For three years, the Bush administration has waged a campaign to choke off North Korea's access to the world's financial system, where U.S. officials say the nation launders money from criminal enterprises to fuel its trade in missile technology and its efforts to build a nuclear arsenal.
That effort has started to pay off.
U.S. pressure forced Macao this year to freeze North Korean assets in one of its banks, then foiled North Korea's panicky attempts to find friendly bankers in Vietnam, Mongolia, Singapore and Europe. And after North Korea's Oct. 9 nuclear test, China ordered some of its major banks to cease financial transactions with the country.
The cash crunch appears to have played a key role in North Korea's decision Tuesday to return to six-nation talks over its nuclear ambitions. North Korean officials said that as part of the talks, they wanted to raise the issue of lifting financial sanctions.
"They're not coming back because they want to give up nuclear weapons," said David L. Asher, the U.S. State Department's point man on North Korea until last year. "They are feeling the financial pressure and the cutoff from the international financial system, so they are trying to make nice."
Even Kim Jong Il can't hide from financial reality. He's going broke, and China's latest tightening of access to cash has NoKo is a untenable position, fiscally.
Kim's power rests with his military. His priority is keeping the military well fed, reasonably well equipped and in a position of power and respect. He does that by spending fairly lavishly on them (at the expense of the people of NoKo). The cash crunch is a direct threat to maintaining that ability. So as Asher says, he wants to make nice.
However the US still faces to "formidable obstacles" to success as Meyers calls them: China and Russia.
North Korea continues to have access to banks in both countries, according to current and former U.S. officials who say that without those nations' cooperation, the U.S. effort will be largely ineffective.
Both major powers have historically been more concerned about protecting their strategic interests than in joining U.S. efforts to sanction their neighbor.
Stuart Levey, the U.S. Treasury undersecretary in charge of investigating terrorist financial webs, has traveled to Russia and China, including a trip to Moscow last week. Levey said he had "constructive discussions" with his Russian counterparts, but declined to say whether they would act. A Russian Foreign Ministry official said they had "agreed to further cooperation."
U.S. officials believe that both countries will continue to resist American appeals for a further crackdown in part because of their "historic ties to North Korea," said a senior counter-terrorism official, who spoke about the U.S. campaign on condition of anonymity.
The implication here is although the US has been consistent with it's attempts to bring pressure on NoKo financially, China and Russia have been there to allow just enough of a trickle to allow Kim to hang on. Just how close Kim is to collapse (or at least being unable to sustain his financial support of his power base) is indicated by how quickly he agreed to the renewed talks when China finally clamped down financially.
His agreement to the talks doesn't at all mean Kim plans on giving up nukes. Nor does it mean six-party talks will be successful. It simply means that Kim will do what is necessary right now to increase the financial flow he needs so desperately.
Still, this is a victory for the administration and it's insistence on multi-lateral talks instead of bi-lateral talks. The key here, though, isn't North Korea. The key, as Meyers points out, are China and Russia and convincing them that their support of sanctions, to include freezing Kim's ability to put his hands on ready cash, are critical to the success of the talks.
And that may prove to be a far more formidable task than getting NoKo back to the table.
Since I’m usually so critical of Bush foreign policy, I have to point out that the policy towards North Korea has been probably as good as it could be. They avoided pressure to engage in bilateral talks, maintained their stance, and used gentle pressure on China to play a constructive role. It may not ultimately succeed, but it’s probably the policy with the best chance of success.
I think that China’s suspension of oil shipments to North Korea had more to do with KJI’s change of heart than any pressure applied to banks and that in turn was more due to the Chinese loss of face as a consequence of North Korea’s nuclear test than it was due to any pressure of any kind by the U. S.