By Anthony Ruggiero
May 25, 2018

President Trump cancelled the June 12 summit with North Korea’s Kim Jong Un after saying Pyongyang’s latest statement demonstrated “tremendous anger and open hostility.” The sides were far apart on the sequencing of denuclearization, with lingering questions of whether Kim was using his father and grandfather’s playbook to delay real concessions. The Trump administration must now initiate the second phase of its maximum pressure campaign, where all those who continue to do business with North Korea are cut off from business with the United States.

The main goal of Kim Jong Un’s summit diplomacy was to sabotage the Trump administration’s original maximum pressure policy. In just 16 months, the Trump administration issued more North Korea sanctions than the Obama administration did in eight whole years. The Trump administration also used the threat of sanctions to alter North Korea’s trade and diplomatic relationships. More than 20 countries have curtailed and/or ended diplomatic and commercial relationships with North Korea.

By proposing a summit and promising denuclearization, Pyongyang earned itself a two-month respite from increased pressure. That should end immediately; Maximum Pressure 2.0 should include the following three components:

First, China needs to know that the U.S. will hold it accountable for any efforts to undermine sanctions on Pyongyang. Managing China’s reaction to the cancelled summit will be critical since Beijing had finally begun to implement sanctions after more than a decade of inaction. Regrettably, recent reports suggest that China has already begun backsliding.

The way to go after China is to put pressure on its banks, many of which have helped North Korea conduct illicit transactions. Late last year, the Trump administration reportedly was close to sanctioning Agricultural Bank of China and China Construction Bank—two of the largest in China with more than a trillion dollars of assets each—but held back for fear of the impact on the global economy. This was a mistake. The U.S. needs to take a page from its Iran sanctions playbook and make it clear that foreign banks face a simple choice: Do business with the U.S. or do business with North Korea—it can’t be both. While Chinese banks likely are violating U.S. law, imposing sanctions that would cut them off from the U.S. financial system is not the only option. Instead, if Beijing won’t clean up its financial system, the Treasury Department should issue multi-billion-dollar fines and warn that Chinese banks may soon face penalties that are even more significant.

Second, the Trump administration should move aggressively against North Korean shipping. So far, the maximum pressure policy has only scratched the surface of sanctions on North Korea’s shipping sector, which plays a crucial role in Pyongyang’s evasion, including the prohibited transfer of commodities. The Trump administration has sanctioned illicit shipping networks and worked with partners in the region to track Pyongyang’s activities, including its use of ship-to-ship transfers to evade sanctions. The next big step is to put in place tough inspections of vessels of North Korea-linked vessels to prevent Pyongyang from importing and exporting prohibited items.

Finally, the 2017 State Department Human Rights Report noted there are “an estimated 100,000 North Korean citizens working as overseas laborers, primarily in Russia and China.” The Kim regime likely earns hundreds of millions of dollars a year from the practice, and the UN noted the regime uses the revenue for its nuclear weapons and missile programs. The U.S. should build a coalition of like-minded countries that commit to prohibiting North Korean overseas laborers. If a country refuses to join the coalition, the Trump administration should enforce mandatory U.S. sanctions against those who employ North Korean workers.

The cancelled summit was a prudent move to end Kim’s efforts to play the same games that allowed his father and grandfather to fleece the U.S. and its allies. Maximum Pressure 2.0 faces a difficult road ahead, but countries are not going to side with a dictator that builds nuclear weapons while his people starve. And if they do, then they will have to deal with the consequences.

Anthony Ruggiero, a senior fellow at the Foundation for the Defense of Democracies, was the nonproliferation advisor to the U.S. delegation to the 2005 rounds of the Six-Party Talks and spent more than 17 years in the U.S. government. Follow him on Twitter @_ARuggiero.

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