North Korea missile crisis should cost China
North Korea’s launch of an intercontinental ballistic missile this week demonstrated it could strike the United States. With American civilian lives on the line in any conflict with the rogue nation, the stakes are rising.
The test was conducted on America’s Independence Day, no less, a thumb in the eye of our president, who vowed in a January tweet that North Korea’s goal of developing a nuclear-armed ICBM “capable of reaching parts of the U.S. ... won’t happen!”
For months, Donald Trump relied on a charm offensive with Chinese President Xi Jinping to enlist China in squeezing its neighbor. China controls about 85% of North Korea’s trade.
China agreed last spring to stop buying North Korean coal, but not before overall trade with North Korea actually increased by 37% for the first quarter.
Xi could bring North Korea to its knees by cutting off oil, but he fears a collapsing regime that would flood China with refugees and risk a unified — and democratic — Korean Peninsula with U.S. troops on his border.
Trump must face the same reality as previous presidents: China believes that the lesser of two evils is tolerating an erratic neighbor.
The good news is that Trump has tools to dramatically increase the costs to China.
North Korea raises money for its militarism not only from trade that violates United Nations sanctions, but also by operating like a criminal enterprise with drug dealing, counterfeiting and arms sales.
This requires access to international financial networks — often through China-based banks and institutions — for laundering illicit income or otherwise violating sanctions. These deals can largely be in dollars, so by sanctioning the banks, the U.S. Treasury Department can cut them off from the dollar system, preventing transactions with international financial networks. This can lead to financial ruin.
President Bush in 2005 sanctioned one small, Macao-based bank that funneled money for North Korea. The move led two dozen other financial institutions around the world to cut ties to Kim Jong Un’s regime, including some of China’s largest banks.
President Obama raised China’s ire last fall threatening similar actions against a host of Chinese banks and businesses working with North Korea. When Trump took office, he didn’t follow through, instead trusting that Xi would crack down. But that gambit has gone nowhere.
Last week, Trump finally acted, cutting off the Bank of Dandong — a small institution that helped finance North Korean missile development. The message to Xi was clear.
The Chinese banking system is a soft spot for the communist regime in Beijing. China has long propped up its economy with a shaky scaffolding of dubious loans. Any U.S. moves that threaten that financial system could have dire consequences. The Trump administration should not be shy about quickly ratcheting up the pain for Xi’s government. The threat of a North Korea missile reaching the USA demands nothing less.
Within 18 months, North Korea will develop an ICBM that can reach the continental USA with a nuclear weapon. Trump must use that time to raise the costs for Kim’s brinkmanship.