The fifth nuclear test of North Korea on 9 September provoked a new round of discussions about how to contain this growing threat. The United States and its allies in northeast Asia are already preparing another dose of sanctions.
Most military experts believe that military response to North Korea’s actions can quickly escalate into open conflict with mass casualties. Instead, the international community responds to nuclear and missile tests, North Korea’s constant tightening of economic and political sanctions against Pyongyang. Since the first nuclear test in North Korea in October 2006, the UN Security Council adopted five resolutions prohibiting North Korea’s access to components for nuclear and missile programs.
But many experts in the security field doubt that these sanctions were effective. The study showed that the online company regime, which are referred to as North Korea, Inc., engaged in the illegal procurement learnt to evade sanctions. We [the author approx.ed.] interviewed former North Korean businessmen, currently residing in Seoul, South Korea that bought components for the nuclear and missile programs of the regime. The strengthening of sanctions have led to the development of alternative, more efficient channels of procurement.
A key role of Chinese intermediaries
To evade international sanctions, North Korean managers cooperate with the commercial centres in China, which is the largest trading partner of North Korea, as well as with local Chinese business intermediaries. These brokers charge their North Korean clients a fee for the purchase of dual-use technologies that can be used for both civilian and military purposes.
North Korean managers conducted procurement sanctions of equipment as a normal business transaction. They mainly talked about the challenges and opportunities of the particular local market in Asia, as well as foreign businessmen dealing with the regional chamber of Commerce.
With the tightening of sanctions by the local Chinese intermediaries had requested a higher fee to compensate for the increased risk of doing business with North Korean clients. Instead of letting the procurement activities, the sanctions actually helped to attract more capable intermediaries, which drew large rewards. The North Korean regime has financed higher fees, based on significant cash reserves which it has accumulated in the accounts on the mainland during the boom in the coal trade between North Korea and China at the end of 2000-ies.
The convoy of trucks waiting for crossing the border between China and North Korea. Photo: Roman Harak/Wikipedia
Despite the high costs, North Korean managers use Chinese intermediaries, because they provide them with two unique opportunities. First, these brokers have access to a wide range of foreign companies that produce dual-use equipment and industrial goods in China and sell them in the Chinese market. Managers from North Korea purchased these products through the use of local Chinese companies. The headquarters of the European companies receive copies of documents and certificates that show that their affiliates in China sell their products to Chinese companies, and in fact these products end up in North Korea.
Second, the Chinese intermediaries is relatively easy to deliver goods to North Korea. Using your logistics company in China, they can effectively hide these operations in the vast flow of goods from China. Try to detect items sanctions the scale of turnover is like looking for a needle in a haystack.
China’s activities to curb the illegal purchases
Like the US, South Korea and Japan, China is also concerned about the rapid development of North Korean missile and nuclear programs. Chinese authorities fear that the introduction of more severe sanctions could lead to the destruction of the North Korean economy, and it will cause refugee flows and instability. So they use domestic laws to stop the illegal trade in weapons components.
In 2013, a group of Chinese ministries and agencies has published technical Bulletin No. 59, containing the list of dual-use goods that Chinese citizens are allowed to sell to the North Koreans. This unilateral move clearly not stopped the flow of prohibited goods, as North Korea has already tested a more advanced nuclear weapons and missiles. However, this initiative speaks to the intention of the Chinese authorities to curb the illicit trade with North Korea, and can also serve as a rare basis for cooperation of China with the United States.
States act to protect their national interests, and Beijing, Seoul, Washington and Tokyo have a common interest in ending the illegal trade of companies of North Korea, Inc. The export control authorities and law enforcement agencies of South Korea and the United States have the opportunity to secretly cooperate with their Chinese counterparts to improve Chinese domestic laws and to stop illegal procurement activities in the Chinese market.
North Korean border with China in Dandong. Security is reportedly low in many parts of the 1400-kilometer border. Photo: Jack Upland/Wikipedia
The United States and South Korea could communicate with commercial intelligence on transactions in North Korean business managers with private Chinese middlemen. It can help China to disrupt North Korea’s procurement in China. There are two specific opportunities to stop the illegal activity of a network of companies North Korea, Inc.
First, most North Korean major managers have diplomatic status that allows them to collaborate with Chinese commercial centers for many years and to make purchases in the Chinese market. The collection of evidence that North Korean sales representatives abuse their diplomatic privileges, will give the Chinese government grounds for the expulsion of these illegal commercial agents. The expulsion will cause long delays in illegal procurement activities in China, as they will have to create new commercial channels.
Secondly, you need to convince Beijing to carry out a targeted investigation of illegal activities by Chinese middlemen who work with North Korean procurement agents, through the existing anti-corruption authorities of the Chinese government. It is a powerful tool that current leader of China, XI Jinping uses to consolidate power. Most of these Chinese intermediaries are closely linked to corrupt local officials of the Communist party. Identification of illegal activities and punishment of those responsible for this can be an effective way to stop the flow of sensitive goods to the North.
Deterring nuclear and missile programs of North Korea
As the intervals between the nuclear test, Pyongyang has dropped from several years to several months, you need to find ways for more effective enforcement of sanctions against North Korea. Nuclear potential of North Korea has grown significantly over the last decade, despite the fact that the international community regularly introduces targeted sanctions to prevent the acquisition of sensitive components.
The horse escaped from the barn, but has not yet jumped over the fence, as the saying goes. The goal of North Korea is the miniaturization of nuclear warheads for the already tested ballistic missiles, but it will probably take a few years. So you need to use the opportunity to counter the practice of illegal procurement of the North Korean regime, strengthening of real cooperation with China in this field.
Author: John S. Park
John S. Park is an adjunct lecturer at Harvard University, senior Advisor at the National Bureau of Asian research received a grant from the funds of the MacArthur Foundation and the Stanton Foundation.
