China Matters

China Abstains and Gets out of the Way

The Security Council, by a vote of 10-0-5 (five abstentions by China, Russia, Indonesia, Qatar, and South Africa), authorized the imposition of a tribunal to investigate, try, and sentence the murderers of Lebanese Prime Minister Rafik Hariri, and maybe some other Lebanese citizens possibly murdered by Syrian agents.

Middle Eastern affairs are way out of my bailiwick, but this is nuts.

Lebanese Prime Minister Siniora invited the United Nations in because he was unable to reach an agreement with pro-Syrian and Hizbollah forces inside Lebanon concerning the investigation.

In the least generous interpretation, Siniora surrendered Lebanese sovereignty for the sake of advantage in a domestic political squabble.

That’s not the kind of international action China likes.

Theoretically, if Taiwan deadlocked between pro and anti-reunification forces, a pro-independence president could cite the Hariri precedent and ask the Security Council to help out.

I imagine China abstained, instead of vetoing the tribunal resolution, in order to stay on the good, not-blowing-up people side of the debate and avoid an argument over a situation in which it has little leverage and few compelling interests.

Syria is a bridge too far for China: too distant, too isolated, too beyond sustained, effective Chinese assistance for China to risk its political and diplomatic capital in the Middle East with an overt demonstration of support for Syria against the concerted efforts by Europe and the United States to establish the tribunal.

But after the tribunal gets going, well that’s another matter.

The tribunal is authorized under Section VII of the UN Charter—making cooperation an enforceable, binding obligation on member states, including Syria--which is meant to give it intimidating weight.

News reports sometimes imply that Section VII authorizes military action to enforce the resolution.

Not quite.

Here are the relevant articles of Section VII:

Article 39

The Security Council shall determine the existence of any threat to the peace, breach of the peace, or act of aggression and shall make recommendations, or decide what measures shall be taken in accordance with Articles 41 and 42, to maintain or restore international peace and security.

Article 40

In order to prevent an aggravation of the situation, the Security Council may, before making the recommendations or deciding upon the measures provided for in Article 39, call upon the parties concerned to comply with such provisional measures as it deems necessary or desirable. Such provisional measures shall be without prejudice to the rights, claims, or position of the parties concerned. The Security Council shall duly take account of failure to comply with such provisional measures.

Article 41

The Security Council may decide what measures not involving the use of armed force are to be employed to give effect to its decisions, and it may call upon the Members of the United Nations to apply such measures. These may include complete or partial interruption of economic relations and of rail, sea, air, postal, telegraphic, radio, and other means of communication, and the severance of diplomatic relations.

Article 42

Should the Security Council consider that measures provided for in Article 41 would be inadequate or have proved to be inadequate, it may take such action by air, sea, or land forces as may be necessary to maintain or restore international peace and security. Such action may include demonstrations, blockade, and other operations by air, sea, or land forces of Members of the United Nations.

Long story short:

Any enforcement action requires further Security Council action. Article 41 actions are limited to non-military measures. Article 42 is the kitchen sink, including military action.

As far as China is concerned, Article 42 ain’t never gonna happen. China is dedicated to denying the United States and its allies a hunting license for military action in the Middle East or elsewhere. "No more than Article 41--if that" has been the Chinese rallying cry on Iran and North Korea. And that will be the case on Syria.

Bloggers can be wrong about anything and everything, but I think this is one piece of China Matters wisdom you can take to the bank. UN military action against Syria is off the table, forever.

Getting Beijing to support Article 41 action against Syria would require not just Chinese enthusiasm for truth, justice, and goodness in the matter of Hariri’s assassination. It would require some major geopolitical benefit to compensate for the destabilization of an anti-US, pro-Chinese regime. I don’t see that happening either.

Of course, blocking enforcement actions by the Security Council isn’t the end of the story.

I think the United States, Russia, and China—and Syria and Lebanon and France and the UK and Germany—all understand that the Security Council resolution’s main utility is to provide legal and diplomatic cover for unilateral US/”coalition of the willing” actions against Syria if and when the tribunal stalls and the Security Council waffles.

If America and its allies decide to impose a Proliferation Security Initiative-type economic blockade against Syria (presumably with greater success than the disastrous North Korean blockade, which failed embarrassingly without regional support beyond Japan and against the active opposition of South Korea, China, and Russia), there’s not much the Chinese can do about it.

But the Chinese won’t do anything.

Maybe they don’t need to.

Events inside Lebanon may overtake the anti-Syria campaign.

To my mind, the subtext for the Hariri tribunal is “The West needs a win in the Middle East”, especially to assert continued Western prestige and influence after the Iraq and Iran debacles.

The Bush administration yearns for the creation of a strongly pro-Western Lebanese state, an objective which was partially accomplished by the Cedar Revolution. It also yearns for the destruction of Asad’s regime in Syria, a seemingly attainable goal that has been frustrated by US mis-steps in Iraq and Asad’s craftiness.

The Hariri tribunal, with its broad mandate, its Section VII authority, and its renewable three-year term, seems to offer the promise of productive months of legal, diplomatic, and economic isolation and harassment of Asad’s regime.

The theory is that putting Syria on the defensive will strengthen the pro-Western forces in Lebanon.

But perhaps just the opposite will occur.

The March 14 coalition has created an advantage for itself by obtaining UN backing for its position. But that’s a step away from grudging coexistence with Hizbullah and pro-Syrian forces, let alone reconciliation.

To my mind, the Hariri tribune represents an escalation of a domestic political conflict that will further polarize the factions inside Lebanon.

That’s not good, because the only way that Lebanon’s rickety and illogical political structure can survive is if the various confessional and political factions agree to co-exist and make things work.

Lebanon’s political power-sharing is based on having a Christian Maronite President (Emile Lahoud, strongly pro-Syrian; go figure), a Sunni Prime Minister (Siniora, rich, secular Hariri associate), and a Shi’ite Speaker of Parliament (Nabih Berri, Hizbullah sympathizer whose refusal to convene parliament to debate a Hariri tribunal impelled Soniora to petition the UN to establish it unilaterally).

When one group, like the March 14 coalition of pro-Western forces, decides to upset the political balance, much craziness can quickly ensue.

The March 14 coalition apparently believes it holds enough cards to maintain its political ascendancy. But demographics seem to be against them.

Seats in the Lebanese parliament (the bunch that Berri refused to convene) are apportioned to the Taif Agreement that ended Lebanon’s civil war with a power-sharing arrangement between Christians and Muslims.

What kind of arrangement?

The Agreement says:

G. Abolition of Political Secterianism (sic): Abolishing political secterianism is a fundamental national objective. To achieve it, it is required that efforts be made in accordance with a phased plan. The Chamber of Deputies elected on the basis of equal sharing by Christians and Muslims...

So the Lebanese parliament has 64 Christian deputies and 64 Muslim ones (that was an improvement over the previous arrangement--a legacy of French colonialism--in which Christians held the majority. That's why the civil war ended).

There’s only one problem with that.

Lebanon’s government got out of the population census business to avoid awkward questions, but...

...a private researcher crunched the numbers for Lebanese birth records and, as translated on the Middle East website Voices on the Wind, concluded:

Lebanon's population is 64.29% Muslim and 35.33% Christian.

Ouch. That means Christians should only have 46 seats instead of 64.

Guess Berri would be much more willing to convene that kind of parliament.

And he certainly has some grounds for regarding the current parliament as a political tool of a minority, rather than a truly representative body.

But there’s worse news:

The more telling statistic in Dweihy's report is that among those under the age of 20 , the Christians form only 23.31% compared to a whopping 76.59% for the Muslims.

Demographics—and not the undeniable Syrian influence and intimidation in Lebanese politics—is the biggest threat to the pro-Western coalition.

And there’s even worse news:

The Taif Agreement consensus—the basis for the various factions ignoring Lebanon’s demographic reality—is breaking down.

Israel’s attack on Lebanon in 2006, targeted Hizbullah and also destroyed beaucoup non-Hizbullah assets in order to try to convince Sunnis and Christians to blame Hizbullah for their misfortune (which they did) and turn on Hizbullah and destroy or marginalize it (which they didn’t, perhaps because of nationalistic qualms or because Israel made such a hash out of the war that the prospects for defeating Hizbullah with or without Israeli help were non-existent).

There are rumblings that Israel and the United States, having learned from their (numerous) 2006 mistakes, are going to try for a do-over war this summer, perhaps with support from the March 14 coalition this time around.

Hizbullah and the Shia are now questioning the viability of the Taif Agreement (or as a Hizbullah member of the Lebanese cabinet stated during the 2006 Israel attack, “the accord is no longer a document of national agreement”), on the understandable grounds that, if Hizbullah is going to be the target of an attack by the state of Israel, it deserves to have at least equal representation in the Lebanese government that may determine its fate.

Which makes the existing Taif Agreement an implement of sectarianism, rather than the solution it was meant to be.

Muslims will be demanding—and getting—a bigger share of the parliamentary pie. The only question is when.

The United States and the May 14 coalition are staking their political and diplomatic fortunes on propping up the Taif system (UN involvement in the Hariri matter, including the current unilateral tribunal, are justified by the de-Syrianization that was an element to the Taif Agreement) despite the demographic tidal wave bearing down on it.

By increasing the polarization within Lebanese society, they may be unwittingly accelerating the collapse of the Taif system—with its enforced supremacy of Christians and prosperous Sunni and Druze—instead of forestalling it.

And if another US-backed Israeli attack on Hizbullah occurs this summer, the collapse of Taif and a existential political crisis inside Lebanon—rather than the destruction of Hizbullah and Lebanese Shi’ites as a Lebanese political force or the destabilization of Syria—would seem to be pre-ordained.

With this oncoming train wreck inside Lebanon, maybe all China and Syria need to do is try to stay out of the way.

Labels: China, Hariri, Lebanon, Syria

I asked Wachovia Bank, today, May 25:

I haven't seen anything on Wachovia's participation in the BDA matter since May 18.

Is Wachovia's participation still a possibility? Any developments?

and they replied:

No additional updates at this time.

FYI

Labels: BDA, North Korea

Another nail has been tapped into the coffin of the North Korea Supernote counterfeiting story by McClatchy.

Recall Stanley Au’s sworn statement that Banco Delta Asia didn’t come across significant quantities of counterfeit currency in the deposits of North Korean account holders since 1994, the U.S. claim that Pyongyang is faking our currency looks ever more dubious.

Add to the mix, a 2006 Congressional Research Service report that had this to say:

Subsequent press reports (of February 2, 2006) cite a Uri Party Member of Parliament’s account of a closed briefing by South Korea’s National Intelligence Service to members of Korea’s National Assembly to the effect that North Koreans were arrested abroad for counterfeiting offenses in the 1990’s but that the Service had no evidence of the North making bogus currency after 1998. (Raphael Perl and Dick Nanto, North Korean Counterfeiting of US Currency, March 22, 2006, Order Code RL33324)

That’s probably because after the 1996 redesign of the US currency (meant to foil the new computer age threats such as digital scanning by switching to special inks and security threads), counterfeiting US currency became really, really hard and incredibly expensive and the North Koreans probably, quite sensibly, got out of the business.

Now McClatchy reports that the Swiss police issued a report challenging US assertions that North Korea is printing US$100 Supernotes:

The Swiss federal criminal police, in a report released Monday, expresses serious doubt that North Korea is capable of manufacturing the fake bills, which it said were superior to real ones.
...
The fact that the Swiss are questioning the veracity of the U.S. allegations against North Korea carries special weight in the insular world of banknote printing.

McClatchy quotes financial journalist Karl Bender:

"The producers of the most sophisticated products used in banknote printing are Swiss or at least of Swiss origin. That goes for the (specialty) inks and that goes for the machines," said Klaus Bender, a German foreign correspondent and the author of "Moneymakers: The Secret World of Banknote Printing."

"Can the North Koreans do it, are they doing it? The answer is couched in diplomatic language, (but) the answer is clearly no," Bender said.

In January, Bender also posted a long, technical article on what makes the US$ 100 bill so difficult to counterfeit, and does a persuasive job of debunking hardline talking points about North Korean access to presses and inks.

He also claims that Interpol’s US director convened a conference in the summer of 2006 to make the case for North Korean counterfeiting of the Supernote.

However, at the end of the one-day conference, to which even specialists from the United States had been flown in, not one single conference participant was fully convinced of the American viewpoint, according to a survey. Some were even making jokes. The South Koreans, who should really have been interested in the topic, did not even attend.

I find this interesting, because if there was a criminal case—as opposed to an unproved accusation—concerning North Korean complicity in Supernote counterfeiting, Interpol would have been carrying the ball instead of the U.S. State and Treasury Departments.

The fact that Interpol—and its highly regarded secretary general (previously the U.S. Treasury Department’s Undersecretary for Enforcement) Ron Noble, could not make the case against North Korea is of itself significant.

A few interesting elements in the McClatchy article caught my attention.

First, the notes, though perfect to the naked eye, contain microscopic errors that appear to be deliberate, in order to make the bills detectable under close examination:

The supernotes are identical to U.S. banknotes except for added distinguishing marks, which can be detected only with a magnifying glass. In addition, under ultraviolet or infrared light, stripes appear or the serial numbers disappear on the supernotes.

As a for instance, the McClatchy article shows an enlargement (reproduced here; click on the image for a nice, clear view) of the spire of Independence Hall on the back of the century note. The good note has a gap in the outline; the “bad” note has neatly closed it.

McClatchy quotes the Swiss report as saying these distinguishing marks apparently make it impossible for the notes to be passed within the US:

On their return to the U.S., the issuing bank after examination can easily distinguish the `supernotes' from originals using banknote testing equipment, due to altered infrared characteristics. For this reason, the United States over the years has hardly suffered economic damage due to the `super dollar.'

Second, considering the prodigious criminal effort that would be involved in acquiring the necessary presses and inks, and tracking 19 redesigns of the US notes (not to mention adding those puzzling markers that make the bills impossible to pass within the US), only $50 million worth of Supernotes has been seized over 16 years.

$50 million is a drop in the bucket. There are $780 billion in US greenbacks circulating now, two-thirds of them overseas.

And how long does it take to crank out $50 million in hundred dollar notes?



McClatchy:

In theory, if North Korea were producing the notes, it could print $50 million worth of them within a few hours - as much as has been seized in nearly two decades, the report said.

Of course, the North Koreans could have ordered up another, completely perfect, set of plates and kept the presses running entirely undetectable Supernotes for the other 364 days of the year, an idea that conspiracy theorists would find irresistible...

...especially since the only way to pass a significant, obviously suspicious wad of hundreds of millions or billions in US currency, even if the bills were perfectly undetectable, would be with the collusion of Chinese or Russian banks—and their governments.

Now that's a conspiracy. Anybody want to run with that one?

Ladies and gentlemen, I present Balbina Hwang:

Balbina Hwang, a researcher at the Heritage Foundation, says the North Korean government has been making and circulating forged $100 bills for more than a decade."They produce some of the best quality supernotes," she says, adding that the North Koreans make $250 million a year from the bills. (Bill Gertz, Arrest ties Pyongyang to counterfeit $100 bills, Washington Times, September 20, 2005)

Bender treats this number with scorn, and it’s easy to see why. In a report by the Federal Reserve Board in 2002 , the total amount of counterfeit currency circulated per annum is estimated at $40 million—less than 1/10,000 of total US currency in circulation.

Given an estimated profit of 50% of face value for counterfeit currency, Hwang’s guesstimate implies the North Koreans would be circulating $500 million in funny money per year—about ten times what the U.S. government estimates total worldwide counterfeit flows to be.

But it’s interesting to have an idea of the kinds of useful if dubious assumptions the hardliners were plugging into their North Korea equations to make their policies work.

Which makes me wonder if hardline architect of the North Korea sanctions David Asher’s chain of logic went like this:

Let’s assume North Korea has the capability of forging supernotes;


then I will further assume that the notes are undetectable so we hardly ever find them;


then I will assume they are forging them in enormous quantities to cover their current account deficit;


finally I will assume that Chinese banks are knowingly accepting and laundering these funds;

Therefore I will threaten the Chinese government with a money laundering investigation under Patriot Act Section 311 unless they cease and desist in providing financial services to the North Koreans...


...and I will initiate an action against Banco Delta Asia to demonstrate the seriousness of my intentions.

I think this is as good an explanation as any for Mr. Asher’s notorious “monkey” statement:

“Banco Delta was a symbolic target. We were trying to kill the chicken to scare the monkeys. And the monkeys were big Chinese banks doing business in North Korea...and we’re not talking about tens of millions, we’re talking hundreds of millions.” David Asher, oral testimony, April 18, 2007

Suspicions of money laundering on Pyongyang’s behalf might have served as a convenient pretext for threatening China if it didn’t moderate its support of North Korea.


However, I don’t know if Mr. Asher would take such a big step on the shaky assumption that North Korea was grinding out hundreds of millions of dollars in absolutely undetectable supernotes. I suppose we’ll have to await the publication of his memoirs to learn his true feelings on the subject and whether I am pummeling a straw man on this subject.

A conspiracy theory that seems much more likely to me is that the CIA or the Russian secret service—which must have some of the most sophisticated press facilities in the world for forging every imaginable document from currencies, financial instruments, and passports in small runs to one-off picture IDs, business correspondence, and compromising photographs—would have the capacity to do a limited run of phony dollars with special markings, maybe for a sting.


Bender notes:

In light of all these facts, leading representatives of the high-security printing industry and counterfeit money investigators have been wondering for some time now what the CIA is actually doing in its secret printing works. There is a machine in this plant, which is located in a well-known city north of Washington, which is exactly of the type required for printing these super counterfeit bills.

(By the way, this statement is a lot clearer and more categorical than the clumsy translation from the Frankfurter Allgemeine Zeitung that Kevin Drum excerpted : It is in this facility, thought to be in a city north of Washington D.C., where the printing presses needed to produce the Supernotes is said to be located.)

Bender doesn’t accuse the CIA of printing the supernotes, but he does note an interesting area in which suspicions of US involvement could be tested—the color shifting ink.

Maybe, against all odds, the North Koreans were able to reverse engineer the inks.

Maybe not.

We could find out.

The top-secret color shifting ink is only manufactured by Sicpa and is exclusively reserved for the BEP [the U.S. Bureau of Engraving and Printing—ed.] ... It would be easy for the Swiss corporation to determine whether the inks on the «supernotes» really are original Sicpa inks. Secret markings known as «tagging» permit the security inks to be traced right back to an individual production batch.

However, at the Interpol conference mentioned at the beginning of this article, Sicpa of all people were conspicuous in their absence. There is a reason for their silence: BEP is a major customer and vital for Sicpa’s survival.

Interesting story.

Labels: counterfeit, North Korea, Supernotes

The Wu Yi/Hank Paulson photo-op a.k.a. the Strategic Economic Dialogue, has come to an end.

Obviously, the purpose of a two-day meeting is not to negotiate—even if one counts Secretary Paulson jawboning Mdme. Wu over dinner about the merits of opening up China’s financial markets to his eager buddies on Wall Street.

The meeting is political theater—meant to announce agreements and concessions previously negotiated.

And for whatever reason, we came up with a whole lotta nuthin’.

The Great White Whale of PRC-US economic relations—RMB revaluation—escaped our Ahabs once again, leading to appropriately dismissive coverage of the meager catch our negotiators hauled in.

Considering I read somewhere that China seriously considered cancelling the summit as an expression of displeasure at the US CVD and WTO complaints that sprouted like weeds earlier this year, expectations should not have been too high.

However, Henry Paulson is the great white hope of the Bush administration as far as a sophisticated, adroit, and effective China policy is concerned, so it was disappointing that so little came of the meeting.

Steve Clemons’ The Washington Note reprinted a column from the Nelson Report alluding to the apparent frostiness of the meeting, and blaming Paulson for a gaffe:

...witnesses agree that something definitely was "missing" today. Commented one, privately, "it was as cold as ice in there. The Chinese just looked like they wanted to get off the stage quickly. They really didn't bother to put on a show for the cameras back home."
...

One normally hesitates to ascribe too much to the theater of body language, but here's something that just bashes you right between the eyes: Paulson, the guy with 72 private trips to China, all that hands-on experience, he who told the White House, State and USTR not to worry, that he would be the China Guy in this Administration...at the closing press conference, Paulson stalked in, well ahead of Wu Yi, and then started reading his statement before she even reached the podium.

Excuse me? An American or European would have cold-cocked the President for such calculated rudeness! In China (Japan, Korea, etc.) you watch older married couples walk into someplace. . .the husband is 10 feet in front, and the subservient wife is dutifully plodding behind. You think for one minute that elderly maiden lady Wu Yi didn't catch the insult here?


It seems that Mr. Paulson might have been disappointed that his friendly efforts on behalf of China over the years had yielded him little more than a middle finger salute at the SED, and he used the setting of the closing statement to convey his unhappiness.

But he shouldn’t be surprised.

He should be chastened.

In my experience with Chinese bureaucrats, they respect power and admire those who can combine friendship and power.

But to attempt to extract through friendship concessions that should only be demanded from a position of power is a blunder, even an insult.

Right now, with a Democrat-controlled Congress considering 27 different pieces of anti-China legislation and President Bush scraping along in the polls at under 30%, Henry Paulson doesn’t have much of a negotiating position.

The Chinese, for all their Pollyannish wonder at the independence of our legislative branch, know full well that the unpopular, lame-duck Bush administration can deliver very little on China policy.

So if the Chinese were frosty, it was a calculated frostiness, designed to show that Secretary Paulson can’t use his weakness as a negotiating point and ask the Chinese to make substantial or face-saving concessions so he can save them from the big bad Democratic Congress.

I think China will be facing some hard decisions on its economic future—which may require serious engagement with a US government that can negotiate seriously and deliver on its promises--so they aren’t going to make concessions that only enable the continued, directionless flailing of an impotent administration on the wrong end of a dysfunctional relationship with Congress .

The Chinese attitude is probably, How about Paulson showing he’s still got some mojo by slapping around Chuck Schumer a bit before he asks us help him out.

And Mr. Paulson should reflect on the lesson that weakness makes it difficult—and dangerous—to presume upon a friendship.

Labels: China, Paulson, Treasury

Nothing like a good conspiracy theory to liven up a dusty diplomatic and banking dispute.

Via Onefreekorea , the March 19 Washington Times informs us that Congressman Ed Royce (whose positions closely follow those of the hardline crowd on North Korea) wrote a letter to Condoleezza Rice accusing the State Department of trying to “unravel” the Treasury sanctions against North Korea by approaching Wachovia Bank to handle the BDA money:

By asking Wachovia to deposit the money in an effort to clear the way for the closure of the North's main nuclear reactor, the State Department is trying to "unravel" the Treasury Department's decision to ban U.S. banks from dealing with Macao's Banco Delta Asia, wrote Mr. Royce, who is a member of the House Financial Services and Foreign Affairs Committees.

This supports my take on the underlying dynamic: that the State Department took the initiative in approaching Wachovia and announced the deal in order to put Treasury in the difficult position of either giving a thumb’s up—or refusing to cooperate and thereby openly admitting that Treasury recalcitrance (and not North Korean scheming or finicky attitudes of international bankers) is holding up the remittance.

Royce’s letter and Bolton’s op-ed both seem to be weak efforts to divert the focus from Treasury obstruction to alleged State Department perfidy.

Onefreekorea tries to connect the dots on Royce and Bolton’s behalf by accusing Christopher Hill of criminal conspiracy to engage in moneylaundering.

So here’s something I though I’d never see: U.S. government officials more-or-less openly engaging in a conspiracy that would land anyone else in a federal prison for international money laundering.

The underlying rationale is that US law is preventing the release of the BDA funds, and, by actively seeking to involve an intermediary bank to handle the money, Hill is seeking to evade those laws.

Big problem with this argument is that, although the Treasury Department asserted that some of the funds were illicit, it didn’t prove it—which is why BDA was stigmatized as “a bank of money laundering concern” and not “a money laundering bank”.

The only action taken against those funds was a request to the Macau Monetary Authority to freeze them.

Considering the fact that Macau has not seen fit to initiate any criminal proceedings with respect to BDA and there is no apparent legal basis for characterizing the funds as illicit, Onefreekorea’s effort at intimidation of Christopher Hill looks rather ineffectual as well as ignoble.

So, count the criminal money laundering charge against Christopher Hill as another example of misleading rhetorical chaff thrown by the hardliners in an attempt (I know I’m mixing metaphors here) to muddy the waters and whip up a firestorm of allegations against the State Department in order to derail the Six Party Agreement.

I see this a last ditch effort to assert that the Six Party Agreement is not only flawed, but also tainted by improper State Department activity, so it should be ditched in favor of that one shining beacon of consistency and legality, the Patriot Act sanctions against BDA.

However, I think that a narrative requiring war on enemies in the State Department as well as North Korea will be too much for anybody beyond the hard core of the hardliners to swallow.

Also, since President Bush has endorsed the deal, pushing this line would also require a Hirohito defense for the Commander in Chief—that he was a dupe of evil forces exploiting his ignorance and gullibility to promote their sinister designs.

That’s just too much political baggage for one lousy agreement with North Korea to bear.

So I think the hardliners will be placed in an uncomfortable position in which burden of proof is on the Treasury Department to demonstrate that its resistance—and not the State Department’s persistence—is justified.

That is, of course, if anyone pays attention—which nobody seems to be doing. There’s been no sign of that Wachovia trial balloon reappearing this week.

Maybe the whole matter will finally be resolved by Treasury Secretary Paulson in the context of the give and take between the US and China at the Strategic Economic Dialogue.

If so, we might have to wait a few more weeks.

Labels: BDA, North Korea, Six Party Agreement, Treasury

From McClatchy’s article on the US-China strategic economic dialogue now going on in Washington, I learned that China’s immense foreign exchange reserves have earned the nickname "The Great Wall of Cash".

In keeping with China Matters’ kneejerk tendency to question conventional wisdom and conceptual shortcuts, I was compelled to calculate how big a wall of one-dollar bills equal to China’s forex reserves would be.

Based on greenback dimensions of 6” x 2 ½”, 312 bills to an inch,1.2 trillion bills would build a wall 4000 miles from Shanhaiguan to Lop Nor 30 feet wide...

...and 0.55 inches high.

That’s not a wall.

That’s a speed bump.

Despite the fact that China’s greenback barrier is too low to give an invading barbarian even a twisted ankle, Beijing has taken a big step in moving part of its cash hoard into overseas financial markets.

As McClatchy reports:

Cash-rich China rattled the U.S. bond market Monday with the announcement that it was taking a 10 percent stake, worth $3 billion, in the Blackstone Group, one of the world's largest private-equity companies.

Some analysts saw the move as a sign that China intends to diversify from Treasury securities. If true, that could spark investors to demand higher interest rates from Treasuries and could increase the amount of interest that the United States must pay on its debt.

China’s US$ holdings have become a headache for the Chinese government.

There are only a few ways Chinese government bureaucrats can safely and efficiently off-load the billions of trade dollars pouring through the door every month.

Traditionally, the only practical destination was US Treasuries, which made the Chinese government (in their view) hostage to the US government. No matter how annoyed Beijing became with Washington, Bank of China would have to continue to buy Treasuries in order to find a safe haven for its forex, and maintain the value of existing holdings of US debt.

The Chinese government took a small step to allocate central forex reserves through market forces by involving "qualified investors" but I expect was properly anxious about the sticky fingers on the invisible hand.

They also tried to buy our stuff (a.k.a. direct interest in corporations that own or make things) but the CNOOC debacle taught them high profile asset purchases can attract US domestic political opposition and push up the price (or make the deal impossible).

So the Blackstone deal looks like a smart way out of the forex dead end.

Smart, greedy capitalists allocate the capital more efficiently and profitably than any BOC bureaucrat ever could.

They provide the public face of acquisition, with the Yellow Menace just one of many silent partners.

Wall Street types hungry for their bite of the China asset eggroll create a political constuency for a moderate China policy in Washington.

And the Chinese government gets more leverage over the business community through a continual presence as owner, rather than an occasional buyer of US products.

I, for one, would be interested to see if China puts a chunk of change into Cerberus, the investment firm that made big headlines for grabbing the Chrysler anvil and plunging into the deep and stormy waters of the global automotive business.

Cerberus—owned by ex-Secretary of the Treasury John Snow—is also the main shareholder in NewPage Corporation, whose countervailing duty (CVD) complaint was adopted by Treasury to argue the case that China’s paper industry enjoys a de facto subsidy through preferential lending policies by China’s sclerotic state-controlled banks.

It looks to me like this complaint is more likely to seek increased access to Chinese financial markets for US companies as a competition/rationalization measure, than it is to achieve relief for US manufacturers.

In other words, tit for tat.

If China wants to pump forex into our investment houses, we want to do the same over there.

This is a state of affairs that Hank Paulson—who seems to run our China policy these days—can understand, and perhaps even appreciate.

And, so we can better understand--and perhaps appreciate--the US-China trade and economic relationship, I've added China Economics Blog to the blogroll.

Labels: China, foreign trade, forex, Paulson, Treasury

Thanks to readers David and BB, I had a chance to read John Bolton’s Wall Street Journal op-ed.

I had anticipated a laborious and tedious fisking might be required, but there’s not a whole lot of there there.

Owing to frustration, despair, or an emotion familiar to many people covering the Banco Delta Asia saga—boredom—the moustachio’d one seems to be phoning this one in.

The rhetorical reed he leans on is that resolving BDA was not part of the original agreement, the North Koreans are renegotiating, the State Department is caving, (I’m paraphrasing here) Chamberlain, rolled umbrella, appeasement, blah, blah, blah.

Bolton writes:

... we now face the nagging question whether there are other secret side deals beyond BDA. Of course, the BDA agreement was not so secret that Kim Jong Il was barred from knowing about it, by definition. Most troubling, however, is that State apparently thought it too sensitive to share with the American people until the February deal broke down in an unavoidably public way. (John R. Bolton, Pyongyang’s Perfidy, Wall Street Journal, May 18,2007)

The first, surprising point, is the incoherent statement “the BDA agreement was not so secret that Kim Jong Il was barred from knowing about it...”

“...by definition...”

Huh?

This apparent non-sequitur (which reads like the remnant of some biting apercu that, though perhaps fully formed in Mr.Bolton’s mind, did not quite make it to the printed page), is a poor set-up for his accusation that the promise to resolve BDA was “too sensitive to share with the American people until the February deal broke down”.

Let’s go to the transcripts—from February 13, the day the deal was announced (not, of course, the day it "broke down"):

Secretary Rice, February 13 briefing:

QUESTION: Madame Secretary...we've been told that the North Koreans expect that the issue of the Macao bank will be resolved shortly and that within 30 days they will see some of their funds released. Is that true?

SECRETARY RICE: Let me speak to the second of those first, Barbara. We have agreed that we will, in the separate working group that has been working on this issue that the Treasury Department heads, seek to resolve the issues concerning Banco Delta Asia. Now, remember that the case is against the bank for activities and so we do need to resolve that. Treasury is working to do that. We've been having good discussions with all of the parties involved in that and we'll look to what kind of remediation needs to take place to resolve our concerns. But that's a legal channel. We've been very clear that it has to be resolved within that channel. But we've said that in 30 days we would seek to resolve it. I think the Treasury will be speaking to these issues at another time.


From Christopher Hill’s February 13 television interview with AP :

QUESTION: You mentioned the thirty days to resolve BDA. I mean, can you give more specifics on that? Is that all the accounts?

ASSISTANT SECRETARY HILL: I can’t at this point, but we said we would resolve them in thirty days. We have had senior level discussions about that. I think we will get that done.

QUESTION: And that was at the Berlin meeting that you discussed that?

ASSISTANT SECRETARY HILL: I discussed their offer in the Berlin meeting, but we’ve been working very hard to make sure it can be wrapped up.

QUESTION: People say you are caving in -- this was a line that you guys took, and you gave up on these sanctions, and --

ASSISTANT SECRETARY HILL: Well, I think you will always have people that think any concession you make is a cave-in, but I think one must understand that in any negotiations both sides have to give. So I think we’ll just have to see what we can do to move the denuclearization process forward.

QUESTION: Is that part of the whole strategy to use that pressure? I mean, you have leverage on one side?

ASSISTANT SECRETARY HILL: Well, the North Koreans have been involved in some illicit activities which are, very frankly, unacceptable. You know, you can get away with having a bad human rights record, you can get away with having a bad human rights record and being engaged in illicit activities. But I think it’s tough to get away with having a bad human rights record, having illicit activities, and making nuclear weapons. So I think the North Koreans have found that, increasingly, there was a sense they needed to be scrutinized. It’s no surprise that when you are involved in making weapons of mass destruction, people have a tendency to look at your finances.

QUESTION: And the Treasury issue is being resolved?

ASSISTANT SECRETARY HILL: Well, I mean with respect to the BDA, the Banco Delta Asia, we’re prepared to resolve that within thirty days. But with respect to the overall issues, overall financial issues, I think the North Koreans seem to understand that they need to get out of this money laundering business and ultimately start getting out of this nuclear business.

Hopefully this will put paid to the hardliner talking point that the BDA demands were not part of the deal and came out of left field--or that the State Department was secretly canoodling with Kim Jung Il and treacherously keeping their greasy transactions secret from President Bush.

I do not think, however, it will mark an end to efforts to distract attention from actual hardline attempts to derail the Six Party Agreement by sounding misleading alarms about “Pyongyang’s Perfidy” and State Department betrayal.

Labels: BDA, John Bolton, North Korea, Six Party Agreement

There are encouraging signs that the bizarre inability of the world’s only hyperpower to enable the remittance of $25 million to North Korea is attracting more and more skeptical interest.

And there are signs that the hardliners are getting desperate. John Bolton has been summoned to muddy the waters with a conspiracy theory op-ed.

Arms Control Wonk posts critically on a John Bolton op-ed in the Wall Street Journal attempting to create a narrative involving “secret agreements” to explain why the Banco Delta Asia issue is still holding up the Six Party Agreement.

Now, the Wachovia bit. Bolton is obsessed that the North Korea deal has some secrety side arrangement including US bankers (code word!), the Trilateral commission and the Illuminati. Well, at least one bank, Wachovia:

Third, we now face the nagging question whether there are other secret side deals beyond BDA. Of course, the BDA agreement was not so secret that Kim Jong Il was barred from knowing about it, by definition. Most troubling, however, is that State apparently thought it too sensitive to share with the American people until the February deal broke down in an unavoidably public way. (blockquote from Bolton’s op-ed)

I haven’t got my hands on the full op-ed yet, but it appears that Bolton is pushing the idea that there is a conspiracy between the State Department and Wachovia to appease the North Koreans by using the BDA remittance to provide North Korea with a permanent conduit to the world financial system.

For that premise to work, you’d have to believe that a U.S. bank would be willing to defy the Treasury Department for the sake of North Korean business and whatever goodies the appeasement-happy State Department can push its way.

Not too likely. There’s a more logical explanation.

I added my two cents in the comments:

Bolton’s argument makes no sense. He’s trying to substitute an implausible narrative (the North Koreans are scheming not to get their money back) for a more plausible one: that hardliners in the Treasury Department allied with Bolton are scheming to block the BDA resolution so the Six Party Agreement will fall apart. His gyrations have to be even more difficult and contrived because the State Department is seeking to force the issue by identifying a bank (Wachovia) that is willing to take the money if Treasury agrees.

So here come Bolton’s bizarre conspiracy theories about “secret side agreements”.

It’s all rhetorical chaff, thrown with increasing desperation because, if there’s another Condi talks to Hank moment, Treasury grants the approval and the money goes to North Korea and the Six Party Agreement proceeds, journalists and Congresscritters are going to start thinking: it looks like some people in Treasury held up this agreement for three months. What was all that about?

I’m glad ACW is paying attention to this issue. Maybe other outlets will follow.

Labels: BDA, John Bolton, North Korea, Six Party Agreement, Treasury

Hardliners in the U.S. Government Struggle not to Accept the Consequences of the Failure of their North Korea Policy

China Matters goes meta, summarizing dozens of posts and tens of thousands of words written over the last six months to explain why Banco Delta Asia matters—and why the mainstream media should and actually might begin covering it critically and responsibly.

As the Banco Delta Asia farce groans into its third month, it should be time for even the most credulous, lazy, and bigoted observers to realize there is a problem.

The problem isn’t with our North Korea policy.

The problem is with the refusal of elements within the Bush administration—perhaps at the highest level--to come to terms with their failure on North Korea, and the unwillingness of much of the media and Congress to question, investigate, or even think about that.

The big screwup at the heart of our North Korea problem is that at the beginning of its second term the Bush administration committed itself to an aggressive effort to isolate North Korea from the international financial community in the service of a policy of...

...well, nobody really knows.

The easy answer is regime change.

But I had this interesting exchange with Onefreekorea, a vociferously pro regime-change website on the issue of the Six Party Agreement (the “February surrender”):

As an occasional reader, I was struck by your statement:

To them, our February surrender reaffirmed that Their Way prevailed and Our Way — a policy of regime change by pressure that in fact never really existed — has been abandoned.

If “Our Way” never really existed, what was “our” actual policy before Chris Hill & Company took control?

Can you clarify? Thanks!
...

As I stated above, a policy of regime change by pressure that in fact never really existed
I think what in fact really existed, though it was initially opposed by some, was a policy of continuing the Clinton policy of pursuing an Agreed Framework, on slightly less gullible terms.

I agree with his observation.

I think the Bush administration wasn’t prepared to make a full-court press on regime change remotely approaching what we did on Iraq

However for the sake of political expediency in pandering to the conservative political base, President Bush gave free reign to a purely economic campaign of isolation and destabilization against North Korea led by John Bolton, coordinated by David Asher, and executed by Robert Joseph at the State Department and Stuart Leavey at Treasury.

And I wouldn’t be surprised if there was a lazy internal justification for the half-a-loaf policy, as in “If they can achieve the results they are promising, then President Bush will go before the American people, our allies, and the UN and do what it takes to finish the job”.

Trouble is, achieving true financial isolation and an internal crisis in North Korea through the aggressive application of economic sanctions alone was a fundamentally unviable policy.

The Chinese and North Korean regimes have many differences, but they have a shared interest in preventing the establishment of a pro-American regime in North Korea through coup, collapse, or insurrection.

And as long as China was keeping North Korea’s economic lifeline open, a campaign of financial isolation was doomed to failure.

The fatal piece of hubris by the hardliners was to assume that “will” could trump “skill” and circumstance, and a determined escalation of the confrontation to involve China would compel the Bush administration to back their policy and force Beijing to blink and abandon North Korea.

It appears that the hardliners chose Macau as a point of attack, both to cut off North Korean access from the international financial system at an important node, and to threaten China with sanctions against its banks.

So in September 2005, the hardliners announced a Patriot Act Section 311 investigation against Banco Delta Asia as a demonstration project to “kill the chicken in order to scare the [Chinese] monkey”—words of exquisite self-delusion by David Asher that will probably be carved on the headstone of the Bush administration’s failed North Korea policy.

And then, quietly and inevitably, the wheels came off.

The North Koreans walked out of the Six Party talks, as the hardliners probably hoped they would.

But the Chinese didn’t blink, for hundreds of millions of good reasons—China’s size and strategic importance, the US debt it holds and buys, and the value of the trade between it and America.

And the North Koreans didn’t come back to the international scene until they had a powerful new bargaining chip—an atomic bomb they had hastened to completion during their absence from the talks.

The hardliners attempted to use the outrage to rally international support for an anti-North Korea united front, but failed miserably.

A UN resolution condemned and sanctioned North Korea, but Chinese and Russian vigilance ensured that it could not be used as a pretext for escalation.

John Bolton energetically if misleadingly and futilely promoted the resolution as an endorsement for a broad campaign of economic warfare against North Korea under the banner of the Proliferation Security Initiative.

Condoleezza Rice dutifully jetted around the world trying to rally support for an aggressive anti-Pyongyang policy, but in Asia could only count on Japan, Australia, and Singapore.

President Bush squandered his diminished political capital after the November mid-term elections in a fruitless attempt to advance the hardline agenda at the APEC conference, but South Korea’s pointed refusal to abandon its Sunshine Policy of engagement for PSI-driven confrontation probably signaled the death knell for the US effort.

So Bush dumped the hardline policy and let the realist team of Condoleezza Rice and Christopher Hill take over.

They held direct discussions with North Korea in Berlin in January; then they let China orchestrate the Six Party talks, midwife the agreement, and strengthen China’s claim to hegemony over the affairs of the Korean peninsula.

After this debacle, the hardliners retired to lick their wounds and consider their options.

It couldn’t have been easy.

Their policies had turned out disastrously.

They had grossly misjudged their ability to construct a global web of economic sanctions against North Korea—and compounded their perhaps willfully wishful thinking with an over-estimation of how far the Bush administration would back them on China.

Failure was virtually preordained.

And that failure had consequences: it strengthened the position of China, alienated South Korea, and given US foreign policy an image of incompetent intransigence.

And, most damagingly of all, this failure had resulted in the emergence of North Korea as a nuclear weapons power—a genuine policy disaster.

The hardliners have been toying with Dolchstoss (stabbed in the back) memes to explain their failure, but there are so many knives in their back—from the Chinese, the South Koreans, the Russians, the realists, Bush himself—they look like pin cushions.

Going after their numerous enemies would only emphasizes how isolated and discredited the hardliners are.

A source of continual hardliner concern must be worrying about getting blamed for letting Kim Jung Il get The Bomb.

Condoleezza Rice pointedly fired a shot across their bow in early March with a studiously orchestrated campaign of leaks, backgrounders, and Congressional testimony designed to assert that John Bolton’s hyping of North Korea’s (possibly nonexistent) highly enriched uranium program triggered an excessively confrontational policy that led to Pyongyang’s withdrawal from the talks and assembly and test of their bomb.

If the intent was to forestall an attack by the hardliners that Appeasers Incorporated a.k.a. Rice, Hill, & Company had sold out the interests of the United States for the North Korea deal, it seems to be working.

But it looks like the hardliners are still working fanatically and almost overtly to sabotage the Six Party Agreement by preventing the resolution of the Banco Delta Asia matter.

Perhaps they believe that the only way to escape condemnation for a policy that strengthened China and gave North Korea the bomb is to make the alternative policy fail.

Then they can return to their self-assigned roles of being the voices of truth, righteousness, and realism—and power-- on Asian policy.

If you’re keeping track, that’s faulty logic.

No amount of sabotage of the Six Party Agreement will vindicate the hardline policy.

To their eternal discredit, the hardliners haven’t stopped trying...

...even though the North Koreans, apparently confident of their advantageous position, refuse to bite on the series of provocations and delays the hardliners have thrown up.

On the simple matter of resolving the issue of frozen North Korean accounts in Banco Delta Asia, the hardliners have apparently engaged in a three month campaign using government rulings, secret briefings, prevarication, and procrastination—and spinmeistering to the US media--in an attempt to stall remittance of the funds and sabotage the Six Party Agreement

By now, the North Koreans and the world financial and diplomatic community are simply standing on the sidelines observing the ridiculous battle the Bush administration is engaged in—with itself.

And now we get the first murmurings from the mainstream media that Treasury’s refusal to expedite the Banco Delta Asia agreement—an absolute anomaly in an administration that subscribes to the theory of the unitary executive and the unchecked right of the President to set policy—has its roots in a dark and familiar place: the office of the Vice President.

U.S. government officials first disclosed the request made to Wachovia. Treasury officials declined to comment, but sources said that many officials are dismayed that the administration is now asking a major U.S. bank to work around an order issued two months ago. Some White House officials have also objected to using a U.S. bank, but Secretary of State Condoleezza Rice supports the possible deal with Wachovia. (Glenn Kessler, Transfer of N. Korean funds sought, Washington Post, May 17, 2007)

As I blogged on May 17:

First time, by the way, I’ve seen a report that “White House officials” and not just Treasury Department types are opposing the BDA deal.I’d guess you’d have to say the only “White House official” who has the juice on Asian matters to oppose Condoleezza Rice—President Bush’s favorite apparatchik—and blithely shrug off the humiliating two month farce this has become for US diplomacy is probably Vice President Cheney.

The indefatigable Vice President Cheney, by the way, apparently used his recent trip to Asia in an ad hoc, off the reservation effort to will a new Asian anti-China coalition into existence.

Cheney’s continued defiant willfulness could strike a blow at the cherished doctrine of the unitary executive, which shelters all actions of the executive branch under the umbrella of presidential prerogative.

In the matter of the vendetta against Joseph Wilson and Valerie Plame, Cheney’s lawyers made the jaw-dropping defense that any actions he took to defame Wilson and expose Plame were protected by his unique Constitutional position as a quasi-President—which gave him the right to define and defend “policy”, by outing CIA agents and orchestrating press campaigns against his critics if necessary.

If Cheney tries that argument to justify interference in the North Korean issue—where he is apparently undermining an explicit administration diplomatic initiative—it would be clear his objective was not to promote policy: he would be seen defying presidential policy to enhance his influence, preserve his power, and maintain his ability to act with impunity.

By highlighting the sordid contradiction between power-grubbing reality and the Hegelian ideal of the unitary executive, we might be as close to a constitutional crisis as we’re likely to get with this anything-goes administration.

Leaving aside the pulse-quickening question of whether the North Korean question could finally put the kibosh on Dick Cheney, the issue before us is this:

Perhaps the BDA story has become so ridiculous—and its role in the political maneuvers of a rogue clique within the administration sabotaging this country’s foreign policy in order to regain its influence and initiative so apparent-- that journalists and Congressional investigators will finally say:

It’s not a case of where there’s smoke there’s fire. Here we have the smoldering embers of a colossal bonfire of failure and delusion.

Well, maybe they won’t.

My preferred explanation for why the main media outlets, with the exception of McClatchy, don’t use their squishy cranial matter to make sense out of the ludicrous Banco Delta Asia story, instead of mindlessly transcribing anonymous administration backgrounders:

Journalists don’t want to see truth used in the service of evil.

Clear-eyed critical reporting by the mainstream outlets could have undercut US and international political support for the invasion of Iraq; but very few journalists and editors were ready to assume the moral responsibility of prolonging the reign of Saddam Hussein by reporting on the factual and logical deficiencies of the Bush administration’s case.

It’s easier to say, Their guy’s bad and I’ll give our guy the benefit of the doubt in my reporting, even if his facts look a bit dodgy.

Same with North Korea.

We’re supposed to let the North Koreans get some money tied up in a sanctioned bank in Macau as a confidence-building measure so the Six Party Agreement on nuclear disarmament can proceed.

The stated cause for the two month delay is absurd: that a Treasury rule under Patriot Act Section 311—a rule that can be revised or discarded through secret, unilateral deliberations—is somehow binding the hands of the most authoritarian executive in recent American presidential history .

But the media seems to be acutely aware of the embarrassment and the possible moral cost of providing aid and comfort to the toadlike Kim Jung Il by taking cognizance of the fact that our North Korea policy is built on bullsh*t.

So one can almost feel the strain of cognitive dissonance that’s making the sweat pop out on the foreheads of journalists as they try to blame the North Koreans for the fact that we won’t give their money back to them:

QUESTION: Given that it's been a month since the April 14th deadline and initially you were saying that you would give it days and that your time was not infinite, your patience wasn't infinite. What have you heard from the North Koreans besides the fact that they intend to meet their February 13th obligations, about how they're actively working to resolve the BDA issue?
...

QUESTION: But when you say the time was not infinite before, are there any kind of punishments for North Korea if they don't move quickly on this?
...

QUESTION: What do you see that gives you confidence that they are trying to work through it?

That’s enough for one day (May 15) at the State Department press briefing.

The Democrats have a similar problem on the issue of oversight. Beyond the immediate political desirability of looking tough on Kim Jung Il, Democrats are probably enamored of Patriot Act Section 311 sanctions as the prime example of the virtuous, consensual soft-power coercion they expect to apply as their primary diplomatic tool in the post-Bush era.

Also, with our hard-power forces bogged down in Iraq, financial sanctions look like one of the few effective weapons left in our arsenal—ones that should not be weakened by public criticism.

Blogs like China Matters, of course, don’t wield any political influence, so we don’t have the weight of the world on our shoulders.

We can follow the story—and the truth—where it leads.

But it’s also the right way.

Governments don’t lie just for the sake of speed and efficiency.

They lie because they haven’t managed to address real problems, because if these problems were revealed and discussed, our leaders might become discredited and lose the political initiative

Sometimes these are problems that can’t be solved. Sometimes the problems could have been solved but the lie has forestalled public scrutiny, so the caravan can move onto the next problem—and maybe the next lie...

...and the next, and the next...

...until the consequences of all those successful lies—the fatal accretion of faulty assumptions and failed policies--come home to roost.

What I believe we have on the BDA matter is a small clique trying to sabotage our current North Korean policy, not because it has a better policy, but because it wants to avoid accountability and responsibility for a policy that has already failed.

And I think the media and Congress should go after it.

It’s not an issue of giving Kim Jung Il a hand.

It’s a matter of helping the United States get out of a jam that the hardliners put us in—and perversely want to keep us in.

There’s no point anymore in giving failure the benefit of the doubt—or the protection of willfully obtuse and credulous coverage.

Labels: BDA, Cheney, John Bolton, North Korea, Treasury

The State Department Fights the Treasury Department to get the Banco Delta Asia Deal Unstuck

The Washington Post reports that Wachovia Bank is willing to handle the North Korean funds at Banco Delta Asia...

...if it gets the necessary blessing from its regulators a.k.a. the Treasury Department.

Wachovia, by the way, is on the long list of US banks (two; the other was HSBC, according to the Financial Times) that handled transactions for BDA prior to September 2005.

It didn’t take two months to find that bank, which seems to indicate that the State Department has entered into the realm of desperate, last-second improvisation in trying to get the money moving.

Then, according to Yonhap, we get this :

The U.S. Treasury deferred all questions to the State Department."That request was initiated by the State Department, so you need to speak with them," Treasury's spokeswoman, Molly Millerwise, told Yonhap through e-mail.

Snap!

The Washington Post story puts the State--Treasury conflict (something we’ve been blogging on since March—see Treasury’s Not So Secret War Against the Six Party Agreement ) on the front burner again.

U.S. government officials first disclosed the request made to Wachovia. Treasury officials declined to comment, but sources said that many officials are dismayed that the administration is now asking a major U.S. bank to work around an order issued two months ago. Some White House officials have also objected to using a U.S. bank, but Secretary of State Condoleezza Rice supports the possible deal with Wachovia.

Maybe the media will turn its attention to what Treasury’s Daniel Glaser really did on his trip to Macau after the BDA rule was announced on March 14 (a seemingly gratuitous visit during which he presented further “evidence” from Treasury dossiers on a case that was already closed, but might have been a foray to intimidate the government of Macau into more enthusiastic cooperation)...

...and why Glaser spent ten days in Beijing in end-March/early April working on “implementation” of the BDA agreement but apparently accomplished nothing.

First time, by the way, I’ve seen a report that “White House officials” and not just Treasury Department types are opposing the BDA deal.

I’d guess you’d have to say the only “White House official” who has the juice on Asian matters to oppose Condoleezza Rice—President Bush’s favorite apparatchik—and blithely shrug off the humiliating two month farce this has become for US diplomacy is probably Vice President Cheney.

That kind of backup would explain the Chinese-style passive-aggressive stalling that Treasury is bringing to bear on the issue.

The Treasury Department has not been involved in the effort to find a financial institution to handle the money, leaving the search to the State Department. But Treasury would need to grant significant waivers, such as special permission for a U.S. bank to deal with Banco Delta Asia. One senior U.S. official said that it is not clear "what universe of waivers" would be needed to ease the bank's concerns that it would not be putting its reputation at risk.

Ah, the “universe of waivers”.

How could we conceivably get around a rule—a rule, by the way, not a law—that can be unilaterally revised or even discarded by the Treasury Department according to its own secret and arbitrary criteria?

What in the “universe” could we do?

Think...think...think.

How about:

“The Treasury rule against Banco Delta Asia will go into effect on June 1, 2007”.

Because if the ruling is about the bank—as it’s supposed to be—and not about the money—which we’ve already agreed to give to North Korea—that should give enough time to get the money out electronically and solve the problem before the doors swing shut on BDA.

I think that should take care of it.

Creative readers are welcome to suggest improvements in the comments.

Labels: BDA, Daniel Glaser, North Korea, Treasury

From Kevin Hall, Bank owner disputes money-laundering allegations, McClatchy Newspapers Washington Bureau, May 17, 2007:

"In the next couple of years, the Bank was periodically contacted by other U.S. government agents and we cooperated in their inquiries," Au said in a statement to the Treasury first published by China Matters, an Internet blog.

The full texts of the petition from Delta Asia Group and Stanley Au’s supporting personal statement to the U.S. Treasury Department requesting that its rule against Banco Delta Asia be rescinded, and an analysis of the key points involved, can be found in the post Stanley Au Makes His Case for Banco Delta Asia by clicking on this link.

Labels: BDA, Patriot Act Section 311, Stanley Au, Treasury

The American media is waking up to the fact that the Eurocentric Pope Benedict has a Third World problem...

...and a Middle East problem.

...and an Asia problem.

...as China Matters readers already knew.


via Tapped’s Adele Stan, we learn that the Pope alienated some Brazilians:

HONEY, I SHRUNK THE CHURCH. It seems as if Pope Benedict XVI is really out to prove his philosophy that he's willing to accept a smaller, but more loyal flock for the Roman Catholic Church. Among the loyalty tests -- aside from the traditionally misogynist stands against women in the priesthood and reproductive rights for women -- one rarely discussed appears to have roiled to the surface: acceptance of Western civilization and culture as superior to all others.

Yesterday, as his Brazilian sojourn drew to a close... reports Raymond Colitt of Reuters, [Benedict said]:

[Brazil's indigenous people] had welcomed the arrival of European priests at the time of the conquest as they were "silently longing" for Christianity, he said.

... Particularly telling is reaction of Brazilian Indians who are Catholic, as well as the priests who minister to them. "The Pope doesn't understand the reality of the Indians here, his statement was wrong and indefensible," Father Paulo Suess, who runs the Brazilian church's advocacy group for the indigenous, told Colitt. "I too was upset."

Thanks the convoluted character of Catholic doctrine and Benedict’s penchant for high-minded hairsplitting, it’s a bit difficult to tease out the Pope’s point.

The bottom line is that Benedict regards attempts to understand and acknowledge and reconcile what the indigenous people lost in that whole bloody genocide, forced conversion, and slavery fracas with the Conquistadors in South America as deluded carping by liberation-theology types who should be grateful that their once-pagan ancestors are not broiling in eternal hellfire.

So, thank you Christian Europe! for the wafers and wine that allowed this Godforsaken land to realize its destiny as a Christian continent.

An unsentimental farewell to whatever was going on here before the guns-germs-and-steel action!

And stop trying to put that pre-Columbian toothpaste back into the tube!

The Utopia of going back to breathe life into the pre-Columbus religions, separating them from Christ and from the universal Church, would not be a step forward: indeed, it would be a step back. In reality, it would be a retreat towards a stage in history anchored in the past." (quoted in comments to Stan's post)

That kind of condescending dismissal is at the heart of Benedict's thought--and his problems as Pope.

Pope Benedict is quite the expert on the futility of non-Catholic spiritual exercises, as is clear in my post from 2006 riffing on the Pope’s notorious remark equating Buddhism with masturbation.

The post provides background on the Pope's travails in Brazil by exploring his clash-of-civilizations view of European Catholicism as the bulwark of the true faith against assaults by secularists, Freudians, and those brown and yellow people whose traditional cultures and philosophies offer only barren ground for Christianity.

It provides an interesting perspective on why the guy who previously headed the Inquisition might be better equipped to shrink the church to a core of true believers, than grow it by addressing Catholicism’s philosophical and historical relationship to other faiths.

I recall some rough handling from a commenter or two in the Peking Duck thread. My response at the time is included at the end of the post.

Pope Benedict and the Buddhism/Masturbation Controversy
originally posted September 26, 2006

Pope Benedict’s recent scuffle with Islam, including his non-apology—characterized by Middle East observer Abu Aardvark as “that time-honored classic ‘I'm sorry that you got angry when I called you fat’” dodge--- has highlighted his confrontational stance toward other faiths.

A column by Madeleine Bunting in The Guardian makes a case for his hostility toward Judaism and Buddhism as well.

In the process, Bunting retails the notorious statement made by Benedict while he was still Cardinal Ratzinger, purportedly equating Buddhism with masturbation.

Buddhist Channel reported that the full quote, delivered in an interview with L’Expresse in 1997, went like this:

"If Buddhism is attractive, it's only because it suggests that by belonging to it you can touch the infinite, and you can have joy without concrete religious obligations,'' Ratzinger said. ``It's spiritually self-indulgent eroticism.''

Other outlets cut Cardinal Ratzinger some slack, opining that “auto-erotisme”, the term used in the original article, could more accurately translated at “self-love” or “narcissism”.

Actually, auto-eroticism is an English-language term coined by the sexologist Havelock Ellis to describe mental or physical sexual activity not directed toward a sexual partner. It was later picked up by Freud. Cardinal Ratzinger knows his Freud. He considers Freud an originator of the secular spirit he detests, and entitled one of his major pronouncements on the decadence of Europe “Europe and its Discontents”—a play on Freud’s Civilization and its Discontents.

In this case, I assume Cardinal Ratzinger employed auto-eroticism as a term of art, using a modern term for the sinful, non-reproductive sexuality abhorred by the church to condemn a kind of shallow spiritual gratification that he considers futile, degenerate, and dangerous to the soul.

So, although the Pope was not referring to Buddhists as masturbators, they can find little consolation in the awareness that what he really meant is that he was dismissing their spiritual exercises as pathetic and contemptible.

In any event, Benedict’s hostility toward non-Catholic faiths is a matter of public record. Religions that have felt the lash of his disapproval include Buddhism, Hinduism, Judaism, and Anglicanism.

In 2000, the National Catholic Reporter published a list of Cardinal Ratzinger’s greatest hits, including a money quote from the same L’Expresse interview:

"In the 1950s someone said that the undoing of the Catholic church in the 20th century wouldn't come from Marxism but from Buddhism. They were right."

Reportedly, at the time Cardinal Ratzinger was incensed that there were allegedly more Frenchmen studying to be Buddhist monks than Benedictine monks.

As the Catholic Church’s top doctrine cop—running the Congregation for the Doctrine of the Faith, a.k.a. the Inquisition--he also ordered a German Benedictine monk, Willigis Jager, a.k.a Zen master Ko-un Roshi, to cease and desist from all public statements and activities promoting dialogue between Catholics and Buddhists.

Beyond strict demands for doctrinal conformity and acknowledgement of the Catholic Church’s unique role as interlocutor between humanity and the one true God, Pope Benedict’s worldview is apparently militantly Euro-centric. Europe, in the Pope’s view, is a creation of Catholicism and the implication is that Catholicism without Europe cannot survive.

There was speculation that Cardinal Ratzinger chose his papal title not to commemorate Pope Benedict XV, but to honor St. Benedict, who founded the Benedictine order and is credited with saving Catholicism from extinction in the European Dark Ages.

The Pope considers Europe to be Catholicism’s home turf, under assault from alien faiths and lazy tendencies toward syncretism (literally “Cretan towns forming an alliance” according to my Webster’s, but figuratively speaking a meaningless mishmash).

Islam at the gates of Europe is Pope Benedict’s particular bugbear.

The Pope’s perspective—in which Catholicism is inextricably bound to its European matrix—has a creepy clash-of-civilization vibe and his recent statements criticizing Islam were undoubtedly a conscious “stay outta my yard” challenge to the demographic, social, and political encroachment of Islam into Europe.

In the lament on decadent, faithless Europe that he coauthored—Without Roots—Cardinal Ratzinger wrote:

At the hour of its greatest success, Europe seems hollow, as if it were internally paralyzed by a failure of its circulatory system that is endangering its life, subjecting it to transplants that erase its identity. At the same time as its sustaining spiritual forces have collapsed, a growing decline in its ethnicity is also taking place.

Hmmm…”a growing decline in its ethnicity”. I don’t think he’s referring to a shortage of good Vietnamese restaurants in Rome.

Pared to the bone, the Pope’s attitudes look a lot like racism cloaked in theology.

Reuters reported on an interview Cardinal Ratzinger gave to Le Figaro in 2004:

Joseph Ratzinger... has said Muslim but secular Turkey should seek its future in an association of Islamic nations rather than the EU, which has Christian roots. In an interview last year for France's Le Figaro Magazine, Ratzinger, then doctrinal head of the Roman Catholic Church, said Turkey had always been "in permanent contrast to Europe" and that linking it to Europe would be a mistake.

If Pope Benedict is going to be busy re-fighting the crusades in Europe and the Middle East and reliving the glories of the Inquisition, he’s not going to have a lot of interest and energy in dealing with Buddhism except as a competitor for the hearts, minds, and souls of the parfit knights of his Caucasian Round Table.

Indeed, since he is wrapped up in his theory that European civilization is uniquely Catholic, he seems ready to write off the rest of the world—at least those parts with “great cultural protagonists”, as he termed them, such as East Asia and South Asia--as spheres that are innately Buddhist , Muslim, or Hindu.

It will be interesting to see how the Roman Catholic Church fares in China under Benedict’s reign.

Comments:

Some commenters on Peking Duck made the point that it’s understandable that the Pope should have the right to speak his mind. And if he believes that Buddhists are (doctrinal) jerk-offs, well, free speech doesn’t stop at the Inquisitor’s door.

A few thoughts.

The Pope believes his is the one true faith, qualitatively different from all others.

That’s his right, even his duty. It’s the cornerstone of his faith.

He can also trash other religions, not only as inferior in doctrine and rigor but also false paths to salvation.

No problem.

But he’s also the head of a religion that claims not only to profess the true Word of God, but also to serve as God’s instrument on earth, and provide the means of human salvation that is not only unique but universal (“Catholic).

It’s a test of his leadership—and God-given duties as Pope—to put points on the board for the Catholic Church worldwide, and not just in the European homeland.

Pope John Paul II, who shared many of Cardinal Ratzinger’s views including, presumably, revulsion at Buddhism, understood that his job was to condone inter-faith dialogue so that the Catholic Church could claim to encompass the good points of other religions and at the same time assert its superiority in the critical matters of revealed truth and salvation.

Benedict XVI, on the other hand, appears to have made the dubious decision that other religions have to be discredited en toto so that Catholicism is the last faith standing.

It’s an understandable position for an Inquisitor to take.

It’s the necessary stand for the leader of an embattled sect, which is how Pope Benedict sometimes appears to regard himself.

But it is not a viable position for the leader of a global church that considers itself not only unique in truth but infinite in its understanding and universal in its scope.

Tearing every other religion (and for good measure, secular humanism) to their foundations so that the deluded turn to the true faith would be a tough job even if the Savior appeared in person to do the job. For fallible men and a fragile church to attempt it by themselves is simply beyond their capacity.

So instead of engaging in a multi-millennial argument with Islam, Buddhism, and every other religion that won’t be decided until the true God shows up to settle accounts, I think the interests of the Catholic Church and the world would be better served if Pope Benedict decided his faith could be most effectively protected and propagated by looking for good in the hearts of Buddhists, Muslims -- instead of making remarks easily construed as deriding them and their religions.

Labels: Brazil, Buddhism, masturbation, Pope Benedict

As sharp-eyed reader David pointed out, the owners of Banco Delta Asia group are petitioning the Treasury Department to rescind its final rule against BDA.

In a China Matters exclusive, I’ve obtained and posted the files for Delta Asia Group’s petition and the personal statement of DAG’s largest shareholder, Stanley Au.

Au’s petition, in particular, provides some interesting detail on BDA’s operations, describing it as a small bank with 8 branches and 150 employees, handling deposits for 40,000 local account holders (about 10% of Macau’s population).

According to Au, BDA’s business with North Korea developed out of a relationship with Pyongyang’s Daesong Bank and the Foreign Trade Bank of DPRK, and grew to include handling North Korea’s bullion sales—a business that Midland Bank apparently gave up on because the margins were so low. He states that business with North Korea and North Korea-related entities accounted for about 7% of the bank’s total revenues in 2005.

Concerning the notorious allegations that North Korea was using BDA to inject counterfeit currency into the world financial system, Au declares under penalty of perjury that BDA received counterfeit currency from North Korea on one occasion—in 1994.

Au further states that BDA closed accounts for two of the three depositors (believing that the third had unwittingly deposited the funny money), reported the matter to the Macau police, and...

“After the Bank reported this incident to the Macau police, I was contacted by agents of the United States government...they asked a number of questions about the circumstances under which the counterfeit notes came into the Bank’s possession. I cordially answered the questions and asked if their preference was that we should desist from doing business with North Korean entities. They said that they would like us to continue to deal with them, as it was better that we conducted this business rather than another financial entity that might not be so cooperative with the United States."

Unfortunately, Au doesn’t recall the names of the agents he dealt with.

However, he did state that since 1994, “the Bank made the policy decision to send all large value deposits of US dollar bills from North Korean sources to the Hong Kong branch of Republic (which became HSBC) to certify authenticity using its advanced technology. "

Unless the Treasury Department can introduce evidence of significant counterfeit dollar activity handled by BDA since 1994, Au’s statement should cause serious heartburn for the hardline crowd.

The background of the petitions is this:

The final rule against Banco Delta Asia isn’t a law; it’s a rule by a regulatory agency.

Because it’s not a law, there is no evidentiary/due process/transparency hocus-pocus.

The whole process is conducted secretly and unilaterally, which is pretty much the way the government likes it, I’m sure.

Beefs about rules are handled under the Administrative Procedures Act, which was enacted in 1946 to address concerns about the broad range of regulatory, quasi-legal powers wielded by agencies of the executive branch starting with FDR’s New Deal.

Interested parties may petition the relevant agency, in this case the Treasury Department, to review its ruling. Upon receipt of the petition, the Treasury Department can decide to reverse its rule or reject the petition; there’s no requirement to have any kind of hearing, rebut arguments, etc.

If the interested party is dissatisfied with the outcome, it can sue—in this case in district court.

However, the only basis for allowing a lawsuit to proceed is if Treasury abused its regulatory powers, in legal speak if Treasury acted arbitrarily and capriciously, abused its discretion, or otherwise acted not in accordance with the law.

BDA has already filed its petition.

Stanley Au is an “interested party” not just because he’s the majority stockholder in Delta Asia Group, the holding company that owns BDA.

He’s an interested party because the Treasury Department declared that his continued ownership of the bank is the sole reason why the Treasury Department can’t rest easy and accept the improvements that BDA, the government management committee running the bank, the Macau Monetary Authority, and the government of the Macau SAR undertook to improve bank management, tighten financial controls, and pass anti-money laundering and anti-terrorism laws during the 18 months of the Treasury’s investigation of BDA.

As Treasury put it in the final rule:

Despite any remedial measures and regulatory changes, this historical pattern of disregard by the bank’s management and primary shareholder regarding both the systemic due diligence failures at the bank and the potential use of the bank for illicit purposes, and the resultant likelihood of recidivism...leave us concerned about the potential for the bank to be continued to be used for money laundering and other illicit purposes. [emphasis added—ed.]

Since the 2005-era managers of the bank are long gone and not coming back, that leaves Stanley Au as the only reason why BDA can’t be trusted to be a clean bank.

Obviously, Treasury doesn’t like Stanley Au.

But maybe that’s not a good enough reason to cut his bank off from the U.S. financial system.

Treasury has not taken the step of calling a Stanley Au a criminal banker.

Treasury chose not to classify BDA as a money-laundering bank e.g. a bank that as a matter of conscious policy conducts money-laundering on behalf of illicit actors.

BDA was sanctioned as a bank “of primary money laundering concerns”, one with weak financial controls, instead. The whole point of that designation is to get the bank and the local authorities to tighten controls, which they did.

So Treasury is now trying to use a bait and switch approach, threatening sanctions meant to effect a tightening of financial controls, then, after the controls are tightened, saying that was not enough because the real issue is suspicion of undesirable intent by the bank’s owner.

The interesting (and for Treasury, rather awkward) question of why the Macau Monetary Authority should be judged incapable of preventing recidivism by its most famous or notorious corporate citizen—implying that the real problem is with the Macau government—is begged by the muddled Treasury rule, but never addressed.

Furthermore, how enticing are the temptations of recidivism to Stanley Au?

I don’t think that impartial observers would believe that the potential profits from future illicit North Korean transactions are so great that Au would take the colossal risk of pursuing them while under the scrutiny of new management, a new board, the Macau and Hong Kong monetary authorities, and the U.S. Treasury Department.

In the conclusion of his statement, Au does a convincing job of pointing out that “recidivism” on his part would be little more than professional suicide:

"Successful resolution of the concerns raised by the U.S. government, which have been publicized around the world, has been a matter of greatest importance both to the Bank and to the Government of Macau...I understood that it was of paramount importance, for my own sake, for the Bank’s sake, and for the Government’s sake to make every effort to fully implement commitments made by my Government’s representatives in my bank’s name, while under the scrutiny of the U.S. authorities and the international media. To have done otherwise would have been unthinkable."


The alternate view—one that is probably shared by Stanley Au, the Macau Monetary Authority, China, the UN as it interpreted its sanctions against North Korea’s nuclear, missile, and proliferation networks, and, I suspect a large percentage of the world’s nations—is that legitimate North Korean financial activity does exist, BDA had a right to solicit North Korean accounts and handle North Korean transactions, and Stanley Au should be allowed to run his bank as long as he conforms to the laws of his jurisdiction--and not be used as a political football in Washington's dealings with Pyongyang.

The Delta Asia Group petition observes:

But BDA’s owners and former managers had no reason to know, prior to FinCEN’s September 2005 finding, that the United States now held the view that bank dealings with North Korea must be entirely avoided. Whether for geopolitical reasons or otherwise, the U.S. government chose not to avail itself of any of the formal mechanisms available to it to put banks on notice of this apparent change of policy...Instead it “announced” this new position by singling out for sanction one small Macau bank, apparently hoping to achieve by in terrorem effects what it did not wish to impose by straightforward regulation.


In terms of attempts to get the rule rescinded, the allegation with the most damaging potential is that the Treasury Department never raised its fears of recidivism during its investigation and rule-making process in order to give Au a chance to give a satisfactory response—it announced these concerns for the first time in its final rule and, what's more, made them the central justification for imposing the most onerous "Special Measure Five".

If BDA decides to try to overturn the rule with a lawsuit, this appearance of “arbitrary and capricious action” by the Treasury Department may persuade the judge to let the legal system open the whole North Korean policy/Patriot Act 311 can of worms to determine if evidence or diplomatic strategy drove Treasury’s seemingly flawed, self-contradictory rule on BDA.

If so, damning statements like this one from David Asher, the self-styled architect of Washington’s North Korea initiatives, may persuade a US judge that the burden of proof is on the Treasury Department to substantiate its allegations against BDA in open court—or abandon them:

The Illicit Activities Initiative prominently involved the use of several—the development of the—conceptualization of the use of several of the tools you’re discussing today including USA Patriot Act Section 311. We worked hand in glove with the Treasury Department to apply and plan to apply against North Korea, and after a time of deep research we came to conclude that one of the best spots was in Macau against Banco Delta Asia."

...

“Banco Delta was a symbolic target. We were trying to kill the chicken to scare the monkeys. And the monkeys were big Chinese banks doing business in North Korea...and we’re not talking about tens of millions, we’re talking hundreds of millions.”

Labels: BDA, North Korea, Patriot Act Section 311, Stanley Au, Treasury

Commenter David provides the link to a news report indicating that he was right and I was wrong in predicting whether or not a US bank would receive the BDA funds. Congrats Dave, and thanks.

Looks like Washington blinked again and Pyongyang’s “dirty” money is headed for a US bank, rather than to South Korea.

Since it comes from the Washington Times, I guess we can assume the report reflects bleak hardliner despair rather than frothy realist optimism:

The Bush administration has found a U.S. bank willing to accept $25 million in North Korean funds, and officials hope the transfer -- the final hurdle to the closure of the North's main nuclear reactor -- can take place in the next few days, The Washington Times has learned.

...

U.S. officials did not identify the American bank, although they suggested that it is not one of the bigger and more recognizable institutions.

...

"This time, I think we really do have something," [Christopher Hill] said.

As to why it happened:

The highly unusual decision to let North Korean money labeled by the Treasury as "dirty" be deposited in a U.S. bank -- entailing full access to the international financial system -- was made by Secretary of State Condoleezza Rice and Treasury Secretary Henry M. Paulson Jr., officials said.

...

Mr. Paulson is said to have agreed with Miss Rice because he does not want to risk his good relations with Chinese officials.

All in all, a good, credible article courtesy of Nicholas Kralev. From the Washington Times. Who’da thunk it?

Along the way, it indirectly acknowledges China’s central role in advancing the agreement.

There was, however, a paragraph in the report that indicates that there will continue to be a role for blogs that can remember past last week and have the sense to parse administration spin.

The State Department used the issue as leverage to force North Korea to return to the six-party talks late last year after an 18-month boycott.

Gee, I guess that ATOMIC BOMB in Kim Jung Il’s pocket didn’t have anything to do with restarting the talks.

Or that UN resolution.

Or China’s decision to withdraw its diplomatic protection from Kim Jung Il.

And of course, North Korea left the Six Party talks in late 2005 in response to the BDA action, which one might consider the exact opposite of “rejoining” them.

But all in all, some substantive, positive news on the issue is cause for celebration

Labels: BDA, North Korea, Treasury

I once read a review of the glacial, demanding pace of Robert Bresson’s French films about misery, moral cowardice, and redemption, which described watching them as “taking a whipping when you can see every blow coming”.

That’s how I’m starting to feel about the BDA saga.

Covering it is an exercise in masochism.

I’m sure I’m not alone in this feeling.

Now, to today’s news, starting with an unsubstantiated and apparently incorrect rumor demonstrating that crappy reporting on BDA is not a Western monopoly:

The Macao-based newspaper Aomen Ribao reported Thursday that BDA dispatched a $13 million tranche to several banks in Russia and Italy, and that the transfer would take two to three days. However, the paper did not name any of the foreign banking organizations supposedly participating in the transaction, nor did it specify where the remaining $12 million would go.

A Russian deputy foreign minister was also unable to confirm that the North Korean funds were being transferred to Russia and Italy after being unfrozen by Washington.

"I do not know how reliable that information is," Alexander Losyukov said.

Not very reliable, as a subsequent report, Russian and Italian Banks refuse North Korean Money indicates.

Later on, the Aomen Ribao a.k.a. Macao Daily, retreated and offered a rehash of reporting from AP, the Washington Post, et. al. concerning the bewildering question of What’s Goin’ On? but also offering the interesting nugget I hadn’t seemed elsewhere that SecDef Gates apparently just wants to get this thing over with.

The South Korean media weighs in with a more mainstream version:

U.S. 'to Let American Bank Handle N.Korea's Money'

North Korea’s immediate banking troubles will likely be resolved this week, as chances are high that the U.S. will accept the North’s demand to transfer its assets in Macau to a third country via a U.S. bank. Diplomatic sources on Wednesday said the U.S. is inclined to allow a U.S. bank to play an intermediary role in transferring the recently unfrozen US$25 million. Quoting a U.S. official, AP reported the U.S. Treasury was expected to make a decision by as early as Thursday. The official told the news agency, “The North Koreans want to use an American bank because they think the transaction would help secure their continued access to the global financial system.”

The matter has been delayed because no international bank wanted to touch the money after the Treasury identified some of it as coming from illicit activities.

In Sean McCormack’s press briefing at the State Department, he certainly didn’t rule out the involvement of a US bank.

QUESTION: Thanks. North Korea insisted to have the North Korea funding in BDA be transferred to an American banking institution. Is it agreeable to the United States?

MR. MCCORMACK: They're still working with their bankers and if there's any requirement for an opinion from the Treasury Department as to whether or not this is a transaction that the financial institutions involved would feel comfortable doing, then the Treasury Department will take a look at that and see what it is that they can do.

You can speak to my colleagues over at Treasury as to whether or not they're looking at that or working on anything.

The Treasury Department ain't sayin' nuttin':

But Molly Millerwise, Treasury's spokesperson, denied the report."The U.S. Treasury Department is not aware of any such request from North Korea to use a U.S. bank to transfer funds," she said in an e-mail to Yonhap.

It looks like the South Koreans—who looked like they were going to step up, albeit grudgingly and handle the transaction through their ExIm bank to get the ball rolling—decided to get uninvolved:

Per Yonhap:

Press reports over the weekend said a South Korean bank may serve as an intermediary in delivering US$25 million from Macau to a third country. Some said North Korea initially asked a New York bank to play that role but that was rejected by the U.S.A State Department official, speaking on condition of anonymity, did not flatly reject either of the possibilities.

He said the use of a South Korean bank "could well end up being a solution," but added "at this point, I wouldn't focus too heavily on it." Asked if a New York bank remains an option, he only said there were a "lot of different options people are looking at."

Maybe Seoul developed qualms because the Treasury Department wasn’t prepared to give an unambiguous assurance to a foreign bank that their credit rating wouldn’t get dinged by handling BDA funds.

Maybe only a US bank can receive an ironclad legal waiver from Treasury that completely sanitizes the BDA remittances and lets them vanish into the world financial system.

According to the Russians:

Russian Deputy Foreign Minister Alexander Losyukov, head of the Russian negotiating team at the six-party negotiations with North Korea, said in Beijing that there would be no problem transferring the money if the U.S. guaranteed in writing that no consequences would befall the bank accepting the funds.

Maybe this is just North Korean brinksmanship, trying to squeeze additional concessions out of the United States that it can spin as a return to the international financial system.

But it looks like the problems are genuine.

At least, no banks have stepped up (including any in Japan, which hates the agreement and would love to call a North Korean bluff) and said, Hey, you crazy North Koreans! I’ll take your dirty money!

This is getting pretty tiresome and it seems that somebody should step in and instruct the Treasury Department to stop noodging on this deal.

Am I the only one who’s wondering why our Commander in Chief a.k.a. the Decider a.k.a. the Commander Guy can’t issue an Executive Order instructing the Treasury Department to knock off the BDA funds vendetta so the Six Party show can get on the road?

After all, Patriot Act Section 311 sanctions require a finding that they won’t harm the international financial system.

Surely the boredom and exasperation surrounding this ridiculous transaction rates as sufficiently harmful to pull the plug on the BDA final rule, in part if not in entirety.

More on the China Pet Food Additives Scandal

It’s refreshing that the New York Times is doing some crackerjack investigative reporting.

It’s rather unique that the reporting concerns a scandal in China, rather than America: China’s role as a serial contaminator of feed additives.

And it’s ironic that it’s a story that the Chinese government is probably less than eager to see covered by any media outlet, let alone America’s most authoritative news outlet, the New York Times.

Today’s entry from the Times’ David Barboza, Another Chemical Emerges in Pet Food Case, concerns the possible presence of a second contaminate, cyanuric acid in Chinese feed ingredients.

Barboza reports that cyanuric acid, like melamine, was added to feed ingredients to inexpensively increase their perceived protein content (for more on how protein is measured, see this post).

Scientists are speculating that melamine and cyanuric acid, presumed harmless by themselves, may have combined fatally to damage the kidneys of the pets that consumed food laced with the additives.

China Matters’ humble contribution to this story is the information that a compound of melamine and cyanuric acid, melamine cyanurate or MCA (氰尿酸三聚氰胺), is used in the Chinese plastics industry as an anti-oxidant and flame retardant.

Its primary use seems to be in the production of Nylon 6 and Nylon 66, the two polymers used to manufacture nylon tire cord, the material that adds strength to the carcass of the rubber tire.

Shandong province, where the laced material (not even crappy wheat gluten but, according to Barboza, ordinary wheat flour juiced with additives to make it test like higher quality and more expensive gluten--that's a cheap, nasty trick) was probably produced is, for reasons that escape me, big in tire factories.

And it’s also big in production of MCA. MCA is an inorganic compound apparently produced by facilities involved in China’s coastal salt chemical industry, which has many facilities stretching along the shallow coastal plain from Jiangsu to Shandong to Tianjin.

On a list of MCA producers and suppliers that is probably by no means comprehensive over one third of the enterprises are in Shandong or immediately adjacent.

FYI.

Labels: cyanuric acid, melamine, pet food

When China Matters got named in that “5 blogs that make me think” thingee, I didn’t do anything, mainly because the China blogs I read were all taken already.

However, I do have a list of non-Chinese blogs that make me think, mainly because they provide an inside look on places and people that I know very little about.

One of them is Sepia Mutiny, a blog for the Indian expat community.

It offers a vision of what a great group blog by Chinese writers and accessible to Western readers would look like—if the Chinese writers were Anglophone, informed, thoughtful, and good natured and not embroiled in the Taiwan vs. PRC, Communism vs. democracy, US vs. China, patriotism vs. human rights, spy vs. spy, troll vs. troll censored, monitored, and paranoid state of incipient flamewar that seems to hang over the China blogosphere like a dark cloud sometimes.

As an example of what I mean, look at the 100+ impassioned but reasoned and reasonably collegial comments taking on the incendiary issue, (I’m paraphrasing here) Was Gandhi an anti-semite...or just a dope?

I’m taking this opportunity to add Sepia Mutiny to my blogroll...

...and link to a eye-popping post about an incident on American Airlines where a vigilante passenger walked up behind a distinguished architect, Seth Stein, put him in a headlock, and rifled his belongings because Stein fitted his personal profile of a terrorist: he was brown (actually rich-guy tanned, not Arab-guy swarthy), had used the bathroom, and was carrying an iPod.

Reactions of other passengers and the airline add up to a feel-good story about how individual human decency flourishes even in an atmosphere of government-fostered paranoia—not!

Read the whole thing, Flying While Brown, even Jewish at Sepia Mutiny.

Labels: India, Sepia Mutiny

...after this morning’s post, here’s confirmation that Seoul is impatient to cut the Gordian knot and resolve the BDA funds issue so it can get on with the business of rapprochement.

Yes, it looks like South Korean expressions of frustration with the US strategy of ostracizing North Korea are becoming ever more explicit.

First, the leak:

A senior South Korean government official on Monday admitted that Seoul is reviewing the option of letting the state-run Export-Import Bank handle North Korea’s funds in a Macau bank.

...

[An unnamed “senior South Korean government official”, maybe the guy who handles the Unification portfolio—ed] hinted the government is prepared to take the flak if the EXIM Bank’s credit rating suffers from handling what the U.S. Treasury says is money from North Korea’s illicit activities. “What’s wrong with considering anything we can do? We can’t sit by and just watch (U.S.-North Korea negotiations) without taking any steps of our own,” he said.

Then the pissy editorial:

All banks around the world must go through a depository bank in New York when it comes to dollar transfers. And the U.S. Treasury Department regulates this process. If that’s the case, then it would only be proper for the U.S. government to handle the matter transparently through an American bank, rather than trying to dump that responsibility on an unwilling country and an unwilling bank.

And finally the news, with some more interesting detail about a meeting attended by just about every key South Korean government official, sending a public message that Seoul doesn’t want to see the BDA farce go on a moment longer:

Thursday’s meeting discussed enabling North Korea to open an account with an overseas branch of EXIM so it can withdraw its funds from BDA and move them to an Italian or Russian bank via the bank. A senior security source said the government proposed the measure since North Korea insists on having the money transferred rather than withdrawing it in cash. According to the source, the U.S. has agreed to Seoul’s suggestion and promised not to take issue with the bank over what would by Washington’s own earlier determination amount to abetting money-laundering.

According to a diplomatic source, North Korea is nearly done combining the money from its 52 accounts in BDA into a single one ready for transfer. The epic issue hit the latest snag when, after the U.S. gave the green light to unfreezing the funds, no bank in the world proved willing to receive the funds. That problem would be resolved if EXIM plays the intermediary role. The U.S. has already reassured countries concerned that the transfer will be an exception from its blanket ban on transactions with BDA. [emphasis added]

So it looks like the United States has finally capitulated 100% and issued the waiver on accepting BDA money that, as I wrote on April 8, Daniel Glaser should have granted during the ten days he spent in Beijing in late March--early April accomplishing, apparently, nothing.

This involves more than seven weeks and counting of wasted time (from March 14, the date that the BDA matter was supposed to be "resolved").

The belated concession makes us look foolish. More disturbingly, it makes our diplomacy look at best unreliable and at worst duplicitous.

Labels: BDA, Daniel Glaser, North Korea, Treasury

... more plausible, anyway, than North Korea’s reported demand that the BDA money be remitted to a new North Korean account in a New York bank...

From the May 7 Washington Post:

Under South Korea's plan, the Export-Import Bank of Korea will act as an intermediary between BDA and a North Korean bank account at a third country, a high-ranking national security source was quoted as saying by the Chosun Ilbo newspaper.

"The United States has agreed to the government's plan, and I understand it has conveyed the position that it won't raise issues if the Export-Import Bank of Korea mediates the transfer of BDA funds," the source was quoted as saying.

Nothing in the WaPo article about the interesting element that South Korea is once again undercutting the U.S.-led campaign to isolate Pyongyang financially...

But if you’re paying attention, in early April South Korean Red Cross officials boarded a freighter to deliver $400,000 in cash to North Korea.

And USA Today reported on May 5:

South Korea has agreed to send 500 tons of polyester fiber to North Korea next month as an initial shipment of promised goods in exchange for rights to develop mineral resources in the North, officials said.

Is this some old agreement or a new initiative? A little bit of both. According to the article, last year South Korea promised to provide $80 million worth of raw materials for the North Koreans to produce clothes, shoes, and soap.

In the first shipment of the promised raw materials, South Korea will send the fiber in June, the country's Unification Ministry said in a statement issued late Friday after three days of talks with the North.

In any case, the South Koreans displayed no qualms about executing a barter deal that makes a mockery of US attempts to strangle Pyongyang by cutting it off from the international financial system.

I think we can toss Western coverage of South Korean opposition to U.S.-led financial and economic sanctions, Seoul’s concrete efforts to circumvent them, and how this figures in the State Department’s diplomatic calculus, in the “underreported” file...

...underreported, that is, except by Onefreekorea, which fulminates against South Korean appeasement and Chamberlains in the State Department, and labors to spook Seoul with the threat that U.S. bases in South Korea may not be long for this world:

Conservatives watched the ascendancy of the Korean left, its inexhaustible apetite for appeasing North Korea, its general diplomatic incompetence, and its delusional fulminations of America-hate that reached the highest levels of its government. They watched the Korean right fall silent, barely admitting to its support for America or pointing out the benefits that the alliance brings (it stands for nothing and is paying the political price). Overall, South Koreans are as anti-American as many Muslim populations. American conservatives have come to resent this deeply, and on a more detached level, have come to realize that the two countries no longer share enough common goals, interests, or values to support a military commitment as large, expensive, and risky as USFK...

... Conservatives won’t repeat the mistake of leaving men like Chris Hill, Nicholas Burns, George Tenet, and Jack Pritchard with the run of their camp to sabotage them again. Plenty of liberals may be sympathetic to South Korea’s instinct to appease, but they won’t expend political capital to keep more of our troops posted in Korea.

Well, then.

Judging from Onefreekorea’s tone, it looks like the party’s over, at least for the time being, for hardliners on North Korea policy.

It’s another indication that the BDA money will make it to North Korea at long last and the Six Party process will limp forward, with efforts to harass, pressure, and destabilize Pyongyang subordinate to engagement, instead of the other way around.

Labels: BDA, North Korea

According to Reuters Tokyo:

- North Korea has demanded the United States allow it to open an account at a bank in New York and its funds at a Macau bank be transferred there, a Japanese daily reported in Sunday.

Quoting an unspecified source in Washington linked to relations between the United States and North Korea, the Mainichi newspaper said the United States had rejected Pyongyang's demand.

...

"The United States hurt the credibility of North Korea by imposing financial sanctions. The United States must correct this," the source quoted an unnamed North Korean official as saying, according to the Japanese daily.

"We can prove to the international community the funds are clean by transferring them to a bank in the United States."

North Korea was believed to have made the demands when the Bush administration's top Korea expert, Victor Cha, contacted North Korean representatives at the United Nations on April 24, the Mainichi newspaper said.

A couple things here:

First, this looks like an indirect confirmation that the U.S. did back down on its protracted efforts to tie up the North Korean funds in BDA, and agreed to some kind of lump-sum repatriation.

The North Koreans are, as a result, emboldened to take the provocative step of demanding that the lump-sum remittance be made to a bank in the United States.

Second, I can’t imagine that the US will acquiesce to this humiliating demand, since it has spent almost two months insisting that these funds were too dirty for any bank in the world to accept—let alone a US bank.

Also, beyond the amusing spectacle of the Treasury Department sullenly allowing the Norks to open an account in New York, it’s a little premature for the US to openly welcome North Korea back into the world financial community. That’s a concession that should be part of a general strategic rapprochement between Washington and Pyongyang.

President Bush is no friend of the Pyongyang regime, so this episode of overreach by the North Koreans might arouse his deep resentment and poison the well for a broader engagement between the two countries.

Perhaps the North Koreans feel that the possibilities of a “Nixon Goes to China” moment for Kim and Bush is so remote that their iron-assed diplomats will concentrate on wringing as many concessions as they can from the current BDA imbroglio, even if it means antagonizing President Bush.

Maybe the BDA affair will just drag on and on, reflecting the fundamental stalemate in US-North Korean relations.

That’s a dismal, dreary prospect, even for this writer, who has made a specialty of blogging the BDA matter into the ground.

Maybe that’s why Victor Cha decided to go back to Georgetown.

Labels: BDA, North Korea, Victor Cha

From the May 3 Financial Times:

A senior US official said Pyongyang had encountered several problems in consolidating all its accounts at BDA. In addition to not realising how many accounts it held at the bank, the official said North Korea appeared to be having difficulty getting the necessary signatures to release the funds.

Once Pyongyang had consolidated its accounts, officials said it could withdraw the money from BDA. South Korean and US officials confirmed that North Korea wanted to transfer the money to Italian and Russian bank accounts. (Demetri Sevastopulo in Washington and Anna Fifield in Seoul, N Korea still to recover frozen $25m, Financial Times, May 3, 2007)

So it looks like the lump sum approach is going ahead, no doubt to the chagrin of Bush administration hardliners who hoped to force North Korean account holders to present themselves (if they could or dared) to withdraw their funds in person with a suitcase.

And I’m not surprised that North Korea is “having difficulty getting the necessary signatures to release the funds”.

Especially since one of the signatures they will presumably need is Colin McAskill’s, since his group purchased the Daedong Credit Bank. About $8 million in Daedong’s accounts were frozen when Treasury announced its Patriot Act Section 311 action.

Pushing for a logical resolution to the BDA mess, McAskill had wanted the legitimacy of his accounts confirmed, and acknowledgement that he could move the money without restriction or fear of potential sanctions for whatever bank handled the funds.

From the April 15 International Herald Tribune:

Colin McAskill, a British businessman who represents Daedong Credit Bank in negotiations over its frozen funds, said he would insist on using legitimate banking channels to shift money from the newly freed account. "I am not going to stand in a queue behind other North Koreans with a suitcase and try to move it," McAskill said. "We will move it through the banking system."

Good luck with that, Colin.

The point at issue here seems to be that the United States does not want the BDA settlement to signal a breakdown in U.S. efforts to impose an international financial embargo on North Korea.

Reviewing what the international community had agreed to do concerning North Korea, I reviewed UN Resolution 1718, which sanctioned North Korea’s WMD and proliferation-related activities.

In the process, I came across a classic piece of Boltonianism:

The resolution also provides for a regime of inspections to ensure compliance with its provisions, building on the existing work of the Proliferation Security Initiative.


One thing that jumps out is Bolton’s reference to “building on the existing work of the Proliferation Security Initiative”.

In fact, the UN has repeatedly refused to endorse the PSI, the US-led security operation that could be construed as giving Washington and its allies license to conduct unilateral interdiction activities with UN approval.

Bolton, as I’ve written before with enormous corroborating detail, had been indefatigable in asserting UN support for the PSI when no such support existed, a point that mush-minded supporters of PSI—who apparently misconstrue the PSI as a piece of muscular multi-lateral dogooderism—have stubbornly refused to grasp.

Second entry in the John Bolton “I said it loudly and confidently so you must believe it is true” pantheon is:

This resolution also targets other illicit activities of the regime in Pyongyang, and includes a ban on trade in luxury goods. It targets the way Kim Jong Il finances his weapons of mass destruction programs through criminal activities like money laundering, counterfeiting, and selling of narcotics. It imposes a binding requirement on all member states to take action against those activities and freeze the assets of entities and individuals of the DPRK involved.

Actual references in UNSC Resolution 1718 to targeting Kim Jong Il’s criminal activities as part of the anti-WMD sanctions action:

Zero

Nada

Bupkus

Nothing there about moneylaundering, Supernotes, meth, phony cigarettes, or counterfeit Viagra.

For those of us who care, there are about 200 pages of UN-approved documents here describing the nuclear, ballistic missile, and WMD-related trade with North Korea that the international community had agreed to embargo.

The "illicit activities" enjoined by the UN relate to trade in these particular embargoed items.

UNSCR 1718, that celebrated expression of international unanimity was, of course, not enough for John Bolton.

Just as he did with the PSI statement, Bolton took the back door (or “signing statement” approach), declaring a unilateral interpretation that added new elements to an agreement that has already been negotiated and signed.

Here, his purpose was to establish a spurious link between the UN resolution—designed specifically to sanction North Korea’s WMD efforts—to US efforts to ostracize the North Korean government and economy as a whole from the international financial system.

For the United States, the necessary conceptual link—as David Asher, one of the primary architects of Washington’s anti-Pyongyang effort, defined it —was to regard the North Korean government as an essentially criminal enterprise.

Therefore, any and all international financial activities could be construed as buttressing the essential criminal activities of the North Korean “Soprano state”, including its signature racket—acquisition of a nuclear capability.

This conception certainly made dealing with North Korea easier for the heavy thinkers in the Bush administration—there was no North Korean activity that was licit and unrelated to WMDs, so we could go after everything.

However, it was not an idea that was embodied in the UN resolution, nor was it one that the world at large had endorsed.

Now, the United States has gone overboard in imposing the North Korean financial sanctions.

It is not only trying to force the international community to participate in a unilateral sanctions regime that goes beyond the wording and intent of the UN resolution.

It is attempting to maintain that regime even when it conflicts with the agreements made by its own State Department to denuclearize North Korea under the Six Party Agreement.

It’s come to a point where I think that many countries are getting sick of the US preoccupation with the $25 million in BDA.

More dangerously, it threatens to discredit the pretensions of the Patriot Act Section 311 regime to legitimacy and effectiveness in the eyes of the international community—in fact, making it look like another piece of dangerous, stubbornly and incompetently executed idiocy by the Bush administration--just as we wish to use it as the vehicle for our anti-Iran diplomacy.

Labels: BDA, John Bolton, North Korea, Patriot Act Section 311

China Matters Goes Another Round on the Matter of the City Journal

In the comments to my previous post concerning the City Journal’s media blitz to the China/India blogosphere concerning Guy Sorman’s The Empire of Lies, Billz1981 quoted from a 2001 article in The Nation:

"...let's accept for the sake of discussion that the right-wing foundations are outgunned in dollar terms. Why, then, are we living in a policy landscape determined by their ideas?. . . Maybe it's because the conservative foundations have spent their somewhat more limited funds--the Manhattan Institute, for all its influence, gets by on ... the equivalent of pocket change for any of the larger, more progressive foundations--quite strategically..." Gara LaMarche, The Nation, April 19, 2001

I am assuming that Billz1981 is employing the honeyed words of the left-friendly Nation to challenge my description of the Manhattan Institute (whose house organ the City Journal is) as “well-heeled” and “battening on the Koch-Olin-Scaife teat.”

If so, Billz1981, prepare to taste my steel.

I went back and read the article in question, Compassionate Aversionism.

If Billz1981’s intent was to advance the reputation of the Manhattan Institute with some selective quotation, in this case failure is the only outcome.

The full quote reads:

Maybe it's because the conservative foundations have spent their somewhat more limited funds--the Manhattan Institute, for all its influence, gets by on a budget of $6.2 million, the equivalent of pocket change for any of the larger, more progressive foundations--quite strategically, eschewing demonstration projects for well-promoted shibboleths about the evils of government like--well, like Heather Mac Donald's [the Manhattan Institute author whose book Gara Lamarche is critiquing—ed]. As Edwin Feulner, longtime president of the Heritage Foundation (a model for the Manhattan Institute), which provided the blueprint for the Reagan Administration in 1981, told the American Legislative Exchange Council late last year, "It is telling that much of the left's distress about our success is aggravated by the skills we've acquired in marketing ideas." Given the success of the right's agenda, the pervasive whine about its marginalization that Mac Donald typifies is particularly galling. She complains about the professional victimhood of welfare rights and minority advocates, but nobody plays the role better than Mac Donald.[emphasis added--ed.]

The point of the article is that the Manhattan Institute is not a grant-dispensing foundation dispensing funding and administering programs as the Ford Foundation and other “liberal” institutions do.

The Institute is an advocacy group purpose-built to discredit state-run social programs and attack government intervention in the market place.

Based on this narrow mission—that of a pro-business lobbying group seeking to shape public opinion—and the relatively low cost involved in producing, procuring, and recycling anti-liberal polemics, my description of the Manhattan Institute as “well-heeled” still stands.

The interesting larger issue is the one raised by Feulner of the Heritage Foundation in the quote above: the “marketing” of ideas.

There is apparently an inexhaustible demand for simple ideas, especially if they benefit rich and powerful groups who don’t want their advantages taxed, regulated, or scrutinized. And the most powerful and marketable idea for the Right has been that liberalism is not just harassing the rich—it’s destroying the world.

It’s a simple idea, one that can be quickly and inexpensively propagated. When there’s serious money involved—both for the lobbying groups and the individuals and enterprises who will benefit from the lobbying—it’s an idea that can take wing, at least on the editorial pages, 24-hour news networks, and blog networks.

The author of the Nation piece, by the way, is not particularly impressed with the “well-promoted shibboleths” that the Manhattan Institute propagates with its “strategically” allocated “pocket change”:

...in the parallel universe in which Mac Donald, Magnet and other City Journal writers dwell, government can't do a thing right. What's most striking about this, from authors who claim to celebrate old-fashioned virtues, is its fundamental dishonesty. It's hard to take seriously intellectuals who, in their ideological zeal to discredit government, ignore all contrary evidence...

Perhaps more accurate truth in packaging for the Manhattan Institute would be "The Gold-Plated Megaphone for Right-Wing Anecdotal Bullshibboleth", but I guess that's not the gateway to corporate and foundation funding.

The consolation for the Left, I suppose, is that the Bush administration has done such an effective job of driving the country into a ditch that the simple idea that the source of all our problems in the Right and solution for all our problems is stripping away its political power has gained a certain amount of traction.

But, to paraphrase Napoleon, God is on the side of the big balance sheets, so I expect that the Manhattan Institute and the City Journal will continue to find ready funding, clever advocates, and eager collaborators for their efforts.

In that context, I’d like to admit that I’ve finally figured out what those Blogger tags are for.

They’re used to help place the Google Ad-sense ads which appear at the top of the site that nobody apparently clicks on.

As soon as my post on City Journal went up, the banner filled with ads promoting the Wall Street Journal, conservative websites, and a passel of organizations offering services to non-profit foundations. Even, bless her, Ann Coulter chose to promote her e-mail service on my humble blog.

All this attention has turned my head.

Therefore, I am tagging this post with references to the City Journal, the Manhattan Institute, the Heritage Foundation, the Weekly Standard, the American Enterprise Institute, the Scaife Foundation, the Olin Foundation, and the Koch Foundation. And, of course, Ann.

I urge all my readers to click on the resultant banner ads at least a couple gazillion times to show you care about these admirable institutions and the wonderful corporations that choose to affiliate with them.

I'm not selling out. I'm buyin' in!

Labels: Ann Coulter, City Journal, Heritage Foundation, John M. Olin Foundation, Koch Family Foundations, Manhattan Institute, Scaife Foundation, Weekly Standard

Guy Sorman and City Journal Rock the China Blogosphere

I got an e-mail from Paul Beston, Associate Editor of the City Journal, directing my attention to an article about China in its current edition, Guy Sorman’s "The Empire of Lies."

Flattered, I sought out the article (note to City Journal: the link in the e-mail didn’t work. Get some interns working on that!).

I found that the City Journal is a publication of the Manhattan Institute, a well-heeled right wing think tank battening on the Koch-Olin-Scaife teat.

How well heeled? Wikipedia tells us:

The Manhattan Institute received $19,470,416 in grants from 1985-2005, from foundations such as the Koch Family Foundations, the John M. Olin Foundation, Inc., the Lynde and Harry Bradley Foundation, the Scaife Foundations, and the Smith Richardson Foundation. The Manhattan Institute does not disclose its corporate funding, but the Capital Research Center listed its contributors as Bristol-Myers Squibb, Exxon Mobil, Chase Manhattan, Cigna, Sprint, Reliant Energy, Lincoln Financial Group Foundation, and Merill Lynch.

It also has a reputation of serving as Rudolph Giuliani’s brain trust.

The Journal’s editor, Brian Anderson, proudly lists several articles extolling the virtues of Fox News (By steering right, Fox News speaks for ignored millions) on his resume. The masthead features endorsements by various people whom I, as a liberal, don’t particularly like, such as Peggy (“God sent the dolphins to save Elian”) Noonan.

I wasn’t particularly taken with the article. Although based on considerable first-hand reporting—and apparently mined from Sorman’s full length book, Year of the Rooster--I found it to be another entry into what I mentally file as the China: It’s Worse Than You Think! genre.

These cautionary tales are perhaps on one level a necessary antidote to the China Rising optimism, which hopes that, just because the Chinese are currently eating our lunch economically and geopolitically, something good is going to come out of it for the world.

But China’s post-Tian An Men run of success has been long enough that I think we have to take a serious look at the positives and negatives of a genuine Chinese post-Communist developmental and political model, and not just collate anecdotal evidence for Cassandra-esque warnings that China is a tottering tyranny rotting from the inside.

Having said that, we’re probably going to be hearing a lot from Mr. Sorman, especially if Sarkozy wins the French presidential election.

Mr. Sorman is a big deal in France, a conservative public intellectual, apostle of free markets, and much more sympathetic to India than to China.

Perhaps because his country hasn’t committed a colossal cock-up in the Arab world for about 40 years, he seems to still have a childlike faith in the power of capitalism and its little buddy democracy to miraculously transform human behavior and society at large.

Talking about how France is shaking off the mental and social chains of liberalism, Sorman wrote in the Wall Street Journal:

The immigrant population does not wait for the central government to find a solution for their economic problems. Leading of our rap singers with Arab or African origins , have become entrepreneurs in entertainment and fashion ; they openly advocate capitalism in their lyrics.

Hmmm. The Rap-Based Economy. Maybe “Le Bling...c’est moi!” I smell a book deal, or at least a WSJ op-ed.

With the elevation of a pro-American center-right Sarkozy regime in France, French diplomacy will probably be more in sync with whatever diplomatic intiatives the lame-duck Bush administration is able to muster up, and we can expect to look to Mr. Sorman to promote the shared agenda to us through the pages of the Wall Street Journal, the City Journal, and various sympathetic blogs.

The Wall Street Journal opinion page—the bellweather of hardcore conservatism—excerted the City Journal article, and also carried his musings on the French presidential elections this month.

The Manhattan Institute seems to have a strong Francophile (at least francophile-droit) tilt, making it a most suitable venue for introducing America to the new, conservative face of Old Europe.

The City Journal's editor, Brian Anderson, wrote a biography of one Raymond Aron, a French thinker very much in Sorman’s conservative vein.

And the Journal is apparently getting behind Sorman in a big way.

The City Journal's e-mail blast to the India and China blogs at large is an interesting indication that the Right, at the very least, is getting its act together to set the China/India agenda in the blogosphere.

Of course, I found the e-mail interesting for another reason.

Because I got one too.

My little blog, which ranks somewhere between plankton and whalesh*t in the lowest reaches of the China blog food chain, is residing in a right-wing database somewhere, together with ESWN, China Digital Times, China Confidential, the twenty-odd or so other China and India blogs that already linked to the article, and...

...who knows who else.

Did you get an e-mail from Paul Beston?

Labels: City Journal, Sorman

There’s been a flurry of rumor and activity on the BDA front, with indications that the fat lady, if not ready to sing, is at least clearing her throat.

Rumors are circulating that the $25 million in unfrozen but heretofore unremittable funds in Banco Delta Asia will be remitted to Russia...Italy...Singapore...Vietnam...and/or Mongolia.

I also read a rumor that a South Korea’s Asset Management Corporation (whose normal brief is buyouts/bailouts of busted South Korean enterprises) would take over BDA, with the assumption, I suppose, that the North Korean funds would be reborn on a higher, purer plane together with a reorganized and resurrected BDA.

There are rumors that the funds from the 52 accounts released separately according to account-holder.

The report I found most interesting (NHK via Phoenix TV), is that the funds will be remitted in a lump sum to the (North) Korean Foreign Trade Bank.

The element that interests me is not the proposition that the Norks are possibly getting their dirty money back.

What I find interesting is the idea of “lump sum”.

I’m sure Colin McAskill finds the idea interesting—and appalling—as well.

After all, McAskill bought a controlling interest in Daedong Credit Bank, which apparently had $8 million of rather licit funds frozen in BDA. He hoped his accounts would receive a clean bill of health and be returned directly to his bank. If the NHK report is true, he’ll just have to talk to Kim Jung Il about his money.

I found the “lump sum” report interesting and plausible because it dovetails with one of David Asher’s preoccupations.

David Asher is the hardliner, now at the Heritage Foundation, who claims to have conceived and designed the BDA Patriot Act Section 311 investigation as part of his operation at the U.S. State Department to financially isolate North Korea.

In his testimony before a House subcommittee on April 18 (which I blogged about here), Asher played up a particular consequence of the Patriot Act sanction against BDA and his much wider effort to ostracize North Korea from the international financial community.

Asher talked about how he had labored to get banks throughout the world to freeze accounts and transactions and refuse to remit moneys on behalf of North Korean account holders.

Asher demurely gloated concerning how discomfited the North Koreans would be to have to present themselves personally in order to claim their funds.

And that got me to thinking about America’s baffling obsession with tying up the North Korean money in BDA even after we had promised they could get it back—and we had a denuclearization deal hanging in the balance.

And it occurs to me that perhaps the U.S. Treasury Department was insisting to Macau and anybody else that received money from the North Korean accounts inside BDA would have to require that the account holders claim the money from the bank in person—thereby getting beyond the nominees, aliases, and shell companies to find out whose money it really was.

The big fish would be Kim Jung Il, who undoubtedly had some of his private coin tied up in BDA.

Perhaps the hardliners were looking forward to Dear Leader shuffling into BDA’s ornate headquarters to furtively empty his personal accounts...

...only to be told he couldn’t have the money until he came back with a certificate of permission from the U.S. Treasury Department and two forms of picture ID!

BWWWWWWWWAAAAAAAAAAHAHAHAHA!

Just kidding.

But I think the U.S. might have been hoping to score some points with the international financial community by zeroing in on what unsavory characters showed up to claim their funds—and how much money was left behind by miscreants unwilling or unable to show their faces.

Just a thought.

But, if the money is going back to North Korea in a lump sum, the glorious prospect of a serial perp walk through the doors of BDA by the North Korea’s shadowy elite will have to be abandoned.

I had also speculated that America’s campaign against Macau was to deny that territory to Kim Jung Il and his government and companies as a venue for foreign exchange transactions that were a priori illicit according to America’s reading of North Korea as a criminal state.

However, these same transactions would be considered licit—if not especially commendable—if North Korea was granted the benefit of the doubt as a legitimate sovereign state, as South Korea is apparently ready to do.

Significant elements of South Korea’s checkbook diplomacy with the North were conducted through Macau, most notably the colossal US $500 million payoff that paved the way for the 2000 North-South peace summit.

But if the United States was determined to deny the Koreas the use of Macau as a facilitator of checkbook diplomacy, it looks as though the South Koreans came up with a creative alternative: suitcase diplomacy.

From Joong Ang Daily via NKeconwatch:

South Korea hand-delivered $400,000 in cash to North Korea yesterday [April 7, 2007] for Pyongyang’s purchase of video communication equipment. The North will spend the money to buy computers and display screens to reunite families separated for more than a half century by the demilitarized zones through video conference calls.

Two South Korean Red Cross officials boarded a cargo ship in Incheon for Nampo of North Korea Thursday morning. They carried a suitcase containing 40 bundles of one hundred, $100-dollar bills. The ship arrived in North Korea yesterday morning.
...

“It is sad that the North Koreans do not have a proper bank account that we can wire money to,” a Roh administration official said. “It shows the unfortunate reality of North Korea as an outsider of the international community.” (Lee Young-jong and Ser Myo-ja, Cash delivered to North Korea for video reunions, Joong Ang Daily, April 7, 2007)

Maybe the world lost its appetite for vigilante financial justice American style and decided it wanted to let North Korea get the $25 million and give diplomacy a chance.

In order to see where the international united front against North Korea crumbled, it may not be necessary to look much further than South Korea.

Labels: BDA, North Korea, Six Party Agreement, Treasury