WASHINGTON -- Likening North Korea to a mafia state for its illicit activities, Republican lawmakers Tuesday called for tough U.S. action to cut the authoritarian nation’s access to hard currency that helps fund its missile and nuclear programs.
In addition to U.S.-supported moves afoot at the U.N. Security Council to tighten international sanctions in response to Pyongyang’s latest nuclear test, there’s also pressure in Congress for unilateral action by Washington.
That’s driven by skepticism of the readiness of North’s chief trading partner China to implement any U.N sanctions, and also by memory of the impact that the targeting of a bank based in the Chinese territory of Macau in 2005 had on Pyongyang’s access to international banking.
On Tuesday, the Republican-led House foreign affairs panel examined how criminal activities support North Korea’s government -- part of chairman Ed Royce’s push to introduce legislation for tougher financial sanctions.
"It is important to realize we have more options other than to simply rely on Beijing to ‘do more,"’ Royce, R-Calif., said.
Royce said illicit activities such as missile sales, meth trafficking and counterfeiting $100 bills are continuing in North Korea and underwrite its weapons programs. The North is also believed to counterfeit cigarettes and pharmaceutical products.
The panel’s top Democrat, Rep.
"I hope that China will not do what it’s done in the past and agree to sanctions and then just evade those sanctions so the sanctions never really take hold," Engel said.
China is considered key to implementation of international sanctions since it accounts for 70 percent to 80 percent of North Korea’s trade, although Beijing’s admonitions against Pyongyang for conducting its latest nuclear test three weeks ago were ignored by the North’s young leader, Kim Jong Un.
That China is supporting the latest draft U.N. resolution shows Beijing’s patience is wearing thin with its ally. But the Obama administration may be reluctant to rock the boat further with Beijing by adopting extra unilateral measures targeting China-based banks suspected of working with North Korea.
However, Kim’s confrontational approach and concerns that North Korea’s nuclear program potentially poses a direct threat to the U.S. are stirring calls in Congress for tougher action. There is deep skepticism that the North can be trusted to negotiate in good faith and accept aid in exchange for disarmament.
On Tuesday, Pyongyang’s military threatened to cancel the 1953 Korean War cease-fire.
At the hearing, Rep. Ileana Ros-Lehtinen, R-Fla., called for North Korea to again be declared a state sponsor of terror on the grounds that it has supplied the weapons programs of Iran and Syria. The designation was lifted by the George W. Bush administration in 2008.
Royce called for U.S. sanctions similar to those imposed in 2005 on Banco Delta Asia, a Macau-based bank which held about $25 million in North Korean funds. That caused a ripple effect among other banks worried about being shut out of the international financial system. But the measure proved complicated to undo when nuclear negotiations with North Korea finally got back on track.
David Asher, a former U.S. official involved in implementing those restrictions, told Tuesday’s hearing that Beijing had reacted pragmatically to the 2005 restriction as it feared more banks would be so designated by the Treasury Department. He said such sanctions could be imposed again, but it would require the resolve of the Obama administration to act against Chinese institutions and trading companies.
Marcus Noland, an expert on North Korea’s economy at the Peterson Institute for International Economics who didn’t testify, said the North’s illicit activities continue, although their overall importance for the North’s economy has declined as its international trade, particularly with China, has grown sharply.
In a rough estimate, Noland said arms and illicit exports accounted for just under 10 percent of the merchandise the North traded in 2011, compared with more than 30 percent in 1999, when the economy was at a low point after years of famine. International interdiction efforts have also impeded the illicit trade, he said.
The North’s improved financial standing could help explain its recent provocative behavior in conducting rocket and nuclear tests, he said, but added it is now very dependent on China, particularly for its energy supplies, and would be economically vulnerable if Beijing changed its policy.