The 'Livelihood Loophole' And Other Weaknesses Of N. Korea Sanctions

       

The ground had barely stopped shaking from North Korea's most recent nuclear test last week when the international condemnations began.

President Obama called the test destabilizing and provocative. South Korea's President Park Geun-hye said the test displayed North Korean leader Kim Jong Un's "maniacal recklessness." Even North Korea's longtime ally China said it "resolutely" opposed the test.

         

Almost as fast came calls for additional sanctions on the North. But North Korea is already one of the most heavily-sanctioned countries in the world. And so far, these punitive measures have yet to achieve their aim — forcing North Korea to denuclearize, or at least return to the negotiating table.

"It's the same response every time. I don't think we're getting a lot of innovative thinking," says Jim Walsh, an international security researcher at MIT, who along with Harvard's John Park looked into how sanctions work.

"We asked...if sanctions are effective and if not, why not? What are their unintended consequences and how they might be improved," Walsh explains.

The most recent round of U.N. sanctions — which U.S. ambassador Samantha Power called the "toughest...in more than two decades" — was passed by the Security Council in March, following a North Korean nuclear test in January.

They clearly did not dissuade the North from carrying out last week's test.

"North Korea's innovated," Walsh says. "We impose sanctions but they have taken countermeasures and we keep doing the same thing over and over again, singing the same song only a little louder and they've taken actions that help them evade sanctions."

One sanctions workaround for North Korea's nuclear program has been to station North Korean businessmen in China. While there, they work with a network of private Chinese companies to procure arms.

"So these private Chinese companies were able to order parts and materials from other Chinese companies or from European companies that had set up production platforms in China, selling their goods, without ever knowing that they were ultimately going to the North Koreans," Walsh says.

Still, several rounds of sanctions have had an impact. The sanctions and North Korea's reclusive nature have made the North increasingly cut off from other countries. That has deepened its dependence on China for trade, business and travel. An estimated 90 percent of North Korea's trade is with or via China.

"China doesn't want a failed nuclear weapons state on its doorstep. So it's not going to cut off oil or coal or iron or something that threatens directly the survivability of the government," Walsh says.

China did sign on to U.N. Resolution 2270, the package of new sanctions in March. The resolution called for cutting off trade in commodities, such as coal. Many analysts thought that was a big deal at the time, since coal is North Korea's number one export and makes up an estimated 35 percent of the economy there.

But before signing on to the sanctions, China insisted on a key loophole called the "livelihood exemption." It allows the export of a product if cutting it off might affect the livelihood of the exporter, so long as the revenue doesn't go to North Korea's nuclear program. The problem is, companies self-certify that's the case.

"I think because of this sort of potentially large carve-out, the Chinese are roughly saying, 'Well, this coal is fine,'" says Troy Stangarone, senior director of congressional affairs and trade at the Korea Economic Institute.