Here’s How the US Could Cripple North Korea’s Economy
Policy + Politics

Here’s How the US Could Cripple North Korea’s Economy

Toru Hanai

If it was meant to soften the image of the North Korean leader Kim Jung-un, the announcement that the regime had released captive American college student Otto Warmbier on Tuesday failed dismally after it was revealed that the young man, unbeknownst to his family, has been in a coma since last year. Warmbier was convicted in a show trial last year for allegedly stealing a political poster -- a “crime” for which he was sentenced to 15 years’ hard labor.

While the treatment of one prisoner by a regime that has historically brutalized both its own citizens and foreigners by the thousands seems like a small addition to the list of the Kim dynasty’s crimes, it’s the sort of personalized story that can draw public attention to a larger issue. And in this case it seems to be doing just that.

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The mistreatment of Warmbier is attracting additional attention to North Korea at a time when U.S. officials are already convinced that the rogue regime presents a serious threat to U.S. interests and national security. Kim’s government frequently threatens attacks on the U.S., is known to possess nuclear weapons and is working to develop a delivery mechanism with a range great enough to strike the United States mainland.

However, over the years, U.S. officials have struggled to find effective ways of punishing a government that has been willing to tolerate starvation of its own citizens even as it continued to build up its military capabilities. In addition, North Korea is already largely isolated from the global economy, and uses a network of hidden international intermediaries and financial institutions to provide the things it does need -- including financing, weapons and technology. 

But according to a new study from C4ADS, a non-profit based in Washington, D.C., the answer may be simpler than many imagine. The report, Risky Business: A System-Level Analysis of the North Korean Proliferation Financing System, argues that pressure applied to a relative handful of specific points in a global network of shadowy actors could do vast damage to illicit Korean trade with the rest of the world.

“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,” writes David Thompson, a senior analyst with C4ADS. “On the contrary, targeted enforcement actions against key nodes within the system can have the effect of impacting multiple networks across multiple countries simultaneously, removing key functions, such as individuals or entities specialized in illicit finance and procurement, who cannot be easily replaced.”

Thompson, who has previously produced reports using publicly available data to map the connections between North Korean companies and their enablers around the world, describes a system that is global in nature but reliant on a relative handful of intermediaries and facilitators who have a hand in most of the country’s trade relationships. Their relatively small numbers, he argues, makes the country’s system especially vulnerable to disruption if the United States and its international allies were to take concerted action against them.

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He points out that action last year against just one Chinese company, Dandong Hongxiang Industrial Development Co., resulted in a massive revenue loss to the North Korean government.

“Each action can individually increase the cost and complexity of sanctions evasion for North Korea, but if applied against a number of these key nodes simultaneously, they could, in theory, cause the entire overseas system to collapse.”

The impact, he believes, could be enough to force the Kim regime to the negotiating table under circumstances in which the U.S. and its allies would have a much stronger hand. 

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