Sanctions Update: UNSC 2321 Aftermath
In the wake of Resolution 2321, governments have passed implementing legislation and in some cases so-called “autonomous” or bilateral sanctions that go beyond UN proscriptions. Following is an update on a few of these moves and what—if anything—they mean.
UNSC 2321 not only established a cap on coal exports for all of 2017, but also had a cap on exports for the remainder of the year (to be precise, “$53,495,894 or 1,000,866 metric tons, whichever is lower, between the date of adoption of this resolution and 31 December 2016.” Apparently in line with the resolution, China appears to have cut North Korea off, only allowing in coal that had already been in transit at the time the ban was announced on December 10. According to Daily NK the effect was swift: coal prices quoted by Chinese trading companies fell 30% on the announcement. But DailyNK did not pick up the irony of the story: what does it mean to cite reduced prices on an altogether banned commodity? We can expect a cat-and-mouse game with respect to smuggling (Arirang is suggestive here), particularly as the military with ties to coal exports are squeezed by end-of-the-year “loyalty payments” to the regime. Leo Byrne at NK Pro will be watching all of this. But China may be the beneficiary of the caps. Since exporters will be uncertain about how the caps are allocated, Chinese traders will have bargaining power and appear to be using it.
South Korea’s autonomous sanctions had a particular Alice in Wonderland quality given that they went after a number of individuals and entities highly unlikely to come into contact with South Koreans (see NK News and Yonhap). What is the practical—as opposed to possibly symbolic—effect of sanctioning top aids to Kim Jong Un such as Hwang Pyong So, Choe Ryong Hae, Kim Won Hong and Kim Ki Nam or the Korean Workers’ Party, State Affairs Commission and the Central Military Commission? A handful of things were potentially significant, however, although not when compared the magnitude of the China-DPRK trade:
- South Korea showed a willingness to undertake its own secondary sanctions by going after the Hongxiang group in line with US actions;
- New secondary sanctions also went after shipping, banning any ship from entering South Korean ports that had called at North Korean ones within the last year. Given tracking technology now available it is certainly possible to put such a ban in effect.
- The government promised closer scrutiny of South Korean firms that may be involved in a complex third party trade running from export-processing operations in Rason, through Chinese brokers to Korean trading companies. Similar efforts of monitoring third country trade were announced with respect to North Korean mineral products, although the magnitude of such trade is unknown.
For the most part, however, the new measures show the paradox of embargoes: that once you restrict virtually everything, it is hard to find more to sanction. Much will rest on South Korea’s diplomacy with jurisdictions that might be tempted to do business as usual. A small win in what my colleague Marc Noland calls “the battle for Africa”: Uganda has said it will comply with restrictions on trade of military goods with the North.
The independent Japanese actions largely followed the South Korean approach, signaling a willingness to impose secondary sanctions on Chinese entities and going after shipping in a similar fashion. One interesting difference: China appears to have protested Japan's autonomous sanctions, and at a high level (Wu Dawei).
The one twist on the Japanese sanctions was to target a number of the pro-Pyongyang General Association of Korean Residents or Chongryon, by threatening to bar them from re-entering Japan if they travel to North Korea. As with South Korea, however, the most significant thing that Japan can do is to try to shut down transactions involving Japanese parties through third countries, the difficult business of financial forensics required for many of the new sanctions to actually have effect.