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U.S. Targets Firms Tied To N. Korea Arms Trade

By Glenn Kessler
Washington Post Staff Writer
Wednesday, July 1, 2009

The Obama administration yesterday began a campaign to curtail North Korea's ability to finance its trade in missiles and nuclear materials, with the Treasury and State Departments announcing actions against two North Korean companies, including one allegedly connected to the building of a nuclear reactor in Syria.

Administration officials said they are determined to ramp up pressure on the North Korean government in response to a series of missile tests and the detonation of a nuclear device -- its second -- this year. The playbook is drawn from similar efforts in the Bush administration -- and largely directed by the same person, Stuart Levey, Treasury's undersecretary for terrorism and financial intelligence -- that were abandoned by President George W. Bush in late 2006 in an effort to win North Korea's cooperation through diplomacy.

To strike a deal, Bush even authorized the return of $25 million that North Korea had earned in part through counterfeiting and money laundering and removed the country from the State Department's list of state sponsors of terrorism. But the diplomatic effort fell apart before he left office, and North Korea has since restarted its nuclear program.

Obama administration officials said the lesson they learned is that pressure tactics cannot be dropped until North Korea takes "irreversible steps" to end its program.

Analysts say North Korea is planning another missile test, perhaps as early as this weekend.

The U.N. Security Council has imposed sanctions aimed at punishing North Korea for the nuclear and missile tests, and the United States is pressing for U.N. approval for additional sanctions against individual North Korean companies. Ambassador Philip S. Goldberg, who was named last week as coordinator for implementing the U.N. resolution, left yesterday for China for two days of meetings with senior officials, State Department spokesman Ian Kelly said.

The U.S. actions announced yesterday are unilateral steps that aim to cut off the companies from the global financial system by freezing their U.S. assets and prohibiting Americans from doing business with the firms.

The Treasury Department targeted Hong Kong Electronics, located on Kish Island, Iran, alleging that the company "has transferred millions of dollars of proliferation-related funds" to North Korea's Tanchon Commercial Bank and Korea Mining Development Trading Corp., both of which have been the subjects of earlier U.S. and U.N. sanctions.

Treasury said Hong Kong Electronics "has also facilitated the movement of money from Iran to North Korea" on behalf of Korea Mining, suspected to be an arms dealer and main exporter of goods and equipment related to ballistic missiles and conventional weapons. Tanchon, a commercial bank based in Pyongyang, is the financial arm of Korea Mining and is thought to have helped finance the sales of ballistic missiles from Korea Mining to Iran's Shahid Hemmat Industrial Group, which developed liquid-fueled missiles.

"North Korea uses front companies like Hong Kong Electronics and a range of other deceptive practices to obscure the true nature of its financial dealings, making it nearly impossible for responsible banks and governments to distinguish legitimate from illegitimate North Korean transactions," Levey said in a statement.

The State Department said it had moved against Namchongang Trading Corp., also based in Pyongyang, because it had been "involved in the purchase of aluminum tubes and other equipment specifically suitable for a uranium enrichment program since the late 1990s."

The Washington Post, in reports in 2003 and last year, documented how the company, also known as NCG, was a key intermediary in North Korea's efforts to acquire the materials for a uranium enrichment program and the country's building of a suspected nuclear reactor in Syria that Israeli jets destroyed in 2007.

Operating through an office in Beijing, NCG provided the critical link between Pyongyang and Damascus, acquiring key materials from vendors in China and probably from Europe, and secretly transferring them to a desert construction site near the Syrian town of Al Kibar, The Post reported, citing U.S. officials, European intelligence officials and diplomats.

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