The North Korean Paradox: Sanctions that Actually Work

By Jenny Park

When North Korea makes belligerent threats of nuclear annihilation and actually carries out nuclear tests and ballistic missile launches, the world’s response is surprisingly lukewarm. This is an odd phenomenon considering the tougher sanctions against Russia for supporting the separatists in Ukraine, and against Iran for a multitude of transgressions, including continued illicit nuclear activities. 

But North Korea’s violations of international law are quite extensive. To name a few, North Korea developed nuclear weapons after withdrawing from the international Nuclear Non-Proliferation Treaty, and tested them out not only once in 2006, but also in 2009 and in 2012. Mind you, China, the U.S., Japan, Russia, and the two Koreas have engaged in six-party talks from 2003 to 2007 to try to resolve North Korea’s nuclear issue to no avail. Furthermore, the multiple UN sanctions (UNSecurity Council Resolutions 1718, 1874, and 2094) that imposed economic and commercial pressures against North Korea also proved to be ineffective. 

Ultimately, North Korea is resolutely defiant. After the UN Security Council approved of new sanctions against North Korea after its third nuclear test in 2012, North Korea responded by launching four short-range missiles over one weekend. Just this year, North Korea test-fired two medium-range ballistic missiles as well as several short-range missiles.
One would think that North Korea, with a small and weak economy, would not have so much leverage to be so defiant. However, sanctions may be largely ineffective, as they target North Korean companies and state institutions, which are effectively impervious to sanctions because they are removed from the global economy.

Furthermore, North Korea relies on China to mitigate the force of UN sanctions. Since the first UN sanctions were implemented in 2006, Chinese exports to North Korea actually increased by 140 percent by 2009. When North Korea launched a rocket in 2012 - in violation of an international ban of long-range missile tests - the U.S., South Korea, Japan, and the EU proposed additional UN sanctions. However, China vetoed all but three (China is one of the five permanent members of the UN Security Council). China’senforcement role is also important to implementing these sanctions because, for example, the majority of North Korea’s cargo - including the transfer of banned items - passes through Chinese ports and airspace.

Oneremedial strategy is for the UN to adopt a more focused, targeted set of sanctions. This approach recognizes that actors, who engage with North Korea in arms trafficking and proliferation activities, are modeling their business model after global drug trafficking networks. These actors use the global network to camouflage their activities. This offshore economy should be the target. UN member states should recognize that their own citizens may be engaged in sanctions evasion, by either actively engaging or passively permitting. This recognition ultimately aims to strike at the support system of arms trafficking and proliferation from the outside. However, the effectiveness of this approach, at least from the UN Security Council’s perspective, is questionable because North Korea may continue to rely on China’s support.

Another, more persuasive strategy has two recommendations. The first is to target North Korea’s offshore economy. The second is to increase unilateral action by the U.S. to impose stricter punitive measures against North Korea. 

So far, the U.S. has only incrementally imposed sanctions against North Korea, with much room left for stronger sanctions. But imposing stronger measures has historical support. In 2005, U.S. criminal investigations revealed that North Korea was involved in drug smuggling and money laundering with Macao individuals and entities. The U.S. declared Banco Delta Asia (BDA), a Macao-based bank, to be a primary money-laundering concern. This declaration was an effective deterrent - two dozen financial institutions, spanning five Asian countries, voluntarily terminated their businesses with North Korea. (Unfortunately, the U.S. eventually backtracked on these sanctions after criticism that its unilateral action undermined the six-party talks.) 

Consequently, the latter strategy proposes a revamped list of unilateral punitive measures that are inspired by current U.S. sanctions against other countries. One measure recommends designating North Korea as a primary money-laundering concern, similar to how the U.S. had designated Ukraine, Burma, and Iran as such under the Patriot Act in 2002, 2004, and 2011, respectively. This recommendation effectively bans direct or indirect exportation or reexportation of any financial services from the U.S., and this may deter even the Chinese and European banks from transacting with North Korea if they need access to the U.S. financial institutions. Another measure recommends sanctioning North Korean shipping companies and airlines that are caught in proliferation activities, just as the U.S. had targeted the Islamic Republic of Iran Shipping Line and Iran Air with sanctions for maritime proliferation. These unilateral sanctions should strike at the offshore financial support system, and result in stronger punitive measures against North Korea.