On the heels of North Korea’s nuclear test, the U.N. agreed today to a new round of sanctions on the rogue state. Those sanctions, however, are mostly incremental and far from comprehensive.

The financial sanctions block the assets of a handful of individuals and entities. They also prohibit North Korean banks from opening new branches in member countries. North Korean banks are forbidden from joint ventures with, or ownership interests in, banks in member states but only if the member state believes that these ventures or interests could contribute to North Korea’s nuclear or missile programs. An absolute prohibition is imposed on bulk cash transfers to North Korea.

New inspection measures are also imposed. Member states are directed to detain and inspect cargo to and from North Korea if there is reason to believe that the cargo contains items prohibited under these new sanctions or previous sanctions. Among the prohibited items added by the new sanctions are perfluorinated lubricants, certain valves useful in uranium enrichment, and control and measurement equipment for wind tunnels.

The new sanctions also include prohibitions of export to North Korea of sodium perchlorate. That chemical is not particularly useful as a propellant because of its tendency to absorb moisture. As such, it is not specifically listed on the Missile Technology Control Regime. However, it is apparently useful as a precusor to ammonium perchlorate, which is more interesting as a propellant and which is listed on the MTCR.

Of course, no sanctions on North Korea would be complete without tossing in prohibitions on a few more luxury goods. The new sanctions clarify that prohibited luxury items include precious and semi-precious stones (such as diamonds, sapphires and rubies), jewelry with pearls, yachts and racing cars.

My guess is that Kim Jong Un decided to threaten the U.S. with a preemptive nuclear attack when he heard that the new sanctions would include pearl necklaces.

ABOVE: Kaesong Industrial Park

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The White House has been ratcheting up U.S. sanctions against North Korea, culminating in Executive Order 13570 on April 18, 2011, which banned all imports from North Korea. Today the Office of Foreign Assets Control (“OFAC”) finally got around to promulgating implementing regulations for that order.

The regulations, in order to provide “immediate guidance,” did little more than cite the Executive Order and say that all transactions prohibited by the Executive Order were now prohibited by the regulations. OFAC’s comments in the public notice promised to issue more expansive regulations later on “which may include additional interpretive and definitional guidance” (emphasis supplied).

The Executive Order and by extension the new regulations contain the troublingly vague prohibition on “the importation into the United States, directly or indirectly, of any goods, services, or technology from North Korea” (emphasis supplied). Obviously the “directly or indirectly” language is going to cause the most heartburn to U.S. companies. That suggests that products from South Korea or China that contain components or parts from North Korea would be subject to the import ban. These new Nork sanctions contain no rules of origin or anything else to clarify the scope of the language covering “indirect” imports.

An employee of the Congressional Research Service, speaking a few days ago before a forum hosted by the Korea Economic Institute, said that the “indirect’ language was designed to target such parts and components.

Dick Nanto, a specialist in industry, trade and foreign affairs with the Congressional Research Service (CRS), noted that the April executive order prohibits the direct and indirect entry of North Korean goods.

“The Treasury Department’s Office of Foreign Assets and Control said goods, services and technologies from North Korea may not be imported into the United States directly or indirectly without license,” he said at a forum hosted by Korea Economic Institute.

He said the wording “indirect” was inserted in consideration of Congress’ objection to the inclusion of Kaesong products in the South Korea-U.S. free trade agreement, or KORUS FTA.

“That includes any country – China, South Korea – any country that uses a product of North Korea in the process or as part of the process,” Nanto said.

The Kaesong industrial complex is on the border of North and South Korea. It was created in 2002 as a result of South Korea’s engagement policy with the North. Over 100 South Korean firms now employ more than 40,000 North Koreans in Kaesong.

ABOVE: Purchase the teapot for
$1200 directly from the artists
Mike Leavitt and Charles Krafft

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The State Department issued last week its annual Country Reports on Terrorism for 2009. Originally scheduled for release on April 30th, the report was inexplicably delayed for more than three months. In the briefing on the report by Daniel Benjamin, Coordinator, Office of the Coordinator for Counterterrorism, a diplomatic non-explanation was offered to explain the delay:

The delay was to ensure that the report was accurate, comprehensible, and as readable as possible.

Translation: We were trying to resolve our position on matters that we can’t reveal to you at this time. And likely those matters may have involved North Korea.

The centerpiece of the country report is the list of state sponsors of terrors which this year was populated by the same familiar faces as last year: Cuba, Iran, Syria and Sudan. Appearance on the list has many consequences, which, the report notes, include:

1. A ban on arms-related exports and sales.

2. Controls over exports of dual-use items, requiring 30-day Congressional notification for goods or services that could significantly enhance the terrorist-list country’s military capability or ability to support terrorism.

Another consequence, not mentioned by the State Department in its list, is that under section 906 of the Trade Sanctions Reform and Export Enhancement Act of 2000 (“TSRA”), permitted exports of agricultural products, medicine and medical devices to countries on the list require the issuance of one-year licenses.

President Bush had thrown the Norks a carrot in 2008 by removing them from the list, but the Norks haven’t really been model citizens since then. We have them torpedoing the South Korean naval vessel Cheonan in March of this year, although technically an attack on a military vessel would not be classified as a terrorist act. On May 21, Secretary Clinton condemned the attack and warned of possible, but unspecified, sanctions in response.

More troubling was the intelligence report, disclosed among the war logs leaked by Wikileaks, that the Norks were selling missiles to Al-Qaeda and the Taliban. Ambassador Benjamin, when asked in the briefing about these recent disclosures, suggested that the Norks might find themselves back on the list of state sponsors of terrorism:

Let me be clear about North Korea. We’ve seen those reports. We are looking into them. The Secretary and others in the Administration have been clear that if we find that Korea is indeed sponsoring terrorism, obviously, we will revisit the issue of the listing as a state sponsor. But Korea was delisted in accordance with U.S. law in 2008, and it was at that time certified that Korea had not – North Korea had not supported any terrorism in the previous six months.

But you raise interesting and important points, and we are looking at that.

The intelligence report at issue was uncorroborated, which explains why Benjamin indicated that the U.S. was still investigating the matter. But if the report can be corroborated, I think we can expect to see North Korea once again on the list.

According to this report on the BBC website, Secretary of State Hillary Clinton announced today that the United States is preparing new economic sanctions against North Korea. The new sanctions are clearly a response to a report blaming North Korea for sinking a South Korean naval vessel with a torpedo.

[Secretary Clinton] said the measures would target Pyongyang’s sale and purchase of arms and import of luxury goods, and would help prevent nuclear proliferation.

An international inquiry blamed North Korea for sinking the Cheonan warship in March, with the loss of 46 lives, but Pyongyang has denied any involvement.

Speaking at a news conference in Seoul, Mrs Clinton said the measures would increase Washington’s ability to “prevent North Korea’s proliferation, to halt their illicit activities that help fund their weapons programmes, and to discourage further provocative actions.”

It is less than entirely clear how exports of cognac and mink stoles to North Korea assist the Norks in developing nuclear weapons unless, of course, Kim Jong-il provides moral support to his nuclear engineers by getting tanked on Rémy and prancing around Pyongyang* wearing a mink stole.

It’s equally unclear what Secretary Clinton is contemplating here. Under section 746.4 of the Export Administration Regulations, exports of most U.S. origin items to North Korea require an export license. Most items are subject to a licensing policy of case-by-case review except for luxury items (and arms and materiel), which are subject to a general policy of denial. Perhaps the idea is to expand the list of examples of luxury items. But I have a prediction, which you can probably figure out. What’s missing from this list?

(f) Electronic items, as follows:

(1) Flat-screen, plasma, or LCD panel televisions or other video monitors or receivers (including high-definition televisions), and any television larger than 29 inches; DVD players

(2) Personal digital assistants (PDAs)

(3) Personal digital music players

(4) Computer laptops

Do you see what’s missing? It’s the gadget of the moment — the iPad. If Kim Jong-il can’t get an iPad without renouncing nuclear proliferation, well, it’s going to be bye-bye Taep’o-dong and hello iBooks app.

*For readers that are thinking of forming a rock band, “Prancing around Pyongyang” would make an excellent name for the group.