American officials have been wrong for years predicting breakthroughs in the North Korea nuclear crisis, but this week could prove to be different. The combination of Kim Jong Un’s growing belligerence, new U.S. financial sanctions, and a Chinese turn on North Korea trade might be a turning point that finally isolates the Kim regime.
The new U.S. sanctions that President Trump announced Thursday will finally cut off the regime from the U.S. dollar, the currency it has continued to rely on for trade. Any institution that does business with Pyongyang will lose access to the U.S. financial system. Meanwhile, Chinese regulators told China’s banks on Monday to stop handling North Korea trade, and many of them had already frozen North Korean accounts.
These mark a significant ramp up in pressure on the North. Americans might think that such sanctions were already in place since the regime first tested a nuclear weapon 11 years ago. Barack Obama once called North Korea “the most heavily sanctioned, the most cut-off nation on Earth.” And the U.S. foreign policy establishment, right and left, has claimed that sanctions were tried and failed to change Pyongyang’s behavior.
Yet until last year United Nations and U.S. sanctions on North Korea were far less stringent than those imposed on Iran before 2015. Only in March 2016 did the U.N. begin to restrict the country’s commercial trade, and only in November did the U.S. sever North Korean banks from its financial system. This June the U.S. finally blacklisted a Chinese bank along with companies and individuals that helped the North obtain forbidden materials for its nuclear and missile programs.
Those were important steps, but on Thursday the gloves really came off. Treasury Secretary Steve Mnuchin told a press briefing, “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.” The punishments to be meted out are similar to those reserved for financiers of terrorism under the Patriot Act. One Administration official claimed that Thursday’s executive order goes further than sanctions on any other country.
So far the U.S. has declined to sanction large Chinese banks, so will it do that now? It may not have to. Since the U.S. fired its warning shot by sanctioning the Bank of Dandong in June, Chinese banks have frozen or closed North Korean accounts. That has reduced trade flows across the Chinese border by 75%, according to a Kyodo report. Fuel prices began to rise in Pyongyang even before new United Nations sanctions this month capped trade in petroleum.