The Sunday News
BEIJING — Chinese banks that do business with North Korea stand to lose several billion dollars in the wake of new United States Treasury Department sanctions on all such foreign institutions, analysts said on Friday. The new sanctions were announced days before a visit to Beijing by Secretary of the Treasury Jacob J Lew and Secretary of State John Kerry for an annual meeting on economic and security issues that starts on Monday and whose agenda this year includes North Korea.
The Chinese banks most affected by the sanctions will be comparatively small regional ones that facilitate the bulk of North Korea’s business in China, the analysts said. Major banks in China suspended their North Korean accounts in 2013 after the Chinese president, Xi Jinping, criticised a nuclear test conducted by the North that year, the analysts said.
The Bank of China, for example, which has been expanding its operations in the United States and did not want its American business tainted by co-operation with North Korea, closed the account of North Korea’s most important financial institution, the Foreign Trade Bank, in May 2013.
The smaller banks in the northeast area of China that borders North Korea would probably not want to risk continuing to do business with the North because the cost of sanctions by the United States would far outweigh the benefits of such commercial ties, said Jin Qiangyi, dean of the institute of Northeast Asian Studies at Yanbian University in Yanji.
China is by far North Korea’s biggest trading partner.
Using a provision of the Patriot Act, the Treasury Department designated North Korea on Wednesday as a “primary money-laundering concern,” a move that will enable Washington to take aggressive measures to cut off its access to the United States financial system.
Under the new designation, non-American banks and other entities are banned from conducting dollar transactions on behalf of North Korea, a prohibition intended to crimp the North’s economic activities and its ability to further expand its nuclear program.
The Chinese government said on Thursday that it opposed the Treasury action, although Beijing signed onto a tough new round of United Nations sanctions imposed on North Korea in March as punishment for a nuclear test it conducted earlier this year.
“We consistently oppose imposing unilateral sanctions on other countries based on one’s domestic laws,” said a Foreign Ministry spokeswoman, Hua Chunying. Instead of creating new sanctions, countries should “fully implement” the United Nations sanctions established in March, she said.
The United Nations resolution called on member states to terminate “joint ventures, ownership interests and correspondent banking relationships” with banks in North Korea within 90 days. The Treasury move goes a step further with its prohibition against United States banks’ allowing North Korea access to the American financial system via third-country banks.
If China were committed to enforcing the United Nations sanctions it agreed to, then the Treasury move would not affect it.
The Foreign Ministry spokeswoman’s pointed use of the word “unilateral,” however, raised questions about Beijing’s commitment to the March sanctions.
The tough approach by the Treasury contrasted with the decision by Mr Xi to meet this week with a senior North Korean envoy, Ri Su-yong. Mr Ri was dispatched by his country’s young leader, Kim Jong-un, to mend North Korea’s frayed ties with China, but he told the Chinese leader that North Korea had no intention of giving up its nuclear weapons, North Korean state-run media reported.
The Treasury action also came as Mr Kim has begun a policy, named byungjin, that calls for North Korea to keep expanding its nuclear weapons program while pushing for development that would bolster its rudimentary economy.
The collective impact on the regional Chinese banks by the Treasury action will probably be much greater than the losses incurred by Banco Delta Asia, a bank based in the Chinese special administrative region of Macau, when it was designated a money-laundering concern in 2005 because of its dealings with North Korea, said Cho Bong-Hyn, an analyst at the Industrial Bank of Korea’s Research Institute in Seoul. — New York Times
