By Reuters has confirmed that Stuart Levey’s trip to Seoul was in fact to begin looking at implementing financial sanctions against the North Korean regime:
U.S. officials visiting Seoul told South Korean officials Washington is looking at ways to punish North Korea financially for its nuclear test last week, a South Korean newspaper reported on Friday.
But they may find they have few options because the impoverished North’s meager international finances have already been curtailed by sanctions.
Here is a look at the international finances of North Korea, whose yearly GDP is about $20 billion, according to estimates by the South’s Bank of Korea. [Reuters]
Here is the article’s description of North Korea’s international finances:
INTERNATIONAL BANKING
The U.S. Treasury brought North Korea’s international finances to a virtual halt in 2005 by cracking down on a Macau bank suspected of aiding the North’s illicit financial activities. Other banks, worried about being snared by U.S. financial authorities, steered clear of the North’s money.
TRADE PARTNERS
North Korea’s two biggest trade partners are China, with $2 billion in annual trade, and South Korea, with about $1.8 billion. The neighbors are worried about instability in the North spilling over borders and will not push for measures designed to topple Pyongyang’s leaders. Studies indicate their trade with North Korea did not decline after U.N. sanctions were placed on North Korea in 2006 following a missile test and Pyongyang’s first nuclear test.
Beijing, the closest thing that Pyongyang can claim as a major ally, is reluctant to accept any new sanctions that would significantly undercut its economic ties to North Korea.
South Korea is worried about a sudden collapse in North Korea and an estimated bill of $1 trillion to absorb its destitute neighbor, which could wreck its own economy.
The North relies on global food handouts to feed its people and energy aid from China to power the country.
LEGITIMATE EXPORT ECONOMY
North Korea has vast mineral deposits and its exports to China include items such as lead, zinc ore and coal. Its exports to South Korea are largely generated by a joint industrial park located in the North’s city of Kaesong.
Estimates say the North’s yearly exports are valued at about $920 million to $1.7 billion. They also include textiles, food stuffs and fisheries products.
The North, considered in the global business community as a risky and unreliable partner, has a few small joint ventures including a mobile telephone deal with Egypt’s Orascom Telecom. Its SEK animation studio helps makes cartoons with ventures in France and other places.
ILLICIT ECONOMY
The United States and others have said they suspect North Korea of selling arms, missile parts and proliferating nuclear know-how in violation of U.N. measures. They have also said they suspect North Korea of sales of illegal drugs including methamphetamines, counterfeiting U.S. currency and producing counterfeit cigarettes.
This article seems to underestimate the importance that the illicit economy is to the North Korean regime. Just in counterfeiting there are estimate that the North Korean counterfeit $250 million dollars worth of US currency. The article also seems to underestimate the importance of the international banking system. Without the international banking system North Korea would not be able to move its money from its various ventures both legal and illegal. These sanctions now would have to be clever and track the various front companies the North Koreans are now using a penalize the banks doing business with them. This is not impossible to do and the US administration has the right man, Stuart Levey to do it.
6:39 pm on June 4th, 2009 1
Hmmm…
The last time we sanctioned an Asian country into a corner, all we got was a shiny, new USS Arizona memorial.
Fortunately, that time, we were the only ones with the big, scary nuclear bombs.
10:16 pm on June 4th, 2009 2
This is a perfect and relatively easy way for Obama to show he's got some balls. Clamp down on North Korea enough to cause them to collapse then laugh while China inherits the basket case North and then the U.S. and it's allies can laugh while the commies languish in economic pain for awhile.
What does the U.S. have to lose anyway?
1:46 am on June 5th, 2009 3
Yep, I like where this is headed. Hit em' in the wallet. We're so broke nowadays we shouldn't be paying for anything to support N.K. anymore. We've got nothing to lose except a couple of hostages but I say do it the Commie way this time and disregard them. That would scare the shit out of NK if they realize we're willing to take a few losses to get them in line.
6:38 am on June 5th, 2009 4
These sanctions if implemented properly could strangle the ruling elite which could always turn to China for assistance but Chinese banks would be afraid to move money to North Korea if it meant being frozen from the international finance system. China will probably keep them afloat with direct aid such as oil, food, fertilizer, and other goods, but then at least we have turned the tables to where the US is no longer paying off the North Koreans and the Chinese are at increased cost plus making life less pleasant for the ruling regime.
2:45 pm on June 5th, 2009 5
This is one of the more assinine comments I have read on this site. Need to study what was going on during that period of history as well as understanding that many US GIs were probobly killed by steel and Iron sold to said country in the years leading up to the Pacific war.
However, I suspect any sanctions to stop an invasion of the Chinese mainland that killed an estimated 10,000,000 Chinese (very low estimate, some estimates go as high as 30,000,000 Chinese), would not be enough cause for any sanctions at all. Nor the 100s of thousands of Philipinos, Malaysions, and so on and so forth throughout Asia.
The total number of 'enemy' civilians killed during the Pacific war is estimated at 430,000. (including all those killed by the 'big scary atomic bombs.) Yes, we have the Arizona memorial, and they have 'Nagasaki" and 'Hiroshima' memorials. Tough s**t for them.
10:51 pm on June 5th, 2009 6
Gerry, you are a funny one…
"This is one of the more assinine (sic) comments I have read on this site."
I would have guessed the comment asking GI how many times he jerked off to the photo of the nude North Korean soldier would have eclipsed it… but I guess Comment Asinization Level is not really a subjective matter.
The fault must be mine for using literary devices to indirectly convey a point… thinking my true intention would be clear to all but those looking for offense or seeking to find fault.
More clearly…
Despite your implication, I certainly didn't say the pre-WWII sanctions on Japan were incorrect… the statistics and points you stated are valid and we are in agreement.
…but there is something to learn from those sanctions.
Once Japan was hopelessly backed into a corner, their choices became increasingly limited until an attack on our fleet was their best option… hence the sinking of the USS Arizona.
North Korea is in a similar situation… a point not lost on those who put pressure on North Korea but have avoided backing them completely into a corner.
Having a grandfather nervously waiting on Guam for a mainland invasion of Japan made me aware that our use of big, scary nuclear bombs was certainly the correct thing to do… at least from an American (and personal) standpoint… so we are not in disagreement there either… hence it was a very good thing we had the monopoly on nuclear weapons.
What you failed to get out of my comment is that, unlike WWII Japan, North Korea seems to have nuclear weapons and a strong desire to stay in power.
If North Korea gets backed into a corner to the point that the leadership could find themselves hanging from a rope Saddam-style, would they use them…
…say, in a container that went from NK to Syria to Europe to New York?
That might get a lot of attention focused away from North Korea while everyone tried to figure out what happened.
There are many other scenarios which the vagueness of my comment allowed the gentle reader to imagine.
So, once again, the last time we sanctioned a country into a corner, they attacked us.
Gerry, is there really anything to disagree about here?
4:16 am on June 6th, 2009 7
Gerry, here is something to think about in dealing with North Korea that coincides with my ideas on the impotence and possible dangers of further sanctions. This was written by Dr. Andrei Lankov.
"Military options are unthinkable. And sanctions won't work … [T]he only likely result would be a lot of dead farmers. North Korea's great famine of 1996–99 demonstrated that the locals do not rebel when oppressed, even under terrible circumstances. North Koreans are terrified, disorganized and still largely unaware of any alternative to their misery."
"The past 15 years have seen the spontaneous growth of grassroots markets in the North and partial disintegration of state controls. Rumors of South Korean prosperity have begun to spread, assisted by popular smuggled DVDs of South Korean movies. The world's most perfect Stalinist regime is starting to disintegrate from below. The best way to speed things up is for Washington and its allies to push for active engagement with the North in the form of development
aid, scholarships for North Korean students and support for all sorts of activities that bring the world to North Korea or take North Koreans outside their cocoon. Such exchanges are often condemned as a way of appeasing dictators, but the experience of East Europe showed that an influx of uncensored information from the outside is deadly for a communist dictatorship."
1:06 pm on June 6th, 2009 8
I'm glad you agree with my comment.