Wednesday, January 9, 2013

Don't Engage Kim Jong Un -- Bankrupt Him: It's time to play hardball with North Korea's new leader.

The Banco Delta Asia operation was a good one.  Excerpt:
There is a precedent for this: In September 2005, Treasury declared the Macau-based Banco Delta Asia a "primary concern" for North Korean money laundering, and a haven for drug dealing and counterfeiting proceeds. Treasury's action only directly affected $25 million in deposits, but its indirect effects were far greater, causing a run on Banco Delta and damming one of North Korea's main streams of illicit revenue. 
The North Koreans sought new banks elsewhere, but Treasury followed them. Senior Treasury officials visited banks throughout Asia, warned their officers of the risks of doing business with North Korea, and stated that it was "almost impossible to distinguish between the North's legitimate and illegitimate dealings." Multiple banks quickly cut their ties with the North. Stephen Haggard and Marcus Noland, economists who study North Korea, estimated that Treasury sanctions and Japan'scrackdown on remittances to North Korea badly hurt Pyongyang's capacity to launder the proceeds of its illicit activities, which accounted for approximately half of the North's income in the 1990s and still made up a significant share of Pyongyang's total earnings in 2005. As a result, the regime was forced to sell off some of its gold reserves. By January 2006, Kim Jong Il was so desperate that he reportedly told Chinese President Hu Jintao that he feared that the sanctions would cause his regime to collapse.
In principle I agree with Joshua and if we wanted to really strangle north Korea we would go after Department 39 operatives around the world to cut off the supply of illicit trade and the flow of hard currency and luxury goods back to the regime to keep the elite happy.  But I think it will e hard for us to replicate the Banco Delta Asia operation for the very reason highlighted in the last sentence above. We could cause the collapse of the regime but this time China is unlikely to cooperate (as it had to tacitly in 2005) because of the Chinese policy of "Three no's" - no war, no nukes and no collapse.  China will not support regime collapse and going after the north's finances is too dangerous for China.

It's time to play hardball with North Korea's new leader.

Barack Obama and Sen. John McCain clearly agree on one thing: Bill Richardson and Eric Schmidt should not have visited Pyongyang this week. A State Department spokeswoman said last week that the timing, coming just four weeks after a rocket launch that violated three U.N. Security Council Resolutions, was not helpful. McCain tweeted that Richardson and Schmidt were "useful idiots." Richardson is among the staunchest advocates of appeasing North Korea after billions of dollars in U.S. and South Korean aid have bought little more than attacks, provocations, threats, and broken promises to disarm.

This could be the Hermit Kingdom's year of living provocatively. North Korea's dynastic ruler, Kim Jong Un, who turned 29 (or possibly 30) on Jan. 8, is very likely to act aggressively toward his neighbors in 2013 to burnish his leadership credentials at home and to deal with the new South Korean president-elect, Park Geun Hye, from a position of strength. New administrations in Washington, Beijing, Tokyo, Seoul, and Moscow will seek to avoid foreign crises as they consolidate their power domestically, creating a less confrontational and moreappeasement-prone neighborhood in 2013.
The provocations have already begun. North Korea's rocket launch in December was calculated to intimidate the U.S. and South Korean governments: The rocket was theoretically capable of reaching the United States, and North Korea carried out the test on Dec. 12, seven days before South Korea's presidential election. Pyongyang's announcements that it might postpone the test due to technical difficulties in the days leading up to the launch appear to have caught Obama's Asia team off guard.

So far, the Obama administration's response to the North Korean test has been to return to the United Nations to ask for more Security Council sanctions, but the test already violated three Security Council resolutions that China won't enforce. Despite prior U.N. condemnations, North Korea followed its 2006 and 2009 missile tests with nuclear tests three and two months later, respectively. Beijing's new leadership will likely keep funding the Kim regime and letting it smugglemissile parts and sanctioned luxury goods through Chinese ports. (China claims to "resolutely"oppose North Korea's nuclear programs, but probably sees its behavior as useful in keeping the United States distracted and Korea divided, while it pursues territorial ambitions elsewhere in the Pacific.) If the pattern holds, North Korea's next nuclear test could occur around the time of the late Kim Jong Il's Feb. 16 birthday, or president-elect Park's Feb. 25 inauguration.
(Continued at the link below)

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