What You Need to Know About North Korea and Sanctions: QuickTake

(Bloomberg) -- Economic sanctions can take the form of embargoes, travel bans, asset freezes, capital restraints and trade restrictions. They have been a core part of the “maximum pressure” the U.S. and its allies have been applying to force concessions on North Korea’s nuclear-weapons program. North Korea is expected to require sanctions relief in return for the surrender of its nuclear arsenal. At his historic June 12 summit with North Korea leader Kim Jong Un in Singapore, U.S. President Donald Trump said sanctions would be maintained until North Korea’s nuclear program was “no longer a problem.” Their second meeting, held in Vietnam in February, broke down over sanctions relief and disarmament.

1. What sanctions are on North Korea?

United Nations sanctions started more than a decade ago with a focus on exports of military supplies and luxury goods to North Korea and grew to include bans on North Korean sales abroad of coal, iron ore, seafood and textiles. The UN also has asset freezes and travel bans on certain individuals and entities and has mandated that all North Koreans working abroad return home by late 2019. After President George W. Bush declared North Korea a threat in 2008, the U.S. imposed additional sanctions of its own. Trump, in 2017, imposed a full trade and financial embargo that includes penalties for non-U.S. banks, companies and people that do business with North Korea. South Korea’s initial sanctions in 2010 banned most trade and cultural exchanges as well as North Korean ships from South Korean waters. Japan and Australia also have sanctions on North Korea.

2. Why is China’s role so important?

It shares a border with North Korea and accounts for 90 percent of its trade. In 2017, Trump pressured China’s leaders to stop buying commodities such as iron ore, seafood and textiles in violation of the UN sanctions. North Korea’s trade with China went down by more than 60 percent in the first quarter of 2018. China hailed the outcome of the Singapore summit, saying the talks should spur the UN Security Council to revisit sanctions. Since then, the U.S. has accused China of undermining the sanctions.

3. What effect have sanctions had?

That’s not easy to answer, as the Kim regime doesn’t publish economic statistics. As informal markets and budding entrepreneurs are allowed to develop, analysts outside North Korea are finding it even trickier to measure North Korea’s economy. The Bank of Korea in Seoul, using a mixed-bag of data and some guesswork, reckons the North’s output shrank 3.5 percent in 2017 to about $32.2 billion, or more than 40 times smaller than South Korea’s GDP. As long as sanctions remain, the outlook doesn’t look good.

4. What would it take to lift them?

Ahead of the Vietnam summit, Trump called for something “meaningful” from Kim. Afterward Trump said the North Korean leader had offered to dismantle the country’s main nuclear facility at Yongbyon in exchange for lifting all sanctions, “and we couldn’t do that.” North Korean diplomats said talks broke down after the U.S. refused to support lifting economic sanctions imposed since 2016 in exchange for dismantling the aging complex. The hard-line view championed by U.S. National Security Adviser John Bolton calls for no easing of pressure until North Korea achieves complete, verifiable and irreversible denuclearization, a high bar that’s sometimes shorthanded as CVID. That’s the standard that the U.S. enforced on Libya to pressure it to dismantle its nuclear-weapons program.

5. How are sanctions lifted?

The Security Council would have to vote to lift specific UN resolutions. Any one of five countries -- the U.S., China, Russia, Britain or France -- could veto such a measure, though that would be unlikely if the U.S. and its allies were on board. (China and Russia have been pushing for sanctions relief.) As for U.S. sanctions imposed by presidential executive order, such as Trump’s financial embargo, these can be lifted as well by presidential order.

6. How tightly are sanctions enforced?

It’s a constant battle, and North Korea is known to use many tricks, such as reportedly transferring oil between ships at sea. Trump, via Twitter and at the Singapore summit, suggested that China’s enforcement might be lapsing. The Associated Press reported March 12 that UN experts are investigating possible sanctions violations in about 20 countries, including China and Iran.

The Reference Shelf

• QuickTake explainers on North Korea’s nuclear program, the meaning(s) of denuclearization and closing North Korea’s test site.
• What little is known about North Korea’s economy.
• Will Kim give up his weapons? History says no.
• A Bloomberg infographic on North Korea’s military buildup.
• What an end to the Korean War would mean.
• Bloomberg explained why the nuclear club is a North Korean obsession.

To contact the reporter on this story: David Tweed in Hong Kong at dtweed@bloomberg.net

To contact the editors responsible for this story: Brendan Scott at bscott66@bloomberg.net, Laurence Arnold, Grant Clark

©2019 Bloomberg L.P.