Friday, March 16, 2007

Twilight of the Boltonians: Treasury Works to Derail the North Korea Deal

In a comment on Arms Control Wonk in 2007 and in this post, I made the statement that the website Onefreekorea had apparently received an advance copy of a government ruling concerning Banco Delta Asia. I inferred this from my reading of the timestamp on the OFK post, which I believed indicated that the post had been put up the day before the ruling was officially announced and publicly available. OFK’s proprietor has advised me that he obtained the ruling through an electronic subscription to the Federal Register and did not receive it in advance. I regret the error, withdraw the statement, and apologize to OFK. I’ve also asked ACW to delete the comment. CH, June 1, 2008)

In a display of maximal middle finger truculence, the Treasury Department posted its final decision concerning Banco Delta Asia on the very last day, darnit! of the 30-day term promised by the United States during the Six Party negotiations.

In one way, the Treasury decision promotes the North Korean denuclearization process by closing the books on the BDA investigation and allowing the Macau government to distribute the deposits of the bank (which collapsed when the US investigation was announced) to North Korean and other depositors.

However, the true import of the Treasury decision was to force the closure of BDA as an outlaw bank doing outlaw business with an outlaw regime by declaring it was an unrepentant conduit for illicit North Korean actions and unfit to maintain correspondent relations with any banks operating in the US.

Since BDA is bust, the decision can be viewed as announcement that, in the eyes of some people at the Treasury Department at least, North Korea is still a financial pariah and other banks that are thinking of doing business with the North Koreans can expect the same treatment as BDA got.

You can imagine that the North Koreans are shooting angry glares at the Chinese, in effect saying, “You promised me that the US was going to ease up on sanctions. The sanctions on BDA are gone, but only because the bank is gone with them! And the way the decision’s written, no other bank is supposed to do business with us either!”

And the Chinese are shrugging and saying, Hang in there. Next time we’ll pay more attention to the fine print.

"We express deep regret at the US insistence on using US domestic law to apply a ruling to the Banco Delta Asia," Qin Gang, Chinese foreign ministry spokesman, told a news conference.

He said all steps should assist general progress in the six-party talks that produced the February accord, under which Kim Jong-il's regime agreed to shut down its main nuclear reactor by mid-April. "We hope the relevant parties can honour their commitments [to the February agreement]," Mr Qin said.

Are there politics involved? As in that whole realist vs. neocon thing? You bet!

Courtesy of Arms Control Wonk, the Nelson Report stated:

Still, observers in and out of State were shocked at the very firm declaration by Treasury that even though the Ernst & Young audits completed last October had apparently found nothing to confirm the various charges, as of yesterday, Treasury firmly stated that each and every one was proven beyond doubt.

Onefreekorea, a Washington-based lover of all things regime-change who spends quality time with John Bolton, had the complete text of the Treasury Department decision up on its website on March 13, the day before it was officially issued, indicating some concerted perception management is at work.

Onefreekorea is eager to claim evidence of dealbreaking perfidy and bad faith by the North Koreans, and promotes the canard that North Korea had no right to expect that the BDA issue be resolved in the initial stage of execution of the Six-Party Agreement (or hold up a meeting with El Baradei in Pyongyang because Treasury was still sitting on the ruling).

In an early March post, Onefreekorea quoted a report from Yomiuru Shinbun:

“The United States promised to resolve the problem of sanctions against our country within 30 days. If this promise is kept, then we will shut down our nuclear facilities in 60 days,” said Kim, the chief negotiator to the disarmament talks.

and commented:

That would suggest that it’s the North Koreans themselves who are either misunderstanding or reinterpreting.

He also argued:

...there’s no pretending that we can accomodate this North Korean demand [for lifting financial sanctions—ed], or that it’s consistent with what we’ve agreed.

What did we actually agree to do? The agreement is silent on any action by Treasury or on the lifting of sanctions or financial measures.

Again, one March 15, onefreekorea has another go:

The DPRK mentioned that they are waiting for the lifting of sanctions with regard to the Macau bank before they implement the part of the agreement allowing the agency to monitor and verify the shutdown of the Yongbyon facility,” ElBaradei told a news conference…. [Reuters, Chris Buckley] ...

Needless to say, the agreement does not make the lifting of sanctions a precondition to the shutdown of Yongbyon. This may well be our critical failure point.

Let’s put that one to rest, courtesy of the State Department transcript of Christopher Hill’s February 13 press conference in Beijing:

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 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.

There are important factors at work that make the resolution of the BDA issue less than perfect, but North Korean bad faith and misunderstanding are not among them.

The declaration by Treasury is of a piece with recent efforts by pro-Boltonian forces use their now limited organizational resources at hand to derail the North Korean deal.

As blogged previously, in January Jay Lefkowitz took note of his part-time obligations as Special Envoy for Human Rights to North Korea and accused North Korea of slave labor practices, and our Ambassador for UN Reform, Mark Wallace, was able to freeze UNDP aid to North Korea on the basis of allegations of financial mismanagement yet to be proved.

The Treasury action, like these two previous sallies, is proving to be a damp squib, eliciting a stern statement of disapproval from the Chinese, no response from the North Koreans and, as yet, no signal that the Six Party process has broken down.

These measures may not be useful in reversing US policy on North Korea, but they feed the Boltonians’ creation myth, a myth that it was U.S. intransigence and harassment—and not China’s regional power offices in the aftermath of the North Korean nuclear test—that pushed Pyongyang back to the negotiating table.

On the BDA issue, in particular, I’m skeptical of the extravagant claims that Treasury has made on behalf of their campaign to bring North Korea to its knees by gutting this small Macau bank. In fact, I think the Chinese forced our hand even on that matter by unilaterally unfreezing some accounts in BDA back in December.

Of course, incorrigible skeptic that I am, I am also willing to give credence to the detailed Frankfurter Allgemeine report asserting that the $100 supernotes that North Korea is reputedly running off to finance Kim Jung Il’s mad schemes are more likely blowback from some CIA-run off-the-books funding operation, than they are the fearsome economic poison of those master counterfeiters at Pyongyang’s Printing Plant No. 62.

The Allgemeine describes the Supernotes—which have been circulating since 1989 and have kept pace with 19 ever-more sophisticated redesigns of US currency, including 1/42,000 of an inch microprinting--as follows:

Even experts on currency printing have been unable, using visual inspection and touch-testing - the most important tests of authenticity for average citizens - to differentiate the counterfeit 100-Dollar-Notes from the genuine ones. With respect, investigators therefore baptized the forged notes as Supernotes.

Compare and contrast the Asia Sentinel’s description of its experiments in passing North Korean funny paper acquired in Dandong.

Pyongyang’s pitiful productions (the Allgemeine also notes that Pyongyang's only legit currency press is out of action due to a lack of spare parts and North Korean currency is probably printed in China) apparently can’t get past the cursory scrutiny of any experienced examiner:

First at a bank:

A counterfeit-bill detecting machine similar to ones used in casinos and about the size of a large wallet was produced and the bills inserted one at a time. The real $100 slid through effortlessly but the supernote stopped three fourths of the way through and a small red light began blinking.

...then a mom and pop money changing outfit:

When given both bills it took the couple about two minutes to confidently select the phony bill – “bad color!” ‑ and advise that it be taken to the nearest bank for confiscation.

...and finally Western Union:

In Wanchai, a Western Union clerk, equally used to handling massive amounts of foreign currency, immediately picked out the phony bill. Asked why, she said it just didn’t quite feel right.

So I think the world financial system is safe from North Korean economic sabotage even if the Treasury sanctions amount to nothing, as they probably will:

... one source in Washington said, “The access to the financial institutions of China and Russia, which are relatively less influenced by the U.S., will become easy for North Korea. Since transactions between the North and two countries are significantly large, you may say, a half return (to the international financial market) will be likely made by North Korea.”

Of course, if things go sour on the North Korean deal, facts can be eagerly and easily dispensed with and the creation myth can also be easily converted to a Dolchstoss myth, so the neo-cons mount a counterattack to purge the realists from the State Department.

Despite my reservations about the North Korea deal, that’s something I don’t want to see happen.


Asad said...

looks like that is all solved now

China Hand said...

The North Koreans walked out of a set of meetings today (3/20/07) because the money hadn't reached their account yet. Given the obvious splits between the State and Treasury Departments, can't blame them too much for being so demanding.