Potential Sanctions From North Korea Nuke Test Likely to Impact China

A nuclear test last week has reignited lawmakers’ desire to pass new sanctions against North Korea, including economic penalties that previously were considered too inflammatory toward China.

While Pyongyang’s claim that it successfully tested its first-ever hydrogen bomb has been widely disputed by U.S. officials and weapons experts, there is bipartisan agreement on Capitol Hill that the pariah nation must be punished for its fourth nuclear test — and the third to occur during the Obama presidency.

Two days after Kim Jong Un’s regime carried out its nuclear test, House Republican leadership announced a floor vote for this week on a bipartisan bill (HR 757) to impose new sanctions on the country.

“The House will consider new sanctions that will prohibit North Korea’s access to hard currency and other measures to block and seize assets related to nuclear proliferation, illicit activities, and human rights violations that are the hallmark of the Kim regime,” said Majority Leader Kevin McCarthy and House Foreign Affairs Chairman Ed Royce in a joint statement.

House Minority Leader Nancy Pelosi told reporters on Jan. 8 the sanctions bill would have strong Democratic support.

The legislation from Royce, a California Republican, was advanced out of committee last February. The measure seeks to curtail North Korea’s access to the international financial system by essentially making foreign banks choose between doing business with the United States or Pyongyang. It would do this by authorizing secondary sanctions against banks and foreign governments that assist North Korea in violating the financial restrictions imposed upon it by existing U.N. Security Council resolutions.

The Royce bill would also make mandatory some sanctions authorities that are currently discretionary on individuals who have supported North Korea’s ballistic missile and nuclear programs and other prohibited activities, such as human rights abuses.

On the Senate side, Cory Gardner has a North Korean sanctions bill (S 2144) that would do many of the same things as the Royce bill, but would additionally attack the country’s mineral export market, one of its biggest sources of income, in the belief that what worked with Iran — penalizing its oil industry so heavily that it agreed to serious negotiations over its nuclear program — can also work with Pyongyang.

Sanctions experts said President Barack Obama is likely resigned to Congress’ determination to enact new sanctions against North Korea and can be expected to try to soften any final bill by giving the administration more flexibility in its implementation, such as through national security waiver authorities on what punishments are imposed, particularly those that will affect China.

“I think the administration understands there will be legislation,” said Marcus Noland, an expert on North Korea’s economy at the Peterson Institute for International Economics. “The question is going to be where do you draw that line on secondary sanctions and how much discretion is the executive branch given in implementing them.”

Because Beijing is by far Pyongyang’s largest trading partner, any new sanctions that punish foreign companies for doing business with Pyongyang could be expected to disproportionately impact the Chinese economy.

The United States has long pressed China to do more to coerce North Korea into improving its behavior. However, Beijing is seen to have refrained from taking any steps that could jeopardize the stability of the North’s Kim dynasty. An implosion of the regime, in China’s eyes, would likely lead to the reunification of the Korean Peninsula under Seoul’s leadership, which is strongly U.S.-oriented.

“The real issue is the extent into whatever legislation that comes out that you have secondary sanctions that target largely Chinese entities,” Noland said. “That’s where the rubber hits the road.”

Bill Newcomb, a former member of the U.N. Security Council panel of experts with oversight of North Korea sanctions, said Obama already has plenty of authority to immediately act to punish the country by blacklisting senior regime officials.

“The government has lists of potential designees that they debate back and forth,” said Newcomb, now a visiting scholar at John Hopkins University’s U.S.-Korea Institute. He faulted the Obama administration for previously shying away from sanctioning “high-value targets” in North Korea.

“The ones that have been [sanctioned] more recently have either been those that have been repeatedly designated and were already designated under the U.N. for the most part, which means there is a an awful lot of redundancy,” he said.

Action Expected at U.N.

State Department spokesman John Kirby indicated on Jan. 7 in comments to reporters that the administration’s preference is to see what action the Security Council takes before pursuing new unilateral sanctions.

George Lopez, a past member of the Security Council panel of North Korea sanction experts, said Congress should hold off on passing legislation until it sees how extensive any new Security Council sanctions are and then look to plug any gaps that the United States is uniquely positioned to fill.

Lopez said he is “more than cautiously optimistic” that the powerful 15-member U.N. body will approve punitive sanctions on Pyongyang in addition to strengthening existing sanctions that target the county’s nuclear and missile activities.

“The tone of the dialogue in New York in preparing the resolution is that part of it will be strong punishment and part of it will be about further constraints on nuclear and missile,” said Lopez, who is a professor emeritus of peace studies at the University of Notre Dame.

Any Security Council actions that punish members of the North Korean regime would be notable given China’s history of using its veto power on the body to protect Pyongyang from punitive sanctions.

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