential for nukes, missiles and other military efforts. The United States, South Korea and even the UN have managed to obtain details of how North Korea partially overcomes many sanctions and that provides a short list of additional sanctions that would mainly hurt the North Korea military and government officials. Most of these will only work if China (and to a lesser extent Russia) cooperates.

For example, have China ban all oil exports to North Korea. China is the only sources of petroleum for North Korea and China has already cut the tonnage but is reluctant to halt all oil exports. In response North Korea has already converted thousands of trucks to run on coal gas. This sort of thing was popular in Japan and Germany during World War II because of oil shortages but largely disappeared after 1945. In North Korea these coal powered trucks are common for the same reason. But coal gas is half as efficient as petroleum fuels, are slower, have less range and require more maintenance. Thus coal gas is not suitable for most military vehicles or combat operations. The sluggish and smoky coal powered trucks remind North Korean that their war is not over yet. Even though China now prosecutes and punishes some businesses that take bribes to help North Korea evade sanctions there are a few sanctions, like no oil at all, that would be much more difficult to evade and very expensive if North Korea persisted.

For example, ban North Korea commercial and military aircraft from foreign airports. Same with North Korea seagoing transports. Rail and road traffic into North Korea can be monitored because it can only enter via a few Chinese and Russian border crossings.

The U.S. has been successful at hunting down and punishing major banks and financial institutions that help North Korea move cash to fuel the illegal trade and this would be more effective if China cooperated. The banking sanctions could be more thorough and be extended to hundreds of individuals (most of them North Koreans) who make the illegal banking network work.

One of the more lucrative exports for North Korea is slave labor. Most of what North Korean workers overseas are paid is taken by an unofficial agent of the North Korean government and then the cash is transported back to North Korea. These legal North Korean migrant workers are part of what amounts to a slave labor program that has become a major (up to $2 billion a year) source of foreign exchange for North Korea. The export of North Korean workers has gone from 60,000 men and women in 2014 to over 100,000 in 2016. The number of workers outside the country is nearly triple what it was before since Kim Jong Un took over in 2011. The government takes up to 90 percent of the wages these men and women earn outside the country (mainly in Russia and China) and holds the workers’ families hostage in case the worker does not return home when ordered. If someone does not come back, their families are sent to prison camps.

North Korea has long used blatantly illegal exports (drugs, counterfeit currency, weapons, stolen data and tech) to keep its dictatorship and key (nuclear, chemical, ballistic missile) programs going. These become more important if all bulk imports and exports are banned and only food and some medicines are allowed in. Even these imports have been abused, with food aid showing up in Chinese markets near the border, along with medical supplies donated to North Korea. So it is essential to go after the known corrupt North Korean practices when imposing and enforcing additional sanctions.

More effective sanctions are more essential now because the North Korean government is allowing another major famine (like the one in the 1990s that killed 5-10 percent of the population) to develop. The North Korean rulers believe having nuclear weapons will enable them to extort sufficient fuel, food and cash to turn things around. That is a fantasy and most of the potential North Korean victims are aware of their vulnerability. China does not want a mass rebellion and government collapse in North Korea, especially when there are nuclear weapons and a lot of other dangerous items involved. So this time around the Chinese appear ready and willing to support more effective sanctions.

 


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