The latest raft of US sanctions against North Korea have targeted individuals, companies and banks in a bid to deter any party from doing business with the state.
The Office of Foreign Assets Control (OFAC) has added nine North Korean banks to its Specially Designated Nationals (SDN) list, meaning that any individual or company found to be doing business with them could be subject to punitive measures.
Furthermore, 26 North Korean bankers living overseas have been added to the list, including individuals in China, Libya, Russia and the UAE. The treasury secretary Steven Mnuchin says the sanctions target those who facilitate financial transactions for North Korea.
It effectively amounts to a complete embargo on North Korea, says Tatman Savio, a Hong Kong-based trade partner with US law firm Akin Gump.
She tells GTR: “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. An individual or entity can now be subject to sanctions as a result of trading with North Korea or merely on the basis of being North Korean. The reason for the latter basis is that North Korean business is so intertwined with the state that it’s difficult to know where the line is separating the two.”
It was reported in the Japanese media this week that five major Chinese banks, including the Bank of China, have suspended transactions with North Korea. This follows recent reports that the People’s Bank of China, China’s central bank, had warned banks that doing business with North Korea carried economic and security risks.
Given that North Korea has been an international pariah and subject to international sanctions for so long, it’s unlikely that US companies have direct engagement with any of the newly sanctioned entities. However, the message emanating from OFAC is that if you should not be doing business with any entities that transact with those SDNs.
The risk for international banks and companies here comes largely in the supply chain complexities of Asia. You may be certain you are not doing any business with a North Korean entity, but how sure are you about counterparts in China or Russia?
“By this stage, US companies are generally not transacting directly with North Korea. Now they need to be sure they can say the same about their counterparties in China, Russia, India and everywhere else, to avoid the risk of doing business with a party that could become subject to sanctions,” Savio says.
The US has been ratcheting up its sanctions imposition in recent weeks, at a remarkably fast pace. However, it doesn’t appear to be having the desired effect on Pyongyang. Kim Jong-un continues to threaten to test nuclear weapons in the Pacific Ocean and said this week that Trump’s forceful rhetoric against North Korea amounted to a declaration of war.
With the US running out of economic options, it must be hoped that China can exert some pressure on its neighbour, with the threat of conflict in the Korean Peninsula looming larger than it has for generations.