Asking the Unanswerable Question: Did Sanctions Work in North Korea? - Global Trade Magazine
  March 19th, 2018 | Written by

Asking the Unanswerable Question: Did Sanctions Work in North Korea?

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  • Regimes targeted by sanctions will often endure hardship for years.
  • Many sanctioned regimes become adept in the art of sanctions evasion.
  • As a short term strategy, sanctions are rarely, if ever, successful at achieving their ends.
  • Trump has mirrored the Obama administration’s Iran strategy in North Korea.

President Trump’s unexpected announcement, on March 8, that he would agree to meet North Korean leader Kim Jong Un raised as many questions as eyebrows, foremost among them, why, where, and to what end? It is not yet clear what Kim might be seeking, and while the administration has made clear that denuclearization of North Korea remains its ultimate goal, it is not apparent what it might be willing to negotiate away (if anything).

But perhaps the most perplexing question is “how did we get here?” Is North Korea suddenly willing to agree to a temporary freeze of its nuclear and ballistic missile programs because it has achieved its aims, and now believes itself to be negotiating from a position of strength? Or did the administration’s “maximum pressure” campaign and escalating international sanctions bring both parties back from the brink?

Can Sanctions Ever Work?

The homespun adage is that “sanctions never work … until they do.” Regimes that find themselves the target of multilateral or US sanctions will commonly endure material hardship and diplomatic opprobrium for years, even decades. Many become adept in the art of sanctions evasion, allowing insiders to survive and even profit through illicit trade and indirect access to financial markets. Others curry domestic political favor by blaming the United Nations or the United States for economic troubles that often have root causes unrelated to sanctions. As a short term strategy, sanctions are rarely, if ever, successful at achieving their ends.

In the longer term, however, sanctions can exert meaningful pressure. Whether such pressure is determinative in any given instance depends upon a number of factors, foremost among them—what behavior is sanctions intended to change, and what value does the target place upon it? A regime that views a nuclear weapons capability as indispensable to ensuring its survival–a view that many have attributed to Kim Jong Un—may never be willing to negotiate that leverage away, no matter what sanctions are imposed or what sanctions relief is offered.

But that proposition can’t be tested unless and until the sanctions begin to have a real-world impact. In the case of North Korea, the regime has successfully blunted the impact of UN and US sanctions for several years by falsifying documents, opening front companies abroad, and indirectly moving money through the international financial system via third countries, most prominently, China. The hard currency it earned from this illicit trade undermined the sanctions strategy on two fronts. Not only did it allow the regime to sustain itself in material terms, it also allowed Pyongyang to finance and fund its nuclear weapons and ballistic missile programs, which were the stated purpose for imposing sanctions in the first place.

Multilateral Sanctions Start to Squeeze

The United States has maintained (and enforced) sanctions against North Korea in some form since 1950, including a partial embargo of the country prohibiting many exports and most imports since 2011 and a comprehensive embargo, which prohibits nearly all trade between the two countries, since March 2016. During this same window, North Korea’s nuclear and ballistic missile programs made appreciable advances. In order for sanctions to have any chance of impacting North Korea’s strategic calculus, they needed to be tightened at the margins, beyond the reach of US primary sanctions.

Enter the Trump administration’s campaign of “maximum pressure.” The United States has continued to target North Korean individuals, entities, and front companies with targeted sanctions that block any assets coming within US jurisdiction. Washington has also led efforts at the United Nations to impose additional multilateral sanctions on Pyongyang, with three UN Security Council Resolutions passed in 2017 alone that compelled UN member states to cut supplies of fuel oil to North Korea, expel North Korean guest workers, reduce remittances to North Korea, and prohibit the export of luxury products and dual use items, as well as the import of North Korean products and natural resources.

Of course, the United States has been targeting North Korea with primary sanctions and shepherding the passage of UN sanctions resolutions for several years. What may have begun to tip the balance is that China, which has long accounted for the vast majority of North Korea’s trade, began to more rigorously implement and enforce those measures. Beijing has doubtless grown more concerned about Pyongyang’s nuclear weapons program and potential instability on the Korean peninsula. But it may also have been influenced by the threat that the United States would impose additional secondary sanctions—sanctions on Chinese banks and entities that continue to facilitate trade with North Korea, even if such transactions have no nexus to the United States.

The secondary sanctions model was used to great effect in Iran, and is widely credited with altering Tehran’s strategic calculus by cutting off its access to the international financial system. The irony is that President Trump—no fan of the Iran nuclear deal, which he may be on the verge of tearing up—has essentially mirrored the Obama administration’s Iran strategy in North Korea.

What Comes Next

There is no doubt that North Korea is now feeling a more pronounced impact from the international sanctions regime imposed upon it. How much of an impact, and whether it in fact compelled them to offer a temporary freeze on nuclear and ballistic missile development and direct negotiations with the United States over its nuclear program, is less certain. It is no coincidence that Pyongyang’s weapons development programs raced forward in 2017, just as the multilateral sanctions regime took shape. Kim Jong Un may now feel that, having successfully tested several nuclear weapons and missiles capable of reaching the continental United States, the regime has a crossed a finish line of sorts.

The concern is that, simply by offering to negotiate, North Korea will drive a wedge between the United States and the international community, especially China, thereby weakening the implementation and enforcement of multilateral sanctions and lowering the pressure on Pyongyang, just as it was starting to squeeze. If President Trump is unable to strike a deal with Kim Jong Un—as seems likely, based upon the enormous issues in play—the United States may be left more alone than before. The most potent leverage that may then remain would be an aggressive secondary sanctions campaign primarily targeted at China—with unpredictable short and long-term consequences.

Sean Kane is counsel in the Washington, DC, office of Hughes Hubbard & Reed LLP. He was formerly the Deputy Assistant Director for Policy at the Office of Foreign Assets Control.


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