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.
Thursday, May 31, 2007
Friday, May 25, 2007
Ask and ye shall receive...
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
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
North Korea Funny Money Story Gets More Interesting
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.
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.
Thursday, May 24, 2007
A Fragile Friendship
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.
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.
Wednesday, May 23, 2007
I have in my hand a list of names...
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.
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.
Tuesday, May 22, 2007
China's Great Speedbump of Cash
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.
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.
The Moustachio'd One Phones It In
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.
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.
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