Busting North Korea’s Sanctions-Evading Fleet

Washington aims to chase Pyongyang's illicit traders from the seas. It may be too late to matter.

Treasury Secretary Mnuchin shows satellite photos of illicit North Korean shipping activity, Feb. 23, 2018. (Olivier Douliery/AFP/Getty Images)
Treasury Secretary Mnuchin shows satellite photos of illicit North Korean shipping activity, Feb. 23, 2018. (Olivier Douliery/AFP/Getty Images)

The North Korean-flagged oil products tanker Kum Gang 3 was steaming north through the Yellow Sea not far from the coast of the Shandong Peninsula at the end of January. About midnight on Jan. 28, the ship seemed to cut its engine and started to drift nearly dead in the water, heading southwest — for two entire weeks. Then the ship spent about 12 hours on station before starting another lazy, nine-day drift southeast. Once back on the ship’s original track, it throttled back up to cruising speed and took off north for several hours — then suddenly went dark and vanished from ship-tracking screens.

The Kum Gang 3 as well as 18 other North Korean-flagged vessels and nine flagged by other countries now have a legal bull’s-eye on them. They were the target of what the Trump administration calls the largest-ever sanctions package on North Korea, the culmination of years of effort to dismantle the seaborne nuts and bolts of Pyongyang’s continued evasion of U.S. and U.N. sanctions. U.S. officials say tankers like the Kum Gang 3, and cargo ships like Asia Bridge 1, have been importing oil and exporting coal in contravention of U.N. sanctions meant to strangle the financing for Pyongyang’s weapons programs.

Friday’s sanctions were a big step, adding to a couple of previous sanctions on vessels. But fully choking off that illicit shipping behavior will be a tall order. North Korea has as many as 240 merchant ships in its fleet, and in the past has redesignated vessels and appropriated the identity numbers of other ships to mask their identities.

“It’s a game of whack-a-mole. There will be new front companies, new vessels that emerge,” said Jonathan Schanzer, a former U.S. Treasury official now at the Foundation for Defense of Democracies. “It will require constant gardening.”

And the latest measures — including sanctions designations on more than two dozen shipping companies — may be too little, too late, to force North Korea’s hand given the rapid advances it has made in its illicit weapon program over the past year.

“I’m not sure I see this as being that significant,” said Richard Nephew, a former sanctions expert at the State Department in the Obama administration. “The term ‘largest’ here clearly implies ‘number of things sanctioned,’ and that’s not exactly the metric that concerns me,” said Nephew, now at the Center on Global Energy Policy at Columbia University.

The latest batch is a big part of the administration’s effort to put “maximum pressure” on the Hermit Kingdom. On Friday, the administration announced new designations on 27 companies and 28 vessels allegedly involved in smuggling prohibited goods into and out of North Korea. This new round of sanctions came on the heels of two other recent efforts to choke off North Korea’s illicit shipping: The United States sanctioned six cargo ships in January, and the U.N. Security Council blacklisted four in late December.

Going after merchant ships is a way to put sharper teeth into a pair of U.N. resolutions last year that limited the amount of oil North Korea could import and also banned exports of coal from North Korea, a big money-maker for the Kim regime. But the United States and other countries have compiled growing evidence in recent months that North Korea was sidestepping the sanctions with illicit shipments and transfers, including with vessels included in Friday’s announcement. Treasury accused some of the North Korean ships of illicitly exporting coal to Russia.

On Tuesday, Japan said it had caught another North Korean vessel — also included in the latest sanctions — carrying out a ship-to-ship transfer of oil.

“It was overdue, in the sense that we always knew the shipping industry had been important for North Korea’s sanctions evasion,” said Schanzer of FDD.

Even former Obama administration officials applauded the new measures. “It’s tightening the noose. It’s the most effective way to put pressure on the regime,” said Evan Medeiros, who heads coverage of the Asia-Pacific for Eurasia Group, after previously overseeing Asia policy in Barack Obama’s White House.

Alongside the sanctions, the U.S. Treasury released a global shipping advisory meant to shine a spotlight on the kind of illicit behavior — including turning off transponders, changing ship identities, and conducting ship-to-ship transfers — it says North Korea engages in.

“Now that we have guidance for the industry, the system should start blinking red,” Schanzer said.

In some ways, it already is. South Korea in late December seized two ships identified by the United States as helping North Korea evade sanctions, including a Panama-flagged tanker named in the latest batch of sanctions. And the focus on the global shipping industry is targeting the weak link of maritime insurance; European Union sanctions on Iran in 2012 kneecapped Tehran’s ability to export oil by making it difficult to get insurance.

One North Korean ship blacklisted by the United Nations lost its insurance in January, and the new U.S. sanctions give shipping brokers and insurers a tool to limit their own exposure and cancel or deny coverage for any designated ships.

“If a vessel cannot be insured, it will not be able to enter ports,” said a spokesperson for Lloyd’s of London, the big maritime insurer. The more vessels are identified, the more insurers and banks can “deny or withdraw services and disrupt the illicit activity.”

The U.S. government can use satellites to track North Korean ships, and it published satellite photos of illicit ship-to-ship transfers with its latest sanctions announcement.

Otherwise, keeping track of North Korean merchant ships can be hard. Many of the vessels turn off their satellite transponders, which broadcast location, speed, and heading on a regular basis. Many of the ships on the latest U.S. sanctions list went dark last fall, according to ship tracking data.

But sometimes they leave transponders (technically, collision avoidance systems) on so they can be spotted by another ship, sometimes for a rendezvous at sea. That tracking data offered a window into the Kum Gang 3’s odd behavior in the days before the sanctions announcement. Other ships on the sanctioned list went back and forth to Chinese ports, or sometimes to Russian ports like Vladivostok, records show.

One problem is that it’s labor intensive to compile the legal case for U.N. or U.S. sanctions on shipping companies and vessels, while the financial bang appears limited. The Treasury Department says that illicit shipments of North Korean coal delivered to Russia and other countries were worth only about $5.5 million per shipload. The ship-to-ship transfers of oil products are also small.

Proponents of a tougher line on North Korea hope the latest sanctions are just the first salvo, to be followed by even more aggressive steps including against China’s role facilitating North Korean international finance.

“If we don’t see other pressure applied, we will have lost the battle,” said Schanzer, noting Pyongyang’s progress on developing both nuclear weapons and the missile technology to deliver them long ranges across the Pacific. The “final frontier” for sanctions, he said, would be to go after big Chinese banks that do business with the regime.

“If we are serious about this maximum pressure campaign, if we are serious about denuclearization, we need to get serious about China,” he said.

But that’s extremely tricky to pull off without derailing the entire U.S.-China relationship. China, meanwhile, has blocked more aggressive U.S. efforts in the past, including the December bid at the U.N. to blacklist an additional six China-flagged ships.

Even if the shipping sanctions begin to inflict real financial pain on the North Korean regime, time is running short. Pyongyang is making rapid progress in its bid for nuclear-tipped intercontinental ballistic missiles. In November, North Korea tested a missile that theoretically could reach the East Coast of the United States.

“There is a race between sanctions and technology, and technology always beats sanctions,” said Medeiros, the former Obama official. “The window is closing, after which North Korea crosses a critical technical threshold, relating to its nuclear capability and missile capability.”

The Trump administration, meanwhile, is struggling to formulate a coherent diplomatic strategy — and staff it. The State Department’s point man for North Korea, Joseph Yun, announced his retirement this week, and State said Tuesday it isn’t clear that the special representative position will even be maintained in the future. Meanwhile, there remains no U.S. ambassador in South Korea more than a year since Trump entered office. Those absences threaten to make it harder to do the diplomatic spadework needed to start even preliminary talks with Pyongyang, as North Korea hinted over the weekend it might be open to.

Greater economic pressure alone may not deliver the nuclear surrender the Trump administration is seeking. Sanctions experts argue that both carrots and sticks are needed to convince North Korea to make concessions — and so far there have only been sticks, like the latest effort to name and shame North Korean merchant ships.

“I am all for sanctions use, but it has to be paired with a realistic approach for the quid pro quo. That means really talking about what we could live with in North Korea’s nuclear and missile programs,” Nephew of Columbia said. “If the answer is ‘nothing,’ then that means we don’t have much prospect for success, I think.”

Keith Johnson is a senior staff writer at Foreign Policy. Twitter: @KFJ_FP

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