TOKYO — Targeting just a few pivotal Chinese companies could severely disrupt North Korea’s ability to circumvent international sanctions and buy illicit goods — and could even cause its entire overseas network to collapse, according to a report out Tuesday.
President Trump has repeatedly said he expects China, North Korea’s patron and its largest trading partner by far, to use its leverage over Kim Jong Un’s regime to force it to abandon its nuclear and missile programs.
The new report, by Washington-based research group C4ADS, lays out multiple ways for Beijing to cut off North Korea’s trading routes to the outside world, if it wanted to. It also found a Chinese citizen who was conducting large amounts of trade with North Korea while serving as president of a company in the United States — a status that would allow him to open bank accounts and send or receive shipments.
“By being centralized, limited and ultimately vulnerable North Korean overseas networks are, by their nature, ripe for disruption,” C4ADS researchers wrote in the report, titled “Risky Business.”
Successive U.S. administrations have not been able to persuade North Korea to change its behavior. Talks during the George W. Bush era and the Obama administration’s “strategic patience” both failed.
Instead, North Korea under Kim has relentlessly pressed ahead with its weapons programs, conducting two nuclear tests last year and a dozen missile tests already this year. Kim has made it clear that he wants an intercontinental ballistic missile (ICBM) that can reach the U.S. mainland.
“Trump blustered early this year that the DPRK’s final access to a nuclear weapon that can reach the U.S. mainland will never happen,” North Korea’s Rodong Sinmun newspaper reported over the weekend, using the abbreviation for the nation’s official name. “But the strategic weapons tests conducted by the DPRK clearly proved that the time of its ICBM test is not a long way off at all.”
Since taking office, Trump has urged China to deal with its neighbor using whatever means necessary, and Beijing says it has cut off imports from North Korea of coal, one of the regime’s biggest exports.
There is still plenty more to be done, C4ADS writes. “Although to date economic coercion has been ineffective in persuading North Korea to abandon its pursuit of nuclear weapons, this does not mean it cannot work,” the researchers say.
On the contrary, targeting key companies could cripple multiple networks across multiple countries simultaneously, they write, because so many of these firms are intertwined.
“While on the surface we may see shrubs, below are roots that are remarkably deep and interconnected with other root systems,” said John Park, a sanctions expert at Harvard’s Kennedy School who advised C4ADS for its report.
To take one example: A Chinese trading company based on the border with North Korea, Dandong Dongyuan Industrial, exported $790,000 worth of radio navigational aid equipment to North Korea in June 2016, according to Chinese customs records. This category of equipment includes navigation systems used in vehicles — the category into which guidance devices for ballistic missiles would also fit.
It is not known exactly what was in that shipment, but North Korea often uses licit trading avenues to move illicit goods. That means the real potential is in the network.
Dandong Dongyuan shipped $28.5 million worth of material to North Korea between 2013 and 2016, C4ADS reported. Chinese business registry filings show that the majority shareholder of Dandong Dongyuan, with a 97 percent stake, is a Chinese citizen named Sun Sidong.
A complicated ownership trail of a freighter called the Jie Shun suggests further intertwining of Chinese business people carrying out deals with North Korea. In 2014, the ship was owned by a company of which Sun was a principal owner. Two years later, it was owned by a company controlled by a Chinese national named Sun Sihong, who listed her residential address as an apartment in the same complex as Sun Sidong, C4ADS reported, noting that it could not ascertain the relationship between them.
On Aug. 11, 2016, the Jie Shun was intercepted near the Suez Canal by Egyptian authorities and found to be hiding 30,000 rocket-propelled grenades and sub-components — 132 tons of weapons in all — under a cargo of 2,300 tons of iron ore. The ship had left the North Korean port of Nampo and made no port calls before being intercepted, according to shipping data analyzed by C4ADS.
The United Nations’ panel of experts on North Korea reported this year that, although there was no indication of where the cargo was heading, North Korean RPGs had previously been identified in Syria and Lebanon.
Sun Sidong is also listed as the president of a company based in the United States, according to the report, allowing him to conduct business with firms around the world with no obvious ties to a Chinese company focused on North Korea.
“In principle, it would also provide him the ability to register for business services within the United States, including sending or receiving shipments, establishing bank accounts, or applying for employment visas,” the report stated.
Business registration records show that the American entity is called Dongyuan Enterprise USA and is based in Flushing, N.Y.
Still, the paper trail continues.
Chinese business registry filings show that Dandong Dongyuan shared an email address with another company based on the Chinese side of the North Korean border, Dandong Zhicheng Metallic Material.
Dandong Zhicheng alone accounted for 9.2 percent of North Korea’s total exports to China last year, according to documentation that C4ADS reviewed. Almost all — 97 percent — of this was North Korean coal, totaling about $250 million annually.
The shared email address does not necessarily prove collusion or the existence of illicit activity, the report said.
“However, it demonstrates again what has been consistently apparent: that the limited North Korean trading system is much more inter-connected than it at first appears, and that, because of links to illicit actors, it may be vulnerable to systemic disruption in the face of targeted enforcement action,” it said.
The companies did not respond to emails seeking comment.
The C4ADS researchers said focusing on these kinds of logistical “chokepoints” could cut off North Korea’s centralized, global system of illicit finance.
For example, the Dandong Hongxiang Industrial Development Co., which was sanctioned by the U.S. Treasury Department last year — sending a sudden chill through the border city that acts as North Korea’s main commercial gateway to the outside world — is one of 18 companies that make up the Liaoning Hongxiang Group. This suggests the potential for an indirect effect if one company is stopped from helping North Korea, perhaps disrupting numerous other linked companies.
“Based on what we’re seeing in the data in terms of the reach and scope of these networks and the limited nature of the system that they live in, and the contamination with illicit activity, there is inherent value to enforcement actions,” said David Thompson, a senior analyst at C4ADS.