U.S. official outlines plan targeting firms, banks that help fund North Korea

The U.S. announced that it will strengthen sanctions against North Korea as Secretary of State Hillary Clinton and Defense Secretary Robert Gates toured South Korea.
By Chico Harlan
Tuesday, August 3, 2010

SEOUL -- A top U.S. nonprofileration official outlined a plan Monday to penalize North Korea by choking off the international network of companies and banks that largely fund its nuclear weapons program and the lifestyles of its elite.

Robert Einhorn, the State Department's special adviser for nonproliferation and arms control, said during a trip to Seoul that new U.S. sanctions against North Korea will be finalized within several weeks. But he also emphasized the need for cooperation from other countries -- China, in particular -- to target the entities that do illegal business with North Korea.

Einhorn called it a "serious concern" held by many countries that China could capitalize on the situation, increasing its business dealings with a desperate Pyongyang. China could seize upon similar opportunities in Iran, which in June was hit by a fourth round of U.N. sanctions.

"We want China to be a stakeholder in the international system," Einhorn said, "and not take advantage of the restraint of other countries."

The desire to increase pressure on North Korea -- yet another attempt to push Kim Jong Il's government toward denuclearization -- comes as a direct response to the March sinking of a South Korean warship, which killed 46 sailors and raised fears of further provocations on the Korean Peninsula. An international investigation determined that the Cheonan was sunk by a torpedo made in North Korea and that the weapon was fired by a North Korean submarine. North Korea has denied involvement in the sinking.

According to Einhorn, North Korea accesses hundreds of millions of dollars annually by counterfeiting currency, smuggling narcotics and using overseas banks for illicit activities. Existing U.N. security resolutions target some of these activities, but Einhorn said the upcoming penalties represent a bolstering of these sanctions.

"Our new measures will allow us to designate entities and individuals involved in these activities and to block any property or assets they posses that are under the control of a U.S. person or bank," Einhorn said. "But by publicly naming these entities, these measures can have the broader effect of isolating them from the international community."

For Einhorn, the trip to Asia -- he'll head to Tokyo on Tuesday -- is a means to gather support for sanctions, not only against North Korea but also against Iran. Traveling with Treasury Department Deputy Assistant Secretary Daniel Glaser, Einhorn on Monday encouraged South Korea to approve new sanctions against Iran, as member countries of the European Union did last month.

Though he said he doesn't yet know when, Einhorn will also travel soon to China, whose financial support of North Korea has buffered Pyongyang from the worst effects of U.N. resolutions. Analysts say pending U.S. actions against the dictatorship won't have much impact unless other countries add their support. North Korea has relatively few assets tied to the United States.

"If we're serious about going after illicit transactions, how do we do that if a lot of it takes place through Chinese firms?" said one U.S. official who is involved in sanctions discussions and spoke on the condition of anonymity in order to speak freely about U.S. thinking. "I don't know."

The current U.S. plan resembles a 2005 strategy in which the Macao-based Banco Delta Asia was targeted by Treasury for its alleged involvement in a North Korea money-laundering scheme. Other banks around the world, Glaser said, took notice and "decided they'd reexamine their relationship with North Korea."

Einhorn was not ready Monday to specify the financial institutions that according to the United States are doing business with North Korea. He said identifying those firms will be a part of the finalized sanctions.

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