Maximum Pressure Against North Korea, RIP

This article assesses the efficacy of the United Nations (UN) sanctions regime for North Korea. It reaches the following principal conclusions:

• When it comes to North Korea sanctions, US policymakers are failing to grasp a hard truth: UN sanctions are a depreciating asset and the needle can’t be pointed in the other direction.
• Inadequate sanctions and effective North Korean efforts at circumvention are compounded by a widening gulf at the UN on everything from the content and strategic direction of sanctions to the mechanics of implementation.
• The ability of the UN Panel of Experts to monitor and report on sanctions and recommend measures to improve implementation has been irreparably weakened.
• The crumbling of the sanctions regime for North Korea has put the North in a stronger position and will increase its leverage in future US-DPRK negotiations.
• The Trump administration bears special responsibility for this situation. It has been its own worst enemy in the maximum pressure campaign.

Where Have Sanctions Gotten Us?

Sanctions are a policy tool to induce a change in a country’s behavior. This concept underpins the objectives laid out in UN Security Council resolutions on the DPRK, including denuclearization of the Korean Peninsula and the halting of the DPRK’s nuclear weapons and ballistic missile programs. Yet sanctions have now become an end in themselves, ostensibly to punish the DPRK and give the appearance that something is being done.[1] And even that goal is illusory. In 2019, after three years of “maximum pressure”—which includes unilateral US as well as UN sanctions—there are few signs of macroeconomic distress in North Korea, as one might expect, for example, in the foreign exchange rate, gas prices, rice prices and the like. The UN Panel of Experts reports year after year on the failure of countries to devote requisite time, resources and political will to implement the sanctions. Three years after the launch of “maximum pressure,” this is hardly the look of success.

Sanctions are “pick-and-shovel work,” requiring constant support and tightening to sustain pressure, close loopholes and address rapidly changing evasion practices. This necessitates both new resolutions and the implementation of a range of measures to continually prevent sanctions erosion. Yet the last UN sanctions resolutions were adopted in 2017,[2] and the odds are low for qualitatively new measures from the Security Council, especially if North Korea continues to refrain from the only two actions that have ever triggered them: nuclear tests and intercontinental ballistic missile launches. The possibility of achieving political consensus at the Security Council for further measures will continue to erode. Meanwhile, North Korea presses on with developing its prohibited programs, including through missile tests, which have become routine.

With no new resolutions, there are fewer tools to deal with the North’s relentless circumvention of sanctions. By the time a sanctions provision is adopted, the DPRK has often already instituted measures to dodge it. In the case of sanctions on certain commodities, for example, Pyongyang stockpiled items before prohibitions took effect. Because many of the same North Korean networks facilitate illicit activity across multiple sanctions areas (e.g., shipping, finance, luxury goods and arms sales), evasion techniques and learning spread rapidly through the entire system.[3] Meanwhile, the DPRK has made a quantum leap in evading sanctions through the use of increasingly sophisticated and lucrative cyber attacks to generate income which has largely blindsided financial institutions, cryptocurrency exchanges and other exchanges and entities.[4] These targets remain woefully unprepared for future attacks. Not only does the attacker have the advantage, but the attacks themselves cost next to nothing and generate significant resources for North Korea. These proceeds will almost certainly increase both in scale and as a proportion of DPRK income.[5] Faced with these challenges, the impact of sanctions will only decline over time.

The Role of the UN Panel of Experts

Absent new resolutions, adding new designations to the 1718 Sanctions List becomes key to updating the UN sanctions regime. The current inability of the Security Council’s 1718 Committee (hereafter “The Committee”) to agree to new designations has hampered potential action by Member States and financial institutions against individuals and entities violating the provisions. Indeed, Member States in the Committee now almost reflexively put on hold and then block the requests of other Member States to list a new individual or entity, and have dispensed with the previous practice of including a justification.[6] While China and Russia piloted and perfected this tactic, the US piled on in 2018 by delaying and blocking the majority of humanitarian exemption requests—usually with scant justification.[7] This has helped cement a toxic dynamic of politically-driven “tit-for-tat.”

With the Security Council and Committee unable to take meaningful action, the work of the UN Panel of Experts has become more important. The Panel has a mandate to report to the Council twice a year, in September and March, on incidents of noncompliance with the resolutions and to recommend measures for more effective implementation. Naturally, bad blood in the Council and Committee seeps directly into the work of the Panel which is directly constituted and mandated by these bodies. Moreover, attempts to erode the Panel’s independence and influence have been increasing in scope and scale, while the DPRK finds more clever ways to work around sanctions as the UN apparatus for sanctions approval gets gummed up. Not only have disagreements in the Committee ensured that the Panel’s recommendations languish, but the Panel’s midterm report of August 30, 2019, was half the size of its previous reports, indicating an intention to dial back its monitoring ability.[8]

Disagreement in the Committee has also rendered sanctions measures unenforceable. While Resolution 2397 of December of 2017 capped the amount of oil that North Korea can import annually at 500,000 barrels, the Committee has been unable to take any enforcement action. In July 2018, the US submitted information to the Committee indicating that the cap had been reached, but other Member States called into question its comprehensiveness and the validity of the calculations used to arrive at the cap. Due to the difficulties of gathering information on DPRK ship-to-ship transfers and declassifying this type of knowledge for use by the UN, the US was unable at that time to make available unassailable evidence to counter the questions that were raised about the determination that the North had exceeded the petroleum cap. Nevertheless, instead of shoring up the data, strengthening the submission and making a meaningful attempt to address the concerns, the US decided to share its Committee submission with the media, publicly calling for the halting of oil transfers. This hardened positions and widened the gap between them. With the Committee hamstrung, Washington then expected the Panel to make a determination that the cap had been breached, but without including any information in its report on the concerns about data and calculations articulated by other Member States. Saddling the Panel with such a contentious issue under these constraints was unrealistic at best. When an issue becomes highly politicized in the Committee, it is magical thinking to believe that the Panel of Experts can transcend that deadlock by making a determination.[9]

More than a decade ago, the US worked tirelessly at the UN to establish the DPRK Panel of Experts. With its unique role in reporting sanctions violations to the Security Council, the Panel’s work has been an important buttress for US actions on North Korea. Panel reports are heavily used by officials across US government agencies, Congress and even the judiciary—where Panel findings now regularly appear in criminal complaints and indictments. Due to growing discomfort with perceptions of US unilateral action, an increasing number of governments refuse to act against entities or individuals on the strength of a US démarche alone; instead, they ask whether those individuals or entities have been listed in a Panel report.[10] US officials appreciate Panel reports not only due to this veneer of legitimacy but also because of the onerous and lengthy process needed to declassify intelligence for sharing with other countries and the public. It was, therefore, surprising that then UN Ambassador Nikki Haley announced in the Security Council on September 13, 2018, that the US was blocking the publication of the Panel’s 2018 midterm report due to Russian interference, a decision with far-reaching implications for both the sanctions regime and US credibility at the UN­. US allies and supporters were stunned, lamenting that Haley was killing the goose that laid the golden egg in her public campaign to appear tough on Russia. Typically in these matters, the countries most incentivized to block such reports are those whose nationals or territory are most implicated in sanctions violations. The only other time a DPRK Panel report had been blocked in the Security Council was by China over eight years earlier, and only following the withdrawal by the Chinese Panel member of his signature from the report.

As Haley’s rhetoric against Russia (and the Panel) died down, the facts started to emerge. The report, signed by all eight Panel members, was the strongest midterm report submitted by the Panel to the Security Council. It contained the hardest-hitting content ever reported by the Panel of Experts on both China and Russia[11]—ironic, given Haley’s claim of Russian cheating as her justification for blocking the report.[12] The Panel had added three short sentences to reflect Russian views on the oil cap, removing no information on Russian or other violations.[13]

When other parts of the US government got wind of the situation, requests were made to Haley to release the report. This could have been done quickly—if with some political embarrassment—by simply removing the block. But doing so would also reveal how Haley had overplayed her hand, exaggerating a minor process foul to benefit a political goal.[14] Rather than admitting fault, Haley’s team redoubled its focus on the Panel, insisting that it delete information on Russian violations from its already-transmitted report to the Council.[15] The Panel refused to do so. Not only was there no UN precedent for making substantive changes to a Panel report after it was already submitted to the Council, but conceding to such a request from a Member State would have sounded the death knell for the Panel’s independence and credibility. This entire episode not only further strained relations between the US and its fellow Council members, but also significantly lowered the bar for other countries to similarly threaten to block reports when the contents were distasteful—which even Equatorial Guinea attempted in early 2019.

DPRK Diplomatic and Economic Relations

The DPRK’s political relationships also ensure that it is able to stay ahead of the game by continuing to develop its prohibited programs while guaranteeing that it is shielded from further action at the UN. Kim has met the US president twice and the presidents of China and Russia. He has the president of South Korea on speed dial. And Pyongyang maintains solid diplomatic and economic relations with a broad range of countries. From a sanctions-busting perspective, all of these relationships enable its diplomatic personnel to continue to carry out a wide variety of illicit activities all over the world, as recognized by both the Security Council and the Panel.[16] Venezuela recently opened an embassy in the DPRK, making it that much easier to sell its oil.

With diplomatic outreach allowing it to bring China and Russia more onside, North Korea is able to translate those relationships into economic and strategic benefits far beyond the UN. The US and China trade war, Japan and South Korea’s falling out, the stalled US-DPRK diplomatic process following the failure of the Hanoi Summit and the lack of clarity and coherence in US policy have allowed countries to grow apathetic about sanctions enforcement, with little fear of the consequences. As a result, the efficacy of the sanctions adopted in 2017 will continue to diminish with each passing day.

Maximum Pressure Is on Its Last Legs

Security Council tensions reminiscent of the Cold War are blunting the impact of UN sanctions on North Korea. Pyongyang’s diplomatic overtures since early 2018, its choice to restrain its nuclear and missile testing programs and its ongoing sanctions evasion, have facilitated and exacerbated those divides. The ability of the UN Panel of Experts to monitor and report on sanctions and recommend measures to improve implementation has been irreparably damaged. The Trump administration is in this predicament largely as a result of self-inflicted wounds. US policymakers should be asking themselves what they can realistically expect to accomplish if the UN sanctions regime stays on its present downward trajectory, and what steps, if any, are they willing to take to change the approach.

Meanwhile, the weakening of a critical, if imperfect, source of pressure has left North Korea in a stronger position. The DPRK continues to build its nuclear capabilities below the threshold of US President Donald Trump’s concern, while he remains unwilling to admit fault or failure for the lack of progress on denuclearization or to change the US approach to negotiations with the North. Kim has threatened to resume testing of long-range missiles and nuclear weapons if the US and North Korea do not reach a deal by the end of the year that would provide the North with sanctions relief and security assurances. Should this scenario materialize, the two countries likely seem headed for another crisis, with North Korea in a much stronger and more economically advantageous position.

1. [1]

   Sanctions are a tool, not a strategy, and need to be coupled with other tools to form a cohesive policy. Yet for much of their history, sanctions have comprised the entirety of the US strategy toward North Korea.

2. [2]

   See: Resolution 2397 of December 22, 2017, Resolution 2375 of September 11, 2017, Resolution 2372 of August 5, 2017, and Resolution 2356 of June 2, 2017.

3. [3]

   See United Nations, Security Council, Report of the Panel of Experts Pursuant to Resolution 2407, S/2019/171, March 5, 2019, https://undocs.org/S/2019/171; and United Nations, Security Council, Midterm of the Panel of Experts Pursuant to Resolution 2464, S/2019/691, August 30, 2019, https://undocs.org/S/2019/691.

4. [4]

   United Nations, Security Council, Midterm of the Panel of Experts Pursuant to Resolution 2464, S/2019/691, August 30, 2019, paragraphs 57-76, https://undocs.org/S/2019/691.

5. [5]

   Many of the post-2016 sanctions were designed to deny North Korea opportunities to generate revenue that could be used in its prohibited programs.

6. [6]

   Blocks and holds are one tool used by Member States to prevent the Committee from taking action, and in the past were used far more sparingly and with justification provided.

7. [7]

   For information on the humanitarian consequences, see United Nations, Security Council, Report of the Panel of Experts Pursuant to Resolution 2407, S/2018/171, March 5 2019, 66-67 and 360-372, https://undocs.org/S/2018/171.

8. [8]

   See United Nations, Security Council, Report of the Panel of Experts Pursuant to Resolution 2407, S/2019/171, March 5, 2019, https://undocs.org/S/2019/171; and United Nations, Security Council, Midterm of the Panel of Experts Pursuant to Resolution 2464, S/2019/691, August, 30 2019, https://undocs.org/S/2019/691.

9. [9]

   The Panel’s annual report of March 5, 2019, summarized the information received from the US on the cap and the concerns raised by other Member States, stating that it lacked “the definitive evidence to conclude that the cap has been breached” (paragraphs 3-4). The Panel’s midterm report of August 30, 2019, summarized the information and positions of both sides in its executive summary. ­­­­

10. [10]

    For many countries doing business with the DPRK, US unilateral sanctions alone are insufficient to take action against the relevant entities or individuals, nor are unilateral US designations often considered a valid reason for suspicion of unlawful activities.

11. [11]

    The report was 148 pages in length, with over 140 mentions of China and 30 of Russia. Its findings on Russia were more extensive and detailed than any other Panel report submitted to the Council, including information on Russian involvement in ship-to-ship transfers, Russian joint ventures (JVs) established with individuals and entities linked to North Korea’s intelligence agency and other designated entities, Russian textile imports from North Korea, as well as detailed information on DPRK bank representatives operating in Russia with impunity. With regard to China, the report contained information inter alia on the delivery of coal to Chinese ports, sales of Chinese transducers for North Korea’s nuclear program, violations of the bans on imports of North Korean iron, steel, textiles, food and other products, in addition to substantial illicit financial and front company activity.

12. [12]

    Between the Panel’s submission of its report to the Committee on August 3, 2018, and the Council on September 10, 2018, the Russian delegation requested that the report also reflect its ­­­­­position on the oil cap as stipulated in a Note Verbale to the Panel. The Panel added three sentences to do so. Such additions to reflect Member State views in Panel reports are standard practice. And while the timing was less than ideal, the reality is that reports to the Security Council are often updated until their deadline and after submission to the Committee, either to reflect editorial amendments or factual updates. Throughout this period, Ambassador Haley’s team pressured the Panel not to include mention of the Russian position, which they felt would dilute the report’s findings. Having been thwarted, Ambassador Haley proceeded to block the report, claiming without substantiation that Russia had forced the Panel to remove from the report information on Russian violations of sanctions.

13. [13]

    The Panel reclassified a non-substantive Annex of the report containing the names of DPRK joint ventures in ten countries including Russia as a “confidential” Annex (transmitted to all members of the Committee and Security Council all of whom can use the information), given that 1) the more detailed information had been redacted for legal reasons, i.e. entities under investigation 2) The information was available in open source anyway 3) conformity with how information from other Member States was treated and 4) the text of the report itself which in a section devoted to JVs in Russia, already listed the names of all Russian JVs with North Korean individuals and entities which were linked to designated entities, as well as information on Russian contracts from which they benefited and their operation out of DPRK embassies in the country, with a strong recommendation which was essentially targeted at Russia (i.e., within a section entitled “Russia,” almost unheard of at the UN).

14. [14]

    Haley stated, “We’ve seen the original report and we know the truth – the Panel should do the right thing and release it.” The Panel had already submitted its report to the Security Council, thereby fulfilling its mandate with regard to this particular report as set out by the Council. The report was, therefore, out of the Panel’s hands, with the issue up to the Council members which had the report before them to decide whether to publish it and/or if they wished to make a decision to remove any information from the report. Nevertheless, Ambassador Haley and her team misrepresented the procedure in conversations with other US officials who were requesting the release of the report. They were given the impression the report’s publication procedurally depended on the Panel taking action to resubmit the report.

15. [15]

    In essence, the team wanted to alter the evidence ex post facto, to prove its initial claim. The irony of the Panel having been publicly accused of compromising its independence for a minor Russian process foul before even submitting its report to the Security Council (a regular occurrence) being righted through a very substantial and unprecedented infringement on its independence by asking it to change the content of a report already before the Security Council would have opened the doors in the future to any Member State to remove critical sections of the Panel’s report even after it has been submitted to the Council.

16. [16]

    The Security Council has expressed concern about or required action to prevent and address the illicit activities of DPRK diplomats in multiple resolution provisions: Resolution 2371 (2017) preamble and paragraph 16; Resolution 2321 (2016) paragraphs 14, 17, 18, 34 and 35; Resolution 2270 (2016) preamble and paragraph 13; and Resolution 2094 (2013) preamble. The Panel has also reported extensively on the involvement of DPRK diplomats and diplomatic missions in illicit activity.