Friday, February 17, 2006

Just How Important are Sanctions

Based on developments over the last few weeks, I am beginning to be convinced that the sanctions leveled at North Korea for its illicit production of fake US currency and general money laundering/illegal activities is having a deep impact. NK's breathing room continues to shrink as more Korean firms ceased interactions with banks suspected of being linked to NK money laundering activities. Added to that list of banks is Banco Delta Asia itself who, having been the focal point of US efforts to cut off NK's illicit activities, has pledged to cut off ties with NK. One would not be too far off to say that such action nearly qualifies as an admission to guilt.

On top of that, China has been applying pressure (atleast rhetorically). Earlier, China had publicly supported US accusations (along with Japan, which speaks volumes all by itself). According to reports, President Hu Jintao urged Kim Jong-il to cease money laundering operations.

KJI had his own piece to contribute to the conversation and reportedly admitted that he is concerned that sanctions might be severely undermining his regime. The report alleged that KJI is actually afraid that sanctions could cause collapse. Albeit, this report is a bit hard to verify, but the possibility must be considered, especially considering what measures NK has taken: attacking the US rhetorically, appealing for Japanese help, offering to aid in cracking down on global counterfeiting, and demands that S. Korea provide fertilizer aid.

South Korea has vacillated on the issue. They were the last to defend the US sanctions and then swiftly took back the support. US Ambassador to Korea has been a target in S. Korea ever since he labeled NK a "criminal regime". However, it seems that the S. Koreans weren't in the dark, but were actually hiding that they knew more than they were willing to admit. A recent change of tone seems to be not only a move to counteract bad press for their conspicuous silence on (and even defense of) N Korea's money laundering but also an attempt for Ban Ki-moon
to appear as a mature global politician so as to buffer his bid for UN Secratary General. Ban's pressure on N. Korea is the first time (that i have noticed) that a substantially high ranking official has made a demands on NK to discontinue "illegal activity".

According to the Bank of Korea, and seemingly in opposition to a possible KJI admission, these sanctions are not really having that big an effect. According to the report, sanctions and their effect on the NK economy is driving them further into the arms of the Chinese (I would argue that kicking out the World Food Program and all other humanitarian NGOs already had done a good job of making NK dependent on China - and Korea). However it doesn't seem that China remains the most willing partner. Their assessment of the situation, both in public and in "private", have been attempts to force NK to cut the bull. A WSJ article has the opposite assessment and notes that NK's economy has "ground to a halt". If money laundering was a significant source of income, the death of NK's hub with Banco Delta and the likely timidity this has produced in any other NK front companies has probably rocked the boat more than a little. However, we unfortunately don't know. Such is the nature of organized crime. For the US's part, they haven't moved and inch and want to see the plates before they stop the pressure.

This issue could reshape how North East Asia and the US deal with N. Korea in the future. If providing consistent and substantial pressure can prove successful, my hope is that it may become a tool (not necessarily standard operating procedure) in the US international relations arsenal on the Korean peninsula.

1 Comments:

At 12:37 PM, Anonymous Anonymous said...

wow--great analysis. richardson was right . . . a must-read.

 

Post a Comment

<< Home