The U.S. may have one card to play against North Korea: trade

U.S. Ambassador to the United Nations Nikki Haley speaks during a U.N. Security Council meeting on North Korea in New York on Wednesday.

July 5, 2017 4:46 PM PT

Reporting from NEW YORK — Chinese banks handle North Korean trade deals. African countries employ North Korean guest workers and buy spare parts for Soviet-era military equipment as well as sophisticated new missiles. Moldova recently announced its intentions to export wine for the more sophisticated palates of Pyongyang.

But trade with North Korea might become more perilous as the Trump administration looks to expand sanctions to companies and countries it says are enabling Kim Jong Un’s continued defiance of the international nonproliferation norms.

Americans awoke this Fourth of July to a new reality: North Korea has developed an intercontinental ballistic missile potentially capable of reaching Alaska, if not parts of the U.S. West Coast. The apparently successful test of the missile Tuesday has prompted the Trump administration — which, like its immediate predecessors, finds itself with few palatable options — to look harder at the diplomatic and regulatory tools that could strangulate the North Korean government and economy.

“There are countries that are allowing, even encouraging, trade with North Korea in violation of U.N. Security Council resolutions. Such countries would also like to continue their trade arrangements with the United States. That is not going to happen,’’ U.S. Ambassador to the United Nations Nikki Haley said at an emergency session of the Security Council on Wednesday.

Haley said she had consulted earlier Wednesday with President Trump, who now supports using trade to put pressure on North Korea. “We will not look exclusively at North Korea. We will look at any country that chooses to do business with this outlaw regime,” said Haley.

Nonproliferation experts say that the United States has yet to implement the kind of far-ranging sanctions against North Korea that the Obama administration used to pressure Iran.

“North Korea is just a shadow of what we’ve done on Iran,” said William Newcom, who used to be the U.S. representative on the U.N. panel enforcing sanctions against North Korea. “They have got to be very public about going after the companies and countries that are providing North Korea with income.”

Trump signaled his impatience with China’s unwillingness to pull back on economic ties with its neighbor. “Trade between China and North Korea grew almost 40% in the first quarter,” he complained on Twitter en route to the Group of 20 gathering in Europe. “So much for China working with us — but we had to give it a try!”

Trump’s trade figures appear to be accurate. Although China claims to have cut back on coal imports from North Korea, trade between them rose 37.4% in the first quarter of the year, according to Chinese government statistics. China buys garments and minerals such as iron ore from North Korea, while North Korea relies on the larger communist country for just about everything else — including most of its food and energy supplies.

From Air Force One, the president also telephoned Egyptian President Abdel Fattah Sisi and urged him to respect sanctions.

“President Trump stressed the need for all countries to fully implement U.N. Security Council resolutions on North Korea, stop hosting North Korean guest workers, and stop providing economic or military benefits to North Korea,” the White House said.

In the past, Egypt was a customer for North Korean missiles, and an Egyptian company, Orascom, had installed its cellphone network. (However, Egypt was also responsible for the seizure last year of a cargo ship in the Suez Canal with 30,000 North Korean-made rocket-propelled grenades.)

The U.S. Treasury Department last week took what nonproliferation experts say is an important first step by sanctioning a small Chinese bank that it said had facilitated North Korea’s purchase of ballistic missile technology. The Bank of Dandong, located in a border city on the Yalu River, had done 17% of its business with North Korean-related customers.

Experts say it was a warning that Treasury could go after larger banks, even the Bank of China, if they are found to have dealings with North Korea.

U.N. sanctions against North Korea are invariably watered down by China and Russia and, once in place, unevenly enforced.

Nonproliferation experts have long advocated so-called secondary sanctions, which would target companies and individuals outside North Korea.

“The reason that U.N. sanctions have not worked is because they are directed at the wrong areas,” said Anthony Ruggiero, a senior fellow at the Washington-based Foundation for Defense of Democracies. “The North Koreans are aided by too many non-North Koreans — Chinese, Russians, Malaysia, Europeans. There is this general attitude that North Korea is not my problem.”

Despite its international ostracism, North Korea continues to drum up trade deals throughout the world. Its economy appears to be on the upswing, with gleaming new apartment blocks in Pyongyang and increasing free market activity around the country. On Saturday, Moldovan President Igor Dodon announced his plan to expand trade with North Korea, starting with wine. Angola, Algeria and Mauritania have all hosted North Korean trade delegations in recent months.

The U.N. Panel of Experts, which oversees North Korean sanctions, in its report this year uncovered the sale of a $6-million air defense system to Mozambique and sales of missiles and rockets to Sudan.

North Korean guest workers, who send most of their salary directly to the government and often live in slave-like conditions, are found in Polish shipyards and in forestry sites in Russia. They did construction work on World Cup stadiums in Qatar. A U.N. report in 2015 estimated that about 50,000 North Korean workers abroad brought in as much as $2.3 billion.

The focus on North Korea’s economy comes as Trump, like his predecessors, is staring at an array of unpalatable alternatives for handling North Korea.

After an initial display of bravado, Trump shied away from hints that he was contemplating military action. Airstrikes against North Korea would probably result in retaliation and could put millions of South Koreans, as well as members of the U.S. military, at risk from artillery installations at the demilitarized zone. Secretary of Defense James N. Mattis warned in a recent television interview that a war with North Korea would be “catastrophic” and “would be probably the worst kind of fighting in most people’s lifetimes.”

The prospects of entering into direct talks with leader Kim Jong Un dimmed after the repatriation last month of a comatose U.S. college student, Otto Warmbier, who had been sentenced to 15 years of hard labor for trying to remove a propaganda poster from his hotel. He died a few days after his return to the United States.

Trump had initially placed his hopes on getting Chinese President Xi Jinping to press North Korea harder, but that strategy, as he has acknowledged, has disappointed.

Scott Snyder, an expert at the Council on Foreign Relations who has written extensively on Chinese-North Korean relations, said he is not optimistic about the international community’s ability to completely cut off North Korea.

“The Chinese-North Korean border has many of the same characteristics as the U.S.-Mexican border. There is a lot that comes through regardless of how effectively sanctions are enforced. It is like trying to stop drugs,” said Snyder.

But he believes the Trump administration’s focus on linking trade deals to North Korea is a new approach worth trying. “The idea is that cooperation on North Korea is a prerequisite and a litmus test for a broader relationship with the United States. We are just beginning to test whether that premise will work.”

In a statement Wednesday, the State Department said “the launch demonstrates that North Korea poses not only a threat to the United States and our allies, but also all nations in the region and beyond. This action makes clear that strong and resolute action by the international community is needed.”

Times staff writer Tracy Wilkinson in Washington and special correspondent Jessica Meyers in Beijing contributed to this report.

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Twitter: @BarbaraDemick

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UPDATES:

5 p.m.: This article was updated with more details on North Korea’s economy.

This article was originally published at 4:46 p.m.