Monday, January 30, 2006

generating the right kind of friction

Bazaar in 3 Days!

A very long time ago, in the Jurassic Period of the Koreablogosphere, a fantastic blog called Incestuous Amplification made an interesting point about US conservatives' North Korea policy: tough talk, little substance. Like other Koreabloggers, I have enjoyed the current administration's tough talk when it comes to North Korea. I treasure the idea that ol' Jong-il is freaked out by the fact that he's #3 on a short list. Our current focus on #2 of that list, Iran, has got to have the Dear Leader's mental gears turning.

But Kevin of IA's contention in that long-ago post was that the Bush Administration wasn't really doing all that much. Funds going directly to NK might have been cut off, but funds going to SK-- and from there, ultimately to NK-- are still in place.

That IA post gave me pause and showed me the error of my ways. Since that time, I've been hoping for a truly substantive move by the Bush Administration to prove that our NK diplomacy has teeth-- at the very least, weak little Ben Affleck milk teeth, if not out-and-out Matt Damon choppers.

And now... this.

In the news a few days ago came the announcement that the US is drafting an executive order that would apply to financial institutions that do business with both the US and North Korea: Choose. Us or them. If you choose them, you don't do business with us.

...authorities completed a rough draft of an executive order that would stop any financial firms involved in transactions with North Korea from conducting business in the U.S.

That will mean all banks, brokerage houses and insurance firms and refers not only to illegal transactions but to any financial deals with the North, Perl told the Chosun Ilbo on the phone. Once the regulations are finalized, “the message to financial institutions operating in the U.S. will be that the time has come for them to choose between the U.S. or North Korea,” he added.

When I first read this article, I thought this was the stupidest idea yet. Perhaps some of you still think this way. But then I started thinking about the message such a measure was supposed to send to South Korea, which is the United States' seventh-largest trading partner (the US is SK's third-largest trading partner, after China and the EU; a US-Korea free trade agreement is in the works), and which doubtless has plenty of financial institutions on US soil, most likely in places like New York, Chicago, Atlanta, and Los Angeles.

If we assume the executive order makes no special exception for South Korea, this could very well mean that SK will either have to throw its lot in with America, or break certain financial ties with us-- at huge economic cost to both our countries-- so it can stand proudly beside its beloved brother, North Korea.

I have no idea how harshly the executive order is to be worded, nor do I know whether it really will apply directly to South Korea. I also have no clue whether the order is riddled with other exceptions and provisos. If it is, then Kevin of IA's point still stands: big talk, no real action. But if this bill is as frightening as the Chosun Ilbo writers make it out to be, then it's Christmas all over again for yours truly.

Here's the rest of that article:

Observers will be watching closely if the draft takes effect since it is far more sweeping than the sanctions already in place. The U.S. in September pinpointed the Macau-based Banco Delta Asia as Pyongyang’s primary money laundering channel and induced China to close North Korea’s transaction account there, while a presidential decree froze the U.S. assets of 11 North Korean trading firms. In December, Washington issued an advisory warning North Korea would probably seek to take advantage of other foreign banks for its illegal transactions.

But under the draft order, almost all finance companies would be effectively prohibited from doing business with North Korea. That would also affect international financial institutions outside the U.S. and thus deal a heavy blow to North Korea’s overseas trade.

In Perl’s reading, financial institutions would have a choice whether they are with or against the U.S., but given the importance of their U.S. interests, it would in effect force most major international firms to stop dealing with the North.

Given that Pyongyang is already boycotting six-party talks aimed at dismantling its nuclear program over the earlier measures, the plan could be the death knell for the negotiations. The news comes in a week when President Roh Moo-hyun warned of friction between Seoul and Washington if the U.S. tries to solve the North Korea problem by strangling the regime, and is unlikely to improve strained relations between the two allies. It is not wholly unexpected, however, since the White House has several times warned of possible “additional measures” against the North.

I'm happy to see that final sentence in the article: Don't act like you weren't expecting this. No one's patience is infinite.

UPDATE: Great commentary on this situation over at One Free Korea.


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