U.S. sanctions Chinese, Russian companies, individuals for North Korea business

Washington Post

The Treasury Department on Tuesday placed sanctions on Chinese and Russian individuals and firms that it said had conducted business with North Korea in ways that advanced the country's missile and nuclear weapons program, part of a broad effort by the Trump administration to further isolate the regime.

The sanctions against 10 companies and six individuals are designed to disrupt the economic ties that have allowed Pyongyang to continue funding its missile and nuclear program despite strict United Nations sanctions prohibiting it. It was the fifth set of U.S. sanctions related to North Korea this year, and the largest.

In a related move, two legal complaints were filed Tuesday by the Justice Department seeking the forfeiture of $11 million from two of the sanctioned companies believed to have been laundering money on behalf of North Korea.

The complaints, filed in the U.S. District Court for the District of Columbia, would represent two of the largest seizures of North Korean funds.

The Trump administration has been trying to strengthen the economic vise on North Korea in an effort to persuade it to negotiate an end to its nuclear weapons development. Last month, the administration pushed a new round of sanctions against North Korea at the U.N. Security Council. In response, North Korea vowed retaliation "a thousand times over," and Foreign Minister Ri Yong Ho declared that North Korea would never relinquish its ballistic missile and nuclear programs.

But even as two federal agencies were taking stern measures against North Korea, Secretary of State Rex Tillerson made a gesture of appreciation to Pyongyang, welcoming its apparent restraint in not conducting any new weapons tests since the latest U.N. sanctions were adopted Aug. 5.

"We hope that this is the beginning of this signal that we've been looking for," Tillerson said at a news conference that otherwise focused on Afghanistan, "that they are ready to restrain their level of tensions, they're ready to restrain their provocative acts and that, perhaps, we are seeing our pathway to sometime in the near future having some dialogue."

Sanctions have been the main weapon of choice as the United States has grown increasingly alarmed at North Korea's technological progress in developing weapons capable of reaching the United States and miniaturizing nuclear warheads to fit atop them.

Even though they are imposed by just one country, U.S. sanctions have an outsize influence because most international banking is conducted at least partially in U.S. dollars. The measures prohibit U.S. citizens and companies from doing business with the sanctioned companies, and many banks outside the United States also adhere to them so they don't run afoul of U.S. laws and face stiff penalties.

"The sanctions send a strong message to Beijing and Moscow to stop facilitating North Korea's sanctions evasion," said Anthony Ruggiero, a fellow with the Foundation for Defense of Democracies, which favors tougher sanctions on Russia and China over North Korea. "The action is one element of a pressure campaign that also includes targeting illicit financial transactions and pressuring U.S. allies to choose between business with the United States or North Korea."

But in a display of the Kremlin's anger over sanctions placed on four Russian individuals and one Russian company, Russian Deputy Foreign Minister Sergei Ryabkov said the United States had again "stepped on the same rake." He called the new sanctions the latest example of the United States damaging its relationship with Russia.

"In recent years, Washington 'in theory' should have learned that for us the language of sanctions is unacceptable," Ryabkov said in a statement. "The solution of real problems is only hindered by such actions. So far, however, it does not seem that they have come to an understanding of such obvious truths."

Ryabkov promised that Russia was "beginning to work out a response that is inevitable in this situation."

The Chinese Embassy in Washington, in a statement carried by the China Daily newspaper, said, "China opposes unilateral sanctions out of the U.N. Security Council framework, especially the 'long-arm jurisdiction' over Chinese entities and individuals exercised by any country in accordance with its domestic laws."

It said that China faithfully implements Security Council resolutions on North Korea in their entirety and fully observes its international obligations. "If there are any Chinese companies or individuals suspected of violating Security Council resolutions, they will be investigated and treated in accordance with China's domestic laws and regulations," it said. "We strongly urge the U.S. to immediately correct its mistake, so as not to impact bilateral cooperation on relevant issues."

Although U.S. military officials and President Donald Trump have said that the United States is prepared to take some sort of military action against North Korea if provoked, Tillerson has repeatedly called for Pyongyang to negotiate and said that the United States does not seek regime change.

Despite the diplomatic push, China, in particular, has been a sore point in making existing sanctions stick. Beijing has largely gone along with restrictions, at least for a time, and supported an escalating series of U.N. sanctions. But many Chinese companies have continued to do business with the North Korean regime by supplying technology and hardware for its missiles. China is believed to be responsible for 90 percent of North Korea's international trade.

The sanctions announced Tuesday by the Office of Foreign Assets Control were predominantly against Chinese companies that have dealt with North Korea by purchasing and selling coal, oil and mineral resources, or have provided banking services that made the transactions possible.

The sanctions also hit two companies that arranged for North Korean laborers to build statues in foreign countries. Tillerson has been urging countries that have relations with North Korea to downsize Pyongyang's diplomatic presence and refuse to hire North Korean labor. Overseas labor is a source of revenue for the North Korean government, and the Treasury Department contends that some of the laborers' income helped finance ballistic missile testing.

"Treasury will continue to increase pressure on North Korea by targeting those who support the advancement of nuclear and ballistic missile programs, and isolating them from the American financial system," Treasury Secretary Steven Mnuchin said.

He added: "It is unacceptable for individuals and companies in China, Russia and elsewhere to enable North Korea to generate income used to develop weapons of mass destruction and destabilize the region."

The sanctions hit three types of business dealings that provide a window into how North Korea uses companies in other countries to evade sanctions.

China-based Dandong Rich Earth Trading Co. was sanctioned for buying vanadium ore from a company tied to North Korea's atomic energy agency. The Russian firm Gefest-M, which trades in a wide range of consumer goods as well as construction and industrial equipment, allegedly procured metals for a North Korean mining company with a Moscow office. The Chinese company Mingzheng International Trading was accused of facilitating dollar transactions on behalf of North Korea's proliferation network.

In addition, three Chinese coal companies were sanctioned for importing nearly $500 million of North Korean coal between 2013 and 2016. The Treasury Department said coal trade generates more than $1 billion a year for North Korea, the country's biggest export and an activity that was targeted in U.N. sanctions imposed in November.

In the Justice Department complaints filed in federal court Tuesday, one seeks $4 million from Dandong Zhicheng Metallic Material Co., also known as Dandong Chengtai Trading Co., one of China's largest importers of North Korean coal. According to the complaint, it and related companies imported North Korean coal and then sent a wide array of products - cellphones, luxury items, rubber and sugar - to North Korea.

The other complaint seeks $7 million associated with Velmur Management Pte., a Singapore-based company that was allegedly accepting money from front companies for North Korean banks. Velmur is accused of sending money to a Russian petroleum company alleged to have sent fuel oil to North Korea.

"These complaints show our determination to stop North Korean sanctioned banks and their foreign financial facilitators from aiding North Korea in illegally accessing the United States financial system to obtain goods and services in the global market place," U.S. Attorney Channing Phillips said in a statement.

The United States also is targeting North Korea's revenue from overseas labor. Among the new sanctions, Mansudae Overseas Projects was accused of helping North Korean laborers work abroad, usually in countries with authoritarian rulers, to build statues that immortalize the dictators.

According to Treasury, Kim Tong Chol, Mansudae's managing director, arranged for Qingdao Construction, a Namibia-based subsidiary of a Chinese company, to take over four Namibian government-sponsored construction projects as well as the employees and materials associated with the work.

David Filipov in Moscow contributed to this report

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