November 8, 2017

North Korea: A sanctions overview

As President Trump embarked on a 13 day tour of Asia he pronounced that "the era of strategic patience [with North Korea] is over" and "all options are on the table". Against this background we look at current sanctions against North Korea and consider their impact.

UN Position

North Korea has been subject to a number of rounds of UN sanctions – most recently in August 2017 when sanctions targeted its export of strategic commodities and again in September 2017. In the latest round, the United Nations Security Council unanimously passed UN Security Council Resolution 2375, with the aim of depriving Pyongyang of access to more than $1.3bn in annual revenues. The Resolution stopped short of a complete oil embargo, despite strong US pressure, but was supported by Russia and China. The measures include:

  • an embargo on textile exports;
  • a halt to employing additional North Korean workers overseas and a ban on providing work permits to DPRK nationals;
  • a cap on importation of refined petroleum into North Korea;
  • limits on the supply of crude oil to the DPRK over a 12 month period;
  • a ban on the supply of all condensates and natural gas liquids;
  • a ban on joint ventures with DPRK entities or individuals. States have 120 days to terminate any existing joint ventures. This provision will not apply to existing China-DPRK hydroelectric power infrastructure projects and the Russia-DPRK Rajin-Kasan port and rail project for exports of Russian origin coal.

According to the US mission to the UN, “combined with the previous Security Council resolutions, over 90% of North Korea’s publicly reported 2016 exports of $2.7bn are now banned.”

Impact on Shipping

The UN Resolution introduced measures to prevent international shipping from being used to enable North Korea to evade sanctions. In particular:

  • member states are required to inspect ships on the high seas or direct vessels to port for inspection if they have reasonable grounds to believe they contain prohibited cargo;
  • vessels that refuse to comply, may be designated by the UN Committee and, if designated, must immediately be deregistered by the flag state;
  • member states are also required to prohibit their nationals, persons subject to their jurisdiction and vessels flying their flag, from facilitating or engaging in ship-to-ship transfers of goods to or from DPRK-flagged vessels.

EU Position

On 10 October the EU agreed to transpose UN Resolution 2375 into EU law under Council Regulation (EU) 2017/1836.

The EU has also introduced its own autonomous sanctions aimed at complementing and strengthening the UN's Resolution. These new proposals in Council Regulation (EU) 2017/1858, put forward by the UK, came into force on 16 October.

The new measures include:

  • a total ban on EU investment in the DPRK;
  • a total ban on the sale of refined petroleum products and crude oil to the DPRK. This goes some way further than the UN Resolution;
  • a reduction in the amount of personal remittances North Koreans can transfer to the DPRK from € 15 000 to €5 000 as these funds are suspected of being used to support the country's illegal nuclear and ballistic missile programmes; and
  • a ban on renewing work authorisations for DPRK nationals present in the EU, except for refugees and other persons benefiting from international protection.

The EU continues to update its list of designated persons. All funds and economic resources belonging to, or controlled by, the designated persons are frozen and no funds or economic resources may be made available to or for their benefit.

US Sanctions

We wrote about the dramatic expansion of US sanctions against North Korea on 10 October 2017. In essence these new US sanctions targeted foreign companies that trade with North Korea and foreign financial institutions (FFI) that finance North Korean trade. In particular:

  • anyone who provides transportation services or finances trade with North Korea may be designated as a Specially Designated National (SDN);
  • any aircraft that has landed in North Korea within the last 180 days is barred from landing in the United States;
  • any vessel which has called at a North Korean port within the previous 180 days or engaged in a ship to ship transfer with such a vessel cannot call at a US port.
  • if a FFI has knowingly conducted or facilitated a significant transaction in connection with trade with North Korea it could be prohibited from doing business with the US. The US has already acted to exclude a Chinese bank from its financial system for allegedly helping North Korea evade sanctions

Conclusion

Both the US and EU have applied increased pressure on those who deal with North Korea. As President Trump continues his Asian tour Japan has announced that it will also impose additional sanctions on North Korea. It remains to be seen whether sanctions will prevent the DPKR's missile and nuclear weapons programme or force the regime into talking. Much will turn on how strictly China decides to enforce the UN sanctions. We understand that China's central bank has told Chinese banks to strictly implement UN sanctions which is a significant step.