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Friday, 12 December 2014

What North Korea's rich are worried about

What North Korea's rich are worried about

While sanctions and falling oil prices are forecast to push Russia into a recession, other countries - namely North Korea - have been able to evade the impact of economic penalties.
North Korea's expanding international network and trade with China are key reasons why the north's economy hasn't evaporated. With sanctions largely ineffective, some are now trying to refer North Korea to the International Criminal Court as a way to isolate the country.
Sanctions lobbed at the communist nation generally trickle down to hurt average citizens' ability to access food and other resources. Now a resolution circulating among the United Nations General Assembly specifically condemns North Korean leaders for committing crimes against humanity.
Plus, a bill, the North Korea Sanctions Enforcement Act, passed by the U.S. House of Representatives, not only targets North Korean entities, but third-country parties that have either abetted or assisted the north's abuses. Those violations straddle human rights, weapons trafficking and money laundering.
Both the legislation and U.N. resolution, in particular, have caught the attention of the North Korean elite. That's because the developments target the wealthy ruling class' ability to generate cash and to source nuclear, ballistic missile and other weapons of mass destruction, all despite the current battery of sanctions on the books.
A potential referral to the international court presents more of "a real, immediate threat to the top leadership than economic sanctions or other sorts of coercive economic diplomacy, by a long shot," says Nicholas Eberstadt, senior advisor at the National Bureau of Asian Research. He's also founding director of the U.S. Committee for Human Rights in North Korea. Despite sanctions, the north's trade with China has only grown in recent years, along with the rogue state's foreign-based network of businesses and individuals. According to a U.N. panel, North Korea has cultivated a broad, complex ecosystem designed to elude scrutiny of assets and trade dealings. The prospect of a referral to the international criminal court "appears to have touched a nerve," according to Christine Chung, a former political advisor to the Commission of Inquiry on Human Rights in North Korea. "Allegations of crimes against humanity do not stop at one individual but implicate a cadre of leadership surrounding the current and previous supreme leaders," she wrote in a post on "38 North," a website devoted to North Korea analysis. Sanctions, of course, have impeded some North Korean market activity. But they haven't forced the regime to negotiate and roll back nuclear and missile programs. The north faces various sanctions from the U.S. and U.N., including an embargo on the import and export of nuclear and missile technology, a ban on all arms exports and unilateral sanctions.
Read More China's pivot on carbon is turning North Korea into a suitmaker But North Korea's economy has become surprisingly internationalized, says Eberstadt of the National Bureau of Asian Research.
The north "is experienced in using foreign-based individuals, front companies and shell companies and joint ventures engaged in legitimate business to mask illicit activities," according to a U.N. panel report released in March. North Korea also has strategic partnerships with various countries, including some known to deal in illegal weapons trade with the regime, according to a separate security briefing from U.S. tech giant Hewlett-Packard (HPQ). The north has political and military ties with China, Russia, Iran, Syria and Cuba.
The North Korea Sanctions Enforcement Act aims to weaken such international transactions, according to Joshua Stanton, an attorney and longtime advocate for North Korean human rights who was involved in drafting the bill. The legislation proposes to use a combination of existing and new legal authorities to sanction and bankrupt those responsible for various North Korean abuses, Stanton said in an email to CNBC.com. The targeted parties include banks, ports and shippers that facilitate North Korean operations. The Senate has yet to introduce companion legislation. Despite widespread poverty and hunger, North Korea's rulers have managed to engineer a corporate machine of international companies, plus a growing cyber army. The country's brightest are culled and summoned to North Korea's capital, Pyongyang, for special training.
Read More North Korea: More cyber warrior than you think There are at least 3,000 North Korean cyber warriors, though some reports peg that number higher. Over the past two years, South Korea estimates the north has nearly doubled the number of people trained and assigned to carry out cyberattacks, according to HP security analysis.
But nothing has galvanized the recent attention of North Korea's leaders like the potential to be referred to the international criminal court.
In November, the U.N. General Assembly adopted a resolution condemning human rights violations inside the sealed country, including encouragement to the U.N. Security Council that it consider referring the north to the International Criminal Court or ICC. The resolution, however, is nonbinding and China is almost certain to veto any resolution that includes a referral to the court.
"An ICC referral would be immensely important for publicizing North Korea's abuses and holding those who commit them accountable," said Stanton, who also writes for the blog, "One Free Korea." Read More How millennials are shaking the North Korean regime The fact that North Korean human rights abuses only now are appearing in the international spotlight is worth noting.
A key trigger has been a landmark U.N. commission of inquiry this year that found wide-ranging human rights violations and accused the regime of decades of "crimes against humanity." An estimated 80,000 and 120,000 political prisoners are detained in four political prison camps.
North Korea, meanwhile, has denied any human rights violations. About a month ago, the north released two American prisoners.
While world leaders try to figure out how to solve a problem like North Korea, China remains North Korea's chief ally.
In 2013, North Korean trade totaled $8.6 billion, with 77.4 percent of that amount stemming from China, which accounted for $6.7 billion. In 2003, North Korean trade was China was a mere $1.05 billion, according to estimates tracked by "North Korea: Witness to Transformation," a blog about North Korea. Other trade partners to a lesser degree include South Korea and Russia.
"North Korea hasn't opened up, and it seems that sanctions only hurt the weak," says Jennifer Jung-Kim, a Korea expert and assistant director of UCLA's Center for Buddhist Studies. "North Korea gets what it needs from China." Some Asia experts see North Korea's trade deficit as an indirect Chinese subsidy, as North Korea can't finance its trade deficit through borrowing.
The north receives an estimated 90 percent of its energy imports, 80 percent of its consumer goods and 45 percent of its food supply from China, according to HP research.
And China's relationship with Pyongyang, where the nation's economic and military elite live, seems particularly entrenched.
It's widely believed Chinese food aid is directly channeled to the North Korean military, according to 2010 analysis from the Congressional Research Service, a think tank. This direct food aid to the military allows U.N. World Food Program aid to be distributed among the general population "without risk that the military-first policy or regime stability would be undermined by foreign aid policies of other countries," according to the think tank's analysis on North Korea. In the end, whether Kim Jong Un is tried before the international court at The Hague in the Netherlands is a long road with no guarantees. The U.N. Security Council has referred both Darfur and Libya to the court, but the prosecutor has been unable to gain custody of any leaders that it has indicted. Besides, Kim hasn't physically left North Korea since he took over as ruler in 2011.

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