New Sanctions Over North Korea

The Obama Administration announces new sanctions on companies with ties to North Korea.
2009-07-01
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This undated picture, released by the Korean Central News Agency on Jan. 5, 2009, shows a missile firing drill from an undisclosed location in North Korea.
This undated picture, released by the Korean Central News Agency on Jan. 5, 2009, shows a missile firing drill from an undisclosed location in North Korea.
AFP

WASHINGTON—The United States has imposed sanctions on companies involved in suspected missile proliferation by North Korea and in purchases of equipment that could be used in a nuclear weapons program.

The Treasury and State Departments said they had targeted Iran's Hong Kong Electronics and North Korea's Namchongang Trading Corp. under an executive order that would freeze their U.S. assets and ban U.S. firms from dealing with them.

North Korea launched a ballistic missile April 5 and detonated a nuclear device May 25. The atomic test prompted international condemnation and a United Nations Security Council resolution to punish North Korea.

The moves announced Tuesday aim to further isolate the companies from the U.S. financial and commercial systems and other countries' banks and corporations, which may now resist doing business with them to avoid alienating the United States.

Whether either company has any U.S. assets that could be frozen wasn’t immediately clear.

Asked whether the moves would affect North Korea, State Department spokesman Ian Kelly said, “I certainly hope so ... The decision was made on its merits.”

Expected reaction

James Person, coordinator of the North Korea International Documentation Project at Washington's Woodrow Wilson International Center for Scholars, said the communist regime would likely respond to the sanctions with typical language.

"They will of course threaten to retaliate. They will probably declare it an act of war. They will probably threaten to turn Seoul into a ‘sea of flames.’ The normal rhetoric. They may even step up military adventurism again," Person said.

But Person called the freezing of assets the only type of sanctions that "really bother the North Koreans" and that force the country's leadership to "react one way or the other."

"[Earlier] sanctions through the Security Council seemed to have less effect, and I’m really surprised that we went that route after the missile launch," Person said.

"We did a foolish thing by going through the U.N. Security Council, because that just annoyed the North Koreans even more. If we really wanted to hit them where it hurts … this should have been the way to go in the first place," he said.

John Park, senior research associate  for Northeast Asia at the Washington-based United States Institute of Peace's Center for Conflict Analysis and Prevention, said freezing assets is an attempt to force North Korea to abandon its nuclearization process out of desperation.

"That’s the intention—to pursue these measures and get North Korea to realize that the only way to more or less survive is to go the opposite direction, not to continue with further nuclear development but in fact to come back to the denuclearization agreements, implement those, and have these financial sanctions lifted," Park said.

But Park said that North Korea has already started down a path of weapons development that the country's leadership would be loathe to abandon.

"North Korea appears right now quite determined to continue with nuclear capability enhancement. And this environment of financial sanctions, if effectively implemented, will make that task harder."

"But to reverse North Korean behavior—some analysts are saying that it is way too late now," Park said.

"These are not the traditional provocations of North Korea in the past where the playbook was brinkmanship, raise the stakes, and get the various parties, especially the U.S., back to the negotiating table and negotiate it from a higher position," he said.

"It looks like the playbook is different now. It’s really one of making statements almost in a unilateral fashion."

Front companies

The U.S. steps are part of an effort to get tough with North Korea, which conducted its second nuclear test this year and has walked away from a 2005 agreement to abandon its nuclear programs in exchange for economic and diplomatic benefits.

The Treasury Department said Hong Kong Electronics "has transferred millions of dollars of proliferation-related funds" to North Korea's Tanchon Commercial Bank and Korea Mining Development Trading Corp.

The United States has already moved to financially isolate those two companies, alleging that they have supported the spread of deadly weapons.

Hong Kong Electronics "has also facilitated the movement of money from Iran to North Korea" on behalf of Korea Mining, an arms dealer and main exporter of goods and equipment related to ballistic missiles and conventional weapons, Treasury said.

Tanchon, a commercial bank based in Pyongyang, is the financial arm of Korea Mining, the department said.

"North Korea uses front companies like Hong Kong Electronics and a range of other deceptive practices to obscure the true nature of its financial dealings, making it nearly impossible for responsible banks and governments to distinguish legitimate from illegitimate North Korean transactions," said Stuart Levey, the department's undersecretary for terrorism and financial intelligence.

The State Department described Namchongang as a Pyongyang-based "nuclear-related company" and said it has been involved in the purchase of aluminum tubes and other equipment "specifically suitable for a uranium enrichment program since the late 1990s."

The State Department also said Ambassador Philip Goldberg would lead an interagency group examining ways to sanction North Korea.

Goldberg, who was posted in Bolivia before being forced to leave last year in a diplomatic dispute, will travel to China and other countries to build international support for the U.S. policy, officials said.

John Park said that following North Korea's most recent nuclear test, the international response was intended to punish the regime, but that over time that response would likely soften and enforcement would become more difficult.

"Right now the way I see Ambassador Goldberg’s appointment and this White House-based interagency team—it’s focused on continuing with this consensus and, if anything, building the momentum," Park said.

Treasury warning

Treasury’s Financial Crimes Enforcement Network recently warned U.S. banks that North Korea might try to skirt financial sanctions by using various "deceptive practices."

The warning was aimed at ensuring Pyongyang doesn't evade U.N. Security Council sanctions intended to prevent the financing of nuclear weapons, ballistic missiles, and other weapons of mass destruction.

In September 2005, Treasury pressure led to the freezing of $25 million in funds held at Macau’s Banco Delta Asia. Treasury accused the bank of laundering money for the North Koreans but allowed Macau to release the money in 2007.

Original reporting by Joshua Lipes and J.M. Noh for RFA's Korean service. Korean service director: Insop Han. Written for the Web in English by Sarah Jackson-Han.

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