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The Peninsula

Are China and the United States Converging in Their Treatment of North Korea?

Published June 11, 2013
Category: North Korea

By Andrew Kwon

According to reports, this past weekend’s Xi-Obama Summit went “terrific.” While the two leaders spoke on sensitive issues, like cyber attacks, they found additional common ground on North Korea. They agreed to continue to pressure North Korea on its nuclear ambitions, but how far is China willing to go?

In the past few months we have seen a China that is more willing to discuss internally the challenges faced by North Korea and take additional steps to reign in North Korea’s behavior. For example China has taken a stronger stance on North Korea’s financial activities within China.

In March, Chinese financial regulators issued a warning to the North Koreans. More recently, Chinese banks have begun closing accounts related to North Korea’s Foreign Trade Bank. Despite targeting accounts that are suspected of being part of a large-scale money laundering network, the 2005 and 2013 enforcement of North Korean accounts sanctions are remarkably different both in scale and significance.

What are the differences?

Firstly, the most obvious differences between events were the initiating parties. The 2005 sanctions were unilaterally undertaken by the U.S. government. In contrast, the 2013 sanctions were part of U.N. Security Resolution 2094 and enforced by the Chinese Government.

Secondly, the precision of the actions are a matter of comparison. Whilst the U.S. threatened to cut Banco Delta Asia (BDA) off from the U.S. financial system, the Chinese action only targeted accounts.

Finally, the timing of the 2005 sanctions occurred after the Chinese brokered an agreement through the six-party talks. Though it remains a matter of debate over the significance of the sanctions in triggering the nuclear test the following year, it was still widely seen to have caused difficulties during later talks. In contrast, the Chinese sanctions have been viewed as reactive to the recent tests and cautiously considered by experts to be a part of larger considerations such as compliance with internal pressure to distance itself from North Korea.

What was the significance?

The act of China undertaking banking sanctions themselves is of major significance. Given the relative caution the Chinese government has expressed in undertaking actions against North Korea, its initiative and decisiveness took many by surprise. However, a critical difference as pointed out was the timing of the act itself. Despite having occurred after an event, it is yet to be seen if China would react the same way given similar circumstances as 2005, whereby, in the midst or following negotiations.

Another major point of significance is the relative similarity with which both China and the U.S. undertook their respective banking sanctions. The events have highlighted that both China and the US will balance action with stability. Despite the differing approaches, both acts were deliberate in scope to insure minimal damage to the greater economy. To demonstrate, it has been widely suggested that the U.S. Treasury deliberately targeted BDA for its size rather than its relevance to North Korea. Despite suspicions that major Macau banking institutions have been heavily involved in North Korean activities for some time, the relatively small BDA was targeted instead due to the minimal damage it would pose in the event of its collapse as well as the symbolic message of its targeting to other institutions. To further demonstrate, with the recent sanctions, The Bank of China insured the cessation of activity was surgical applied to North Korean accounts only. This can be seen as having insured that damage was compartmentalised to the North Koreans alone and to assure U.S. business interests of its compliance to U.S. backed efforts.

Overall, it would appear that the significance of the acts may lie in its symbolism alone. Given recent news that China has maintained co-development efforts along its border with North Korea and has eased initial restrictions it placed on Chinese businesses working with North Korean ones, the trajectory of China’s North Korean Policy is yet to be seen.

Andrew Kwon is a recent Masters of International Security Graduate from the University of Sydney. The views expressed here are the author’s alone.

Photo from David Starkopf / Office of Mayor Antonio R. Villaraigosa’s photo stream on flickr Creative Commons. 

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