U.S. and China faceoff on North Korean Sanctions
Ambassador Curtis A. War
The cooperative relationship between the U.S. and China on North Korean sanctions got off to a good start in the United Nations Security Council. But, before the ink dried on resolution 2371 (2017), the relationship took a body blow from the bellicose rhetoric which flowed between Washington and Pyongyang. China cautioned President Trump not to travel that road and the U.S. president pulled back, at least for now.
Despite China’s commitment to enforce the new UN sanctions, the U.S. was not convinced China would implement and enforce the U.N. sanctions effectively. There was some optimism however that China would move away from economic protection of North Korea, as all, including China, were firmly convinced that the Pyongyang regime of Kim Jong-un had gone dangerously far with its nuclear program.
As most of North Korea’s international trade is linked to China, it was evident from the outset that the most likely sanctions violators, or potential violators, would be Chinese citizens and companies doing business with Pyongyang. China is required under the UN sanctions to prohibit its own citizens and business entities from doing business with North Korea – no trade or trade facilitation in the targeted commodities and no related financial transactions are allowed. Many of the business relationships that have been in place for decades must now end abruptly. Clearly, China would need some time to make this transition.
Donald Trump, not known for his patience and tolerance, didn’t wait on China to act. However, Beijing will not be bullied by Washington.
On August 22, 2017, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a set of unilateral sanctions targeting ten entities and six individuals doing business with, or facilitating business with North Korea. According to OFAC, these new designations, which include Chinese citizens and entities, are related to support of North Korea’s nuclear and ballistic missile programs, energy trade, labor exports, sanctions evasion, and enable sanctioned North Korean entities access to the U.S. and international financial systems. Also, that these new sanctions designations complement resolution 2371.
In addition to Chinese entities and citizens, these new U.S. targets include companies and individuals in Russia, Namibia, and Singapore. Many Chinese companies and citizens do business with North Korea and more could become future targets of U.S. unilateral sanctions.
China objected strongly to these sanctions and, like most countries, objects to U.S. extra-territorial reach in its unilateral sanctions and enforcement of its financial sector regulations. There is global concern that the U.S. uses its economic power to coerce extra-territorial adherence to its policies even when such policies run contrary to international norms. How far will president Trump seek the advantage of U.S. economic power is yet unknown for this administration.
China will push back. China is a strong defender of state sovereignty and territorial integrity and an opponent of extra-territoriality. At the same time, the U.S. needs China in dealing with North Korea going forward, and Trump’s advisers know this.
The primary burden for enforcing U.S. unilateral sanctions against the Chinese companies and individuals operating in Namibia and Singapore now shifts to these two sovereign countries. This creates new geopolitical issues for both as they must now balance their respective economic and political relations between the U.S. and China. Either way they are likely to be the losers.
With China’s economic footprint spread across Asia, Africa, the Caribbean, and Latin America, the U.S. is likely to go after Chinese individuals and companies where they are likely to be more vulnerable – outside of mainland China. The governments of countries hosting Chinese companies in these regions are forced to pay closer attention to U.S. unilateral sanctions enforcement against Chinese companies but also to U.S. sanctions enforcement more broadly.
Failure to enforce U.S. unilateral sanctions will invariably lead to a deterioration of bilateral relations between recalcitrant countries and the U.S.; and, as the U.S. Ambassador to the UN said earlier this year the U.S will take note of those countries not having the U.S. back on issues important to the U.S., clearly for retribution. I paraphrase an old Chinese proverb here which says “when elephants fight the grass gets trampled.”
Already, the Trump administration is building a reputation for bullying its non-cooperative “partners”. Those most vulnerable will be easy targets. In a globally interconnected world economy no country is immune from the U.S. extra-territorial reach. In particular, no country can ignore the U.S., even more so small economically vulnerable countries.
© 2017 Curtis A. Ward/The Ward Post