Punishing a Nation: How the Trump administration is waging a merciless economic war on North Korea

Diplomacy never had a chance. It was not long after President Trump took office that he signed a directive establishing a North Korea policy based on overtly hostile measures. The Treasury Department was told to implement a series of sanctions against North Korea and those who traded with it. U.S. diplomats were instructed to exhort foreign officials in nearly every meeting to break off contacts with North Korea. [1] That program has been accelerating in recent weeks, with far reaching consequences. [2]

In negotiating the last round of UN sanctions, the Trump administration sought a total oil embargo and other harsh measures against the Democratic People’s Republic of Korea (DPRK – the official name for North Korea). It did not quite achieve its goals, so President Trump issued an executive order ten days after the sanctions vote that aims to impose a total trade blockade against North Korea. [3]

Trump’s executive order seizes all property held in the United States by anyone involved in import or export trade with North Korea, and any “North Korean person that has engaged in commercial activity that generates revenue” for the DPRK.

Ships docking at North Korean ports are banned from visiting the United States for a period of half a year, which will encourage shipping companies to shun North Korea. Treasury Secretary Steven Mnuchin indicated that his department plans to work “very closely with the Coast Guard and others on this,” and “we can put actions against ports as well.” [4] Exactly what he has in mind was not specified, but his statement seems to imply that ports that allow offending ships to dock during the blackout period may find themselves targeted for punishment.

Among the executive order’s other provisions, the primary ones focus on financial operations. All funds that pass through the U.S. financial system that at any point involve the DPRK or a North Korean individual are to be frozen. The Treasury Department is authorized to impose sanctions on foreign financial institutions that “knowingly conducted or facilitated any significant transaction in connection with North Korea” and to “block all property” that the entity holds in the United States.

Since international financial transactions must pass through the U.S. system, any institution involved in handling or facilitating North Korea’s trade risks ruination. Any firm that the Treasury Department sanctions will lose the money it sends through the U.S. system, and it will be barred from international financial operations altogether. Inevitably, the financial entity would also see a run on its funds by panicked depositors.

It would be suicidal for any financial business to handle a transaction that involves North Korea. Consequently, for the most part, North Korea is going to be excluded from international trade. The DPRK may be limited solely to small-scale transactions paid with bags of cash. Soon, North Korea may no longer be able to import oil and natural gas. Since the DPRK has no domestic source, once the nation exhausts its internal supply of those commodities, it could face the near-total shutdown of its economy.

The DPRK is thought to have a fair-sized reserve of fuel, but it will not last forever. And once the supply runs out, factories and manufacturing plants will not be able to operate. Trucks and buses will stop running.  Those homes and offices not powered by solar panels or lines originating from hydroelectric dams will remain unheated throughout winter. Hospitals may go without power for lighting and medical equipment. Because it has a limited amount of arable land, North Korea typically must rely on imports to fully feed its people. With the DPRK’s access to the international financial system now blocked, sooner or later hunger and perhaps starvation may visit the land.

According to Juan Zarate, a former official in the George W. Bush administration, the executive order constitutes “a full-freight, full-throated sanctions regime” that “makes it very clear that financial institutions run the risk of falling prey to U.S. sanctions.” [5] Hong Kong-based trade partner Tatman Savio echoes that assessment: “These sanctions are broad and catch-all. There’s no ambiguity about what President Trump is trying to accomplish. It is aiming to isolate North Korea through the use of secondary sanctions measures.” [6]

Treasury Secretary Mnuchin warns, “Foreign financial institutions are now on notice that, going forward, they can choose to do business with the United States or with North Korea, but not both.” Given the enormous disparity in economic significance between the two nations, this is no choice at all. It is an ultimatum, and Mnuchin calls for “all countries around the world to join us by cutting off all trade and financial ties with North Korea.” [7]

Blockades are considered an act of war. Technically, the United States is not imposing a blockade in that it is not physically preventing trade with North Korea. But the result is the same. Through threats, the Trump administration is forcing nations to abandon trade relations with North Korea.

The U.S. is free with its threats, and there was nothing subtle in Mnuchin’s message to China: “If China doesn’t follow these [UN] sanctions, we will put additional sanctions on them and prevent them from accessing the U.S. and international dollar system – and that’s quite meaningful.” [8]

Already China, hoping to fend off possible U.S. retribution, has ordered all North Korean-owned and joint ventures based on its territory to be closed by the beginning of 2018. This action goes beyond what UN sanctions dictate. [9] Chinese banks, furthermore, are notifying North Korean depositors to withdraw their funds. It is becoming increasingly difficult for traders to handle financial transactions, and cross-border business is grinding to a halt. [10]

On September 26, the Treasury Department sanctioned 26 individuals and eight North Korean banks involved in international trade, including the Agricultural Development Bank and the Foreign Trade Bank. The latter is regarded as North Korea’s main financial institution for handling foreign exchange. The Treasury Department states that its intent is “to further disrupt North Korea’s access to the international financial system.” [11] It also imposes a secondary boycott on anyone trading with the sanctioned banks or individuals. [12]

The Trump administration’s economic war is global and unyielding. Acting Assistant Secretary of State Susan Thornton says that Secretary of State Rex Tillerson “has made the DPRK a key issue in every engagement with leaders and ministers across the world,” and his message “is aggressively reinforced by our ambassadors in capitals everywhere and in meetings at every level.” In each of these encounters, U.S. officials bully their foreign counterparts “to cut off the sources of DPRK financial support.” [13]

Under Secretary of the Treasury Sigal Mandelker says the United States has “the unique ability to map out and target North Korea’s trade and financial networks,” and its “goal is to strategically and tactically choke off North Korea’s revenue sources.” Thornton is not shy in her use of aggressive language, demanding that “all countries must stop trading with North Korea.” She adds, “A key part of our strategy to suffocate North Korea financially is to target the regime’s most profitable industries.” United Nations sanctions, she says, “should be the floor, not the ceiling.” [14]

All this talk of suffocating and choking North Korea’s economy – and therefore its people — hardly raises an eyebrow. The policy is widely accepted, yet it must be stated: the DPRK has the right to engage in normal international trade. It has the right to run its economy unhindered and to feed its people. The Trump administration has been threatening North Korea, both militarily and economically, on a near-daily basis. Washington wants North Korea to unilaterally denuclearize, but its actions only fortify North Korea’s conviction that it needs a nuclear deterrent — a not unreasonable conclusion on the North Koreans’ part.

The relentless economic war being waged by the Trump administration may not be grabbing the headlines in the same manner as talk of war. But that does not lessen the harm that is being done. Washington’s pressure on other nations is having an effect, as one nation after another cuts diplomatic and political ties with the DPRK or severs trade relations. The Trump administration has rejected North Korean offers to talk, believing that it can drive North Korea into economic submission without the need for the give-and-take of negotiations. In a recent tweet, Trump reiterated his hostility to the concept of diplomacy: “I told Rex Tillerson, our wonderful Secretary of State, that he is wasting his time trying to negotiate with Little Rocket Man.”

The United States has far too much economic muscle for any nation to be able to say no. But how many North Koreans will have to suffer through hunger and loss of employment and freezing winters without heat, as a result? The cruel collective punishment of an entire nation can produce nothing but misery. With one nation after another caving into pressure and bullying, and the Trump administration ruling out negotiations, there does not appear to be a way out.

[1] Karen DeYoung, Ellen Nakashima, Emily Rauhala, “Trump Signed Presidential Directive Ordering Actions to Pressure North Korea,” Washington Post, September 30, 2017.

[2] Gregory Elich, “Trump’s War on the North Korean People,” Zoom in Korea, September 23, 2017.

[3] Executive Order, “Presidential Executive Order on Imposing Additional Sanctions with Respect to North Korea,” Office of the Press Secretary, the White House, September 21, 2017.

[4] Press Briefing by Treasury Secretary Steven Mnuchin,” Office of the Press Secretary, the White House, September 21, 2017.

[5] Eunjung Cho and Jenny Lee, “Analyst: Latest US Sanctions on North Korea Will Result in Full Trade Embargo,” Voice of America, September 27, 2017.

[6] Finbarr Bermingham, “New Sanctions Target North Korean Banks,” Global Trade Review, September 27, 2017.

[7] “Press Briefing by Treasury Secretary Steven Mnuchin,” Office of the Press Secretary, the White House, September 21, 2017.

[8] “US Treasury Secretary Threatens More Sanctions on China Over North Korea,” Bloomberg, September 20, 2017.

[9] Ma Jingjing, “China to Shut Down North Korea-related Enterprises: MOFCOM,” Global Times, September 28, 2017.

[10] Kim Oi-hyun, “Chinese Banks Suspending North Korean-related Business Activities,” Hankyoreh, September 23, 2017.

[11] Press Release, “Treasury Sanctions Banks and Representatives Linked to North Korean Financial Networks,” U.S. Department of Treasury, September 26, 2017.

[12] Elizabeth Shim, “North Korea Banks under U.S. Sanctions Have Partners in China, Singapore,” UPI, September 27, 2017.

Press Release, “Treasury Sanctions Banks and Representatives Linked to North Korean Financial Networks,” U.S. Department of Treasury, September 26, 2017.

[13] “Statement of Susan Thornton Acting Assistant Secretary Bureau of East Asian and Pacific Affairs Before the Senate Committee on Banking, Housing, and Urban Affairs,” September 28, 2017.

[14] “Testimony of Sigal Mandelker Under Secretary, Terrorism and Financial Intelligence U.S. Department of the Treasury Senate Banking Committee,” September 28, 2017.


Originally published on Zoom in Korea