Andrea Berger
IV. North Korean evasive activity
3. Circumvention when moving goods
Goods flows with any obvious, paper link to North Korea are likely to invite more scrutiny than ever in the sanctions era. To address this, North Korean networks have traditionally routed these flows through China or Russia. For imports to North Korea, a front or partner company in a neighboring country will be named as the end user, and the product will subsequently be rerouted or reexported to North Korea. For North Korean exports, goods will be sent into China or Russia, and parties to the transaction will relabel them as having originated in those coun-tries before sending them onwards to their final destination.
In some cases, the buyer or seller is aware of the scheme, while in others they are oblivious. North Korea managed to sell coal to buyers in several Southeast Asian countries by convincing the recipients, including the authorities at the receiving port, that the coal had in fact come from China or Russia.58 The scheme highlighted how North Korea’s tactics have evolved as sanctions have expanded and slowly been better enforced. In certain cases, ships would turn off their tran-sponders when entering North Korean waters to load coal. Once again outside of North Korean waters, they would turn on their transponder, sail to a Chinese port, and hover near it. Rather than calling at the port, parties to the transaction would falsify the ship’s documentation to say that it had loaded coal in China before sail-ing to Southeast Asia to deliver the North Korean consignment. In cases involv-ing Russia, North Korean-controlled ships would physically unload the coal at Russian ports before a foreign vessel would pick it up to take it to its destination shortly thereafter. The paperwork would be appropriately modified to suggest the coal originated in Russia.59
Countless other North Korean tactics have been identified by UN, governmen-tal, and nongovernmental investigators, from the use of shipping flags of conveni-ence, to moving goods in diplomatic bags, to writing “Korea” in the country field on official documentation in the knowledge that many will assume “South Korea”
was intended. Simple, combined, widely replicated, and agile evasive tactics will make it disproportionately challenging for implementers to detect and act to coun-ter illicit North Korean activity taking place on their soil.
Authorities must be aware of these activities when they assess their national risk exposure to potential illicit North Korean activity. They must be conscious of them when they craft laws and regulations, when they establish interagency pro-cesses, and when they outline intelligence gathering and monitoring operations.
Yet few countries manage to look closely at their corporate networks, trade flows, and financial transactions to systematically identify North Korean connections that could violate sanctions. Instead, those with the political will to take stronger action appear to rely upon information shared by better resourced countries track-ing North Korean activity around the world. Fueled by Pyongyang’s sophisticated
172 Andrea Berger
evasive tactics, the sanctions regime seems increasingly to depend upon the intel-ligence gathering and sharing efforts of the United States and its closest partners to deliver a tangible and timely impact.
Conclusion: Uncertain trajectories
At the time of writing, the future of the sanctions regime on North Korea seems particularly unclear. President Donald Trump and Kim Jong Un held a summit meeting in Singapore in June 2018, during which both leaders indicated their interest in transforming the security situation on the Korean Peninsula, including by actively pursuing denuclearization objectives. South Korea and China have indicated their support for this effort and are engaging in their own direct dialogue with the North. Any progress made on the North Korean nuclear file could result in the phased lifting of UN sanctions, autonomous measures, or both. The possi-bility remains also that President Trump will seek to declare victory on the North Korean nuclear issue at some undefined time, request complete sanctions lifting at the UN, and move on to other subjects. He could seek to unravel the sanctions regime as quickly as he expanded it.
Alternate trajectories for the sanctions regime exist as well. The importance that Pyongyang has continued to place on nuclear weapons as a key to national and regime survival, and the linking of the sanctions regime to the goal of North Korean disarmament highlights the potential that the Security Council will pre-serve sanctions for the foreseeable future. Any return to a more provocative rela-tionship with North Korea, and to nuclear and missile testing by Pyongyang, could also result in the United States pushing for fresh sanctions in the Security Council.
In any of these scenarios, the sustainability of the infrastructure supporting the sanctions regime is in doubt. The UN Panel of Experts monitoring the sanctions regime and promoting global awareness of North Korea sanctions evasion tech-niques is already over-stretched. Technical assistance programs currently driven by individual Member States could languish if political priorities shift or if they encounter greater implementation fatigue among recipient countries, especially if it appears that the North Korean disarmament is becoming a fantasy.
Furthermore, there is already growing concern that amidst the ongoing, high-level engagement with North Korea, and in the face of rising tensions between Beijing and Washington over trade matters, China will ease its implementation of UN sanctions.60 Signs of this are already apparent at the time of writing in mid-2018. Several media outlets reported busloads of North Korean migrant labor-ers – whose visas should be restricted by UN sanctions – returning to China.61 North Korean ships resumed regular visits to the coal terminal at a Chinese port of Longkou.62 Details of a Chinese ship engaging in a prohibited ship-to-ship transfer with a North Korean vessel were also published in May.63
These developments raise the possibility that even if sanctions remain in place on paper, their value could be diminished in practice by implementation backslid-ing. This is not only a possibility in China, and it could transpire in the short-, medium-, or long-term. A notable portion of the implementation and enforcement
North Korea 173 progress made in the last 18 months has occurred because North Korean provoca-tions raised the profile of the Korean Peninsula security situation on the global agenda and because the US and its like-minded partners began leaning more heav-ily on a variety of States to take action to implement UN sanctions. Yet there are risks associated with securing progress by applying pressure. Should the inter-national conversation over North Korea change and US lobbying efforts ease, countries or even private sector implementers are likely to reduce their level of attentiveness to North Korea sanctions as well.64
For now, many countries around the world will continue to grapple with the daunting task of translating a range of still fresh UN obligations into national law and practice, while North Korean networks fight to undermine their efforts. The architects of the sanctions regime, for their part, will be occupied by another task:
having designed one of the most complex and wide-ranging sanctions regimes in history, they now need to consider what the exit ramp should look like. American and South Korean officials have reiterated that sanctions will remain in place until
“complete denuclearization has been achieved.”65 While this may be long-standing Security Council policy that countries supporting the sanctions regime worldwide have acknowledged, never before has that consensus seemed so fragile.
Notes
1 “Kim Jong Un’s 2018 New Year’s Address,” (January 1, 2018), available at <www.
ncnk.org/node/1427>.
2 Ibid.
3 “Final Report of the Panel of Experts Submitted Pursuant to Resolution 2345 (2017),”
U.N. Doc. S/2018/171 (2018).
4 “Press Statement by First Vice-Minister of Foreign Affairs of DPRK,” Korean Central News Agency (May 16, 2018), available at <https://kcnawatch.co/new-stream/1526482853-432433886/press-statement-by-first-vice-minister-of-foreign-affairs- of-dprk/>.
5 David E. Sanger, “North Koreans Say They Tested Nuclear Device,” New York Times (October 9, 2006), available at <www.nytimes.com/2006/10/09/world/asia/09korea.
html>.
6 U.N. Doc. S/RES/1718 (2006).
7 Ibid.
8 These considerations are discussed in greater detail in Andrea Berger, “A House With-out Foundations: The North Korea Sanctions Regime and Its Implementation,” RUSI Whitehall Report 3–17 (2017), p. 5. For a discussion on North Korea’s negotiating considerations at the time, see Stephan Haggard and Marcus Noland, “North Korea in 2007: Shuffling in from the Cold,” Asian Survey, Vol. 48, No. 1 (2008), pp. 107–115.
9 U.N. Doc. S/RES/1737 (2006). Indeed, the similarities are partially a result of political and negotiating dynamics. Having already secured agreement on particular language in a resolution on DPRK, it was easier for negotiators to convince their counterparts to subsequently adopt similar language on Iran. The author is grateful to Richard Nephew for this point.
10 U.N. Doc. S/RES/1747 (2007).
11 The luxury goods ban is an exception.
12 Kelsey Davenport, “The Six-Party Talks at a Glance,” Updated June 2018, available at
<www.armscontrol.org/factsheets/6partytalks>.
174 Andrea Berger
13 For a reflection on the agreement, see Ankit Panda, “A Great Leap to Nowhere:
Remembering the US-North Korea ‘Leap Day’ Deal,” The Diplomat (February 29, 2016), available at <https://thediplomat.com/2016/02/a-great-leap-to-nowhere-remembering-the-us-north-korea-leap-day-deal/>.
14 “Executive Order – Imposing Additional Sanctions With Respect to North Korea,”
(January 2, 2015), available at <https://obamawhitehouse.archives.gov/the-press-office/2015/01/02/executive-order-imposing-additional-sanctions-respect-north-korea>.
See also Andrea Berger, “New Kids on the Blocked Persons List: US Expands North Korea Sanctions,” Royal United Services Institute (December 14, 2015), available at <https://rusi.
org/commentary/new-kids-blocked-persons-list-us-expands-north-korea-sanctions>.
15 See, for example, Euijin Jung, “Iran Sanctions: A Successful Episode,” available at
<https://piie.com/blogs/trade-investment-policy-watch/iran-sanctions-successful- episode>. Josh Cassidy, “The Iran Deal Is a Victory for Reason and Economic Sanctions,”
The New Yorker (September 3, 2015), available at <www.newyorker.com/news/john-cassidy/the-iran-deal-is-a-victory-for-reason-and-economic-sanctions>. See also the extensive discussion in Richard Nephew, The Art of Sanctions: A View from the Field (2018).
16 “DPRK to Adjust Uses of Existing Nuclear Facilities,” Korean Central News Agency (April 2, 2013), available at <https://kcnawatch.co/newstream/1451895823-698999602/
dprk-to-adjust-uses-of-existing-nuclear-facilities/>.
17 “Law on Consolidating Position of Nuclear Weapons State Adopted,” Korean Cen-tral News Agency (April 1, 2013), available at <https://kcnawatch.co/newstream/
1451896124-739013370/law-on-consolidating-position-of-nuclear-weapons-state- adopted/>.
18 “Asian Buyers to Deepen Iranian Crude Import Cuts in 2013,” Reuters (December 23, 2012), available at <www.reuters.com/article/oil-iran-asia/rpt-update-1-asian-buyers-to-deepen-iranian-crude-import-cuts-in-2013-idUSL4N09V3HK20121223>.
19 These countries include North Korean military customers and general trading partners, countries home to North Korean business communities or diplomatic presences, and common trade routes for products going to or from North Korea.
20 “North Korea Fires Long-Range Rocket Despite Warnings,” BBC (February 7, 2016), available at <www.bbc.co.uk/news/world-asia-35515207>.
21 Chinese imports of coal from North Korea increased following Resolution 2270. Ben-jamin Katzeff Silberstein, “Is China Serious About Banning North Korean Coal?”
The Diplomat (February 21, 2017), available at <https://thediplomat.com/2017/02/
is-china-serious-about-banning-north-korean-coal/>.
22 “Fact Sheet: DPRK Resolution 2270 (2016),” (March 2, 2016), available at <https://
geneva.usmission.gov/2016/03/03/fact-sheet-dprk-resolution-2270/>.
23 U.N. Doc. S/RES/2270 (2016). Such thinking was embedded in Resolution 2270 as a preamble: “Regretting the DPRK’s diversion of financial, technical and industrial resources toward developing its nuclear weapons and ballistic missile program.”
24 Almost all officials and experts working on North Korea sanctions who were consulted informally by the author in the period since December 1, 2016, have said they did not expect China to agree to the number and type of new/expanded measures proposed.
25 U.N. Doc. S/RES/2270 (2016).
26 U.N. Doc. S/Res/2321 (2016).
27 U.N. Doc. S/Res/2371 (2017).
28 For example, recent resolutions have clarified what Member States can choose to do with any cargo seized in fulfilment of their UNSC obligations. See U.N. Doc S/
RES/2375. These practicalities had not previously been clear in relevant UN sanctions provisions and had been a source of difficulty for states carrying out interdictions and seizures.
29 “Remarks at the UN Security Council Ministerial Meeting on D.P.R.K,” (December 15, 2017), available at <https://vienna.usmission.gov/latest-north-korean-developments- u-s-statements/>.
North Korea 175 30 Gaps in implementation by UN Member States and private sector stakeholders, as well as evasive tactics adopted by North Korea, make it more difficult to establish these linkages. Consequently, many transactions which may breach sanctions are never iden-tified as being of particular concern.
31 Sanctions imposed in relation to North Korean military trade with Myanmar were also lifted by President Obama as part of his decision to remove sanctions on Naypy-idaw. See “Obama Orders US Economic Sanctions on Myanmar Lifted,” Al Jazeera (October 7, 2016), available at <www.aljazeera.com/news/2016/10/obama-economic- sanctions-myanmar-161007215716882.html>. United Nations investigators later reported that North Korea was indeed continuing to sell ballistic missile, surface-to-air missile, and other conventional weapons technology to the Myanmar military in defi-ance of UN sanctions on Pyongyang. See: U.N. Doc. S/2018/171, p. 43.
32 Using autonomous sanctions in this way is not unique to the Trump Administration.
Since coming into office, however, the administration has used unilateral sanctions on shipping networks in some cases as a prelude to discussions in the UNSC and in other cases as a response to them. “Treasury Announces Largest North Korea Sanctions Package Targeting 56 Shipping and Trading Companies and Vessels to Further Isolate Rogue Regime,” (February 23, 2018), available at <https://home.treasury.gov/news/
press-releases/sm0297>; see also the subsequent UN Sanctions Committee action:
“Security Council 1718 Sanctions Committee Adds 22 Entries to Its Sanctions List, Designates 27 Vessels,” (March 30, 2018), available at <www.un.org/press/en/2018/
sc13272.doc.htm>.
33 At the time of writing, no new sanctions on North Korea have been adopted by the US since February 2018.
34 “US Accuses Bank of Dandong of Dealings With North Korea,” Financial Times (June 29, 2017), available at <www.ft.com/content/5cc01814-5d48-11e7-9bc8-8055f264aa8b>.
35 “US Bars Chinese Bank Linked to North Korean Weapons Programme,”
Financial Times (November 2, 2017), available at <www.ft.com/content/
c6c2d0fa-c051-11e7-9836-b25f8adaa111>.
36 Sarah N. Lynch, “U.S. Justice Department Seeks $11 Million in Forfeiture from Firms With Ties to North Korea,” Reuters (August 22, 2017), available at <www.reuters.
com/article/us-northkorea-nuclear-forfeiture/u-s-justice-department-seeks-11-million-forfeiture-from-firms-with-ties-to-north-korea-idUSKCN1B21WC>.
37 “與朝鮮航運方法相關的制裁風險 [Sanctions Risks Relating to North Korean Shipping Practices],” (February 23, 2018), available at <www.treasury.gov/resource-center/
sanctions/Programs/Documents/dprk_vessel_advisory_chinese.pdf<.
38 Andrew Prokop, “Trump: Maybe We’ll End All Trade With Countries That Trade With North Korea: Everyone: Huh?” VOX (September 3, 2017), available at <www.vox.
com/2017/9/3/16249504/trump-north-korea-trade-tweet>.
39 “Report: Egypt Cuts Military Ties With North Korea,” US News (Septem-ber 12, 2017), available at <www.usnews.com/news/world/articles/2017-09-12/
egypts-top-commander-says-ties-with-pyongyang-severed#close-modal>.
40 Gazetted sanctions lists are available from South Korea’s Interior Ministry at <http://
gwanbo.mois.go.kr/>.
41 See, for example, the sanctioning of the Korea National Insurance Corporation office in Germany. “North Korea: EU Adds Korea National Insurance Company and Six Senior Employees to Sanctions List,” (July 10, 2015), available at <www.lexology.
com/library/detail.aspx?g=c07d735c-3427-4fc5-ac42-1d639db33c19>.
42 The European Union banned sales of crude oil to North Korea several months before this requirement was incorporated into a Security Council resolution. “North Korea:
EU Aligns Sanctions With Latest UN Security Council Resolution,” (February 26, 2018), available at <www.consilium.europa.eu/en/press/press-releases/2018/02/26/
north-korea-eu-aligns-sanctions-with-latest-un-security-council-resolution/>.
176 Andrea Berger
43 “Presidential Executive Order Imposing Additional Sanctions With Respect to North Korea,” (September 21, 2017), available at <www.whitehouse.gov/presidential-actions/
presidential-executive-order-imposing-additional-sanctions-respect-north-korea/>.
44 A similar measure relating to shipping has also existed in Japanese law for some time.
Christopher W. Hughes, “The Political Economy of Japanese Sanctions Towards North Korea: Domestic Coalitions and International Systemic Pressures,” Pacific Affairs, Vol. 79, No. 3 (2006), p. 433.
45 Leo Byrne, “Seoul Adds New Sanctions on North Korea,” NK News (March 8, 2016), available at <www.nknews.org/2016/03/seoul-adds-new-sanctions-on-north- korea/?c=1528700749551>.
46 Ibid.
47 Dagyum Ji, “S. Korea Unveils Unilateral Fresh Sanctions Against N. Korea,” NK News (December 2, 2016), available at <www.nknews.org/2016/12/s-korea-unveils-unilateral- fresh-sanctions-against-n-korea/?c=1509940839382>.
48 Berger, supra note 8, p. 31.
49 Andrea Berger, “Guest Post: The Chinpo Shipping Case Implodes,” Arms Control Wonk Blog (May 15 2017), available at <www.armscontrolwonk.com/archive/1203164/
guest-post-the-chinpo-shipping-case-implodes/>.
50 For example: Katie Simpson, “Canada Makes $3.25M Contribution to U.S. Program Enforcing Sanctions on North Korea,” CBC News (January 16, 2018), available at <www.
cbc.ca/news/politics/north-korea-summit-vancouver-freeland-tillerson-1.4489166>.
51 “North Korea Nuclear Crisis: Putin Calls Sanctions Useless,” BBC News (Septem-ber 5, 2017), available at <www.bbc.co.uk/news/world-asia-41158281>. See also, Andrei Lankov, “Why Russia May Use Its Veto Power on New North Korea Sanc-tions,” NK News (September 10, 2017), available at <www.nknews.org/2017/09/
why-russia-may-use-its-veto-power-on-new-north-korea-sanctions/>.
52 In early 2017, China withdrew third-party service provider access to shipment- level China-DPRK trade data. In early 2018, it began wiping corporate registry data for companies deregistered for reasons related to North Korea. Catherine Dill, “A Note on China’s Implementation of UNSCR 2375,” Arms Control Wonk Blog (May 16, 2018), available at <www.armscontrolwonk.com/archive/1205203/
a-note-on-chinas-implementation-of-unscr-2375/>.
53 See, for example, Steve Holland and Matt Spetalnick, “Trump to Press China on North Korea, Trade on Beijing Visit,” Reuters (October 23, 2017), available at
<www.reuters.com/article/us-northkorea-missiles-usa/trump-to-press-china-on- north-korea-trade-on-beijing-visit-idUSKBN1CS1XA>.
54 See U.N. Doc. S/2018/171, paras. 104–108. Mansudae is also registered in the Demo-cratic Republic of the Congo as “MOP Architectural and Technical Services.” Corpo-rate registry documents held by the author.
55 “Final Deregistration of Companies: Companies Act, 2004,” Government Gazette of the Republic of Namibia (January 31, 2018), available at <https://laws.parliament.na/
cms_documents/6521-a98a0bdb11.pdf>.
56 For an example of this pattern, see the discussion of the Chinpo Shipping case in Berger, supra note 49.
57 This system is discussed extensively in UN Panel of Experts reports. See U.N. Doc S/2018/171. See also the excellent descriptions of North Korean financial patterns in
“Risky Business: A System-Level Analysis of the North Korean Proliferation Financ-ing System,” C4ADS Report (2017). See also the study on proliferation finance
“Risky Business: A System-Level Analysis of the North Korean Proliferation Financ-ing System,” C4ADS Report (2017). See also the study on proliferation finance